Baron Coleman responds to my previous post and continues to argue that agricultural subsidies are key to national security. I continue to believe that agricultural liberalization would not harm, and could perhaps enhance, our economic “security.”

Initially, Coleman misunderstands my comment about “the marginal impact of subsidies.” I meant “marginal” as in “difference,” not “trivial.” Subsidies obviously cause the marginal producer to enter the market. My question is – how many farmers are entering the market due to subsidies? Coleman suggests that almost all of US agriculture is subsidy-dependent. I’m not aware of evidence that suggests anything close to such extreme dependence. In fact, I’ll now argue that “trivial” would be an accurate description of the marginal impact of subsidies.

First, subsidies don’t support most US agricultural output:

Most of U.S. agriculture receives little or no subsidies, with 60 percent of the value of U.S. agricultural production receiving a 3 percent subsidy share in 1999. This concentration of benefits on a relatively few commodities is an artifact of the way that commodity programs were initially set up in the 1930s. Tobacco, barley, corn, wheat, cotton, oats, rice, and grain sorghum were by far the most important commodity crops that had firm political backing because production was geographically concentrated in a relatively small number of states. [Iowa Ag Review]

It’s not as if the subsidies are ‘saving the family farm.’ Of the 2,128,982 farms enumerated by the most recent Census of Agriculture, for 2002, only 33 percent received government payments. Two-thirds of the nation’s farmers get no subsidy payments whatsoever. For the most part they don’t qualify because they grow the ‘wrong’ things. If you want to see what the wrong things are, stroll through the produce aisle or meat department of your local supermarket. The farmers who produce most of America’s food do so without a check from taxpayers. [Environmental Working Group]

Second, New Zealand provides an example of agricultural subsidization liberalization that resulted in a more efficient allocation of resources in the agricultural sector, not the end of domestic farming:

In New Zealand, farm subsidies “were gradually introduced in the early sixties, and steadily increased until 1984 when it was announced that most of them would be eliminated. By 1987, they had been phased out and the era was over.”… The Federated Farmers of New Zealand reports that in 1984, “nearly 40 percent of the average sheep and beef farmer’s gross income came from government subsidies.” In fact, New Zealand farmers were more dependent on subsidies then than U.S farmers are now. They survived the subsidy cuts by slashing their own spending, purchasing only essentials, and implementing more efficient methods. Without subsidies, they began to operate on the basis of market demand. [Heritage]

Agricultural protection is critical to agricultural producers earning rent, not keeping them in business. Given that subsidies aren’t critical to the existence of domestic agricultural production, the arguments in Coleman’s third sub-point aren’t crucial to this discussion.

Next, Coleman writes:

Fourth, while oil dependence has served us fairly well, it has also held our economy captive to the political whims of foreign nations, many of which are hostile to our interests. More than once, other nations have strategically limited oil supply in an effort to disrupt our economy.

The terminal impact to “dependence” is that our economy can be “disrupted.” During the 1970s, high price caused consumer to reduce the oil-consuming activities with the lowest marginal utilities, not cease all consumption. The “disruption” of our economy merely reduces gains from trade and doesn’t cause welfare losses that make us worse off than in the state of “oil independence.” Similarly, “food dependence” might expose us to a greater risk of manipulation by foreign producers, but it wouldn’t put anyone in danger of starving should there be an embargo by those exporters.

Coleman argues:

Free and rational markets cannot guarantee foreign actors will continue to act in their own best interest by supplying America with food. In the event a producing country wanted to limit America’s food supply, there is nothing a rational market could do to prevent it.

Two objections.

First, what percentage of the globe would need to ally against the United States for this threat to be credible? If a hostile nation stopped exporting food to the US, food exporters from nations still friendly to the US could make a profit by selling food to the US and then importing food from the anti-US exporters for their own consumption. For its tactics to be effective, the hostile nation would have to cut off its exports not only to the United States, but also to all countries still friendly to the US.

Second, I think the incentives created by US “dependence on foreign food” would outweigh the possible gains from such a confrontation. The United States is a significant export market for most developing nations, and I believe the classic arguments about interdependence increasing the price of war and thus promoting peace are relevant here.

Regardless, this discussion seems to have entered the realm of geopolitics and left economics behind. If a food embargo was used as a military tactic against the United States, then perhaps military tactics could be used to deter such a move. Such approaches are outside of my field, but if Coleman is addressing agricultural subsidies as a non-economic issue, then non-economic solutions are relevant.

On a closing note, consider two pieces of empirical evidence that others may wish to investigate in application to this topic:

– I believe that the UK has long imported a significant portion of its agricultural consumption goods. Has an enemy ever attempted to exploit this “dependence”?

– Cuba was subject to a US food embargo for forty years. What was the impact upon consumption of agricultural goods and citizens’ well-being?