Farming and the tax-payer
Paying for food and countryside in the new age of free trade.

This piece appeared in The New Rural Economy: Change, dynamism and government policy, edited by Berkeley Hill, The Institute of Economic Affairs, 2005

begins:

Farming has been at the centre of British politics for two hundred years. Even as industrialisation transformed the economy in the 19th Century, free trade in food caused many of the fissures around which parties formed. In 2003, reforms to EU agriculture policy were perhaps rightly described as being “as important as any since the repeal of the corn laws” in 1846.[1] The questions have always been deceptively simple. Since we can grow food, shouldn't we aim for self-sufficiency and food security? Or: Why would a wet grey country try to buck the market and deny itself foreign food? The 1846 answer held for a century. In the islands that gave the world Adam Smith but had to import French chefs, we were and are bound to discuss food not merely as a matter of nutrition, taste, or fashion but also as a matter of comparative advantage.

The English in the 19th Century decided to eat food sourced for the convenience of factory workers and their employers, not of the farm labourer, or the yeoman farmer and his landlord. But that policy didn’t kill off a British agriculture dominated by progressives. Even when the north Americans and – much later - the French, Danes and New Zealanders caught up, industrialised British farmers could survive against their competitors’ cheaper land and better weather. These were the years when an urbanised country fell in love with its countryside, and farmers were thought of as natural, unconscious guardians of its loveliness.

In the 20th Century, Hitler made self-sufficiency as necessary as Napoleon once had. For fifty years we have been happy to shelter our farmers behind trade barriers and to throw money at them. Discussion of the CAP (Common Agriculture Policy) was subsumed and almost lost in the vast, fractured debate on the EU in general. Yet the £30bn the EU spends on its farmers constitutes half the EU budget. Whilst many services (health, education, broadcasting) remain statist, farming is the last state-run production industry. The situation was probably tolerated for so long because consumers didn’t associate the £3bn support given to UK farmers with their own shopping basket. They vaguely understood that some at least of the money came from Germany.

Across the last half century, a vociferous minority of the public learned a new aesthetic: they yearned for a pre-modern countryside. Worse, they knew that CAP-fuelled farmers had had a big hand in robbing them of it. Even so, campaigning against the CAP was half-hearted because the various ideologues who hated it hated each other more. That's to say, the free trade, free market right which disliked the CAP’s corporatism has never wanted or been able to make common cause with the leftish conservationists and environmentalists who disliked the deepening factorification of the farmscape which it helped fund. Besides, as the animal welfarists pointed out, the market - and not the EU - was causing a good deal of industrialisation of animal farming all by itself. The market might have made some farmers more destructive even than the CAP did.

In the end, the underlying engine of reform was the liberalisation of world trade, which has even been embraced (in part and grudgingly) by Oxfam and other cheer-leaders of Third World development. And it has been helped by the widening of the EU to include tens of thousands of new farmers whom it would be impossible even if it were desirable or desired to support.

Producing butterflies
However it was that they clung to the public purse, farmers have seemed like John Bull with a begging-bowl. Like all victims of welfare, they became unattractive: addicted but resentful. To their credit, the farmers' leaders - even the National Farmers Union and the country landowners'association - have long understood and embraced the case for reform. It is very likely that - absent its being trapped in the EU - Britain would have followed New Zealand in abandoning subsidies years ago. It is possible that, absent the EU, the American farmers would have been half-weaned off support as well. Following World Trade Organisation and EU decisions made in the past year, farmers and politicians are working out how to shift an unchanged quantum of support from production to social and environmental subsidy. That will reduce the trade-distorting effects of the CAP, and largely silence the claims of Oxfam, Bono and Bob Geldof that the EU causes starvation in Africa.

But the free trade logic will grind on, and farmers seem to believe subsidies of every kind will be reduced dramatically within a decade or so. They freely discuss the interim arrangements as a relatively gentle “de-tox” alternative to the more brutal "cold turkey" which the free-market people might prefer they suffer, but they tell politicians that they accept that the drug of subsidy simply won't be there soon.[2]

Peculiarly, we are likely to go from a system under which farmers were well-paid to do pretty much what they liked to one in which they have to deliver all sorts of “extras” whilst getting low prices. Their impacts on the landscape, soil, and watercourses; their treatment of animals; and their use of fuel, will all be scrutinised and regulated (or “voluntarily” policed) much more. British farmers will be required to maintain regimes which are far more costly than those imposed in other parts of the world. They will struggle to persuade consumers that their product is worth the extra: it is work they are bad at. It will be especially difficult for as long as supermarkets believe that most of their customers care mostly about cheapness.

Let's put this brutally. Many of the British have been happy to eat rubbish, and have done so whilst the supermarkets (let alone foreign holidays) have offered them interesting alternatives. Alongside a commoditised market in junk, there has grown up a niche organic market whose rationale has been to pose a radical alternative to the mainstream. These two strands are for the time being at war. The organic sector will lose market-share as soon as conventional farming slightly greens itself. And the conventional, pesticide-based mainstream has much more to learn from the pseudo-peasants of the organic tendency. The latter co-operate together so as to match the power of the supermarket buyer. They have understood how to pin a narrative to their produce. They talk - and mostly believe - nonsense and sell at high prices often surprisingly unhealthy or dreary food to anxiety-ridden consumers who also talk and believe nonsense.[3] But they are one of the best examples of the market at work.

Let’s not subsidise organic
Politicians have been in a muddle about organic food and farming. Caught up in a mantra of “Sustainable Development”, and wary of organic’s vociferous middle class fan club, they have sought to endorse it, have given it a few tens of millions of subsidy, but not dared celebrate it wholeheartedly. How to praise it without condemning the mainstream?

They may also realise that from a public policy point of view, organic farms are of very limited use. There is good evidence that organic farming is not, of itself, much better for the birds and the bees (let alone for consumers), than stuff sprayed with chemicals. [4] The environmental NGOs have spread nonsense for years and the newer boutique farmers have loved them for it. It is true that some early pesticides poisoned some predator birds and some river creatures (otters, for instance). Those chemicals were almost all banned years ago and aren't the issue now. But there were other factors at work, and some of the most important remain. Chemicals have allowed farmers to wage war on pests, and unfortunately that includes the weeds (that is, the wild-flowers) and insects that birds and landscape painters and photographers live on. They have sewn crops in the autumn, when the fallow ground used to be good for birds. But organic farmers are only good for wildlife because they promote it; “conventional” farmers aren’t, because – at the moment - they spray it.

The unsung equation is this. The vast majority of English land is in the hands of mainstream farming. Any given percent of environmental improvement – even if small - we get from that land is worth far more than whatever we have got or can ever get from the tiny percentage of land which is or will ever be "organic" (a few percent now, and most of it grassland).[5]

The conventional farmer can grow huge amounts of cheap food, and has the potential to do so alongside a vibrant wildlife. That's what chemicals and crop regimes already deliver wherever anyone bothers to “tickle” the system in favour of nature. It's also what farmers are moving toward as they negotiate changes to the subsidy system. They are busy demonstrating how green they can be, granted that their remaining subsidies depend on this new pitch. In the bureaucratic argot: as their subsidy is “de-coupled” from production, one of the “modulations” by which they can hang on to it is “cross-compliance” with a rising tide of the slightly greener things they should have done decades ago if they had understood where their market was going. [6] They will now need to learn how to sell the merits of their “conventional” farming: to say that, refocussed, chemicals and sheds are good for food, landscape and animals.

There will be far fewer farmers in the future. It was a bad year but only a historic trend which saw 17,000 people leave farming in the twelve months to June 2003.[7] That trend is as old as civilisation, and has been slowed only slightly by subsidies. No amount of money will produce replacements for the present generation of hill farmers, for instance. Modern culture does not produce the near-peasants who have traditionally run our most attractive, bleak landscapes. There and elsewhere, there may be an influx of pseudo-peasants. But even organic, free-range farming is likely to succumb to the advantages of scale, and fall into the hands of a proficient and adventurous few. There may well be two tracks for farmers, irrespective of their preference for the conventional or niche model of farming: some will throw lots of capital at their land, and others won't. Equally canny operators will choose either high or low input approaches to solvency in a business which will presumably remain prey to roller-coaster income fluctuations and vicious cycles of under- and over-production.

It is just possible that the tax-payer will be prepared to continue to subsidise farmers to produce butterflies. But, as Sir Richard Packer, one-time permanent secretary at the erstwhile Ministry of Agriculture, Fisheries and Food (now DEFRA) said in a Centre for Policy Studies pamphlet, we shouldn't believe that the answer is to keep subsidising lots of farmers, but for environmental gains rather than production.[8] We've got to get it out of our heads that we are in the business of populating the landscape with hicks at all.

Modern taxpayers may pay for environmental outcomes, but they aren't likely to fall for looking after producers, especially tweedy types in 4X4s who are believed to have killed off the farm birds whilst gruffly seeing-off ramblers. What is much less clear is what level of wildlife-friendliness should be "normal" for farmers. What is the amount of butterflies or space for pigs which society can reasonably expect farmers to produce without special reward? Set the amounts too high and one is costing farmers out of any chance of international competition, and in any case flirting with a new form of stalinisation. Set them too low and we leave too many of the "externalities" of farming to be picked up by non-farmers.

Whatever the compulsory level, the trick to getting even more animal welfare, more birds and bees, more hedges, copses and ponds, is for conservationists, supermarkets and even the taxpayer to pay for them, but to pay only for the welfare, wildlife or habitat. When farmers see these extras as crops, we'll get huge amounts of them, because actually they're quite easy to deliver. The mechanisms have been outlined by many people, and perhaps especially by the Royal Agricultural Society of England.

Under one version, a supermarket, or a conservation group, even the taxpayer if all else fails, would advertise that there is a pot of money with which to fund contracts for the production of this or that bird (or insect, or whatever) which is in decline. Farmers, singly or in co-operation with one another, make sealed bids in the manner of an auction. If they deliver the birds (or snakes, or whatever) they get the money. It doesn't matter if they use chemicals or hate them. It's the outcome which matters, not the method of production, or the numbers of producers.

Connecting customers with food production will also be important. If consumers started to care about the provenance of their food, they might buy some of the externalities they are supposed to like but don’t presently connect with shopping. Supermarkets have been brilliant at delivering cheap food smothered in pictures of a long-dead countryside of straw-sucking peasants in smocks. Farmers and retailers shouldn’t be expected to be social workers, propagandists or even conservationists. But they should, as professionals, be uncomfortable with the way their customers are buying food which does so little for the countryside in which it is produced. Supermarkets could be enhancing their bottom-line, and making us even more proud of them, by competing to identify their products with the wider scene. Some already seem to be serious about this approach. The trick will be to abandon the purist excesses of the organic myth and instead to discuss and offer a sort of golden mean. Within a decade the food business could prove that “Grown in Britain” means something valuable. If they don’t, farmers will be condemned to pay for an improved world out of their own pockets and supermarkets will be accused of starving their suppliers of the means to be useful.

There may be lots of good news in the pipeline. Less subsidy for production may reduce the opportunity cost of waging a less intense war on wildlife, and land cheap enough to encourage it. We may decide that large areas of land near the sea should return to salt marsh. The hills may return to scrubby woodland and bog. Free-ranging animals on cheap, soggy and steep land may well be the best use for it. At the other end of the scale, intensive agriculture will get better at being useful. Farmers keeping animals in sheds may well have the tricks and technologies - and breeding stock – which make them even more profitable as well as welfare-conscious. Shed-farming allows the majority of a farmer's income to come from a tiny covered acreage whilst the majority of his land is used to turn chicken, cow or pig manure into gorgeous habitat for wildlife and people.

We will probably rurbanise much more land. Planners ought to be far more imaginative – and politicians far bolder - in envisioning the countryside they want to get other people to fund. We could easily be producing large quantities of houses set in great wooded landscapes, with kestrels hunting over the roads which lead to them. There is very little wrong with our slightly crowded island landscape that cannot be put right with the judicious use of a JCB. Rising transport costs, or road congestion, might complicate this picture - but we have no idea whether "hypermobility", or global warming, will really worry our children and grandchildren, and whether even rurban dwellers need be hooked on either.

Ponds, wetlands, hillocks, meadows, woods – we can create them all, and some will be farms and others will be housing estates and technology parks. Some of them will be managed by the children of our present generation of farmers. Many more, probably, will be created by dynamic incomers who also love the countryside. And none of these rural entrepreneurs and professionals will be allowed to fantasise that they've a god-given right to get a living from it.

How much farming policy do we need?
Obviously, my preference is for as little policy as possible: that’s the free-market dream. There is hardly any desirable in the countryside which is not widely popular. Handsome landscape, well cared-for animals and a rich wildlife are all much-admired. They are also highly-marketable and quite cheap to achieve. They need not be the victim of market-failure. But that is no guarantee that they will happen. Unless government has the courage to say that it really does not want to get involved, the farmers, supermarkets and public will settle for the rather shabby default we have known so far. That is: the state’s imposition of low standards, which it reluctantly enforces. We can hope for better than that. But, as in the dismantling of any state machinery, it will require other – voluntary – players to see and seek advantage in doing things, and doing them better, for themselves.

There is some sign that these sorts of view are becoming orthodox amongst farmers. ADAS, the hived-off erstwhile Ministry of Agriculture advisory service, has been celebrating its 35 years of life with a “Blue Skies” project whose conclusions are surely fairly mainstream, would not shock a free-market person.[9] ADAS supposes that farmers may have many pressures on them in the future (some of them regulatory), but assumes more surely that will not be able to expect very much state support or even guidance in facing them.

ends

The author is media fellow of the Institute of Economic Affairs and publishes continuously at www.richarddnorth.com. He has been a part-time shepherd and viniculteur.

[1] George Dunn, of the UK Tenant Farmers Association, giving evidence to the House of Commons select committee on Environment, Food and Rural Affairs, January, 2004
[2] The House of Commons Select Committee on Environment, Food and Farming’s Seventh Report, April 2004, is a rich source on the contemporary debate.
[3] Judith Woods, Is Organic Food Really Worth the Money, The Daily Telegraph, 27 October, 2004. http://www.food.gov.uk/science/sciencetopics/organicfood/
[4] P B Tinker, ed., Shades of Green: A review of UK farming systems, Royal Agricultural Society of England, 2000
[5] http://statistics.defra.gov.uk/esg/statnot/orguk.pdf
[6]http://www.defra.gov.uk/farm/capreform/implementation/qa08.htm#changed
[7] http://www.farm.org.uk/FM_Content.aspx?action=detail&id=169
[8] Sir Richard Packer, A Policy for Agriculture: Ending state interference, CPS, 2001
[9] http://www.adas.co.uk/bluesky35/