Monday, July 11, 2005

Farm Subsidies are Good (for some people)

In comments Tim Burke points out:
Dropping farm subsidies would be a good thing, but what I think those who advocate it have to recognize that if it's not quite a zero-sum step, it nevertheless is a case of transfer-seeking of sorts--that there are people who will be hurt by that step here in the US just as it assists others elsewhere[.]
To which I say: amen, brother!

Being from Wisconsin where we are told that a family-run dairy farm closes every week (or something like that) because of the growth of factory farms and the structure of farm subsidies, I certainly don't deny that dropping farm subsidies would have costs, major costs. In Wisconsin politics, farm subsidies are like CAFE standards in Michigan (even Russ Feingold has gems like this:
"Over the past few years, I have advanced a number of initiatives to ensure that our farmers compete on a fair playing field in the international marketplace, and, at the same time, American consumers benefit from the quality products that industry produces").
And for good reason: in the short run, I imagine, ending farm subsidies would not do happy things to the Wisconsin economy. Even more family farms would close, and thus rural Wisconsin, and rural America in general, would suffer.

Further, because the government wouldn't be subsidizing production (or not producing, as the case may be) and wouldn't be enforcing a band on any food price, you'd see an increase in the volatility of food prices. Prices would be even more sensitive to season on season crop yields. Right now you pay twice for food: once through farm subsidies (taxes), a second time at the counter), so, on net, you'd imagine that expenditure on food would be less. But the volatility would not be nice: we here at Armchair Capitalists are on record as thinking more risk is a bad thing for American households, and increasing volatility in the price of a major consumption item wouldn't be good.

Ending farm subsidies may also do odd things to agribusiness and reduce diversity. Currently you have lots of small farms producing for the mass market, without farm subsidies many of them would be swallowed by larger businesses*. There would probably be consolidation in the farm industry. Insofar as this increases efficiency and reduces food prices, good. Insofar as this concentrates political power in a sector where it is easy to play the populist (Do you want your children to eat...your food your congressman now...paid for by astroturf of massive corporation....), this may, in the long run, do even worse things than currently happen. Plus, we may make the argument that ending farm subsidies would help niche producers (of more interesting, or higher quality food items) by putting them on a more level playing field with large producers, but the opposite may happen: if agribusiness grows larger, it may squeeze smaller producers off the shelves and etc. Concentrated power and all. So a case could be made that farm subsidies are good for the little guy, and for us, by reducing the power of agribusiness.

Still, obviously, ending farm subsidies is a good idea (what else did you expect me to conclude?). If you are concerned about family farmers as people, then your standard welfare system ought to kind-of work. If you are concerned about family farmers as the embodiment of Jeffersonian agrarian values, then I'll probably have a hard time convincing you. But really if that is your concern, make a national park of farmers, or something, so we can all see these values in action, don't hide them away in inaccessible rural locales. Make it a tourist destination! To the volatility problem: that is serious and doesn't have a flip retort. Yet, and this is my main rejoinder to any and all objections, I don't think it justifies harming countries far poorer than our own (something I ought to know more about, like with numbers and projections). And to the "farm subsidies reduce the power of agribusiness": well, chalk it up to bullshit, I doubt it is empirically accurate because subsidies encourage the politicalization of food companies and I don't know enough about the structure of farm subsidies to know whose relative position is benefited. Farm subsidies: good for some, bad for most.

*This might not be perfectly clear: why would you get more consolidation without farm subsidies than with? Why wouldn't consolidation already be happening, farm subsidies can't change incentives that much (well, they can)? True, there is consolidation going on right now, but ending farm subsidies would accelerate the trend both because some farmers would go bankrupt, and some others who were marginally profitable would fall below that margin, while agribusiness would be immune to that change, because of caps on farm subsidies.


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