Agricultural Subsidies

I'm still reading Making Globalization Work, and have reached the point at which Stiglitz discussion the role of agricultural subsidies in stymying development and continued poverty.  

...more than two-thirds of farm income in Norway and Switzerland came from subsidies, more than half in Japan, and one-third in the EU.  For some crops, like sugar and rice, the subsidies amounted to as much as 80 percent of farm income.  The aggregate agricultural subsides of the United States, EU, and Japan (including hidden subsidies, such as water), if they do not actually exceed the total income of sub-Saharan Africa, amount to at least 75 percent of that region's income, making it almost impossible for African farmers to compete in the world markets.  The average European cow gets a subsidy of $2 a day (the World Bank measure of poverty); more than half of the people in the developing world live on less than that...The Burkina Faso cotton farmer lives in a country with an average annual income of just over $250.  He ekes out a living on small plots of semi-arid land; there is no irrigation, and he is too poor to afford fertilizer, a tractor, or high-quality seeds.  Meanwhile a cotton farmer in California farms a huge tract of hundreds of acres, using all the technology of modern farming:  tractors, high-grade seeds, fertilizers, herbicides, insecticides.  THe most striking difference is irrigation-and the water he uses to irrigate the land is in effect highly subsidized.  He pays far less for it than he would in a competitive market.  But even with the water subsidy, even with all of his other advantages, the California farmer simply couldn't compete in a fair global marketplace were it not for further direct government subsidies that provide half or more of his income.  Without these subsidies, it would not pay for the United States to produce cotton; with them, the United States is, as we have noted, the world's largest cotton exporter. Some 25,000 very rich American cotton farmers get to divide $3 billion to $4 billion in subsidies among themselves, which encourages them to produce even more.  

Stiglitz proceeds to note, that like the Bush tax cuts, subsidies predominantly benefit the wealthy and industrial farms, rather than the family farm.  

Looking across all crops, some 30,000 farms (1 percent of the total) receive almost 25 percent of the amount spent, with an average of more than $1 million per farm.  Eighty-seven percent of the money goes to the top 20 percent of the farmers, each of whom receives on average almost $200,000.  By contrast, the 2,440,184 small farmers at the bottom-the true family farmers-get 13 percent of the total, less than $7,000 each.  The huge subsidies-including the allegedly non-trade distorting ones-actually drive out the small farmer.  When farming becomes more lucrative because of the subsidies, the demand for land is increased, driving up the price.  With the price of land so high, farming has to become capital-intensive.

Stiglitz notes that doing away with agricultural subsidies will have significant benefits to farmers in developing countries (aka, the majority of people in developing countries), although urban workers will be hurt by higher food prices.  His solution?  "The way to solve this transitional problem would be for industrial countries to provide assitance to help the developing countries through the adjust period-even a fraction of what they no spend on agricultural subsidies would do." [emphasis added).  


In short, removing agricultural subsidies would save us a ton of money, which could be invested in research, education, infrastructure, medical care, or any number of the areas in which the United States could use some work.  The downside is that industrial farming will be negatively impacted, which could lead to a decrease in jobs, higher food prices, etc.  The thing is, people still need to eat.  The decline of industrial farming means the rise of smaller family farms.  As Stiglitz noted, subsidies to industrial farms raise the price of land to the point where industrial farming is actually necessary to turn a profit, which discourages small farmers.  The removal of those subsidies will lower the price of land, and make labor-intensive rather than capital-intensive farming profitable.  This equals job creation, especially for unskilled laborers, who have been hit the hardest by our decline in economic fortune, and who are troublesomely numerous due to our decrepit public education system.  


Moreover, there is a built-in market for food from smaller, local farms because of the rise of the idea of organic food.  A while ago, I was having a conversation with someone who irrationally hated the Pacific Northwest's snobbery about organic, locally produced food.  I pointed out to her that industrial farming was a less viable option due to the geography of the region, but that there was still plenty of arable land available for farming, which led to a proliferation of smaller, local farms that produced organic, pesticide/herbicide/genetic modification free food that tasted better and was healthier, but still remained relatively affordable.  I asked, "Why wouldn't you eat food that tasted better and was better for you if it was available at a relatively equitable price?"  


Removing agricultural subsidies simply expands the areas in which it's feasible to grow locally produced, healthy food so that the rest of the country can enjoy the fruits of tomatoes that don't taste like durable pulp.  It could be argued that the second and third order effects of the decline of factory farming would negatively impact, say, tractor manufacturers, etc.  My argument would be that a more level playing field will allow for wealthier farmers in developing countries, who in turn can invest capital in tractors, irrigation, etc.  The market for those goods and services will expand significantly, leading to increasingly efficient agricultural practices world-wide and increased crop yields.  Moreover, the increased market share of smaller farms will make it more feasible for smaller farmers to invest capital in tractors, etc.  


These are just the economic reasons to do away with agricultural subsidies.  It doesn't even touch the increased environmental benefits of decreased use of pesticide, herbicides, and industrial farming generally speaking.