Agribusiness Corporations Are The World's Biggest Welfare Queens
US and EU Corporate Welfare Handouts -- Blocking the Free Market
In a free market with no special privileges, small independent farmers would do better, and large agribusiness corporations would do worse. So, don't expect to see a free market any time soon.
Here are selected portions of an article circulated by allafrica.com; it originally appeared in "This Day" (Nigeria).
by Kevin WatkinsApart from wringing their hands, endorsing human development goals, and promising more aid, what can governments in rich countries do about poverty in poor ones? Answer: get serious about reforming their own flawed farm policies. Rich-country corporate welfare is destroying the livelihoods of poor farmers across the developing world, reinforcing an unequal pattern of globalisation in the process.
Devastating subsidies ruin the free market
Three-quarters of the world's poor, about 900 million people, live and work in rural areas, most of them as small farmers. Rich-country agricultural policies are destroying the markets on which they depend.
Each year, industrialised countries provide over $300 billion in corporate welfare to agribusiness corporations, roughly six times the amount they spend on anti-poverty aid. It is more than the total income of the 1.2 billion poorest people in the world.
Small farmers in developing countries suffer damage through various channels. Subsidised exports undercut them in global, and even local, markets, driving down household incomes. Meanwhile, those seeking access to northern markets have to negotiate some of the world's highest trade barriers.
The US and the EU are the 'subsidy superpowers', accounting for over 60 percent of rich country agricultural support spending. The biggest 7 per cent of farms receive over 50 per cent of farm subsidies, both in the US and the EU. Subsidy distribution to agricultural producers in Europe and America is more unequal than income distribution in Brazil, one of the world's most unequal countries. To make matters worse, many of the benefits end up with corporate exporters or get capitalized into rising land values and input prices.
If industrial country farm subsidies were purely of domestic concern they could be written-off as an act of reckless extravagance guided by perverse economics. But no -- sadly, the subsidy fest for the world's richest agribusiness corporations producers hurts some of its poorest.
Cotton Corporate Welfare Scandal
Take the case of cotton. When it comes to harvesting subsidies, America's 25,000 cotton barons are first among equals. In 2001 they received $3.6 billion in government support, three times US aid to all of Africa. Because the US is the world's largest cotton exporter, accounting for 40 percent of the world market, these subsidies lowered world prices: by around one quarter according to the International Cotton Advisory Committee. Farmers in Africa have suffered the consequences.
In West Africa alone 10-11 million people depend on cotton cultivation as a source of income. The crop is also a major source of foreign exchange and government revenue. Lower world prices caused by American subsidies mean that desperately poor households have seen their incomes fall, with attendant consequences for poverty. In Benin, the price decline associated with American subsidies translates into a 4 percent increase in the incidence of poverty, or 250,000 people falling below the poverty line. Burkina Faso loses more because of US subsidies than it gets in debt relief.
What makes the cotton case so egregious is that West Africa is a far more efficient producer than the US. Fewer than 10 per cent of America's producers would be competitive on world markets without support. But in 2001/2002 the subsidy provided to American cotton farmers exceeded the total national income of countries like Burkina Faso and Mali. In a bizarre throwback to the principles of Bolshevik state planning, it also exceeded the value of cotton output.
Unfair tariffs and export dumping
Tariffs are another sharp example of US and EU policies against free trade. Average agricultural tariffs in the EU and the US are some five times higher for agricultural goods than for manufactured goods. And tariff peaks in excess of 100 per cent are common, notably in tariff lines such as sugar, beef, dairy produce and processed fruit.
In Africa, farmers are being pushed out of urban markets by heavily subsidised EU wheat and dairy exports, undermining incentives for production and creating a dangerous dependence on imports.
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