Why the government should stop subsidizing agri-business.

by Victor Davis Hanson

Tribune Media Services

The European Union says it’s now considering reducing agricultural subsidies for farmers (if the United States does as well), and our government, to its credit, is calling the E.U.’s bluff. The U.S. has proposed cutting farm subsidies here by 60 percent if Europe makes its own significant cuts.

It is an embarrassing issue for the E.U. Usually idealistic Europeans may lobby for the poor of the Third World, chastising the United States for its insensitivity to the “other” on issues ranging from global warming to the use of military force in Iraq.

Yet Europe’s state-subsidized agriculture makes the exporting of targeted Western food to poorer nations easy – and the importing of produce from these countries hard. Since agriculture is the most basic of industries in developing nations, the barriers caused by state subsidies are especially ruinous to these countries’ fragile economies. Europe spends more public tax money on the daily feeding of its cows than Third World nations do on their own people.

Even if Europe backs down and chooses not to trim its bloated farm subsidies, as originally agreed upon, in principle, four years ago, the United States should nevertheless end our own altogether for a variety of reasons.

First, at a time of record budget deficits, we are borrowing money to subsidize agribusinesses that are not poor. Current market prices for cotton, grains and other targeted crops are improving. They will probably only get better as the dynamic new economies of India and China continue to create hundreds of millions of affluent consumers. The future of food – like oil and other key minerals – is radically changing, as a growing global population becomes ever more voracious and capitalist.

Second, there is no logic to the present support system. Wheat, for example, is subsidized, but fresh vegetables are not. Soybeans get federal money, but not peaches. Sugar is richly endowed, but why not nuts or grapes?

It gets more ludicrous: Federal water projects in the West often supply irrigation for agribusiness at well below the real cost. When the resulting harvests are additionally subsidized, the result is Orwellian: The public provides money to water crops that it must pay out even more government cash to harvest.

Third, subsidies have not succeeded in their two prime goals: preserving the family farmer and ensuring American self-sufficiency in food production. Less than 1 percent of the population are now genuine family farmers – a romantic label that’s also extended, disingenuously, to original family businesses that long ago evolved into multimillion-dollar consortia.

And in lean years, true family farmers usually must subsidize their money-losing crops by working for wages in town. Meanwhile, next year, the United States will likely become a net food importer for the first time in our history.

Fourth, there is the issue of hypocrisy. Conservatives believe entitlements have an enervating effect on the self-reliance and responsibility of the individual: The more the government gives you, the less you are likely to be self-supporting. If businessmen often argue that ill-conceived welfare programs hurt the poor, what can they say about largesse for the mostly wealthy? Why did David Rockefeller, Ken Lay and Ted Turner need our tax dollars to farm?

In 1996, the so-called “Freedom to Farm” legislation was supposed to phase out gradually all farm subsidies in exchange for giving more direct cash to farmers without government telling them what to plant or when to sell. Instead, the deal was quickly reneged on, as both Republican and Democratic legislators pandered to a small but influential population in a few key swing farm states.

Fifth, we forget the history of farm subsidies. They began in earnest as a New Deal program aimed at artificially controlling the market, insulating our farmers from imports and creating foreign markets in hopes of keeping alive millions of Americans suffering from the Dust Bowl and the Great Depression. But we should have learned that subsidies and distorting the market usually result in the opposite of what is intended – in this case large corporations on welfare masquerading as family farmers.

After an initial shock, the United States would thrive without subsidies. The Treasury would curtail the federal deficit by $20 billion per year. We would once again show the Europeans that morality consists of action, not utopian rhetoric. Our current dwindling number of actual family farmers who don’t receive government money at last might compete on a more level playing field with those who do. Meanwhile the market could determine, far better than the government, what, how and why particular crops are grown.

We should learn the lesson of the 1990s when globalization threatened to undermine the American economy. Despite real discomfort, we kept our markets open and stressed fluidity, as businesses and jobs disappeared and reappeared in a constantly changing market-driven cycle. The result was that American business leaders learned to be sensitive to fluctuations in taste and demand – and thrived in a tough global market.

Today, unlike a stagnant, protected Europe of high joblessness, the United States enjoys real growth, low inflation, low interest rates and low unemployment. If the government gets out of the food business, farmers themselves will prove far more adept at market decisions. Indeed, we may end up with more family farmers and once again become a net-food exporting nation – ironically the original purposes of the now-failed federal program of agricultural subsidies.