Thursday, December 06, 2007

Today's vocab word: Agflation

The Economist takes an in-depth look at the rising costs of key agricultural products (wheat, corn, beef and the like) and what it means for the world economy. As for causes, the magazine — never a big fan of subsidies or trade barriers — doesn't hesitate to take U.S. policy to task:

With agflation, policy has reached a new level of self-parody. Take America's supposedly verdant ethanol subsidies. It is not just that they are supporting a relatively dirty version of ethanol (far better to import Brazil's sugar-based liquor); they are also offsetting older grain subsidies that lowered prices by encouraging overproduction. Intervention multiplies like lies. Now countries such as Russia and Venezuela have imposed price controls—an aid to consumers—to offset America's aid to ethanol producers.
The surge in income for farmers is good, the magazine reports, and is the perfect time to end subsidies and price supports in America and Europe, for the benefit of all:
Cutting rich-world subsidies and trade barriers would help taxpayers; it could revive the stalled Doha round of world trade talks, boosting the world economy; and, most important, it would directly help many of the world's poor. In terms of economic policy, it is hard to think of a greater good.
What do you think?

1 comment:

Anonymous said...

"Never make a long term plan with a short term market". This is a good year for farmers, but; the cost of inputs (fuel, fertilizer, equipment, parts, labor, insurance, etc) will not drop when the market does. We've seen fertilizer go from .22 cents per unit rise to .65, diesel go from 66 cents per gallon to 3.10 per gallon, all in the last few years. If wheat goes back to $4/bushel, the lower third of producers will be out of business, especially minus the small grain subsidies.

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