The Economic and Political Factors Affecting the U.S. Sugar Subsidy Program :: Sugar Subsidy Economics Essays

The Economic and Political Factors Affecting the U.S. Sugar Subsidy Program Graphs Not Available Sugar growers continue to benefit from favorable economic conditions provided by the U.S. government. Yet empirical data reveal a decrease in the aggregate support for sugar legislation in recent years. In 1978, there were 9,187 full or part owners of sugar cane and sugar beet farms, compared to 7,799 farms in 1987. The level of sugar subsidy allocated to the farmers, however, has increased and even favored certain sugar growers disproportionately over others. Such empirical findings suggests that politics, as much as economics, affect the level of sugar subsidy. This paper examines why an increasingly smaller number of sugar farmers receive a steadily larger government subsidy. Mainstream economics cannot explain the unusual linkage between sugar producers and subsidy levels. While traditional, neoclassical economists cultivate elegant models that explain economic phenomena, they fail to characterize correctly the relationship between voters, their elected representatives, and the political institutions which shape the policies. Consequently, an accurate model must combine what we know from mainstream economics and political economy. Before outlining the theoretical framework, however, the following section reviews the history of the sugar subsidy. History of Sugar Subsidy The Jones-Costigan Act, created the modern sugar program as part of the New Deal package of agricultural legislation in 1934. The program included domestic production controls and direct payments to farmers, as well as import restrictions that addressed the declining ratio of farm to non-farm incomes of the preceding decade (Harper, 1990). The first major transformation of the U.S. sugar program resulted from the U.S. trade embargo of Cuba's exports to the U.S. in 1963. Throughout the following years, the United States government imposed a series of price supports, import quotas, and loans to protect U.S. producers from lower-priced foreign grown sugar as well as to encourage domestic production of sugar (Rendelman, 1989). Many farmers in the U.S. began to supplement the dearth of sugar left by the embargo and exploit the "protected market" conditions provided by the U.S. government subsidy. Despite the federal aid granted to sugar growers, not all sectors of agriculture devoted to growing sugar derivatives flourished. Domestic production of sugar cane increased steadily from 1982 onward, while sugar beet production stagnated (Knutson, 1985). Through time, the largest number of sugar beet farmers were concentrated in a specific West/Midwest region of the U.S. (Minnesota, North Dakota, Idaho) while sugar cane farmers were found in the Southeast, specifically Louisiana and Florida.