Thursday, August 02, 2007

What Happens After a Farm Program Ends? II

I blogged the other day about what might happen if farm programs were ended. Today's NYTimes has an article on what happened in New Zealand to the dairy farmers when their subsidies were ended.

It's mostly positive, though between the lines you see that there was consolidation--more large farms, fewer small (opponents of US farm programs say that the program helps large farmers, but the free market may be more helpful) and there would have been a lot of bankruptcies when the program ended if the banks hadn't given relief.

Because New Zealand dairy is mostly export, it's hard to do a real comparison. Nor does the article discuss any fluctuations in the 20+ years since the program was ended. My guess is that NZ may, in part, be "free-riding" on the dairy programs in the rest of the world--there would be more volatility in price if the world dairy market was entirely free, and volatility in price leads to humans hurting.

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