Free-Market Principles for Agricultural Policy
May 13, 2014
The United States' agricultural policies are out-of-date and grounded in central-planning philosophies, according to Daren Bakst, research fellow in agricultural policy at the Heritage Foundation.
From farm and commodity programs to food safety to international trade, America's agricultural policy has substituted government controls and subsidies for free-market principles. Bakst offers a set of principles that should guide U.S. agricultural policy, including:
- Markets should inform faming decisions: Government policies and subsidizes -- whether in disaster assistance, price guarantees, or import barriers -- create misplaced incentives that influence farmer decisionmaking. Governments cannot plan economies, and farmers should produce based on consumer demand.
- Free markets make food more affordable: The U.S. sugar program and the Renewable Fuel Standard are bad policies that drive up food prices, hurting low-income Americans the most.
- Subsidies are unnecessary: Farmers should be able to succeed on their own merits, not require subsidies in order to succeed. Ensuring that farmers are profitable is not the role of the government.
- Regulation should be minimized: The recent farm bill illustrates the problems with poor regulatory policy. For example, the recent farm bill includes subsidized crop insurance. This can distort farmer decisionmaking, as the reduced risk encourages them to use land in environmentally unfriendly ways.
- Free trade benefits both farmers and consumers: Eliminating trade barriers encourages competition and gives consumers access to foreign products. Protection, on the other hand, limits competition and hurts the economy as a whole. And when Congress subsidizes agriculture, other countries find similar ways to retaliate against the U.S.
The U.S. should apply these principles to transform our misguided agricultural policy, says Bakst.
Source: Daren Bakst, "10 Guiding Principles for Agriculture Policy: A Free-Market Vision," Heritage Foundation, May 5, 2014.
Browse more articles on Economic Issues