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Subsidies started out as an attempt to produce some price stability (smooth fluctuations) so that farmers had some certainty of at least a minimal return on their investment/crops.  As world food prices fell below the economic cost of production in Europe the subsidies rose to ensure farming within the EU remained viable.  This incentivised volume production. However large productivity increases resulted in both surplus production (butter mountains, wine lakes etc.) which in turn were dumped on world markets depressing world prices further and creating an even greater need for subsidies!  The costs became so enormous that the subsidies exceeded total farming income from crops/products actually sold.

The solution, which I advocated 20 years ago, was to decouple the social supports for farmers from their actual production - and thus de-incentivise production - and positively support reduced intensity/ more sustainable/environmentally friendly farming.  The result was that farmers got a social wage, the environment was supported, overproduction eased, third world farmers had less produce dumped on their markets, and the total cost of the enterprise to the taxpayer/consumer was reduced.

Now, with world prices rising, and pressure to liberalise trade (not least to provide access to developed markets for third world producers), farming incomes are rising in any case, and the need for a social wage support structure within the EU may diminish.  However the money saved should be spent on ensuring third world farm productivity rises to enhance their incomes, prevent food prices rising further, and provide subsidies to the poorest of the poor who have no prospect of feeding themselves.

The problem with increasing farming productivity is that it increases energy/chemical inputs and reduces labour inputs leading to increased unemployment/rural poverty, soil degradation, social inequality, corporate dependencies etc. so more sustainable and equitable means of increasing production have to be found.

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu May 1st, 2008 at 03:57:17 PM EST
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It sounds like the correct solution would be a reverse Corn Law, only allowing exports from Europe when world prices rose above a certain level in order to prevent food shortages. Other than that, European (and US) produce is just bad news.

Member of the Anti-Fabulousness League since 1987.
by Ephemera on Thu May 1st, 2008 at 05:01:01 PM EST
[ Parent ]


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