We've going around and around on this whole ag subsidies thing. I thought it would useful to break it down into more manageable pieces. Part one is "how do we feed the world." Part two is "how do we ensure a decent living for people in rural America (or France or Australia etc)." Part three is "how do we manage our environmental resources."
Tuesday, March 03, 2009
So, part one....As I understand it LTG and I both want to feed the world (aren't we a couple of nice guys!?). We have two radically different approaches though. LTG wants to help the poor get food by subsidizing supply thereby reducing prices. I argue that we should give money to the poor to buy their own food - in effect, I want to subsidize demand. Both involve injecting government money from rich countries into the world market. Leaving aside the relative prices of these two approaches for the moment, what are the different consequences of subsidizing supply versus subsidizing demand?
If we subsidize demand we allow the market to determine who buys what from whom. We also allow the market to determine who ultimately will profit from the government money being injected into the market. If poor people in India want to buy from their neighbors they will and Indian farmers will profit. If poor people in India prefer to buy imported food from California they will and American ag companies will benefit. Price will play a key role in that...so might quality differences. If they chose to buy food from 3rd world sources this will have the additional benefit of increasing economic growth in countries that desperately need it.
If we subsidized supply we would not only be increasing supply we would be determining WHERE that increased supply comes from. And since only the rich countries can afford to subsidize, it will be ag companies in the wealthy "North" that get all the new profits.
So even if we assume that we can feed the world by both approaches and if we assume that both are more or less equally costly and efficient, there are profound differences in the distributive consequences of the two approaches. So let's talk about this for a while before we move on to part 2: ensuring a decent living for rural Americans.
Posted by Raised By Republicans at 5:50 AM