Thursday, February 21, 2008

Time to scrap agricultural subsidies

With demand at record levels for many agricultural goods, fed by demand for biofuels, high growth in East Asia and the corresponding lack of expansion in agricultural lands, prices are at record levels for many agricultural goods. Farmers can look ahead to several banner years. The moment is perfect for eliminating the subsidies they enjoy.

Most developed economies help their farmers in some way, either to protect the disappearance of some inefficient farming, to maintain a stock of stable and conservative population, or to satisfy some national security needs. But as the European Agricultural Policy shows, this is extremely costly. Also, as US policy shows, this can lead to absurd results like rice farming in the California desert. Finally, subsidized farming undercuts those countries that should be the best at it and that need it the most the ability to expand: developing economies.

Farmers in developed economies are doing mostly great now, and will do so in the foreseeable future. Time to cut their subsidies.

Update: Here is a great post explaining why a salad costs more that a BigMac: Federal agricultural subisides are heavily tilted towards meat and diary.

PS: On a lighter note: Improv Everywhere at Grand Central.


Vilfredo said...

These agricultural subsidies should have been scrapped long ago. I agree that now is a good time to do away with them. Apart from the misallocation of resources they generate, I am particularly bothered by the fact that they basically annihilate development aid. What does it help to send aid, and then deny imports from developing countries?

Mupetblast said...

You wrote "diary". Should be "dairy".