2ndlook

Free Trade By The Free World

Posted in America, Business, Current Affairs, Desert Bloc, India by Anuraag Sanghi on February 19, 2012

Western agriculture has to answer existential questions. Can the West do without subsidies? And the world must press for an answer.

What troubled FDR now trobles Obama - and the West?  |  Undated cartoon by C.D. Batchelor in the New York News; source - nisk.k12.ny.us  |  Click for larger image.

What troubled FDR now trobles Obama - and the West? | Undated cartoon by C.D. Batchelor in the New York News; source - nisk.k12.ny.us | Click for larger image.

Hunger, starvation and plague

Western Europe has a long history of food insecurity!

Much as it may seem strange, Western Europe either depended on imports – or starved. Food shortages are a historical constant – and the current surplus is an exception.

Before WWI (1914-1918), Russia was the main grain supplier to Europe.  Russia’s grain exports kept cooking fires burning in Europe. After WWII (1939-1945), it was Argentina that supplied Europe with food grain – to Spain at nearly double the open market price, for instance.

The Roman Empire (circa 150 BC-400 AD) depended on Egypt to supply them with grain. The French Revolution (1787-1799) was preceded by bad harvests in 1788. Supposedly, the French Revolution was triggered by the comment, “If they dont have bread, let them eat cake” by the the French Queen, Marie Antoinette. Victor Hugo’s French epic ‘Les Miserables’ (published 1862) starts with a child, Jean Valjean, stealing a loaf of bread.

Since, the land and forests, and all that lived and grew on the land and in the forest – all belonged to the king, it was the royal responsibility to ensure food availability. Friar Tuck, one of Robin Hood’s men in Sherwood forest was persecuted by English nobility for hunting deer in the forest. .

What about those who had no land or food? They could eat cake.

This was picture in Europe.

Starving victor of WWII

What was the situation in Britain – the victor of WWII.

After WWII, potatoes, eggs, milk, cheese, clothes, meat and bacon (fish excluded, petrol included) were all rationed – which finally ended in 1954. A huge bureaucracy and rules created an elaborate rationing system which finally ended 9 years after the end of the WWII – in 1954.

Reduction in Russian agricultural exports after Stalinist collectivization of farms, deprived war-ravaged Europe of a nearby source of agricultural commodities. In the Russia of  1953, one year before rationing ended in Britain, the year of Stalin’s death, grain production was below the level reached in 1913.

Instead, high cost food imports from Argentina were needed. This caused much angst and hand-wringing in the British Parliament. One British MP, Sir Waldron Smithers (Orpington) made a revealing complaint about how it “looks as if the Argentine Government took a nice commission of £49 million at the expense of the British taxpayer”.

The same MP, Sir Waldron Smithers (Orpington), further referred to “an article which appeared in “Wall Street Journal, New York,” published in the “Evening Standard” on 13th March, with the title, “How to make 200 per cent. profit on wheat … The procedure is simple. Buy wheat from the farmers for £11 to £13 a ton—sell it to the bread-hungry British for £34 a ton.” This, according to the MP, was a price that, “tops the peaks of world war I and the Napoleonic wars … They know that Britain is short of food, and they are getting the highest prices they can.

The West has been papering over this problem for the last 100 years.  |  Cartoon by Cargill in the Cortland Standard ; source - nisk.k12.ny.us  |  Click for larger image.

The West has been papering over this problem for the last 100 years. | Cartoon by Cargill in the Cortland Standard ; source - nisk.k12.ny.us | Click for larger image.

Birth of a behemoth

After WWII, with acute food shortage across Europe, with colonies going, situation in Europe was desperate. Enter the Common Agricultural Programme – (CAP).

A Europe-wide agricultural subsidy scheme named Common Agricultural Programme – (CAP) was put in place. British and European farmers increased production as massive subsidies were lined up.

The CAP was instigated against the backdrop of food shortages and rationing after World War II, to stabilise European food markets while giving farmers a steady income and consumers low prices. (from Q&A: Farm funding row).

The CAP scheme was never withdrawn – and what was an emergency scheme, is now a US$70 billion behemoth.

CAP originated as a means to avoid food shortages in Europe following World War II. By the 1990s, payments were linked to production leading to massive stockpiles of rotting agricultural produce; the infamous “mountains of bread” and “lakes of butter”. Subsequent reforms decoupled subsidies from production and linked them instead to land ownership.

Under the current system, farmers are paid, in the main, according to each hectare of land they own. But this leads to the ironic situation in which the largest farmer-holders (like the Queen) get the most subsidies, while poorer, more marginal farmers get the least. There are, moreover, several instances of “farmers” getting paid for doing nothing since they don’t actually grow anything but simply own land. (via Pallavi Aiyar: In EU, farm subsidies remain crisis-proof).

The State blesses the farmer. The imagery is revealing.  |  Cartoon by Halladay in the Providence Journal; source - nisk.k12.ny.us  |  Click for larger image.

The State blesses the farmer. The imagery is revealing. | Cartoon by Halladay in the Providence Journal; source - nisk.k12.ny.us | Click for larger image.

What now!

By 1962, The European Community (EC), started

intervening to buy farm output when the market price fell below an agreed target level. This helped reduce Europe’s reliance on imported food but led before long to over-production, and the creation of “mountains” and “lakes” of surplus food and drink.

The Community also taxed imports and, from the 1970s onward, subsidised agricultural exports. These policies have been damaging for foreign farmers, and made Europe’s food prices some of the highest in the world.

European leaders were alarmed at the high cost of the CAP as early as 1967, but radical reform began only in the 1990s.

In 2010 the budget for direct farm payments (subsidies) and rural development – the twin “pillars” of the CAP – was 58bn euros (£48bn), out of a total EU budget of 123bn euros (that is 47% of the total). In 1970, when food production was heavily subsidised, it accounted for 87% of the budget. Regional aid – known as “cohesion” funds – was the next biggest item in the EU budget, getting 36bn euros.

For the new member states – including Bulgaria and Romania, which joined in 2007 – direct EU payments to farmers are being phased in gradually.

The eastward enlargement increased the EU’s agricultural land by 40% and added seven million farmers to the existing six million. (via BBC News – Q&A: Reform of EU farm policy).

Even as European banking system and State-financing is on the edge, Europe is being forced to work out CAP reforms.

The current CAP regime will end in 2013 and “reforms” of the system are, thus, being worked out for the 2014-2020 period. According to the European Commission’s draft proposals, the CAP budget for the seven-year period would be some 400 billion euro (an amount enough to make the region’s bank recapitalisation needs disappear).

Payments will also be capped at 300,000 euro with progressive levies being charged on subsidies over 150,000 euro.(via Pallavi Aiyar: In EU, farm subsidies remain crisis-proof).

These huge subsidies cause illogical distortions across the world – especially the Third World. Starting with the fact that

the annual income of an EU dairy cow exceeds that of half the world’s human population.

Another problem is that the subsidies cause overproduction.

The EU cannot use all its agricultural products, so it sells them cheaply to the third world. This undercuts local farmers, who cannot compete with the heavily-subsidised imports, and so distorts the market (though the EU is not alone in this, as the US also dumps subsidised agricultural products on developing markets).(via The EU common agricultural policy | World news | guardian.co.uk).

Image source & courtesy - news.bbcimg.co.uk  |  Click for larger source image.

Image source & courtesy - news.bbcimg.co.uk | Click for larger source image.

All this encourages intensive farming. More fertilizer, more pesticides, more hormones, more stimulators – which finally end up in the environment.

And inside human systems.

Earlier, CAP subsidies made it profitable to use practices that are

environmentally damaging intensive farming. Its commitment to guarantee prices makes it economically worthwhile to use all available land, with the aid of chemicals, to grow more crops than are demanded by consumers.(via The EU common agricultural policy | World news | guardian.co.uk).

Most of the money, to the few

Faced with the overproduction critique, the CAP system was modified on American lines. Same results. The CAP system in Europe, in the aftermath of WWII,

was set up 50 years ago when food supplies were uncertain and nearly 20% of the population worked on the land. Today, just 5.4% of EU’s population works on farms, and the sector is responsible for just 1.6% of the economy. Moreover, the subsidy system distorts markets, encourages farms to get bigger, does little for the environment and forces small farmers off the land. The result is that the subsidies are grabbed by fewer and fewer richer and richer people.(via CAP provides another bumper payout for landowners | John Vidal | Comment is free | guardian.co.uk).

‘Real’ farmers responsible for most of EU’s agricultural farm-output, however get the least amount of subsidy.

Gail Soutar of Britain’s National Farmers Union also said it was important to direct support to “active farmers… who are producing a crop or a litre of milk, we don’t want support to go to people who are no longer producing… sofa farmers”. (via BBC News – EU plans CAP reforms for ‘greener’ farm subsidies).

Instead, the opposite happened.

CAP has become badly unbalanced, with 70% of its funds going to only 20% of Europe’s farms – predominantly the largest – and leaves nearly three-quarters of EU farmers surviving on less than £5,000 a year. Small farmers account for about 40% of EU farms, but receive only 8% of available subsidies from Brussels. According to British government figures, five UK farms receive more than £1m a year in subsidies.(via The EU common agricultural policy | World news | guardian.co.uk).

Yes! Western farms are in perpetual need of subsidy | Cartoon by Ding in the South Bend News Times; source - nisk.k12.ny.us | Click for larger image.

Yes! Western farms are in perpetual need of subsidy | Cartoon by Ding in the South Bend News Times; source - nisk.k12.ny.us | Click for larger image.

It is not surprising that release of information was being blocked by the ‘few’ beneficiaries. After prolonged activism, and much pressure, in 2009, the EU authorities directed the releaseof data of subsidy beneficiaries.

Jack Thurston, a founder of Farmsubsidy.org, said that for the first time this year the EU’s 27 governments have provided varying degrees of information on the beneficiaries of farm cash payments.

He is critical of the European Commission of failing to compile complicated and patchy data to give the public a clearer picture of how money is spent.

“The idea of publishing is that European people can have the information so debate about CAP and how it spends money is well-informed,” he said. (via EU farm subsidies paid to big business – Telegraph).

Various governments in the EU, used different methods to make it difficult to extract and analyze data. Some dispersed data, others limited data to 500 records at any one time. ‘Activistas’ used ‘web scrapers’ with some software code to comb the data and make reports.

With all this information in the public domain, it soon became embarrassing for subsidy recipients. Two German farmers approached European Court for ‘justice’. The Court ruled in 2011, that member Governments can with-hold information on subsidy payout.

The UK Government quickly decided to

grant anonymity to all farmers who receive EU farming subsidies, a Department for the Environment, Food and Rural Affairs (Defra) spokesman said that it was not possible to reveal details of any individual farmers because this would breach their privacy. All details identifying large industrial farming concerns and individual farmers have been removed from Government websites. Ministers say this follows a directive from Brussels which requires all EU member states to comply with a judgment from the European Court of Justice in Luxembourg.

Plans for the publication of a list of the individuals who have benefited from the EU subsidy last year, which was due to be released at the end of April, have now been halted.

Ministers argue that they are following advice from Brussels, but freedom of information campaigners claim they have deliberately taken draconian steps to protect rich farmers from public scrutiny.

Freedom of information campaigners argue that the Government has over-reacted to the ruling because the judgment bans the identification of private individuals but not the naming of industrial farming enterprises, which include large agricultural concerns such as the Englefield Estate.

The decision represents a reversal of an important freedom of information victory in 2005 when the Government was ordered to release the names and payouts of all those benefiting from the subsidies. (via Wealthy minister earns £2m in EU farm subsidies his department tried to cover up | Mail Online).

Who gets the money?

Under the ‘reformed’ CAP system, subsidies are paid according to the size of lands: the greater the area, the more the subsidy. This leads to some curious situations.

According to Kevin Cahill, author of Who Owns Britain, 69% of the land here is owned by 0.6% of the population. It is this group that takes the major payouts. The entire budget, according to the government’s database, is shared between just 16,000 people or businesses.

As chairman of Northern Rock, Matt Ridley oversaw the first run on a British bank since 1878, and helped precipitate the economic crisis that has impoverished so many. This champion of free market economics and his family received £205,000 from the taxpayer last year for owning their appropriately named Blagdon estate. That falls a little shy of the public beneficence extended to Prince Bandar, the Saudi Arabian fixer at the centre of the Al-Yamamah corruption scandal. In 2007 the Guardian discovered that he had received a payment of up to £1bn from the weapons manufacturer BAE. He used his hard-earned wealth to buy the Glympton estate in Oxfordshire. For this public service we pay him £270,000 a year. Much obliged to you guv’nor, I’m sure.

But it’s the true captains of British enterprise – the aristocrats and the utility companies, equally deserving of their good fortune – who really clean up. The Duke of Devonshire gets £390,000, the Duke of Buccleuch £405,000, the Earl of Plymouth £560,000, the Earl of Moray £770,000, the Duke of Westminster £820,000. The Vestey family takes £1.2m. You’ll be pleased to hear that the previous owner of their Thurlow estate – Edmund Vestey, who died in 2008 – managed his tax affairs so efficiently that in one year his businesses paid just £10. Asked to comment on his contribution to the public good, he explained: “We’re all tax dodgers, aren’t we?”

As for the biggest beneficiary, it is shrouded in mystery. It’s a company based in France called Syral UK Ltd. Its website describes it as a producer of industrial starch, alcohol and proteins, but says nothing about owning or farming any land. Yet it receives £18.7m from the taxpayer. It has not yet answered my questions about how this has happened, but my guess is that the money might take the form of export subsidies: the kind of payments that have done so much to damage the livelihoods of poor farmers in the developing world.

The British government has also demanded that the EC drop the only sensible proposal in the draft now being negotiated by member states: that there should be a limit to the amount a landowner can receive. Our government warns that capping the payments “would impede consolidation” of landholdings.

It seems that 0.6% of the population owning 69% of the land isn’t inequitable enough. (via We’re all paying for Europe’s gift to our aristocrats and utility companies | George Monbiot | The Guardian)

These few cases apart, further analysis by various ‘activistas’ has thrown up more reasons why the system is broken. One group that is in the forefront of this reform, is Farmsubsidy.org that

collated the EU figures which identify where the €55bn common agricultural policy (CAP) subsidies went in 2009. No big surprises there, with five giant European sugar companies netting €500m between them, a few dairy companies making tens of millions each and the top 1,200 landowners and companies on the continent receiving more than €5bn between them.

Last year, the number of farmers and food companies who received individual payments of more than €1m increased by more than 20%. Britain had 32 organisations and individuals each getting more than €1m.

The biggest handout will probably to the Co-op group, which manages 16 large farming estates and is now Britain’s largest farmer. Up near the top of the list, though, are the Dukes of Westminster and Marlborough, the former Lord Vestey’s family, the Queen, and very many hereditary landowners.

The vast majority of farmers get under €5,000 and bust a gut to survive, but in a time of recession and belt-tightening these subsidies to the richest look grotesque. That €55bn (goes to the) top 10% of big landowners, the people in least need, paying them to do little more than own land.

France and Germany, have more subsidy billionaires than any other country. (via CAP provides another bumper payout for landowners | John Vidal | Comment is free | guardian.co.uk)

Image source & courtesy - news.bbcimg.co.uk  |  Click for larger source image.

Image source & courtesy - news.bbcimg.co.uk | Click for larger source image.

For instance, Prince Charles, owner of Sandringham Farms received €3,309,318, subsidy for growing durum wheat.

Ligabue, an Italian caterer, serving luxury cruise ships and airlines, received 148,000 euros of export subsidies in 2008 for the dairy and creamer sachets consumed by international travellers.

The subsidies have included payments to Haribo, the sweet manufacturer, and Coca-Cola. Haribo qualified for 332,000 euros in farming subsidies for the sugar used in its “gummy bears” produced in Germany.

In France, the EU country that benefits the most from farm subsidies, over 103 million euros every year boosts the profits of sugar manufacturers – companies that do not own any farms.

Groupe Doux, a French chicken processor, raises no poultry itself but pocketed 62.8 million euros.

In Britain, Tate & Lyle Europe benefited from the taxpayer to the tune of 134 million euros in 2007.

Arids Roma, a Spanish construction company, received 1.59 million euros for road-making materials under EU rural development budgets that are a growing part of the CAP.

Another Spanish construction company, Pasquina, also benefited for EU farm cash, getting1.13 million euros for an asphalt factory. (via EU farm subsidies paid to big business – Telegraph).

The new, ‘reformed-again’ CAP system links payment of subsidy to ‘environment protection. This proposal raises an important question.

Should land-users get paid not to do, what they should not do in the first place – anyway.

The rest of us don’t get paid for not mugging old ladies. Why should farmers be paid for not trashing the biosphere? Why should they not be legally bound to protect it, as other businesses are?

We may reach this stage sooner than you think.  |  Cartoon by Mark Knight; on 7/8/09; cartoon source and courtesy - thepunch.com.  |  Click for a larger image.

We may reach this stage sooner than you think. | Cartoon by Mark Knight; on 7/8/09; cartoon source and courtesy - thepunch.com. | Click for a larger image.

What about the US of A?

Today, an ‘efficient’ and ‘hi-tech’ agricultural farm sector in the US needs more than US$ 15-20 billion (estimates vary) of subsidies to survive.

The US-EPA says, “By 1997, a mere 46,000 of the two million farms in this country (America), accounted for 50% of sales of agricultural products (USDA, 1997 Census of Agriculture data)- and gobble up most of this huge subsidy that lowers Third World agricultural prices.

EU ‘reformers’ are talking about a 10%-25% cut in ‘real’ terms, between 2014-2020.

Reality.

CAP spending will increase by about €15 billion overall in 2014-2020 period. Who is paying the price for this?

More than anyone else, the poor of this world.

Aid agencies say these subsidies make it impossible for poorer countries to compete, and health groups argue that they make industrial fats and sugars artificially cheap for junk food production. (via CAP provides another bumper payout for landowners | John Vidal | Comment is free | guardian.co.uk).

Trade campaigners have expressed concern at the impact on poor countries. “The biggest problem is that subsidies keep prices artificially low, mainly for grain traders, so developing country farmers cannot compete,” said Ruth Bergan, co-ordinator from the Trade Justice Movement.

Research cited by the Overseas Development Institute (ODI) shows that African and Latin American countries are particularly affected by the CAP. A study last year from the University of Lausanne argued that the world as a whole would gain from the removal of the “most distortive CAP instruments, with Europe being the main beneficiary”.

“The reallocation of resources within the economies across the world and corresponding terms of trade effects would increase world economic GDP and welfare by nearly €33bn – the European border protection (various import duties) elimination being the key contributing element,” said the study. (via EU agriculture policy ‘still hurting farmers in developing countries’ | Mark Tran | Global development | guardian.co.uk).

These lower agricultural prices devastate agriculture in Third World countries, creating man-made famines. These man-made famines, of course, gives the West a false sense of superiority.

What is the way out of this?

EU proposes

to cap payments at €300,000 ($409,170) a year for each farm, which would save €2.5 billion a year on direct subsidies. (via EU Proposes Cap on Farm Subsidies – WSJ.com).

Theoretically, this will save some subsidy – but there is a simple loop-hole. Large farms, now under single-management, could easily be ‘de-merged’ and broken into smaller units – to stay under the €300,000 limit. A large enough limit which will not inconvenience the millionaire club – and satisfy all the ‘activistas’, and keep them quiet for 5-7 years.

One of the biggest subsidies was $223 million, given to the French sugar conglomerate Tereos, one of whose subsidiaries produces rum on France’s Indian Ocean territory of Réunion. France’s Saint Louis Sucre also received multimillion-dollar subsidies and the British sugar giant Tate & Lyle received hundreds of thousands of dollars.

Last year, more than 1,200 of the recipients received more than $1 million each — a sharp increase from the approximately 900 such recipients in 2008. “The bigger you are, the more subsidies you get,” says Jack Thurston, co-founder of FarmSubsidy.org. “It is the reverse of what you think a subsidy is.” (via E.U. Farm Subsidies: Agriculture Benefits Raise Eyebrows – TIME).

This will jolt you upright

There have been other aspects to the Western model of farming.

Take swine flu — now renamed. We know it started in La Gloria, a little town in Mexico. We know a young boy suffering from fever in March became the first confirmed victim of the current outbreak, which, even as I write, has reached India. What is not said is this ill-fated town is right next to one of Mexico’s biggest hog factories, owned by the world’s largest pig processor, Smithfield Foods. What is also not said is that people in this town have repeatedly protested against the food giant for water pollution, terrible stench and waste dumping. (via Sunita Narain: The real pandemic).

There were two things about this post which made me sit up.

One – The real story behind the ‘probable’ pandemic. This is something that most mainstream media writers do not tell. Take official Government press releases, (sometimes) change the language and call it news. Sometimes, they help in the cover up. If this story does not become well-known enough, Mexico and its poor will be blamed for the starting this pandemic – by the West.

Two – the fragile state of US agriculture, specifically, and the West in general.

The other two complications are the buying and selling corporations.

Beasts of Debt & Equity

These giant corporations are aiming for entry into India – promising ‘efficiencies’ in buying (which will give consumers a better price), and higher prices for farmers (which will increase farm incomes). Of course, this will last as long as there is competition. Once, these giant corporations, fueled by huge amounts of debt and equity, drive out competition, they will lower the boom on the consumers and the farmer – like in the EU and USA.

Giant food corporations, killed buying competition with high prices (to farmers), direct buying from farmers (at higher prices), monoclonal seeds that destroy bio-diversity. And the US consumers are not getting the lower food prices that are being promised in India.

And paid hacks of these Western corporations are trying to tell Indian consumers and policy makers that these giant corporations will cut the costs of food In India.

Raj Patel, in his book, Stuffed and Starved, demonstrates how global food corporations are behind global food habits, imbalance traditional diets, creating disease epidemics (like diabetes) – and how India needs to be careful before crafting industrial policies that encourage these global corporations to destroy Indian agriculture. A book review extracts some key points as follows,

What we think are our choices, says Patel, are really the choices of giant food production companies. Millions of farmers grow food, six billion people consume it. But in between them are a handful of corporations creating what Patel calls “an hourglass” model of food distribution. One Unilever controls more than 90% of the tea market. Six companies control 70% of the wheat trade. Meanwhile, farmers across the world are pitted against each other, trying to sell these gatekeeper companies their produce. And if you think the consumer comes out on top because of all this competition, think again.

As the Europe & US play out a charade of negotiations, it is Africa and Asia which is suffering from food shortages.  |  Cartoon by Peter Nicholson; on July 5, 2005; source and courtesy - nicholsoncartoons.com  |  Click for larger image.

As the Europe & US play out a charade of negotiations, it is Africa and Asia which is suffering from food shortages. | Cartoon by Peter Nicholson; on July 5, 2005; source and courtesy - nicholsoncartoons.com | Click for larger image.

Which way the wind blows

Will EU abolish their agricultural subsidies?

Different observers are reading this differently. A recent commentary thinks that in Europe, the

one constituency that remains politically off-limits is the continent’s powerful farmers. Although agriculture contributes only 1.8 per cent of the European Union’s (EU’s) GDP, Brussels is currently firming up plans to continue to spend hundreds of billions of euros on trade-distorting farm subsidies called the Common Agricultural Policy (CAP).

“Throughout CAP’s many reforms and the latest proposals are no exception, the structure of the regime might have changed but the allocations remain the same,” says Jack Thurston, an agricultural policy analyst and co-founder of the website Farmsubsidy.

But when it comes to farmers, it’s a “heads you lose, tails I win” situation, according to Thurston. “In Europe if agriculture is doing well as a sector then it’s argued that it needs support all the more to ensure its continued success. And of course if it’s not doing well, then it needs state support to help it do better,” he says. (via Pallavi Aiyar: In EU, farm subsidies remain crisis-proof).

Nearly three years ago, in July 2009, when G20 talks were headlines, and The Great Recession had started in earnest,

Leaders of five developing countries — India, China, Brazil, Mexico and South Africa — who also met for summit level talks here had separately, called for expediting a global trade agreement that would stimulate the world economy.

But for this to happen, they wanted developed nations to end trade-distorting subsidies and export sops. The G-8 declaration, however, promised only to refrain from taking decisions to increase tariffs above today’s levels.

“We will refrain from raising new barriers to investment or to trade in goods and services, imposing new exports restrictions or implementing World Trade Organisation’s inconsistent measures to stimulate exports.”

Leaders of the world’s eight most rich countries, in the same breath, vowed to keep markets open and free and to reject protectionism of any kind. “In difficult times we must avoid past mistakes of protectionist policies, especially given the strong decline in world trade following the economic crisis,” the declaration said. (via G8 refuses to cut export subsidies).

3 months ago, or three years ago, the direction seems to be pro-subsidy. If not abolish, how strong is the will and consensus on reforms?

Europe’s deep current economic crisis could be jolting officials into considering ways to overhaul subsidies. After all, with their huge debts, most E.U. governments are strapped for money. A formal E.U. reassessment of agricultural subsidies is due in 2013, but Europe’s slow crawl out of recession could pressure leaders to rethink the system before then. “The economic crisis will have a strong impact,” says Valentin Zahrnt, a research associate at the European Center for International Political Economy in Brussels. “With the budget crisis, governments are happy to save on subsidies.” (via E.U. Farm Subsidies: Agriculture Benefits Raise Eyebrows – TIME).

In the end, net, net, what is most probably likely to happen?

Right question … gets the correct answer

Central to this question is another question.

Can the farmer in EU and USA stand on his two own legs? Without State support?

The EU’s biggest farm lobby, Copa, said the commission’s plan would steer Europeans away from farming. “Many young farmers are not willing to take over the farm and older farmers are leaving the sector in view of the drastic economic situation,” said Gerd Sonnleitner, the lobby’s president.

Pekka Pesonen, the organization’s secretary-general, said the rules will make farmers more reliant on handouts from Brussels, which he estimates already account for as much as 70% of farmers’ incomes. “If you cut off the competitive edge of the agricultural sector it will affect the lives of the 28 million people who depend on European agriculture,” he said. (via EU Proposes Cap on Farm Subsidies – WSJ.com).

West is already one huge public-sector economy already. This will only become pronounced and more extreme. If something like that is possible.

What if …

What is the one reality in the entire CAP debate that must be confronted.

The West will go hungry, without subsidies.

Over the next 20-30 years, this leaves India (with China, Brazil and Russia) to cater to global food shortfalls. The Western industrial model is in its sunset phase. The Indian agricultural model can be the big winner in the next few decades – under the right stewardship.

Indian agriculture has a great future – and you ignore it at your own risk! On the other hand, industrial over-production, debt-financed over-consumption, American economic model, funded in the past by Bretton Woods /Petro-dollars /Sino-dollars, is about to end. And that is the reason why the West (America and Europe) will not lower barriers – or subsidies.

If you thought software was a big success, watch out for the Indian farmer!

What happens to Indian the farmer

Is there a business opportunity in here? Somewhere …

One part of the Rothschild family seems to think so.

China has 60 percent of the arable land of India, but it’s 40 percent more productive because of technology. That India is the largest producer of fruits, No. 1 in the world, No. 2 in vegetables, and has only 1 percent of the export market. So, those are all really big factors that we know how to fix. You fix them with technology on the ground, with cold storage and infrastructure on the ground. And if the retail sector isn’t ready to buy higher-quality fruit and vegetables, which I always thought they would be-but three years ago, it was less obvious than now-you could export them and be the lowest-cost exporter. (via An interview with Lady de Rothschild – Executives Column – Lloyd Grove – World According to … – Portfolio.com).

Most interesting!

The ‘backward’ Indian farmer working without subsidies, with low technology, lower productivity has a cost edge over his European an American counterparts? Between the US and the EU, Western farmers get a subsidy of US$100 billion – and yet they cannot compete with Indian farmers?

How well did this idea go down the European throats? Not too well … going by this reaction.

Even with the transportation and duty costs, the Indian fruit and vegetables are likely to bankrupt the European and Japanese farmers. In Europe, most of these farmers are heavily indebted as the EU paranoid sanitary norms as well as the packaging requirements of the supermarkets have forced them to invest in expensive machinery and infrastructures.

When the Indian fruits and vegetables arrive in Europe, most of these indebted farmer families will have to say goodby to their farms which will be confiscated by the banks. Many of the still remaining independent European farmers are producing fruit and vegetables since the independent livestock and wheat farmers have already been decimated by the “market economy” making profitable only the giant exploitations in these sectors. (via Rothschilds Move To Bankrupt European Farmers « Aftermath News).

How paranoid can the Europeans get?

When it suits them they can talk, from one side of their mouth, about free market – and at other times they get suspicious about small farmers from India.

The Western model of heavy urbanization and small numbers of people in the farming sector, has its admirers in India, too.

Twisted data

India’s top 20 cities account for just 10 per cent of the country’s population, but this population earns more than 30 per cent of the country’s income, spends 21 per cent and, so, accounts for just under 60 per cent of the surplus income. The next lot of cities account for 20 per cent of population, 13 per cent of income and under eight per cent of surplus income or savings. Rural areas account for 70 per cent of population, 64 per cent of expenditure and just a third of the country’s surplus income. It’s obvious then that India’s savings can grow only as the country’s urbanisation rises. Given this, the promise of creating more urban centres would be a more effective tool in getting votes from rural India. (via Rajesh Shukla: Why India’s top cities matter).

How about also pointing out, Mr.Shukla, that urban India hogs all the infrastructure investments? Or that traditional banking (in the form of money lenders) has been done to death in the rural areas – and ‘modern’ urban banks do not go the countryside. Or that the traditional health infrastructure has been demolished in rural areas – and urban areas are getting all the investments. Or that credit growth in the rural areas has been choked for nearly 80 years now – and the Indian farmer competes with the Western farmer, without the US$100 billion dollar subsidy.

Not seen is also the fact that rural India, largely a user of Indian languages, is excluded from higher education, which is transmitted in English? Has it occurred to anyone that this exclusion of India’s rural population from higher education could be the reason for the stagnation in rural areas?

Indian economic model

There is something interesting in the state of Gujarat.

Gujarat is a drought-prone state, with an irrigation cover of just 36% of gross cropped area. Increased water supply from Sardar Sarovar project, higher investments in check-dams and watersheds (as of June 2007, a total of 2, 97,527 check dams, boribunds and Khet Talavadi (farm ponds) had been constructed by the state in cooperation with NGOs and the private sector), and of course, good rainfall for the past few years has helped propel growth. (via Emulate Gujarat’s agricultural success- Policy-Opinion-The Economic Times).

While we have Westernized ‘experts’ saying that Indian agriculture is a dead end - and promoting a line of ‘there is no option apart from mega projects’, we have here in Gujarat the real solution to agriculture and water management. The Gujarat solution, which has been India’s way of managing water. Effectively, at a low cost, under the control of the people who use it and need it.

Indian agriculture has a bright future – these ‘experts’ notwithstanding.

The End of Bretton Woods

With the collapse of Bretton Woods, Western subsidy-based regime will become increasingly difficult.

September’s World Trade Organisation talks at Cancun, Mexico, where the EU is expected to come under fire for its lavish farm subsidies. EU has been accused of attempting to divide opposition in the developing world to the CAP in the hope that this will allow it to get minimal reforms through the WTO.(via The EU common agricultural policy | World news | guardian.co.uk).

Where will Western agriculture be without subsidies – in a massively high costs zone. Western food production and exports will shrivel and global agricultural prices will reach (at least) 200 year highs (my estimate).

And that will be the golden hour for Indian agriculture.

What is the only dark cloud in this scenario – GM seeds which the West is pushing down the reluctant Indian agriculturists’ throat. With significant help from the Indian Government.


17 Responses

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  1. senthil said, on February 19, 2012 at 12:31 pm

    Excellent, and detailed article anurag.. but why should our farmers export to europe, when most of the food produced here is consumed locally.. let them suffer their own fate..

    WHen the Briton Woods system falls, there would be less incentive in agricultural export, and our farmers would be more happy to serve the local market..

    • Anuraag Sanghi said, on February 21, 2012 at 8:24 am
      Senthil – Why should Indian farmers not earn money by catering to world markets. That is how India became rich. Spices and cotton is agriculture based.
  2. Dr. Jessie Mercay said, on February 19, 2012 at 5:33 pm

    Farming is a topic very near and dear to me. I was raised on a dairy farm. We raised our own vegetables and milk. My father fertilized the fields with the manure from the cows he raised. It was a difficult life and required an immense amount of hard work by all family members. Yet, in that setting I learned to deeply love and respect animals and nature. I also learned the value of working together and creating joy during hard labor.

    It deeply distresses me that family farms have failed in the west and have been replaced by agribusiness and poison farming methods.

    On another related note, there are so called farmers in Colorado and many other places in the US who are couch potato farmers. They are paid hundreds of thousands of dollars to let their fields go empty. They are rich farmers making money to not farm. This is a complete waste of assets which should bew going to people who work hard to make an honest living on their family farms.

    I find no solution except to live the values I learned as a child and raise my own food and promote that idea to anyone who will listen.

  3. Vinay said, on February 20, 2012 at 5:33 am

    Your articles are always brilliant and very informative, and this being no exception is an excellent piece in your long list. Thanks for your hard work in making these available to us.

  4. A fan of your content said, on February 20, 2012 at 4:24 pm

    It also bears observation that the same technology and chemical intensive agriculture was shoved down Indian throats in the name of the Green Revolution. Result: Land which was fertile for millenia (e.g Punjab) has lost it’s fertility due to intensive chemical fertilizers. The pesticides have poisoned our food chain and underground water sources.

    It is some genius of our civilization that our agriculture practices have helped our sustenance for so long . The Western problem can be understood: in the absence of a favourable climate and conditions only a technology intensive, subsidy driven, centralized subsidy disbursement model of agriculture was quickly adopted. But did we need to ourselves import this stuff wholesale?

    My view: the Indian genius of millenia is in evidence here: While we adopted the Platonic state and ideals wholesale, the implementation has been half-hearted. In every sphere, agriculture being one of the many, where we set out with zeal.Imagine destroying our millenia old agri practices with “missionary” zeal. While we have gone that path too far, we can still get back if we look hard at the outcome. Time for some serious leadership here.

    The problem is also with our education. While we have excellent manpower to decipher the best journals of Western agricultural research, we do not have resources to look into our own vast native literature to gleam insights into better agricultural practices. Blame our education policy here. Our educated academia feel it infra-dig to take lessons form the rustic rural folk while their own research output is alien to the common farmer.

    • Anuraag Sanghi said, on February 21, 2012 at 8:22 am

      My view: the Indian genius of millenia is in evidence here: While we adopted the Platonic state and ideals wholesale, the implementation has been half-hearted. In every sphere, agriculture being one of the many, where we set out with zeal.Imagine destroying our millenia old agri practices with “missionary” zeal. While we have gone that path too far, we can still get back if we look hard at the outcome. Time for some serious leadership here.

      Very well said.

      Sometime back, the Mint newspaper reported how in the Konkan region, some farmers have discontinued use of fertilizers and pesticides in mango cultivation.

      So, the change is happening. And it will happen sooner than we believe,

      • A fan of your content said, on February 25, 2012 at 6:08 am

        Thanks, Anuraag. The views on this blog are not to be found anywhere else and the content is mindblowing.

        The West is,ironically, looking like the”Six Blind Men of Indostan”, who encountered an elephant and each ended up describing it in terms of his own blinkered outlook. As the decades roll out into centuries, India and China will increasingly dominate Western efforts at containment. This is already playing out.

        India defies analysis and description, since there is no one way to do things here and hence the failure of Western models of legal-rational bureaucracy and the Westphalian nation-state. India is now increasingly becoming a representative republic rather than a true democracy as the educated class increasingly dissociates itself from the responsibilities of elections. Witness the falling percentages of urban voting and it becomes obvious that the economically empowered Indian is increasingly less dependent on state structures. The one favour the British did while leaving: giving India a political unity.From an external point of view, this has given India a voice. We could well have ended up as the Middle-east, given our size and diversity,effete sovereigns perked up by the West.

        • Anuraag Sanghi said, on February 25, 2012 at 7:25 am
          AFOYC – Thanks for your attention and participation.

          The one favour the British did while leaving: giving India a political unity.

          I wonder why you say the British gave us this.

          We were one before they came – and after they left. I reminded of an incident that my grand father, a subject of the Nizam kingdom, narrated. Nizam was seen as a rather benign figure – as rulers went. Unlike many other rulers, who lived it up in Paris and London, Osman Ali was a rather ‘frugal’ man – except in the matter of his mistresses.

          But …

          My grandfather decided to join in the Congress Adhiveshan – sometime between 1938-1942. My grandfather was motivated enough to make a train reservation some 4-6 months in advance. My father, a child at that time, came down with cholera during this trip. I was told this story by grandfather some 50 years after this ‘vacation’. The high point was the procession of elephants that the Congress managed, for this Adhiveshan. A family from Narnaul, Haryana, persecuted after the 1857 War, settled in Hyderabad – safe, but wants its presence felt at the Congress Adhiveshan. India was one.

          Remember, that: –

          1. More than 500 kings and rulers gave up power – which even the British could not do.

          2. Indians accepted fiat currency for the time in their history – which again, the British tried – and failed.

          3. India put up a ramshackle Constitution, that we keep tinkering with – and, very importantly, made it work. Pakistan on the other hand laboured over a Constitution till 1956 – and it broke down in just a few years.

          4. India and Pakistan had the some British ‘legacy’ – and see where it got them.

          See how people struggled for centuries, to get a Germany. Western historians talk of ‘divided’ India – but Germany, the size of Karnataka, for instance was some 300 kingdoms till 150 years ago. India merged into one – and Europe is still struggling.

          But surely, the British did give us a ‘legacy’.

          What exactly did the British give us:-

          1. English language – which is a mill-stone round our neck.

          2. Kashmir problem – like they gave Israel in Palestine; like they gave a Singapore in Malaysia, like they created the Cyprus problem; or in their own backyard, the Northern Ireland problem.

          3. They gave us a neighbour like Paksitan – and pushed some 8 crore Muslims into the maws of a religious state.

          4. They had systematically drained India – and left us without homes, food or clothing.

          • A fan of your content said, on February 25, 2012 at 1:05 pm

            I’ll take these one by one:
            “We were one before they came – and after they left.”
            Granted. We were culturally one. Not politically. Else we would not have been enslaved for two centuries.
            “1. More than 500 kings and rulers gave up power – which even the British could not do.”
            Could they have held out? For how long? E.g. Junagadh and, of course, Hyderabad. Not to mention Kashmir, Nehru’s gift to posterity, though I doubt he had any choice since the top military brass in both the countries were British
            2. Indians accepted fiat currency for the time in their history – which again, the British tried – and failed.
            Indians have accepted everything with trademark mild manners, one of the hallmarks of our civilizational genius. Have we ever taken up arms in mass? During the 1857 uprisings when the British came within a hair’s breadth of getting kicked out of India, South India was mostly quiet. If the state has imposed “secularism”, it is Hindu acceptance of it rather than state fiat that has made it successful. Same goes for fiat currency.
            3. India put up a ramshackle Constitution, that we keep tinkering with – and, very importantly, made it work. Pakistan on the other hand laboured over a Constitution till 1956 – and it broke down in just a few years.”

            This Constitution, a typical Desert Bloc import is a copy, paste job of the GOI Act 1935. But we have worked it out not because of it’s inherent merits, but because of our acceptance. Tomorrow, should we have a totalitarian government, we will still accept it in all benignity.

            4. India and Pakistan had the some British ‘legacy’ – and see where it got them.
            Pakistan is desert bloc. If you want to understand it, club it with it’s brethren in the middle-east, all Western props. Including that another state formed on religious lines, Israel. As you rightly have pointed out in other posts, in the Desert Bloc, a state cannot exist without a religion.

            See how people struggled for centuries, to get a Germany. Western historians talk of ‘divided’ India – but Germany, the size of Karnataka, for instance was some 300 kingdoms till 150 years ago. India merged into one – and Europe is still struggling.

            The European Union is merely going through birth pangs. The centripetal forces attempting to hold it (Global big business) is far more powerful than those centrifugal systemic flaws snapping at EU. Why don’t you do a 2nd look on the Bilderberg Group?

            But surely, the British did give us a ‘legacy’.”
            1. English language – which is a mill-stone round our neck.

            A huge one at that. It dispossesses a very large part of our population in a single fell swoop. Do Indians have any use for that language? I’m doubtful. Our University education system is a collosal mess. This British system of top down degrees, certificates and diplomas has atrophied our talent. Native languages are losing ground. We need a far more decentralized system for our levels of population and diversity. Claude Alvares has nailed it bang on here:

            http://www.typewriterguerilla.com/2011/07/alternatives-to-current-ancient-university-pedagogy/

            2. Kashmir problem – like they gave Israel in Palestine; like they gave a Singapore in Malaysia, like they created the Cyprus problem; or in their own backyard, the Northern Ireland problem.

            Typical colonial stuff: Why ignore Africa, where national borders were created on drawing boards, or the Middle East: 100 years ago, you had none of the countries you see on the map today

            3. They gave us a neighbour like Paksitan – and pushed some 8 crore Muslims into the maws of a religious state.

            Only to ensure India did not share a boundary with Afghanistan.

            4. They had systematically drained India – and left us without homes, food or clothing.
            We will bounce back faster than they imagine. More important than our forward march, is their retreat in all aspects. You have, in this matter, pointed out British travails very well.

  5. Sridhar Subramanian said, on February 21, 2012 at 4:37 am

    Read this blog….. it explains how a 100% FDI would totally ruin the country and its farmers. In the name of helping farmers, they will slowly addict them into dictating terms….

  6. admin said, on February 22, 2012 at 5:55 pm

  7. Nobody said, on February 23, 2012 at 3:04 am

    Some Indian farmers do receive subsidies. No?
    Free electricity, free water, pumpsets.
    But of course it is way below western subsidies.
    Great post with lot of info!

  8. A Fan of your Blog said, on February 27, 2012 at 3:56 pm

    AFOYC,

    You make some good points. India is held together by an ethos. That ethos is not religion but the concept of “Dharma”, which means doing what’s right always. It is deep rooted into our culture. Religion is an expression of that Dharma, through characters and stories. Once you accept this fact, all issues fall to the wayside. All differences dissolve instantly. Dharma has been the one notion that has held India together. Pakistan has failed because they have no Dharma. They have desert bloc religion. BIG difference.

    Europe is not going through any birth pangs. There are many commonalities between Europe and India — variety of languages, clothes, food, even skin color. What they are missing is a unifying ethos that holds them together. Europe has been around at least for 3 millenia. Yet, no unifying ethos. That is the fundamental difference between India and Europe.

    • A fan of your content said, on March 3, 2012 at 4:13 pm

      AFOYB,

      The concept of a “United States of Europe” has been in currency since close to 70 years now. Winston Churchill is supposed to be one of it’s proponents. When I say “birth pangs”, I mean problems associated with Europe. Please read the paragraph in it’s entirety. Economically, Europe has centralized to the extent that a few thousand can decide the fate of the 500 million Europeans.

      As to the unifying ethos, why don’t you look to the the Pope’s “Christian Europe” doctrine? Europe is firmly in the Desert Bloc mode. Why is Turkey perenially begging at the gates for an entry? And for how long? With the Islamists slowly gaining currency in Turkey, it is a matter of time before Islam finds common cause against it’s Desert Bloc cousins, Israel and the West.

      • Anuraag Sanghi said, on March 3, 2012 at 4:37 pm
        Islam finds common cause against it’s Desert Bloc cousins, Israel and the West.

        AFOYB /AFOYC – Unity in the Desert Bloc is a mirage. It never happens.

        Centralization of power – yes.

        But unity, as in Indian style and meaning – 25 languages, multiple worship systems, 3 major racial stocks, extremes of economi disparity – yet we can arrive a modus vivendi.

        What you may see from Desert Bloc is the type of unity, that is displayed by a gang of bank robbers – while they ‘case’ a joint.

        • A Fan of Your Blog said, on March 4, 2012 at 6:18 pm

          My thoughts exactly! Christianity of the Roman Catholic variety has its inherent drawbacks. It stretches too far away from ordinary normal life due to its rulebook. It stands against the five liberties. Acceptance may be high, but conformance is very low.

          A common face of the Desert Bloc is a lack of trust between its members. One-up man ship. Basically, no dharma.


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