The reasons McDowell is wrong about farm subsidies

Questions have been raised about the justification for subsidising farmers, including by economist Moore McDowell, on RTÉ’s Prime Time current affairs TV show, hosted by Miriam O’Callaghan, on Tuesday night.

McDowell replied ‘so what?’ when the IFA said that without subsidies three quarters of Irish farmers would go out of business.

The reasons it is necessary for Ireland and Europe to subsidise farmers are as follows:

1. Food is a ‘strategically important’ public good, and Europe wants to maintain a strong food supply for its citizens.

2. Food production consists of delicate systems of crop and animal husbandry, dependent upon good quality soils and water, which are limited.

It is not possible for farmers to change systems of production quickly, to respond to the volatile, free-market conditions.

3. The relentless growth in world population has resulted in low stocks of all major food commodities, creating food shortages in many places, even, at times, leading to social unrest.

Europe wants to protect against this.

4. European consumers insist that European food should be of very high production, welfare and environmental standards, which means the returns from food production are only marginally ahead of the costs of production.

5. Conflicting policies relating to world trade mean that Europe is open to imported food produced to much lower standards, which thus has an unfair competitive advantage.

6. Farmers hold a weak position in the market place, relative to the large supermarket buyers, creating an environment of low returns to the producer and high profits to the retailers.

7. Europe recognises the benefits of supporting rural communities, which contribute to balanced, regional development and maintain rural environments.

The vast majority of food produced in Europe comes from small family farms, which, with a modest subsidy, can survive and sustain these rural communities.

The reasons we don’t subsidise hairdressers and taxi drivers, to use McDowell’s comparison, are as follows:

1. European consumers are more than willing to pay a price for these services, that gives a fair return to providers of such services.

If they were not prepared to do this, we would not have enough hair dressers nor taxi drivers.

2. These services cannot be substituted for imported services, delivered to standards unacceptable to European consumers.

3. There is no risk that these important services will ever be in short supply for European consumers.

They are not considered strategically important services, albeit they are necessary services.

It is also important for consumers to be able to put the matter of agricultural subsidies into context.

As an illustration, in 2012 Ireland provided the following subsidies to four strategically important areas: social protection, €13.4bn; health, €12.5bn; education, €8bn; and agriculture, €2.7bn.

McDowell should ask himself why he received an annual healthy ‘subsidy’ when employed by UCD ?

That ‘subsidy’ sounds an excessive amount, compared to the average Irish farmer, who gets an annual subsidy of just under €10,000.

On second thoughts, seeing that he has no clue why farmers should get any subsidies whatsoever, I would not hold my breath waiting for him to justify his own ‘subsidy’.

Edmond Connolly

Chief Executive Officer

Macra na Feirme

Irish Farm Centre

Dublin 12