In the Fifties, when European leaders were setting up what is now the European Union, they promised that there would never again be a food shortage in Europe. At that time, Europe was still a food importing region and the hungry winter in the Second World War was still fresh in everyone’s minds.
However, that hunger was not so much due to shortage of food, but rather to the fact that it just could not be brought to the places where it was needed. The Government had called for a train strike in occupied Holland in order to frustrate the occupying forces, which had simply placed their own drivers on trains to transport troops and weapons. Dutch train personnel doggedly continued to strike and that led to hunger because the problem was not production of food, but distribution thereof.
When the war had ended, that factor was soon forgotten and only the memory of the hunger remained. Food production thus needed to be increased and for this purpose, help was required from the farmers. The plan devised for this in The Netherlands was astoundingly simple: ensure that the farmers can count on a guaranteed good price for their products each year, then they will automatically start producing more, which will be the end of hunger. Upon formation of what is now the European Union, this plan was adopted by the other member countries and in this way practically every agricultural product was assured of a price determined by the Common Agricultural Policy (CAP), which exceeded the cost price. In this way, the mechanism of supply and demand, which normally determined the market price, was overridden.
In order to protect the farmers from competition from outside of Europe, where many agricultural products can be less expensively produced, the borders were closed for these products. In other words, import taxes were levied on these products that were so astronomical that foreign products were made artificially more expensive than European ones. And so, the farmers were protected from foreign competition.
The CAP also served another purpose. In the Fifties, many people began to move from the countryside to the larger cities. To ensure that farmers had a decent income, measures were taken to stop the migration from the countryside.
The system worked magnificently. By the end of the Seventies, the European agricultural sector produced more than the European consumer could eat. A good moment to abolish the CAP or at least to adapt it, but attempts by the European Commission was met with a stern “no” from the member states. The political power of the Green Front was still very strong and the majority of citizens only came to their senses when the damage had been done.
A law had been passed whereby Brussels had to guarantee farmers a minimum price per product. That mechanism worked like this: when, due to surplus supply the price of a product dropped below the minimum price, Brussels bought enough of that product until the balance between supply and demand - and thus the price - was restored. In business terms, that is known as intervention. The price paid by Brussels for the product removed from the market, was equal to the set minimum price.
And the farmer continued producing. Where, formerly, the market functioned as steering wheel for production, that wheel was taken away by Brussels. The result was a totally uncontrolled and unstoppable growth in production.
Harvests were stored in European Union warehouses, where enormous mountains of butter and meat were formed at the beginning of the Eighties, augmented by lakes of wine and seas of olive oil. In the meantime, the related costs have risen to astronomical amounts. About half of the total European budget, some 45 billion Euros, has been used over the last decades to support the agricultural sector.
Aided by pressure from the public sector, who spoke shame of this, the agricultural sector agreed to measures to limit production. Europe introduced a production ceiling for a number of products such as wheat and milk. But as so often in politics, this did not work. Production was not limited at all, the status quo at the time was simply frozen, which is an entirely different thing. Expansion was prohibited, which is not the same thing as limitation.
Throughout the years, production has only been reduced very slightly, but in the case of certain products, the European agricultural sector still produces about 25% to 30% more than Europe can consume itself.
Although the mountains of meat and butter have disappeared, the costs of the European agricultural policy continue to rise. This great disappearing trick of products and money has been realised on the global market. All surpluses produced in Europe are sold on the global market, for any price.
Until 2007, average global market prices were about 30% higher than the set European minimum prices. The difference between the two is made good by Brussels, in other words the European tax payer. In this way the taxpayer pays twice for his food: once in the shop, where the minimum price has been determined by Brussels and a second time via his tax form, to finance sale of surpluses on the global market.
This sale on the global market for any price offered is nothing other than dumping and it has far reaching consequences. European surpluses, which are dumped on the global market, cause the already low price on that market to remain under constant pressure and even to collapse on a regular basis. The European farmer does not feel this at all: he is guaranteed a set minimum price. Many of his colleagues elsewhere in the world feel the impact all the more.
Whereas the European farmer can finance his expansions and modernizations comfortably, thanks to the European agricultural policy, that same policy makes it practically impossible for his colleagues elsewhere in the world to expand or to modernize. European dumping practices also cause extreme instability in prices on the global market. Just a little more supply than demand on food markets is sufficient to cause the price to come crashing down. A bank in one of those countries would be most hesitant about financing an entrepreneur who is dependent on such unstable price fluctuations.
The Rabobank, in former times the agricultural credit bank for rural Holland, is now active all over the world, principally in the food industry. However, with the exception of Australia, the bank does not provide loans to any individual farmers outside of The Netherlands. Due to the uncertain position of their incomes, the risk has become too great.
Through dumping on the global market, Europe at least seriously impedes agricultural development in large regions in the world. In this context, the European citizen, who allows the farmers to continue production, is just as responsible for a great deal of the hunger that is still being suffered in other parts of the world. To illustrate: Europe has a population of some 350 million people, 8 million of whom are farmers. There are still some 800 million people in the world who do not have enough to eat.
Most ironic is that the original aim of the Common Agricultural Policy has not been achieved, whilst the enormous costs of it continue to rise.
The first aim was: good and affordable food for the Europeans. Putting it mildly, the quality of food produced in Europe and The Netherlands is disputable and it is anything but affordable. Furthermore, food prices in Europe are considerably higher than in the rest of the world, whilst the European consumer pays twice for his food: once in the shop and once via his taxes to finance subsidies.
The second aim was to ensure that the “small” farmer could survive economically and that at the same time migration from rural Holland to the cities was curbed. The Common Agricultural Policy has achieved exactly the opposite. The “small” farmers disappeared and large ones grew even larger, whilst those large farmers least needed all those billions in subsidies. With the disappearance of the small farmers large parts of Europe, particularly in France have been depopulated!