Government expenditures have long been regarded as a principal instrument of agricultural policy, both capital and current-account expenditures. They become subsidies in cases in which their costs are not recovered from the beneficiaries of the policies. Fiscal subsidies are explicit subsidies. Agricultural policy also confers many kinds of implicit subsidy. A very common example is the legislation of an import tariff, which shields domestic producers to a degree from international competition and therefore implicitly subsidizes higher costs of production. Price controls are implicit subsidies - or the reverse (implicit taxes) - because frequently they are established at levels that effectively subsidize consumers and tax producers.
Implicit subsidies are also found in the field of natural resource management, when a user of a natural resource does not pay the full damage to it. For example, a widespread practice that constitutes an implicit subsidy is the issuance of licenses for fishing boats that are not priced sufficiently high to restrain over-fishing of the stocks, or simply are given out free, or do not
1. Christopher Adam, 'Privatization and Structural Adjustment in Africa', in Negotiating Structural Adjustment in Africa, Heinemann, Portsmouth, NH, USA, 1994, Chapter 9, p. 139.
exist. The lack of such licenses also constitutes a subsidy, for it leads to an understatement of the true, long-run costs of fishing in a sustainable manner.
The benefits that implicit policy subsidies confer on producers are sometimes called economic rents. To economists, rents are flows of income that derive from the mere fact of ownership of an asset, above and beyond the normal returns to the labor and management that would accrue to operating the asset in a competitive market. A common example is a license for a radio or television station, while another is a license for distribution of alcoholic beverages. Both kinds of license are restricted in supply relative to the potential demand for them, and so the owners can reap monopoly or oligopoly profits.
In the same sense, access to special regulatory niches can generate economic rents. Access to a support price for grains, if it is set above the market-clearing level, creates rents for producers who enjoy such access.
Some of the more common examples in agriculture of explicit subsidies, that is, fiscal expenditures that are not fully recovered from the beneficiaries, are the following:
• Construction of irrigation systems, whose full cost is rarely recovered from the users.
• Subsidized sales or grants of State-owned farmland, with or without provision of full title. Often, this transfer of land takes the form of the State's acquiescence in squatting on the land. If a full market price or rental rate is not paid for the land, then its transfer is subsidized.
• Production credit from State-owned banks, or credit from commercial banks that is supported by government rediscount lines at lower-than-market interest rates. The subsidy may be embodied in the interest rate or in a failure to exert normal efforts for loan recovery.
• Provision of research and extension services free or at less than cost. (It often is argued that the externalities arising from agricultural research justify its subsidy.)
• Purchase of harvests at above-market prices and their subsequent sale at below-market prices.
• Construction of feeder roads in rural areas.
• Provision of seeds, seedlings, veterinary services and other inputs at below-market prices.
Historically, pressures to make these kinds of outlays from the government budget have arisen in part from a desire to compensate the sector for unfavorable trends in real prices. In some cases, domestic price trends have been a consequence of downward trends in world market prices, and in other cases the price decline has been accentuated by macroeconomic policy. In yet other cases, government price controls for some commodities have held down their prices to producers, for the purpose of subsidizing consumers. It is also argued frequently in international forums that subsidies for production and exports in richer countries have depressed world prices for agricultural commodities, requiring some kind of compensatory action by governments of poorer countries. Whatever the reasons, there is little doubt that such fiscal expenditures have come to be regarded as a legitimate, and perhaps the most important, instrument of agricultural policy in many countries.
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Lets start by identifying what exactly certain boats are. Sometimes the terminology can get lost on beginners, so well look at some of the most common boats and what theyre called. These boats are exactly what the name implies. They are meant to be used for fishing. Most fishing boats are powered by outboard motors, and many also have a trolling motor mounted on the bow. Bass boats can be made of aluminium or fibreglass.