Justification of state intervention in the agricultural sector.
Traditionally, agriculture is seen as a means of production. Its value is assessed in terms of the value of farm products. Similar to how a country’s value is measured in GDP. However, there is a growing realisation that agriculture has a greater value than this. It has multiple functions and provides many benefits, often referred to as “externalities”. These include food security, environmental protection, the maintenance of rural traditions and communities, and Landscape values.
Externalities occur when the production of a “good” creates a benefit (positive externality) or damage (negative externality) on the people who themselves have not been involved in the decision leading to the benefit or damage. According to Cahill, C. (2001, The multifunctionality of agriculture: What does it mean?) because these benefits and damages are not taken into account in the decisions of the producers, positive externalities tend to be undersupplied, and negative externalities tend to oversupplied. Crop production is an example of a farming procedure that has both positive and negative externalities, it can cause nitrate leaching while it also maintains landscape values. Positive and negative externalities are a prime reason for state intervention in the agricultural sector, the state will try to eradicate as many “negative externalities” and try to develop as many “positive externalities” as possible in an attempt to improve society.
Intervention provides many positive “externalities”, and to that effect the state is justified in intervening in the agriculture sector, some of the effects/benefits of state intervention are as follows:
1. Food Security benefits
Food security concerns, not only food production, but the availability of food, and access to food. It has been defined by FAO as “access by all people at all times to the food needed for a healthy and active life”.
Due to the fact that there is increasing globalisation of agricultural markets, many nations are concerned that they retain a sufficient agricultural base- both in farms and farmers- to avoid excessive dependence on caprice of international agricultural trade, Cahill, C. (2001, The multifunctionality of agriculture: What does it mean?)
Exporting countries: claim that Asian countries can replace the food they produce themselves with imported food, and still have a stable and secure food supply. However, most Asian countries are reluctant to become completely dependent on imports. They want to keep a certain level of self-sufficiency in food production. They worry that if there is a global food crisis caused by war or bad weather, exporting countries may not want to sell their food stocks overseas. (Japan, Basic Law on Food, Agriculture and Rural areas)
For importing countries, food security means removing the uncertainties which result from free trade. At the FFTC seminar, Director Torng-Chuang Wu suggested that addressing these concerns should involve action by both exporting and importing countries. Exporting countries might consider contracts, under which they undertake to reserve a certain level of food for export. Importing countries might need to maintain a certain level of self-sufficiency in food production, and adequate stocks of staple foods.
2. Environmental protection benefits
Environmental protection is a phrase that is uttered from the lips of politicians on a daily basis, but it is not for any unjust reason! Environmental protection of our land, our waters and our air is pivotal to the survival of man-kind. Many nations have recognised this and have instigated procedures to encourage farmers to use environmentally friendly methods of farming.
One example of a farming method that pollutes the environment is the excess use (or use at all) of inorganic fertilisers. These chemicals run off the land into the streams and rivers that supply water to a region, these polluted streams are no longer a source of nutrients to the surrounding wildlife and are in effect killing off the local habitat.
The State intervenes in many countries by financially rewarding farmers that are using environmentally friendly (sometimes completely organic) methods of farming.
3. Landscape values
Landscapes are a major tourist attraction to countries, especially countries not blessed with sundrenched beaches, for instance Scotland, Ireland and Wales. Countries, like these, are starting to recognise this fact and are putting in place incentives for farmers to keep the natural landscape of their land intact. This is prevalent in Ireland at the moment with the Rural Environmental Protection Scheme (REPS). REPS have been in operation since 1994, involving some 45,000 farms at a total cost of almost €1.3 billion. The scheme provides a valuable opportunity for improved landscape quality in Ireland.