Agricultural Subsidies: 

Does the good of the many outweigh the good of the few?

 

Sitting in my new, more expensive home with all of the niceties of DINKdom,[1] I know that if catastrophe befell me (lost job, health issue, stock market crash, etc), I have de-risked my financial situation enough so that I could survive on my current assets for quite some time.  I am in the top 6% of wage earners and more secure financially than most of the U.S. populace.  It is very easy for me to look at the “world economy” and say we, as a nation and world, would be far better economically if agricultural subsidies were eliminated.  It makes good economic sense and we should be more concerned with the “collective” good of eliminating subsidies than the “individual” good of protecting U.S. farmers.  Well, I disagree.  You see, I grew up on a small family farm in southern Minnesota, and I know the other side.

 

When I was born, my father worked as a milkman during the wee hours of the morning, and during the rest of the waking hours he tried to establish his farm:  corn, soybeans, oats, hogs and beef cattle.  Until the age of five, the only time I saw him was when my mother took me, along with dinner, to the field or barn where we ate together in the cab of the tractor.  He worked incredibly long hours and we lived in an old house that was so expensive to heat, we had to dress by the kitchen stove in the winter to remain warm.  I never knew we were poor, because that was normal.  We always had food and clothes and the community I lived in lived similarly.  During this time and during the whole time growing up, agricultural subsidies helped my family to grow into a middle class way of life and we were able to survive the 1980s when commodity prices dropped, interest rates soared, and cost of land and machinery skyrocketed.  My father was a good businessman and had contingency plans for such things. 

 

I do believe that the agricultural subsidies provided to my father, if eliminated, would have had positive impact on the world economy and the income level of our country in general.  However, I am not convinced that the impact would be significant. In today’s US farm economy, farmers often do not respond to lower prices by taking land out of production.  “They sometimes switch to other crops, but they rarely allow the land, their most valuable asset, to lie idle.  If indeed they do go bankrupt, the land is generally taken over by larger farm interests and kept in production.  If production does not go down, prices do not rise and dumping margins remain untouched.”[2]

 

So perhaps the solution is not the elimination of all agricultural subsidies but the control of overproduction.  For instance, in the early 1990s, Minnesota offered farmers an agricultural subsidy to take land out of farming production and plant native prairie plants and trees.  The state paid for the plantings and gave farmers a certain amount of money per acre removed from production.  Perhaps a small move in the way of limiting overproduction, but nonetheless a move in that direction and still considered an agricultural subsidy.

 

The WTO has seen recent advancement in the elimination of agricultural subsidies.  “For the first time, member governments have agreed to abolish all forms of agricultural export subsidies by a date certain. They have agreed to substantial reductions in trade distorting domestic support in agriculture,”[3] Director-General Supachai Panitchpakdi reported.  Advancements were seen in the agreed elimination of cotton subsidies which will presumably open markets to cotton producers in developing countries.

 

Although I cannot completely disagree with the efforts of the WTO to eliminate agricultural subsidies, some finer points must be recognized.  First, not all agricultural subsidies are created equally.  Cotton subsidies are not equal to corn subsidies, are not equal to subsidies such as the one provided by the state of Minnesota to remove land from production.  U.S. agricultural policy will have as great or greater impact on consumer pricing and production as will openly free trade and elimination of subsidies. 

 

Second, the United States must realize the “opportunity costs” of eliminating agricultural subsidies, particularly in the short term, but impacting the long term.  For instance, farmers who depend on subsidies to maintain a middle class lifestyle may indeed slip in socioeconomic status and become part of the nation’s poor.  Along with the slip may be the long-term implication of future generations of poor.  (Yes, the climb in class is possible in the U.S., but realistically, the chance of being poor over your lifetime increases if you were born poor and see no way of changing it.)  Additionally, poor people do not have purchasing power, but because of subsidies and being raised in the middle class, my family had purchasing power, contributing positively to the local and national economy.  I wonder also, if subsidies had not provided my father with the “boost” to maintain a middle class lifestyle, but rather we remained poor, would my sister and I be highly educated, high-earning contributors to our society?  I don’t know. 

 

Lastly, does the good of many really outweigh the good of the few in this instance?  Or does what the small family farm in the U.S. has to offer our culture outweigh the need for developing countries to enter the market and the small increase in commodity prices and decrease in consumer prices?  I watched an entire community of small family farmers, all subsidized in some fashion 1) maintain the good Protestant work ethic this country was built on (because subsidies did not make us wealthy!), 2) produce children who for the most part became significant contributors in today’s society, 3) maintain and propagate values and principles that we all live by, and 4) provide the U.S. with a unique culture that adds to our diversity and continued well-being.  Will the small family farm be maintained in the absence of subsidies?  I doubt it, but I think we will find out.