Getting public policy right is hard enough. When you start out by misunderstanding history it is impossible.
I was reminded of this reading an account of what the International Monetary Fund (IMF) had to say to Ottawa about how to fix things up. Much of an expert report on Canada (prepared as part of a periodic consultation the IMF does with its members) rehearses familiar nostrums about the need to reduce debt, balance the budget, and not share tax revenue with the provinces in an equitable fashion.
But what gives the game away is what the IMF has to say about agriculture: wind down supply management. Now, in Canada, we have people at the Department of Finance who are quite capable of making things worse for most people without the help of the IMF.
Any number of people have been trying to make Canadian agriculture conform to market forces of supply and demand by removing income support features for farm communities which is what supply management is about. The IMF advice is not going to determine the outcome of the debate about how to price Canadian milk. But where the IMF has enormous leverage is precisely in poor countries where agriculture still employs many people. IMF misunderstanding of agricultural economics produces tragedy on a world scale.
The problem lies with confusing the nature of consumer demand for food with demand for manufactured goods; it stems from misunderstanding the market mechanism itself.
The great contribution of the industrial revolution occurred when mechanization, technology and workplace organization allowed consumer goods such as cars to be sold for diminishing prices. Coupled with high wages — the workers could afford the goods — the sale of increased output at lower costs increased revenue for the industry, for a time. In the good old days of the 1950s, General Motors was banking a return of 15 to 20 per cent on its investment in producing automobiles, though today it is losing money.
In agriculture, producing more food at less cost does not lead to more sales; it only leads to less money for the producer. People who do not have cars, or computers or blackberries but find them attractive and even necessary will buy them when they can afford to. People do not drink more milk or eat more bread because lower prices mean they can afford to. Generally, people eat the quantities they need to satisfy their appetites.
In a rich society the problem is getting safe and affordable food produced. Food security is important. Producing your own food makes sense for a host of reasons starting with not relying on climatic conditions elsewhere for providing the necessities of life.
In a poor society the first problem is food insecurity — ensuring everyone has enough to eat. Agricultural producers have been told by bodies such as the IMF to specialize production for export. This has created great imbalances. Too much coffee, sugar and other tropical products have pushed down prices. Nationals have lacked affordable food. The land should never have been taken out of domestic production in the first place.
Dealing with food security and insecurity requires incentives to producers to manage supply. The rising price of oil undermines the miracle fertilizers that have boosted agricultural productivity. The U.S. cheap food policy has led to dumping of products on world markets and has impoverished Third World farmers.
The issue of sustainable agriculture is huge. Canada’s farmers are the custodians of the land. If for only that reason, they deserve to be supported by our communities through programs such as supply management that allow them to make a living and stay on the farm. The IMF policy would lead to Canadians importing milk and other agricultural products we produce today, while the farm land went to dust.
Good, safe food costs money to produce. It’s worth it.