Canada’s dairy system runs on supply management whereby each farm is only allowed to produce a certain quantity of milk depending on the amount of quota they have, even though milk producing productivity has increased drastically in the past half century. This economic policy does not allow the market to act freely and thus causes inflated prices for consumers as well as a deadweight social loss for society. The very high quota price, along with all other costs involved in starting a dairy farm, gives low incentive for someone to start a new dairy farm. For those lucky enough to have a share of the quota pool (especially farmers who were given free quota when the system was first implemented), they are unable to increase market share through marketing or innovation. Rather they have to save up to buy more quota on which they will only see a profit many years down the road. Larger milk producers have bought up quota from smaller producers resulting in only 16% of dairy farms accounting for a whopping 45% of farm gate sales in BC. These domestic policies affect all Canadian dairy farms.

The BC Dairy Marketing Board sets the milk price well above the world market price which acts as a tariff to protect the domestic market. This issue has been the source of much controversy regarding US-Canada trade relations. Since domestic producers reach the quota themselves, there is no need for more milk products in the Canadian market; any imports over and above the quota maximum are heavily tariffed as a means of inhibiting imports. The US argues that Canadian quota tariffs are overly extreme and that they in fact contradict NAFTA which specifies that tariffs on all US exports be reduced to zero. Canada went to the NAFTA Dispute Settlement Panel regarding the US’s complaint and claimed that GATT rulings, which allow a slower reduction in tariffs worldwide, override NAFTA.

Canada’s persistence on this matter arose due to the relative size of the US dairy market compared to theirs. Since production costs decrease as output rises, and the US has much higher output (and therefore sells their milk to consumers for considerably less), Canadian dairy farmers fear that domestic prices will fall to US levels if the tariff was not in place. Alas this tariff actually protects Canadian dairy farmers.

The desire for achievement is a natural human precondition. Individuals seek to add value to their lives and communities through the realization of success and a lasting legacy. This capacity is engrained in the human psyche.

While handouts can provide individuals with crucial short-term necessities like food and water, they do not address the root causes of poverty. Whether rich or poor, people want to wake up in the morning with a purpose; they want to further themselves in life. Underprivileged individuals are at a disadvantage because they lack the ability to ’spend money to make money.’ For example, university students borrow upwards of $20,000 per year for education and living expenses because they know these high costs will result in long-term gains. The poor have the human capital to succeed, but they lack the finances necessary to transform their intellect into cash.

This is where micro finance comes in. Lending an impoverished person a small amount of money with a very low interest rate can help them progress economically in a much more efficient way than a simple handout. For example, a small loan for a woman in the Third World to buy fabric can help kick-start her small clothing business in the informal sector. This small risk is well worth the reward.

Reasons for the need of effective low-interest loans to the poor are abundant. Exploitative moneylenders in rural parts of developing countries charge excessive interest rates, which prevent smallholders from investing in more sustainable, profitable, and efficient agricultural practices. This is partly due to a lack of property rights, as poor farmers have no land titles to borrow against. In turn, smallholders have to forfeit their land to lenders which effectively turns them into landless labourers; they essentially become slaves to ’loan sharks’ in order to pay back not only the loans, but the absurdly high interest associated with them.

Global stratification of social classes is a key reason for worldwide social inequality. The Grameen Bank and other micro lending firms realize this so they have come up with an unorthodox method of closing the gap between the rich and the poor. In effect, they are helping to upgrade people’s social statuses from poor to middle class. While there remains much controversy around the Bank’s practices, it is evident that they have excellent intentions coupled with a proven model. They should undoubtedly be encouraged to continue on their mission to reduce global inequality.

A famous 19th century British proverb sums up the message that the Grameen Bank is trying to convey quite nicely: “Give a man a fish, and you feed him for a day; show him how to catch fish, and you feed him for a lifetime.”