Oooh! Contrarian!

Robert at LGM links to an essay by Daniel Davies in praise of agricultural subsidies. And it's a good one!

You would not think, in the normal course of events, that a sensitive and intelligent person would go to Ghana, spend a few days walking round and talking to locals, have in-depth briefings on the local economy and come away with the following policy prescription:

"What a great country! You know what they really need though? More expensive food!"

I swear this is a good post, and more than that it's along the same lines as what My Favourite Economist (tm) Dean Baker has been saying for years - that agricultural subsidies have mixed results, and there are almost certainly bigger fish to fry:

To put the problem in perspective: the World Bank, one of the world's most powerful advocates of removing most trade barriers, has estimated the gains from removing all the rich countries' remaining barriers to merchandise trade -- including manufacturing as well as agricultural products -- and removing agricultural subsidies. The total estimated gain to low and middle income countries, when the changes are phased in by 2015, is an extra 0.6 percent of GDP. In other words, an African country with an annual income of $500 per person would then have $503, as a result of removing these barriers and subsidies.

Now, as Matthew Yglesias has noted, farm subsidies are pretty bad for the US and especially the American taxpayer, regardless of their impact on the global poor. So if we want to be rid of them, it shouldn't be that hard. Obviously, we don't really want to be rid of them that badly.

On that note, I should say something about the collapse of the Doha round of the WTO talks. There is nothing I can think of that shows quite as clearly how little we actually care about free trade than this collapse. If we're serious about free trade, then it makes sense for us to lower our tarriffs and subsidies, regardless of what the other side does - cheap imports should be good for our economy regardless of what the other guy does, right?

But the WTO, the IMF, and the World Bank have never really been structured for any kind of free trade, much less economic fairness or (God forbid!) justice. The driving motivation behind the IMF and the WTO especially has been mainly to constrain the development options of the third world. Read, oh, anything by Robert Wade to get a sense of what developing countries used to be able to do under international law that is now forbidden.

The whole fascination with agricultural subsidies seems to me to reflect the old European mentality of "civilized" development - that nations need to progress in stages, and you need to start with mastering agriculture before you can move on to the big boy toys. Of course, the United States and Europe will never, ever, ever stop subsidizing companies like Boeing, Lockheed, GM, or GE (or their European equivalents) because of their military supplies.

So good luck to the third world exporting jet engines, airframes, or any other higher-tech industry. If we were serious about using trade as a tool for development - and I'm pretty sure we aren't - we might even raise tariffs on imported food, but encourage foreign production of cars, electronics, and other industries while simultaneously making a global push for better labor rights, including here at home. Pushing up wages in the developing world, while giving them meaningful, value-added jobs, is a tried-and-true method of development.

The interesting thing is that, totally without western doing (indeed, against our interests) booming Chinese and Indian demand has caused a commodity price surge that is already helping Africa and South America. It's not just oil, either. Which still leaves us the other half of the puzzle - improving labour rights worldwide. Which we should be doing whether we care about development or not, because they're called rights for a reason.