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Draft Paper – Not to be cited without author’s permission

Box 2. Farm Subsidies: Who Gets Them?

In both the United and the European Union, farm subsidies mostly go only to the largest and wealthiest farmers, who in many cases are not farmers at all, but rather companies. In both cases they function to compensate farmers for low crop prices, so that instead of decreasing the area planted to a given crop when the price drops, larger farm operations maintain or even increase the area planted. The result is to short circuit the normal tendency toward reduced area which would otherwise lead prices to rise again. Instead, there is nothing to keep prices from falling and falling, which is exactly what they have done.

Figure 1.

Source: Stam and Dixon, 2004

In the United States, farm subsidies totaled US $114 billion between 1995 and 2002, an average of US $ 14.25 billion per year (see Figure 1). Of that total, about 80% went to support the incomes of mostly crop, and some livestock farmers. Another 12.5% was in the form of so-called “conservation programs” (which vary in the extent to which they really achieve conservation objectives), and some 7% was paid out in disaster programs due to bad weather.58 While the wealthiest 10% of growers received some 61% of the subsidies (see Table 1), 60% of farmers received nothing at all, finding themselves mired in debt as a result of low prices and high production costs (see Figure 2).

In 2002 the U.S. approved a new farm bill, the so-called Farm Security and Rural Investment Act, which extended the basic U.S. subsidy system for another ten years, at an estimated cost to tax payers of US $190 billion. Coming as it did while the world was enmeshed in negotiations over farm trade, this was widely seen as a slap in the face of Third World governments. 59


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