Marco Rubio's Defense of Crony Handouts Defies Basic Economics
Recently first tier Republican presidential candidate Marco Rubio was asked about his support of federal sugar subsidies. It was a reasonable question considering the Florida senator's oft-stated aversion to business handouts. Rubio responded with:
"I'm ready to get rid of the loan program for sugar, as long as the countries that export sugar into the U.S. get rid of theirs as well, and here's why: Otherwise, Brazil will wipe out our agriculture and it's not just sugar."
"I'm prepared to say, absolutely, we should change the law so that as soon as countries get rid of theirs, we get rid of ours, and then there will be a free market for being able to sell food. Otherwise these other countries will capture the market share, our agricultural capacity will be developed into real estate, you know, housing and so forth, and then we lose the capacity to produce our own food, at which point we're at the mercy of a foreign country for food security."
Unfortunately, Rubio's answer either revealed impressive ignorance on his part about basic economics, a crony capitalist streak within the Florida senator that he would rather have kept hidden, or perhaps both.
Missed by Rubio is that there's no such thing as and no need for "food security," "energy security," and least of all "sugar security." If the U.S. were utterly bereft of not just arable land, but also literally had no natural oil resources in any of its fifty states, its citizenry would and could still consume both food and fuel with ease, and as though it had been sourced in Iowa and Texas.
Of greater importance, the U.S. could be at war and embargoed by every food, fuel and sugar-producing nation on earth, yet its citizens would still be able to consume all three as though they originated in Iowa, Texas and Florida. That is so given the simple truth that there's no accounting for the final destination of any market good.
Assuming once again war and embargo circumstances with countries long on food, fuel and sugar, we could simply buy all three from those they have sold to. Short of hoarding these basic commodities, and hoarding is unlikely given Rubio's own assertion that to do so would be to tantamount to giving up market share, producers will always sell their goods into the marketplace at which point there's once again no accounting for their final destination.
Importantly, global economic history has proven the above argument countless times. Going back to the first half of the 19th century, Great Britain subsidized its agriculture industry with its "Corn Laws" for the same reason Rubio says we should today: the presumed need for food security during times of armed conflict. The problem with this argument was that since 1810 Britain had been at war with nearly every European power, yet it still managed to import over 1,491,000 quarters of wheat from the very countries it had been fighting.
Fast forward to the early part of the 20th century, and World War I. It was then that Britain's Royal Navy imposed a blockade on Germany with an eye on frustrating American exports to the European power. No problem there. While direct U.S. exports to Germany plummeted, exports to Scandinavian countries like Sweden soared -- on their way to Germany.
Most famously, in 1973 the Arab members of OPEC imposed an "energy embargo" on the U.S. The latter was great symbolism, but that was about it. Middle Eastern oil not sold to U.S. interests still made it to the U.S.; albeit via Europe first.
At the end of last year a normalization of relations with Cuba was announced by the Obama administration. Expected in this thawing of a formerly chilly relationship is that the U.S. embargo on Cuba will soon enough end. Rubio has made plain his desire to the keep the embargo in place, but economic history says he should pick another battle.
That is so simply because the embargo of Cuba has almost been totally irrelevant to its economic misfortune. Other than perhaps giving the U.S. a bad name in the eyes of the Cuban people, the latter arguably a source of the Castros' staying power, the embargo achieved nothing economic as the previous examples hopefully reveal.
Simply put, to consume or import is to produce something of value first. Cuba's economic problem is that with the means of production largely controlled by the country's communist government, there's very little production of exportable goods. Cigars are about the only the marketable product still made on the island, and as any cigar lover will confirm, those produced in Cuba are easy to buy in the U.S. despite the embargo. The dearth of U.S. goods in Cuba isn't a function of laws against Cuban-American exchange; rather it's solely the result of Cuban production being so meek as to not rate imports in return. Such are the tragic economic consequences of central planning.
Back to food or sugar security, Rubio's explanation for a continuation of sugar support doesn't stand up to the most basic of scrutiny. No matter what happens, and regardless of whom we're warring with, we'll always have a stable supply of sugar, bread, oil and any other consumable good being brought to market so long as we're producing ourselves.
In that case, sugar subsidies are only successful insofar as their existence is a certain weight on U.S. production. Not only are the paychecks of every American shrunk by the coerced support of sugar producers, subsidization of economic activity that couldn't continue without it shrinks global markets for the most efficient U.S. producers while at the same time depriving them of precious capital that is being diverted to the politically connected.
Senator Rubio should publicly end his support of any and all sugar subsidies. The very notion of "food security" is an affront to basic economics, and as such is an economy-sapping myth.