A Panorama programme on Monday evening on farm subsidies has not surprisingly caused controversy: Panorama
I felt that the programme focused too much on the issue of 'sofa farmers' which admittedly makes for good journalism. If one is going to have subsidies, this arrangement is actually a second best solution as it allows farmers to convert their entitlement into a capital sum - although a bond scheme would do that more efficiently.
The programme also did not really tackle the contradictory objectives of the CAP. If it is a social policy, then it should be designed as such. But if it is intended to promote the competitiveness of EU agriculture, then it is not so inefficient to subsidise larger farmers who are generally more efficient.
4 comments:
How would you define efficiency? Is that not part of the problem of EU agriculture? Is it efficient to rely on huge petroleum inputs in terms of chemicals and machinery? Is it not efficient for small scale farmers to be producing their own feed and using it within their own farming systems? How we define efficiency is very important to the establishment of sustainable agriculture.
In conventional terms of using the smallest possible combination of resources to produce the desired outcome. But also I had in mind competitiveness on an international market in terms of price, although protectionist barriers ensure that doesn't generally apply to the EU at the moment. Small farmers may be able to generate some efficiencies of their own. However, one could not maintain current production levels using machinery that consumes fossil fuels or fertilisers either.
I see that you are aware of Panorama's claims (obviously!) and I find it interesting that there can be more efficiency in larger farms, but isn't one of the problems the tax-payer lack of knowledge about the true value. Clearly those who don't want to get involved won't and so when it comes to their complaints about the fact of tax-payer subsidy, it would depend on their knowledge of global prices and their financial situations that would determine the extent of their protest.
The efficiency in larger firms is economies of scale driven to a large extent, although they also have greater bargaining power/sophistication in the market (which would be an argument for capping subsidies). As you know from Olson the costs to taxpayers are diffuse and not very visible and those to farmers concentrated and apparent and these affects the structure of incentives.
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