Friday, November 9, 2007

The Great Farm Subsidy Scam

It’s the time again when the United States government is debating farm policy and agricultural subsidies and once again instead of focusing on bringing an end to the agricultural subsidies and making the farm sector a fair and free market, they are talking about how to reform them. Agricultural subsidies benefit a small portion of the population, the farm sector, and cost the rest of us.

There is a lot of myth out there about farm subsidies and how they affect the public and a lot of them that claim they benefit the public, so lets look at a couple of these myths. The first is that farm subsidies are needed to protect small family farmers, the first problem with this statement is that most farm subsides do not go to small family farms, around 70 percent of all subsides flow to the largest 10 percent of producer. So this means instead of helping the family farms like some proponents of subsides claim, they are really helping larger producers and actually hurt small farms because the value of future subsidies are capitalized into the values of land and other farm inputs, like machinery, raising there prices and making it more costly for small farmers to purchase more land and equipment and difficult for new farmers to enter the market because of the high cost, reducing competition in the long run. Since farm subsides are tied to production and size of the farm, increasing as the amount of output produced by farms increase, farm subsides actually encourage large farms to buy up small farms and land and price small farmers out of the market.

The next myth is that with out farm subsides the price of food in the United State would sky rocket and the general public would be hurt. This is just plain wrong and misconception on the part of many in the public because it ignores that right now there are two prices the public pays for farm goods. The first is the one that most of us know about which is the price we pay at the store, but there is a second hidden price, and that is the price we pay in higher taxes in order to fund the farm subsidies program. If farm subsides were to end, yes the market price would probably rise some but there is no reason that it would rise above true cost that we pay for farm goods, to be exact the cost to the public would probably be less since right now we are paying subsides for far more farm goods that are consumed. The other factor that people ignore is that only select groups of farm products are subsidize and many do not receive any at all, farmers that receive subsides are actually forbidden from growing certain crops, and ending farm subsides would have little effect on the price of these goods. The biggest change is that right now people have no choice on how they spend money that goes to hidden cost of farm products, but with out subsidies they would have a choice since they would be able to decide which items they purchase.

One other point about farm subsides are that are bad for the world economy and they are bad for the environment. They are bad for the world economy because farm subsides in developed countries, the United States far from the worse offender in this case, because they cause farmers in these countries to over produce, in some cases to the put that countries end up giving away some of these products because product is greater than world demand, this over production because of subsidization artificial lowers the prices of these crops in the world markets making it impossible for many farmers in underdeveloped countries to compete in one of the few industries that would have an advantage in and that could be produce an export good that would bring in hard currency, like dollar, euros, yens, ect, that could be used to help fund development in these countries. The over production of farm subsidies also hurts the environment because it leads to the over use of pollutants like fertilizers and pesticides and the over use of farm land with depletes it over time.

It would be better off for everyone in general, excluding of course subsidized farms, if farm subsidies were complete ended and the farm sector returned to a competitive free market. The free market would make farming a more competitive industry; it would create prices that reflect the true market cost and the values of the consumers and it would end the current practice were both the working and middle class are taxed to benefit large corporations.

No comments: