Targeting Agricultural Subsidies

We all like to talk as if we are dedicated free marketeers. The reality is that we dispense billions in subsidies, tax breaks and other forms of corporate welfare in schemes that are not only “protectionist” but in many cases destructive and nonsensical. Here are two examples of the mess we’ve gotten ourselves into, from the world of agriculture.

1. The American cotton industry is worth $5.9 billion. The federal government subsidizes it to the tune of $4.5 billion. That’s not a business. It’s a federal corporate welfare scheme. The cotton we grow is shipped to China (and other cheap labor countries) to the manufactured into clothing, since we no longer have a viable manufacturing sector in garments. And the tax dollars? They go mostly to Texas agribusiness, not family farmers.

2. Americans pay twice the world market price for sugar, in order to protect sugar cane producers in Florida, Hawaii (which finally gave up on sugar), and sugar beets in the Midwest (which also didn’t fly economically, even with the supports). Because of this, our soft drinks are sweetened with high fructose corn syrup, now the leading suspect in our epidemic of diabetes. In the process of supporting an unviable sugar industry, we helped to destroy the economies of Cuba, Haiti, the Philippines and many other countries that produce sugar by the labor-intensive, and environmentally sound, methods appropriate to “emerging economies”.

I appreciate how complex these issues are, and cannot offer any pat answers for addressing them. My first suggestion, though, is that we take a serious look at all of these subsidy programs, all government price supports, and all forms of government corporate welfare, and assess exactly how the composite of all of these federal state and local dollars could best be applied to meet our goals: how much money, how many jobs, what contribution to the economy, what strategic goals are supported, etc. For example, what if we give up on homegrown cotton and shift that subsidy to homegrown energy crops to replace fossil fuels purchased from hostile regimes? Or what if we target specifically family farms for support and select those crops that provide more jobs per federal subsidy dollar?

Dragging this back to the beginning topic, why not apply this same scrutiny to all federal assistance, whether through subsidies, tax breaks or whatever. Let’s target them to specific strategic goals, and not just to a general pumping up of the economy with tax dollars.

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One response to “Targeting Agricultural Subsidies

  1. It is estimated a staggering $350 to $380 billion is currently allocated every year on agricultural subsidies around the world. After entering the World Trade Organization in 2001, China began exploring ways to directly subsidize farmers, who were believed to be vulnerable to foreign competition (Liu, Ouyang, and Zhang). Furthermore, as part of its entry to the World Trade Organisation in 2001, China it agreed to cap its support for its farmers at 8.5% of production.

    Without a doubt, OECD member countries including the United States, Canada and France (which is the largest recipient -22% in 2004 – of the controversial part of the European Union’s Common Agricultural Policy which began operating in 1962) could learn something from China in respects to agricultural subsidies.

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