The Times has been flogging the evils of farm subsidies as long as I’ve been reading the paper, for at least the last ten years. This has had no measurable effect on farm policy. But they keep trying—the latest installment explores the success New Zealand, an agriculture-based economy, has had by eliminating its farm subsidies.
“They went cold turkey and in the process it was very rough on their farming economy,” said Ray Goldberg, a retired professor of agriculture and business at Harvard Business School. “But they came out healthier and stronger. They proved it could be done.”So by eliminating subsidies, you save consumers money and make your farmers more efficient and competitive. What's not to like? Why don't we do something similar? Well, because of the farm lobby.
. . .
Traditional subsidies, economists contend, generally encourage inefficient farmers to grow unprofitable crops far beyond what consumers actually need, secure in the knowledge that the government will help protect them from loss. And they make it much harder for farmers in poor countries to compete on a level playing field against coddled farmers in the West. Removing subsidies, the argument goes, liberates the best farmers anywhere in the world to produce what people really want.
“When you’re not going to get paid for what the market doesn’t want, you have to get off your backside and find out what they want,” said Charlie Pedersen, who, when he is not raising sheep and beef cattle on his farm north of the capital, Wellington, is president of Federated Farmers of New Zealand.
If the United States were to pursue a New Zealand-type strategy, [farm lobbyist] Mr. Buis argued, large corporate entities would end up controlling most farms as smaller farmers went into bankruptcy. “Those people are going to get financially ruined,” he said.A favorite trick of corporate farmers is to use small farmers as poster children to keep the subsidies flowing, while most of the subsidies end up going to the mega-farms. And New Zealand's approach could never work here, farm lobbyists are eager to point out.
“There’s a lot of differences between New Zealand and the United States," Tom Buis, president of the National Farmers Union in Washington, said in a telephone interview. “They are almost completely export oriented, and that’s quite the reverse of the U.S.”For the life of me, I can't figure out what he is saying here.
Perhaps the reason subsidies are essential in the U.S. is because farming is such a crucial part of the overall economy? Well, not exactly . . .
[F]arming [in New Zealand] is not a small part of the economy as it is in the United States; it is the nation’s largest, most important sector.For New Zealand, the subsidies meant inevitable bankruptcy and poverty. For us, it just means we pay extra for milk and eggs to ensure that the teenage children of corporate agriculture executives can drive Hummers to high school. Farm subsidies put the lie to the myth of the Western farmer as a ruggedly independent character who takes handouts from nobody. The system is set up so that small farmers have to line up, cap in hand, for the federal alms. Small farmers can run their farms with ruthless efficiency, but even with federal subsidies, they may only barely break even. Without subsidies, many would run at a loss and end up selling out to subdivision developers. Who ever heard of a wealthy family farmer? They are rare birds, at least in Utah.
“It was wacko,” said John Yeabsley, a former trade official who is now an economist at the New Zealand Institute of Economic Research in Wellington. “Who’s going to pay for the subsidies?”
Farmers eventually realized that it was them. They responded to their higher tax burden by maximizing their subsidies. “The whole thing,” Mr. Wooding said, “was a game to try to get as much government money as possible.”
By the early 1980s, the cost of this system had created a balance of payments crisis for the nation.
The story concludes:
Without government aid, New Zealand farmers have found other ways to deal with the vicissitudes of commodity markets. In 2001, dairy farmers merged two rival cooperatives to form their own purchasing and exporting cooperative, Fonterra, which also gives New Zealand pricing heft in international markets.But the U.S. interest-group driven political model and national bias towards rural areas will ensure that no such innovations come our way. Instead, corporate megafarms will continue to suckle at Congress’s munificent teat.
“I’m very happy with Fonterra,” Mr. Lumsden said. “They’ve taken the peaks and troughs out of the price in the world market.”
Fonterra also drives innovation and product development: New Zealand’s dairy farmers have ventured into new lines like antibody-rich milk for the health food and pharmaceutical markets, kosher milk and even chocolate cheese.
“What’s happened since the reforms is that you have a new type of farm emerging — a business farm,” Mr. Lumsden said. Giving up subsidies made farming harder, he conceded, but introduced the pride that comes of entrepreneurship. “It made it more enjoyable,” he said.