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Europe’s Farm Policies in Trouble

July 1, 1986 -

Many are now questioning government intervention and support of business because of its obvious limitations. The Common Agricultural Policy of the European Economic Community is one government scheme that has proved to be woefully inadequate. Attempts to protect farmers and to establish a common support program for agricultural products were begun, no doubt, with the best of intentions. But the EEC's agricultural policy has become a monster gobbling up huge amounts of money and creating massive and expensive surpluses.

Increasing American opposition to importing subsidized European farm products has helped to bring the EEC's crisis to a head. Also, a phenomenal increase in productivity has made former large importers of foodstuffs (e.g., India) self-sufficient. Developing countries are demanding greater freedom in agricultural trade. Furthermore, according to a recent World Bank report, distortions in agricultural trade cost OECD taxpayers and consumers in excess of $100-billion per year. What can the EEC do in the face of these mounting problems? The Economist advised:

The absurdities of the common agricultural policy could be cured in many rational ways, but reason has long since departed in disgust. Reformers would do better to concentrate on undermining and ultimately destroying the common part of that three-word monster. If national governments want to subsidise their farmers, let them. If they want to double their subsidies, let them. But they must pay the bill, not foist it on the EEC's budget. (April 19, 1986) 

In a more recent discussion of the same topic, The Economist reiterated the point that new initiatives are needed to defuse a trade war in agricultural goods and prepare the industrial world for less state protection of farmers. The editorial concludes:

Whether they like it or not, European governments will have to shift their support away from crops and towards selected farmers. They will have to move to direct and thus transparent income support. They'l1 have to pay for land to remain idle. They will have to explore private- and public-sector ways of preserving the countryside for visitors, pleasure and leisure, without livestock or crops. (June 21, 1986) 

The simultaneous existence of large surpluses of food in the first world and hunger in the third world surely ranks as one of the most distressing contradictions of our time. The Economist may be correct to suggest that curtailment of production is the solution to our agricultural problems in the rich countries. However, we should remember that large amounts of food supplies are now shipped from the industrialized countries to parts of the world where poverty and hunger is common. Also, some of the surplus food is sold at reduced prices to Eastern bloc countries. Nonetheless, in the search for wholesome agricultural policies, both in production and trade, a more concerted effort must be made to balance the surpluses of the rich part of the world with the immense need for food existing in many poor countries.

In pondering this dilemma, we should note that government policies are often responsible for the dismal performance of the agricultural sector in poor countries. Governments (for example, in Ethiopia, Nicaragua and Tanzania) centralized the marketing of farm products and suppressed prices paid to the farmers in order to please their urban population, but in so doing destroyed the incentive of farmers to maintain and increase their production. Donating food to countries that mismanage their agriculture only serves to perpetuate harmful policies. This is not a simple problem; however, it is clear that hunger is not caused by the inability of the earth to produce food, but rather by human stupidity and cruelty.