This unintentionally hilarious news story at The Observer reveals a great deal about the mindset of the urban, ecologically aware types that write for that newspaper:
Soaring food prices are threatening to inflict widespread ecological damage on the countryside, as farmers abandon environmentally friendly schemes that have improved much of the landscape.
It is a matter of debate whether these schemes have improved or harmed the landscape: such an observation has as much to do with a certain aesthetic taste as anything else. For years, policymakers have thrown vast gobs of taxpayers’ money to discourage farmers, such as in my native Suffolk, from growing crops like wheat, barley, soybeans, beans and so on. Now that the price of wheat has skyrocketed, encouraged by such developments as biofuels and rapid growth in emerging market economies, the economics of “set aside”, as the daft policy is known, looks completely indefensible. So farmers are acting as entrepreneurs should in the face of rising prices for their produce: they are growing more crops. If that means that land that had been set aside for cute little meadows is now being ploughed up and sown with wheat, well, that is just too bad. Do the Observer journalists argue that there should not be some change in land usage at a time of rapidly rising food prices? There is no point in bashing the current government for such rising prices – I don’t think even the most fanatical Gordon Brown hater thinks he is to blame for this – if farmers are not allowed to exploit market forces in the way they should have been allowed to do all the way along.
For what it is worth, the Suffolk farmer’s son in me rather objects to the countryside being regarded by the Guardianista classes – many of whom have no idea about husbandry – as a glorified park for them to ramble around in. It is, as this article reminds us, primarily a place of work, where food is produced. It is sometimes useful to be reminded that the landscape has been moulded by the hand of Man. I personally rather like to see large, golden fields of wheat. But then I’m kind of strange in that way.
Good post J.P.
Of course it is time for farmers to actually campaign against all subsidies (not just the mad “set aside” – but all of the schemes) ON CONDITION THAT all the crazy regulations are done away with as well.
I suspect that the regulations and schemes have become so demented that most farmers (as well as most nonfarmers) would be better if the whole system was done away with.
It can be done – for example it was done in New Zealand.
This rather illustrates the difference between the Old Left and the New Left-
Old Left: “Good news comrade, tractor production is UP!”
New Left: “Good news comrade, tractor production is DOWN!”
The answer is obvious – it is clear what we must do –
THE GOVERNMENT MUST CONFISCATE ALL FARMLAND!!!
– Oh – you say that’s been tried…
And of course all those evil capitalist farmers are making windfall profits from the high food prices that must be punitively taxed!
Oh dear!
The market is spoiling the Guardianistas EU sponsored fantasy theme park.
Diddums!
My farmer relatives are cheering and ploughing.
A good plan would be to take the land from these selfish exploiters, then divide it into small uneconomic plots and give it to people with no farming skills or capital.
Some clarification is necessary.
Whilst, as a libertarian, wishing that farmers could have survived, as New Zealanders have, on zero subsidies; but also as a fellow Suffolk farmer’s son but also practicing farmer, I believe it ought to be better understood that UK agriculture would have long since died out without the “vast gobs of taxpayers money”.
New Zealand has a warm, moist climate, meaning that its main product, grazed grass, can be converted into sheep meat and milk at far lower costs than in Western Europe.
Worldwide commodity prices have been effectively controlled by the US subsidy programme, and this, coupled with the superior quality of their bread wheats lent by their own climate advantage, has obliged the EU and the UK compensatory payment system that preceded it, to maintain an unpopular subsidy system.
Huge productivity increases brought about by the Green Revolution exacerbated the problem, causing a situation of overproduction between the mid 70s and present times.
I am surprised that some important issues are not better understood in contemporary politics:
1. “Farming” does not make money- land ownership does- particularly in the UK where traditional large estates have been perpetuated by the inheritance system.
2. Set-aside has not, and never has, “discouraged” farmers from growing crops. The scheme was obligatory, and whilst bringing in a known revenue was arguably less profitable than growing crops, particularly on the better soils.
3. Set-aside income is and always has been, less than the fixed costs per hectare of an arable farm (machinery, labour, rent, overheads), leading to a net LOSS per hectare. The only possibility for any profit was in growing energy crops.
4. Total subsidies for tenanted arable farms did not and never have, added to available income, they have merely turned net loss into survivability.
5. Higher commodity prices today are offset by high fuel and fertiliser prices – when finally subsidies are ended due to demand for food, farmers will be no better off. I find the article quoted rather sad instead of hilarious, having been on the receiving end of such politics.
Otherwise you have an excellent article, Jonathan. Apart from soya (american = soybeans) in Suffolk. Unless the global warming alarmists are correct, of course.
You are talking about The Observer; of course they oppose market forces. That is so obviously to be expected that it is not news.
Tom, your post raises an interesting question for libertarians. Is British farming inherently uneconomic, or do subsidies prop it up and prevent it increasing in efficiency? (E.g. by propping up small farms that should in an entirely free market go bankrupt, to be bought up by larger more efficient businesses?)
Or is Britain growing the wrong crops, economically?
Would an entirely free market world lead to food production being concentrated in some countries while others grow little or none? If so, what are the security ramifications of being entirely dependent on foreign food sources? And what would be done with the land?
No Ian, the problem clearly resides with agri-business.
The best plan would be to confiscate the land from these exploiters and turn it over to people, (like themselves), who could manage the land in an ecologically sound fashion without the selfishness these evil capitalists display. We could call these paragons something like ‘Barons, or ‘Lords of the Manor’.
Of course the ‘estates’ thus created would need people to manage and run them, say serfs or peasants, but the Lords would set the policy and get together with their peers to manage the country in a firm but fair way for the good of all, including Gaeia.
Probably, though “little or none” might be an exaggeration.
Probably less than they are of being dependent on foreign oil sources. I doubt that there is anything analogous to the oil curse for agriculture.
That is the really interesting question. Tom seems to be at least hinting that removing subsidies would cause land prices to drop, something that historically wreaks a lot of economic damage. Tom, please correct if I am reading this wrong.
“Farming” does not make money – land ownership does- particularly in the UK where traditional large estates have been perpetuated by the inheritance system.
Would that be the system where individuals enjoy property rights and get to choose who will inherit their property after they die? The specific inheritance system in the UK seems to involve a curtailment on this freedom which would do the opposite of perpetuating large estates: the Government taxes it.
If farming is the only economic activity for which the land can legally be used, and farming makes no money, I struggle to understand how you think land ownership would make money.
Farming made good money in Britain in the early years of the 20th century (having recovered from the down turn of the late 19th century) without a penny of subsidy.
Ture the 1920’s and 1930’s were hard (very hard) but to say “farming can only survive with subsidies” is the same as saying “farming has got to go”.
The point is to work out how a given farm can survive without subsidies – not to assume they will always be there.
Under W.T.O rules if another government subsidises the production of a product (including various sorts of food) then other governments are within their rights to tax (or limit) its import into the countries they represent.
So “we have to have subsidies or the subsidized Americans would destroy us” will not wash.
The Americans should be told that either the 305 billion Dollar subsidy bill gets put in the bin – or they can forget about exporting to Britain.
But if you turn round and say “even if the Americans ended all subsidies, I still want Suffolk farmers subsidized – because they could not compete even with unsubsidized American farmers” then you lose any case that you may have.
Climate:
Time for G.M. crops then J.P. – and you know it.
“No top rank American politician would back free trade in farming and a roll back of subsidies”.
In case anyone says that.
John McCain.
Well I am completely lost by Tom’s ‘clarification’.
An aquaintance of mine who owns a farm near my home was telling me that for doing absolutely nothing with his land he has been paid a lot of money for many years. Last year around £350,000. Where are his fixed costs? He needs no labour, no machines. He does not even need to get up in the morning.
He felt so guilty about this that he has now converted some of his farm buildings into a hostel for disadvantaged inner city children to spend time in the country.
He still takes the money coerced from everyone else but now he feels that he has something worthwhile to do.
I suspect that most of us are absolutely right and there should be no farm subsidies. Farmers should run profitable businesses or go bust. I also do not think that there is a security issue with importing all our food – not that I think that is likely to happen- as the land would still exist and the owners could always start growing on it again when it became economic to do so.
Of course if my various businesses were supported by government subsidy I would probably try and justify the need to continue somehow, if I could keep my lunch down.
Well, if we let it all return to thicket and primeval forest it’d take some time to get it back into production again, especially if all the former agricultural workforce had gone into other businesses.
But I personally don’t believe that would happen. Maybe growing sheep on British farms is less economic than in other parts of the world, however closely we plant them together, but is that true of every crop? Is there really nothing we can produce agriculturally that could surive in the free market? Can New Zealand supply the whole world lamb demand, especially with increasing population and increasing wealth in poorer nations? I’m sceptical, but ignorant, so I’m open to being convinced otherwise.
The primary problem with subsidies is political; removal would lead to many small farms going bust, which is right and proper from a market perspective but understandably difficult to sell to farmers and the wider public. Besides all else, I hate the thought of libertarians trying to gain political success with harsh messages, “we’ll have to do all these difficult things then it’ll get better”. And then there’s the immense problem of trying to get the rest of world to follow suit. I’d be very peeved if I were a farmer driven to the wall by removal of subsidies, watching my market taken by a foreign farmer who is subsidised by his government.
Farming can do very well in the UK. We have some of the best agricultural land on the planet!
My (limited) understanding of agriculture is that the heriditary principle is not just fair and just but the only thing that works because knowledge of the land, the specific land, is vital to getting it right.
My wife attended enough lectures on the absurdities of Soviet agriculture to have had to spill the beans on that on. The People’s Commissar down from Moscow doesn’t necessarily know more about the kulak’s field than the kulak does. D’oh! Especially not if the Commissar has just boned up on Lysenko. Or whatever hare-brained, centrally planned, scheme is the flavour of the Politburo. Sometimes literally. A large chunk of the infamous, dissasterous “virgin land scheme” was merely because Khrushchev liked corn on the cob. If he had a penchant for mange-tout it might have worked out differently. In a Moscow park there is a giant, hilariously phallic, gilded corn cob that Nikita himself ordered erected.
Paul’s comments on this, are as usual, bang-on. GM is a big part of the solution. As is possibly, as they did in NZ when they phased out the subsidies, changing to higher value products like vines and Kiwi fruit.
The whole business, as I see it, is in a right muddle. We need more farmers to be genuine land-owners and not C21st serfs of the EU. Then they can innovate, plant GM, run their own markets and use their land as they see fit.
And there’s another thing. My wife has recently started growing things – herbs, tomatoes, flowers in the garden and she gets enormous satisfaction from it. I am sure the average farmer feels much the same when he’s put away the harvest. It is something a fair few people like doing. Some people will always do things for the love of it if they can just make a decent living out of it.
The fact we are even having a discussion about the “sustainability” of the most vital of all primary industries and the very foundation of civilization itself shows quite what a state we’re in.
You can argue about whether we need iPods or advertising but food.
Politicians know only two ways to deal with subsidised food imports, (or any thing else for that matter). One is to subsidise ‘our’ farmers and the other is to impose tariffs on ‘their’ farmers. Or both. No-one pays them to remove subsidies or tariffs.
As far as Britain is concerned the whole problem is moot as agricultural policy is decided by the EU, and since that whole tottering edifice is built on subsidising French farmers there ain’t a thing we can do about it.
A key question relevant to the sort of point Tom brings up is how quickly land can be brought into cultivation if needed. I would have thought land not actually built on could be activated within a season, even if it was being used as, say, a golf course or a park. The equipment used for farming is generally mobile, the soil if anything benefits by not having been used for crops for a while. But it’s more than possible that I’m missing something important.
If I’m right, there’s no reason we can’t respond to excessive subsidy of food exports from the USA etc. by simply buying the cheap subsidised food instead of expensively growing it ourselves.
If I’m wrong, then there is some kind of need to keep land available for farming in case of shortages. In theory the market ought to be able to do this, but it’s a large investment with a probable negative return and the chance of a large positive return – the sort of gamble that has to be handled by the financial markets, which haven’t been working too brilliantly of late.
In the long term there’s also the question of long term fixed facilities and of expertise, which would be lost if farming was scaled down.
A good plan would be to take the land from these selfish exploiters, then divide it into small uneconomic plots and give it to people with no farming skills or capital.
Perhaps we could start by making every liberal arts graduate do four years of agricultural labor after getting their degree, before being allowed to go into journalism or publishing or politics?
This is standard green waffle from the Observer, which caters to the affluent ‘do as I say, not as I do’ type of planet saver.
Don’t talk to me about growing things right now Nick. My peonies had just come into glorious bloom and now they’re wrecked, thanks to these “bank holiday storms”. It’s time we abolished these “bank holidays” if they’re just going to wreck my bloody garden.
If you got rid of subsidies to British agriculture, I suspect that there would be a kind of polarisation: much agriculture would become less intensive and would employ even fewer people, and at the other end there would probably be more farmers concentrating on “high value added crops” like organics (not something I am fond of myself, but if people want to produce and buy them that is their business), I am eating some West Country cheese as I type this, and people will continue producing this because it is outstandingly good cheese. More market forces means quality because more important to the farmer. Without government direction I am sure the crops grown would change. I don’t believe for a moment though that British agriculture would cease or even be greatly reduced in quantity. The market would find something to do with all that agricultural land – something much better than in the dreadful controlled and subsidised situation we have now.
There is a pretty good observation of the present state of farming and subsidies shown by the commenters here so far. But a little historical background on the relationship between government and farmers will help the rest of the tumblers click into place for most of you.
Farmers have historically been the most independent and ungovernable demographic in America (presumably Britain, too). They are just too !$#@%&^* self-sufficient to be controlled. In the early part of the 20th century, as the collectivists were expanding the tentacles of government, farmers were still not willing to be directed. Then some diabolical geniuses came up with a plan that worked beyond anyone’s imagination.
First, they offered a subsidy. There were not too many strings attached but even so most farmers were reluctant to allow any government involvement in their lives. But some farmers, I like to think it was the incompetent ones who should have gone bankrupt, started accepting subsidies. By adding the money taken from the other citizens to their incomes, they were able to continue. Eventually enough farmers took the subsidy that commodity prices started to drop. Honest, independent farmers were now trying to sell against a subsidized market. Eventually, they had only two choices. Take the subsidies and government interference* that comes with them or get out of farming.
In this insidious way, totalitarians slipped their fingers around the throats of the most independent and freedom minded demographic in America and slowly throttled them.
But there is a wonderful built in weakness in the scheme. When the system is eventually (and inevitably) unable to meet demand under government’s meticulously petty control, market price exceeds the margin provided by the subsidy. The greater and the longer lasting the excess, the more farmers slip their collars.
A great many regulations have slipped in with the subsidies and in the US at least, they are often a condition of receiving the subsidy. This is because everyone took the subsidy, so control was complete. But it will be interesting if the prices stay high for long. I strongly suspect a lot of farmers will begin to jump ship. If the economy is tight, there will be no sympathy among the electorate for increasing the subsidies so the government will begin losing its hammerlock on farmers.
When this happens the totalitarians will try to change to stronger outright regulation of farming. It will be under the guise of environmental preservation most likely or even bald faced price controls and – dare I say – ‘Consumer Protection‘. We must be energetic in fighting the expansion of regulation from being conditioned on subsidies to direct authoritarian measures and we just may be able to take back a lot of liberty from our ivory tower enlightened rulers.
What I have said applies mostly to crop commodities. Meat products of all kinds in the US basically have no food safety standards to meet, only onerous procedural requirements intended to protect industrial (and politically astute) industrial food processing giants. I know many of you are indirectly aware of this from the consumer standpoint. One example is the prohibition of unpasteurized ‘fresh’ cheeses in America. No matter how safe a producer of fine cheese demonstrates their product to be, the procedural guidelines are rigid. No exceptions. This is purely rent-seeking by the large scale manufacturers to protect themselves from smaller operators. The sloppiness of the industrial processing giants is such that it is necessary for all of the milk to be sterilized. By buying politicians to mandate industrial production methods, they eliminate the majority of all potential competitors from the field.
* I had one reality detached experience when I was attempting to plant a field in compliance with the regulations and also the ‘common sense’ of raising a successful crop. The government bureaucrat showed me a picture of one of my fields, maybe five to ten acres in size, that had probably a dozen different zones in it, each with a different history and therefore different restrictions. It was my job to take my allocation of how much I was to be allowed to plant, and fit it into this maze in accordance with truly Byzantine regulations. Even so, I had to get my congressman involved to avoid a 100% penalty for foolishly following the advice of the bureaucrat.
I don’t think you have to be fanatical; you just have to believe that the government (and Gordon Brown) is/has been in control of the money supply and has expanded it massively over the last 15 years (ie since the last recession).
– Do remember that land being used for something else, like golf courses or parks, will not be made available for a return to agriculture without a cataclysmic outcry – from readers of the Observer as well as golf players, most of which are very influential – so the only land likely to be returned to the farmerd is the marginal scrub land that was good for nothing else anyways.
“Excuse me, Sir – the current global food crisis necessitates we bulldoze your townhouse and plant biofuels on the land again.” “DO YOU KNOW WHO I AM???!!!” You see the problem.
Following comments made:
1. I make no judgement on the UK inheritance system. My point is that owner occupied farms can make money without the subsidy, but tenants paying rent, cannot.
2. I believe that without subsidies and tarifs, the world price would be higher and the 3rd world better fed. The UK is an excellent place to produce arable crops, achieving twice the productivity of US farms, but at higher costs. Higher commodity prices don’t need subsidies.
3. The correspondant above maintains that a friend pocketed £350,000 per year by converting his whole farm to set-aside. This would mean a farm of over 1,000 ha. He would now have to find a couple of million to re-equip in order to take advantage of today’s commodity prices. He would have still had to maintain his set-aside under cross-compliance legislation, and this would generate costs. He still has overheads as well in spite of not growing anything. A likely story in my opinion. I’m sick of people pretending to know about farming when they don’t.
Midwestener:
It is the same in the U.K.
Under the E.U. regulations (more strictly enforced here than in other lands) local farmer owned slaughter houses have been forced out of operation.
Cattle and sheep have to be sent great distances to big places where the “procedual standards” (which, of course, have nothing really to do with food safety) can be met.
People have forgotten Adam Smith’s words that it is not in the interests of a butcher to poison his customers.
Reputation is vital to any business – if it gets around that a butcher is selling bad meat he is finished.
Especially if he is a local man who owns a farm and a slaughter house.
But these days it is all “we followed the regulations”, rather than the results, that count.
I was not kidding.
Get rid of all the regulations – and, in return, we give up all the subsidies. Is the best deal farmers can hope for.
That should be done in the United States also.