Lesson from New Zealand

With all due respect to Sen. Richard Lugar, who wants to "rewrite" America's farm program, that would only give us a slightly more sensible multi-billion-dollar subsidy monster. Why not try something truly radical, like just ending the whole thing? It sounds scary, but one country's experience indicates that the fear might be exaggerated:

Once upon a time, in a country way, way down under, the government dismantled its system of agricultural subsidies and supports. Initially, cries of outrage and disbelief were heard from farmers all across the land.

For more than 20 years, farm assistance had steadily increased, peaking at 33 percent of total farm output (about double the level of assistance in the U.S. today). Then, with one swift and decisive decree, all subsidies were eliminated.

The transition period, which lasted about 6 years, was not easy, but it was less painful than expected. The government predicted a 10 percent failure rate, but only 1 percent of farms went of business. Government assistance during the transition period was limited to one-off "exit grants" for those leaving their farms, financial advice, and the same social welfare income support afforded to all citizens.

The fortune of farmers now depended on their ability to meet consumers' demands.

[. . .]

A prosperous farm sector without government subsidies? Sounds too good to be true...sounds like a fairy tale. It's not. In 1985, New Zealand permanently eliminated 30 different agricultural production subsidies and export incentives. Over the past 20 years, as New Zealand's farms flourished without assistance, the opportunity cost to American consumers and taxpayers of U.S. farm programs has totaled more than $1.7 trillion. With the 2007 Farm Bill, our government has the opportunity to make much needed reforms to farm policy. We could do worse than look to New Zealand's policy tale for guidance. Like any good fairy tale there is more to take away from their experience than just the story.