Yesterday afternoon I had the pleasure of reading a great article on RealClearMarkets about the problem with American farm subsidies. The article is titled, “If You Want to Help Starving Countries, Don’t Send Food.” It was written by Allan Golombeck and is about how farming subsidies in America and Europe area form of “dumping” that limits economic growth in developing nations.
Golombeck does an excellent job of describing the problem with farming subsidies when the food grown with them is sent as food aid to the Third World.
According to both Golombeck and President Donald Trump, farming subsidies are meant to help US farmers deal with protectionism. President Donald Trump’s tariffs on Chinese goods are meant to bring China more into the bounds of acceptable behavior. Perhaps they’ll work. In the meantime, tariffs have had the effect of making the Chinese decrease the amount of America good they import. Soybeans have been particularly hard hit.
Because the Chinese won’t import American farm products due to tariffs, American farmers are struggling. The subsidies for those farmers are meant to make up for that problem.
The problem with those subsidies, as Golombeck points out, is that many American farm products are sent as food aid to the developing world. Or they are sold to those developing countries at ridiculously low prices because of the subsidies.
Because the prices are so low due to US subsidies, farmers in developing nations cannot compete. They cannot match the low price of imported food that was grown with subsidies.
Golombeck ends the article by showing examples of developing nations ruined by food aid. Haiti, Brazil, and Bangladesh have all received high levels of food aid over the past few decades.
While the politicians who sent that food aid meant well, the unintended consequence has been the ruination of many farmers in those nations. Additionally, agriculture is a large industry in developing countries. When it struggles to grow, or even survive, so does the economy of those nations.
Just as Americans are hurt by the Chinese dumping steel on our economy that they produced at ridiculously low prices due to government subsidies, so are farmers in the developing world hurt by US farm products that are sold are ridiculously low prices due to government subsidies. Instead of sending food aid, we should let those countries help themselves. Their farmers and economies will be better for it.
I thought that this article was well-written and made an excellent point that I hadn’t thought of before. I have always been against subsidies for farmers. I see why they exist, but I think farmers should have to compete in the free market like everyone else. However, I hadn’t thought of the deleterious effect that those subsidies indirectly have on the developing world.
After reading the article, I can see why food aid hurts already struggling countries. If they are already struggling to grow economically, sending goods for free that will undercut their main home industries will obviously hurt those countries.
I don’t think there is a good solution to this problem. It doesn’t seem humane to let people starve when we have an abundance of unsold farm products, but it seems even less moral to undercut those countries economically.
The only solution I see is the free market. Get rid of subsidies and food aid of any type. Instead, just let food be grown and sold at the market price. The invisible hand will guide and help everyone. Capitalism is a great corrective force that will help solve our problems. We just have to rid ourselves of government inflicted problems and then let capitalism work its magic.
Read this article if you are at all interested in trade, the negative effect of subsidies, the problem with farming subsidies, or how to help the developing world to grow economically. It is well written and the points in it are well-researched. Read it!
By: Gen Z Conservative