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Who pays for what?

A View From the Edge

All developed nations subsidize their industries and thereby put goods on the market at artificially low prices. This, in turn, means that developing nations (without budgets for subsidies) cannot compete in an open and fair marketplace leaving them little recourse but to strip mine their natural resources and cut manufacturing costs where they can (as well as producing old-fashioned energy with makes abundant pollution).

It’s a fair argument, on the one hand, and an unfair one if seen from a different perspective.

Let’s try to tell the truth first. Everything developed nations produce has some subsidy applied, either to raw goods or energy or delivery. In the USA and Europe, the planes built were designed from specs originally developed as part of your taxpayer defense budget. The trucks that deliver goods are fueled by diesel that has a reduced import rate or a domestic tax credit as an essential product for the economy, and run on roads in which private cars pay a hugely disproportionate amount of tax for the wear the trucks actually cause. Food produce is subsidized to the tune of billions of dollars annually, even though farmers hardly make a reasonable wage for that most dangerous occupation. All cell phones have been subsidized by monopoly rights and monthly service fees for decades. Computer components have been designed with ample support of defense budgets and, further, that industry receives some of the most generous tax incentives and government guaranteed loans of any industry.

You may ask: “Why do we have these subsidies?” It’s called managed common good.

For example, computers are good for a modern economy. Made from raw materials refined in, processed in, assembled in and shipped from developed nations, this industry keeps many thousands employed and makes efficient use of raw materials. The subsidies and tax credits applied to this industry means that developed nations’ technology remains cheaper and in demand across the world. Now, of course, we have to pay for these subsidies. How?

By earning more and paying more tax.

Henry Ford first realized this paradigm. If he paid his workers $5 a day (an unheard-of amount of money in 1920) then not only could he demand more of those workers, but they would have more money to spend. On what? A car, of course. Once the Model T started showing up everywhere, the boom took off.

Take the case of corn. America is the No. 1 producer of corn worldwide. Our regular corn production is so heavily subsidized (from farm credits, tax incentives, and export tax kickbacks to the reduced cost of fertilizers and diesel fuel made from oil) that we export corn at less than 50% of the cost of comparable corn producers in India, South American farmers, and most African nations. On the one hand, this well managed U.S. subsidy produces a strong economy, assures a national defense strategy, and makes our customers (who sell on the corn to the end-users throughout the world) dependent on at least one American product (and good will). It is worth noting that the State Department has used these visible subsidies, especially the export tax credit subsidy, as part of most treaty negotiations since before Nixon. In fact, the great inflation recession of the early ‘70s was caused by a Senate-approved subsidy for wheat that caused us to lay out $350 billion in one purchase order to Russia (which had a catastrophic wheat failure that year). Subsidies can work for and against us. But managed properly, subsidies can move financial resources from, say, excess shopping at Walmart to the farming sector and make America stronger. In the end, you pay for it. This way you pay less for bread and gasoline, but more for that toaster oven than you should.

Seen from a developing nation’s perspective, subsidies are evil and the cause of their poverty. In truth, what they want to know is: How do we get up enough of a head of steam to do the same? How will Tanzania or Zambia turn away from simply licensing those huge mines of copper or gems to foreign companies and actually make the copper pipe at a cost-effective price, or polish those emeralds in Dar es Salaam instead of Holland? To do so they need to subsidize those industries from somewhere, but their economies are too fragile, they have no tax base, no spreading of the common wealth to rely on. So they scream “Unfair!” at world trade and environmental forums. They have a point. We have shown them the promised land but are doing little to help them get there.

The solution is not to dismantle our system, but to help them, like the Marshall Plan, and build theirs. There will always be parts of society that need more help than others. NPR is necessary to maintain some semblance of media balance away from commercial interests.

Good roads are necessary for industry even if they are paid for by the family car. Our airways are a vital means of national communication, defense, and transport and deserve to be paid for by that surcharge on your holiday ticket. What you now need to do is listen to the voices of your cousins in Asia and Africa and South America and embolden our congressmen and -women to promote the true American dream into reality. In the end, it will be beneficial to us all. If that Zambian earns more, he will surely want to buy the best American goods. Henry Ford was right, make the best product, create the most affordable new way of life and they will flock to your side.


Peter Riva, a former resident of Amenia Union, now lives in New Mexico.

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