The failure of the European powers to confront the farmers will almost certainly feature as the most serious economic news of the year. Europeans are paying the 8 percent of their working men who live by tilling the soil more than $100 billion per year in excess of the value of their produce on the market, a reflection not of the love of agrarian life but of the political power of the agricultural lobby.
In Europe, as in the United States, there are more people engaged in making edible and potable products than a free market can sustain. The glorious events of 1989 brought on the disintegration of the Soviet empire but not, we note happily, any serious possibility that we would all be turning swords into plowshares. If we did, with agricultural lobbies at their current state of efficiency, we would find the Cold War a relatively happy economic memory.
The most efficient farmers in the world are in fact American, a pleasant reminder of our sometime supremacy in every economic enterprise. And of course $100 billion pumped into European agriculture means that the surplus generated in the United States has no prospect of finding a market in Europe. To compete with a $100 billion subsidy is something even Iowa and Nebraska can't do.
Then there is the burden of our own agricultural subsidy. The figure of $25 billion per year is commonly accepted. (Prof. Milton Friedman insists that the figure is nearly double that sum.) What we give out to people who grow sugar cane is readily identifiable, less so the sacrifice paid every day by Americans who use sugar and pay double the free market price for it.
If we keep farmers in Louisiana busy growing sugar that can be produced in the Dominican Republic for one-half the price, we need to protect against the purchase of cheaper sugar, and we do this by tariffs against it. In doing this, we move concretely against the working class in the Dominican Republic, which loses the protected market and reacts politically in ways that prove to be strategically expensive to the colossus of the North.
It is all somehow clearer on the microcosmic scale. A fortnight ago, intending a Christmas gift to a warm and valuable friend who suffers from British pricing, I wandered about the shops of the island of Barbados in search of an inexpensive laptop computer. I was scared off by the fancy models at the fancy stores when my eyes lit happily on a Radio Shack. Radio Shack -- the oasis of competitive pricing: quality goods at factory prices.
How much for its laptop? Twenty-nine hundred dollars.
I grabbed for the nearest counter to brace myself. No, no, I said, pointing to the little machine, not $2,900? The salesman was a young, expressive type who felt no inhibition when I asked him whether the same machine, bought in the United States, was significantly cheaper.
Indeed, he said cheerily. "This same model cost $950 at Radio Shack up until last week when they decreed a $200 markdown, so you can get it there now for $750." I asked whether it was tariff duties that were responsible for the difference between a price tag of $750 and one of $2,900. He said that tariffs in Barbados are set at 30 percent, and the balance of the difference had to do with "the cost of freight and things."
With agriculture, one could expect the laws of arbitrage to govern: since everyone eats, there is by definition a mass market, and if one could buy wheat in France cheaper from Americans than from Alsatians, one would place one's orders.
Manifestly, there are few people in Barbados wanting laptop computers, or Swiss wanting answering machines for their telephones, so that merchandisers are encouraged to gouge, and arbitrageurs are not attracted to the scene by the lure of significant profits.
The mischief of the overpriced product designed for the few damages only the few. With agriculture, everyone is damaged: the European consumer, the European taxpayer, the European farmer (who under pressure might gravitate to more productive work), the American farmer, the Argentine farmer -- you and me.