16 March, 2009

Let Market Fix It!

Last week I saw the documentary Let's Make Money in cinema. Despite some awkward conspiracy theory tendencies it shows some really interesting examples of globalization gone wrong. One of it is cotton production in Burkina Faso, one of the poorest countries in the world. Not long ago I also posted about an approach to help German farmers called "Ein Herz für Erzeuger" or in English "A Heart for Producers" which I consider totally wrong.

Now how are the two stories linked with each other? It's as easy as that: Due to globalized markets paying huge subsidies to European and American farmers does not only distort the local markets but has effects on the markets in the whole world. And just as with the milk seas the cotton subsidies lead to over-production and an extremely low price for cotton. According to the film's website the US spend $3 to 4 billions on cotton subsidies (German) per year. This costs Burkina Faso around $150 millions per year while they get only a fourth of it as development aid - from the US, EU and Japan together! (The EU isn't better of course: Cotton in Spain is subsidized with $1 billion per year as well.)

This means the most severe problems in the developing countries (or emerging markets as they are called now as one episode in the film shows) could be fixed just by opening markets in the EU and the US - without any additional payments in form of development aid. Surprisingly, this is capitalism in pure form, simply following the maxim of market fixing itself. I understand this doesn't make it easier to pursue in the EU but what about the US!? Next time somebody complains about Big Government (in both the EU or the US) I suggest to get rid off agricultural subsidies. But wait, it might just be the same people complaining about Big Government and getting elected by farmers...

PS: Some amounts I converted from Euro to US Dollar at current rate of 1 Euro = 1.30 US Dollar.

PPS: The film also has an episode on Cross Border Leasings (German) I wrote about recently as well.

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