In its annual report, the Organisation for Economic Co-operation and Development (OECD) concludes that over 60% or US$338 billion of the US$540 billion directed each year to individual agricultural producers is given “through potentially the most distorting instruments” that heighten social inequalities and environmental crises. In a conversation with DevelopmentAid, an expert in agricultural economics, Alan Matthews, points out that the established system of subsidies to farmers lacks the required sustainability element. However, he also notes that it is not easy to reform the system mainly due to resistance from established beneficiaries. One of the solutions he sees is to redirect payments for natural resources to support sustainable farming.
Every year, the OECD publishes an ‘Agricultural Policy Monitoring and Evaluation’ report which offers a review of “developments in agricultural policies and provides up-to-date estimates of government support to agriculture for all OECD members and the European Union” including key emerging economies. This year’s publication details the amount of funding that needs to be redirected towards policies to achieve socially just and environmentally sustainable food systems that, aside from productivity, also take into account health and climate costs.
See also: ‘UN Food Systems Summit needs world experts for just and sustainable food systems’
According to the report, world food systems today are yet to meet the “triple challenge” of food security and nutrition, decent incomes and livelihoods for farmers and rural workers, and, last but not least, to ensure the sustainable use of natural resources.
Alan Matthews: Too much support is given in the wrong way to farmers
According to Alan Matthews, Professor Emeritus of European Agricultural Policy in the Department of Economics, Trinity College Ireland, government support to producers is often not linked to sustainability which means that the cost of the harm to the environment is not included in the production cost, rather on the contrary:
“The problem I think is not that the focus is to increase production, certainly many countries still need to do that, but the fact that there is no link or requirement that it is done in a sustainable way. Much support takes the form of market support to stimulate production or in the so-called emerging economies, the focus is on input subsidies (fertilizer and water)”, he explained.
Alan continues to say that these subsidies make production cheaper for farmers thereby encouraging them to use more of the inputs. For example, giving subsidies for water consumption rather than charging for it while many OECD countries experience water scarcity and with agriculture consuming 70% of water of the usable water makes this completely unsustainable.
“Too much support is given in a wrong way to farmers”, he concludes.
Clearly, current policies are not working to save water in agriculture and Alan refers to the case of India where the Green Revolution and the introduction of new technologies has led to high productivity but also to the overuse of water. In fact, the Green Revolution has had other serious environmental and social repercussions all over the world including developed countries.
See also: “Indebtedness and dependency: the untold story of the Green Revolution”
Why do governments continue to pursue such policies?
“Reforming agricultural policies is hugely difficult. We see it in Europe,” stresses Alan.
In this respect, Alan recalls the recent political agreement that resulted in the Common Agricultural Policy in the EU and the criticism that this received from environmental organizations despite the visible progress it made. According to Alan, there is history that hampers the shift in public support, the main reason for which, according to him, is political economy resistance:
“Once producers receive a subsidy, they become used to that subsidy, which is built into their costs so that in many cases we see land rents going up because farming is now more profitable as producers are getting higher prices (because they are getting subsidized inputs). Once you start providing subsidies, you create beneficiaries whose interest is to maintain these subsidies, and indeed, if their productivity is deteriorating with time, they have even more argument to receive subsidies because they are showing that their income is falling behind in their economy. They need to use more fertilizers or more of insecticides.”
If the government withdraws these subsidies, the income of producers will fall and thus Alan refers to the agricultural reforms in Europe whose philosophy was to provide income support in an alternative way. However, according to the OECD report and other reports, it continues to be unsustainable.
Alan points out that it is also a bureaucratic issue – too complex and expensive to administer many payments to small individual farms – that represents the second main reason for the reluctance to reform current policies by many countries. He adds that the bureaucratic issue applies to sustainable farming practices such as agroecology:
“How do you actually control that they are actually doing what you have paid them for? It is an expensive thing – monitoring the fields, checking the practice if the farmer is using pesticide when he shouldn’t be, and so on.”
OECD recommends investing in public goods
One of the OECD’s recommendation to address the ‘triple challenge’ faced by food systems suggests the need to “re-orient public expenditures towards investments in public goods – in particular innovation systems” which in fact represents an alternative way to support farmers’ income. The OECD refers to ecosystem services which are vital to people’s life. In fact, the decrease in productivity linked to conventional production is directly linked to the degradation of ecosystems and the services they provide to people:
“Ecosystems sustain human life. They supply food and drinking water, maintain a stock of continuously evolving genetic resources, preserve and regenerate soils, fix nitrogen and carbon, recycle nutrients, control floods, filter pollutants, pollinate crops, and much more.”
Alan confirms that payment for ecosystem services is one of the 10 measures suggested by the European Commission in its recommendations to Member states, so “agroecology is fully included”, he says. In fact, several institutions including the Global Environment Facility (GEF) have been providing financial resources to Payment Ecosystem Services (PES) projects.
“In principle, Payment for Ecosystem Services is a good idea and can potentially be used to support agroecological practices amongst other things”, acknowledges Alan.
While Alan stresses the importance of the respective measures and the difficulty of these being realizable for farmers to bring about changes we want, the Food and Agriculture Organization (FAO) has already started testing an instrument that measures progress towards Sustainable Development Goals in a comprehensive way including such aspects as farmer’s income, dietary diversity, and agricultural biodiversity to name just a few.
