American Farmers Don't Need Subsidies
Margaret Thatcher is said to have quipped, “The trouble with socialism is that eventually you run out of other people’s money.” New Zealand has discovered that this result may not be all bad. In the mid 1980s, New Zealand faced bankruptcy. The tab for years of socialistic policies had finally come due. The Labour government was forced to act quickly and drastically to cut expenditures.
The New Zealand economy was — and still is — heavily dependent on agriculture. Farmers and farm prices had been subsidized for years through a multitude of government programs. In 1984, the government eliminated over 30 subsidy programs, not gradually, but overnight. The ruling Labour Party predicted an economic disaster. They foresaw a mass exodus of farmers and fully expected to be forced to reinstate some type of subsidy program.
What followed astounded most observers. This dose of cold reality jolted the New Zealand farmers and unleashed, in the words of Mike Petersen, the country’s special trade envoy, “an incredible process of innovation, guts, and determination from those people who really wanted to make this work.” The transition period was rocky, with mass protests from thousands of farmers, but ultimately less than 1 percent of farmers were forced to abandon the industry.
New Zealand farmers have relentlessly cut costs, developed new products, and diversified their use of land. Loosened from the constraints of subsidies and government incentives, farmers have been free to produce what consumers really want. Agricultural productivity has far exceeded the growth rate of the overall New Zealand economy. Chris Hausman, a Midwestern U.S. farmer, recently wrote about New Zealand,
You had a system dictated by government programs that was thrown out the window overnight. But the farmers kind of reinvented themselves and now New Zealand is a powerhouse when it comes to agricultural production on the world stage.
Not only did the change produce sanguine economic results, but there was a moral side to the story. Agricultural leaders in New Zealand report a new sense of confidence among farmers. Nick Clark of the Federated Farmers of New Zealand states,
For many farmers, I think they underestimate just how successful they can be without government support. Farmers do not want subsidies back. Most farmers want government out of their lives and do not want to be beholden to it.
The United States has not yet “run out of other people’s money,” as New Zealand did, but we are well on our way. After over 75 years of agricultural subsidies and incentives, our government spends billions each year on well-intended farm programs designed to facilitate farming. American Transparency’s “Harvesting U.S. Farm Subsidies” reported $13.2 billion in subsidies paid to 958,000 recipients in 2017. An additional $1.8 billion was paid to farmers not to farm their land.
Just recently, President Trump announced a $12 billion supplemental subsidy program to ameliorate the impact of his tariff policies on farmers. Milton Friedman summed up U.S. agricultural policy as follows:
An agricultural program intended to help impecunious farmers has become a national scandal that has wasted public funds, distorted the use of resources, riveted increasingly heavy controls on farmers, and withal has done little to help the impecunious farmer.
Before it is someday forced to slash expenditures, Congress should drastically rethink our farm policy. We could save billions by eliminating subsidy and incentive programs, while simultaneously making our farmers more productive and self-sufficient. With the worldwide demand for food expanding rapidly, we have an obligation to follow New Zealand’s example and unleash the productivity of our farmers to meet this demand.
Finally, don’t forget the moral dimension. Agricultural policy reform would free American farmers from the debilitating dependency upon government programs. Speaking for his fellow New Zealand farmers, Craige Mackenzie wrote on August 16 “Without subsidies, we have more freedom to solve problems through creativity and innovation rather than the command-and-control impulses of government.”
As President Calvin Coolidge wisely said in 1925, “I favor the policy of economy, not because I wish to save money, but because I wish to save people.”
Garland S. Tucker III is the Retired Chairman/CEO of Triangle Capital Corporation, author of “Conservative Heroes: Fourteen Leaders Who Changed America – Jefferson to Reagan,” and Senior Fellow at the John Locke Foundation. These comments are the opinion of the author, and do not necessarily express the position of the John Locke Foundation.