Friday, October 21, 2005

Farm subsidies: still bad, but other things are worse.

From Pietra Rivoli's The Travels of a T-Shirt in the Global Economy:
The subsidies to cotton farmers that have in recent years attracted so much attention are everything recent critics have charged: way too big, way too unfair, and embarrassingly hypocritical when practiced by the world's self-proclaimed free trade champion. But they are also not the whole picture.

Competing with [Texas cotton farmer] Nelson Reinsch requires a systematized method of factory cotton production. But cotton factories require capital, and profitable factories of any kind require functioning markets and both technical and basic literacy, as well as at least a semblance of the virtuous circle of institutions that support not just agriculture but broader development. At the close of the twentieth century, many poor cotton producers lacked capital, working markets, literacy, or all three. And in spite of our intuition it is far from clear that cheap labor is an advantage at all. Labor costs are low when people have no choices, and people who cannot read have no choices indeed.


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