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Farm Subsidies: Separating the Wheat From the Chaff
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16813 |
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CURRENT ISSUES
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9 / 1989 |
2,663 Words |
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James Bovard
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Agricultural subsidies are one of the most divisive issues of international trade. Bickering, loud denunciations, and threats and counterthreats seem to pass between the United States, Europe, and Japan on a weekly basis. Yet, fundamental forces that could radically change world agricultural trade are growing.
Agricultural subsidies proliferated in the 1980s. The Organization of Economic Cooperation and Development (OECD) estimates that industrial nations are now spending over $150 billion a year on farm subsidies. The bulk of this spending occurs in the United States, the European Community (EC), and Japan. The best way to understand the irrationality of current farm trade disputes is to begin with an in-depth analysis of the three largest markets' policies.
U.S. Up On The Farm
American farm subsidies--roughly $20 billion a year, plus another $10 billion in higher food prices--constitute the equivalent of giving every full-time subsidized farmer two new Mercedes each year. Annual subsidies for each dairy cow in the United States exceed the per capital income for half the population of the world. With the same $260 billion that government and consumers have spent on farm subsidies since 1980, Uncle Sam could have bought every farm, barn, and tractor in 30 states. The average American head of household worked almost one week a year in 1986 and 1987 simply to pay for welfare for less than a million farmers.
Handouts in lieu of exports are the core of American farm policy. For most of the past 60 years, politicians have driven American farmers out of world markets and onto the government dole. The federal government decided in the 1930s that American farmers could not compete with foreign farmers and proceeded to close the borders to imports, undermine exports, and drive up domestic farm prices. The leading export sector of the U.S. economy was confined to a government hospital because politicians said it could not survive on its own.
U.S. farm policy is a maze of contradictions. By late 1985, the U.S. wheat surplus was large enough to provide 27 loaves of bread to every person in the world. Yet, in the 1985 five-year farm bill, Congress encouraged farmers to produce even larger wheat surpluses by promising farmers crop subsidies far higher than market prices. At the same time, the U.S. Department of Agriculture (USDA) paid farmers in 1986-87 to kill almost two million cows to reduce milk supplies. Some politicians have perennially encouraged farmers to produce food surpluses and then cited surpluses as proof that politicians must control agriculture and protect farmers against themselves.
In 1988, the USDA rewarded farmers for not planting on 78 million acres of farmland--equivalent to the entire states of Indiana, Ohio, and much of Illinois. Government shut down some of the best American farmland in an effort to drive up world wheat and corn prices. "Set-asides"--programs that pay farmers not to work by "setting aside" or idling their cropland--are the opiate of American farm policymakers, the annual tribute to the bureaucratic and political delusion that America somehow controls world grain markets. The effects of last years' drought in reducing harvests and sending prices skyrocketing were greatly intensified by USDA's program to pay farmers to reduce
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