Farm subsidies may be described as statutory financial aid provided to the farmers to help them in their agricultural activities and the process supplements their income. Subsidies also help the farmers to manage the supply of commodities produced as well as influencing the cost of such supplies in the economy. The firm subsidy was introduced in the United States in 1933 after years of crop failure and it was mainly intended to keep the prices high (Susan Welch, John Gruhl, John Comer and Susan M. Rigdon, 540). The deal included a price support system that guaranteed the farmers a given price for their produce while the government was meant to purchase the excess crops (Welch, Gruhl, Comer and Rigdon 540). In addition, the farmers were being paid to stop farming some land to prevent overproduction. The 2002 bill introduced direct payments which were payments forgiven crops independent of the prices. The purpose of this paper is therefore to prove beyond reasonable doubt that the farm subsidy does not make economic sense and should therefore be done away with.
The agricultural sector is normally faced with a lot of uncertainties which may either be manmade or just natural disasters and this status of unpredictability has remained the biggest challenge to both the producers and consumers of farm products. According to Robert Goodman, an Alabama Cooperative Extension System Farm Economist and Auburn University Associate Professor of Agricultural Economics, (para. 1), the farm subsidy proponents therefore argue that the subsidies are important as they help the farmers to continue with production even when there are fluctuations in the commodity prices resulting from climate and market hindrances (Goodman Para 1). They also assert that the subsidy protects the consumer from increased prices as a result of shortages of crop inventories. Moreover, while most the Americans look unto the other countries for agricultural supply, they should realize self-sufficiency is always associated with security. Goodman (para. 2) argues that farm subsidies therefore, are important in preserving the farm infrastructure and they could be used in the production of other commodities in the event of an emergency. He goes ahead to argue that the collapse of the farm’s economy, as in the case of Canada, stands to greatly affect a country’s security and sovereignty (Goodman Para 3). Most people assume that it is only the farmers who stand to gain from the farm subsidies while tending to forget that once the production cost has been lowered for the farmers, even the others along the production chain will benefit from the low input costs. The supporters of farm subsidies argue that since everyone can attest to the benefits of the farm subsidies over the years since their introduction in the United States, it would be rather suicidal to have it scraped off as no one can really tell the misfortunes that may come with such a decision (Goodman Para 5).
Subjectively, the farm subsidies should be scrapped since the agricultural sector should be able to support itself just like any other sector. The kind of a scenario seen in the developing countries in which too much attention is paid to the agricultural sector while the other sectors are left neglected is quite disturbing. This as a matter of fact, has had the developing countries left in a state of confusion and desperation when the agricultural sector gets attacked by uncertainties such as droughts or floods. Therefore, Craig sams, B.Sc Econ graduate from the Wharton School at the University of Pennsylvania, views that the subsidies should actually be done away due to some more reasons, for instance, in the European Union and United States of America, subsidies have indirectly caused obesity and other problems that come with being overweight (Sams, Para 1). This is a real concern especially in the U.S.A where a good number of people are either obese or overweight, resulting from intake of too many carbohydrates. This of course emanates directly from cheap costs of the carbohydrates from the easily available and affordable agricultural produce. Indeed, the subsidies are mainly given for the large-scale production of the starchy crops such as corn and wheat.
Farm subsidies have also been shown to result in poverty in a number of ways. To start with, the exportation of subsidized food surplus especially by the developed countries really undermines the local agricultural production and this may consequently lead to the collapse of the agricultural sector (Sams Para. 2). World prices of the major food commodities have been maintained at a reasonably low cost by the subsidies, a phenomenon that is the major cause of poverty among the billions of farmers across the world. Precisely, the argument here is that the urban poor should not be used as a reason to keep the rural poor in constant poverty.
The foundation of most developing countries is built on agriculture and more than half their population depends on agriculture for livelihood. Therefore, if the farmers earn well from their production, then they will be able to feed and educate their children with ease thus substantially reducing poverty. Lastly, the subsidies in the United States and European Union are driving the small-scale farmers out of production mainly because the subsidies are mainly given to the large-scale farmers. This is resulting in more unemployment and as a result increasing the rates of poverty in such countries.
One may wonder where the government sources the money that it gives to the farmers in the form of subsidies; the answer of course is that it is from the taxpayers. The subsidies are a good thing since they support the farmers a great deal and they also enhance food security in a country. The only problem is that the program increases the tax burden on the taxpayers. This should not really be justified since a large number of people are burdened for the sake of a few individuals. Moreover, the government seems to forget that even the taxpayers are also just struggling to meet their basic needs and adding them a tax burden which may not just be agreeable to them as noted by Morgan Rose, a Ph.D. candidate in economics at Washington University in St. Louis.
Some of the opponents of the farm subsidy program argue that it is a waste of public resources. The introduction of the subsidies has not really resulted in the decrease in the prices of foodstuff, but it only stands to benefit the farmer who enjoys a relatively low cost of production. The subsidy also enables the farmers to increase their output but the farmers do not really transmit the benefits of the subsidy to the consumers by lowering the prices of the commodities they produce (Rose para. 5).
The farm subsidy program as seen above is aimed at increasing the incomes of the farmers by protecting them from uncertainties of unfavorable climate or other calamities. This has not been the case since the subsidy has instead caused overproduction. Definitely, this leads to lowered prices and the farmers are therefore obliged to sell their produce at much more reduced prices, leading to low farmer’s incomes.
The farm subsidy system has also been shown to harm the poor farmers because it excludes them from the funding simply because the subsidy is only given to the consolidated family farms and the costs of the land have also gone substantially high thereby preventing the younger people from getting into farming. This therefore implies that the farmers who have not had their farms consolidated will therefore not receive any subsidy from the government. This will make it quite difficult for such farmers to compete with the ones getting the funding (Organization for Economic Development and Cooperation 53).
The farm subsidy system should not be justified since the premises that it is based on have been found to be untrustworthy. For instance, the subsidy system claims that one of its mandates is to reduce farmers’ poverty as described by Brian Riedl, Senior Policy Analyst and Grover Hermann Fellow in Federal Budgetary Affairs. Most of the farmers live in the rural areas where the cost of living is quite low and therefore the poverty levels are relatively low as compared to number of the urban dwellers. Furthermore, the subsidy system mainly favors the large-scale farmers who mainly practice monoculture but not the small-scale family farmers.
Another argument is that the subsidy is given in order to protect the farmers from possible unfavorable weather conditions (Riedl Para. 5). This is not an economically wise decision mainly because the farmers can always have their crops insured instead of giving the farmers free money regardless of whether they have experienced some losses or not – this is a complete wastage of tax payer’s money which should instead be diverted for the development of another part of the economy.
Another argument is that farm subsidies are meant to help in maintaining a cheap and stable supply of food. However, this is not really the case since analysis shows that two thirds of the food production are unsubsidized and again the food prices not only depend on the crop prices, but also on the cost of transportation, manufacturing, processing and marketing of the given commodity.
According to Riedl (Para 6), the government could be lying to Americans by telling them that the subsidies are meant to boost national security since the country is overproducing the farm produce and exporting about a third of it. The state should instead consider having in place price stabilization measures in order to protect both the consumers and the farmers.
The government could consider a change of tactic by allowing the importation of the cheap subsidized commodities from Japan and the European Union (Riedl Para 9). This move will provide people with cheap commodities while the farmers should then be encouraged to produce other crops which will give America a competitive advantage in the world market (Riedl Para 7). Unfortunately, the trade barriers that America has put in place have instead resulted in increased commodity prices and this has also affected free trade between the countries.
In summary, the farm subsidy program is a non-profit venture and is a complete waste of the taxpayers’ money. Indeed, a bold step should be taken in doing away with the program and the farmers, just like any other stakeholders in the economy, should be able to take full responsibility for their investments. Instead of the subsidies, there could instead be advocacy for price control mechanisms or instead have in place an insurance program to compensate the farmers in case of calamities.
Annotated Bibliography
Goodman, Robert. “A five-Point Defense of Farm Subsidies.” Alfa Farmers. 2006. Web.Â
Goodman argues that the farm subsidy program lowers the cost of production for the farmers by allowing them to sell the crops at relatively lower prices to the consumers; subsidies protect the farmers against fluctuating market prices. The author further contends that subsidies boost national security in the country since self-sufficiency is always associated with security. In addition, the author notes that subsidies also encourage the preservation of farm infrastructure as the same piece of land could be used for the production of other things in case of emergency. Finally he says that it is important for a country to produce its own foodstuff and preserve the agricultural economy as its collapse has a serious negative impact on a country’s security and sovereignty.
“Organization for economic Development and Cooperation (OECD).” Farm household income; issues and responses. Paris. OECD publications. 2003.
This publication paints a picture of the farm subsidy system to have led to a reasonable decline in the amount of household income and this has in a way increased poverty rates among the small-scale rural farmers. It further explains that the government gives funds to the large-scale producers more than the small-scale farmers, making them disadvantage as they can not compete with the large-scale farmers. In addition, small-scale farmers tend to be adversely affected by market fluctuations. The subsidies are also given to the consolidated family land and those not consolidated shall not receive any funding.
Riedl, Brian, “How farm subsidies harm taxpayers, consumers, and farmers too.” Fragile-earth. 2007. Web.Â
Brian Riedl argues that the policies of the program are meagerly myths and should no longer be used as the reasons for justification of the program. This is because the program mainly funds the wealthy large-scale producers and not the small-scale poor farmers. The author further posits that America experiences an overproduction of farm produce and does not need subsidies to boost food security. He also argues that the farmers benefit from the subsidies whether they have experienced any losses as a result of adverse weather conditions or not. Riedl concludes on this by arguing that the subsidy program is too expensive for the government and it could instead be replaced by price stabilization procedures and that America could instead import the cheap subsidized crops from other countries and concentrate on producing what it has a competitive advantage on.
Rose, Morgan. “Paying for Farm Subsidies.” Library of Economics and Liberty, 2002. Web.
This article presents the picture of funding by the government on farming, claiming that the amount spent each year is so enormous that despite boosting the food security, it affects the financial stability of the taxpayers. This therefore means that the taxpayers are forced to dig dip into their pockets to cater for the increased taxes. At times the farmers do not really increase the amount of produce as a result of the subsidy given to them. The article further portrays another sad thing whereby the subsidies are given to the farmers whether they have experienced any losses as a result of adverse weather conditions or not – this is a real waste of state resources.
Sams Craig, “Subsidies – Who Gains who Loses.” The Little Food Book. 2000. Web.Â
The author claims that the subsidies are responsible for the increased overweight and obesity cases in America since they have led to the prices of carbohydrates being substantially low. He also adds that the subsidies are accountable for the increased rates of poverty among the farmers and in the developing countries because it leads to overproduction thereby forcing the farmers to sell their commodities at much-reduced prices. The importation of cheap subsidized commodities from other countries undermines the local agricultural production and could cause the collapse of the local agricultural sector.
Welch, Susan, et al. Understanding the American government. Boston, Cengage Learning. 2008.
According to this book, farm subsidies represent the financial assistance by the government to help the farmers manage their farming activities efficiently and economically. Most of the world’s major economies have this program and it is normally geared towards encouraging agricultural production for food security and at times for exportation. The book also views that when the government imports cheap subsidized crops from other countries then the local farmers are likely to experience losses the prices of the commodities are likely to go down.
Works Cited
Goodman, Robert. “A five-Point Defense of Farm Subsidies.” Alfa Farmers, 2006. Web.
Organization for economic Development and Cooperation (OECD). Farm household income; issues and responses. Paris. OECD publications.2003.
Riedl, Brian, “How farm subsidies harm taxpayers, consumers and farmers too.” Fragile-earth. 2007. Web.
Rose, Morgan. “Paying for Farm Subsidies.” Library of Economics and Liberty, 2002. Web.
Sams Craig, “Subsidies – Who Gains who Loses.” The Little Food Book. 2000. Web.
Welch Susan, et al. Understanding the American government. Boston, Cengage Learning. 2008.