With agricultural subsidies, America is exporting crony capitalism
Immigration tensions are symptomatic of a deeper economic hypocrisy
Illegal immigration a hot button issue and a point of political contention. Many republicans want to build walls, bulk up security, and deport "illegal aliens." Many democrats want a consequence-free utopia and amnesty for all, irrespective of the law. Both parties boast more sophisticated thinkers, of course, but the megaphone holders for both groups ultimately address merely the symptoms of the problem and propose terribly inadequate Band-Aids.
Very few people ever take notice of one of the key drivers of illegal immigration: poverty in the developing world fueled by U.S. agricultural subsidies and crony capitalist trade policies supported by Republicans and Democrats alike.
The U.S. subsidizes its agricultural industry heavily. We’re not talking about protecting the family farm from a crop-ruining storm, here. We’re talking about direct government handouts to major corporations.
Government agricultural subsidies are not new, nor are they are intrinsically wrong.
Food security is critical for national security, and the government can play an important role in insulating farmers from disasters that could jeopardize the nation’s food supply. But too much of a good thing can become a bad thing, and that’s where U.S. agricultural policy is today. It’s no longer a security blanket; it’s corporate welfare on a scale the world has never seen. It’s the entitlement problem politicians should be talking about and would be talking about if both parties weren’t so reliant on big agri-business donations and votes.
The subsidies take many forms. Direct payments are among the most egregious; this is where we supplement the income of farm operations (again, we’re not talking mom and pop’s family farm here) on an ongoing basis and the money is based not on need but on yield. In other cases, we pay farm-designated landowners to refrain from farming. We also guarantee the price and federal purchase of a number of different commodities. All of these have the collective effect of incentivizing firms to produce as much as they possibly can (cue monocultures, genetic modifications, and other unnatural manipulations of the industrial food system) irrespective of the actual market demand.
The economic result: an extraordinary market oversupply that would cause prices to bottom out if the surplus products were released on the domestic market. To avoid this fall-out, we must re-purpose those products (ex. corn into ethanol or high fructose corn syrup) and/or export the surplus to developing countries. Like the U.S., these countries generally have tariffs to protect their industries. For crony capitalists in cahoots with lawmakers, this is an annoying inconvenience that can be fixed with the right amount of political leverage. The dialogue might go as follows:
Hey Mexico, hey Haiti, hey Jamaica: You’re poor; your people are starving. We can help. We produce food for cheaper than your farmers can grow it. If you embrace free trade and open up your markets to us, you too can be prosperous. Not convinced? Tell you what, we’ll throw in some free foreign aid food shipments along with some cash, and we’ll also hook you up with a nice, big development assistance loan from either the IMF or the World Bank. The interest? We’ll say around 30%, which might seem high, but it’s better than nothing right? Are you going to deny your people the opportunity to feed themselves?
The offer can seem appealing to both nations and both sides of the aisle. Republicans enjoy the expansion of free markets. Democrats appreciate the poor being aided by lower food prices. The unfortunate reality is that the markets aren’t authentically free and the poor aren’t better off.
The first fundamental issue is that the nature of the arrangement is coercive. One party holds all the cards and all the power. The prospect of a genuinely mutually beneficial agreement is therefore largely contingent upon the ethic of the stronger party; in many an example, the U.S. has not lived up to its own professed ideals.
This allows for the second fundamental issue, which is a gross double standard. We strong-arm these countries into lowering their tariffs to allow our products in, yet we maintain stringent protectionist policies of our own, policies granted by election-oriented legislators selling favor to competition-allergic corporations and industry alliances. If and when we do agree to lower our tariffs on certain products for certain countries, we do so only if that country has no chance of actually competing with us.
But the most egregious problem in play is that these arrangements harm the poor and hinder the development of nations. Most of these countries are still agrarian economies, so when we “dump” our artificially cheap, subsidized agricultural products on their markets, we end up undercutting indigenous farmers and systematically decimating local industries. This drives unemployment up as employers, however industrious, have difficulty creating new industries and transferring human resources quickly enough. Higher unemployment means lower purchasing power, i.e. increased poverty. Food may technically be cheaper, but people have less money to buy it.
Meanwhile those high-interest loans have chained the governments in a cycle of debt and broken the sovereign link between administrations and their constituents. Coupled with a crippled economy, the majority of which operates in an informal sector that doesn’t provide tax revenue, governments become increasingly dependent on (and therefore responsive to) international bodies like the IMF and the World Bank, controlled of course by the U.S. and Europe. Instead of answering first and foremost to their people, governments of underdeveloped countries are captured by these new colonial masters. The sovereignty of nations is compromised and disdain for America brews.
Governments who are not accountable to their peoples do a poor job of taking care of their peoples. Corruption festers and infrastructure erodes. Crime soars as the rule of law becomes the rule of powerful men. Entrepreneurial energy and enterprise are choked off and suffocated, lacking the stable ecosystems necessary for growth and innovation.
So how does life look for our developing world farmers? They’re up against an ongoing invasion of artificially cheap food products from the U.S. that compromise the entire value chain and relegate them permanently to a subsistance level with zero hope of upward mobility. This is compounded by a weakened political infrastructure giving way to corruption and organized crime. Cities once relatively prosperous turn into poverty-stricken war zones as a powerful few compete in a power struggle among the innocent many.
Meanwhile U.S. commercials and TV shoes paint a far more glamorous picture of prosperity and opportunity. Mexican newspapers feature enticing “Now Hiring” ads from U.S. farming companies – “If you can get here, this is how much you could earn…” Is it any wonder why we see so many Mexicans saddling up to cross the border? It’s not because the U.S. is just that much better than everyone else; it’s because our policies and practices make things very hard on our neighbors.
The options for a developing world farmer are as follows: a) continue as subsistence farmer living one disaster away from starvation; b) farm a product that isn’t grown and subsidized in the States (ex. coffee); c) move to a city in hopes of finding work; d) steal over the border to work for the U.S. agricultural machine – if you can’t beat ‘em, join ‘em.
It’s clear that the U.S. strain of so-called “capitalism” can be and has been debilitating for many in developing countries, but the problem lies in the corruption of a potentially good system, not in the nature of the system itself.
If I go to a farmers market to buy fresh organic eggs, but a shyster deceptively sells me rotten eggs instead, should I lose faith in the ideal of fresh organic eggs? Of course not. I should demand the fresh organic eggs that I know to be healthier and more ethical. We sell developing countries on the ideal of free markets, but in reality we give them crony capitalism. In the words of Hernando De Soto, “They use the terms but not the content.” No wonder there’s so much anti-American sentiment and suspicion of capitalism in the world. We’ve been doing a bait and switch. It’s time for an authentically free market driven by human relationships, protected by but not controlled by ethical governing bodies.