POLITICS

Farming vs. capitalism

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Politics,Beltway Confidential,Business,Timothy P. Carney,Agriculture

Farmers take risks, buy things, sell things, borrow, invest, and try to make profits. But thanks to Congress, farming differs quite a bit from free-market capitalism. Let’s take a look for a second at the summary Brad Plumer has written of the farm bill, and contrast the way farming works to the way a free market works.

1) Food stamps and nutrition, $760.2 billion over 10 years. This is welfare program for the poor. In that regard, it doesn’t clash with my understanding of a free market. But it is also corporate welfare for food companies. It’s complicated, so I’ll move on to the next one.

2) Commodity programs, $41.3 billion over 10 years. In a free market, farmers would develop means for dealing with the fluctuations in crop prices. Private insurance products could do this. Securitization or long-term contracts. Hedging strategies. These market-based means for dealing with fluctuations would differ from government supports by not creating as many distortions.

3) Crop insurance, $89 billion over 10 years. In a free market, farmers would pay their crop insurance premiums and deductibles. Without subsidies, the premiums and deductibles would be lower. So, think of federally subsidized crop insurance as another subsidy for the financial sector.

4) Conservation, $58 billion over 10 years. To some extent, farmers have incentive to protect their soil and their land. To some extent, long-term environmental damage is externalized. So conservation efforts are arguably a response to a market failure.

5) Trade, $3.6 billion over 10 years. In a free market, farmers would do the business of marketing their food to foreign buyers.

6) Energy, $1.1 billion over 10 years. This is partly a subsidy to green-energy companies. Some renewable energy sources, like ethanol, wind, and solar would be used heavily in select regions where they are cheap to make and distribute. But there wouldn’t be giant national pushes for politically favored green energy.

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