RUTHFULLY YOURS

In the past few weeks European farmers have taken to the streets of their capitals to advertise a rebellious mood that few expected to see.

Having enjoyed a comfortable life for decades, thanks to subsidies from their respective governments and the European Union’s Common agricultural Policy (CAP), they were not expected to invade the grand capitals together with their sheep, cows and tractors with a litany of woes.

The question of food security was first raised after World War II as a top priority for Western European nations as they tried to rebuild their shattered economies.

At the time global shortage of food was still seen as a looming threat while large scale famines claimed millions of victims in the People’s Republic of China and several sub-Saharan African nations while Western European countries gradually dismantled the rationing systems set up during the war.

Up to the 1960s the average European family spent almost 50 percent of its income on food, something that limited the market for manufactured goods and services. Reducing the cost of food became an imperative as rebuilt industries looked for growing markets.

The Western powers, led by the United States, launched a series of initiatives to create a global free market for manufactured goods while keeping their agricultural sector under protection.

Coming into effect the General Agreement on Tariffs and Trade launched what was to develop into the global free market for industrial goods. During the Cold War the concept of a “free market” provided the ideological core of capitalist democracies against the concept of “planned economies” championed by the Soviet Union.

Attempts at challenging the concept with slogans such as “the social market”, advocated by Federal Germany’s Social Democratic Party (SPD) and the “non-capitalist road to economic development” championed by the emerging Third World politicians, failed to stop “free-marketers” from leading the world towards what became globalization.

Needless to say, the concepts served the interests of the handful of nations with industries capable of competing in world markets. Until the late 1950s, for example, only five nations manufactured automobiles capable of attracting customers across the world. The same was true of domestic appliances and the bulk of textile industries. The principle of comparative advantage favored nations with an industrial infrastructure and culture.

As for financial and other services, the subject of the second rounds of GATT negotiations, again the US and a handful of Western European nations started with a huge advantage.

However, since comparative advantage could come in many ways, it was inevitable that newcomers to the global market would find ways of securing at least a stool at the high table.

In Japan, for example, the comparative advantage came through a massive campaign of copying Western products at a time that laws on intellectual property, copyright and brands were in their infancy, combined with a highly disciplined but relatively inexpensive work force.

A generation later China and, still later India, Brazil and Indonesia, along with other smaller “emerging nations”, used the advantage of cheaper labor and looser social regulations to enter the global market for manufactured goods.

As for financial services a galaxy of tax-havens appeared across the globe, denting the monopoly enjoyed by the US, Great Britain, France and Germany. Still later, Japan, with its economy growing in size, and China, having recovered Hong Kong and Macao, gate-crashed the financial services club.

All along agricultural remained a protected zone.

That kept the richest potential markets closed to outside competition. Even when European farmers produced mountains of excess food, the European Union continued to give them subsidies and, later, to reduce production. Thus for two generations it was profitable to be a gentleman farmer in Western Europe and North America.

Then came a double whammy in the shape of extending globalization rules to agriculture on the one hand and applying the strictures of the new environmental religion. Globalization rules enabled many nations to use their comparative advantage in terms of climate, richness of soil, less expensive labor and variety of products to claim a growing chunk of the traditional Western markets. At the same time, Western farmers had to cope with the growing cost of environmental measures concocted by the “save-the-planet” lobby.

The result is that in many cases Western farmers cannot compete with cheaper imports from across the world.

Helping them stay in the game through larger subsidies would mean either higher taxes or higher prices for food at a time it represents just over 12 percent of the average family’s current budget.

Declaring a moratorium on costly environmental measures would require a degree of courage that the current Western ruling elite cannot mauster in a system hijacked by pressure groups, shaky coalitions and the end-of-the-world prophets.

Abandoning the doctrine of cheap food is doubly problematic because of the current inflationary trend that seems unlikely to subside anytime soon.

European policymakers now face a truth that Aristotle saw over 2,000 years ago: every system is corrupted by exaggerating its basic principle!

Thus, too much free market kills the free market and too much globalization encourages protection.

As farmers prepare to invade London, Paris, Brussels, Rome, Amsterdam, Madrid and Berlin with their cows, sheep, pigs and tractors, decision-makers are in panic mode offering concessions that would anger the environmental lobbies, the food importers and the big supermarket chains, not to mention customers, without squaring the circle.

Regarded as an absolute “free market”, as even Adam Smith, the father of the concept of a capitalist market economy, noted two centuries ago, within a state or a group of states organized on shared principles and observing the same laws and rules.

In other words, the ideal “global free market” requires a world government, precisely what Eurocrats in Brussels dream of but lack the courage to openly advocate. The real world is divided into nation-states with frontiers, different cultures and legal systems, and resistance to the one-size-fits-all sought by ultra-globalists.

Protesting European farmers demand a “level-playing field”, something that, if regarded as a perfect model, does not and cannot exist in every human transaction. The “win-win” concept peddled by ultra-globalists is a myth. What matters is that the sum-total of relations among nation-states does not favor some and hurt others in the medium and long term.

The scale of transformation that the EU demands in its “Farm to Fork” strategy is truly dramatic. It includes cutting fertilizers and pesticides use by 50 percent by 20230, doubling organic production, consigning 20 percent of the current farmland to wilderness and, in effect, pushing the percentage of farmers below three percent.

Most polls show that most Europeans sympathize with their farmers. But will they continue doing so if the price is more expensive and less varied food and ditching part of the ecological dogma?