Case Study 2 - The Effect of Agricultural Subsidies
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Rural Virginia is one of a dozen states that maintain a longtime American tradition: farming. Farms in Virginia today are larger than they used to be-almost 400 acres, and there are fewer of them. But production is up, thanks in part to a national subsidy program. The more farms produce, the more money they get from the government. Virginia farms grow corn-lots of corn. While it isn't worth much, the government subsidies help to make it profitable, and it provides the farm with grain to feed its cattle. US livestock eat about 60% of all corn grown in America. But even though the farm feeds vast amounts of grain to cattle and poultry, it makes less money on the animals than you might think. The farm has 240,000 chickens. It costs thousands of dollars in heat, feed and heavy doses of antibiotics to grow the birds. After expenses, the farm makes about $12,000-or 5 cents a bird-from raising poultry. For the farm to be profitable, it has to breed chickens, calves and other livestock by the thousands. It is hard for small farms to survive in today's market but the large ones-who get most of the subsidies since they have the highest yield-do well. While the U.S. feeds huge amounts of grain to livestock, it also sells wheat, corn and rice to consumers in America and other countries as well. In fact, the U.S. is a world leader in grain exports; it sells large amounts of cheap rice and wheat to countries all over the world.
Haiti is a small country in the Caribbean, home to mangoes, warm breezes and beautiful beaches. While it not a rich or powerful nation, Haitians pride themselves on being self-sufficient. Up until the mid 1980's, farmers grew enough rice in Haiti's fertile Artibonite valley to feed the entire nation. But when the government followed an IMF recommendation to cut taxes on imported rice from 50% to 3%, a flood of cheap US rice to entered the country. Since the U.S. farmers received subsidies from their government, they could sell rice for far less than Haitian farmers could. In Haiti's cities, people saved money by buying the cheaper rice, but in rural areas people suffered. Farmers who had earned a living growing rice went out of business as demand dwindled. Since the U.S. rice was so cheap, the farmers had to cut their prices, and they could no longer make a living out of farming. Many went out of business and now live in poverty. By the year 2000, rice production in Haiti had declined by 50%. Almost half of the rice that Haitians eat now comes from the U.S.
Virginian Farmer
We farmers are the bedrock of this nation. Our government recognizes this-that's why they have a seventy-year tradition of giving us assistance. The 2002 Farm Bill gives us $270 billion in government subsidies over the next decade. This will help us grow more crops-which we need to feed the livestock. We sympathize with farmers in other countries who do not get any help. But this is a security issue. What's wrong with Americans getting help from the government to grow what the country needs?
Haitian Farmer
My family has grown rice Haiti's Artibonite valley for generations. We work hard, with little help from our government. When Haiti began opening its markets to foreign imports in 1986, American rice invaded the country. It sold for so little that we could not compete. 'Why did the government stop taxing imported rice?' we asked ourselves. 'What is the sense in buying rice from the United States when Haiti already has enough rice in the first place?' Our questions went unanswered, but change came quickly. Today some of my fellow farmers are so poor that they can't even afford to buy the U.S. rice that brought about our downfall. Haiti no longer feeds itself-now we depend on another country.
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