One often forgets that repression of economic liberties constitutes a form of state violence. Whatever temporary good it seeks to accomplish, government intervention often tends to disturb the global market, exacerbating inequality and threatening the very survival of countless individuals around the world. Nowhere is this more clearer than in the agricultural policies of the United States and the European Union. The far-reaching ramifications of the west’s agricultural subsidies include not only the possibility of intensifying the current global economic crisis, but also undermining the security of the entire world.
It is important to grasp two very important facts from the Great Depression of the 1930s. First, the Depression did not develop from a vacuum, but as a consequence of the American government’s policy after WWI to increase tariffs, mostly in the agricultural sector. Second, once the depression began, the American government ignited a tariff war with the Smoot-Hawley Tariff Act of 1930, which by increasing tariffs further destabilized the deteriorating world market and order.
In the current global market, while agricultural tariffs no longer have as great an influence, the same detrimental effects are exerted by agricultural subsidies. The European Union alone spends $50 billion every year supporting domestic production of agricultural goods. As a result, not only are agricultural products from the third world not competitive within the EU but also the third world is forced to purchase subsidized agricultural products from Europe. By unfairly eliminating competing producers of agricultural goods in the third world, the United States and the European Union have effectively reduced the agricultural output of the world. Furthermore, the introduction of bio fuel subsidies exacerbated the diminishing supply of food. As a result, according to UNESCO, wheat prices have gone up 130% since March of 2007. Unable to compete in the food market despite the increase in prices, the purchasing power of many agriculture based nations will plummet as the crisis deepens. In this scenario, the world trade can only diminish with terrible consequences.
Although the crises in the housing and the financial markets overshadow the enormous burden placed on the global market by agricultural subsidies, the rest of the world is not so oblivious to the ongoing crisis. In retaliation to the west’s agricultural subsidies, increasing food prices, and the global economic crisis, 29 countries have curbed their export of food products. This feeble attempt to hoard domestic products has been a consistent response by nations facing economic hardship. During the Asian Financial Crisis of 1997, the response from many afflicted nations was to raise their tariffs, especially against highly competitive American produce such as beef. In response, the United States passed anti-dumping laws, causing havoc in Pacific commerce. This time the crisis is global and the global trends that we had seen in the 1930s, following the Smoot-Hawley Tariff Act, are already evident around the world. India, Russia, Vietnam, and other countries have already raised tariffs, spearheading the cataclysmic economic combustion which may decrease global trade for the first time since 1982.
If one remembers what lay at the end of the Great Depression in the mid and late 1930s, the direness of the current situation does not need to be reiterated. In 2008, Foreign Policy magazine ranked Pakistan the nation most heavily afflicted by the food crisis. With 200 million people losing the ability to purchase basic means for survival, the conditions are ripe for the radicalization of the population. Considering Pakistan’s nuclear capacity, this is no small matter. As the world heads deeper into an economic crisis, tariffs increasing, and the global commerce shrinking, the socio-political conditions can only worsen. Frederic Bastiat said that "If goods do not cross borders, armies will." In other words, tariff wars or subsidy wars can lead to shooting wars.
Recognizing the negative impacts of agricultural subsidies, the European Union seeks to phase out its Common Agricultural Policy which outlines Europe’s policies on food production. However, no global economic reform will be complete without the cooperation of the United States. For the United States, agricultural subsidies account for only a small part of the bigger problem surrounding government intervention. In 2007, government spending accounted for 37% of the entire GDP. The United States must liberalize its market and allow all peoples of the world to have a fair chance to subsist. For this may be the only means to save the world from irrational self destruction.
Best,
Yong Kwon
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