On Nov 3, 2019, the New York Times published a stunning investigation of the EU’s Common Agricultural Policy, which is a program that subsidizes agriculture within the EU. The article lucidly details how the program diverted millions of dollars to oligarchs and politicians, including Czech Prime Minister Andrej Babiš and Hungarian Prime Minister Viktor Orbán.

But behind the problematic corruption lies an even more sinister tale, one that goes beyond routine kickbacks. It is the story of billions across the developing world who try to sustain their livelihoods through agriculture only to find a global market that is stacked against them. For decades, the policy of Western countries to provide exorbitant subsidies to their farmers has ensured that these billions of people remain impoverished.

To understand this economic warfare, one has to understand the fable of free trade that accompanies it. As it is taught in high school classrooms around the world, free trade relies upon the simple idea of comparative advantage. At its simplest, comparative advantage is the notion that free trade allows each country to focus on the goods and services that it can produce at the lowest opportunity cost. This allows producers to access larger markets, while consumers can enjoy a larger variety of goods and services at lower prices.

At the risk of generalization, lower labor costs and natural endowments mean that most developing countries possess a comparative advantage in some subset of agriculture. Free trade doctrine would indicate that the opening of markets would allow these countries to export agricultural goods. Such exports help increase foreign reserves, eventually enabling the diversification and modernization of these economies.

For individuals across the developing world, the above fable does not match reality. Around 12.9 percent of the world’s population continues to be undernourished. Despite free trade flourishing in the post-war period, the schism between the haves and the have-nots of the global economy is almost as wide as ever. The developing world’s share of agricultural commodity exports actually declined between 1970 and 2000 — in direct contradiction to theories of competitive advantage.

Why?

The problem does not lie with free trade, but rather with the perverse manner in which it is practiced by countries in Europe and North America, for the theory behind free trade relies upon the notion that markets are truly free. And no market can be free when the EU uses an outrageous 40% of its central budget to provide farm subsidies. Similarly, the United States — despite its supposed advocacy of the free market — provides more than 50,000 dollars in farm subsidies to the average farmer. This is only going to worsen with the recent introduction of a farm bill by the Trump administration, which provides an additional 16 billion dollars to the U.S American farmers.

Such protectionist policies make a mockery of free trade, as they allow farmers in these jurisdictions to operate on a different playing field from the rest of the world. Even more importantly, they remove the comparative advantage of developing countries. An ordinary Ghanian cotton farmer is forced to compete with massive agricultural businesses in the United States, who receive more in annual government aid than he can expect to make in his lifetime. An Indian wheat farmer is left to his own devices as he attempts to match the low subsidized prices offered by Orbán and his cronies. So much for “free” trade.

Invariably, such policies lead to massive distortions in international markets. The United States, perhaps the most industrialized economy in the world, also happens to be the world’s largest exporter of peanuts. The EU continues to export more than 99 million tonnes of agricultural products annually. In the supposed era of comparative advantage, these remnants of autarky continue to flourish.

Some may suggest that Western nations have the sovereign right to support their farmers. However, such an argument ignores the fact that these subsidies are also disastrous for the United States and the EU themselves. As the New York Times investigation revealed, most benefits from such subsidies are enjoyed by the ultra-rich. Similarly, more than 6000 U.S American entities received more than a million dollars in farm subsidies between 2008 and 2018. Essentially, taxpayers in the United States and the EU are financing the extravagances of agricultural oligarchs. As British writer George Monbiot once described them, such farmer subsidies are the “most blatant transfer of money from the poor to the rich that has occurred in the era of universal suffrage.”

Furthermore, even if the recipients of such subsidies were ordinary farmers, there is little economic rationale for developed countries to subsidize agricultural production. Instead, they should be using their technological prowess to develop new-age industries, especially in a world economy that is about to be devastated by climate change. In a global economy with true free trade, farming exports in the United States and the EU would be as obsolete as video cassettes.

Finally, it is rather hypocritical for the United States and the EU to pontificate about their right to formulate their sovereign economic policy. For decades, the developed world — through crony organizations like the International Monetary Fund and the World Bank — has forced indebted countries to implement pro free-trade reforms. Yet instead of putting their money where their mouth is, the United States and the EU have continued to implement protectionist subsidies. The developing world is compelled to open its markets to Western products, a favor that is very rarely returned.