Farmers Don’t Need to be Protected from Capitalism

COMMENTARY Agriculture

Farmers Don’t Need to be Protected from Capitalism

May 31st, 2017 4 min read
COMMENTARY BY
Daren Bakst

Research Fellow in Agricultural Policy

Bakst studies and writes about agricultural and environmental policy and property rights, among other issues.
Many farmers don’t believe in such an extreme handout system, and in fact, most don’t even get handouts. iStock

Key Takeaways

Policymakers should stop insulting farmers as being inferior business people who are incapable of operating in a capitalist system.

It isn’t up to taxpayers to make sure that every farmer’s business model is going to succeed. Every industry has challenges.

Congress has a chance to adopt real reform; the next farm bill is already upon us.

The $15 billion a year taxpayer-funded “safety net” for farmers isn’t really about risk, it’s really about entitlement: a belief that farmers are entitled to have federal government support to ensure they succeed.

A shocking line on the United States Department of Agriculture web site says that part of its mission is to help “keep America's farmers and ranchers in business” due to the uncertainties of the market. Policymakers should stop insulting farmers as being inferior business people who are incapable of operating in a capitalist system and managing the risks faced by all businesses in the market. They need to stop promoting the entitlement mentality.

Of course, many farmers don’t believe in such an extreme handout system, and in fact, most don’t even get handouts. However, too many farmers do feel this way, as anyone working on agricultural reform can attest.

Consistent with this entitlement mindset, the current “safety net” isn’t solely focused on helping farmers when they experience a major crop loss, such as from severe weather, as most people would reasonably assume. It goes way beyond this. Farmers can pocket federal handouts even when they have bumper crops or when they just fall short of their revenue targets.

Citing their significant investments, many handout proponents often then ask: Don’t they deserve protection from taxpayers? The answer is simple: Of course not. It isn’t up to taxpayers to make sure that every farmer’s business model is going to succeed. Every industry has challenges. Yet, others manage without such handouts. Do we really think farmers, including multimillion-dollar operations, are incapable of operating like other businesses. 

Risk forces businesses to respond to market demand and innovate. This is how the economy progresses. Farmers sheltered from market realities will often take unwise actions they otherwise wouldn’t. Under the current system, the cost of these unwise decisions is borne by taxpayers.

Markets provide valuable information to businesses. For example, low prices signal it’s time to produce less of one crop and switch to another. By intervening to insulate farmers from low prices, the federal government distorts production decisions and commodity prices.

Many defenders of agricultural handouts turn to the claim that these handouts are necessary to our national security. There’s little explanation as to why this is the case. Apparently though, we are supposed to believe that these handouts are required for our nation to feed itself, and without them, we won’t have farms and we will forget how to farm. We will be at the mercy of unfriendly countries; famine and social unrest would just be around the corner. If this sounds like absurd hyberbole, that’s because it is. But it’s the type of extreme scare-mongering that keeps the handouts coming. 

National security crises haven’t been caused by governments removing subsidies. There is, however, an excellent example showing the benefits of removing subsidies: New Zealand. Their agricultural sector has flourished since major reforms in the 1980s. The Federated Farmers of New Zealand declared that they “are proud of their independence and are determined never again to be dependent upon government subsidies.”

The sense of entitlement to farm handouts is even more audacious when one looks at the actual distribution of the handouts. Most go to the largest agricultural producers that have much greater income and wealth than non-farm households.

The income and wealth numbers are staggering even when looking at all farm households (not just the largest farms). In 2015, the median income of all U.S. farm households was about 50 percent greater than that of all U.S. households. Median farm household wealth was 10 times greater than that of all U.S. households. 

Legislators need to start pushing back against the powerful agricultural special interests and start representing all Americans: taxpayers, consumers, and yes, farmers.

Congress has a chance to adopt real reform; the next farm bill is already upon us. Will legislators choose the status quo of corporate welfare or will they pursue long-overdue reforms that help preserve opportunity, not guarantee success? We’ll know the answer soon enough.

This piece originally appeared in The Hill on 3/31/17