Freeman

ARTICLE

End the Farm Dole Once and for All

We Need a Genuine Free Market in Agriculture

SEPTEMBER 01, 2000 by LAWRENCE W. REED

A new program to require the U.S. Department of Agriculture to pay the cost of inspecting meat from emus and ostriches. A plan to spend $200 million to buy surplus cranberries, black-eyed peas, and other crops. A $100 million proposal for payments to producers of cottonseed. At this writing (June), these were among a bundle of agricultural subsidy schemes either passed by or under serious consideration in both houses of the U.S. Congress.

But wait a minute! When landmark legislation to get the government out of the crop subsidy business passed in February 1996, U. S. News & World Report told us, “the government will abandon the elaborate system of price supports that restricted the amounts of corn, wheat, cotton, rice and feed grains farmers could grow.” Private crop insurance was going to take the place of incessant public disaster relief. Uncle Sam, we were advised, was about to liberate both farmers and taxpayers from decades of public policy folly. It was to be a crowning achievement of a new Republican majority pledged to curtail the size and intrusiveness of the federal establishment.

Then-Speaker of the House Newt Gingrich assailed the “East German socialist” farm programs built up since the New Deal. President Clinton signed the “Freedom To Farm Act” designed to wean farmers from handouts by 2002.

A funny thing happened on the way to a free market in farming. Commodity prices on world markets took a dip, farm-state interests started agitating again for bailouts, and our courageous Congress blinked. In 1999 federal payments to American agriculture soared to a record $22.7 billion—no less than three times what the figure was when the Freedom to Farm Act was passed in 1996.

Quotas on foreign sugar already translate into a sugar tax of about $1 billion annually, paid for by every American consumer. Yet by the time this column is published, Congress may succumb to great pressure from sugar producers to buy 350 million pounds of surplus sugar that nobody wants. Subsidies to tobacco farmers continue as well, at the same time the government doing the subsidizing is suing tobacco companies for the illnesses it says their product causes. Milk consumers pay an extra $1 billion annually in milk prices because of federal meddling, and consumers of manufactured dairy products like cheese and butter pay an extra $400 million—facts that make a mockery of the same government’s “war on poverty.” (See Kevin McNew, “Milking the Sacred Cow: A Case for Eliminating the Federal Dairy Program,” Cato Policy Analysis No. 362, December 1, 1999.)

We’ve come a long way from the day when President Grover Cleveland vetoed a $10,000 appropriation for Texas farmers, warning, “though the people support the Government, the Government should not support the people.” American farmers are more dependent on politicians than ever, and today’s farm policy looks less like the free-market rhetoric of ‘96 and more like the policies of 91—that’s 91 A.D., when the Roman emperor Domitian rigged the grape market to raise the price of wine.

One of the destructively stupid things the 1996 law was supposed to cure was the penchant for federal farm policies to reward the large and corporate well-to-do and thereby confer a competitive disadvantage on small family farms. Payments to the richest 10 percent of farmers—mostly large corporate agriculture firms—were running at more than twice the amount of payments to the poorest 50 percent of farmers, mostly small operations run by single families. Nothing since 1996 has changed that. Even the current secretary of agriculture acknowledges that the federal government continues to subsidize big operations while driving smaller farms out of business.

While big farmers reap most of the ever-higher federal payments, the national glut of foodstuffs fostered in part by those subsidies is choking all farmers with ever lower prices. The Agriculture Department forecasts that the price of soybeans this year will be the lowest in 27 years and the price of wheat and corn will be at their lowest level since 1987.

The sad fact is that 70 years of federal meddling on the farm has produced almost nothing but trouble for both farmers and consumers. As we’ve seen, it has been especially hard on small farmers and low-income consumers. No policy that produces such havoc can be justified.

But, some would say, the free market is hard on farmers too. In 1800, 97 percent of Americans lived on farms. Today, about 2 percent do. Free markets made farmers so productive that just 2 percent now produce more foodstuffs than we Americans—and much of the world—can possibly eat. The market has been weeding out the least efficient farms for at least 200 years.

Before anybody cries crocodile tears for agriculture, let’s recognize an important fundamental principle of economics: consumption, not production, is the ultimate end of human economic endeavors. We produce in order to consume, not the other way around. Furthermore, as human energies, physical resources, and capital become less in need in one area, they are free to work their wonders in others. If 97 percent of our people were employed on the farm at today’s levels of productivity, we would be buried in rotting food and deprived of endless other products and services today’s nonfarmers provide.

Experience since the federal government became a major player in agriculture seven decades ago, including recent years when Congress made promises to restore a free market but didn’t deliver, argues decisively for one rather obvious scenario: a genuine free market in agriculture. That means no subsidies, no quotas, no handouts of any kind—just the same market forces that determine almost every other good’s supply and demand.

Congress should finally do what it only promised in 1996. After ceaseless failures of intervention, legislators have no excuse for not getting it right the next time.

ASSOCIATED ISSUE

September 2000

ABOUT

LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

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