A $12-billion “assistance package” to American farmers sounds like a great deal, at least for the recipients: a one-time payment that is intended to soften suffering caused by trade wars and low commodity prices, from a White House that sincerely wants to help.
I have a different perspective. As a farmer in New Zealand who once received government subsidies and then lost them, I speak from experience when I say that agriculture is much better off when governments stay out of our business and let us grow our food without interference.
The federal assistance package is in fact a devil’s bargain: It would deliver short-term benefits but also create long-term problems for American farmers.
When I first became a farmer in the 1980s, New Zealand supported agriculture the way so many governments do. Rather than letting us operate in an unfettered free market, it paid us subsidies for our sheep, wool, dairy, and beef.
Then a new government came to power. It viewed farmers as a bunch of privileged, wealthy landowners. We didn’t know it, but while we were pulling weeds from fields and cleaning out pig stys, we had become New Zealand’s landed gentry.
So the government took away our subsidies. It didn’t just reduce them. It didn’t phase them out over a stretch of time. It wiped them out all at once. It cut us off cold turkey.
I won’t pretend that it was easy. In fact, the elimination of these supports put our farm in jeopardy.
Farmers protested in cities and towns. On the South Island, where our farms are located, some of them actually slaughtered sheep in the streets. They made a dramatic political point, but they were also acting out of economic self-interest. With the loss of subsidies, many animals were more valuable dead than alive. When farmers sent them for processing, they didn’t earn payments in return. Instead, they received bills.
It sounds perverse—and indeed it was. But that’s what happens when governments pay subsidies. They mutilate markets and build bad incentives into economic systems.
I didn’t participate in those protests. I was too busy trying to save our farm. For several years, we spent as little as possible. We made almost no capital improvements. We’ve always kept a vegetable garden, but back then it became a lifeline. The garden wasn’t a hobby, but a source of food. This was about survival.
The government that removed our subsidies had acted out of spite. It didn’t mind watching farmers fail—and many did fail, due to the loss of financial supports combined with high interest rates, low land prices, and other factors. When the government offered to pay some farmers to exit agriculture, lots agreed to go and felt relief when they did.
The irony is that although the elimination of subsidies started out as a kind of political punishment, it wound up becoming a long-term blessing for farmers. We went through a difficult period of adjustment but emerged from it stronger than ever.
My family focused on our farm. When we faced a hard choice, we suddenly had the flexibility to make decisions based on nothing other than good agricultural and business practices. We became ruthlessly efficient, which is another way of saying that we became really good at what we do.
We also improved our ability to resist regulations that hurt agriculture. Subsidies empower politicians, who can threaten to cut off aid if farmers refuse to accept new forms of control. Without subsidies, we have more freedom to solve problems through creativity and innovation rather than the command-and-control impulses of government.
As a country, New Zealand obtained an advantage in the global economy. When we make trade agreements or take cases to the World Trade Organization, we’re always in a strong position because our negotiators and diplomats don’t have to explain away market-distorting policies. Today, we export more than ever before.
So should American farmers accept the $12 billion handout? That’s for them to decide. But if my government in New Zealand were to make a similar proposal, I’d feel a flicker of temptation and then reflect upon what I’ve learned from a lifetime in agriculture and come to my senses. My answer would be simple: No thanks.
3 thoughts on “A New Zealand Farmer Looks at Subsidies Through a Different Lens”
[…] A New Zealand farmer looks at subsidies through a different lens – Craige Mackenzie: […]
As a farmer in EU/Denmark where we get subsidies based on historical data, which then is converted in to a fixed amount per Ha. Single payment scheme. This subsidy is further divided and depend on several, typicaly, enviromently terms. The premium is decreasing every year and is now apr 60% of what is was when it was introduced in 1993. Today we recive 235 €/ha. We often hear the statement that in NZ did they cut down all subsidies over night, and the result today is a healthy agricultural sector who is capable to manages on the open market. There is just one very important details thats never been mentioned. In NZ was it the whole society that they turned up side down. Not just the agricultural industri. Every year when I get my cheque from the EU, do I make a quick calculation and deduct the property taxes on the land, taxes on pesticides, 5% set a side of arable land ( green rules) and the needed consultancy to fulfil all the terms, then is there “only” apr 70-90 €/ha left over.
This case is typicaly for most conventionel farmers in Denmark and we are often envious of our colleagues from NZ
It’s just that small detail that, a turn around, should apply to our entire community
[…] We also improved our ability to resist regulations that hurt agriculture. Subsidies empower politicians, who can threaten to cut off aid if farmers refuse to accept new forms of control. Without subsidies, we have more freedom to solve problems through creativity and innovation rather than the command-and-control impulses of government. – Craige Mackenzie […]