There was an interesting article in the New York Times regarding the surprisingly large impact that the farm bill has on many aspects of life in the US and abroad. A pithy excerpt:
Compared with a bunch of carrots, a package of Twinkies, to take one iconic processed foodlike substance as an example, is a highly complicated, high-tech piece of manufacture, involving no fewer than 39 ingredients, many themselves elaborately manufactured, as well as the packaging and a hefty marketing budget. So how can the supermarket possibly sell a pair of these synthetic cream-filled pseudocakes for less than a bunch of roots?
I recommend reading the article, but the answer has everything to do with subsidies. We, the taxpayers, pay farmers to produce certain kinds of food. This bill is structured so that the farmer is rewarded for maximizing production of a few kinds of produce, mostly corn and soybeans. It’s a result of this overproduction that they are so plentiful and so cheap, which is a big part of why they have been adopted as feedstocks (raw materials) for the processed food industry. In short, by paying farmers to produce as much corn as possible, we artificially lower the cost of corn, which makes corn a dirt cheap ingredient in processed food. The health and economic impacts from this are substantial. Or, as the NY Times puts it:
That’s because the current farm bill helps commodity farmers by cutting them a check based on how many bushels they can grow, rather than, say, by supporting prices and limiting production, as farm bills once did. The result? A food system awash in added sugars (derived from corn) and added fats (derived mainly from soy), as well as dirt-cheap meat and milk (derived from both). By comparison, the farm bill does almost nothing to support farmers growing fresh produce. A result of these policy choices is on stark display in your supermarket, where the real price of fruits and vegetables between 1985 and 2000 increased by nearly 40 percent while the real price of soft drinks (a k a liquid corn) declined by 23 percent. The reason the least healthful calories in the supermarket are the cheapest is that those are the ones the farm bill encourages farmers to grow.
The article goes into greater detail, but it’s pretty clear that these subsidies are hurting public health in the US, and probably having a detrimental impact globally by depressing prices of our exported goods.
I’m definitely a free-market kind of guy, and massive subsidies are generally only good for the people getting money and the politician buying the votes, and that benefit comes at the expense of the rest of the population, both in terms of opportunity cost (you could have spent that money on something else) and in terms of shifting the market away from a reasonable equilibrium.
On the other hand, any change to our current farm bill status quo will have a massive impact on the food industry in the US. I say “industry” with a bad taste in my mouth, because we really are talking about purely artificial food-products, but the fact is we’re talking about a lot of companies that exist based on the precondition of plentiful, cheap, government subsidized corn as a raw ingredient. Consider not only the food companies, but also the grocery stores, in which the majority of the contents are processed containers of long-shelf-life food coming from a few large manufacturers. A shift in the equilibrium or a perturbation in availability of these kinds of goods would have a big impact to the whole food distribution model that business is based on. You could argue that it needs to be disturbed, and we’d be better served by going to a free market model where the cheapest food is also locally produced, and we are all paying less tax money to distant farmers. Maybe so. But I can’t see all of the impacted businesses rolling over and letting this traditional handout legislation get changed when it poses such a threat to the fundamental way of doing business. For example, how could a Wal-Mart maintain a central distribution center and economies of scale when it’s food products shift to perishable locally produced goods?
If nothing else, this is just an example of the danger, and far reaching impact, of subsidies and government interference in markets. The farm bill was set up with good intentions, but good intentions don’t guarantee foresight or wisdom. It’s still a truism that the government governs best which governs least.
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