17 April 2007

Scrap the CAP - and what next?

My grandma who lives in the countryside recently asked me why it is that all the young and talented people leave the countryside nowadays. Few farmers survive where there used to be huge farming cooperatives giving employment to everyone in the village only 15 years ago. The reality of rural life has changed completely. The schools in the countryside have disappeared. Most of the people left commute for work to towns (not a big problem in densely populated Czechia).

I had to retreat to the politician's answer: it's the economy, stupid. The communism did not collapse because people were hungry for democracy. It collapsed because we wanted to be a "rich nation" again. We wanted to eat hamburgers, watch Hollywood films and go for expensive holidays abroad. But to consume, people needed money - so they migrated to towns where they could reach higher-paid jobs in the 1990s (wage equality prevented that under communism). The wages in the agricultural sector have stagnated and the hard work barely makes more than the national minimum wage today. Poor incentive for the young to take up farming.

The politicians have done little to reverse the trend. The gradual shift of labour from agriculture to the robustly growing, previously almost non-existent services sector has boosted the economy. Petr Pávek of the Green Party has fiercely criticised the successive governments for discrimination against the countryside. The maverick mayor of Jindřichovice pod Smrkem, a little village in northern Czechia, even accused the political representation of the systematic liquidation of the countryside as he rightly pointed out that the villages and rural towns get disproportionately less funding from the state coffers than the urban areas. There is also no strong countryside or agricultural lobby inside any major political party (with the exception of the perennial outsiders, the Communists). Strana venkova (the Countryside Party), despite my grandmother's support, will go down to history as a party which did not make any history (dissolved itself before gaining a single parliamentary seat).

As a matter of fact, there would be even less farmers if it was not for the European Union's Common Agricultural Policy (CAP) and its subsidies on which the vast majority of family farms is dependent. Yet the CAP has endured a lot of criticism, and not only because it is deemed unfriendly towards the developing countries. The high import tariffs on agricultural produce combined with dumping of the EU surpluses on the Third World in the past ruin the farmers in the developing countries. The Economist however surprised many when it revealed how the celebrated Fair Trade scheme actually harms the African farmers too.

France is seen as the main obstacle to reforming the CAP (and thus to the success in the WTO Doha Round of trade talks) - the only presidential candidates who oppose it are José Bové, a hardly credible anti-globalisation crusader and organic farmer, and the centrist surprise François Bayrou. Bayrou, who is a farmer himself and his tractor-driving skills have done him well in the campaign, is quoted stating: "We have assassinated the African farmer. And this policy will be changed, so that we cannot be held responsible. We cannot let the African countries die of hunger.” Yet to call this a wind of change coming from France would surely be an overstatement.

What may do for the CAP rather than the plight of the African farmer is the CAP's apparent unsuitability in the enlarged EU. The Polish farmer's subsidies have to be "topped up" by the Polish state to the EU level already. The Romanian farmer's hand is wide open and possible Turkey's accession would not lower the CAP spending either. Furthermore, the CAP is raising the price of food for the consumers. Everyone has to eat - so it hits the poorest the most.

So what would we be the consequences of downsizing the CAP? Inevitably, the jobs would be lost - in places where it is difficult to replace them. The development of a "rural development policy" has long been viewed as a viable alternative to the CAP. The farmers would simply swap the current role of a food producer to the "protector of the environment". But I have to agree with Tim King, who writes the excellent Prospect blog on the French election, that such a transformation would come uneasy; the mentality of the people who have not given up till now is likely not to be very welcoming of such changes: "Farmers want to produce food to feed the masses, a virile, status-rich occupation, not receive a monthly cheque from a computer in Brussels for titivating a few hedgerows – for farmers are as much seduced by rural nostalgia as townies..."

Yet there is little choice. The cost of subsidising the farmer is too high to be sustained. The EU, striving to become the most competetive economy in the world according to its Lisbon Agenda, cannot afford to spend 44% of its budget on the agricultural subsidies. Research and development deserves more resources, as do the student exchange schemes like Erasmus. The ever closer cooperation in justice and home affairs also needs to be backed financially. Especially Frontex, the EU border protection agency, should get more money: it does bring concrete results.

Many farmers will of course survive as the locally produced food is becoming ever more popular (and expensive), or switch to biofuels. Ecotourism is on the steady rise too. But the key to keeping the countryside alive is encouraging the entrepreneurial activity there (although the early 1990s vision of people moving from towns to the countryside and working home from their computer has not materialised). Perhaps it should be the rural businessmen instead of large multinationals like Hyundai or Toyota who should get the tax incentives? I know a guy who lives in a little village and employs significant amount of local people in his company manufacturing swimming pools. And there are more success stories like that. Together with the ever improving infrastructure, developments like this could help make the countryside attractive for young people. There is a life after CAP.

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