Monday, November 15, 2010

Cotton Subsidies Help Some Cotton Farmers, Hurt Others

BBC News has a provocative report about arguments over cotton subsidies. Trade negotiators from Chad, Mali, Benin and Burkina Faso claim that government subsides to US and British cotton farmers may help cotton farmers in those countries, but at the same time they harm cotton growers from the poorest nations. Subsidies do so by artificially increasing the amount of cotton grown in the U.S. and U.K. This artificially lowers the world price, making life more difficult for cotton farmers in Western Africa.

This is another example of the contradictory nature of our economic policies as they relate to economic development in poorer countries. In 2008, for example, the U.S. Government spent $35,899,000,000 (that's $35.899 billion)on foreign aid, ostensibly to assist less developed countries in getting out of poverty. At the same time, the U.S. government provides large subsidies to sugar and cotton subsidies which artificially lower world prices of these goods, making it harder for farmers in less developed countries to earn a living.

A more sensible plan for economic development that works according to economic law and not against it would be to free markets. This would include both stopping foreign aid and removing subsidies for domestic cotton farmers. Such a policy would encourage capital investment toward its most highly valued uses and would allow farmers in poorer countries the chance to compete on their own merits.

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