August 13, 2003

The Political Economy of Protectionism

Reason's Ronald Bailey and *gasp* the NY Times editorial page are correct that agricultural subsidies and tariffs are wastes of money and harmful to the poor in developing nations. However, let's look a little at the politics of these subsides in the U.S.

A few weeks ago, there was some buzz about the outsourcing of tech jobs to places like India. Politicians have called for a stop to this. I have even heard people worried that all the good, high-paying jobs will leave the U.S. Workers here will be stuck with low-paying retail and service jobs. Few thought the New Economy would be similar to the Old Economy with lower-priced labor hired for tech support and computer programming.

Then we have farmers. In the U.S. they're looked at in a romantic light. We have a picture of a man of the land working from sun up 'til sun down just to put food on his family's table and ours. The farmer is in constant contact with nature. He doesn't worship it like radical environmentalists do, but he has a deep respect for what nature gives and takes away. This closeness to the earth makes him for in touch of what it means to be human. Such wisdom that comes from hard work, patience, prudence, and common sense results in the ideal American citizen.

This view of the farmer goes as far back as Thomas Jefferson who wanted the new country to be a land of citizen farmers. In a letter, Jefferson wrote, "The cultivators of the earth are the most virtuous citizens, and possess most of the amor patriae." As it turned out, the U.S. looks more like Alexander Hamilton's vision of a land of businessmen. Nevertheless, Jefferson's bucolic picture still hangs on the wall of the American mind even if many of us have never once walked around a farm.

Through the 20th Century, America lost it's huge number of farmers, yet became the most productive agricultural nation on earth. Improved equipment, fertilizers, techniques, and science led to commodity markets flooded with corn, wheat, milk, and other products. Such output forced farmers to get more productive--which usually meant getting bigger--or to find niches like organic farming.

Economic trends ran smack into romantic visions. The result is a plethora of government subsidies and trade barriers. Price supports were enacted to prevent the disappearance of the family farm. Products like mohair and cotton are subsidised because at one time they were considered essential to national security.

When these programs are even mildly threatened, those people who stand to lose the most will fight the hardest. The rest of us who pay most of the costs (explicit and implicit) don't get involved because we're not directly affected. In Jonathon Rauch's book Government's End takes an insight from economist Mancur Olson:

In other words, small, narrow groups have a permanent and inherent advantage, and "often triumph over the numerically superior forces because the former are generally organized and active while the latter are normally unorganized and inactive."

Combatting this combination of deep-set romanic vision with special interest politics requires not just accurate economic arguments. It also requires an alternative view of the ideal America.

"Harvesting Poverty"