Study Notes
Arguments for and against farm subsidies in developing countries
- Level:
- A-Level, IB
- Board:
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 26 Jan 2023
Here is a brief synopsis of some of the arguments for and against farm subsidies in developing countries
Historically, countries with large agricultural sectors and less developed economies tend to have a higher percentage of GDP coming from farming.
For example, in sub-Saharan Africa, many countries have over 30% of their GDP coming from agriculture. In some countries, such as Malawi, Burkina Faso, and Sierra Leone, the figure is over 50%. Similarly, in Asia, countries like Nepal and Laos have a large share of GDP coming from agriculture. In the Americas, Haiti is one example of a country where farming represents a high percentage of GDP.
Farm subsidies in developing countries are a contentious issue, with arguments for and against their use.
Arguments in favour of farm subsidies include:
- Improving food security: Subsidies can help smallholder farmers increase their production, which can improve food security for the country.
- Higher per capita incomes can reduce extreme poverty in rural areas and prevent high levels of rural - urban migration
- Encouraging sustainable farming practices: Subsidies can be used to encourage farmers to adopt environmentally-friendly practices, such as reducing the use of pesticides and fertilizers.
- Supporting farmers facing economic difficulties: Subsidies can help farmers facing economic difficulties as a result of market fluctuations or changes in government policies.
Arguments against farm subsidies include:
- Distorting markets: Subsidies can artificially lower the price of agricultural products, making it difficult for farmers in other countries to compete. This can be seen as a form of trade protectionism.
- Encouraging overproduction: Subsidies can lead to overproduction, which can then result in surplus and lower prices, which in turn might hurt farmers incomes.
- Over-production can lead to negative externalities from production which threatens sustainable growth and development
- Limited public resources: Subsidies can be a significant expense for the government in a developing country, and may then divert fiscal resources away from other important public services such as access to basic education, health care and infrastructure.
- Limited to certain farmers: Subsidies can be targeted to certain farmers, such as large-scale producers, leaving small farmers with fewer resources. In many lower-income countries, small-holder farms are unable to fully reap the benefits of government subsidy.
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