Monday, July 23, 2012

Farm Subsidies make fraud of US Free Trade demands

How U.S. subsidies and corporate welfare corrupt the world we live in and wreak havoc on our food bills 
by Thomas Kostigen, Scribe, 288pp.  

Reviewed: 21 July 2012

In the West we have been led to believe that "Free Trade" is an essential expression of the economic principles of free market economics.  We have also been told that electoral democracy is the political equivalent of the free market -  it aggregates  free choice of individuals into the political decisions of national-scale societies.

When I worked on international trade negotiations for some years, I learned that political democracy can often be the enemy of free trade.  The ability to compete against the cheapest producers in the world is not the only value that governments must consider when they are deciding how to regulate imports and exports.  Free trade forces structural adjustment, and structural adjustment means disruptions to local industry.   You may argue about the long-term national interest, but in a democracy you can be sure than economic pain will cost votes and can change governments.

Nobody spruiks the principles of Free Trade more strenuously than the United States, but Thomas Kostigen's book tells us that the home of free market economics does not practice what it preaches.  Kostigen describes an economy characterized by production subsidies and discriminatory tax breaks that make nonsense of free market principles, and that make US arguments for global Free Trade seem hypocritical.

He asserts that American exports of subsidized wheat, cotton and rice are destroying the domestic economies of developing countries, thus contributing to anti-American sentiment and even terrorism.

With congressional elections every two years, the USA is never out of election mode.  The few politicians who dare to resist the loud, ruthless and well-funded industry lobbyists are outvoted by those who dare not resist them.

Free markets, national or international, do not offer easy solutions to the "creative destruction" that economists see as a necessary outcome of unregulated competition.  

Should the cost pressures of ruthless competition be allowed to force agricultural communities to destroy their own soils and ecologies, as humans have done repeatedly through history?

Can a democratic electorate ever be sufficiently far-sighted to support long-term protection of common resources, and to accept the short-term pain of economic adjustment?  

Kostigen can't address these issues, but he shines an uncomfortably bright light on the failures of the American system to deliver the results its people deserve and the world needs.

Richard Thwaites has participated in Australia’s international trade liberalization negotiations.