Brian Sutton’s (Otago, New Zealand) economics chiding of “Tonga’s Agriculture Ministry becomes a squash grower” (14 Sept., 2007) fails its first basic Supply-and-Demand test.
Government is not a “rugby referee” but rather a guarantor of law and order, economics stability, security, etc. It would be ideal for Mr. Sutton to keep the Tongan Government out of the free marketplace, but in his own admission, the Supply side is lagging. What should government do?
Why are Tongan squash growers falling like flies? Mr. Sutton had not presented an educated reason. Is it purely of economics reasons, or something else?
Basic economics teaches that short Supply should attract high demand, growers would then ship more products, and get paid more. However, squash is an elastic (sensitive to price, not a necessity) product in which a price increase reduces demand quickly. Therefore, sellers are forced to reduce price, and supply, to raise demand. Spinning in a downward spiral, the costs add faster than revenues for growers. Perhaps they need modern farming techniques, hire Chinese workers, and reduce cost of doing business, etc.
Now Government has two choices: 1) Damned if it does not act; 2) damned if it does act. Tonga’s annual quotas are being threatened, opportunities would be given to other suppliers, bonuses reduced, and growing squash would be as attractive as fattening up hogs. Some growers are crying foul because Government decides to pick up the void to protect a vital industry.
In a purely capitalistic economy, Government can either “referee as in rugby” until there are no more teams to referee, or pay the expenses (subsidize) for the teams so they can show up at game day. Thus, the fans could return, busses are running, peanuts are sold, and they are back in business.
Trouble is, the Tongan Government elects not to use tax money to “subsidize” farmers like they have done in New Zealand, and the U.S., both of which are pure capitalistic economies. Farmers are paid more for their products, or were paid to destroy their products in cases where there was too much supply.
The Tongan Government’s decision is the reversed thinking to subsidies. Why pay the growers tax money so they can sit on their behinds doing minimal work? I commend the Ministry of Agriculture for resisting the temptation. Tonga’s “subsistence” economy does afford the growers to sit out a year or two without real personal financial losses, but very detrimental to the country’s economy.
Sione A. Mokofisi
samokofisi [at] mac [dot] com