We are no longer living in the world of Steinbeck’s dismal Grapes of Wrath. As the Dust Bowl destroyed millions of farms, the government stepped in to help the struggling industry to ensure the survival of the country. Fast forward to today, the government is still shilling out $16 billion in subsidies despite most farms not needing it. With the amount of subsides getting out of control, the government should instead use those funds for areas that have proven to work – namely, agricultural research and development (R&D).
When farm subsidies were enacted, they were meant to help family-owned farms. However, as time passed, farm subsidies went awry, helping the rich getting richer. In 1930, 21 percent of the workforce was employed in agriculture, today it’s a little above 1 percent. Similarly, the number of farms has dropped by 5 million, while the average farm size has tripled. Today, large farms dominate the market and their profits exceed many of the crops they produce. With the help of the subsidies, large farms continue to reap the benefits designed for small struggling farms.
The Mercatus Center reports that in the past two decades, the largest 1 percent of farms had received 25 percent of all subsidies while only the smallest 80 percent of farms got only 11 percent. Since 2008, there have been no more than 10 farms that have each received $1.8 million in subsidies every year. On the flip side, the average small farm receives $4,000 to $10,000 annually.
However, it’s not just in the U.S. where farm subsidies help the rich in a disproportionate way.
Ukraine, for example, had lower agrarian support in the form of tax benefits compared to other European nations until two years ago. Then in 2017, the government added 6.3 billion UAH (Ukrainian currency) of subsidies to the agricultural industry which lead to similar effects found in the U.S. A report found that 5 percent was wasted in dead weight losses, while farmers and rural people were the ones that benefited the least. Regrettably, they found that farmers with the best connections –usually the richest—were able to secure subsidies while everyone else got the scraps.
Unsurprising, American farmers claim the industry would be devastated without government support, despite other countries, like New Zealand, flourishing without subsidies.
After decades of support, in 1984 New Zealand decided to cut farm subsidies and instead invest all the money into research. After the transition, farmers thrived. Now, New Zealand is one of the most productive countries in agricultural production, growing enough for 40 million people despite its 4 million population.
Instead of unnecessarily subsidizing farms, the government should consider spending the money on R&D. The Foundation for Sustainable Agriculture found the marginal returns to agri-GDP growth is 5 to10 times higher when spent on R&D compared to farm subsidies. The report also shows that farm subsidies encourages mismanagement of the land while R&D promotes efficient practices like water management.
Despite America’s long history of subsidizing its farmers, this financial support has largely gone to waste as the wealthy continue to accrue their fortunes at the expense of the small farmers who barely see any of the subsidy. Instead of throwing money away, we should instead invest in R&D which has proven to increase farming outputs. It’s time our policies reflect the times and scrap outdated subsidies.