Subsidies in Developed Countries

One nasty result of the subsidies to the agricultural prices in the rich countries such as the United States is the great harm they cause the developing countries. For example, the price of rice in the United States is three times higher from the rest of the world because the United States restricts sugar importations of foreign sugar that is cheaper in order to help some giant American food producers. The result is that thousands of poor agricultures in developing countries that could have made a living selling sugar to the Americans and Europeans do not have this means of support. 

What is even worse is what the United States does with the tons of excess agricultural products that become accumulated due to the subsidy prices. Since they do not want to sell the excess in the United States to not depreciate the internal prices, the government sends it free to developing countries as alimentary aid. Obviously this sounds like a very nice gesture, but when all this free food arrives free to Nigeria, it takes all of the Nigerian farmers out of the market.

Generally it is contra producing to interfere in the markets. There are almost always unexpected secondary effects that end up hurting the people that this policy did not have intentions of hurting. Even more so, such policies are also generally inefficient, with a higher cost for those that lose then for those that are benefited from it.

Subsides of prices generate huge accumulations of crops that nobody wants to buy. For example, thanks to the subsidy on the price of milk, each year the government of the United States needs to buy hundreds of thousands of milk that nobody wants to buy at the high price that the government maintains to help specialized farmers in the production of milk.

So what happens with all that extra milk? They turn it into cheese that they cannot sell because the price of cheese is also subsidized and they store it in big storage refrigerators indefinitely. And all of this is done on the account of the contributor.

The government also used to subsidize the price of oranges and literally would have had to buy and burn tons of oranges each year, since this was the easiest way of getting rid of the excess supply. But like people protested about this waste, the government has changed the policies for some cultivation and now pays the farmers to not plant them. This way, the farmers still receive their pay but there is no worry about the excess of supply that would have to be destroyed.

The idea that should be looked at here is that both ground prices as well as price ceilings, is that interfering the markets causes a great amount of harm.