Paying for it twice (or more)

To complete the circle of mutual admiration, I'll comment on Joe Miller's post/response to Matt's TCS article on exploitation, to give a hearty "here, here" to this sentiment:

A lot of the reason that subsistence farming entails so much misery, however, is that we've decided for some reason that it's a really good idea to offer subsidies to farmers in this country (subsidies which, for the record, mostly benefit agribusiness and not the nice folks whose farms I pass every day on my drive to work). By subsidizing relatively rich American farmers, we make it impossible for farmers in developing nations to compete. Thus, rather than exporting cheap food to the United States, and in the process raising the floor such that Nike will need to pay more to convince someone that life in the factory will be better than life on the farm, developing nations instead find themselves filled with miserable subsistence farmers. And the real irony here: we pay twice for this sort of thing, first in taxes to fund the subsidies and then in the check out line in terms of higher prices.

It really is galling how we (and Europe) screw over the rest of the world with farm subsidies. Its inverse comparative advantage- we pay extra for our high cost producers and put world farmers out of business, thwarting development and sticking it to our own (quite rich by world standards) poor. In fact we pay for it thrice; once in taxes for subsidies, once at the check out line, and once again in taxes as development aid. If we'd just let them farm commercially by refusing to overproduce food, they'd make money the old fashioned way. The extra bonus would be that superintensive farming would lessen in the developed world, which has environmental benefits. If the goal is to keep the family farm-type lifestyle and/or pastoral land use in play, then we should explicitly make policies to support that goal rather than trying to do it indirectly through subsidies.

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Subsistence farmers aren't

Subsistence farmers aren't affected by U.S. agricultural subsidies or the global price of food. Subsistence farmers by definition produce only enough food to feed themselves. If you mean poor farmers, meaning poor by pretty much any standards but still wealthy and productive enough to produce a surplus, that's different.

Thus, rather than exporting cheap food to the United States, and in the process raising the floor such that Nike will need to pay more to convince someone that life in the factory will be better than life on the farm, developing nations instead find themselves filled with miserable subsistence farmers.

That doesn't make sense. It says that the US subsidies depress the global food price (true) and thus reduce the price that industries have to pay to shift third-world labor from farming to manufacturing (true) and thus people stay on farms instead of moving to factories (huh?). If industries can get labor for less (because the alternative they are competing against, farming, pays less because of subsidies) then they will get more of it, not less.

Third world countries probably should be getting out of farming. It probably is not their comparative advantage, i.e. the thing they are least worst at. If they shifted their production from farming to manufacturing, as they probably should, then US and European agricultural subsidies would be a boon to them, not a curse.

They still should be eliminated, though, for plenty of other reasons.

Eddie, The point though is

Eddie,

The point though is that poor farmers become subsistence farmers because they can't compete with Western farmers who are receiving subsidies. These are folks who are pretty much going to be farmers. If they could raise crops and sell them to Westerners, then they wouldn't be subsistence farmers. Since they can't compete, they can't sell their crops, and thus instead of raising cash crops, they become subsistence farmers. Remove subsidies and these same farmers can convert to cash crops and become much less poor.

You're right that when farm wages are lower, factories get more labor at a lower cost. That was my whole point. If you think that, on balance, sweatshops are a bad thing (in that the people working at those sweatshops are still pretty poor, all things considered), then you should be trying to make farming better paid. That will mean that industries will have to pay higher wages.

Joe: my point is that we

Joe: my point is that we probably shouldn't be trying to make farming pay more. We should be trying to get people out of farming, because they're probably not very good at it relative to the rest of the world. Comparative advantage and all that, you know?

Our subsidies hurt anyone else who is a net producer of what we subsidize. But they help anyone else who is a net consumer of what we subsidize. Poor countries are probably net producers of agricultural products, so they're being hurt; I'm suggesting that they should probably switch production to be net producers of, say, shoes or auto parts or tech support instead of agricultural products. They should do so for reasons independent of the US subsidies (comparative advantage), but once they do, those same subsidies will then help them instead of hurting them.

The European subsidies to Airbus are harmful to Boeing (and its employees and shareholders) but are a free gift to air travellers and airlines, even the ones in the United States. And there are more air travellers and airline employees and stockholders in the US than there are employees and stockholders of Boeing. We should be sending thank-you notes to the French taxpayers for their generosity to Americans.

Same thing with US subsidies. They actually help anyone that's not in direct competition with the subsidized producers, no matter where they live or how rich or poor they are. Except the taxpayers paying the subsidies, of course - we're just getting screwed.

"It really is galling how we

"It really is galling how we (and Europe) screw over the rest of the world with farm subsidies."

Actually, Europe doesn't screw over the rest of the world. It screws over middle-income countries. LDCs and ACP countries have preferential access to the EU market under the Everything But Arms program, created in 2001. As such, they get to export at protectionism-inflated prices and import at subsidized prices. Abolition of the EU subsidies would be a terms of trade loss for the poorest of the poor.

Check out http://www.tradediversion.net/archives/2005/11/everything_but.html & http://www.columbia.edu/~ap2231/Policy%20Papers/Fallacies_Agriculture.pdf for more.

Farming happens to be a very

Farming happens to be a very emotional issue and can be used to wring a tear out of almost anyone. The 'family farm' is an amazing tool, along with the 'poor third world' farmer, to grind money or force it out by proxy from the liberals enemeies, ie ME. Why do people feel sorry for them? DO you think they have classrooms full of weeping vietnamese, with some pepperhair showing them how thier evil low wages caused the destruction of Flint Michigan? of course not. they couldn't care less, and neither should we or our gov't about thier pathetic inability to compete in this world. go get a gold backed curency, quit stealing and fornicating,and following pepperhaired demagogues, and work your way up.
its easy, it just takes 40 yrs or so.

Fantasy Economics It's

Fantasy Economics
It's frustrating when someone is struggling to make a point that may be valid but they stumble and fail to make it. A lot of the reason that subsistence farming entails so much misery, however, is that we've decided for some reason that it's a real...

Let me get this straight:

Let me get this straight: Farm subsidies screw people around the world by pushing food prices down?

Would you say that innovations which favor large scale farming similarly screw people around the world?

"The ‘family farm’ is an

"The ‘family farm’ is an amazing tool"

Too true. This is a weepy drama that has played continuously for well over 100 years in the US, but I believe it is an old world import of truly antique vintage.

Actually, we pay three

Actually, we pay three times:

1) Taxes for subsidies
2) Higher prices
3) Aid to foreigners

Joe - On whether sweatshops,

Joe -

On whether sweatshops, 'on balance', are a bad thing, I lived in Hong Kong in the 1990s and was surprised at the attitudes in Asia towards the anti-sweatshop movement. They viewed it as rich people trying to hurt the poor, a sort of 'we got ours but we're not going to let you get yours' movement to prevent them from feeding their children and building a better life.

I agree that we should get rid of farm subsidies in the US, especially the ones that go to agribusiness or to rich people running a hobby farm on the side. But the best way to help the poor in poor countries is to pressure their governments to try to adopt international best practices in terms of legal, political, financial and regulatory systems. Then people can figure out for themselves what they should do, and can build lives for themselves without corrupt, lazy government bureaucrats stopping them.

Ann, I don't disagree with

Ann,

I don't disagree with anything that you've said in your comment. My point is that I think, all things considered, that it's probably a bad thing that people work 14 hours a day and still live in desperate poverty. That doesn't mean, however, that one should ban factories that require 14 hour work days and pay wages that leave workers still in desperate poverty. One should acknowledge the fact that those 14 hour day and those terrible wages are still much _better_ than what that same worker would otherwise receive.

Still, that doesn't imply that we ought simply to be content with the status quo. I'm all for cheap goods and services, and I think that free markets are about the best way to produce cheap goods and services. I'd also like it to be the case that even the poorest worker can afford those cheap goods and services. I don't think that this is an unreasonable position to take. Indeed, I'd worry lots about anyone who said that it was, on balance, a good thing that people work in sweatshops. To note that X is better than Y is not to claim that we ought to remain forever satisfied with X.

Joe - I agree with you

Joe -

I agree with you overall. The depth of feeling against the anti-sweatshop movement in Asia surprised me - they felt that the true goal was to price poor workers out of the market completely by demanding excessively high wages. One of the reasons poor workers wanted foreign companies to bring in 'sweatshops' was because they tended to raise the local standards. For instance Western companies were less likely to padlock all the fire exits to prevent theft, even though this ensured that many people would die if there was a fire.

The big multinationals tend to raise the standards (beyond merely the effects of added competition) because of outside pressure and the possibility of bad publicity, I think. Multinationals have more of an incentive to adhere to at least certain basic standards, and publicity from the anti-sweatshop movement is largely responsible for that. So reasonable pressure is good, since I agree with you that the standards should steadily be raised.

That's why I think we should all be focused on putting pressure on governments as well as corporations, since the people in poor countries have huge, largely untapped potential, and their biggest obstacle is their own government, not multinationals or farm subsidies. There are limits to how far either farmers or factory workers can hope to progress if corrupt government officials are waiting to confiscate any excess.

I still don't get how lower

I still don't get how lower food prices screw over the rest of the world.

"I still don’t get how

"I still don’t get how lower food prices screw over the rest of the world." Subsidies lead to artificially low prices, prices that push out potential foreign competitors. These "lower" prices are not lower since taxes pay for them. Whereas genuine foreign competition is not covered by taxes (assuming their governments are not subsidizing in the same way, or undervaluing their curency [i.e. China]) "Would you say that innovations which favor large scale farming similarly screw people around the world?" No. If high innovation + labor alone produces enough food to satisfy customers, then it is legitimately competeting with people around the world. However if foreign farmers can produce cheaper goods with low innovation + labor, then it hurts them to compete with local goods that are subsidized. --- It is hard to say that you pay for it twice or thrice. You actually pay for it infinite times - because the missallocations are too difficult to track. "Actually, we pay three times: 1) Taxes for subsidies 2) Higher prices 3) Aid to foreigners" Actually you pay more than that. You pay for all the factors of production that go into them. Those factors themselves may be subsidized too. My general rule of thumb is to say that government intervention restricts supply, stimulates demand, and does so for all the factors of production that go into the supply (which it self consists of supply + demand curves). But if we want to remain simple, there is #4) Aid to locals (food stamps, etc.)

"These “lower” prices

"These “lower” prices are not lower since taxes pay for them."

Ya, they're not lower for me but they're lower for the rest of the world which does not pay for the subsidies. That hurts me but not them.

"If high innovation + labor alone produces enough food to satisfy customers, then it is legitimately competeting with people around the world. However if foreign farmers can produce cheaper goods with low innovation + labor, then it hurts them to compete with local goods that are subsidized."

That makes no sense. In each case the rest of the world simply gets lower prices. And lower prices are actually good for the rest of the world. Just not for me if I pay for it.

Brian, "...and once again in

Brian,

"...and once again in taxes as development aid."

You might as well argue that we pay for low prices at Walmart in taxes for welfare and health care. Or that we pay for low labor prices from illegal immigrants in taxes for social services. Are those valid arguments against Walmart or free immigration?

"Ya, they’re not lower for

"Ya, they’re not lower for me but they’re lower for the rest of the world which does not pay for the subsidies. That hurts me but not them."

John, imagine a highly industrial country like Japan (for example) providing massive subsidies for YOUR line of work, and then exporting it. You are now out of a job and the Japanese taxpayers are picking up the tab. Lucky for you, you are smart guy in a wealthy country - you can find work. Now imagine all you know is farming.

Cheap goods means nothing to a man that NEEDS to sell similar goods in the first place to get the money to buy the cheap goods!

Imagine a highly industrial

Imagine a highly industrial country like Japan making technical advances in mass farming which drive the price of food down.

Where is the Catallarch who'll affirm this screws the rest of the world over or admit that it doesn't?