Like most government policy, agricultural subsidies in both the United States and the European Union, started out with good intentions. In the US, the New Deal programs of the 1930s, beginning with the Agricultural Adjustment Act (AAA) of 1933, marked the beginnings of agricultural subsidies. In Europe, though its beginnings long precede the United States’, the modern iteration, the Common Agricultural Policy (CAP) began following the devastation of World War II. In both cases, governments and advocates sought to stabilize markets, help low-income farmers, aid rural development and beyond.
The AAA eventually turned into the Farm Bill, a congressional act that now must be renewed every 5 years. Under these bills, the primary tool of the government was the use of direct payments, or payments straight to farmers that were paid to them, regardless of their harvest for the year. At the end of this 5-year cycle, Congress writes a farm bill that delegates money that includes farm subsidies which are believed to keep commodity prices artificially low. Over time, prices have only increased, even in the seeming ubiquitous cuts of the Reagan years. Spending routinely surpassed the $100 billion over the 5-year appropriations. New rules in the most recent Farm Bill have changed the payment scheme to a more robust crop insurance program, but the effects remain to be seen. Overall, according to The Economist the federal government spends $20 billion per year of public funds collected through taxes. In contrast to the wealthy small farmers of the European Union, a large portion of the United States’ funds go to industrial farmers who are producing staple crops like soy beans and corn. The last farm bill was passed in 2014 where Congress halted direct payments based on land ownership. The new policy features a system where payments are determined by past crop prices and productivity. Additionally, through the 2014 Farm Bill farmers will now get more subsidised insurance. Parties that are not “actively engaged” in farming are banned from collecting subsidies, although the task of defining who is really a farmer is murky.
In the EU, it was only after several bad post-WWII harvests that governments helped to form the CAP. This was meant to stabilize the markets and recover the former agricultural capabilities of the continent. The EU aimed to keep their post WWII markets competitive on a global scale. Overall, France and Germany have been the largest producers, but, as the EU has grown, and these countries have become further developed, they have received an unfair amount of assistance and newer members of the EU more dependent on the CAP do not receive their fare share of funding. Their system is primarily direct payments as well, and remains this way, with major landowners and aristocrats being the primary beneficiaries. Top beneficiaries of the programs include France (17%), Spain (13%), Germany (12%), Italy (10.6%), and UK (7%) as seen in the picture featured on the left. Overall, it is important to note that the EU spends about €59 billion a year on farm subsidies. At the root of the issue, taxpayer, public money is being sent to farmers and the agricultural sector. As farmsubsidy.org’s video “Fields of Gold” argues, transparency is key to a well-informed debate that questions a system that supports small elite farmers in the EU through the CAP. Wealthy landowners and old noblility families continue to reap the benefits which contradicts the initial arguments of pro agricultural subsidies stakeholders. The distribution of aid has been one of the most central debates around agricultural subsidies in recent years.
This timeline published by the New York Times creates a coverage map of the United States Department of Agriculture and its on ongoing activities. Keep up to date on its efforts through this link.