A Billion Dollars a Day: The Economics and Politics of Agricultural Subsidies

Preface viii

List of Abbreviations xi

Prologue xiv

1 Introduction: The Problem of Agricultural Subsidies 1

Benin 1

Western Agricultural Subsidies 7

Organization of the Book 13

2 The Economics of Government Intervention 15

Introduction 15

The Invisible Hand 17

Market Failures 21

Violations of the basic conditions: imperfect competition, information, and risk 22

Public goods and externalities 28

Income distribution, poverty, and inequality 33

Conclusion 34

Appendix 2.1: The Theory of the Invisible Hand 35

Appendix 2.2: The Prisoners’ Dilemma 41

3 The Structure of the World Food System 44

Introduction 44

Historical Perspectives 47

The World Food System 52

Agribusiness, Government, and Science 65

Conclusion 68

Appendix 3.1: Country and Commodity Classifications used in Statistical Tables 68

4 Global Institutions and the World Trade Organization 70

Introduction 70

The World Trade Organization 73

Agriculture in the WTO 76

Trade and Development 87

Appendix 4.1: Comparative Advantage 94

5 The Nature and Scope of Agricultural Subsidies in High-Income Countries 98

Introduction 98

Agricultural Policy Objectives and Tools 100

Agricultural Subsidies in OECD Countries 105

Effects of OECD Agricultural Subsidies 116

Conclusion 122

6 U.S. Agricultural Policy: How Not to Save the Family Farm 123

Introduction 123

Historical Overview of U.S. Farm Policy 126

The Impacts of U.S. Farm Subsidies 142

The Politics of U.S. Agricultural Policies 147

Appendix 6.1: ERS Farm Typology 150

7 Agricultural Policy in the European Union: Europe’s Sacred Cows 152

Introduction 152

Agricultural Policy in the European Union 157

The Impact of the Common Agricultural Policy 170

Appendix 7.1: Green Currencies and the Re-Nationalization of the CAP 177

8 Agricultural Policy on the Pacifi c Rim: Non-Trade Concerns versus Comparative Advantage 180

Introduction 180

Japan and Korea 183

Australia and New Zealand 193

Conclusion 202

9 Agricultural Policy in Developing Countries: Cheap Food 205

Introduction 205

The Developing World 207

Agricultural Policy in Developing Countries 214

The Impacts of Agricultural and Trade Policy Reforms 224

Conclusion 229

Appendix 9.1: Country Lists 231

10 Conclusion: Whither Agricultural Policy? 235

References 253

Index 279