Anagricultural subsidy is a government policy offered to farmers tosupplement their revenue, manage the supply of commodities, andinfluence the price and quantity of the merchandise. In a perfectcompetition market type, there are numerous small sellers andproducers standardized and homogeneous products individual sellersare unable to influence the price free entry and exit of the vendorswithin the market and needless non-price actions. Agriculture is anexample of perfect competition. Farm subsidies tend to distort thismodel in various ways. This paper will dwell on the means by whichthe perfect competition can be distorted. It will also discuss thevarious opinions supporting and opposing farm subsidies.
How distort a model of perfect competition
Thesubsidies can change perfect competition because they redistributewealth upwards. In other words, established landowners and farmbusinesses benefit from taxpayers cash. According to the UnitedStates Department of Agriculture (USDA), Farm revenues have risenbeyond the average U.S. incomes. For instance, in 2014, the incomewas $134,164. This was 77% higher than all the other U.S. householdsthat stood at $78,738. Though the subsidies are claimed to assistsmall farmers, most of them benefit the large farms. As a matter offact, 85% of the subsidies benefit large farms. This distorts theperfect competition as small farmers are forced to dwell on otherincome generating activities [ CITATION Ver131 l 1033 ].
Perfectcompetition is also distorted since the subsidies damage the economy.The range of government micromanagement and indulging of theagricultural industry is distinct. In most businesses, market ratesbalance the supply and demand, earnings steer stock, manufacturerstake risks, and businesspersons invent to enhance the value andlessen costs. These market devices are dampened and dented in theUnited States agriculture triggering an array of financial damagessuch as distorted land use, choice of crops, insufficient costcontrol, inflated land prices, and overproduction. As a result,unfair competition is created. Competition shifts from farming toother practices that still misuse the subsidies. For example,overproduction damage the natural environment, drawing lower qualityfarmlands into vigorous production. In that regard, designated areasfor wetlands, grasslands, forests, and parks are utilized for theless efficient agriculture [ CITATION Chr161 l 1033 ].
Ingeneral, agricultural subsidies can harm the competitiveness of theindustry, especially the small sellers and producers. The subsidiesalso create a standardized price. Therefore, other farmers may notcover the cost of production. In other words, the production coststend to vary among different farmers. When they sell the produces,the ultimate goal is to recover the initial costs and get profits.However, due to the subsidies the prices tend to be standardized,thus locking out other farmers. Though a perfectly competitiveindustry allows for free entry and exit of the sellers, subsidiestend to favor large farms [ CITATION Ant12 l 1033 ].
Howthe United States Corn Subsidies hurt Mexican Farmers
Theaids offered to the American corn farmers permits them to sell theirproducts at extremely low prices than what it actually cost toproduce the same. As such, cheap corn from America floods the Mexicanmarket, thereby affecting the poor Mexican agriculturalists. TheMexican residents opt to import cheap corn from the United Statesinstead of getting the same from their farmers. As a result, theMexican farmers are left without a market for their products. Mexicois the origin of corn. It opened the borders for American corn viathe North American Free Trade (NAFT) Treaty in 1994. In one year, thecorn imports from the U.S. doubled. As a matter of fact, presentlyapproximately one-third of the corn in Mexico is obtained from theU.S. It is the leading exporter of maize in the global perspective.Ever since the NAFTA agreement came into place, the cost of Mexicancorn has dropped by over 70%. As a result, the income of Mexicansdepending on the corn has reduced significantly [ CITATION Dev16 l 1033 ].
Asper the International Food Policy Research Institute (IFPRI), whichis NGO dwelling on research, the farming policies in rich countriessuch as export subsidies, direct farm subsidies, and tariffs of morethan $300 billion annually, affect the developing countries. In fact,close to $24 billion is lost on an annual basis. The report alsosuggests that the Caribbean and Latin America loses close to $8.3billion yearly due to the subsidies. As such, the United Statesactions to offer tariffs to their farmers has an effect onneighboring countries relying on corn [ CITATION Eco15 l 1033 ].
Underthe NAFTA, the heavily subsidized United States corn entered theMexican market and pushed many farmers out of practice. Internationalcompanies opened up industries making low-wage works at the cost ofsystematized labor as well as the environment. This, consecutively,instigated the northern migration. A good example of how the Mexicanswere affected by the subsidized U.S. corn can be illustrated by theMexico to United States movement. One of the largest Mexico to U.S.migrations coincided with the NAFTA. According to Perez-Rocha,Mexicans were forced to migrate due to joblessness and difficultworking conditions. This has led to insecurities in terms of gangsthat have severed the routes used for migration. These are violencegroups and drug lord [ CITATION Mic141 l 1033 ].
Mexico’seconomic development has been slow ever since the NAFTA wasimplemented. The corn subsidies in the United States have thuscontributed to the slow growth rate. Mexico’s GDP per capitaprogressed at a rate of 0.89% annually between 1994 and 2013. Thishas been the most stagnant proportion of economic development sincethe 1930s. In addition to that, Mexico’s economy was the slowest ascompared to the other Latin American countries. Conversely, theUnited States corn has contributed to this slow growth. The notionthat NAFTA has been advantageous to the economy of Mexico is ratheruntrue. Though it has championed trade and investment, it has notreplicated on the generation of jobs as well as other growth. One ofthe issues created by NAFTA is the exporting for internationalorganizations that have not necessarily benefitted the Mexicans. Ithas flooded Mexico with cheap corn and grains that have destroyed thecountry’s own industries [ CITATION Far l 1033 ].
Evidently,in retrospection, the farming rudiments of the deal were unfair onMexico`s corn agriculturalist. An overflow of the United States cornimports together with grants that favor agroindustry are responsiblefor the loss of over 2 million farm works in Mexico. The businessdeal deteriorated proscribed migrations, some specialists think,especially in regions where lesser farmers hardly eke out a living.Perhaps, the Mexican mediators involved in signing the NAFTA thoughtthe small corn farmers who were affected by the cheap corn would beabsorbed in other jobs like vegetables and fruit industry or evenmanufacturing. However, this was not the case as many farmers weredisplaced from their daily farming jobs. Small farmers involved infamily farming were also forced out of their daily undertakings [ CITATION Ext l 1033 ].
Ingeneral, the U.S. corn produces crested, similar to a rain-swollenriver, rising from seven percent of Mexican purchases to roughly 34%.The corn was mostly utilized for animal feed and industrial use ascornstarch. Depending on the year, the U.S. corn influx in Mexico hasbeen multiplying annually. As elaborated, the effect has forced manyMexicans to be jobless. Mexican farmers who relied on corn wereforced out since they were not making any profits. Conversely, otherrelated ventures such as dairy farming that depend on the corn hasalso suffered the consequences [ CITATION Ext l 1033 ].
of the Arguments
Thosein favor of the farm subsidies think they make more sense, unlike theDepression Era subsidies that looked to offer support to the farmersby controlling the market. The coverage subsidies are more flexiblethus permitting the market to regulate what agriculturalists plant,but shielding them from much risk characteristic in the industry. Theproponents also state that the subsidies are needed since the netfarm revenues have dropped by close to 32 percent from 2014 to 2015.The insurance plans assist in guaranteeing that agriculturalistswould sell their crops above a particular price. In addition to that,they would get specific revenues. The proponents also imply thatbetter planning associated with drought and spread of crops would beachieved [ CITATION Dev16 l 1033 ].
Opponentsof the subsidies believe they are prone to scandals. As illustratedabove, some farmers receive the grants without necessarily farming.One key issue is that some of the farm subsidies are accounted forincorrectly, and agriculturalists develop corporate schemes to avoidthe legal support limits. The distributions are also unequal as someof the farmers who do not necessarily need the grants are offered thesame. Some of the congressional farm committees have participants whoare actively involved in farm ownership. As such, the members areinvolved directly in voting for the increase of subsidies resultingin a conflict of interest. The farm programs are therefore subject torecipient fraud and bureaucratic waste. Such thoughts are echoed byassertions elucidated above that subsidies distribute wealth upwards.The rich continue to benefit since they own large tracts of landwhile the poor are forced to abandon the practice [ CITATION Eco15 l 1033 ].
Fromthe two perspectives, it is evident that subsidies have both positiveand negative impacts. If incorrectly utilized, it can only benefitthe rich while it can prevent numerous losses involved in thisdynamic venture. As such, I think the positive impacts outweigh thenegatives. As envisioned by President Obama, the farm bill givesfarmers the opportunity to venture in practice. It gives the poorequal opportunities on the same. For instance, farmers can be guidedon how to make farming plans in and accorded the necessary support.Therefore, they are encouraged to take risks. Agriculture is a keysector for any country. Some nations fail due to feeble policiesprotecting the farmers. However, the U.S. farm policies motivate thefarmers. The agriculturally related revenues have been rising overthe years due to the stable policies or rather subsidies [ CITATION Mic141 l 1033 ].
Inconclusion, the grants positively impact on the farmer but still needa sufficient evaluation. For instance, some rich farmers takeadvantage of loopholes to benefit themselves at the expense of poorfarmers. Some are involved in crafty practices of getting the cash,even without farming. As such, much of the taxpayers’ money iswasted. Nevertheless, the agricultural bill rightly benefits amajority of the farmers.
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