Click here to see photos of Belgium’s September 16th dairy protest.

Farming in Europe has been exempt from free market forces since recovery from World War II, an effort to end rationing and hunger by paying farmers to increase output. This system may have, for a time, shielded the European agricultural sector from some would-be financial woes, ensuring work and wages to many, but it also effectively bound Europe’s farms and farmers to a dependency on government funds, policy and price manipulation. So what we’re seeing now in Belgium (and France, and Italy, and Germany…) is a result of ineffective government lever-pulling.

I’m reminded of a quote from Thomas Jefferson’s beautiful autobiography: “If we were directed from Washington when to sow and when to reap, we would soon want for bread.”

And European farmers are feeling the hurt in a serious way: Brenton farmer Pascal Massol predicts, “If we go on another three months like this, 40 percent of French milk producers will be condemned to bankruptcy.” The European Milk Board said milk prices are below 75 percent of production costs. Copa-Cogeca, another European farm union, said prices have plummeted 30 percent in the last year, and that producers would lose upwards of 14 billion euros before the end of the year if nothing is done.

Dairy unions are demanding tougher EU production quotas. They want the price of milk raised from $.26-$.35 to $.58 a kilo. The situation qualifies as a pressing one, a Moanie supposes. One can practically smell the outrage and the frustration.

But it isn’t peaches and cream on the west side of the Atlantic either: This week the House of Representatives passed a bill allocating 350 million dollars to emergency aid for American diary farmers. 290 million goes to direct support for farmers through a new program to be headed by the Agriculture Department, 60 million goes to the purchase of “surplus cheese and other dairy products,” an effort to raise prices.

What a mess.

To be sure, the American agricultural sector is somewhat less shielded from the movements of the free market than the European agricultural sector, but it possesses certain similar incongruities:

Agricultural subsidies are as common as they are controversial. They make up over 40 percent of the EU budget. Check it out here.

The United States Agricultural Department is required to subsidize over two dozen commodities. The Farm Security and Rural Investment Act of 2002, also called the 2002 Farm Bill, directs around 16.4 billion dollars toward agricultural subsidies each year.

To be extraordinarily reductive, subsidies take a couple main forms. ‘Positive’ subsidies are issued to farmers and agribusinesses to pay for and/or incentivize an increase in production. On the flip-side, some subsidies pay farms not to produce or to slow production. Subsidies also set price floors, ensuring farmers receive a minimum profit for commodities.

Subsidies are often put in place to protect farmers from fluctuating crop yields, because supply and price correlate largely with weather, a huge variable. A sort of cushion, to prevent failure should a farm suffer a bad growing season. That’s the concept, and it doesn’t sound so bad.

But at the end of the day, subsidies distort price signals. This is the source of our present milk debacle:

Prices indicate to farmers what commodity they should produce and how much of it, so when a commodity is subsidized and prices are distorted commodities are often overproduced. The producer ceases to gauge or plan for production by consumer signals–ideally the farmer is rewarded for work that most benefits the consumer for the least money–but may be rewarded for poor planning or bad decision-making with subsidized profits.

This is the part where the snake eats its tail:

Subsidies transfer funds from taxpayers to farm owners. Farms produce according to parameters of subsidies. When the farm overproduces the taxpayer takes the loss.

Milk is cheap because it has been overproduced. It has been overproduced because it is recklessly subsidized. The taxpayer paid for overproduction, for milk he never wanted. The 350 million dollars the House of Representatives is rushing to dairy farmers also comes from the taxpayer, to purchase the “surplus cheese and other dairy products” the taxpayer paid to subsidize but, again, never wanted.

Subsidies are a cancer to the aggregate economy. They distort prices and values. The solution probably isn’t in manipulating prices, but in cutting back on the price manipulation that spurred such needless overproduction.

However you spin it, something’s gotta change. As it stands now the taxpayer’s taking it from both directions, and it’s lame.

Now here’s Einstein: “We can’t solve problems by using the same kind of thinking we used when we created them.” Smart man. I hope the Belgian farmer has this idea in mind as he urges the very system that crippled his industry, the enormous governmental control engine, to spend and distort further. It would be a short-term solution to a long-term and vast problem.

I also hope Europe sticks to its assertion it would abandon the quota system in 2015, and that European leaders deliver the “soft landing” their citizens were promised.

Jmoanie.