Rent-Seeking and Vote-Trading in the U.S. Senate

Last night the U.S. Senate played host to naked special-interest politics, as agricultural subsidy interests won vote after vote on the floor. As this story from Politico notes,

the sugar program stands out as one of the most intrusive of the commodity programs still on the books: a mix of price supports, import quotas, and since 2008, a feedstock program under which sugar can be purchased by the government to be used in biofuels.

The amendment Wednesday sought to end these purchases and roll back the price-support level from 18.75 cents per pound to 18 cents.

The amendment failed, 53-46. Some Republicans voted to keep the subsidies, including Marco Rubio of Florida. Even non-sugar-producing states’ senators voted to keep sugar subsidies:

And as a member of the Agriculture panel, Sen. Heidi Heitkamp (D-N.D.), warned her colleagues against unraveling the commodity coalition behind the farm bill.

“We forget that this is much bigger than a sugar program. It’s much bigger than any one single commodity,” said the North Dakota freshman, who hails from a state that is a major producer of sugar beets. “My concern is when you single out one commodity, whether it’s soybeans, corn or sugar or tobacco or rice, when you single out one commodity, you threaten the effectiveness of the overall farm bill.”

In other words, there’s a logroll among senators from subsidized states. My guess is that if you ran a logit model of votes on the sugar amendment, both sugar production and production of other subsidized commodities would enter the equation negatively. I wonder whether ideology or partisanship would factor in. I count 20 GOP “nays” (out of 45), meaning that a little over 60% of Democrats voted nay. And will Tea Party activists hold people like Rubio to account? I’m not holding my breath.

My last intemperate rant against agricultural subsidies here.

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For an Anti-Farm Bill League (update)

Conservatives and taxpayer groups are ready to fight the $1 trillion farm bill when it comes up for a vote in the new Congress. Agricultural subsidies, price supports, and tariffs in developed countries (the U.S., Japan, and the European Union especially) not only harm consumers at home by hitting them with higher prices, but cause severe poverty abroad by shutting exports from less developed countries (LDCs) out of developed-country markets and by dumping developed-country surpluses on LDC markets at prices below marginal cost. Since the poorest people in the world are farmers in poor countries, and over 15 million people die from hunger and disease each year due to severe poverty, rich-country agricultural subsidies are literally killing poor people on a massive scale.

Here’s just one anecdote from the IFPRI report of how this works:

Harrison Amukoyi’s farm is perched on a hillside in western Kenya. On less than two acres of land, he raises several crops and a dairy cow. To sell milk, Harrison and his neighbors must compete with industrialized countries that dump their subsidized milk on local markets, depressing prices for Kenyan farmers. This unfair contest appears in countless guises throughout the developing world, intensifying conditions of poverty.

And here are some figures from the NCPA analysis on how poor farmers would benefit if cotton subsidies alone were eliminated:

The International Cotton Advisory Committee (ICAC) estimates that ending U.S. cotton subsidies would raise world prices by 26 percent, or 11 cents per pound. The results for African countries dependent on cotton exports would be substantial:

• Burkina Faso would gain $28 million in export revenues
• Benin would gain $33 million in export revenues
• Mali would gain $43 million in export revenues.

We have seen reductions in severe poverty recently. The world’s biggest reduction in severe poverty has come in China over the last three decades. It’s clear that economic reform is the critical, long-term driver of poverty reductions. But where did China’s poverty reductions start? With growing agricultural productivity. The poorest countries of the world can’t just move straight into manufacturing. They need first to generate some agricultural surplus. Making it possible for poor farmers to sell to rich consumers, or even to their own people, is necessary to making that happen.

Removing rich-country agricultural subsidies could also have political-economy benefits. Many LDCs repress their agricultural markets in favor of the urban sector. Thus, their own governments deserve some share of the blame. The typical tool for this repression is a “marketing board” monopsony. The marketing board buys produce at coercively depressed prices and then tries to export it for a profit, plowing the proceeds back into urban subsidies. Rising world prices for farm goods would increase the profits of these marketing boards, potentially allowing them to raise the prices they pay farmers at home. While some nasty governments might find the new revenue reinforces their power, the new revenues would surely build useful state capacity in just as many places. Furthermore, rising farm incomes should increase the political power of the farm bloc in LDCs, which increases the probability of domestic liberalization.

Ending the rich world’s harmful policies would not eliminate global poverty. However, it would make a significant dent and could set in motion economic and political processes that would have far-reaching effects indeed.

Still, agricultural subsidies and trade barriers survive, amounting to well over $300 billion per year in the rich countries of the OECD, dwarfing the aid sent from rich to poor countries. They survive because of the collective-action problem: poor people have no voice at all in the political systems of the rich world, and rich-world consumers barely have one. Producers organize effectively because of the clear benefits they receive from subsidies, and even ideological opposition from both the left and the right cannot effectively fight them.

The only effective way to counter the greed of the few is with the white-hot moral passion of the many.

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