Beat the Press

Dean Baker's commentary on economic reporting


Rich Countries Provide $300 Billion Annually in Subsidies to the Pharmaceutical Industry

You won’t see this headline in the newspapers. You should ask why. Newspapers have repeatedly reported on the hundreds of billions of dollars that the rich countries give to the agricultural industry. (See the Financial Times for the latest example.) While the wording of the headlines, and often the articles themselves, would lead readers to believe that this money is being paid directly from rich country governments to farmers, the vast majority of this money takes the form of higher prices that result from trade barriers of various types.

To those who might say that it doesn’t matter whether the money comes from government coffers or through higher prices to consumers, I will point out that this is not how the media generally treat the issue. The media have never run a story about the hundreds of billions of dollars in government subsidies to the pharmaceutical industry. These subsidies take the form of patent protection – government granted monopolies that raise the price of patent protected drugs by several hundred percent above the free market price. We can also talk about the hundreds of billions of dollars in subsidies to the software and entertainment industry through copyright protection. These subsidies serve a purpose – they provide incentives for innovation and creative work – but that doesn’t change the fact that they are subsidies.

Another type of subsidy that the media don’t discuss is the high wages of doctors, lawyers, economists, and journalists, which are artificially inflated by restrictions on foreign competition. This subsidy would also run into the hundreds of billions annually.

So I applaud the media’s vigilance in calling attention to the market distortions created by protectionism in agriculture. I am just curious as to why they are so oblivious to protectionism in other sectors of the economy.


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