Lee Rotherham on the Common Agricultural Policy, Food, and Trade

Lee Rotherham says that the Common Agricultural Policy is a major disaster. And he blames the French, their working population was dropping relative to other countries and they desired a subsidy to maintain the French countyside.

The costing he did demonstrated that the policy costs each family £398 anually (3.1% of a living wage) and an additional cost of £2.81 per week (1% of a living wage) stems from the Common Fisheries Policy. Dr Rotherham pointed out that other EU policies add additional costs on top of those two.

The mechanisms at work are the direct draw by the EU on UK tax payers and the indirect effect of higher (not lower, higher) prices for food products.

Ian Dunt complimented the French lobbying that lead to the CAP but pointed out that the upward trend in food prices is a more recent phenomenon. Combined with the fact that other countries have similar policies he contended that this policy does not fully explain the problems since 2008.

Kristian agreed after a fashion, and added that there was a historic downward trend in food prices. However although the problems of the crisis post-date it, he argued it is no longer reasonable to endulge French farmers. Times are tough and we would prefer food prices were lower than they are now. Kristian refered to global market forces to explain the more recent rises.

Yaron agreed that it is not proper to endulge French or any other farmers. This is form of central planning and Yaron believes that plannning creates unwelcome distortions in every area that it is attempted. Recalling his knowledge of US food markets he mentioned subsidies to leave land uncultivated (not unheard of here) and bio-fuels subsidies that raise the price of corn globally. He went on to repeat his observation that there are so many state interventions in various markets that it is difficult to clearly observe the effects, but he said that if you look at the areas where the state has kept largely out of the way you see prices come down and quality go up.

Yaron throws in an interesting extra point here, not specifically related to food but related to the price of every good, and that is the effect of regulating banks. Banks, he says, are the engine of the economy (I assume he refers to their heterarchical, and therefore free, role in allocating capital to where it is most productive – something Yaron has spoken about before). This drop in productivity is a cost that is passed on to all of us.

Kristian picks up on a passing remark Yaron made about the lack of a parrallel universe to demonstrate what he is arguing. Kristian refers to the recent deregualtion of agriculture in Australia and New Zealand as an example of market mechanisms restoring the productivity of the economy in a previously regulated sector. The panel appreciated that this was largely reponsible for the flood of good wine from those countries.

Returning to Dr Rotherham, I ask him what can be done to solve the problems that have been talked about. Lee was skeptical that this would be possible without a fundamental change to the nature of the EU treaties. Returning to the “Hobbits” he mentions that farmers in New Zealand are now so persuaded that the market-liberal approach is the right one that they are advocating in favour of the policy, having seen only small numbers of farms getting into difficulty at the end of their subsidy system.

Lee concluding by describing some of the flaws of the CAP, with subsidies flowing to golf clubs and airports and inner London councils rather than to farmers. He said that despite those flaws, if you kept the same system but ran it nationally you would still be £5 billion better off – that’s becuase the CAP is costing UK tax payers money and is sending that money abroad. For him this highlights the ethics of the situation which is that there are much better cases of marginal businesses offering social value in the UK and we ought to focus, if we are to have a CAP, on helping them.

That would certainly be a step in the right direction.


  1. It is often claimed that farming is a “special case” deserving of government support – but this is not so.

    For example, farming in Britain actually recovered after the decline of the late 19th century – by 1914 farming (changed farming) was again doing O.K. in most of the United Kingdom – with free trade and without government support (then the First World War arrived – messing up the world economy).

    “But that is a century ago Paul”.

    O.K. – what about New Zealand right now (today)?

    New Zealand used to have a massive system of government subsidies and government CONTROLS (he who pays the piper calls the tune) – and they were abolishes, farming prospered.

    Remember the money comes with strings – the controls (regulations) of the government (E.U. and national).

    Many farmers (not just consumers – farmers also) would be better off if the whole system of subsidies and REGULATIONS was abolished.

    Yes – even perhaps in France.



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