Why are agricultural subsidies bad?
I've been nosing around trying to figure out what the heck happened in the Cancun round of WTO talks. Everyone seems to agree that things didn't work out, but no-one seems to be able to figure out why. The anti-WTO brigade says that the breakdown proves they were right all along, in that the WTO isn't really working to promote free trade, but rather to promote the interests of "the corporations" or "rich nations" or "Bush's cronies." Needless to say, I don't find these explanations particularly compelling; the WTO hasn't lived up to its ideals yet, but that doesn't mean it's part of a grand conspiracy of plutocrats.
Daniel Davies
says Cancun was torpedoed by a dispute over a set of proposed international investment rules collectively referred to as "Singapore Issues." There's a conspiracy-theory edge to the idea (the EU deliberately used Singapore Issues to derail the talks! Alack! Alarum!), and I initially had a bit of trouble understanding why it would be a bad thing to have some rules making it easier for foreigners to invest in developing nations. How would more money be a
bad thing? It seems, though, that there's some question of national autonomy at stake; the rules in question would make it difficult for nations to put government money into local businesses for things like research or health care or other things that governments like to promote. Brad Delong, lovable "neoliberal" (Am I missing something, or does that term mean "libertarian, except sort of leftish?")
takes Davies to task for preferring governments to markets (and takes a gratuitous slap at Bush in the process). Delong's readers in turn take him to task for preferring markets to governments, and I'm left not knowing quite what to think.
So, while I was scratching my head and trying to figure out whether or not these Singapore Issues rules were good or bad, I read a comment somewhere that asked a much better question, one that nobody has answered to my satisfaction. The question is the one at the top of this ramble, and I think it relates to the foreign investment muddle. Why are agricultural subsidies bad? In particular, why on earth are
lower food prices bad for the developing world? I understand the idea that lower prices make it harder for developing nations to export agricultural goods, but don't they also make it easier for those same nations to
eat? Shouldn't those low food prices make it easier for a poor nation to take the step from subsistence agriculture to a more diverse economy?
Why is it wrong for the US and France and their ilk to use government money in a way that makes it easier for other nations to buy food? The only arguments I can think of invoke principles of self-sufficiency or national autonomy-- principles that have no place in the sort of economic models that demonstrate the virtues of open markets, or in political outlooks that embrace those models. And it seems to me these same sorts of principles are at stake in those Singapore Issues that have me so confused.
