Globalization and the rhetoric of free trade have often been used to the detriment of the poor. On the other hand, free trade and free markets also have the potential to facilitate positive change throughout the world, if their excesses are moderated. Want a great example of how the principles of free trade and the ethic of rooting for the poor can be undermined in one fell swoop? Let’s try farm subsidies.
Farm subsidies help our farmers compete in international markets against all natural market forces. These subsidies hurt farmers in developing nations because they are forced out of markets they might otherwise be able to compete in (domestic and international).
Republican and Democratic presidents and legislatures have been equally bad on this count, constantly increasing subsidies for U.S. farmers. Our hypocrisy on this issue is nearly unrivaled; as we call on other countries to open their markets while keeping the poor shut out of ours (the European Union is just as bad, if not worse). Joseph Stiglitz, a Nobel Prize-winning economist, has written a striking piece on cotton subsidies; “The Tyranny of King Cotton”.
Stiglitz’s piece caught my eye because I got his book Globalization and Its Discontents last year for Christmas (yes, I actually ask for things like that). Greg Mankiw (a Harvard economist) also recently blogged about Stiglitz’s article.
In general, I’ve found that economist speak an entirely different language. I took a macroeconomics class one summer to help me understand a little, but I’m afraid I’m still far from conversant on many issues. But Stiglitz makes things understandable to the layman on a level similar to Jeffrey Sachs’ The End of Poverty. Here are some excellent quotes from Stiglitz on farm subsidies:
“Americans like to think that if poor countries simply open up their markets, greater prosperity will follow. Unfortunately, where agriculture is concerned, this is mere rhetoric. The United States pays only lip service to free market principles, favoring Washington lobbyists and campaign contributors who demand just the opposite.”
Stiglitz continues, saying that if we had eliminated farm subsidies,
“Likewise, migration pressure would have been reduced, because it is the huge disparity in incomes more than anything else that leads people to leave their homes and families to immigrate to the US. A fair trade regime would have helped reduce that disparity.”
“Indeed, citizens throughout the rich developed world all stand to benefit from a more prosperous globe – especially a world in which there is less poverty, with fewer people facing despair. For we all suffer from the political instability to which such despair gives rise.”
So eliminating farm subsidies is definitely within our self interest; rational self interest is usually the purview of economists. But when they start moralizing as well, you know an issue is rather clear:
“America’s national interests thus dictate a change of policy. But there is also another powerful rationale for doing so: treating fairly those who are poorer and less powerful is the morally right thing to do.”