In countries where agriculture occupies a significant place in the economy, governments usually take additional measures to strengthen this industry. Even the most efficient market economy is not able to do without financial injections into the agricultural sector, which usually take the form of regular subsidies.
Do you need subsidies in agriculture
At the dawn of the development of a market economy in modern Russia, there were economists who believed that the capitalist structure in the agricultural industry would allow it to do without material support from the state. However, the practice of the world economy shows that even in such developed market countries as the USA, Great Britain, Germany, France or Japan, the agricultural sector is subsidized by the state.
This approach is economically justified, since without financial assistance from the state, agriculture will be doomed to disparity in prices for agricultural products. Price disparity is a violation of the principles of equality and equal benefit in economic relations. It is observed when there is no equal price ratio for various goods; however, prices do not correspond to the true value of labor costs.
In the agro-industrial complex, price disparity is the main reason for the decrease in profitability and the appearance of loss-making in certain sectors of agriculture. This phenomenon, which is directly related to the state subsidized policy, leads to insolvency of agricultural enterprises and their inevitable bankruptcy.
In the field of agriculture, overcoming price disparity is the central task of stabilizing the industry.
