May 13th, 2015
As a taxpayer, you probably think about how the government chooses to spend your money. We often perceive grants as “handouts” for people who are unsuccessful in the business world. While you might not know it, there are a number of important reasons why governments offer agriculture grants to farmers and food processing companies. Unlike bailouts, grants reward and help businesses that are working hard and just need a little extra support.
The Great Depression
With the “Great Recession” of 2008 a recent memory, you’ve probably heard plenty of talk about the Great Depression from the early 1930s. Even if you weren’t paying attention in history class, this term is likely familiar. What you might not remember about the global financial collapse that began in 1929 is that the Great Depression’s by-product of agricultural collapse facilitated the long-term pattern of agricultural grants.
The Great Depression coincided with a massive drought in the western half of North America, often referred to as the “Dust Bowl.” As farmers’ crops failed, they began to sell their goods at cheaper and cheaper prices. The price of grain in Canada dropped from $1.60 to $0.28 per bushel by 1932! Many farmers could no longer afford the cost of living with those prices. They moved into the cities looking for jobs that were already gone.
Governments in North America and Europe realized that farmers were an essential part of the economy largely because of this collapse. After World War II, grants became an easy way to support struggling farmers and ensure that they were able to produce food for everyone. Food production underpins society’s ability to persist, after all!
Government investment into the agricultural industry has proven to be an easy way to increase employment numbers. Not even including all of the spin-off food service industries, the agriculture industry employs 15% of the population in North America! Food production is absolutely vital to every other aspect of our economy, so the money invested into agriculture is never a waste. Often these positions are filled by people living in rural or remote areas where service sector jobs are limited. Talk about killing two birds with one stone!
The recent “green shift” towards environmental sustainability is also one of the reasons why governments offer agriculture grants. Outdated technology is not only inefficient, but also harmful to the environment. As the Canadian government attempts to meet their carbon emission target of 611 MT by 2020, grants help farmers do their part. Investment in newer, greener technology allows farmers to be more efficient in their production and reduce their costs. It also helps governments to reduce our overall carbon footprint.
In 2014 alone, Canada exported $12 billion more in agricultural goods than it imported. In a global economy, agriculture is not simply about feeding the population, but selling goods around the globe. The problem is that very little of the GDP comes from the agriculture industry in the developed world. Less than 2% of Canada’s GDP comes from agriculture! Keeping up with developing countries, where often a third of the GDP comes from agriculture requires government investment. Agriculture grants are a significant reason why North American farmers can compete in the global marketplace.
Having a healthy skepticism for government programs is never a bad idea. In the case of agricultural grants, the reasons for why governments offer them is clear. Farming is hard work, and used to offer little reward. Check out the CanExport Program for export market development funding.