Friday, May 06, 2005

Magyar farm minister gets the sack

Hungarian farm minister Imre Nemeth has been sacked for failing to provide adequate storage for the country's mountain of surplus grain and pay EU subsidies to farmers on time. The dismissal is of more than Hungarian interest as it illustrates some more general issues that arise out of enlargement.

Much of Hungary's grain storage is oudated and leaky and there is not enough of it. As a result it has been forced to rent grain storage facilities in other countries. The storage space problem and other infrastructure issues mean that Hungarian farmers have seen little benefit from the record grain harvest last summer. In addition, raspberries and sour cherries were left to rot as state buying prices were too low to make harvesting worthwhile. Since Hungary joined the EU the country has increasingly been flooded with cheap fruit and vegetables from Poland and dairy products from Slovakia.

Semi-subsistence farming

It is estimated that between 700,0000 and 1.2 million people (seven to ten per cent of the population) depend on farming. Some 80 per cent of these are small-scale farmers. Government estimates suggest that between a third and a half of all agricultural concerns are unviable.

The story of the early years of the CAP was effectively the elimination of the European peasant, always seen as a politically dangerous reservoir of support for reactionary and populist movements (or occasionally for the far left). Now with acession peasants (or subsistence and semi-subsistence farmers) are back in droves. And there will be even more of them when Bulgaria and Romania join the EU. These problems would be exacerbated even further should Croatia and Turkey join.

When the European economy was expanding rapidly in the years of the long post-war boom, it was possible to transfer peasants (or rather their children) into urban areas and manufacturing employment. There are large areas of eastern Europe with a very low density of services, with high unemployment, but where subsistence level agriculture makes it possible to eke out some kind of living. For example, Poland has 1.8 million people classified as farmers, many of them cultivating holdings of an average of little more than one hectare in size.

What all this points to is the importance of a rural development policy that promotes economic restructuring. But it won't be easy to find the money or to remedy deeply rooted structural problems reinforced by a lack of appropriate skills and the absence of an entrepreneurial mindset.

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