NationStates Jolt Archive

Government set price floors (or ceilings), production subsidies, prohibitive tariffs, import quotas, selectively targeted tax breaks, and other means of government intervention in the market have consistently been shown to harm consumers. I used to blame it mostly on politicians – diffuse cost with a very narrowly targeted benefit lends itself to base political pandering to a special interest group (which I see as a form of corruption, and is therefore unethical and should not be tolerated). After a few discussions with people I have realized that the average man on the street has bought the propaganda and is actually willing to aggressively defend them.

Though there are many examples, in the interest of brevity I will focus on agriculture in the US.

The US pays large agricultural firms billions of dollars in production subsidies every year. These subsidies divert resources to producing goods which are not needed. Some people get very angry when I suggest that this is not necessary, which I find highly surprising. Only a few goods are ‘program crops’ and receive subsidies. If we stopped subsidies then there will be less dairy, wheat, corn, and soybeans. Even for those odd individuals whose entire diet consists of these goods will not suddenly be on the verge of starvation or penury – the price will not actually change. To make up for these subsidies over-producing food, the government then buys up the excess off the open market to bring the price up above their set minimum price. In addition to this, there is also a trade barrier regime setup to block products where the world price is below the domestic price – dairy products, sugar, lamb, and many other products are kept at artificially high prices in the US.

Ending these programs would reduce the cost of a few foodstuffs for consumers, save billions of dollars a year in government expenditure, reduce costs for domestic food processors, provide markets and an income for farmers in developing nations, reduce the demands of intensive farming in regions where it otherwise does not make sense to produce (rapidly depleting the aquifers to grow crops in the desert), with the final cost being a hit to the profit margins of large agricultural firms.

So outside of those who work for the firms specializing in program crops and their major investors, why do people rabidly support this idiocy?

Before someone starts on the old rant about protecting small family farms and the rural way of life – almost all of the funds go to huge businesses, not small family owned farms. Small farms tend not to have a team of specialized grant writers and lawyers to be able to get awarded the funds. Oh yeah, and by the way, even when you see grant money being directly targeted to ‘small farms’ (a political slight-of-hand), that means anything making less than $100 million a year. On top of that, most crops are not program crops; much of the farming would simply switch to other crops. So why do we flush billions down the drain every year for this?

Weeeeelll, it's the government. Why do they flush billions of dollars down the drain conquering Iraq and Afghanistan? Because the political interests of the few are superceding common sense, let alone the interests or will of the public in this so-called democracy. Governments, whether "democratic" or not, seem intent in general on wasting money. They have the money to waste, after all - seems like it'd be a waste not to waste it!

Politics. I mean, it's obviously not merit given that price controls have failed every single time they've been implemented in recorded human history.

Governments, whether "democratic" or not, seem intent in general on wasting money.

Amen.

*gives you a very large, very tasty, fresh-out-of-the-oven, homemade cookie*

Agricultural subsidies in the Developed World lock the Developing World in poverty and cause hundreds of deaths per year. Furthermore, I am prejudiced against Rural people, and would enjoy seeing them lose their stolen jobs and be forced to do some proper work in the city. Thus I support the discontinuation of agricultural subsidies.

However, I do not support the rest of your ideas. There is a definite place for price controls in any market. For example, recently in Mexico (before you bemoan that Mexico is incomparable to the USA, bear in mind it is the 14th wealthiest nation on Earth), many people have been unable to afford the corn to make their tortillas as all of Mexico's domestic corn is being bought out by American ethanol companies (whilst the USA itself refuses to even consider buying the huge surplus of Cuban sugar...). And so, the Mexican government has stepped in, and ordered the Mexican corn producers not to charge above a certain price for their produce. This was a prudent decision, and avoided serious discontent from the Mexican working class.

Similarly in the UK, (and, I believe, some US states), the price of fruit is controlled. In order to insure that the people most in need the nutrition (i.e. the people who'll have to run around with the rifles in case of a proper war) get what they need.

There is a definite place for price controls, despite the blind insistances of the libertarians.

And the "Family Farm" thing doesn't wash with me anyway - a farm is a business. If it doesn't make enough money to keep it's head above water, it deserves only bankruptcy.

In a lot of cases, it's a handful of very wealthy farmers who receive the vast majority of the money while the actual small farmers either sell or get next to no money for their produce.

All of these measures came into existence as emergency measures during the Great Depression. Now, they've been in place so long that entire businesses exist to service the situation - businesses that would not survive if those measures were eliminated.
That said, they should be doen away with. And the "Family Farm" thing doesn't wash with me anyway - a farm is a business. If it doesn't make enough money to keep it's head above water, it deserves only bankruptcy.

Amen.

*gives you a very large, very tasty, fresh-out-of-the-oven, homemade cookie*

I want a cookie too.

In a lot of cases, it's a handful of very wealthy farmers who receive the vast majority of the money while the actual small farmers either sell or get next to no money for their produce.

What your talking about is the farming corporations that have nothing to do with the families that use to farm large operations. Most of the small farmers as you say do struggle a bit. While of course the large corporations cash in on subsidies and the such.

Agricultural subsidies in the Developed World lock the Developing World in poverty and cause hundreds of deaths per year. Furthermore, I am prejudiced against Rural people, and would enjoy seeing them lose their stolen jobs and be forced to do some proper work in the city. Thus I support the discontinuation of agricultural subsidies.

However, I do not support the rest of your ideas. There is a definite place for price controls in any market. For example, recently in Mexico (before you bemoan that Mexico is incomparable to the USA, bear in mind it is the 14th wealthiest nation on Earth), many people have been unable to afford the corn to make their tortillas as all of Mexico's domestic corn is being bought out by American ethanol companies (whilst the USA itself refuses to even consider buying the huge surplus of Cuban sugar...). And so, the Mexican government has stepped in, and ordered the Mexican corn producers not to charge above a certain price for their produce. This was a prudent decision, and avoided serious discontent from the Mexican working class.

Similarly in the UK, (and, I believe, some US states), the price of fruit is controlled. In order to insure that the people most in need the nutrition (i.e. the people who'll have to run around with the rifles in case of a proper war) get what they need.

There is a definite place for price controls, despite the blind insistances of the libertarians.

I agree that, if the price of food should rise above a certain amount, the government should step in to reduce the price. As you said, it is necessary to ensure that everybody can get the food that they need.

But, I agree with the OP that if the price of food should fall below a certain amount, the government should not step in to increase the price. This is because when the government does this, it is directly benefitting the larger farms, who are able to produce a lot cheaply and who shouldn't have problems managing their economies. The smaller farms who are not able to produce as much or as cheaply don't get any benefit, so their costs are higher while the revenue is the same in both cases. This means that larger farms win, as they end up with a lot more money. They'd win anyway, since they can produce stuff at lower prices, but now they just win even more and unnecessarily so.

Also, if the price of food falls below an affordable price to sell it, maybe it's because the market is too flooded with these goods and it would then be better not to use as many fertilizers and intensive farming?

/snipThere is a time and a place for properly set price controls.

The example you gave is certainly not one of them, I wouldn't mind nearly all of that eliminated.

governments tend to like their countries to be self surficent as much as possible (hang over from WW2 when massive amounts of supplies had to be imported from america with lots of it wasted due to subs sinking the freighters). That is the main reason behind the thinking of CAP here in the EU. I would prefer if most of the subsidies were done away with and along with them quotas. The quotas limit the amount farmers produce to stop mountains and lakes of food and drinks forming due to subsidies. However many farms (UK, not sure about the rest of the EU), except maybe hillfarming, could probably be ok without sudsidies if quotas were removed as well.


Over here the difference between small and big farms is no where near as pronounced so we don't tend to have these farming corporations.

they persist because profit motive alone cannot do the job. never has and never will.

this isn't neccessarily the best alternative either. i will grant that.
but it's a doable compromise neccessitated by people still expecting little green pieces of paper to be some kind of magic wand.

instead of terrifs and duties, if everything sold in a country required everyone who participted in every aspect of what it took to make that item or substance available had to have been paid a living wage in order for it to be, this would be far more widely bennificial and enable things to eventualy equatably even out.

such rationality is of course irrationaly objected to from every side.
those who profit from the suffering of others,
and those who take for grated in their lives,
cheep crap brought to them by those who do.

even sometimes those, or their immediate masters, who immagine no work for them could exist without such a system.

all of these segments are pattently in error, but try telling them that, especialy when the pseudo science of economics keeps telling them otherwise.

=^^=
.../\...

Most subsidies stem from a distrust of the global economy. A paranoia that another country may at will cut off their supply of goods or services.

In the EU (then EC) agricultural subsidies, and quotas were set as to protect the baseline of the European economy after WWII. The European has since improved, but the CAP has not been abolished. The CAP is so effective in its aims that the EU is still a net exporter of food. Hence if the EU was cut off from the rest of the world European countries would not suffer from excessive food shortages.

Though as the OP pointed out the main beneficaries of agricultural subsidies are rich companies or even rich people. If I remember correctly the biggest recipient of the CAP in the UK is a sugar company called Tate & Lyle (~£110,000,000/year), and the Prince of Monaco recieves €300,000 every year for the farm land he holds in France.

However, this is some credence to this idea of *product* security. Especially when Russia seems perfectly happy to simply shut of supplies of oil and gas to the EU in USSR-esque attempt to force another country back into line. Might I add that Russia did this during the winter months with no regard to situation of the average Ukrainian citizen. And that this less year after the Ukraine decided that it didn't want a pro-Russian premier any more. :)

Most subsidies stem from a distrust of the global economy. A paranoia that another country may at will cut off their supply of goods or services.

In the EU (then EC) agricultural subsidies, and quotas were set as to protect the baseline of the European economy after WWII. The European has since improved, but the CAP has not been abolished. The CAP is so effective in its aims that the EU is still a net exporter of food. Hence if the EU was cut off from the rest of the world European countries would not suffer from excessive food shortages.

Though as the OP pointed out the main beneficaries of agricultural subsidies are rich companies or even rich people. If I remember correctly the biggest recipient of the CAP in the UK is a sugar company called Tate & Lyle (~£110,000,000/year), and the Prince of Monaco recieves €300,000 every year for the farm land he holds in France.

However, this is some credence to this idea of *product* security. Especially when Russia seems perfectly happy to simply shut of supplies of oil and gas to the EU in USSR-esque attempt to force another country back into line. Might I add that Russia did this during the winter months with no regard to situation of the average Ukrainian citizen. And that this less year after the Ukraine decided that it didn't want a pro-Russian premier any more. :)

This is probably the single biggest reason why EU governments are now considering/doing major investment in renewable and even possibly nuclear power generation. In some ways we should thank the Russians because it is forcing our governments to get of their fat asses and consider the issues around fossil fuels.

instead of terrifs and duties, if everything sold in a country required everyone who participted in every aspect of what it took to make that item or substance available had to have been paid a living wage in order for it to be, this would be far more widely beneficial and enable things to eventually equatably even out.

One thing that should be avoided however, as history taught us, is the idea that everyone should spend a year or two working on a farm. When we look at communist Russia, we see why, as the uneducated masses really botched up when sent out to work on the farms.

But then, I don't think that's what you're saying here. Could you perhaps please clarify this further?

One thing that should be avoided however, as history taught us, is the idea that everyone should spend a year or two working on a farm. When we look at communist Russia, we see why, as the uneducated masses really botched up when sent out to work on the farms.

But then, I don't think that's what you're saying here. Could you perhaps please clarify this further?

well a year or two of working on a farm INSTEAD OF in the military wouldn't be a bad idea. and neither would a nonmonetary economy not based on threat but real gratification, earned by creating and sharing real beauty and bennifit, rather then symbolic representations of it.

to clearify THAT would probably take most of a signifigant text.

but as a succinct and direct answer to the question as to why price controls persist, it is simply that lasay faire capitolism doesn't work, or at least not the way fanatics of corporocratic capitolism (and i know some libertarians would say that corporatocracy isn't real capitolism, and i would aggree that mom and pop retailing with unionized infrastructure was cool when that was what we had when i was growing up in the u.s. but i don't aggree that union and environment bashing is ever capable of bringing it back) seem to invision and immagine it as working, or rather try to convince everyone that it might. for the most part probably knowing themselves full well that it doesn't.

=^^=
.../\...

but as a succinct and direct answer to the question as to why price controls persist, it is simply that lasay faire capitolism doesn't work, or at least not the way fanatics of corporocratic capitolism (and i know some libertarians would say that corporatocracy isn't real capitolism, and i would aggree that mom and pop retailing with unionized infrastructure was cool when that was what we had when i was growing up in the u.s. but i don't aggree that union and environment bashing is ever capable of bringing it back) seem to invision and immagine it as working, or rather try to convince everyone that it might. for the most part probably knowing themselves full well that it doesn't.
It's capitalism. It's about capital, ie machines and stuff. Not capitols, that's something else.

And the free market does in fact work. People have shown that the market is in fact just a mechanism for cooperative decisionmaking, that any outcome from cooperative decisionmaking can also be achieved by a free market, and that intervention in a free market in equilibrium simply destroys pareto optimality (in other words, the best you can do is not do anything - if you make anyone better off, someone else will be worse off). That's economics...lots of maths, lots of experiments and analyses and so on. There still isn't enough microeconomics being taught in schools, in my opinion.

You can go ahead and make moral arguments against things like income distribution. You can criticise pareto optimality. But you can't say that "laissez faire capitalism doesn't work".

But you can't say that "laissez faire capitalism doesn't work".I suppose that depends on one's definition of 'working'.