Episode summary
Why New Zealand Abolished Farm Subsidies
Wall Street Week
· · 13 min · Guests: Dan Glickman, Lockwood Smith
Summary
The discussion contrasts the U.S. system of agricultural support with New Zealand’s decision to abolish farm subsidies in one year. Dan Glickman argues that U.S. farm programs are vast, politically durable, and distort market signals, even though farming is uniquely exposed to drought, disease, floods, tariffs, and geopolitical shocks. The program frames subsidies as both a stabilizer and a source of inefficiency.
Lockwood Smith describes New Zealand’s 1984-85 overhaul, when the country was near bankruptcy and cut subsidies for agriculture along with many tariffs. The immediate effect was painful: protests, falling land values, tighter credit, and farms under pressure. But he says the long-run result was a major productivity surge, especially in sheep and lamb, driven by better genetics, pasture management, and market discipline.
Farmers in Iowa say they would rather rely on markets than direct payments, but Glickman says U.S. politics makes broad subsidy reform unlikely. He argues that agricultural constituencies have too much influence, and that subsidies are likely to remain part of the system indefinitely.
Key takeaways
- Dan Glickman says U.S. farm subsidies are "billions and billions of dollars" and distort price, crop, and production decisions.
- Lockwood Smith says New Zealand abolished all agricultural subsidies in one year after the country was near bankruptcy.
- Smith says the sheep industry’s productivity rose 170 percent after the reforms, even as sheep numbers fell from 70 million to less than 26 million.
- Iowa farmers interviewed in the piece said they prefer markets and exports over direct government payments.
- Glickman says the politics of farm-state representation makes eliminating subsidies unlikely in the U.S.
Notable quotes
“-The government wiped those subsidies in one year. And the net results of that has been staggering”
“-We were within months of being bankrupt”
“And in 1985, they decided action had to be taken and they abolished... In one year, they abolished all those subsidies”
“But it looks like we're going to have subsidies of some sort forever”
How the episode opens
-I'm delighted to announce this afternoon that the United States will be taking a small portion of the hundreds of billions of dollars we receive in tariffs. And we're going to be giving and providing it to the farmers in economic assistance. Westin: It's become almost impossible to think of U.S.
farming without government payments supporting it. And the U.S. is far from the only country that intervenes in agricultural markets.
But it turns out that there is one country, New Zealand, that has gone a very different way with some unexpected results. -The government wiped those subsidies in one year. And the net results of that has been staggering.
Westin: America started down its path to paying its farmers back in 1933, in the midst of the Great Depression, when President Roosevelt announced the Agricultural Adjustment Act. -With the whole world in turmoil, even the united efforts of the farmers themselves would not have been sufficient without the cooperation of the government of the United States. Westin: In a recent report covering 54 countries, the OECD found that, quote, "Agriculture support policies "generated on average $842 billion per year "in transfers towards agriculture "between 2022 and 2024.
Dan Glickman was Secretary of Agriculture during the Clinton administration. -Well, first of all, there's a huge amount of agriculture subsidies in the United States. I mean, it's billions and billions of dollars.
I think that farm... First of all, farm programs are complicated and nobody understands them except people in farm countries. So you know, you have people who have to deal with them all the time, are largely the only ones that have been involved in the writing of them.
But look, farming is a precarious, tough business. These people have to deal with drought, disease, floods, tariffs, geopolitical issues.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- farm subsidies
- agricultural markets
- global trade
- american agriculture
- subsidy reform
Watch the episode
Watch “Why New Zealand Abolished Farm Subsidies” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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