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Ending farm supports won't help developing world

Victor Davis Hanson doesn’t like the American farm support system — or its European counterpart.

Writing in The New York Times, Hanson, a Hoover Institution scholar and former California raisin farmer, says both should be dismantled.

Why? Hanson believes these farm policies are simply a convenient way for farm-state congressional candidates to garner votes.

He also contends these supports are based on “phony rationalizations,” if not outright deception and that any Depression-era rationalizations for these programs are now obsolete and even laughable.

Worst of all, Hanson says, is the harm these supports are causing developing world farmers, many of whose governments are “near paranoid in their fear for their own farmers’ livelihoods should they import a glut of imported American and European food that is a product of sophisticated economies of scale.”
 But Hanson’s arguments don’t wash with two Alabama Cooperative Extension System economists.

Robert Goodman, an Extension economist and Auburn University associate professor of agricultural economics, says the biggest factor driving current calls for ending farm supports is spiking corn prices.

Hanson and other farm policy critics believe ending farm supports would free world markets, particularly developing world markets, to produce more corn, thereby meeting demand and reducing prices. But would dismantling farm supports really guarantee that corn prices would go down?

No, says Goodman. What Hanson describes as the constant improvements in technology, mechanization, plant breeding and farm chemicals that have steadily increased production over the last few decades — and consequently, the output of corn and other staple products — were made possible by farm supports. Without these technological improvements, these products never could have been grown on such a vast scale, he says.

Dismantling the current farm-support structure not only would fail to improve farming productivity but would render it less efficient, says Goodman, who compares it with throwing the proverbial baby out with the bathwater.

Goodman says there is a bigger issue here than condemning American and European farmers because they have adopted a corporate form of business operation in the last few decades.

“True, there are more corporate farms now, but most of these corporations are family corporations where the father is CEO and all the officers are family members,” he says, adding that “the family-operated 40-acre farm passed long ago because of intense economic pressure.”

“Profit margins in agriculture are so small it takes a large farm to support a family.”

Goodman says families often incorporate to reduce financial risk because the amount of money and debt involved is large, running in the millions of dollars.
 The important point to bear in mind, he says, is “they got big because they’re good at what they do. They produce large amounts at low prices.”

Indeed, the argument, he says, is not so much about “giving welfare to millionaires” as it is about producing cheap food for the world’s poor in the most efficient way possible.

“If that’s what we have to do — if we have to reward big farmers to produce cheap food for the world’s poor, then this may be the lesser of two evils,” Goodman says.

Goodman’s colleague, Jim Novak, an Extension economist and Auburn professor of agricultural economics, also stresses the current global farming economy is not a zero-sum game where farmers in developing economies always lose to farmers in Western countries.

While conceding he does not totally disagree with Hanson and that nations should be able to feed themselves, Novak says dismantling current farm programs would only speed the move to larger farming and would not make small farmers in this country or developing countries more competitive. 
In many developing countries, a number of internal factors have prevented the development of domestic farming sectors.

“You’ve got to have seed and fertilizer suppliers, sufficient and good land to grow the crops — not to mention, help to go into farming, such as loan programs to get aspiring farmers started,” Novak says.

Social and cultural factors also enter into the picture, he says, citing a recent article by Clemson University Professor and Food Scientist Ken Marsh. Writing recently in the newsletter of the International Division of the Institute of Food Technologists, Marsh stressed the widely divergent food emphases of developed and developing countries.

As Marsh observed, 2 percent of the U.S. population produces 17 percent of the world’s food supply — an achievement that stemmed from a combination of factors: Good environmental and soil conditions and development of the U.S. land-grant university system, which provides both research and outreach to farmers.

On the other hand, a number of factors have prevented the formation of sustainable farming sectors in many developing countries. Novak cites chronic warfare, government corruption, inadequate tax revenue bases, the absence of a legal structure permitting private ownership and the lack of infrastructure as a few of these factors.

Under the circumstances, ending Western farm supports would not make much of a difference, says Novak, who cites Hernando De Soto’s “The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else” as required reading for anyone struggling to understand this issue.

That’s not to say the United States and Europe have turned a blind eye to building farming sectors in these countries. The recently passed farm bill, for example, focuses more than previous bills on the needs of developing nations, Novak says.

Under the Economic Assistance and Food Security provision of the current farm bill, the United States has authorized funds for what essentially would be buy-local programs in developing countries to provide consumers with funds to purchase locally grown produce.

But even this has been widely criticized for driving up overall food prices in these countries, Novak says, though the architects of the policies are hopeful that these higher prices will encourage local production.

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