Who benefits from subsidies take 2

In Saturday’s post on who benefits from subsidies  I wrote that Anti-Dismal’s post who gets what from agricultural subsidies said it was landowners.

Paul Walker pointed out in a comment I’d got that wrong and the study he referred to said 75% of the subsidy went to the farmers and 25% to land owners.

In New Zealand most farmers own their own land and I think even more would have before the mid 1980s when farming was subsidised so the difference is academic. However, no mention is made of those who work for, service and supply farmers and process what they grow and as I said in Saturday’s post the removal of subsidies hit them hardest which suggests they got the greatest benefit from them. 

There are two forms of agricultural subsidies – those on production and farm welfare which isn’t related to production.

When New Zealand farmers were subsidised it was for production which not surprisingly led them to produce more than markets wanted which depressed prices so farmers needed higher subsidies  . . .

Increased production not only resulted in produce domestic and overseas markets didn’t want, it also inflated land values and distorted the employment market, increasing demand and inflating wages  because it required more staff on farms and along the production chain.

When subsidies were removed farm incomes, production and land values all fell. The financial and social impact of that through decreased spending and job losses moved from the farms through rural communities to provincial towns and eventually into cities.

It was pretty grim for everyone and I don’t know any farmers who remember that who want a return to subsidies.

Producers in some other countries haven’t learned that yet. Some still get subsidies based on production and others receive welfare payments which are made to keep farmers on the land and unrelated to what and how much they produce.

Welfare isn’t as bad as subsidies on production because at least it doesn’t flood the market, but it still means farmers’ income depends not on their skill, hard work and dependable variables such as the weather and markets; but on the very undependable variable of politcal whim.

But whether it’s a subsidy on production or welfare, it’s very expensive for taxpayers and consumers.

Subsidies might be good for bureaucrats who administer them but any other benefits escape me.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: