Government Subsidizes, Government Warps and Distorts - Government Bails Out

by Seton Motley, Contributing Author: My favorite joke about government and its inanity goes something like this:

A guy is running late for a meeting. He’s in his car - stuck on a single lane blacktop behind a county government truck. He can’t pass - it’s a double yellow line.

Every fifty yards the county truck stops and two guys jump out of the back. Right beside the road, one guy digs a hole - and the other fills it back up. Then back into the truck they go. Fifty yards later, same thing. Lather, rinse, repeat.

After about the sixth time, the guy stuck behind the truck is steaming. He checks to see if it’s clear to pass the truck - and it is. So he whips around and up to beside the truck’s driver.

“What the heck are you guys doing?” he asks, infuriated.

“The guy who plants the trees called in sick.”

This is what government does when it sticks its enormous proboscis into the private sector. Contrary to popular belief, it doesn’t pick winners and losers - it picks losers at the expense of winners. (See: subsidizing non-green, non-energy like solar and wind - by taxing the likes of actual energy companies like oil and coal).

This government money warps and distorts the marketplace - as otherwise productively-directed time and effort is instead spent chasing the government coin. Producers produce not what the marketplace needs - but for what the government pays.

And because the government doesn't have a clue what its doing - its coin creates unneeded surpluses of the things it subsidizes. So the government then spends more money - bailing out the producers it stupidly subsidized to create the surpluses.

The one government guy who actually has a clue - is on permanent sick leave.

We just saw this in India:

“The nose-dive in global commodity prices has had an unexpected repercussion in India: a giant new subsidy bill as New Delhi spends billions to mop up wheat, rice, sugar and cotton at government-fixed prices.’ …

“‘This is a crisis of plenty,’ said Harish Galipelli, a trader at Inditrade Derivatives and Commodities.”…The (government coin) market support…encourages farmers to produce much more of the subsidized commodities than they would have otherwise, exacerbating the global glut.”

Government digs the hole - government fills the hole back in.

And now it looks like we’re just about there in Spain. From Politico Europe:

“Spanish farmers Thursday bewailed their historical - 20 percent above average - crop harvest at a time where prices have already fallen below €160 per ton….(Read it in full [in Spanish]:"

Why have prices fallen so low? Because government subsidies created a glut - and the market is flooded. And bizarrely, the European Union (EU) is proud of of its contribution to this mess. So proud, the EU provides a level of transparency for which we can only wish here in the United States. Behold FarmSubsidy.org:

“The European Union spends around €59 billion a year on farm subsidies. This site tells you who receives the money.”

And the boasting doesn’t stop there. The EU has created a Spain-specific fact sheet:

“During the next 7 years, the new CAP is going to invest almost EUR 45 billion in Spain’s farming sector and rural areas.”

Government digging more holes with money. And it’s likely only a matter of time before more government money is thrown into the holes to fill them back in. Just like in India.

(#Brexit, anyone?)

Just about every country that grows just about anything has been stuck in this government money rut for decades. Domestically, it largely explains our age-old Farm Bill ridiculousness.

So here’s a thought - let’s negotiate our way out. Of our mess - and theirs. We go to the EU, India and anyone else growing anything - and trade away our subsidies in exchange for their trading away theirs.

Less subsidies mean less gluts - which mean less bailouts.

Food prices will then be lower - not because of government stupidity, but because of free market rational determinism. And we’ll all be saving per annum hundreds of billions of wasted government dollars.

It’s high time we all learn from each others’ mega-mistakes.
----------------
Seton Motley is the President of Less Government and he contributes to ARRA News Service. Please feel free to follow him him on Twitter   /   Facebook.

---

Tags: Seton Motley, Less Government, Government Subsidizes, Government Warps and Distorts, Government Bails Out To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. and "Like" Facebook Page - Thanks!