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01 / 05
Agricultural Subsidies in Wealthy Countries Hurt African Producers

Blog Post | Food & Hunger

Agricultural Subsidies in Wealthy Countries Hurt African Producers

By artificially lowering commodity prices, subsidies prevent African producers from earning a fair price for their labor.

Summary: Africa is the poorest continent in the world, containing over a billion people living in extreme poverty. This article argues that international agricultural subsidies perpetuate this poverty by forcing African farmers to compete on an uneven playing field.


It’s estimated that in 2021, approximately 490 million of Africa’s almost 1.4 billion people lived on less than $1.90 per day. To get a sense of African poverty, note that 9 of the 10 poorest countries are in sub-Saharan Africa. Many factors cause Africa’s underdevelopment, but contrary to what some may think, the continent’s economic prospects are far from hopeless. Indeed, even in the developed world, much can be done to help improve the lives of millions of the world’s poorest people. If we in the West are to help those that we proclaim to care about, one of the first policies to go should be price-distorting agricultural subsidies.

Western (and Chinese) subsidies are bad for many African farmers. Africa relies on commodity exports, and when developed states dole out gargantuan sums of money to domestic producers, global commodity prices fall. These subsidies not only waste an enormous amount of taxpayer money, but by artificially lowering commodity prices, subsidies distort the price mechanism and prevent African producers from earning the fair market price for their labor.

The case study of cotton subsidies impacting West African producers illustrates this phenomenon well.

The four West African countries that have a significant interest in the global cotton trade are Benin, Burkina Faso, Chad, and Mali. Together they are known as the Cotton-4. They are all on the United Nations’ Least Developed Countries list and collectively earn about 60 percent of their total crop revenue directly from cotton.

The Cotton-4 countries only produce about 3 percent of the world’s cotton. China and the United States combined produce over 40 percent, even though African farmers are often more efficient at producing cotton. Why do China and the United States produce so much more when their cotton farmers are comparatively inefficient? One reason is because the U.S. and Chinese governments funnel huge amounts of money toward cotton production, which distorts incentives and causes farmers to artificially increase supply.

Although the price-distorting effects of these subsidies have been known for decades, governments continue to enact policies that impoverish Africans. A 2007 Oxfam study reported that if the United States eliminated cotton subsidies, the global price of cotton would rise between 6 percent and 14 percent. This would lead to a significant increase in West Africa’s yearly revenue and could help lift thousands of Africans out of poverty. However, the United States went on to spend over $7 billion on cotton subsidies in the past decade and is projected to give domestic cotton farmers a further $700 million in aid this year.

Thankfully, the desire to reduce agricultural subsidies in the United States has become an increasingly popular and bipartisan issue. The libertarian Cato Institute, the conservative Heritage Foundation, and the liberal Brookings Institution have all called for agricultural subsidies to be reduced. Unfortunately, the largest price-distorter of all, China, shows no interest in changing its protectionist leanings.

The Chinese government has spent over $41 billion on cotton subsidies in the past decade and uses high tariffs to prevent African producers from being able to sell cotton in the lucrative Chinese market. Chinese subsidies have also been criticized due to evidence highlighting that the Chinese Communist Party uses cotton production to exert control over ethnic minorities.

More than 85 percent of Chinese cotton is produced in Xinjiang province, home to many of the nation’s Uyghur Muslims. The Xinjiang Production and Construction Corps, a Chinese-owned paramilitary organization, produces about 33 percent of all Chinese cotton. The $41 billion of Chinese cotton subsidies have not improved the lives of poor Chinese cotton farmers. Rather, these funds may have been used to build prison complexes and textile factories that are home to and staffed by the coerced Uyghur minority.

While cotton subsidies are a fine example of how U.S. and Chinese policies are hurting Africans, the impact of unfair agricultural policies on poorer Africans reaches far beyond the cotton sector.

Another example of subsidies hurting the incomes of the world’s poor can be seen in the European Commission’s recent attempt to protect the EU’s dairy farmers by purchasing 380,000 metric tons of skimmed milk powder. This decision created an enormous stockpile of milk that resulted in global milk prices plummeting. Unsurprisingly, African dairy producers took the brunt of this economic blow.

To get a sense of just how big a problem agricultural subsidies are, in 2016 the United States, the European Union, and China spent $33 billion, $100 billion, and $212 billion, respectively, on trade-distorting agricultural subsidies. African producers are being forced to compete on an uneven playing field, and unfortunately, they are losing.

While some may acknowledge the negative impacts that subsidies have on developing countries, many more attempt to defend the policy because they incorrectly believe that these funds are allocated to struggling farmers in developed countries. The case of U.S. subsidies illustrates how this belief is false. In 2016, the median household income for U.S. farmers was $76,000, which is 29 percent higher than the median income for all U.S. households. In addition, commercial family farms, which have a high median household income of $167,000, received 69 percent of commodity payments and 78 percent of insurance indemnities. These funds are not being allocated to farmers struggling to get by.

Removing subsidies is difficult because people assume that doing so will hurt agricultural workers. However, New Zealand’s experience in reducing aid to its agricultural sector demonstrates that countries need not fear the consequences of ridding themselves of wasteful protectionism.

Before the 1980s, New Zealand’s farmers enjoyed high levels of government support. Due to a budget crisis, the government removed agricultural protections in 1984, and farmers were forced to compete with global producers. Despite predictions that such action would end family farming and cause large numbers of farmers to move off their lands, just 1 percent of farmers were forced out of the market. Instead, New Zealand’s farmers adjusted and began to explore new markets. Productivity rose, market-distorting effects brought about by government funding went away, and today, New Zealand’s farming sector is dynamic and internationally competitive. The same story could happen in the United States, Europe, or anywhere else.

Free markets improve productivity and increase prosperity. On the other hand, as seen in New Zealand, subsidies distort prices, cause land to be allocated in ways that maximize an individual farmer’s ability to acquire government money—rather than in a way that makes land more productive—and hurt both domestic consumers and overseas producers.

Too many governments that lament living conditions in the developing world implement policies that keep people impoverished. Developed countries need to align their policies with their rhetoric and start helping African producers by removing subsidies and simply allowing the market to work. In doing so, their own economies will become more efficient, and millions of people across the world will be richer.

World Bank | Food Prices

Global Food Prices Ease amid Improved Supply and Trade

“Global grain supplies are projected to reach a record 3.6 billion tons in the 2025-26 season, marking a third consecutive year of growth—though at a slower pace than the average annual growth of the preceding two decades. Wheat supply has returned to its long-term average growth rate, while maize supply has rebounded after recent setbacks but remains below its historical trend. In contrast, supplies of rice and soybeans are projected to grow at about their long-term growth averages, building on last season’s significantly elevated levels.”

From World Bank.

Blog Post | Cost of Living

Time Pricing Mark Perry’s Latest “Chart of the Century”

Always compare prices to hourly wages to understand the true change in living standards.

Professor Mark Perry recently posted his updated “Chart of the Century,” featuring price and wage data from the Bureau of Labor Statistics (BLS). The chart tracks 14 items over the 24 years from January 2000 to December 2024 and includes both the overall inflation rate and changes in average hourly wages.

To examine the data from a different perspective, we calculated the change in time prices of these 14 items relative to the change in the average hourly wage. We then determined the abundance multiplier—a value that indicates how many units of an item you could buy in 2024 for the amount of work time it took to buy one unit in 2000. If there were no change, the abundance multiplier would equal one. A value below one indicates decreasing abundance, while a value above one reflects increasing abundance. We also calculated the percentage change in abundance for each item.

This analysis illustrates that things can become more expensive in dollar terms while simultaneously becoming more affordable in time prices. For instance, while the general Consumer Price Index (CPI) rose by 87.3 percent, average hourly wages increased by 123.3 percent. As a result, time prices fell by 16.1 percent. For the time it took to purchase one CPI basket in January 2000, a consumer could buy 1.192 baskets in December 2024—an abundance increase of 19.2 percent.

Notably, categories such as housing, food and beverages, new cars, household furnishings, and clothing all increased in money prices. However, after adjusting for rising wages, they became more affordable in time-price terms. Although 10 of the 14 items rose in nominal prices over the 24 years, only five had a higher time price when accounting for the 123.3 percent increase in hourly wages.

We also created a chart showing the percentage change in abundance for the general CPI and each of the 14 tracked items:

Find more of Gale’s work at his Substack, Gale Winds.

Blog Post | Food Prices

Have Eggs Ever Been More Expensive?

The money price of eggs is higher than in 1919, but the time price is lower.

The high price of eggs may have incentivized a burglar to heist 100,000 eggs from the back of a trailer in Pennsylvania. Have eggs ever been more expensive? The surprising answer is yes—much more. In 1919, eggs were five to six times more expensive: A dozen eggs were 61 cents, or around 5 cents per egg. Wages for unskilled workers at the time were around 25 cents per hour, so these workers had to spend around 12 minutes to earn the money to buy one egg.

Eggs at Walmart at the time of writing (Feb 14) are $8.32 per dozen, but unskilled worker wages and benefits have increased to $17.17 an hour. That would put the time price for one egg at 2.4 minutes. The time price for unskilled workers has decreased by 80 percent since 1919. For the time required to earn the money to buy one egg in 1919, unskilled workers get five today. They’re 400 percent better off.

How about blue-collar workers? Wages for blue-collar workers in 1919 were around 43 cents per hour, so an egg cost them 7 minutes. They’re now earning $37.15 an hour, so their time price for one egg is 1.1 minute. The time price for skilled workers has decreased by 84 percent since 1919. They get 6.33 eggs today for the time it took to buy one egg in 1919. They’re 533 percent better off.

Yes, the money price of an egg today compared to 1919 is high, but the time price is much lower. Always compare the money price to hourly wages to see the time price, since that is the true price we pay for things.

Why did the price jump so high? The USDA recently ordered the culling of millions of chickens in response to worries about bird flu. Reduce supply like that and prices are bound to increase.

Fortunately for us, chickens lay lots of eggs, so the market should be resupplied soon. I have such great faith in our egg-laying friends and free-market entrepreneurs that I’m willing to bet $1 that the time price of eggs will be lower in February 2026 than today. Any takers?

Find more of Gale’s work at his Substack, Gale Winds.