30-06-2005 07:50									#1
	Econ Dev Prof sez that . . . Support Apolyton, buy Galactic Civilizations: Deluxe Edition

developped countries are a) self sufficient in agriculture products and b) more productive in terms of agriculture.

why then is it that developped countries feel the need to subsidize agricultural products to the tune of $350 bn a year?

	30-06-2005 07:56									#2
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	30-06-2005 08:00									#3
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maybe the prof is wrong . . .

	30-06-2005 08:04									#4
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Because its cheaper to produce food in developing countries.

	30-06-2005 08:05									#5
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agriculture is a cyclical industry prone to boom and bust.

I believe one of the original intents was to guarantee continued investment (employment) of farmers into the food business. However, large corporations have taken over from the small family farmer and price supports are less appropriate.

Another argument is that investing the "small" amount of money into our agriculture impacts the developing countries' agriculture industries leaving the advantage to us

	30-06-2005 08:07									#6
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but the price is the same, whether you buy from abroad or not. there is an single international price for the agriculture good, like cotton, or whatever it is that you are growing.

	30-06-2005 08:08									#7
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Really? I thought it was cheaper to buy from 3rd world countries?

	30-06-2005 08:09									#8
	Re: Econ Dev Prof sez that . . . Support Apolyton or Terrorists Win

quote: Originally posted by Lawrence of Arabia developped countries are a) self sufficient in agriculture products and b) more productive in terms of agriculture. why then is it that developped countries feel the need to subsidize agricultural products to the tune of $350 bn a year?

b) doesn't mean more bushels of grain per dollar; it means more productive per acre

Labour is so much more expensive in the first world that inefficient 3rd world agriculture will outcompete it...

	30-06-2005 08:10									#9
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quote: Really? I thought it was cheaper to buy from 3rd world countries?

not anymore, with subsidies that make prices lower in rich countries, plus transportation and other such costs for bringing over stuff from LDCs

	30-06-2005 08:13									#10
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quote: b) doesn't mean more bushels of grain per dollar; it means more productive per acre Labour is so much more expensive in the first world that inefficient 3rd world agriculture will outcompete it...

but again with b), if it means more productive per acre, then why must the 1st world have subsidies to keep them in business, knowing that

W = P x MP

i mean, that equation insinuates that the more productive you are, the higher your wage will be, so you will outcompete the rest and wont need subsidies.

	30-06-2005 08:15									#11
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quote: Originally posted by Shogun Gunner agriculture is a cyclical industry prone to boom and bust.

	30-06-2005 08:18									#12
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LoA is right. The subsidies have the effect of lower US agriculture costs keeping them competitive with the cheaper labor of the 3rd world.

It's also not very politically palatable to import food and become dependant on imports for something as critical as food. Japan has rigid rules of protecting it's rice industry for this reason -- however, they have no choice but to import food as they cannot produce enough for their populations needs.

	30-06-2005 08:18									#13
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its not prone to 'boom and bust'
its prone to fluctuations in prices.

its two different things. when production increases and prices go down is that a boom or a bust?

	30-06-2005 08:20									#14
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great years in production push down prices...however the effects are delayed because of the growing season...the delay of planting seeds to harvesting product and getting it to market.

unregulated, the swings between prices can be enough to push small farmers into debt and out of farming.

	30-06-2005 08:20									#15
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quote: It's also not very politically palatable to import food and become dependant on imports for something as critical as food. Japan has rigid rules of protecting it's rice industry for this reason -- however, they have no choice but to import food as they cannot produce enough for their populations needs.

also true. and as a side not, countires like japan with little arable land, actually ahve a leg up on aagricultural productivity versus others (to a point obviously) because they need to constantly increase productivity to feed the more and more people in the cities, (not enough land for them all to work as farmers) while countries with a lot of arable land will have more farmers, less people to feed, more land, and less incentive to be more productive.

	30-06-2005 08:24									#16
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quote: great years in production push down prices...however the effects are delayed because of the growing season...the delay of planting seeds to harvesting product and getting it to market. unregulated, the swings between prices can be enough to push small farmers into debt and out of farming.

which would make farms bigger on average, and more productive and thus able to withstand those shocks more, making prices more stable.

but back to the original point. are developped economies really self sufficient and more productive in agriculture then developping ones?

	30-06-2005 08:28									#17
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quote: Originally posted by Lawrence of Arabia which would make farms bigger on average, and more productive and thus able to withstand those shocks more, making prices more stable.

agreed. which makes subsidies less appropriate now than in the past.

quote: but back to the original point. are developped economies really self sufficient and more productive in agriculture then developping ones?

Yes, developed countries have advantages as automation, transportation, and for some, large populations to buy these products. I would argue that they are more productive.

Regarding self-sufficient, that would depend on the climate, population versus farmable land of the country in question. The United States? Self-sufficient without a doubt.

	30-06-2005 08:30									#18
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so if 1st world economies are more prductive, then you could say that they have a comparative advantage in producing agricultural products (lower oppertunity cost) and higher wages. why then do many producers need subsidies in the developped world in order to compete?

	30-06-2005 08:48									#19
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*bingo*

That is a good question.

	30-06-2005 09:12									#20
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(that was my first question )

	30-06-2005 09:16									#21
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And I think Shogun's first post answered it .

	30-06-2005 09:21									#22
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quote: Originally posted by Lawrence of Arabia but again with b), if it means more productive per acre, then why must the 1st world have subsidies to keep them in business, knowing that W = P x MP i mean, that equation insinuates that the more productive you are, the higher your wage will be, so you will outcompete the rest and wont need subsidies.

WTF are you on about?

Agriculture in the developed world is not the major employer. Wages at market equilibrium would be higher for farmers here than in the third world, but not enough higher to meet 1st world living standards.

	30-06-2005 09:22									#23
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Basically, a factory worker or software engineer in the first world is so much more productive than a farmer in the first world is, that without subsidies 1st world farming could not provide a living wage to its practitioners...

	30-06-2005 09:26									#24
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Or at least not at the current level of agro-production.

If subsidies were removed then:

a) Food prices would rise
b) Some of the marginal producers in the first world would go under (the rise in prices would obviously not completely cancel the lost revenue from subsidies)
c) This production would shift to the third world

	30-06-2005 09:44									#25
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The first world most certainly can feed itself, in terms of basic staples: the US is a massive exported or grain and soy-lots of Mexican farmers are goign bust cause they can't compete with US corn and wheat growers.

Now, when it comes tot hings like Sugar, Coffee, Cotton, and other such commodities, there things get dicey.

	30-06-2005 11:25									#26
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quote: WTF are you on about? Agriculture in the developed world is not the major employer. Wages at market equilibrium would be higher for farmers here than in the third world, but not enough higher to meet 1st world living standards.

yeah but heres the problem. if 1st world farmers were more productive, then you would see them supplying the goods at lower prices. when they supply them at lower prices, they can sell more of it, making larger profits, and pushing out LDC less productive farmers (and grabbing a larger market share)

if they were more producitve you woiuldnt see them neeeding subsidies to survive.

	30-06-2005 11:37									#27
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First world farming is basically a heavy industry requiring a huge input of water, chemicals, machinery and energy. This allows large yields, but also confers high costs.

Some crops (sugar, cotton) are simply better suited to third world climates, as well.

	30-06-2005 11:52									#28
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quote: Originally posted by Lawrence of Arabia its not prone to 'boom and bust' its prone to fluctuations in prices. its two different things. when production increases and prices go down is that a boom or a bust?

	30-06-2005 12:20									#29
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The USA and Europe have heavily subsided agricultural systems and this subsidy makes them uncompetitive on a non-subsidised basis. Countries where agriculture is subsidised to a minor extent only eg Australia and New Zealand can and do compete globally with non subsidised exports of developing countries.
Economic theory shows that costs generally rise (or fall) in any economic system to a long term level that is sufficiently under the returns to allow a reasonable profit. As subsidies tend to increase the return to farmers, they also tend to increase the cost basis also, thus negating the intention of the subsidies.
This cost basis is increased by a tendency to pay increased money for labour, or for machinery when returns are higher, but particularly important is the tendency to pay more for land when profits are increased as a result of subsidies. This benefits existing farmers, but makes it much harder for new entrants to the industry, entrants with fresh ideas who may have increased productivity and reduced costs.
Agricultural subsidies are therefore a serious drag on the economies and productivity of most 1st world economies. It is interesting to note that the two 1st world economies with the lowest subsidies also have had above average economic growth in recent years, Australia and New Zealand.

	30-06-2005 15:04									#30
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subsidising your farmers so your country can be self suffcient is just about ok, but to subsidise production so that your surplus undercuts the prices of developing countries is economicaly inefficient and morally wrong