A Billion Dollars a Day

A Billion Dollars a Day “This text provides a good narrative on the economics of government intervention, the structure of the world food system and history of the WTO, and the provision of farm subsidies by developed economies, with a special focus on the U.S. and EU.” P. Lynn Kennedy, Louisiana State University“This extremely well-researched and documented book provides a comprehensive overview of the impact (both intentional and unintentional) that developed nations’ agricultural policies can have on underdeveloped agricultural-based nations.” Jay E. Noel, Cal Poly State University “This text’s discussion and explanation of subsidies is well developed in a historical and international context that is not found elsewhere.” Conrad Lyford, Texas Tech University “Peterson has done a nice job of taking complicated issues and explaining them in a manner that is understandable for students with limited background in policy, development, and trade. This well-written text brings both a U.S. and a world perspective to the timely and important topics of government farm policy and food prices.” Rick Whitacre, Illinois State UniversityWhy do Europe, the United States, and some key Asian countries spend, in aggregate, a billion dollars a day on various agricultural price supports, when much of this money ends up in the hands of large agribusiness? In a lively, non-technical, and up-to-date account, this book addresses the core questions that surround the issues of agricultural subsidies.Peterson provides a detailed examination of subsidy histories and the current policies of the United States, various European countries, Australia and New Zealand, and Korea and Japan. Also included is a discussion of how these policies affect developing countries – examining, in particular, their impact on farmers in low-income countries.

Preface viii List of Abbreviations xi Prologue xiv 1 Introduction: The Problem of Agricultural Subsidies 1 Benin 1 Western Agricultural Subsidies 7 Organization of the Book 13 2 The Economics of Government Intervention 15 Introduction 15 The Invisible Hand 17 Market Failures 21 Violations of the basic conditions: imperfect competition, information, and risk 22 Public goods and externalities 28 Income distribution, poverty, and inequality 33 Conclusion 34 Appendix 2.1: The Theory of the Invisible Hand 35 Appendix 2.2: The Prisoners’ Dilemma 41 3 The Structure of the World Food System 44 Introduction 44 Historical Perspectives 47 The World Food System 52 Agribusiness, Government, and Science 65 Conclusion 68 Appendix 3.1: Country and Commodity Classifications used in Statistical Tables 68 4 Global Institutions and the World Trade Organization 70 Introduction 70 The World Trade Organization 73 Agriculture in the WTO 76 Trade and Development 87 Appendix 4.1: Comparative Advantage 94 5 The Nature and Scope of Agricultural Subsidies in High-Income Countries 98 Introduction 98 Agricultural Policy Objectives and Tools 100 Agricultural Subsidies in OECD Countries 105 Effects of OECD Agricultural Subsidies 116 Conclusion 122 6 U.S. Agricultural Policy: How Not to Save the Family Farm 123 Introduction 123 Historical Overview of U.S. Farm Policy 126 The Impacts of U.S. Farm Subsidies 142 The Politics of U.S. Agricultural Policies 147 Appendix 6.1: ERS Farm Typology 150 7 Agricultural Policy in the European Union: Europe’s Sacred Cows 152 Introduction 152 Agricultural Policy in the European Union 157 The Impact of the Common Agricultural Policy 170 Appendix 7.1: Green Currencies and the Re-Nationalization of the CAP 177 8 Agricultural Policy on the Pacifi c Rim: Non-Trade Concerns versus Comparative Advantage 180 Introduction 180 Japan and Korea 183 Australia and New Zealand 193 Conclusion 202 9 Agricultural Policy in Developing Countries: Cheap Food 205 Introduction 205 The Developing World 207 Agricultural Policy in Developing Countries 214 The Impacts of Agricultural and Trade Policy Reforms 224 Conclusion 229 Appendix 9.1: Country Lists 231 10 Conclusion: Whither Agricultural Policy? 235 References 253 Index 279