Saturday, 8 March 2014

This Disgrace Mustn't Go On....

When people in poorer countries can't trade freely, they suffer. One of the biggest barriers to free trading for poorer people (like many in Africa, Asia and South America) is when they are priced out of the market by richer providers (like Americans). If this was going on in a free market capacity there would be less to object to - but it isn't. Government subsidies and high tariffs on imports are two examples of how richer countries are distorting the free market by preventing poorer countries from competing to sell their resources. The European Union subsidises European farmers and the American government subsidies American farmers, placing African, Asian and South American farmers at a huge disadvantage, because they cannot easily sell their own produce as they are unable to compete with richer countries in the price market. When George Bush affords American farmers 180 billion dollars in subsidy deals to buy American votes (which he did when he was President), he depresses prices across the globe, which robs unsubsidised (and much poorer) Africans Asians and South Americans of their ability to be able to sell their crops competitively in the global market. This costs poorer countries tens of billions of dollars in lost revenue.

When President Roosevelt originally set up farmers' subsidies, the policy was intended as a temporary plaster over the bleeding wound of the American depression. In the modern age where we have a widespread global economy, these government subsidies and import tariffs are a disaster for those struggling to make a living in the developing world. To their credit, New Zealand, a country more dependent on agriculture than America, ended their farm subsidies in the 1980s when the government was short of money - and the whole country has seen hugely positive rewards as a result.

In subsidising farmers, the governments in question don't just disadvantage those struggling in developing countries, they retard innovation locally too. Stopping the subsidies helps farmers explore new market potential; it incentivises them to innovate, to diversify their output, and to generally be more economically prudent without government funds to fall back on. When a government subsidises farmers it removes some of the need to run a business in accordance with market demands and price fluctuations. Non-subsidised business owners are much more alert to profit and loss signals, just as any business that makes decisions with other people's money tends to make those decisions less prudently than with their own money. Furthermore, business owners who receive subsidies try to curry favour with the politicians handing out the cash, when they should be trying to win the customers by providing a good business practice and competitive prices.

Farm subsidies in the shape of the very rich giving to the relatively rich at the expense of the relatively poor are a disgrace - and no nation can claim any kind of moral accomplishment in the global scene while they continue to engage in this egregious policy of subsidising their own at the expense of those desperate to get a stronger foot in the free market.

* Photo courtesy of quicktake.wordpress