Europe Misunderstands Farm Subsidies
By Brad Wilson at Oct 22, 2010
Parallel to the farm subsidy database of the Environmental Working Group in the U.S., in Europe groups called “Follow the Money” and “farmsubsidy.org” are “exposing” farm subsidies. They’re showing who gets what. Journalists are leaders in this work.
This reminds me of the leading work here in the US by journalists at the Wall Street Journal, including Dan Morgan (author of Merchants of Grain, decades ago). As I recall, Morgan was a runner up for a Pulitzer for his farm subsidy work. That project was featured on Bill Moyers Journal. (See my comments, with links, to the article here.)
Unfortunately they’re giving the same sorts of false interpretation that are widespread in the US: from EWG, from hunger groups like Bread for the World and Oxfam, from 477 mainstream media pieces listed at EWG, from the Wall Street Journal, from Bill Moyers Journal, and from many others. (See previous link.)
Here are the videos I’m reviewing in this blog:
Short version: http://www.youtube.com/watch?v=dz_rMvIPEDI (6:41)
Long version: http://www.followthemoney.eu/fields-of-gold/ (20:17)
The discussion below is based mostly upon the shorter video.
So they start out by telling what consumers spend on food, and then add the subsidies they pay as taxpayers, as extra food costs.
That’s fine, except no where do they even attempt to set out any kind of a standard for fair farm prices. By implication, however, they make it look as if food prices are too high. But again, they don’t present any evidence of an overall context of what a fair price should be. For example, they don’t compare food prices with the cost to farmers of growing it.
Then they say the policies were implemented “without real public scrutiny,” and advocate for “transparency” and “democracy.” I’m ALL FOR transparency and democracy!
BUT, (Ok, I’m no expert on European farm politics, but I have heard, for decades, of strong farm protests in Europe,) consider this matter of public scrutiny. Here’s how it happened in the US (and I’ve documented some of this online, and more below, as it’s pre-internet). Farmers fought vigorously against such policies for decades, as they’ve devastated family farm agriculture. Surely that happened in Europe as well. Thus the NFO was the leader in the 1950s and 1960s, AAM in the 1970s, and coalitions of groups in the 1980s (North American Farm Alliance, Iowa Farm Unity Coalition and similar groups in Minnesota and other states. During the 1980s the entire state legislative delegation in one of the Dakotas went to lobby in Washington! (So see, for example, my video “Food Movement 1985.”)
BUT, here in the US, most recent media coverage (journalism) (google: "Brad Wilson" “477” “EWG” and read my comments) and most recent work by progressive groups, including the food movement, has shown little knowledge of this past farm state public scrutiny. (See my food movement reviews in my blogs and in my videos.) Hey, it was pre internet, and consumers never came on board. The media went with the agribusiness view. Many of the recent leaders have never heard of this, according to my conversations with a number of them. It’s forgotten.
Next they say there is a huge debate on the CAP (Common Agricultural Policy or farm subsidies) in Europe, but the public is not well informed, as they think subsidies help farmers. Well, yes, that’s exactly the same as in the US. But then he goes to the biggest government subsidies, as if that’s the biggest issue, while the issue that is secretly behind those absurdities is never mentioned. And that’s also the same as in the US.
The biggest issue is low farm prices, what’s taken away from farmers, not what’s given to farmers as partial compensation for what’s been previously taken away. Europe and the US have exported our farm commodities at a loss for decades, but that’s never mentioned. We’ve set world farm prices below our costs, as a matter of policy (as we never needed to do so, as our earlier policies prevented this).
Ok, what were those policies? In the US they were price floors with supply management on the bottom side, and on the top side, reserves to be put on the market when prices reach price ceiling triggers. As I show in an excerpt here, (“Impact of GATT on World Hunger,” section: “The European Plan,” by Mark Ritchie,) Europe was favoring similar policies as recently as the late 1980s.
So here are farmers, with policies drastically reducing their prices and income, (but not mentioned,) and compensatory subsidies, as they lost the fight politically (surely this is the same in Europe), but then the farmers, the first victims, are blamed for the subsidies, while corporate agribusiness recipients of the below cost gains on grains and other commodities are not mentioned.
Next they imply that factory hog farms are fueled by this system (where farmers lose massively in the market and then get compensatory subsidies). The implication clearly is that farmers use subsidy money to expand hog production. But really, it’s the cheap market prices of feedgrains that provide the huge hidden subsidies to hog factories, cattle feedlots, etc., in competition with grain farmers (who get the grain subsidies) who are left without the value added of livestock. So the subsidies are really “break even” or losses (at least in the US) and those getting them are the ones losing livestock, not gaining livestock. Again, those gaining livestock, the pure hog factories, poultry factories, and cattle feedlots, for example, who grow no grains, get no government subsidies, but get huge, off books, below cost gains.
So again, yes, there are huge absurdities, massive exploitation by corporate agribusiness (not by farmers), but not at all as the video suggests.
Ok, I haven’t yet addressed the issue of the large farms getting most of the subsidies. (Again, I can’t verify all of the details for Europe, but much of this is surely valid.) Ok, there are a variety of factors here. I’ll present some of them. First, with very cheap grain prices, livestock fed grain competes aggressively with pasture fed livestock. Therefore you don’t need a grain farm to raise livestock. This then takes pasture, hay (forages) and small grains (ie. with straw) out of farm rotations, reducing sustainability. Therefore more grain is raised per farm, increasing oversupply, and lowering market prices for grain.
Animal factories buy at below cost from grain farmers, and build an animal factory. They get huge benefits, but the grain farmers selling at way below their costs, get blamed as the beneficiaries of subsidies. The pure animal factory gets no government subsidies (in the US, except for EQIP, farm loan, and other subsidy money, which also must be ended for animal factories). They do, however, get massive below cost gains. Thus big farmers are frequently blamed for getting up to some millions of dollars in “farm subsidies” and animal factories are frequently ignored by those concerned about such issues (as here) even as they get multibillions in below cost gains (off books, not found in a freedom of information search). Brilliant propaganda for corporate agribusiness, isn’t it, as even these investigative reporters completely missed it! So too all across the US, in hundreds of mainstream media editorials, on major progressive web sites, etc.
The low grain prices thus encourage livestock concentration. Farms themselves can’t be moved. They’re left with less value added (less livestock) and more low value commodities (grains). For example, grain farmers who feed their own grain to their own livestock do so at the cost of raising it, but giant animal factories get it at a far cheaper price (but another factor is how subsidies are figured to give them some compensation). Grain farms then need to get bigger just to maintain the same level of income. In the US poor farmers go broke, and only richer people can afford to farm, for example with off farm income, again, because of the domino effect of cheap, way below cost grain. Therefore, strangely, farm plus off farm income has risen in the US, even as the farm income portion has shrunk per acre (to below zero for a quarter century, vs. full costs: USDA-ERS, Commodity Costs and Returns). For many farms, there simply isn’t enough income to bring children into the operation, and anyway, the labor intensive work of raising livestock has been taken away. There also isn’t work for the kids to do.
Now, the subsidies are based upon typical losses per acre, and they’re generally lower than what is needed to get up to zero vs full costs, though they may be above zero vs. cash costs (and therefore partly hidden). So, except for some economies of size, the larger the farm, the larger the losses, the larger the subsidies. Again, this is not even hinted at in the video and other info I’m reviewing here (and linked above). In the US, for example, you can lose well over a million dollars in the market place, then get a million dollars in subsidies as partial compensation for the losses. The losses occur because the rich multinational corporations that buy the grain didn’t pay a fair price. (They get their multibillion dollar gains, not as compensations for massive losses, but as pure gains.) As farms lose livestock pastures and hay, and therefore grow more grain, and as grain prices fell even lower during the latter period, (of 1981-2006 for example,) the amount of subsidy per farm grew (as commodity subsidies in the US are only for program crops [ie. grains], not for hay and pasture).
Another important factor in the US is tax loss farming, and this gets more directly at the issue of the large subsidy recipients. Rich people buy farmland for tax loss purposes. Instead of giving farmers fair prices, (farmers lost politically vs the mega multinationals,) they give farmers good tax write-offs. That’s how it works in the US. But then the big corporate animal factories buying below cost grains can use these same tax write-offs. But in our system, the bigger the tax bracket, (the higher the percentage,) the greater portion of a write-off you get. This then escalates land prices. It’s an alternative investment, that then inflates vigorously. This then tends to keep real farmers out of buying land, and provides lucrative sell out value as farmers get older (average age about 55 in the US).
Ok, another point on the question of the subsidies to large landowners. My solution, (nonsubsidy price floors and supply management, plus reserves and price ceilings,) is not Eutopia. It doesn’t by itself fix things. Higher prices as I’ve presented them are the biggest issue (bigger than subsidies) and solve the most things, but they don’t do everything. Other solutions are needed. Part of that solution is in implementing these policies in ways that better favor medium sized and smaller farmers than was the case in the past (as in the policy proposals of the National Family Farm Coalition).
Frankly, you can’t foolishly destroy something for a quarter century and then remove the policies of destruction and expect things to just go back to normal. When damage has been done, you must live with the consequences, and pay to fix them. This is true for U.S. and European agriculture, and for example. We foolishly ran farm kids off the land, so we’ve lost much of the family-based, private-sector, farmer training we had going for 10,000 years. Many farms no longer have livestock, so the kids have less of what it really means to be farm kids. They no longer have the diversity of machinery, so kids lack the skills, and probably a good bit of the safety training. Do you get the picture?
Likewise, in turning LDC agriculture into extreme poverty areas, we’ve created massive dysfunctions. Obviously, fixing them isn’t just a matter of raising farm prices, though that is the biggest solution (for wealth creation in these farming countries). We foolishly squandered and destroyed these heritages, robbing them, ourselves, and our children of enormous amounts of wealth creation. Our grandchildren will still be paying the price for it, for many years to come. What’s important now, however, is that, when efforts are made to fix it, as in these European efforts, it won’t all be in vain (ie. subsidy caps,) but will really address the roots of the problem.
Ok, I mentioned that, obviously, this massive devastation of family farm agriculture has been vigorously opposed by farmers for many decades. This film, however, states that “This is the story of how a group of journalists and activists fought governments and powerful farm lobbies to find out the truth about who gets what from the Common Agricultural Policy.” But as I’ve shown, they didn’t really uncover the biggest WHO’s, nor WHAT they got. Additionally, they mention “powerful farm lobbies,” and not the multinational agribusiness farm commodity buyers. They blame farmers themselves, it appears. This is also the same in the US. For example, on the Bill Moyers show, when David Beckmann of Bread for the World was featured, they argued that farmers themselves, “commodity growers,” were one of the very most powerful lobbies in Washington D.C. (“DAVID BECKMANN: Commodity growers, the corn growers, the cotton growers. BILL MOYERS: Rice growers.”)
This is, of course, absurd, given that farmers fought vigorously against these policies for decades, given that farmers have never in the past 50 years been a very powerful lobby, given that farmers here have lost on these issues for more than 50 years. And, naturally, when you track down the documentation claimed on the Bill Moyers show and in the various sources he cites, it is corporate agribusiness (AGAINST farmers,) that made the lions share of the political contributions. (Again: see my comments, with links, to the article here.) Of course, there have always been farmers who have been duped by agribusiness, as I’ve discussed here, for example.)
This applies, then, to Smithfield, mentioned in the film as getting subsidies. Factually, however, they don’t get grain subsidies, they get hidden, unmentioned, below cost gains (Smithfield: 2.54 billion dollars, 1997-2005, p. 2 here.) Yes it creates “cheap pork,” but not as the film suggests (in the US and surely in the EU).
The film is liberally spiced with talk about the importance of having accurate information, but the film itself does not provide the kind of information that, as I’ve illustrated here, really explains the issue.
Ok, so, having falsely made farm subsidies the policy problem, they then describe subsidy changes as the key policy solution. “...The transparency ... is driving this political move to make the distribution of aid much more fair, ... much more justifiable,” and more transparent. Screen: “Move to cap EU farm relief threatens gentry’s payouts.” In fact, however, subsidy caps do NOTHING to address the underlying injustice of below cost farm prices, the much larger (multibillion, not thousands to multimillions in) below cost gains going to the buyers of grains and cotton: animal factories, exporters, food and feed mills and other processors, including biofuels. That’s because subsidies do now lower grain prices, as I prove 4 ways here.) They do NOTHING, therefore, to make these giant multinational corporations pay farmers any higher prices (ie. up to zero, and above to minimum, or on up to living wage/fair trade prices). In that case, of course, no government/taxpayer subsidies would be needed at all, and the whole question of subsidy caps would disappear. So the solution offered here is misleading, weak, and actually nonexistent for the core issue.
So then, as in the U.S., these journalists have been successful in bringing the false issue of farm subsidies into the mainstream, where lots of ordinary people know the false information. We then face the enormous task of helping people to both unlearn the false information (see previous link), and relearn the correct information. Meanwhile, in the European films here, they talk about giving citizens the “tools” to think about the issue for “the next time they vote.”
There is also, for all of this, a political side. That is, what is the political strategy? Here we find efforts, as all across the U.S., to falsely blame farmers, and then misguidedly try to further destroy farmers, as a solution. (And to return to dumping on LDCs as a solution of poverty and hunger in LDCs.) This then tends to drive US farmers into alliance with agribusiness. This is a foolish strategy. The politics of this is a separate issue, but also needs to be considered. Farmers are fighting for their livelihoods, for their farms. Don’t underestimate them. Remember, the family farm movement has been fighting the real issues here for a lot longer than you have. Remember, (as I put on a tee shirt,) they “actualize your values BETTER than you do,” as I’ve shown here. Finally, remember the bottom line, that they “subsidize you, NOT the other way around.”
References (beyond my imbedded links)
I may add more references here when I have time. I’ve done so many times previously, and on my blog. You can google me and various related topics (ie. “price floors,” “food crisis,” EWG, etc.
Here’s my short intro, my farm bill facts and myths, with brief explanations and links.
See the links in my “Farm Bill Primer” and “Food Crisis Primer,” which both focus on exactly the issues raised here.
See my Michael Pollan Rebuttal and other videos for video versions of some of the evidence. Here are some of the data source links: “False Food Films,” which is also a video, linked there.
Sorry this piece is a bit sloppy. I wanted to get something posted for the Europeans, who are following the footsteps of misinformation so widespread here.