Posts Tagged ‘agricultural subsidies’

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Ag subsidies revisited

March 24, 2011

Over at The American Prospect, Monica Potts has written one of the clearest and most concise summaries of what a progressive view on U.S. agricultural subsidies should take into account. This is a topic I’ve written about before on this blog, in reference to an excellent University of Tennessee report from 2003. Potts gives a brief historical outline and discusses why the debate should be about reforming subsidies rather than eliminating them:

Sometime between Fast Food Nation and Food, Inc., progressives arrived at the simplistic conclusion that crop subsidies are bad for the environment and our health, and we need to end them. But crop subsidies were established for a real reason. The market for items like corn, wheat, soybeans, and cotton — all nonperishable foods — have serious problems that subsidies were designed to address. The reasons for subsidizing these crops are complicated, but they boil down to this: You can’t trust the forces of supply and demand to set stable, fair prices.

I have little to add, just wanted to highlight this as a very well-written summary of the issues at hand. Worth reading the whole thing – and if your interest is piqued, so is the Tennessee document.

And yes, I owe a lot of attention to a couple of recent commenters – you are not being overlooked.

Flying Whale

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Addendum from Daryll Ray

October 13, 2010

A couple years ago I saw a panel on which Daryll Ray, one of the co-authors of the report I cited in my last post, elaborated on his thoughts on ag subsidies. These are among the most interesting points in my notes, and in Econ 101 lingo to boot:

We have been subsidizing agriculture since the very beginning, as a society. We’ve always had specific agriculture programs – land distribution, land grant universities, extension services, all designed for agriculture to shift the supply curve to the right. Generally we shift it faster than the demand curve, and prices go down. In other industries, consumers buy more or producers produce less and prices go back up. In agriculture it doesn’t work that way. Consumers buy the same, prices stay low, producers produce more (farmers don’t produce enough to have an influence on the market; the only thing they can do is produce more), and prices get lower. We “fix” by direct payment to producers. This is not a real adjustment.

He concluded: “It is unrealistic to assume that just because we don’t like the program we have right now, that we don’t need a program. We need a program that keeps prices more consistent and at higher levels… if we don’t do that, it’s naive to think our farmers will reduce production and prices will rise globally. It doesn’t work that way.”

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The demonization of agricultural subsidies

October 13, 2010

I am currently in a development class in which it has become very fashionable to bash rich-country agricultural subsidies as a major cause of developing-country poverty. While I don’t think this anger is misplaced, I do think there is some unacknowledged complexity here, and that simply getting rid of all rich-country subsidies is a dangerous thing to wish for. Today I spoke up to briefly highlight that I don’t think we should be saying all rich-country subsidies should be completely eliminated. It was not a popular thing to say. I wrote a follow-up to clarify my point and I thought it might be instructive to cross-post it here. So, here goes:

I wanted to clarify what I said about agricultural subsidies today, which was perhaps a bit too controversial to present in a 15-second soundbite at the end of class. I was not in any way trying to defend U.S. ag subsidies as they exist today, nor the U.S. farm lobby, nor the various methods the North has used to keep the global South from implementing their own subsidies or tariffs. We tend to demonize subsidies, but I don’t think the problem is that they are inherently bad, but instead that they’ve been implemented poorly, in ways that are hugely harmful. Even worse, the global North has prevented the global South from using many of these kinds of subsidies. But implemented properly, subsidies can and should be useful policy tools – just like tariffs and industrial policy.

I think the extended argument about just how subsidies should be used (which I was foolishly trying to make in two sentences earlier today) is summed up best in this paper: Rethinking U.S. Agricultural Policy: Changing Course to Secure Farmer Livelihoods Worldwide. The basic problem statement here is that low ag commodity prices are currently benefiting agribusiness but hurting farmers everywhere. U.S. direct-payment subsidies are an attempt to make up for these depressed prices (a misguided and harmful attempt, since they are a reinforcing mechanism that keeps prices artificially low), but the global South either cannot afford such subsidies or are inhibited from implementing them. So low ag prices are trouble for farmers in the North but a matter of life and death for those in the South.

But the solution isn’t to get rid of all ag subsidies in the North – this is a fundamentally free-market approach that will not actually significantly increase prices, because many agricultural commodities don’t respond to market signals in a traditional way. (Farmers don’t quickly respond to a drop in price by producing less; instead, they often produce more to try to make up for lost income.) By this logic, getting rid of subsidies wouldn’t help those in the South, it would seriously hurt those in the North, and it would turn the entire ag sector over to the mercy of free-market forces, which we know don’t work particularly well for either the global South or for farmers anywhere. The paper goes on to outline alternative subsidy programs (not direct payments to farmers) which would manage production and return ag prices to a more reasonable level.

I’d encourage anyone interested in the issue to take a look at that paper, which is pretty unique in that it not only provides a diagnosis of the problem but also gives concrete policy recommendations. It’s been a major force in shaping how progressive activists think about agricultural trade in the neoliberal era.

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Your commitment in 7 colors

October 30, 2009

The Center for Global Development releases the Commitment to Development Index annually, comparatively tracking how supportive developed countries are of developing countries.  The resulting maps and charts are entirely too fascinating for my workday productivity.

I don’t find the overall score to be very helpful (the US is towards the bottom, Scandinavian countries take the lead), but poking around gets you to some interesting findings.  For example, a surprisingly large portion of the US’s Aid points are in the private aid category.  Digging a little deeper: it’s because (this time not surprising) we’ve been penalized for our nasty habit of giving a large percentage of our total aid to “less poor and relatively undemocratic governments” and tying or partially tying our aid so that recipients can only spend it on donor goods and services.

The Migration score also caught my eye—especially since Greece and the US, unlikely partners by my reasoning, received the same score.  US points mostly come from an increase in the number of unskilled workers allowed into the country.  Greece gets points for a large foreign student population and the number of refugee and asylum applications accepted, the latter particularly worrisome in light of this story.

Poking around at the Trade score, and particularly the “trade-distorting farm subsidies,” I wasn’t expecting Norway to score so poorly.  Those are some unbelievably high subsidies!

Anyway, you get the picture.  Go play.

Jonas