 Not all that long ago, a report was published about the significance of the Agricultural sector for the Dutch economy. The report was the result of research done by the Agricultural Economical Institute (LEI) and the Government Body for Economic Planning (CPB). What do you think: they succeeded yet again in ignoring the core problems!! These are: overproduction, damage to the environment and in the case of subsectors, a combination of both these problems. Overproduction is covered up with the aid of billions in subsidies, the costs of damage to the environment are moved along to the following generations.
The core problems are literally and metaphorically “reasoned” away, the reasoning being as follows. When assessing the economical interests of agriculture, one should not look at the amounts of subsidies in the absolute sense, but rather at the relative significance of them. Without these subsidies, the report claims, the Dutch taxpayer would be confronted with other costs: higher food prices and higher costs because farmers would have to go on social benefit. After tax, it would not make much difference and even if all farmers did end up on social benefit, the costs for the average citizen would be considerably less than they are in the current subsidy regime.
In The Netherlands, it is mainly the dairy farmers who avail of agricultural subsidies and so, according to the LEI, the entire sector should not be judged as whole here. The total flow of subsidies to the Dutch agricultural sector is estimated at 4,5 billion Euros. The researchers at LEI and CPB have a lower estimation: a little more than 1 billion Euros.
The argument that after tax, there wouldn’t be much difference is disputable, to say the least. The argument that food prices in Europe would be more expensive without agricultural subsidies is not correct. In actual fact, subsidies keep the price of food artificially high. In this way, food prices in Europe are about 25% higher than in the rest of the world. If Europe would remove protection constructions for her own food and would allow competition from outside Europe free access to the European market, the price of food would actually drop!
Added to this, the consumer – who is usually also a taxpayer – would be able to pay less tax because the subsidies would have disappeared. The European agricultural policy costs more than 45 billion Euros annually. About 350 million people live In Europe, which means a contribution of more than 245 Euros per person per year to the farming population. A family of four people thus pays almost 1000 Euros a year in tax for food which is already too expensive.
The claim that the costs in social benefits would soar is ridiculous. To begin with, not all farmers would disappear if the protection constructions and subsidies were lifted. Secondly why would a farmer who is forced to stop his activities not be able to or not wish to work for the rest of his life?
According to the researchers, the environmental costs are not a problem at all, even if only because estimation of environmental damage is difficult in economical terms. Furthermore it is not simple to relate the estimated damage costs to specific activities. The greatest disappearing trick in this context, however, is to be found in the Dutch economical structure itself. This is dominated by service-rendering sectors with immaterial production and they, by their very nature, score higher in the area of environmental pollution than sectors with material production, such as the agricultural sector. So, says the study, these two sectors may not be compared to each other. This is why the argument cannot be upheld that the agricultural sector causes more pollution than other sectors.
This reasoning is somewhat curious. More so because, to name one service provider - the transport sector - is the subject of heated discussions. Subject of discussion: the effects on the environment; think of the building of high speed rail links and the expansion of Schiphol airport.
The researchers feel that the debate on the pros and cons in the agricultural sector is too much based on black and white contradictions: the reality is far more refined. There is something in this. But, those adopting a position like this should also practice what they preach. In their analysis of the costs for the non-agricultural sector, the researchers assume that agriculture has completely disappeared. That is not only considerably black and white; nobody outside of agriculture queries this. The only question asked by critics is: “can we have a little less?”
That question is completely legitimate: not only from the absolute but also from the relative perspective. What is concerned here is redistribution of means paid by the taxpayer; in that event not only the question of necessity, but also that of justification is raised. The purpose of the current agricultural policy is, after all, to keep the (small) farms firmly established, financially speaking. Perhaps we should take a quick glance into the Dutch dairy farmers’ purses and also those of the pig farmers. The first group avails most of the subsidies. The second group not only pollutes the environment free of charge but also the reputation of the sector in the market.
Every year, hundreds of millions of Euros in subsidies go to dairy farming. This means that a farmer with fifty cows receives about 23, 000 Euros in subsidies. A larger colleague with a hundred cows receives more than 50,000 Euros a year. In comparison: the allowance for a family on benefit is about 15,000 Euros.
It is easy to calculate the subsidies per industry. A huge portion of Dutch dairy production is sold outside of the European Union. The prices there are lower than in Europe and Brussels compensates that price difference with the so-called “export restitution”. That amount is paid into the account of the Marketing Board for dairy produce once a year. The Marketing Board distributes that money amongst the exporting dairy cooperatives on the basis of the amount of dairy products that such a cooperative has sold outside of Europe. The cooperative then includes the money in the milk price which is paid to the farmers. It is easy to calculate the subsidy per kilo of milk by dividing the amount in export restitutions that The Netherlands receives in any one year, by the number of kilos of milk that may be produced in The Netherlands.
During the last ten years, that was more than five Eurocents, on average. Ask a dairy farmer how much milk he may produce, multiply that by five Eurocents and you know how much subsidy he received per year for the milk. There are also regulations to keep the price of meat up, and a mound of other protection constructions which lay a solid foundation under the farmer’s income.
The farmers themselves, by the way, deny fervently that they receive so much in subsidies. Some of them even claim that they receive no subsidy whatsoever. Their milk doesn’t go abroad at all; it goes to the local dairy plant. So what are you talking about!
The sneakiest snake in the grass is that the subsidy follows this line: support to unit of production. It is hidden in the price received by the farmers and that means that according as more is produced, the cost price per unit of production is reduced. And so, to a large extent, the subsidies come back to those industries that need them least. The average expendable income of small specialized dairy farmers is about half of the expendable income of the large, strong, specialized farming industries.
The Dutch pig farming sector complains a lot about the disastrous effects of swine flu and the planned new manure laws. These laws could cost 6,000 pig farmers their businesses, they proclaim. There are not even 6,000 full-time pig farmers in The Netherlands! According to official figures, there are more than 10,000 pig farmers in this country. But those figures also include certain crop farmers who keep pigs for their own consumption and who are registered as pig farmers.
There are lies, huge lies and statistics. This is particularly true of the maze of figures which is circulated by the agricultural sector. There are supposedly 80,000 agricultural businesses in The Netherlands, but if the part-time farmers are removed from this figure, less than half remains. Those part-time farmers, by the way, receive the least subsidies, and because they are so small-scaled, they also contribute less.
The subsidies – and the unpaid environmental costs should be added to these – are on the high side when calculated back to the individual entrepreneur. Moreover about 80% of the subsidies goes to 20% of the farmers which makes for an extraordinary distribution. That 20% least need the subsidy, exactly because they are so large and can produce for a lower cost price.
It would therefore appear quite logical to put the subsidies from Brussels into one big pot and then to assess per company whether and if yes, how much support was needed for a reasonable income. This is not such a strange thought. People landing on unemployment benefits or old age pensions are also limited in what they can earn extra. The remainder of the subsidy pot could then be channeled back to its original source: community resources. This is an unspoken subject in agro country.
Strange. Farmers not only protest about the proposed rules of the manure law, but also about the general binding character of it. They feel that, per farm, the manure absorption powers of the soil differ. Therefore the rules, if they ever come, should be set per farm.
In other words: any costs being incurred should be determined per farm, all monies being received may still be done en masse, according to the sector.
This mechanism is also the economical dynamic and the economic significance of the agricultural sector where subsidies are involved. On the one side, a huge transfer of income takes place from a large group (all taxpayers) to a small group (the dairy farmers). On the other side, a huge cost transfer takes place from a small group (the pig farmers) to a large group (all current future taxpayers).
In this way production surpluses (milk, manure) are rewarded with an expendable income above the average.
 In recent years the subsidy system for dairy farmers has changed. Export restitutions have been lowered and replaced by a direct income support per kilo of milk produced (the so-called milk premium). At first farmers protested strongly about this, but now the prices on the global market are rising and rising, we don’t hear them anymore. Nor do we hear the politicians, whilst there is plenty of room for comment. The high prices on the global market make it unnecessary to continue paying subsidies as compensation of the price difference. And if that is the case, neither does a milk premium need to be paid. This indisputable logic is wasted on the ears of the farmers and their advocates. It is, after all, about “accumulated rights”.
Accumulated rights? Legalised theft, is more like it. |
