Wednesday, June 8, 2011

Decades of Common Agriculture Policy leave Europe with little future hope.

Update: 01-11-2011

I have been thinking of a metaphor to sum up this issue, and thought of this:
"Cutting off the nose to spite the face"

Original entry:
This is the perfect fractal (or scale) example of 'no such thing as a free lunch'.

Decades of agriculture protectionism - strangling the death out of developing economies - has (ironically) hindered any prospects for Europe trading itself out of this (next to) bankrupt financial crisis it is currently in.
 One of the saddest topics in the subject of economics is that of the impacts of farm and agriculture protectionism, namely the Common Agricultural Policy, or the CAP.  For decades it has favoured a very  few – some 1  to 2% on average of EU GDP  – at the expense of the EU tax payer, and has almost systematically destroyed –  through the act of dumping –  any hopes of developing counties (LDC’s) producing and importantly trading food themselves. It has gotten so bad, and out of hand, these countries are now net importers of food.

Is it now 'Africa', that could save the EU?  - trade your way out - rather than bail /print yourself out.

In principle, had EU bought African sugar (cotton, corn, chocolate bars and T-shirts best), Africa would have in turn bought EU trucks, EU make trucks, and Africa they will need trucks to move the sugar – both would have won. Through CAP, this principle has been distorted (and still is, even with the austerity in Europe right now, CAP has hardly changed!! ) to the extent where Europe produce both sugar and trucks, and have then dumped the surplus sugar on African market, destroying their production chances and their self sufficiency.  To add salt, EU then expect them to buy the trucks anyway! - with the little they have.

This absurdity has survived due to more than one reason, but it is interesting how rich nations have been able to trade with each other, the same goods – trucks for trucks in this case - as Professor Krugman described in his 2008 Nobel Prize lecture (here).  This has been successful, up until recently, but now rich countries (with the exception of a few, Norway and the like) are broke! 

The only method to kick-start these economies has been extreme monetary policy (printing), with negative interest rates (from around 2014) and fiscal policy. I call this act of printing and deficit spending to improve yourself, Economic incest.  Do it with yourself, your own family.

Europe wouldn’t have had to do this, had they'd traded - freely!  Win Win.

Too late, China is in ahead.
Today, we see China making its way into Africa, and in doing so growing Africa for the first time in 50 (odd) years.  Europe never did that, and thought the only solution for Africa was aid. Wrong!

EU, what a mess you have made for yourself. "Cutting off the nose to spite the face".
From a distance, it is almost as if Europe is racist. Economic apartheid.


http://www.oxfam.org.nz/sites/default/files/reports/DairyPaper.pdf

1 comment:

  1. Common Agricultural Policy has had a huge impact on Europe, and whatever happens next is going to be crucial. That is why it is important to stay up to date on what occurs if you work anywhere in the field of agriculture. Agriculture.com is a great resource for this. They have the latest news, updates, and reports for farmers and other agricultural businesses, including information on common agricultural policy. While I do work for them, I honestly have found a lot great information there, as well as the chance to interact in their forums, share stories, promote your business, and buy or sell products and services. I definitely recommend taking a look.

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