New Zealand’s Gov’t Free Agriculture

New Zealand's agriculture sector accounted for ~80% of New Zealand’s exported goods in 2019 and contributed ~5% of the country’s GDP in 2020. Dairy is New Zealand’s lead export commodity and they are the world’s largest exporter of whole milk powder and butter. For what it’s worth, I’ve been a customer of exported New Zealand dairy for nearly a decade. 

New Zealand ended government subsidies on agriculture in the 80s. The result was capitalistic efficiency where farmers sought out methods to produce more with less—improving product quality, lowering costs, etc. The following video sparked a thought into how taking out gov’t subsidies in for-profit industries will result in positive evolution for the entire industry, and the nation in the long term. 

Consider it as how when a government subsidizes you for something, you will use it because…well..it’s no cost to you. The reverse will also be true. When gov’t subsidies on fertilizers ended, the farmers stopped using fertilizers.

The lack of subsidies meant the farmers had to figure out how to make their labour-intensive business thrive. They had to produce high-yielding products so they moved to high-quality meat and dairy. Whereas the heavy gov’t subsidies in the U.S. resulted in farmers growing low-yielding crops to merely fit the requirements for subsidies so about half their production is in corn and soybeans. 

Incentives drive actions and when governments subsidize industries, people will take it to the extreme to do the least amount of work to get the benefit. This bodes the case for the benefits of gov’t stepping back from industries. 

However, I’m in agreement that gov’t should provide the basic necessities for people like infrastructure, healthcare, education, and even shelter. After all, shouldn’t taxes be used to raise the living standard for all? Look at France and Germany’s amazing nationalized healthcare. Germany’s universities are tuition-free for their citizens and international students as well.

Extremes of socialism and capitalism bring about their own problems. It’s the human skill of judgment that should be used to help us figure out what should be subsidized by the gov’t and what should be let free in the free market. It appears New Zealand was able to figure out what’s better for agriculture.