Monday Musing: Farm Subsidies, Ways of Life, and Poverty

Iraq, Katrina, and the war on terror (or is it now "war on Islamist extremism"?), displaced the G8 summit’s and Live 8’s stated focus on poverty in the Third World, especially in Africa. Perennial problems never bring a sense of urgency, only occasional bursts of concern which then quickly subside like one's conscience when others stop looking.  Of course, many do work on the issues regularly and in sustained ways. And by and large, global poverty has been on the decline—largely due to rapid growth in India and China.

The bombings in London among other things managed to abort what could have been a fruitful discussion of global poverty, even if both the G8’s agenda and Live 8 had cast it in terms that avoided perhaps one of the deeper causes of global poverty—agricultural subsidies for farmers in the developed world—in favor of solutions that could be categorized under bourgeois charitablism, even if some of these have merit. 

The link between farm subsidies in the West and poverty in the Third World is fairly straightforward, even if many don’t quite see the linkage. It’s no secret that farms subsidies in the West are enormous. Excluding subsidies in the form of research and development, food inspection and welfare support for poor citizens (mostly, the food stamp program in the US), subsidies in the OECD averaged 30% of farm receipts, meaning 30 cents of each dollar of revenue from farming in the West comes from state transfers, on average. Nearly, US$290 billion was spent by OECD member in direct support to farmers.

The funny-disturbing figure in these discussions is $2.50 a day in subsidies per cow in Europe; compare that with this one--nearly three in four people on the African continent live on less than $2 a day. And the connection is more than coincidental.

Subsidies, especially on these scales, encourage considerable over-production, allowing farmers, or agro-business, to effectively dump food in poor economies. (Yes, people are made poor because there’s too much food in the world.) Local farmers are unable to compete with the (subsidy distorted) prices of imported foodstuffs. In the last decade, major crops, such as sugar and cotton, have seen a fall in prices by as much as 40%-50%. Sugar subsidies, for example, make it difficult for Mozambican producers to compete with European or American ones. (Moreover, quotas and tariffs in the West add additional costs to poorer producers when they try to export to the West.) Commodities prices fall below the costs of production in many locales. In most of these places, local farmers are among the poorest; pushed out of the market by subsidies, they are often unable to gain a livelihood. And more than 2 billion people on this planet depend on agriculture for their livelihood.

Delegations from poorer countries to talks on trade regularly point this out, and politicians and trade representatives in the West are hardly ignorant of the dynamic. Nor are they so callous as to be indifferent to poverty on this scale, or at least I’d like to think that they are not.

Occasionally, someone makes the case that a nation doesn’t really want its food supply to be at the whim of global markets, and subsidies insure that it preserves the capacity to produce at home. Others treat it as a way of having their nation's farmers command a larger share of the world’s food market. Of course, it’s unlikely that agriculture in the West would disappear without subsidies and further impoverishing millions in the world’s bottom tiers is a rather sickening price to pay for market share.

For most governments in the Western world, electoral politics makes it difficult to end farm subsidies. Rural, agriculture-dependent populations may be small, but they are a strategic voting block who feels the issue intensely. Moreover, the rest of us benefit from cheap food. Even if it is the case that very large producers, and not small farmers, benefit most, the symbolic power of the Japanese rice producer or the French farmer (or the American one, for that matter) is considerable.

Not too long ago, I was having a discussion with a friend who has worked for a long time in developmental economics. Her work mostly concerns Africa, and she’s extremely critical of the subsidy system in the West, but entirely for the havoc it wreaks on the poorest in the world. But she asked a question: what's wrong if a society tries to maintain a way of life for cultural reasons? (The Japanese and French often give this answer when criticized for providing lavish assistance to their farmers.)

And make no mistake, we are taking of ways of life here and not merely support for a job. Farming brings with it more than simply income. Various aspects of life are tied to it: extended family structures, communities, schools, and broad elements of what we would call culture. My grandmother, a small farmer in the rural backwaters of India, continued to work the land into her 80s, long after her children did reasonably well.

When entire ways of life are under threat, people do make strong demands on their societies and governments that these ways of life be maintained. When the company-towns along what became the rust belt (and is now post-rust belt) fell into economic distress, others felt the pull of their demands to have their communities preserved, and preserved through the maintenance of the companies that were the integrating and constituting force of the communities and culture.  The reaction is understandable.

There are two objections. First, even if we choose to help maintain these modes of life, there is no good reason why we should permit the consequence of the impoverishment of millions. But second and perhaps more important is the fact that we don’t owe others the maintenance of their way of life. This is as true of the farmers in the Third World as in the first. (I do think that we should provide assistance to those dislocated in our economy so that they can adjust themselves to new circumstances.)

But it’s clear that despite the reduction in some farm subsidies over the last decade or so, farmers in the Third World will not be enjoying a leveled economic playing field anytime soon. And as much as many people in the West want the end of subsidies, the strategic voting position of farmers makes it unlikely that subsidies will disappear, though some Western societies have managed to get rid of them. Perhaps then it’s time to focus energies on how to keep much of the food produced in the First World off of local markets in the Third World, or to allow tariffs that raise the price of Western foodstuff to market levels. But it is most certainly time to discuss how something this seemingly innocuous is immiserating some of the world's more vulnerable in ways that are not about making us feel good and which also take into account that (at least some) farmers in the West have more at stake than their income.