Question

Some critics of globalization claim that wealthy nations have benefited from free trade at the expense of the poor. Using information from “The Choice,” provide a critique of this argument.

Answer 1

The US government has been expensively involved in agriculture since 1930s. Because, prices of the farm products are too low to cover for the cost, the government initiated a variety of programs to assists the farmers. These policies are targeted to stabilize the conditions in farming and to increase farmer’s income. The two policies that were initiated were price support and policies to restrict supply. But, as the time elapse the policies got strong criticism that they are biased towards large farms and distort the market. Eventually, the price support became less important and target price and deficiency payments become more important.

Price supports are example of price floors, which are government-imposed minimum price for goods and services. These minimum prices set a floor below which the prices are not allowed to fall. To be effective, the price floor must be above the market equilibrium price. On the other hand, a target price is a program in which the farmers are
paid the difference between target prices and market price.