Tuesday, June 24, 2008

Has rural development money been wasted?

This is the question posed by Professor Harald von Witzke, Chair for International Agricultural Trade and Development at Berlin's Humboldt University, in the latest of the Agra Focus series of interviews on the future of agricultural policy.

He argues that a lot of white elephants are being financed with 2nd pillar money because there is more money available than good projects. In particular, some job creation projects are not creating the jobs.

He considers that it would be better to shift money into research and development than rural development policy. Of the increase in production between 1961 and 2000, only 22 per cent was due to an increase in land area. The remaining 78 per cent was due to improvements in yields. That is why increasing productivity remains the key.

He points out that the justification for direct payments to farmers keeps shifting. Initially, he thought they were made in order to compensate farmers for quality regulations they have to observe that competitors outside the EU don't have to observe and that they are being compensated for the production of public goods.

However, he had not seen any analysis that suggested that the amount of public goods and the competitive disadvantage for farmers is as high as €400 a hectare. Farm payments should be reduced to a reasonable level that reflected the public goods being produced by agriculture and represent some compensation for the competitive disadvantage for quality regulations in the EU.

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