"Nullification Amendment" proposed by idiot senators

[Samuel]

Or to put it another way: if the US helps people in poor countries to "save" $4.00/year per capita due to flooding the market with cheap US wheat, but at the same time takes $5.00/year per capita out of the country's economy due to its cheap wheat destroying the agricultural sector, then it is not actually helping people.

On the other hand with cheaper food people can eat more and a more consistent food supply makes people stronger and more productive.

You seem to be missing the point of my argument, which is that the cost of food isn't just "1.80/kg at Walmart" or "$2.20/kg at the local grocers". The actual cost of food is "$1.80/kg at Walmart plus the opportunity cost to myself due to Walmart causing other segments of the local economy to collapse". Cheaper food is all well and good, but if the conglomerate that provides the cheaper food also causes me to lose my job so that I can't afford even the cheaper food, or creates economic conditions so that my income decreases by an amount greater than the amount I would have saved by buying the cheaper food, then my living conditions have actually become worse, not better.

That is an argument against free trade, not subsidies. All imports have that effect on an economy.

Also, you need to show the net cost is higher than the net benefit- I'll try to see if I can get a paper up about the Walmart case. I remember reading a study where the cost was about 1800 and the benefit 2200 per person. I'll try to whip it up.

[Lusankya]

That is an argument against free trade, not subsidies. All imports have that effect on an economy.

It's an argument against subsidies when it's the subsidies themselves that are giving American farmers such an unfair advantage that they can undercut the prices of local goods that much.

Also, you don't need to dig up statistics on how Walmart affects areas - what we need are statistics on how American grain affects economies in poorer countries. The Walmart example that I used was just an analogy. I thought that was perfectly clear.

[Samuel]

It's an argument against subsidies when it's the subsidies themselves that are giving American farmers such an unfair advantage that they can undercut the prices of local goods that much.

So? Natural advantages have the same effect. Plus that assumes that without the subsidies the US agriculture is in a market equilibrium so that they are causing an unfair deviation. Given all the distortions in the economy there is no reason to believe that is true.

Also, you don't need to dig up statistics on how Walmart affects areas - what we need are statistics on how American grain affects economies in poorer countries. The Walmart example that I used was just an analogy. I thought that was perfectly clear.

It is a bad analogy when your opponent can use it against you by pointing out the factual basis is wrong.

You can't automatically assume they make the situation worse off. As for grain affecting poor countries, cheaper staple foods should hurt farmers that grow staple foods and help all other individuals in the country.

Here, lets look at some countries. All information from CIA factbook.
Mexico
13.7% labor force in agriculture
4.2% of the GDP
Brazil
20% labor force in agriculture
6.1% of the GDP
Kenya
75% labor force in agriculture
22% of the GDP
Ghana
56% labor force in agriculture
33.7% of the GDP
Vietnam
53.9% labor force in agriculture
20.6% of the GDP
Nepal
75% labor force in agriculture
33% of the GDP
Haiti
38.1% labor force in agriculture
25% of the GDP
Iran
25% labor force in agriculture
11% of the GDP

Now all I need is to know how many of those individuals are subsistence farmers and what is the crop mix. Subsistence farmers gain from cheap food- by making it cheaper, it is the same as an increase in wages and makes paid labor more attractive. Unfortunately, they don't have these numbers at the CIA factbook. The only thing missing is the number of farmers that move out of producing staple crops because of US subsidies.

The proportion of subsistence farmers is probably high- 48 countries have 50% or more in the agricultural sector, but only 6 have more than half of their gdp coming from the agricultural sector.

[Samuel]

Here, I'll use a simplified model to give an idea what happens.

Country a has
300 people
each person has an acre
there are two crops- cotton and corn
each acre can produce different amounts of cotton or corn, but at a minimum can produce the equivalent of 1 corn
Everyone needs one corn to survive
The price of corn is 1 and the price of cotton is .5
There is a textile factory that uses workers and cotton to make cloths (worth 2).

As it stands, the indifference ratio is 1:2. If you are more than twice as productive in cotton production than you will produce cotton; otherwise you will produce corn.

Now, the US starts dumping corn. Lets say the price of corn falls to .1

The indifference ratio is 5:1. Many of the people previously growing corn now grow cotton. All the origional cotton growers are better off, most of the new cotton growers are better off and all the corn growers are worse off.

However, what happens to the factory? The wages they now have to offer drop! Why? Because they pay for the least productive farmer. Origionally that was a dollar. Now, with the new price, the least productive farmer is one whose land produces one corn or less than .2 cotton, which is .1 dollars.

This means there is an increase in industrial employment and people who were origionally producing items worth 1 are now producing worth 2. The GDP has increased. Additionally, land has been freed up and farmers can work more land. This means that agricultural productivity increases.

The only downside is that the subsistence farmers are now growing cotton are vulnerable to changes in the price of cotton and corn. On the other hand they have more money so they can save in case the market goes bad and there are factory jobs so if there is an overproduction of cotton, they have another choice of employment. It is a downside, but this is inherent in trade and wage labor.

Of course, in the real world, farmers would hedge against that by continuing to plant some corn so if the cotton crop dropped in price or was eaten by insects, they wouldn't starve.

[kaeneth]

...you do know that simplified model isn't the only important parts that actually happens right and you are assuming something that almost never holds true?

> The local increase in cotton production will drop the price of cotton locally as there is more available, leaving all the cotton farmers worse off until/unless demand for Textiles increases enough the factory can expand and buy all the local cotton at the old price.
> Land that badly grows corn will have its value drop substantially, reducing the value of the land (and the farmer's networth) substantially.
> The country becomes dependent on imported corn as most of the corn farmers are driven out of the market and into producing cotton or working at the textile factory. Yes, they can switch back but there is a noticeable economic cost involved.
> Some of the farmers don't have the skills to work in the textile factory and become permanently unemployed because they are too old to learn to learn a new trade.

All four of those points are actually as important than the ones you made, if not more important.

Also....

(1) 2008 crop year.--For purposes of the 2008 crop year, the
target prices for covered commodities shall be as follows:
(A) Wheat, $3.92 per bushel.
(B) Corn, $2.63 per bushel.
(C) Grain sorghum, $2.57 per bushel.
(D) Barley, $2.24 per bushel.
(E) Oats, $1.44 per bushel.
(F) Upland cotton, $0.7125 per pound.
(G) Long grain rice, $10.50 per hundredweight.
(H) Medium grain rice, $10.50 per hundredweight.
(I) Soybeans, $5.80 per bushel.
(J) Other oilseeds, $10.10 per hundredweight.
(2) 2009 crop year.--For purposes of the 2009 crop year, the
target prices for covered commodities shall be as follows:
(A) Wheat, $3.92 per bushel.
(B) Corn, $2.63 per bushel.
(C) Grain sorghum, $2.57 per bushel.
(D) Barley, $2.24 per bushel.
(E) Oats, $1.44 per bushel.
(F) Upland cotton, $0.7125 per pound.
(G) Long grain rice, $10.50 per hundredweight.
(H) Medium grain rice, $10.50 per hundredweight.
(I) Soybeans, $5.80 per bushel.
(J) Other oilseeds, $10.10 per hundredweight.
(K) Dry peas, $8.32 per hundredweight.
(L) Lentils, $12.81 per hundredweight.
(M) Small chickpeas, $10.36 per hundredweight.
(N) Large chickpeas, $12.81 per hundredweight.
(3) Subsequent crop years.--For purposes of each of the 2010
through 2012 crop years, the target prices for covered
commodities shall be as follows:
(A) Wheat, $4.17 per bushel.
(B) Corn, $2.63 per bushel.
(C) Grain sorghum, $2.63 per bushel.
(D) Barley, $2.63 per bushel.
(E) Oats, $1.79 per bushel.
(F) Upland cotton, $0.7125 per pound.
(G) Long grain rice, $10.50 per hundredweight.
(H) Medium grain rice, $10.50 per hundredweight.
(I) Soybeans, $6.00 per bushel.

Part of the problem is, they are price fixing things like Cotton that aren't food. So they are doing it with 'cash crops'.

Anyway, this is kinda far afield from the OP, no?

[Simon_Jester]

A few unheralded problems with this.

1) Not all countries are good crop land. They may be able to do subsistence farming to feed themselves, without being able to do cash crop farming to compete on the export market- against other nations that enjoy more rainfall or easier transportation- to export the cash crops that would enable them to buy food to feed themselves.

2) The cash crop farmers aren't just vulnerable to price shifts; they're vulnerable to disruptions in the supply line that moves food from another continent to their table. This is a serious problem in politically unstable parts of the world, particularly Africa. A village of subsistence-farmer peasants aren't likely to starve because warlords are squabbling over control of a highway a hundred miles away; a village of cotton farmers just might.

3) When a large fraction of the population works in agriculture, disruption of the agricultural sector has consequences beyond those easily measured in dollar values: driving 10% of the peasants off their land may mean they go find jobs in the cities, but it may also mean that a significant minority of them resort to banditry, which has adverse effects on the rest of the economy not easily modeled by talking about relative prices of corn and cotton.

[Broomstick]

2) The cash crop farmers aren't just vulnerable to price shifts; they're vulnerable to disruptions in the supply line that moves food from another continent to their table. This is a serious problem in politically unstable parts of the world, particularly Africa. A village of subsistence-farmer peasants aren't likely to starve because warlords are squabbling over control of a highway a hundred miles away; a village of cotton farmers just might.

We actually saw this in action when the Iceland volcano shut down air traffic over Europe. It had a disproportionate effect on African farmers growing perishable cash crops, particularly flowers but fruits and vegetables as well. The farmer were doing everything right, but they couldn't get their produce to the markets.

If you growing food crops at least you can eat what you can't get to market, but flowers, coffee, cotton, etc. just aren't usable as food.

[Simon_Jester]

True- that's the mirror image of the problem I had in mind, but it's definitely applicable.

Now, this is less of a problem in developed countries where the transportation and distribution network is more robust, but being totally dependent on food imports to avoid short term, immediate famine is a potentially serious problem in poor countries.