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Subsidy, incidence and comedy

Of the many observations on Britain’s membership of the EU that stand out to me as odd, one made by a comedian at a stand up night I recently attended stood out even further! He invited us to ridicule farmers who had voted out despite benefiting from large EU subsidies and employing lots of eastern Europeans. What fools eh! I didn’t find it funny until I thought about it.

I mean, my initial response was just to be puzzled. Why would it be humorous to point out that the people most affected by membership of the EU might want to vote out? In my mind there’s no automatic connection between people getting a subsidy and their welfare – but I laughed when I remembered that for most people there is. You see, the thing about money is that it gets us all confused because of its totally incidental relationship to welfare. It’s quite easy to see why the relationship is incidental. Finding £100 on the pavement just outside a john lewis when I fancy buying an overpriced kettle is one thing. Finding it as I’m in the process of being mugged is another. My ability to use my subsidy, in other words, is contingent on the real world choices I face, my own particular endowments of circumstance and fortune. Most of the time when we think about money it’s when we lack enough of it – which engenders a big bias to believing that more of it will resolve our problems and that having more of it should be our biggest objective. We forget readily the many times where it wouldn’t have helped.

What has this then to do with our Farmers and their subsidies from the EU, and cheap labour to boot! Well, despite the fact that each individual choice (to take a subsidy, to employ bulgarians to pick carrots) may be economically optimal, there may be a broader picture. Subsidies exist because, due to western economies economic might, it’d be impossible to produce food that could compete with cheap imports without them – and food production is seen as an intrinsic good. Given this, the bargaining power of farmers in that situation is basically 0. Indeed, farmers incomes are strained, and much of the food produced in the UK is loss making even WITH subsidies -as the inexorable logic of the market which rewards bargaining power demands that farmers dip into their capital in order to maintain their existence. As to hiring European immigrants, farms that do it would outcompete and be able to purchase land easily from those that didn’t – meaning that the existence of cheap labour from the continent effectively precludes certain kinds of firm structures (ie, family farms and farms employing a few “indigenous” hands) in favour of agribusinesses. It may or may not be good from a welfare perspective for this to happen – but certainly farmers may well not like it, and their lack of bargaining power guarantees that any cost savings are going to accrue straight to consumers and supermarkets.

None of this is to say that immigration is a bad thing, nor that farmers are justified in their views which may be racist, regressive or ignorant. But the idea that the people most affected by Globalisation and the EU being hostile to those things is silly is, well, silly. Of course they are anti EU. It’s an overpowering force in their lives.

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