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Sunday, 31 January 2010

WE IZ IN UR FARMS, LOVIN UR MONEYZ

I couldn’t not write about the farmer uprising currently in progress in Greece.  In a country with the 121st cheapest agricultural policy in the world, not to mention a fiscal basket-case, perhaps this is a bit rich. But anger runs deep in the North of Greece and seeing one’s personal situation in the context of a decade old problem is a bit too much perspective to be expected from some of our farmers, who are admittedly not too well off. Their leadership, however, should know better.



 (Photo courtesy of Petros Papalianos)

Studies show that subsidies, especially decoupled ones, actually reduce efficiency. We know this is true in the case of olive growers and cotton growers in Greece. We know that subsidies make cattle farmers in Crete less efficient and more vulnerable to market and weather shocks. Same goes for the farming powerhouse of Europe, France.

Despite this, research shows that support has increased since 2002, and made up 45% of farm income in Greece as of 2006, 9 percentage points higher than the EU equivalent.

So what are our farmers asking for? You guessed it: more decoupled subsidies. Here are their demands, in Greek. The non-Greek speakers will have to take my word for it. But it’s not just the fact that farmers want subsidies. It is the nature of the subsidies they want: they want to completely remove downside risk from their operations but still hold on to any profits. When bankers ask for this, we rightly scream bloody murder (although we wrongly give in).

First, there is market risk: simply the risk that people will want to buy less at your preferred price than you think. So farmers are demanding that the state guarantee higher prices for their produce.

Then there is natural risk: maybe it won’t rain one year, or rain too much, or snow, burning the crops. So the farmers are asking for total cover in case of any of the above on all farming capital.

Of course even with that in place there is a chance the Greek consumer will stick two fingers up to them and buy cheaper foreign produce. So they are also demanding protection from foreign imports (which is illegal under EU law)

Even if that works, the consumer could tell them to f off and just not buy farm produce, or buy a lot less. So they demand a guaranteed minimum income.

Then there is the risk that this government-fuelled bonanza will not be sustainable. The farmers have thought of that too. So they demand they be allowed to retire at 60 (55 for women), courtesy of a taxpayer-subsidised fund whose deficits will be topped up by the government.
And they also want farmland to be tax-free so that any future tax hikes will not touch them. Moreover, they want a freezing of their debt for three years, and for all of their overdraft fees to be waived by the banks they owe money to.

This, they add, is only a baseline, on top of which local producers should be able to negotiate further perks.
Let’s be clear. An entrepreneur takes risks with their capital. An employee doesn’t. The farmers – who in my mind signed up to be entrepreneurs – now want to be employees instead, simply without their employer being able to tell them what to do, and with an added bonus on top in case they manage to turn a profit – the privilege of civil servants. And they want this status regardless of whether they have another job or not. Note that civil servants in Greece cannot have additional jobs. So they really want to be super-civil-servants, accountable to no one and on the dole for eternity.

This is madness in the best of times. In these times, it’s self-destruction.

I have to agree, on the basis of evidence, that retiree farmers are very prone to poverty and that getting additional work on the side is invaluable to mitigating poverty among farming households in Greece. In fact, where the household head has a non-agricultural job, the research shows that farm households are reasonably well-off. But any policy that gives farmers an incentive to rely exclusively on heavily subsidised farming income must, by the same token, be very bad news. And although the research finds that poverty is reduced by subsidy income, if this comes at the price of reduced productivity then presumably the level of subsidy needed to achieve this reduction will rise with time, as indeed it has.

Finally, EU subsidies have a lot to answer for. As the chart below shows, since 2004 subsidy money has increasingly been turned into farm wages rather than profits. It's a recipe for long-term disaster.



There is, in all of this, a silver lining. Some of our agricultural products are hugely profitable and competitive. The poster-child for this is asparagus farming, more than three quarters of which is concentrated in the Pella prefecture. Research on this, however, shows that this is heavily dependent on the flexible application of seasonal labour, most of it from immigrants. This is probably what Greece is worst at in the world. Fingers crossed for the asparagus farmers of Pella.

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