March 31, 2005

Farm subsidies and poor consumers

Reflecting on the worldwide patterns of food production and the enormous farm subsidies in rich countries, Zaid says in WorldChanging:

Economists base policy decisions on arguments such as this “As many as 45 of the world's 49 least developed countries (LDCS) are net importers of food and 33 are net importers of agricultural products, according to the economists Alberto Valdes and Alex McCalla. The removal of tariffs and subsidies would hurt, rather than help, these countries, because such a move would raise the prices they pay for their imports.” ("Agricultural Liberalization and the Developing Countries: Debunking the Fallacies" (pdf)).

And then Zaid goes on to doubt, if not deride, this argument.

What I think is:

1. Selfishly speaking, food production subsidies in rich countries are very bad for those of us who live in rich countries, and are not farmers.

2. Food production subsidies in rich countries that result in lower international food prices are good for consumers in poor countries. Thanks to lower prices these people can now eat more food and spend more money in non-food products. (Please don't counterargue that these people have less cash because their farms have gone bankrupt; that is nonsense.)

What I would like to know is:

1. Food production is now inefficiently concentrated where subsidies are (rich countries). In the absence of subsidies, food production would perhaps shift to more suitable places in terms of soil, climate, and so on. Would we then be using smaller overall amounts of land, fertilizer, pesticides, fuel and water?

2. On the other hand, as rich countries are now producing an artificially high share of the world's food, perhaps tropical countries are now allocating an artificially small amount of land to agriculture. So, are farm subsidies in rich countries helping to preserve wild nature in the tropics, which is more valuable (for me) than wild nature in the temperate zones?

What I still think is:

1. We can help people in poor countries more effectively by abandoning our economic xenophobia (barriers to trade and immigration).

2. We can protect tropical ecosystems more effectively by... (I leave that for another day).

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