Monday, October 15, 2007

Harvesting Cash: Cotton Farms & The Iron Triangle

What's wrong with cotton subsidies? Let's count the ways, using information from the WSJ editorial today "The Cotton Club":

1. Cotton subsidies primarily benefits large corporate farms and their wealthy owners. Of the $19.1 billion that was paid out from 1995-2005, the top 10% of cotton-subsidy recipients got more than 80%, or almost $15.5 billion. The bottom 80% of recipients had to make do with $1.4 billion.

2. Cotton subsidies are a brazen wealth transfer from the tax-paying middle class to fat cats, i.e. it's a form of corporate welfare, which creates a damaging, corporate dependency on the public's money.

3. Because cotton subsidies eliminate risk and reward production, U.S. cotton growers produce so much cotton that we export 70-80% of our cotton, which creates a glut on world markets and depresses world cotton prices.

4. Cotton subsidies in the U.S. have devastating effects on poor cotton farmers in Africa, because U.S. cotton farmers compete with them and dump so much subsidized cotton on the world market that it depresses world prices, and thereby depresses African farm income from cotton. It is estimated that some 10 million Africans (living on less than $1 per day) could see their incomes from growing cotton increase 8% to 20% if the U.S. reformed its subsidies, and world supplies and the world price of cotton returned to market levels.

5. Another price of cotton subsidies is damage to U.S. credibility in world trade talks. For example, U.S. farm policies have guaranteed cotton exporters the artificially high domestic price of their crop, and at the same time guaranteed that U.S. mills could buy cotton at the lower world price of cotton, creating a protected U.S. market and worsening the problem of too much U.S. cotton being dumped on world markets.

And what's good about cotton subsidies?

Not much, unless you're a) part of the "Cotton Club" that will receive $3.3 billion of taxpayers' money this year, b) a politician receiving "subsidies" or "kickbacks" (aka campaign contributions) from the Cotton Club, or c) a Department of Agriculture bureaucrat involved in the administration of the cotton subsidy program. In other words, if you're part of the "Iron Triangle," which is behind all farm subsidy programs (special interest farmers, politicians who cater to special interest farmers, and bureaucrats who administer the farmers' subsidies).


At 10/15/2007 7:59 PM, Anonymous Anonymous said...

I was wondering...When did cotton subsidies start? For example was it during or shortly after World War II, and might the justification at that time have been to ensure that the US could provide materials for US service mens uniforms?

If so, how many other subsidies are there that may have originated with similar justifications?

At 10/16/2007 4:29 AM, Anonymous Anonymous said...

anonymous: the big 5 beneficiaries of the US Farm Bill are corn, soy, wheat, cotton, and rice.

At 10/16/2007 1:18 PM, Anonymous Sharon Johnson said...

If the editors of the WSJ had really done their homework and not
repeated the biased, distorted information that is routinely circulated about cotton subsidies,
this story would read much differently. The National Cotton Council has a prepared rebuttal to the false arguements that would benefit everyone if read. Before condemning subsidies, try being a farmer and see how long you stay in business. How many US industries have to be given away to foreign soil such as manufacturing before Congress, the White House and the American people wake up. Let's just hope they do so before it is too late.


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