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Belgian Milk-Dumping Highlights Agriculture Insanity

The population of our species is growing at an unsustainable rate. If nothing else changed, it would be a severe struggle to feed this soaring population. However, there is a major change underway in developing/emerging economies to improve the quality of their diets. This change, alone, transforms the currently low level of global food inventories to a bona fide “food crisis”.

 

At the same time, the short-sighted (and sometimes predatory) agricultural policies of developed economies is making a bad situation far, far worse. There are numerous interlocking issues here, so bear with me as I put the pieces together.

 

There are three basic problems here, each with their totally unique dynamics:

 

  1. Rising incomes/wealth in developing economies mean these populations can now afford improved diets – which dramatically increases the total quantities of foods/crops these peoples now consume.

  2. The world's poorest economies are (ironically) being harmed by cheap food imports, because it cripples their own domestic agriculture and worsens the over-population problems of these nations.

  3. Grossly excessive agriculture subsidies by Western economies (principally the U.S. and EU) are not only warping agriculture markets all over the world, but also leading to appalling waste and distorted consumption.

 

Improved diets

 

Something which the affluent citizens of wealthy, Western economies never spent much time thinking about in the past was how much richer our diets were compared to the citizens of “Third World” economies. However, as the world's “emerging markets” now lead the way in producing goods (and ultimately, wealth) the citizens of these nations are seeing their incomes steadily rise – and with their rising wealth comes more expensive appetites.

 

Most people are now aware that it takes several pounds of grain to produce a pound of meat, with similarly steep ratios for the production of dairy products. With the peoples of developing economies acquiring an appetite for these goods (now that they can afford them), this multiplies the increased consumption of these countries which was already occurring with their population growth.

 

What is truly frightening is that the rise of “middle-class” consumers in these countries is just beginning. Even if the populations of all these nations froze at current levels, we would still see dramatic increases in the total consumption of food products (once we factor in the added consumption due to increased consumption of meat/dairy products) – for many decades to come.

 

Clearly, we cannot criticize the citizens of these countries for adopting consumption habits similar to their own (although we might warn them about the obesity which comes with the reckless consumption of these richer diets). Thus, this important change in food consumption dynamics is a reality which the entire world will be forced to adjust to - with the principal “adjustment” being soaring prices for most categories of food.

 

Poor nations trapped in “poverty cycle”

 

Few people understand one of the cruelest truths regarding severe poverty: the worse the poverty gets, the more it encourages and leads to overpopulation. This is not an intuitively logical reality, although it is actually based on a very simple premise.

 

There is no social “safety net” in these poor countries (apart from foreign aid programs which often do little more than barely stave-off starvation). Thus, in the world's poorest nations, the “safety net” is the family unit.

 

With a lifetime of poor diets accelerating the aging of these populations, elder members of the society become highly dependent upon their offspring to support them in their later years. Unfortunately, in cases of severe poverty there is always much higher rates of both infant-mortality, as well as vast numbers of deaths among children (generally from easily preventable/treatable conditions). This harsh reality encourages these people to have larger families than they would have, otherwise – because they are forced to assume that one (or more) of their children will not survive to adulthood.

 

The “poverty equation” in these societies is that the worse that their poverty gets, the higher their birth-rate gets – which aggravates their poverty still further in a truly vicious circle.

 

The converse is also true: the wealthier a society gets, the lower its birth-rate goes. Thus, there is a direct and obvious benefit to all nations in doing a better job of helping these nations develop adequate food supplies, as this is the only way to curb the excessive population growth in these nations – which is straining the global food supply we all depend upon.


 

It is no coincidence that the world's wealthiest societies have the lowest birth-rates. For people, who are worried about the futures of their children and grandchildren due to excessive population growth and the depletion of our food supplies, the best way to act on that fear is to support programs which will make these nations more self-sufficient. Unfortunately, current agricultural policies in the West are likely causing more harm than we alleviate through our aid programs.

 

Excessive Western subsidies

 

For roughly twenty years, there has been an agriculture “war” going on between the United States and the European Union. As with many wars, it is “innocent bystanders” who are suffering the most harm – although we are in the process of also doing severe harm (indirectly) to our own populations.

 

The “war” is being fought with subsidies, and the two combatants show no signs of ending these counterproductive policies. The subsidies can be broken down into two categories: those which provide excessive protection for domestic production (and thus subsidize consumption in these countries), and those which facilitate “dumping” cheap agricultural imports into the markets of other nations.

 

The principal villain for the first category of subsidization is the EU, while the prime offender in the second category is the U.S. Both forms of subsidization are causing severe long-term damage to agricultural markets (and indirectly depleting food stocks), however it is the second category of subsidization which causes more obvious and immediate harm.

 

An example of domestic subsidies gone amok was the recent dumping of 3 million liters of milk by Belgian dairy producers – as a “protest” against low prices (I would be indebted to any reader who could tell me the equivalent tonnage of grains which were wasted in this gesture). The EU has created its own dilemma. Years and years of large subsidies in this sector resulted in far too many dairy farms for their consumption needs – and thus far too much supply, which ultimately depresses prices.

 

The solution is clear: to correct the over-supply, many of these farmers must be allowed to fail, while subsidies must be gradually reduced over time. The alternative is to support the current system, which will not only result in excessive supply of these grain-intensive food products, but also result in excessive consumption of these products – making EU policies a massive drain on already-tight global, grain stocks.

 

In the case of the U.S., their program of subsidies is much more predatory in nature. With more than $100 BILLION per year in total, agricultural subsidies, cheap U.S. agriculture products are being dumped into foreign markets all over the world – including some of the poorest nations.

 

While cheaper agricultural products may seem like a “boon” to such countries, appearances can be (and are) deceiving. The problem is that in these poorer nations agriculture is often the only viable industry/occupation for most of the population. Thus, when the U.S. dumps heavily-subsidized agricultural products into these markets it drives local farmers out of business. Unable to sell their own agricultural products (even in their own domestic markets), local incomes are devastated – meaning the peoples of these nations are much worse off than if they were allowed to rely upon their own domestic production.

 

Not only is excessive U.S. subsidization crippling these economies, worsening starvation problems, and aggravating the problem with overpopulation (as I explained earlier), but it also greatly depresses overall agricultural production in the world – greatly worsening the current, evolving food crisis.

 

Clearly, both sides in this “war” must change their policies, yet many years of half-hearted negotiations have produced little tangible results. Naturally, each side blames the other for the stalemate, with the truth only known to those who have sat in on these negotiations.

 

Wars” always produce casualties, and this war is no exception. While no blood is being shed, the current and long-term harm being caused is sparing no one. At the least, everyone in the world is facing much higher prices in the future, as the inevitable dynamics of current policies are leading to the worst global food shortages in history.

 

This should not be a big surprise. It is a basic premise of economics that depressing prices below their true equilibrium value leads to over-consumption and under-production – leading inexorably to a supply “crunch”, followed by a price spike...and all the U.S. and EU can seem to do is to continue “fiddling” while global food stocks “burn”.