Agricultural subsidies should be off the table

First Published: 2012-05-29

In simple terms subsidies are a waste of taxpayer dollars.

The Bahamas has seen no end of ideas to protect Bahamian farmers (read about some the United States recent subsidy boondoggles here http://bit.ly/JxTd7l) yet, the consultants, bureaucrats and politicians continue to suggest that if they just get their hands on a few more tax dollars they can make it work.

Witness the new Minister for Agriculture, Mr. Alfred Gray (PLP) and his recent suggestion that his first priority is food security. (http://bit.ly/LhvKd9) Presumably the interviewer did not think it advisable to ask if there was a threat to The Bahamas food supplies to prompt his concern?

But the reality is he’s no different than those that have gone before.

Frederic Bastiat’s famous (tongue in cheek) essay, "A PETITION From the Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps, Snuffers, and Extinguishers, and from Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting", to the Honourable Members of the Chamber of Deputies" to the French Parliament in 1845", suggested they pass a law requiring blocking out the sunlight by forcing everyone to close all shutters etc so as to protect the manufacturers of candles and more. Read Bastiat’s essay here…

Silly of course, but is the "protection" of Bahamian farmers from competition through subsidies any less so?

New Zealand, freed itself from the shackles of outdated public policies like these in the 1980’s and had a miraculous turnaround. So what made New Zealand change their approach?

As Mr. Maurice McTigue, former member of the New Zealand Parliament, now vice president and Distinguished Visiting Scholar at the Mercatus Center, pointed out:

  1. New Zealand’s per capita income had sunk to 27th in the world, alongside Portugal and Turkey.
  2. By 1984 unemployment was at 11.6 percent.
  3. They had 23 successive years of deficits (sometimes ranging as high as 40 percent of GDP).
  4. Debt had grown to 65 percent of GDP, and its credit ratings were continually being downgraded.
  5. Government spending was a full 44 percent of GDP, and,
  6. Government controls and micromanagement were pervasive at every level of the economy.

 

Reads like The Bahamas current economic course doesn’t it?

McTigue goes on to relate some specific changes to sheep farming and the results they had:

"By 1984, New Zealand sheep farming was receiving about 44 percent of its income from the government in the form of subsidies. Its major product was lamb, and lamb in the international marketplace was selling for about $12.50 per carcass, while the government was providing another $12.50 per carcass. Well, we took away all of the sheep farming subsidies within one year. Of course, the sheep farmers were unhappy — but once they accepted the fact that the subsidies weren’t coming back, they put together a team of people charged with figuring out how sheep farmers could get $30 per lamb carcass. The team’s report said that this would be difficult, but not impossible: It required producing an entirely different product, processing it in a different way, and selling it into entirely different markets. And within two years, by 1989, they had converted their $12.50 product into something that was worth $30. By 1991, it was worth $42; by 1994 it was worth $74; and by 1999 it was worth $115. In other words, they went out into the marketplace and found people who would pay higher prices for their product. You can now go into the best restaurants in the U.S. and buy New Zealand lamb, and we’ll be selling it to you at somewhere between $35 and $60 per pound."

"Interestingly, as we took all government support away from industry, the prediction was that there would be a massive exodus of people. But that didn’t happen. For instance, in the end all that we lost was three-quarters of one percent of the farming enterprises. And these were people who shouldn’t have been farming in the first place. In addition, some predicted a major move towards corporate as opposed to family farming. But we’ve seen exactly the reverse. Corporate farming moved out, and family farming expanded, probably because families are prepared to work for less than corporations are. In the end, it was the best thing that possibly could have happened. What this showed us is that if you give people no choice but to be creative and innovative, they will find solutions."

Read Mr. McTigue’s entire presentation here…

Shouldn’t The Bahamas follow New Zealand’s lead instead of considering more subsidies?

A brief look around New Providence proves Bahamians can succeed at farming without subsidies. Visit the farmers market at Doongalik Studios on Village Road most weekends, or once a month at the Bahamas National Trust. Good things are happening without costing the taxpayer a dime. The ingenuity of modern Bahamians is helping them create a market for their goods.

Instead of grandiose plans of food security that government promotes at the expense of everyone, for the direct benefit of a few, the private sector is developing this on its own.

Sure, food stores might be able to assist with a specialty area for locally grown produce, poultry or meat, but it’s nothing more than political rhetoric to think The Bahamas can be self sufficient in food at competitive prices. The capacity is simply not there.

While on this subject, duty concessions, favouring one industry over another should also be discontinued.

If there are farmers producing quality products all that’s needed is a middle man or two to get the product to market. This way, no taxpayer money is needed to pay for packing houses where product rots and yet the farmers still get paid.

The Bahamas has a great opportunity to be more original with public policy as the national debt increases and further downgrade pressure mounts from foreign ratings agencies. The luxury of tax dollar waste, deficits and debt for political expediency is becoming an ever more dangerous policy.

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