Free-market economists have argued for decades that interventionist government policies inadvertently lead to negative long-term consequences that far outweigh the perceived benefits. This has resulted, of course, in cries from the political left that advocates of capitalism care nothing about the indigent, needy, or otherwise downtrodden. So it is with bittersweet satisfaction that one sees farm subsidies, a crown jewel of the welfare state, coming under fire because they hurt the poor.
“Of all the problems that plague the world’s poor in the age of globalization,” writes the Washington Post, “few are so widely condemned as the subsidies that rich countries provide their farmers” (“U.S. Farm Bill Finds Few Fans Abroad,” Washington Post, May 5, 2002). The farm bill signed into law by President Bush, “which substantially increases price guarantees for crops such as corn and wheat and creates new subsidies for others such as soybeans,” gives U.S. farmers large, artificial incentives to produce more, causing market floods and depressing crop prices worldwide. This in turn makes it difficult for Third World nations to build healthy agricultural infrastructures to boost their economies. The Post quoted Nancy Birdsall, director of the Washington-based Center for Global Development, as saying that farm subsidies are “very discouraging for developing countries.”
For example, the Post also reported that a then-forthcoming study by the World Bank and the International Monetary Fund would show the effect that subsidies have on the world cotton industry. U.S. cotton farmers’ average annual income is $35,000, approximately one-third of which comes from subsidies. In the African nation of Burkina Faso, by comparison, cotton farmers are making around $1 per day. The study concludes that if world cotton prices were not being driven down by wealthy countries’ subsidies to their farmers, poverty in Burkina Faso could be cut in half within six years. “This [farm bill] is pretty galling,” said a senior World Bank official quoted by the Post. “A few American farmers will benefit, but at the expense of a very large number of poor people in developing countries.”
In addition, “European trade officials” warned, “the U.S. farm bill will make it tougher to overcome the resistance of farmers [in European countries] to giving up their subsidies,” the Post said. Commenting on the bill, Canadian agricultural minister Lyle Vanclief called U.S. price supports “ridiculous policy” because his government might now have to increase aid to Canadian farmers. The cycle of world crop-price deflation will continue, bankrupting impoverished countries’ farmers and condemning more of their people to squalor.
None of this is surprising. After all, advocates of free and open agricultural markets have warned for years that price supports, subsidies, and tariffs only benefit, in the World bank’s words, “a few at the expense of a very large number.” They also noted that the best way to help agriculture is to let market prices reflect real conditions. Naturally, such suggestions drew only the wrath of more “progressive” thinkers.
The U.S. government, continuing the welfare-state programs of the New Deal, and European countries (particularly France), following the “enlightened” path of their own cradle-to-grave mentalities, have proudly proclaimed their allegiance to price supports and other farming subsidies as a cornerstone of their agricultural agendas. When pressed on the moral and economic wisdom of a course that takes wealth created by one group and uses it to prop up another, government officials and media mouthpieces can be counted on to charge, “Do you want all of the farms to go away and people to starve?” By adhering to such socialist dogma they have greatly contributed to starvation and the failure of farms elsewhere.
Risks and Rewards
There is no doubt that welfare-for-farmers is absurd. Those who choose to go into agriculture should be expected to take all the risks and enjoy all the rewards of their chosen occupation. But while earlier the left condemned the “evil” and “heartless” free agriculture market, today they scold the rich countries for aiding their farmers too well. No one yet has the courage or vision to call for an end to subsidies, but with their global consequences becoming clear, many self-styled advocates of the poor are urging the West to move away from a once-cherished pillar of the welfare-state agenda. This at least implies a concession to a more market-oriented approach.
Unfortunately, now comes the lesson that socialism breeds not only economic disorder, but also the power of political pull. Representative Larry Combest of Texas, chairman of the House Agricultural Committee, perfectly illustrated the atmosphere that has been fostered by a socialist farming policy: “This [farm bill] is for rural America. This is not for rural Mexico. This is not for rural Canada, and this is not for rural Europe.” Even in traditionally pro-market countries politicians have been hammered for so long to do “more” for farmers that they’ve decided to do precisely as they were told. And the world is united in its chagrin over the result.
It is certainly encouraging that more people are beginning to see the value of free and open markets and the dangers of government interference–even if George W. Bush does not. Observing the passage of the farm bill, ABC News analyst Terry Moran remarked that it pitted “free market rhetoric against political reality” and “reality won.” A more accurate analysis would be that the universal criticism of the President for signing this bill clearly shows that socialist “reality,” when transformed from rhetoric into public policy, is a tragic failure. America should take note and forthwith abandon all its welfare-state designs. When the planet’s “humanitarians” predictably lament, “What about the poor?” remind them that once upon a time they saw the answer to that question.
Scott McPherson is a freelance writer in Fairfax, Virginia.