Subsidies: the paradox of sustaining the unsustainable.

To say that subsidies are necessary phenomena to maintain agricultural output in the developed world is like saying war is necessary for peace. A contradictory statement. However, subsidies’ are necessary in the developed world for the maintenance of capital flow from public funds to corporate coffers, and the marginalization of recipient farmers and the food security of developing countries. The issue of developed world farm subsidisation is a complicated one – both in nature and by design.

As an outline of cost to minority world citizens (those of us living in a developed nation) in economic terms only, agricultural subsidies account for $300bn of public expenditure 1 (direct payments only). Of the EU budget, half is spent on subsidy payments under the CAP 2. The rhetoric behind these subsidies was to fool people into thinking government was helping farmers maintain a secure production output of cheap food. If anything, it has helped undermine the very people it was supposedly aimed at supporting. Comparative farm incomes have never been so low. It seems that the real incentive, and continued support of, farm subsidisation is more about subverting the autonomy of farmers and deceiving tax payers while in turn financing corporate interests through a focused effort to utilise these indirect “tax credits” for agribusiness, food processing and retail.

If you doubt this is the case, then a look at the flow of subsidy money may well help you understand the point I am trying to make. As mentioned, subsidy payments were introduced in developed countries as a means of supporting farmers in the production of “affordable” food while in turn protecting them from like foreign imports produced more competitively. Government and farming unions felt that to secure domestic markets they needed to concentrate on the production of cheaper and more food as a means of maintaining competitiveness and food security. The incentive for farmers was to produce more from the start. Subsidy payments were tied to production and area-farmed levels. Therefore, for farmers to avail of higher subsidy payments they needed to produce more and farm more land. Industrial efforts now made perfect economic sense. However, industrial farming requires far more inputs and capital expenditure than non-industrial methods. Further to the increased expenditure on inputs, consolidation in the agribusiness, food processing and retail sectors forced down farm-gate prices. And in turn, to remain solvent, farmers looked to produce even more. This cycle continues today and there are clear winners and losers.

The winners are not the small-scale family farmers or the consuming public. Industrial farms, food processors, supermarkets, banks and corporations gain all the economic benefit from farm subsidies. In the UK alone, 20% of farmers receive 80% of subsidy payments1. Supermarkets, agribusiness middlemen and huge food processors pay rock bottom prices for farm produce due to subsidisation. Therefore the “raw material” element of the processed foods in the aisles is of minimum cost – and the consumer pays a huge price for the processing, packaging, marketing and shelf space. This may go some way to explain why Tesco in the UK pay their farmers 19pstg per litre for milk and charge 72pstg in store. The injustice is magnified when one considers that milk costs in the UK, on average, 21pstg to produce3. And so the farmer looks to expand his output to try and make the industrialists’ answer to everything (economies of scale) work for him. Now he visits his bank – and they lend to him on the premise that his increased subsidy payments will meet the debt. And so the cycle continues. Today, the income of a 500-acre family farm in the UK is about £2,500 compared to £80,000 five years ago 3.

While your tax money is going to line the pockets of agribusiness, supermarkets, banks and the like, subsidies are not helping developing world farmers. Overproduction from developed world nations brought about by subsidy payments to farmers means millions of tonnes of foodstuffs are dumped on the world market every year. In 2001, wheat from EU nations was dumped onto the world market at 41% the cost of production1. This undermines both the food sovereignty and security of all developing nations. As if the protectionism offered by subsidising developed world farmers is not enough, our governments (under the WTO) demand these nations open up their borders to our overproduction, and control the levels of subsidisation (never in direct payments, and usually in the form of credit breaks and seed assistance) afforded to developing world farmers so as to maintain this dumping ground. This in turn often pushes developing world governments into adopting more industrialised farming methods. A bad sign for small subsistence farmers in Asia, but a welcome event for agribusiness hungry for pastures new.

With farm gate prices making up so little of overall farm income in developed world farming there is also little incentive for farmers to produce solely with quality in mind. Bigger and more is now definitely better. This policy amongst farmers will certainly suit the beneficiaries of industrialised agriculture but it far from benefits consumers. While being taxed for the illusion of cheap standardised food, consumers are also being poisoned by pesticides, threatened with antibiotic resistance and denied a diversity of fresh produce.

Subsidies, as with most other elements and vehicles of industrial agronomic thinking, are not designed or implemented to change the status quo. They are used as protectionist measures, but not for the benefit of those whom we are led to believe. What they constitute is a means of control over our farmers and our choices as consumers. It is with no surprise that we find subsidy payments are being used as the primary incentive to move into organic agriculture in many developed nations. Tied to the premise that you register and comply (this means pay your annual fee) with the differing organic policing bodies, a farmer is promised increased direct payments. Organic agriculture is not about producing cheap food. People who want to buy fresh organic produce will value their ability to make their own choice, and so will be willing to cover the real cost of production in the price they pay for their food. Then again, subsidies (tied to registration) to organic farmers will enable supermarkets to charge the premium price, pay minimum for the produce, and once again fool the consumer. The economic price the corporations are paying our governments to maintain this farce, cannot cover the total cost to the rest of society.

Malbouffe.

AC

1 ActionAid 2002
2 The Guardian 23rd September 2002, Ian Black
3 CorporateWatch 2002