Reply #5: A couple counterarguments to the subsidies argument

[Sorwen]

It is a commonly held belief that U.S. subsidies encourage overproduction and depress the prices of crops, putting third world farmers at a disadvantage and, therefore, harming developing countries. It's a theory that makes sense. I've also heard some counterarguments that make sense.

If our subsidies do, in fact, depress prices, then consumers benefit. That means consumers in developing countries benefit from access to cheaper food. If we eliminate our subsidies, then third world producers may become more competitive, but third world consumers would have to pay more for food. Also, overproduction of food should not be considered a problem in a world with a continually increasing population.

And if we want to create a level playing field, then not just subsidies would have to be eliminated, but tariffs would also have to be eliminated. The United States imposes very low tariffs on agricultural imports, while developing countries often impose high tariffs. These tariffs benefit developing countries by protecting domestic producers and increasing tax revenue.

There's also an argument that U.S. subsidies really don't depress prices. The idea is that subsidies encourage production, but if subsidies were eliminated, do you think U.S. agricultural production would really decrease? There would be a huge structural change in agriculture, crop mix might change some, but I think overall production might not change significantly. If farm subsidies were eliminated, I think there would be a big drop in the number of middle-size family farms. I think the land would mostly be farmed by huge mega-size operations, and there would also be a number of small niche, part-time, or hobby farms, but the middle would disappear. Despite these changes, the overall level of production may not drop, and, therefore, the aggregate price level would not change.

I think one thing we need to do is produce a dedicated energy crop like switchgrass. That could result in a reduction of other crops, increasing prices, and a supply of domestically produced renewable fuel.