Tuesday, October 17, 2006

Farm subsidies: A total waste

In most countries, the primary producers and farmers are considered to be some kind of national commodity, or icon. Australia is no exception. Farmers are considered to be a breed of heroic battlers, who struggle against the elements and drought to supply us with our fresh produce, something we all rely on for our survival.

The drought has hit farmers hard, which is no surprise. Many of them don't have the water reserves to keep their crops irrigated. So they will be 'doing it tough' as they say, without much income this year. Most of us think that its not the farmer's fault that the weather is harsh, so why should they be punished. And then, some do-good moraliser says "they oughtta help out the farmers" .

When they say "they" .. they don't mean people who give voluntary donations. No.. they are clearly and explicitly putting pressure on government, who has collected massive taxes through coercion and compulsion.

They are saying "we want it to be compulsory for you to subsidise farmers"

So the government has just announced a whopping wasteful $350mil package to help out the farmers. And that aint the end of it:

Farmers have won a $350 million government downpayment to help them through one of the worst dry spells on record and the federal government is preparing to add another $400 million to that figure in a broader package.
You have farmers remaining in their profession for decades, and usually raising their children to follow in their footsteps. Also, due to technological breakthroughs, a much greater food output can be harvested, using only a tenth of the number of farmers that worked several decades ago. Most food can be imported from overseas for cheaper prices, but farmers receive generous subsidies and government protection, with tariffs placed on competing imports.

So the government is pouring hundreds of millions in one off subsidies towards farmers because they are in a bad financial situation. For me, the elephant in the room, and the question that many people dare not ask the farmers, is:


If farming is such a low reward and high risk venture, especially in some particularly dry and arid Australian outback regions, perhaps they might move elsewhere or start a new career altogether.

The Nationals leader, Mark Vaile, still maintains that:
"Most Australian farmers run viable operations and should not be paid to leave the land", Nationals leader Mark Vaile says.
How can you keep a straight face whilst saying that someone runs a viable operation, yet maintain that they need government money to save their asses ?

Why should farmers receive a subsidy because of a bad year ? The farmers chose to work in a profession that is risky and where natural disasters can hurt them financially. Either they should migrate to a geographical area where the risks of natural disaster are lower, or perhaps consider a form of income insurance so they would be covered when things turn bad ? There are many free market solutions that could be used. But we'll never know, because farmers continually fail to make money in the free market, and they rely on public funds to survive another year.

The farmers are receiving massive government assistance to maintain their lifestyle. They choose to live out in the countryside, where droughts and floods will ruin their annual crop, where other forms of employment are scarce, where there are no opportunities to raise children to develop any other kind of skills, where it costs the taxpayer thousands extra to maintain the infrastructure for them including roads, telecommunications, internet, water and gas. The government places tariffs on imported food, so Australian farmers don't have to compete much with foreign farmers.

Why can't I receive a subsidy for my career ? Or why can't someone else "doing it tough", who washes dishes or cleans toilets receive a subsidy ? Maybe if I try a startup business, and it fails miserably due to my incompetence and poor planning, then I should receive a few thousand bucks of government subsidy ? Heck lets get even riskier .. what if I spend all my money down at the track betting on greyhounds, shouldn't I receive a subsidy if I lose all my savings ?

The answer is no. It is up to each individual to do the best they can, find employment where their marginal productivity is highest in order to earn the highest income. Part of that formula, is reducing risk. But why manage your business carefully and minimise risk when you've always got government there to bail you out ?