A farmer’s place in the World Bank’s way of thinking

Farmers fear 2018 could be the year when a 20-year bogeyman finally appears, in the shape of an EU trading agreement with Argentina, Brazil, Uruguay and Paraguay, which make up the Mercosur trade bloc, writes Stephen Cadogan.

Intense negotiations towards free trade started in 1999. But EU farmer opposition and disagreement between Mercosur countries helped to derail talks time after time, including for six years after 2004.

Agriculture Minister Michael Creed says a Mercosur deal is potentially very damaging for the European agriculture sector, and for the beef sector in particular.

Now, officials on both sides claim agreement is just weeks away from completion.

It could devastate Ireland’s most extensive agri-sector, beef. Agriculture Minister Michael Creed says a Mercosur deal is potentially very damaging for the European agriculture sector, and for the beef sector in particular.

However, as in many trade deals, governments seem prepared to sacrifice losses in agriculture for gains in other sectors.

Why they are so willing to do so is perhaps reflected in the World Bank’s latest report on the EU’s Common Agricultural Policy.

Farmers hoping for some sympathy from those who pull the strings of world policy will be shocked by the World Bank’s statement that agriculture’s small and declining share of GDP and of employment, and the 50% income gap to other sectors, is “as it should be”.

The Bank says this reflects the normal process of structural transformation in which agriculture gives way to manufacturing, first, and services, later.

This refers to the Bank’s ideal world, where resources are efficiently allocated across sectors, where a fast-growing manufacturing sector absorbs excess labour from agriculture. Then a services sector provides good jobs, when rising wages start to make labour-intensive manufacturing non-competitive.

The beginning of their ideal economy is urban manufacturing growth which leads to higher wages, that trigger labour migration from rural agricultural areas to urban areas. The resulting urban population growth makes food prices rise, making agriculture more profitable for the remaining rural workers.

Higher farm profits lead to increased investments which boost agricultural productivity and improve rural livelihoods.

Successful transformation hinges on rural incomes rising, but only in order that the more enterprising households or household members can acquire the necessary basic education to make the transition to non-farm sectors, particularly urban manufacturing.

Simultaneously, manufacturing needs to serve as a major source of growth, generating employment.

The Bank preaches that governments should avoid mis-managing this transformation, for example with untargeted agricultural subsidies, or uncompetitive practices, which can undermine productivity growth due to “rent-seeking”.

According to the World Bank, the EU is nicely on the way to this ideal successful structural transformation.

It says agriculture was handy along the way, functioning as a “shock absorber” in the 2008 crisis, by which it was least affected of all sectors, particularly in the newer member states of the EU, where social protection institutions are less developed.

The Bank also acknowledges that EU agriculture matters for jobs, providing work on farms for about one tenth of jobs, while the wider food sector provides work for about one fifth of the workforce.

This kind of thinking by the callous theorists who help to run the world helps to explain Mercosur talks, and why there was no outcry at the recent EU prediction that the European agricultural workforce will decline 28% between 2017 and 2030, while agricultural income per farmer or worker increases by only 1.1%.

That is the main finding in the EU agricultural outlook 2017-2030 report published by the EU institutions on December 18 last.

It’s a rude awakening for any farmers who thought their role as food providers gave them a special place in the big picture!

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