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Big Farm’s Big Scheme: Farm Subsidies and Their Exploitation of the Poor

by Joshua Walton | Spring 2019

For decades the landowning class has been profiting billions off of American taxpayers. Farm subsidies have redistributed immense sums of money from the average taxpayer to the wealthiest landowners and agricultural corporations in the world. Along with exploiting domestic consumers, agricultural producers in wealthy countries have also severely exploited foreign countries dumping their subsidize goods on foreign markets, devastating foreign producers in poor countries as well as developing countries’ economies in general. However, after years of negotiations and lobbying by developing countries, the World Trade Organization has made decisions to correct some of these wrongs by abolishing foreign dumping. Wealthy landowners still hold enormous amounts of subsidize wealth and power, but the developed world is fighting back.

1.  Amadeo, K. (2019). How Farm Subsidies Affect You. Retrieved from https://www.thebalance.com/farm-subsidies-4173885

2.  Edwards, C. (2019). Agricultural Subsidies. Retrieved from https://www.downsizinggovernment.org/agriculture/subsidies

[3] Hasil, T. (2019). Why Do Taxpayers Subsidize Rich Farmers. 

4.  Edwards, C. (2019). Agricultural Subsidies. Retrieved from https://www.downsizinggovernment.org/agriculture/subsidies

5.  Ibid.

6.  WTO | Agriculture - negotiations. (2019). Retrieved from https://www.wto.org/english/tratop_e/agric_e/negoti_e.htm.

7.  Ibid.

8.  Ibid.

Ever since the dawn of globalization and the birth of the international political economy, the voices of farmers and landowners have dominated politics and kept a stranglehold on government. Whether it was the German “Junkers” or the French landowners or American plantation owners, agriculture in the most powerful nations has had its way influencing law and lawmakers. Landowners have repeatedly overcame majoritarian hostility towards their enterprises and successfully organized to advance their interests often times at the peril of others. Unfortunately, this trend still rings true today through subsidizing farming.

 

Protectionism has deep roots in the agricultural sectors of developed nations, and those roots have been bearing fruit on the World Stage. The World Trade Organization (WTO) (and its previous installment the GATT) was created to foster interactions between nations and increase trade and global welfare and economic equality. For the most part, the WTO and the GATT have done an amazing job, opening up markets in the United States, France, and China, allowing previously poor countries like China, India, and South Korea to quickly rise through the developmental cycle and become very rich very fast. However, one aspect of  the GATT and the WTO that has not made as much progress is agricultural-trade liberalization.

As previously mentioned, developed nations have long fought tooth and nail to preserve agricultural protection. As a country gets richer, its farming class gets smaller and better organized, and its consumers begin spending a smaller percentage of their overall income on food as income rises. Therefore, a slight rise in the price of food will not matter very much to consumers. However, a rise in the price of food through tariffs, subsidies, quotas, etc. means an immense increase in revenue for the shrinking class of landowners, greatly incentivizing them to advocate for protectionist measures like farm subsidies. Subsidies allow the landowners to control the price, which in agriculture is crucial because price fluctuations without subsidies are wholly dependant on weather conditions, which are extremely unpredictable. As seen the through the Great Depression, whole midwestern economies were completely destroyed because farmers were not protected from unstable weather conditions.[1]

However, as journalists from the Washington Posts, the New York Times, the Hill, Reuters, the World Economic Forum as well as economist Chris Edwards and Duke Law Professor Michelle Nowlin proclaim, farm subsidies  have consistently been a method of  “[redistributing] wealth upward.”[2] In 2017, $5 billion dollars in farm subsidies were given out, half of which went to households making over $150,000.[3] Furthermore economist Chris Edwards has found that since 1960, the ratio of farmers’ income to the average household has been steadily increasing as well as “60 percent of subsidies from the three largest programs (insurance, ARC, and PLC) go to the largest 10 percent (by sales) of farms.”[4] Studies have also shown that since 1995, three-fourths of farms bringing in revenue above $100,000 are subsidize and that 50 people on Forbes’ top 400 list receive farm subsidies.[5] Rich countries around the world have been spending billions in taxpayers’ money to line the pockets of the wealthiest agriculturalists. However, the inequality within countries pales in comparison to the damage farm subsidies cause between countries.

Since the 1990s, the WTO has been in a back and forth battle over the debate of agricultural liberalization. Over the years, developed countries have decimated developing nations through subsidizing farming, restricting agricultural imports and dumping into foreign markets. Rich nations have controlled the price of  agricultural goods through subsidies, artificially deflating their prices to keep out foreign producers. Furthermore, rich nations subsidize agricultural exports to maintain control over market prices. Developed nations spend billions in subsidies so that agricultural products can be exported at a lower price, artificially deflating the world market price. They then dump their products on foreign markets, driving the price of goods down to a point that makes the price of developing nation’s agricultural products completely uncompetitive. Developing nations, whose economy heavily relies on agriculture, cannot compete with the billions of dollars of export subsidies provided by rich countries. [6] This has led to agricultural ministers across the developing world calling out the WTO, claiming the system is rigged against them. How has the WTO responded?

Well, the good news is that progress has been made. The WTO formed an agricultural committee to enforce its Agricultural Agreement signed in 1995, and the committee has been negotiating for fairer practices for developing nations since then. After years of negotiations, in 2013, a host of Ministerial Decisions were made to increase agricultural trade, the most promising one being a reduction in export subsidies. Then in 2015, the Nairobi Ministerial Decision was passed to abolish export subsidies altogether along with the Nairobi Ministerial Decision on Cotton to increase market access for cotton producers in developing countries.[7] These WTO reforms have helped “level the playing field for farmers around the world, particularly those in poor countries.”[8] The WTO has been working tirelessly to create international law that will revive underdeveloped agrarian economies around the world and build a more just international economic order.

For ages, rich landowners have exploited the poor to expand their wealth and influence. From the dawn of slavery to subsidize farming, elite landowners have had their way in exploiting the less fortunate. The modern day struggle of this can be seen through the wealthiest farmers sitting comfortably in domestic markets on subsidized agricultural products and subsequently dumping them in foreign markets, devastating underdeveloped economies around the world while they make billions. However, the developing world has been fiercely pushing back through the WTO, and only time will tell if developing nations can go after subsidize farming altogether and truly even the playing field. While domestic farm subsidies still give landowners a considerable foothold on power, will it last?

REFERENCES

 

[1] Amadeo, K. (2019). How Farm Subsidies Affect You. Retrieved from https://www.thebalance.com/farm-subsidies-4173885

[2] Edwards, C. (2019). Agricultural Subsidies. Retrieved from https://www.downsizinggovernment.org/agriculture/subsidies

[3] Hasil, T. (2019). Why Do Taxpayers Subsidize Rich Farmers. Retrieved from https://www.washingtonpost.com/lifestyle/food/why-do-taxpayers-subsidize-rich-farmers/2018/03/15/50e89906-27b6-11e8-b79d-f3d931db7f68_story.html?utm_term=.9cb81d8a9f86

[4] Edwards, C. (2019). Agricultural Subsidies. Retrieved from https://www.downsizinggovernment.org/agriculture/subsidies

[5] Ibid.

[6] WTO | Agriculture - negotiations. (2019). Retrieved from https://www.wto.org/english/tratop_e/agric_e/negoti_e.htm.

[7] Ibid.

[8] Ibid.