THE POLITICAL ECONOMY OF AGRICULTURAL POLICY REFORM IN THE EUROPEAN COMMUNITY AND AUSTRALIA

A political-economy framework is used to explore the differences which have been observed in the pace of agricultural policy reform in the European Community and in Australia. In this framework, policy-making is endogenous in comparison with its exogenous position in applied welfare economics. It is shown that the institutional aspects of the policy process, the power of the farming lobby, and the economic philosophy of governments are important determinants of the extent of income re-distribution and of moves towards the use of more efficient instruments of income redistribution. It is argued that the degree to which politicians are captured by the farming lobby, and the extent to which they support transparency in policy-making, determine whether fundamental reforms are feasible. From this analysis, it is concluded that the pace of reform of the Common Agricultural Policy will continue to lag behind that in Australia.     

EUROPEAN UNION CEREALS POLICY: AN EVOLUTIONARY INTERPRETATION

Following an introduction explaining the genesis of the paper, section 2 briefly reviews some relevant literature and concepts. On the basis of this review, section 3 develops an outline evolutionary model of policy development. Section 4 interprets the history and present status of the EU policy within this framework (here illustrated by the cereals policy which is taken as archetypal for the CAP as a whole). It characterises the policy history In broad evolutionary terms, emphasising the 'fitness for purpose' of various manifestations of the policy organism. The key conclusion from this section is that the present policy situation cannot be described as 'fit' — there is too much conflict between the present (rather new) policy environment and the character of the existing policy. This conclusion is in distinct contrast to more conventional views about the status of the present policy and to the current view from within the policy-making bureaucracy. Section 5 develops some major implications of this analysis for future development of the CAP. Section 6 offers some broad conclusions.     

STABILISATION AND RISK REDUCTION IN AUSTRALIAN AGRICULTURE*

Agricultural producers typically are faced with risk about the yields they will experience and the prices they will receive. Stabilisation schemes can spread risk and thereby reduce the risk faced by individual producers. The risk-reducing capacity of a scheme and the cost of risk reduction depend upon the design of the scheme. In particular, it is important to distinguish between risk and instability. A classification of scheme designs is presented to bring out the effects of various design types. Schemes for the wheat industry are given most attention.     

THE PROBLEM OF AGRICULTURE IN A EUROPEAN ECONOMIC UNION

A revaluation of the German Mark has been hindered by the effects that this would have on German farm prices, given the E.E.C. agricultural policy. The article therefore examines the implications of (a) a common agricultural price level, and (b) fixed or adjustable exchange rates within a customs union such as the E.E.C. It concludes that a change in relative price levels between countries couldbe tackled by means of exchange rate changes, while retaining a common agricultural price level; but even with adjustable exchange rates, a common price level may give rise to diBculties unless agricultural productivity in the member countries grows in a particular way. It finally suggests that a wider European economic union would require niorejexible arrangements than those at present in force in the E. E.C.     

ISSUES OF AGRICULTURAL POLICY IN A HISTORICAL PERSPECTIVE

Growth in agricultural productivity and the stimulus of price supports have led to overproduction in Western Europe: in particular, the European Community has become a smaller importer and even a major exporter of several products. But as prices in the EC are usually above world levels, this requires expensive subsidisation and leads to trade conflicts. Adjustments now forced on the CAP mean a greater cost-price squeeze, besides imposing quotas on the dairy sector. Policy aims relating to farm incomes and to market balance have thus become very difficult to reconcile. Future policy will also have to take more account of the impact of farming on the environment and of the role of agricultural activity in rural communities. Are there policy instruments, such as direct aids, which can help to achieve such diverse goals? What are the implications of changing circumstances for farming systems, and in particular can low-input systems offer an alternative to the ‘productivist’ farming model?     

AGRICULTURAL POLICY IN JAPAN

Japan is situated at the opposite end of the European continent from Western Europe. Climate, culture and history all differ greatly between the two, as does agriculture. Half of the farmland is devoted to paddy rice, livestock raising is still a new industry and the average farm size is only one hectare. Nevertheless, one would find many similarities in policy. The oversupply of major agricultural products is one of the most serious problems in Japan, whilst slow structural reform is the other, and a declining rural community is undermining the agricultural base. This paper confines itself to an outline of Japanese agricultural policy, without making explicit comparisons with Western Europe.     

COMBINATIONS OF BUFFER-STOCKS AND BUFFER-FUNDS FOR WOOL PRICE STABILISATION IN AUSTRALIA*

In this paper a preliminary analysis is presented of a combined buffer-fund and buffer-stock as an alternative to a pure buffer-fund or a pure buffer stock for stabilising wool prices. The alternatives analysed are designed so that each provides the same prices to producers as did the Reserve Price Scheme over the period of analysis. Least-cost combinations of policy instruments are derived. The results show that there is considerable potential for cost savings to be made by combining buffer-fund and buffer-stock instruments.     

AGRICULTURAL POLICY IN CHINA—A VISITOR'S IMPRESSION

Following a study tour of China a brief account is presented of recent changes in agricultural policy with some short comments on living conditions. The account concentrates on the prominence now given to agriculture within the planning process and the recent raising of its status relative to other sectors. This is associated with the change to the household responsibility system allied to upward adjustment in agricultural producer prices and some adjustment in input costs.     

RETIREMENT POLICY IN FRENCH AGRICULTURE

A supplementary retirement grant (I. V.D.) has been the most important of a range of measures introduced since 1962 as a solution to social and structural problems in French agriculture. Although one-third of the country's agricultural area has been transferred through the scheme, there has been no revolutionary change in farm sizes. The restructuring required by the policy has been relatively slight and the economic attractions of the retirement grant have declined, particularly since the early 1970's. Problems have also arisen from the uneven spatial adoption of the pension, from internal contradictions within the scheme and from the lack of co-ordination with other aspects of government support for agriculture and regional development policy.     

AGRICULTURAL POLICY IN WEST GERMANY

Much of the area which at present constitutes the German Federal Republic was, in the past, agriculturally backward. Since 1949, West German agriculture has made considerable technical progress, but still suffers from severe structural problems. These problems of small farm size and fragmentation have their origin in the 18th century, when farmers obtained control of the land without the enclosure movement experienced in Britain, and no serious programme of structural reform was undertaken before 1939. In recent years, West German agriculture has increased production very greatly and at the same time reduced its labour force at an unprecedented rate. Moreover, a substantial programme of structural reform was initiated in the 1950's. As a result, farmers' incomes have risen at roughly the same rate as other incomes. In the last few years, West German agriculture has come under increasing pressure as a result of economic developments and the competition of other Common Market countries. It is clear that a more radical programme of structural reform is needed.