How Food Subsidies Make You Poorer and Kill African Babies

by Benjamin Studebaker

Recently in the United States, congress has been fighting with the president about food subsidies.  The bill for renewing food subsidies also renews the food stamp program, which helps very poor individuals purchase food. Congressional republicans are seeking to make cuts to the food stamp program, denying food stamps to those who are not in part-time employment or in job training. They seek to pass a version of the farm bill that permits state governments to deny food stamps to the unemployed. The president threatens to veto the farm bill if it includes language of this kind, preventing a renewal of the subsidies. There has been no resolution to the dispute as of yet.  Today I wish to argue that congressional republicans are attempting to kill the wrong part of the farm bill–they should be targeting the farm subsidies rather than food stamps for the unemployed.

First, food stamps. Presumably the reasoning behind cutting food stamps for the unemployed is that the unemployed are voluntarily unemployed, declining work or declining to seek work and instead parasitically feeding off of social largess. This is patently false–the bulk of our unemployment simply isn’t voluntary. Your average high school economics textbook will talk of around three other causes of unemployment:

  1. Cyclical Unemployment–unemployment that has been brought about by recessions
  2. Structural Unemployment–unemployment that results from a mismatch between employee skills and the skills demanded
  3. Frictional Unemployment–temporarily unemployed people who are between jobs

Fictionally unemployed people typically don’t need food stamps–they’re just in between gigs. Generally, a frictional unemployment rate of between 3-5% provides the economy with an adequate amount of labor flexibility without causing a substantial amount of chronic harm to those unemployed individuals. Of course, our unemployment rate is not presently between 3-5%, and a lot of the people who are “between jobs” have been “between” them for quite some time. At present, the Untied States is running an unemployment rate of 7.6%, and the employment-population ratio, the portion of the population that is employed, has hardly made any recovery at all from the 2008 recession:

To the extent to which the unemployment rate has come down, it has come down because many unemployed people have shifted into long-term unemployment due to chronic inability to find work. The long-term unemployed are not picked up in the unemployment figures, but they do figure into the employment/population ratio, making it a somewhat more accurate employment picture.

This additional unemployment must be either cyclical or structural. Personally, I believe the unemployment is cyclical, and much research done in the last year increasingly supports that conclusion. But even if the unemployment is structural, one important fact remains true–unemployed individuals are not responsible for unemployment that is either cyclical or structural in nature. They do not have jobs because they cannot get them, not due to laziness. The Republican Party proposes to penalize people for economic conditions that have nothing to do with them personally. This does not create an effective incentive to work harder to to try harder to find work–the jobs quite literally do not exist–it only serves to inflict unnecessary harm on the poor, the disadvantaged, and the unlucky. It’s immoral policy.

Now, on to food subsidies. Here’s where that provocative title comes in–food subsidies in the United States (and in Europe via the Common Agricultural Policy) are stealing from domestic consumers and killing African babies.  How?

First, the “stealing from domestic consumers” part. One of the critical ways in which farm subsidies operate is by setting a price floor–they prevent the domestic prices of various crops from falling below preset levels. This means that when farmers do produce enough food to drive the price of food down and make it less expensive for consumers, the food bill kicks in and prevents those prices from falling. In the new legislation that congressional republicans are proposing, food prices will be pegged to their historic highs. In order to prevent food prices from falling, the government has to pay landowners not to farm so as to prevent “oversupply”. This means that tax dollars are being used to prevent too much food from being produced, so as to prevent food prices from being too low. This costs those of us who buy food more money that we could otherwise be spending on other things, and, since our tax money is used to sustain this program, we are essentially paying farmers to charge us more for food. This is inefficient madness. I’ve always been one to stand up for government intervention in the economy when it prevents harms or secures benefits, but in this case, we would be much better off leaving food prices to the market. It may result in the occasional failure of small farms, but small-scale farming is vulnerable to failure in no small part because it’s inefficient. Family farms fail because they’re not as efficient and lack the size to sustain occasional misfortunes. Ideally, we expend the smallest portion of the labor force possible in farming, automating as much of it as we can, and use former farmers to do other kinds of work.

What about “killing African babies”? Well, farmers use food subsidies not only to secure high prices in the domestic market, but to enable them to use their surplus income from domestic sales to undercut local farmers in developing countries. That’s right–thanks to farm subsidies, it is cheaper to buy food shipped to Africa from Europe or the United States than it is to grow it in poor countries. The result of this is that farmers in poor countries cannot compete with their European or American counterparts on price. As a result, they are put out of business. There is a vast amount of arable land in the developing world that is not being farmed because poor people cannot make a living farming it, and the principle reason this is so is food subsidies.

The estimate is that farm subsidies cost developing countries around $50 billion a year purely in exports, which of course holds back development. Even more concerning though, is the way that this prevents developing countries from developing the agricultural technology necessary to produce on a large scale and resolve their chronic food concerns. Farming is not profitable in the countries in which it most needs to be, and that results in this:

Too often, we hear careless commentators in developed world blame food security problems in poor countries on “overpopulation”. The real problem is one of agricultural and technological development in poor countries, and it’s perpetuated by our farm subsidies and those used in Europe. African babies die as a result of this, not merely because they starve (although some of them do) but because the reduced rate at which their countries develop reduces their access to medical care. The perpetuation of poverty in the developing world also harms the life chances of those unfortunate enough to be born in such places in a myriad of other ways (education, job opportunities, quality of life, access to technology, plumbing, clean water, the list goes on).

I would not expect any change in policy–the biggest victims of farm subsidies are poor people living in poor countries about which European and American politicians have no reason to care. That said, domestic consumers in the US and Europe suffer as well from the artificial inflation of food prices, which outpaces the wider inflation rate. It’s a pity that citizens in the developed world are not conscious enough of the fact that farmers regularly leech off of them with the help of their duly elected republican congressmen to do much of anything about it.