Down to Earth 11 Combating EnVIronmental i. in association With? 31mm IEA Studies on the Environment No. 7, First published in July 1996 by THE ENVIRONMENT UNIT THE INSTITUTE OF ECONOMIC AFFAIRS 2 Lord North Street, Westminster, London SW1P 3LB INSTITUTE OF ECONOMIC AFFAIRS 1996 Studies on the Environment No. 7 All Rights Reserved ISBN 0?255 36383-4 Many IBA publications are translated into languages other than English or are reprinted. Permission to translate or to reprint should be sought from the Editorial Director at the address above. Set in Plantin and Univers Printed in Great Britain by nan-2. The Disastrous Common Agricultural Policy* The achievements of the Common Agricultural Policy of the European Union are truly remarkable. Although the cost to the taxpayer and consumer has risen steadily for 20 years, reaching several billion pounds last year just in Britain, look what you have got for your money! Less contribution to the economy: agricultural output has fallen by half as a proportion of Europe's GDP since 1973. Fewer farmers: employment in agriculture has also halved. More dependence on taxpayers: subsidies now account for 66 per cent of the gross value added in agriculture, compared with 9 per cent in 1973. More regulation: public bureaucrats now effectively control many decisions made on farms. More environmental damage: lapwing populations are down by 47 per cent since 1969 and there are 30 per cent fewer plant species on farmland. And regressive redistribution: since farmers are on average richer than consumers, the policy robs the poor to pay the rich. As disastrous returns on investment go, this counts up there with the South Sea Bubble. Little wonder that reform of the CAP is suddenly all the rage even in France. True, it was reformed in 1992 but that only made future reform more likely by transferring the cost of support from the consumer (who can be trusted not to notice that bread costs more in Europe than America) to the taxpayer. So the incoming European agriculture commissioner, Herr Franz ischler of Austria, has fair wind. There is hardly a pressure group in the country, from the National Farmers? Union to the Council for the Protection of Rural England and the Country Landowners? Association, that is not actively promoting some suggestion for CAP reform. What is more remarkable is that they are all unanimous on the direction that reform should take. They urge the politicians to Published as ?Time to uproot the cash crop that never fails? in The Sunday Telegraph on 22 January 1995. I3 switch subsidies from paying for farm produce to paying for environmental benefits. It would all be very cosy. The farmers go on collecting ?200 every time they pass go, while the greens consult and advise and collect fees, and the bureaucrats still justify their existence by handing out huge sums and then tut-tutting over the need to enforce labour-intensive measures against fraud (requiring bigger budgets). The taxpayer, good little obedient chap that he is, would be told that he bene?ted because he would have more lapwings to look at and he would prefer that, surely, to tax cuts. Sorry to spoil the party, fellows, but to abolish the CAP rather than reform it would provide the same benefits at lower cost. The abolition of subsidies would cut taxes, out food prices, stop distorting world trade and make European farm exports more competitive. Yes, you say, but at a terrible price. Many farmers would go bust; and the ones that did not would pour on the fertiliser and chemicals to boost yields, doing the lapwings even more harm. This is conventional wisdom and, as usual, conventional wisdom is wrong. There is no industry in the world that responds to falling prices for its products by spending more on making them. As the example of the United States amply demonstrates. when wheat prices are lower, farmers use less chemicals, not more, and accept lower yields. Result: more lapwings, not fewer. And if Europe stopped dumping exports on to the world market. world prices for cereals would rise, to a point at which price most European growers could compete. The example of New Zealand, which suddenly removed all farm subsidies in one swoop, is encouraging. Many fewer farmers went under or left the industry than expected, and farming became noticeably less intensive and therefore more wildlife-friendly. Of course, the bureaucrats, lobbyists and other jackals that scavenge for taxpayers? money wherever government spills it might have to ?downsize? their operations. What a pity. I4 IEA ENVIRONMENT UNIT Staff Director: Roger Bale Manager: Lisa Mac Leilan Fellows: Julian Morris Mark Pennington Matt Ridley Michael =t Sas-Rolfes Secretarial Support: Patricia Donelson Editorial Advisers Professor Colin Robinson (Editorial Director, IEA) Michael Solly (Publications Manager, IEA) Advisory Council Chairman John Blundell Institute of Economic Affairs) Honorary Fellows Dr Wilfred Beckerman (Emeritus Fellow, Balliol College, Oxford) Professor Donald Denman (Emeritus Professor, University of Cambridge) Dr Hans Rausing HC (Tetra Laval Group) Academic Advisors Professor Terry Anderson (Montana State University) Professor Boudewijn Bouckaer?t (University of Ghent) Piers Corbyn (Weather Action) Professor Don Coursey (University of Chicago) Professor Harold Demsetz (University of California, Los Angeles) Victoria Edwards (University of Portsmouth) Dr John Emsley (Imperial College, University of London) Kent Jeffreys (National Center for Policy Analysis) Dr Jo Kwong (Atlas Economic Research Foundation) Professor Deepak La] (University of California, Los Angeles) Scarlett (The Reason Foundation) Professor Julian Simon (University of Maryland) Hernando de Soto (Institute Libertad Democracia, Peru) Professor Richard Stroup (Montana State University) Dr Andrew Warren (University College, University of London)