Saturday, September 09, 2006
Uncle Sam's teat
Can America's farmers be weaned from their government money? How do subsidies, according to this article, violate market efficiency? How is this an attempt to repeal the law of supply and demand, and what is the consequence?
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It is truly a sad thing that the farmer, in a modern economy, is forced into a position of meek existance. Prices for basic staples seem to always fall to a minimum value, providing a meer subsitance for the farmer. This is (in my limited knowlegde on the subject) due in part to the fact that every unit of corn or wheat or soy bean sells for the same price in the market, and so the farmer has little opportunity to maximize his profit by making the product more desirable (organics is of course an exception). The high competition from large mechanized farms, and foreign markets in which land and labor are cheaper, make the predicament of the small american farmer almost impossible. Farmers may be doomed to a low quality of life in a modern free-market economy (which is ironic because they provide us with the product that is most fundamental to our lives) but the government in recent decades (starting in the New Deal, I believe) has changed this through farm subsidies. But by subsidizing large farmers disproportionatly, they have made it even harder for the small farmer (who is a hallmark of the origional american ideal). Also this disrupts the free trade ideals of a global economy. Because the american subsidized farmers can lower their prices below what they would need to survive (due to the extra income, which is sometimes considerable, that they get from subsidies) they can out-compete foreign produce and dominate american markets.
My long American-Kansan heritage, a family tree chock full of farmers, and the experience of growing up with a vegetable garden in my back yard (as well as doing numerous hours of volunteer labor at a local orgainic farm) make me sympatheic to the farmers' perdicament. Yet I am a strong beleiver in free markets and I think that farm subsidies are unecessary, unfair, and damaging. Farmers should get payment for what their products demand, and should not need to rely on welfare. These subsidies violate the law of supply and demand because the farmers get more than their products naturally fetch on a free market, and so they are able to either underproduce ( and be inefficient) without terrible consequences, or they can reap un-fair benefits. This hurts market effiency and takes money (in the form of taxes from citizens to pay for the subsidies) out of the market. I realize that the farmers are already dependant on the subsidies, and "weaning" them from this money may prove quite hard, or impossible. It may not be possible to take the extra money away without ruining the agricultural economy in America. Altough I know little about economics, and have no plan for how to fix the problem, I do feel that it is a serious problem.
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