Free Government Intervention in Agricultural Activities Essay Sample
This paper aims at determining the areas of government intervention in agricultural activities and whether the government intervention production of agricultural products is necessary. There is a dilemma in many economies on which policies to adopt in the production of the agricultural products. Some are for the adoption of the laissez faire policies while others insist that the government intervention is necessary if not mandatory (Trostle, 2010). Free market economy sometimes referred to as laissez-fair system is an economic theory that calls for minimal government interventions. The government in laissez-faire system has no control over the decisions that are reached at the free market economy. Some of the decisions that are made in free market include determination of the prices to be charged for the goods and services produced in the economy. The amount of wage to be paid to workers is yet another decision that has to be made in the economy (Trostle, 2010).
In free market economy, the market forces; demand and supply, are responsible for determining the quantity of the agricultural products. The market forces are also responsible for determining the prices to be charged for the agricultural products produced to the market. According to laissez-faire policy, the agents should be left to pursue their interests and in so doing the market would in turn perform efficiently. The different agents in the market include both the consumers and the producers of the products. These agents have different interest to meet. The producers have an interest of selling goods and services at high prices and thus earning high profits (Faundez, 2010). On other hand, assuming the consumer is rational would like to have more goods for low prices. The forces of demand and supply in the market fix the optimal quantities and the prices to be charged for the goods in the market. The equilibrium prices and quantities are determined by the interaction of demand and supply curves. Equilibrium quantity refers to the quantities the producers and consumers are ready to supply and demand respectively at a particular price. In free market economy the role of the government is only limited to making policies necessary to regulate trade and eliminate the hindrances to trade in the economy (Strange & Tooze, 2010).
From the explanation given above, it is almost impossible to adopt laissez-faire policies in production of agricultural products. Many economies of the world, the governments play a crucial role in production of agricultural products. The governments are interfering directly in the production of agricultural products in terms determining the prices to be charged on the agricultural products, the amount to be produced and the quality of the products. As the laissez-faire policy demand, the government actions in the market are not restricted to offering policies meant to regulate the markets but also in making major decisions such as the prices of the agricultural products, the wages to be paid to workers in agricultural production and the quality of the products to be given to the market. A country like United States is no where closer to be a free market economy especially where agricultural production is concerned. In 2008, for instance, the United States government allocated over $37,733,526,000 for agricultural production (Leonard, 2010).
The government intervention in agricultural production is done through three ways or rather by enacting three policies. These policies are price policies that are meant to control the prices of agricultural products in the market, direct payments and the provision of agricultural inputs to the producers. The governments set the prices, through applying price policies, that are favorable to the producers to encourage them produce more goods (Leonard, 2010). The governments also control the prices of the agricultural product to make it affordable to the citizens of the country. Some of the policies adapted by the government aimed at controlling the prices of agricultural products include the tariffs, quotas and taxes. These policies are also meant to control amount of agricultural products that enter a given country. By allowing other countries to supply their agricultural products would lead affect productions of the agricultural products in the country. The agricultural products produced with the country may not compete with those produced in others countries in terms of prices and quality. The policies are also source of revenue to the government (Ocampo, 2010).
Direct payments, as government intervention policy in agricultural production are aimed at helping the producers to increase production. The direct payments' measures include compensating the producers for loss or poor production in a given period, motivating the farmers to increase their production or even to comply with the policies sets aside by the government. In 2003-4, Queen Elizabeth II of Britain received about $1.31 million as direct payment. Westminster, the richest man in United Kingdom received $ 480,000 as subsidies from the government. In America, for example there are about 20,000 farmers who receive about $10.1 million daily. In daily farming, the farmers receive US $2.7 per cow per day in subsidies in United Kingdom; US $8.0 per cow per day is given to daily farmers in Japan whereas a mingle US $ 1.50 per cow per day is given to famers in India. The people who receive subsidies from the government can be classified into two; the small farmers and the big agri-business corporations. According to the research conducted, 20 % of those who benefit from $ 1 billion subsidies in United States are farmers. The 80% of the subsidies goes to large corporations that are not in need of the government assistance in production of agricultural products. According to some critics, the governments need to review it policies of subsidies to determine whether the policies really help the needy farmers (Berggreen et al, 2010).
Another government intervention policy in the production of agricultural products is the policy of taxation. Taxes levied by the governments are the major source of government revenue. The taxes are used by the government to provide essential services to the citizens of a given country such as provision of health services, educational facilities and the provision of recreational facilities. The government uses the taxes to provide the infrastructure in the country such as construction of roads, railway lines, sewerage facilities and also the electricity lines. The taxation policy adopted by the governments increase the prices of the products and thus hurt the consumers in the country. The government should adopt the tax regimes that do not overburden the tax payers. The policies makers in the country should be very carefully not to increase the prices of stable foods products through taxations and prove to be out of reach to the citizens of the country.
Another way in which the governments intervene in the production of agricultural products is through the use of tariffs. The aim of the tariffs is to protect the local producers from foreign competition. Sometimes is not possible for the local producers to compete with the efficient foreign producers in terms of the quality of goods produced and prices charged for the goods. Thus the aim of the government in imposing tariffs in the imports is to protect the local producers who are inefficient. The government has an interest in protecting local producers (Arnon, 2010). To begin with, the collapsing of industries in the country would lead people loosing jobs and thus escalating the problem of unemployment in the country. The governments also protect dumping in the country by imposing tariffs for the imports to the country. Dumping involves importation of cheap products from other countries whose prices are low than the production costs of the same product in the country. By government allowing dumping would lead to people demanding for the foreign products that are far much cheaper than products produced locally thus collapsing of production activities in the country (Magnus, 2010).
There are various reasons as to why governments intervene in the production of agricultural products in the country. The governments intervene in agricultural sector to ensure that the quality of goods produced meet the required standards. The governments provides financial and technical assistance that ensure that the farmers produced goods that can compete effectively in the international market and thus fetch the much needed foreign reserves for the country. To ensure that agricultural products of high quality are produced in the country, the government establishes research institutions (Smith, 2010). Another reason as to why governments intervene in the agricultural production to protect the environment. Some of the practices performed in agriculture are not environment friendly and thus the governments intervene to prevent the menace. The governments also intervene to ensure that all the places in the country are developed equally and no regions are marginalized. The urban places and the rural should develop at the same pace thus government intervention. The protection of jobs is another reason as to why the governments intervene in the production of agricultural products (Byrne, 2010).
In conclusion, there are various government interventions in the production of agricultural products. Due the shortcoming that have being identified in the laissez-faire policies such as production of goods of poor quality, high prices of agricultural products as a result of high cost of production, it becomes necessary for the government to intervene in agriculture. Some of the government intervention policies include taxations, quotas and subsidies; all these are grouped as pricing policies. These pricing policies are meant to control the prices of the agricultural products. The government can intervene in the production of agricultural products through applying direct payment policies that are sometimes referred to as subsidies. The government can also provide inputs to farmers such as machineries, seeds and chemicals used in cultivation of crops.