Friday, 16 May 2008

Dean Baker on farming Subsidies

I'm a big fan of Baker, he's the only economist I respect because he sticks to evidence and calling out his profession for having no idea about what is going on in the economy. However his opinions on agricultural subsidies sound like a purely theoretical economist sticking to his starting assumptions. Baker has a post where he argues that farming subsidies in the west lead to cheaper food pricing in the south. Indeed this is true axiomatically, you can use the fancy models and graphs to show this.

But the issue is that incomes are reduced by lack of economic development because of these very policies (dumping). It doesn't matter if 1kg of rice costs only 3 dollars, if you're earning $2 a day. Now it's not entirely the fault of subsidies that sweat shop workers earn $2 a day. But if you cram people into cities from farms, the over supply of labour is huge so the price they command falls.

The affordability of the price is the question, not the absolute price. This is so obvious to anyone that thinks about it for more than 3 seconds.

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