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Letting agricultural markets prevail optimal for Louisiana

In the parlance of collective behavior, it’s known as “logrolling:” the exchanging of assistance or favors. Specifically regarding politics, it’s the trading of votes by legislators to secure favorable action on projects of interest to each one. It explains why the U.S. expends tens of billions of dollars a year on agricultural subsidies, and the dilemma presenting itself to Louisiana producers that could change all of that.

Because of political clout, American agricultural producers enjoy taxpayer subsidy of their products to the detriment of those paying, consumers, and American international trade. That is, they are encouraged to grow more than the marketplace ordinarily would support; specifically, the largest producers reap the lion’s share of these gifts from taxpayers. It’s a notion inherited from an era when agriculture was the largest single industry in the economy and was performed almost exclusively by “family” farms.

(Some useful statistics here: Farms comprising less than 4 percent in number have over 52 percent of the total acreage. Sales of the largest 1.4 percent, comprising 9.8 percent of the total acreage, are 47 percent of the total. Theses are 2002 figures. Of the $43.7 billion in profit made by farms in 2003, $13.6 billion came from subsidies, or over 31 percent.)

One reason why it has persisted is members of Congress from farm states could team up with each other to support the many kinds of products collectively produced, but often with any particular product concentrated in just a few states – logrolling. As long as they could stick together, enough could agree to get everybody’s favorite product supported. Louisiana, in particular its producers of sugar as it is the single largest commodity produced in the state, are a big beneficiary of this attitude.

But that may be changing in the state as opprobrium increasingly is turning onto the sugar industry, usually cited as the worst example of inefficient, wasteful subsidy spending, as well as a rift growing between agricultural and aquacultural producers. It turns out that the “dead zone” in the Gulf of Mexico, where virtually no harvestable marine life exists during periods of maximal output, is exacerbated by fertilizer runoff.

Advocates of farming interests who benefit from the transfer of wealth from taxpayers to the agriculture industry and representatives of the fertilizer industry itself tapdance around the essential issue by saying other pollutants contribute and that farmers have every incentive to minimize the use of fertilizer since it costs them money. But these excuses miss the overarching point: if subsidies were not present to over-stimulate production, there would be less fertilizer runoff, and a smaller de-oxygenated zone, if any at all.

From Louisiana’s perspective, it changes the situation of producers from win-win to win-lose. Either agriculture gets propped up to the detriment of aquaculture/fisheries, or freeing market forces benefits aquaculture at the expense of the present preferential position for agriculture. And it is here that the seeds of change could germinate.

Supporters of subsidies have argued that they are needed to keep America self-reliant in agriculture, and because removal of them would also create a huge dislocation in agriculture. But these fears have been proven unfounded as the experiences of Australia and New Zealand, whose economies depend much more heavily on agriculture, show when they essentially, in a matter of years, dropped practically all subsidies, that the doomsday dislocation scenario never happened. And the agricultural market is not so inelastic as, if American quickly needed to ramp up production, it could not quickly respond to a shortage situation (which may not be such a bad thing with obesity in the U.S. raging out of control).

What Louisiana’s federally-elected officials must understand is the tradeoff here, that one set of the state’s interests has become opposed to another. And since one gets resources taken from the people and handed to it for no good reason which seems to cause the problem, they should support the end of this wasteful system which will help the other and the public as a whole. As almost is universally true, letting the free market determine allocation of resources optimizes the well-being of society.

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