Cafe Hayek: Autarky is Bad Policy

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June 11, 2008

Autarky is Bad Policy

Don Boudreaux

University of Illinois law professor (and co-blogger with me over at Market Correction) Andy Morriss sent this superb letter to the Wall Street Journal:

Sirs,

Contrary to the impression left by your story on agriculture and trade (“Food Crisis Forces New Look at Farming,” June 10), higher commodity prices do not result in a repeal of the principle of comparative advantage. Trade benefits people and trade distorting subsidies do not. This simple truth seems to have escaped both the “experts” interviewed in the story and those doing the interviews as the story quotes multiple experts complaining that countries like Haiti are no longer self-sufficient in various commodities. But food is no different than any other good. In no case is autarky a welfare-enhancing public policy, as the disastrous example of Albania under communist rule ought to have demonstrated once and for all. Public policies built around subsidizing inefficient producers in agriculture will raise, not lower, the price of food in poor countries and divert scarce resources from other, more productive investments. The problem for countries like Haiti is not a lack of investment in agriculture but the existence of a predatory public sector facilitated by international institutions like the World Bank and IMF peddling the latest fad. Poor countries are poor because they lack secure property rights, free markets, the rule of law, and free trade. Sorting that out, rather than developing a new Five Year Plan for agriculture, is what will lift their people out of poverty.