Thursday, August 21, 2003

Matthew Yglesias likes the new piece by Jacob Levy (a Volokh Conspiracy blogger) in The New Republic on agricultural subsidies. But is there really much to like there?

Levy is way off-base on much of his commentary. In short, he really doesn't know what the hell he's talking about.
Agricultural protectionism--the combination of quotas, tariffs, and subsidies for farm products--may be the purest example of destructive special-interest politics ever created. Rich countries--with a few exceptions, such as Australia--burden their own populations three times over. The policies cost taxpayers directly--the atrocious 2002 U.S. farm bill is slated to cost $180 billion over ten years. (Worse, annual unbudgeted "emergency" farm spending during the late 1990s accounted for a great deal of the spending boom that squandered much of the predicted budget surplus long before the first Bush tax cut took effect.) In return for their largesse, taxpayers get the privilege of paying higher prices as consumers (and, of course, inflated prices for basic foodstuffs hit the poorest proportionately hardest). And, by locking up an excess of labor and capital in an agribusiness sector that couldn't turn an honest profit on its own, agricultural protectionism inhibits productivity growth, preventing shifts in employment and investment to more productive parts of the economy.
First, let's ask why farm subsidies exist in the first place. In the US, these things took off after the 1996 "Freedom to Farm" bill was passed which scheduled the elimination of all production controls on US agriculture. Without production controls, overproduction occurred and prices went through the floor. Farm subsidies then came in to compensate for these ultra-low prices -- prices farmers had not seen since the Great Depression. Sure, the General agrees, these massive farm subsidies are bad policy and bad economics. But they don't come out of nowhere. They are the direct result of the rule of the market in agriculture.

What next from Levy? Higher food prices? Please! The US is the master of malbouffe -- "junk food" in the sense of mass-produced crap with low nutritional value, even less cultural value, standarized, laced with pesticides, additives, fillers, preservatives, artificial flavors and colors. The intensive agriculture system which the US has mastered has produced the cheapest food on the face of the planet -- cheap malbouffe. Adam Drewnowski of the University of Washington has done an interesting study that suggests Americans are so obese precisely because our food is too cheap, not too expensive. What costs less, a malbouffe box of Twinkies or a head of lettuce? Calorie for calorie, Drewnowski found, in the words of the Seattle Times,
the less-convenient foods recommended by most experts for all-around good health and weight control particularly fresh vegetables, fruits, fish and lean meat tend to cost more than packaged convenience foods when measured on a cents-per-calorie basis, even when including the costs of processing and packaging convenience foods.
What next from Levy? Subsidies keep too many Americans in agriculture? Now he's moved straight from the sublime into the ridiculous. In 1990, just 3.9 million Americans lived on farms -- a mere 1.6% of the country's population. And this is too many for Levy?? Give me a break.

Levy continues:
By shutting off access to developed countries' markets for the goods that developing countries are most likely to produce competitively, agricultural protectionism forecloses the most likely route to development and poverty alleviation. Moreover, the artificially high prices in the rich countries encourage overproduction there; the surplus gets exported at cut-rate prices, which not only makes it hard for developing countries to compete in export markets, it typically makes poor farmers uncompetitive in their home markets as well.
Not exactly. The US produces no coffee at all, must import every bean, and yet coffee farmers around the world are in desperate poverty and the ones in Ethiopia are dying. Did the colonies in Africa or Latin America get rich off of sugar, palm oil or tobacco? No. Farmers in the global south need most of all for the US and the EU to stop dumping, much less do they need access to US and EU markets.

At least Levy recognizes that many in the Global South overproduce, too. Brazil, Argentina and most of the rest of the Cairns Group are no saints in this story. They are as desperate to dump their overproduction as are the US and the EU. In fact, they are using many of the same methods as the rich countries use. The Cairns Group is no story of peasant agriculture on the ropes. They're as much a part of the problem as anybody.

Levy's argument is so weak because he hasn't the slightest idea why overproduction occurs. It doesn't occur because of subsidies. Subsidies are an effect, not a cause, of overproduction.

The causes are several. First, technology is the biggest culprit. The US, the EU and many other governments as well as corporations now such as Monsanto pour billions of dollars into research to produce crops, animals and techniques which boost production with no thought as to whether we need to boost production in the first place. In fact, there is rampant overproduction in the US and yet agriculture research institutes continue to fund research to produce more and more.

Second, the nature of agribusiness today is not far behind as a chief culprit. The Cargills, ADMs and Tysons of the world make their money off of volume. They have driven farmgate prices so low through overproduction that the profit margin is extremely thin. In order to make profits, therefore, they need volume, volume, volume! Then the game becomes one of trying to stick "the other guy" with the costs of overproduction. Currently this largely means US agribusiness trying to stick it to the EU, and vice versa. As long as we have a policy of ultra-cheap food, we will have rampant overproduction.

Third, consumers in the Global North themselves are party to this madness, and especially Americans. US consumers want cheap food. They pay the least amount relative to their incomes in the world, they like it that way, and they demand it persist. And whether they realize it or not, the path to cheap food is overproduction. Eric Schlosser's fantastic book Fast Food Nation demonstrates very clearly the wide ramifications of the American food culture on society at large. As this culture moves not just to Japan and Europe but to the cities of Mexico, Brazil and even Vietnam, obesity and all its health problems follow. Did you know that there are more overweight people worldwide today than underweight people?

The piddling libertarian move of Levy will get the world nowhere. History shows that crop acreage changes very little in relation to price. Prices can tank and production will fall just a little. Daryll Ray of the University of Tennessee shows that since 1985, "a one percent change in the index of prices received by farmers results in a 0.15 percent change in total harvested cropland acreage". So much for the market solving our problems.

Yes, help the world's poor, but don't do it by 'unleashing the market'. Do it through promoting food security and food sovereignty, and get over the libertarian whining.

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