Saturday, April 24, 2010

Unseen Victims of Democrat Policy

A WSJ article today, written by Anne Jolis, presented Paul Kagame, the warlord of Rwanda, who led an army outnumbered two to one and ousted a genocidal leader who had slaughtered 800,000 of his own citizens. During an interview with Jolis, Kagame made is attitude about foreign aid quite clear: they don't want it.

Instead of asking for aid, Kagame boasted of his nation's attainment of self-sufficiency in feeding itself and of their slashing of foreighn aid by half over the past 15 years. Kagame told Jolis that Rwanda's greatest needs were for other countries to stop subsidizing their own agriculture and to get rid of import tariffs.

Domestic agricultural subsidies in the United States lower the price of domestically grown produce while import tariffs make the price of foreign produce imports higher. This combination of policies helps domestic agricultural producers but hurts the citizens of developing countries.

Developing nations have limited options for exporting goods. Often, they lack the technological sophistication to export anything other than what they can grow on their own soil. Their labor is cheap and their land worth little, thus the price of their exported goods should be very low compared to rhe same good produced in a technologically advanced society where labor is expensive and land comes at a premium.

In economics, when one country can produce something at a lower cost (opportunity cost, actually, but thats another lesson) than another country, we say that country has a comparative advantage in producing that product. The US can produce technologically advanced goods at a lower cost than most other countries, but it is relatively expensive for us to produce such things as corn and wheat compared to how cheaply other countries can produce the same good. That is, Rwanda has the comparative advantage over the US in producing cheap agricultural products.

Devoting resources and taxpayer wealth to subsidizing the production of goods we don't have a comparative advantage in is wasteful, inefficient, and damaging to developing economies.

The US should lower it's agricultural subsidies and abolish import tariffs.

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