Farmers and economic growth

[rockofcashel]

A few threads were started by a poster talking about farmers losing out over the years of the Celtic Tiger, which related to farmers benefiting least from the boom of the past decade, so I wanted to address the issue.

By the time I had written what I have written below, the threads were locked and I could not post, so I am starting a new thread, which others can contribute to. Please just address the issue here, without re-posting the other stuff.

The issue is, have farmers lost out in the boom. I say yes, and here is why.


Unfortunately this is a common occurrence in practically all economies as they move from mainly agriculturally based, to post agriculture industrial and then post industrial service based, if simple economic growth is used as the indicator of an expanding economy. I studied this a few years back, and I believe it was called Lens' Law or Lenz's Law.

Basically what happens is the in an agriculturally based society, farmers are generally better off that non farm workers, as they are producing a saleable product, and also because they can consume part of their own produce, which reduces their consumption costs.

Then, as the economy grows, consumers have more money to spend, and hence they consume more food, also increasing product sales from agriculture, which benefits farmers even more. So, both consumers and farmers benefit.

However, if economic growth continues, consumers will increase consumption of food up to a certain point i.e. until they are not hungry anymore, and then switch their consumption into other goods.

At this point, the ability of the farmer to continue benefitting from economic growth will stagnate, because no matter how much extra money consumers earn from the economic growth, they won't spend it on food.

So, when the economy expands again, the consumers continue buying non food goods, but the farmers don't benefit, so they become poorer relative to non farmers.

This gets worse as time goes on, because as a consumer benefits from growth, i.e. gets richer, their taste patterns become more diverse, and they move from buying indigenous staples.

This has already happened in Ireland.

I can remember as a younger person, when times were tighter, we ate mainly potatoes as the staple food (sounds like the famine era, I'm not that old!!!!), supplemented with other Irish meats and vegetables i.e. carrots, turnips, etc

Now, on any given week, we could spend 3-4 days eating staples such as pasta or rice. And you don't see any paddy fields or spagetti trees around Ireland now, do you.

The beef comes from Brazil, the lamb from New Zealand, with the chickens originating in Thailand or somewhere like that.

So, while the country gets richer because of economic growth, the farmers get poorer, relative to non farmers.

The only way a farmer can increase his income as a result of this loss of demand, is to cut his costs on the supply side, which is mainly achieved through economies of scale, therefore the smaller farmer has to get squeezed out, as is happening.

So, there you go, economic growth is by its nature, bad for farmers.

That is unless they diversify into product lines where people are willing to pay a "premium" on their goods, possibly for "organically" produced goods, or in energy crops.

However, it seems that this economic law has bypassed the IFA and other farming organisations, who still predominantly support FF or FG, despite the fact that they continue the mantra of increased "economic growth", without ever considering agricultural sustainability.

QED.

[Stíofán]

What RoC are you suggesting Sinn Féin would do about it? As opposed to FG or FF which farmers support "despite the fact they continue to support the mantra of economic growth"?

Would SF in government pull out of CAP? Encourage more tarriffs on foreign produce (the Brazillian beef)? Bear in mind Ireland is by far a net exporter of food products.

[Twin Towers]

Are most Irish famers not beef dairy and sheep farmers Roc? Travelling around Ireland over the years its always impressed on me how little is grown, compared to say Germany, Italy or especially the Netherlands.

I seem to grow more in my own suburban garden then some farmers of my acquaintance!

[rockofcashel]

I believe we need to completely refocus our agricultural industry into one which is

1. Organically produced, thereby creating our own niche in the global economic market, which will reduce low value output and increase "premium" value goods. We simply cannot compete with the massive economies of scale that industrial farming units in other countries can avail of.

2. Switch to energy crops, diversifying our agricultural markets

3. Create a much stronger, much more vibrant food industry, to reverse the Irish trend of selling our agricultural goods as commodities, and start selling as value added food products.

[Stíofán]

I believe we need to completely refocus our agricultural industry into one which is

1. Organically produced, thereby creating our own niche in the global economic market, which will reduce low value output and increase "premium" value goods. We simply cannot compete with the massive economies of scale that industrial farming units in other countries can avail of.

2. Switch to energy crops, diversifying our agricultural markets

3. Create a much stronger, much more vibrant food industry, to reverse the Irish trend of selling our agricultural goods as commodities, and start selling as value added food products.

Some good points there, but presumbly shared by all across the political spectrum including FG and FF (although you wouldn't know it from the last 10 years in government), so farmers voting FG or any other party is not misguided.

(By the way FG policy on these issues is available here: http://www.finegael.ie/policy/index....5/type/details)

Your points are not confined to Agriculture though, you could make the same argument about any industry, the need for diversification, value-added activities, 'up-scaling' to use management jargon...

[Cantdecide]

The biggest issue for farmers is the lack of competitivness that Ireland currently enjoys.
They are effectively competing in world markets with very high input costs - especially labour costs.
You will see this affecting more and more sectors of the economy over the next 5 or 6 years because our costs are now seriously out of line with most other OECD countries,not to mention emerging economies in other parts of the world. This country needs a very sharp dose of reality very quickly because we are sleep walking into major trouble. We have consistant 5%+ inflation which is just not sustainable

[905]

There is a model I learnt in school for economic movement. First you have farming, mining, forestry etc. Then you have manufacturing, factories and 'rationalisation'. Then - supposedly lastly - you have services. Ireland allegedly went from phase one to three with very little time spent in phase two.
I think the same could apply to farming. First we had, eh, farming, and now we're moving into service related activities such as biofuel and organic farming. The second phase would be American style big farms with hundreds of acres run like businesses. This is the model favoured by the EU. FG also were traditionally in favour of the big farm, though Imay be wrong.
I think the focus on third phase farming is good because it resembles first phase farming in many ways. The second phase will do more harm than good. Tourism is another aspect of third phase economy, which digging up hedges to make farms more profitable won't help.

[Wolverine]

Now, on any given week, we could spend 3-4 days eating staples such as pasta or rice. And you don't see any paddy fields or spagetti trees around Ireland now, do you.

The beef comes from Brazil, the lamb from New Zealand, with the chickens originating in Thailand or somewhere like that.

Yup - and it's stupid. Flying foodstuffs around the world to an area that can already easily produce the same food.

This is something that's contributing - unnecessarily - to global warming and I can't see it lasting much longer. Brazilian beef might be cheaper to produce but it will rapidly become much more expensive to transport.

There's great potential for bio fuels, and tourism. Even if we were to take all our tillage land and convert it to growing Bio fuels, we'd still only produce 10% of our fuel needs.

Tourism is another massive potential winner, but - dare I say it - I don't think there's much of an appreciation of it's potential among farmers.

There's plenty of potential for proper, sustainable development in rural areas, it just needs some fresh thinking.

[meriwether]

The isue of agriculture is complicated.
It is becoming clear that farming is not economically viable.
However I think it is disingenuous to look at it from that point of view. I think we may have to, in effect, pay fromers to produce foodstuffs, above and beyond what the market pays for it.
Quite simply, we may have to pay for the service that farmers provide.
I think this is the correct decision to take, considering:
(a) We have become very conscious of what we eat- "Fast food nation/Supersize me" et al. Irish farmers provide a good service, of healthy foodstuffs. There is no doubt that if we as a nation moved awat from fast-food and pre-cooked meals, to Vegetables, fruit, meat, dairy products and breads produced by our very own farmers, it would be a healthy step.
So, perhaps making farming viable, will increase the amount of fresh food we consume, making us eat healthier, and becoming healthier. And what sort of cost saving would that represent?
(b) society benefits from a thriving rural society. Wastelands of agrticultural areas made up only of huge ranches does not represent the optimum result for Irish society.
Paying farmers to stay on the land may well turn this around.

[david]

RoC, you missed out the supermarket angle, which I think is important: in order to maximise profits, supermarkets force producers' prices down to the point where farmiing as we knew it becomes unviable. No-one can get a living from it unless farmers form some kind of union or co-op and push farm gate prices up again. Then, of course, supermarkets go abroad for their produce.

I agree with the general points though and certainly some form of protectionism (globally) is a necessary evil - even if 'only' to save the biosphere.