First World Subsidies and Third World Poverty
By Bryan Caplan
I never touch the stuff, but tomorrow I’m on a panel discussing the coffee trade at the Johnson Center. It’s all part of GMU’s International Week. While getting ready for the talk, I was pleased to learn that activists concerned about Third World poverty have finally noticed the ill effects of First World agricultural subsidies. Check out the Kick All Agricultural Subsidies (Kickaas) blog – it’s not bad.
I suspect that the activists are a bit confused about who will profit from the end of agro-subsidies. Based on elasticities, the main gainers will probably be First World consumers, First World taxpayers, and owners of high-quality land in the Third World. Low-quality land and agricultural workers are too elastically supplied to be big gainers. Still, the Guardian editorial that launched the Kickaas blog is more or less correct:
Abolish all agricultural subsidies… This is one of those rare topics that unites right and left. It is also one of the few remaining free lunches in economics from which practically everyone gains. It would galvanise developing countries’ agriculture while freeing more than $300bn currently being spent by governments – over $200 per capita – every year on subsidies for other purposes. There will inevitably be transitional problems for some western farmers but nothing like the structural change other industries have experienced. And in the long run it will be of benefit to them, too. [Uh, that’s going a little too far. B.C.] They will be able to grow crops they are good at rather than those attracting subsidies. All that the developing countries are seeking is a level playing field on which to compete. Is that too much to ask?
No, it’s not. Economists and humanitarians, unite!