Tuesday, October 23, 2007

US Subsidy

Historically, US farmers have received subsidies to keep small farmers from going out of business by reimbursing them for losses incurred while the price of their particular crop is low. Does it make economic sense for the government to give money to farmers to compensate? Shouldn’t the market dictate the profits of these farmers?
It may make sense, in a time of crisis like the Dust Bowl, for the government to bail out a vital part of the economy. Yet when it becomes a regular occurrence, there is a major market failure. Even when the price of a particular crop is high, the farmers often receive government subsidies. Also, the farmers have fewer incentives to compete for consumers: it is economically rewarding for them when the market prices are LOW.

Environmental consequences

Subsidizing farmers also has a negative effect on the environment. The government allows farmers to drill for groundwater with no upfront cost to them. The farmers use this groundwater, with all of their straws in the same cup, competing to use the most out of the resource before it is used up by a competitor. If someone were given property rights to the valuable groundwater, the depletion may not be an issue. Many of the largest aquifers in the US are being exhausted at an alarming rate. However, the farmers in some of the driest states must use copious amounts of this water to grow “cash crops”, which are unsuitable for particular geographic areas.

Economic consequences

Recently, the crackdown on illegal workers has left many small and large farms unable to afford the costs of doing business in this economy, even with the subsidies. Many are buying land in Mexico to use similar workers legally, thereby bypassing this inconvenience. As a result, the US is growing more reliant on foreign food, and becoming much less self-sufficient. At the same time, farmers are still being subsidized at a greater rate. The system cannot hold itself up for long. Many foreign countries, such as Canada and the UK, are starting to look at the US’s subsidy program as being unfriendly and unfair.
The recent trend has been for the government to fund research into alternative fuel technologies. If we can find a crop, ethanol made from corn or sugar that replaces gasoline as a major fuel source, possibly our energy woes and our farming woes will be rectified. It is yet to be seen whether the free market will reimburse this ingenuity, or the farmers and technology will continued to be subsidized.


1 comment:

zimzum said...

I'm looking for Alison Blackwell, the granddaughter of Russell and Edna Blackwell. If the person who posted this comment is her, would you please get in touch with me. I'm researching the life of a person who was close with him during the 1960's, and need to find our more about their relationship.
Harriet M.