
When asked about skyrocketing food prices, most pundits pin the blame on our new favorite villain: rising gas prices. While gas is partially responsible, it's worth noting that increased shipping costs haven't caused the prices of every other consumer item to soar. In truth, the biggest force driving up the cost of food has been exports; basically, European markets are filling up with cheap American foodstuffs. Over the course of 2008, Europe will have imported $110 billion worth of our produce, a 22% increase over 2007.
There are two main reasons that American produce is (comparatively) cheap. First, the dollar is very weak, which makes American exports much less expensive in Europe. Second, the U.S. subsidizes its agricultural sector, artificially lowering the price of its harvests. In the last two years, for example, the federal government gave $36 billion to American corn farmers.
So there you have it: American taxes underwrite agricultural subsidies. These, in turn, keep America's produce cheap, making it a bargain for European consumers. American consumers, meanwhile, pay taxes that fund the subsidies, then pay inflated prices because the subsidies have encouraged the price of produce to rise. In other words, you pay once to grow the corn, then pay again to buy it at European market rates.
Is anybody else starting to question the value of this system?
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