Is there any area of public policy in Australia that gets weaker treatment than agriculture these days? Whether it’s milk prices or agricultural investment, the normal Australian tough-mindedness about policy gets shunted aside in favour of emotive puffery. Not too many people want to be tough-minded when it comes to our farmers – not nearly as tough-minded, anyway, as they were when they were taking the subsidies away from the TCF industries employing migrant women in Melbourne in the 1980s.
Now I can think of a few reasons for this.
- Lack of adaptability: People who have lived on a farm all their lives will find it really hard to do anything else. They may be tough but they’re really not that adaptable that they could just move into town and settle down running a milk bar. And no-one wants to shove them off the farm just because they can’t make a go of it.
- Effort: Farmers are actually working extremely hard, which to most people (me included) makes them more deserving than some.
- Nostalgia: Clem Smith, Manangatang farmer, has a higher and longer-established place in our national mythos than Vera Dimopoulos, Coburg house cleaner and former seamstress.
- Distance: Most of us live a long way from farming communities, so we are free to breathe in the myth of farming without observing the less pleasant realities.
- Our emotional relationship to food: The food issue somehow trigger things in our psyche that make us more amenable to bad policy solutions.
So as we prepare to read the coverage of the latest drought relief announcement, here are a few ideas on drought relief and farm policy that seem in danger of getting lost in the dust:
- Farming is a small part of the national economy, and getting smaller. (The NFF itself says that the agricultural sector, at farm-gate, contributes three per cent to Australia’s total gross domestic product.) That doesn’t mean it’s unimportant – three per cent is still a lot – but it does mean we are not deciding the future of national GDP when we talk about farms. This is probably one reason we put up with bad agricultural policy: as a sort of policy luxury good, it costs us relatively less than it used to.
- We export much, much more food than we import. Indeed, we have one of the ten largest food production surpluses in the world, and that’s not likely to change anytime soon. The ratio of exports to imports is about 2.4 to 1. According to the Federal Department of Agriculture, “In 2009-10, Australia exported $24.3 billion worth of food compared to food imports of $10.1 billion. A substantial proportion of these food imports comprised highly processed foods not produced in Australia, speciality branded spirits, seafood and processed fruit and vegetables.” In the incredibly unlikely event that we ever have to endure a food blockade of Australia, there will be a serious shortage of truffles and French champagne, but we will not starve.
- Plenty of farmers survive drought; we are in no danger of running out of Australian food producers, despite the seemingly endless stream of claims about how latte-sipping socialists will have to go cold turkey if we don’t give the farm lobby everything it wants. When we talk about drought-stricken farmers, we’re talking about farmers at the margin – the ones closest to going out of business. Their distress is real and important, but their problems are not going to change the shape of the national economy.
- Struggling small farmers are struggling small businesses, with generally the same financial issues as other small business. At any point in time, some of them will have made bad choices of industry and location and product and many other things, simply because they are like small businesses of all sorts and run by people whose judgement is not always perfect. The difference is that other struggling small business owners expect to go out of business if they make these choices. In the world of farm policy, there is an expectation that some subset of struggling small businesses will be rescued.
- In part because the point above is so obvious, much of the current government rhetoric around drought is now suddenly directed to painting it as a special event that no-one could have foreseen. Tony Abbott and Barnaby Joyce have been repeating “natural disaster” endlessly. But drought is normal in Australia. Check this website for up-to-the-minute info. More than 20 years ago, as a result of a lot of work by Hawke government ministers like John Kerin and Peter Walsh – people who understood farming and good policy – national policy was changed to exclude drought from the category of “national disaster”. Now it’s creeping back, in a sort of rising dust-cloud of dumb.
- Climate change means there will likely be more drought. Never mind what caused the change; many Australian dryland farming areas are getting hotter and drier and conditions more volatile.
- Many farmers themselves are well aware of most of this. But they’re mostly too good-natured to say it in the pub in earshot of their broke mates. A few did speak to the Productivity Commission’s inquiry into drought support back in 2008, though. It’s worth reading page 168 of the PC’s report, which lists farmers talking on both sides of the issue. Under the heading “Farmers not in favour of drought assistance”:
“The same producers are queuing every time assistance is offered which proves there is no adapting to seasonal variability. … Those of us who have embraced new technology and diversification are excluded from assistance as [we] are self-sufficient. (G. Schmidt)”
“It is disconcerting to see a number of ‘inefficient’ graziers … receiving drought assistance when they have done little to plan and manage the risks of drought … (J. Cooper)”
“… the current exceptional circumstances assistance system does not encourage the efficient operation of farm businesses through economies of scale, in fact they encourage the opposite. (L. Mann)”
“Efficient farmers who save and invest off farm are penalised, whilst farmers who waste money [and] spend everything get more help. (H. Clark)”
“A farmer who has diversified risk, managed borrowings conservatively, kept operating costs low and planned a financially secure retirement is less likely to qualify … (P. Wallace)”
- A small subset of farmers continually claims that the problem is returns. You might as well say that Holden’s problem is that it can’t charge $200,000 for base-level Commodores. It’s kind of true, and at the same completely wrong. There is no “right” level of farm prices, any more than there is a “right” price for a Commodore.
- Farmers have been told for decades that they need to get big or get out. As that curmudgeonly rural realist Peter Walsh once pointed out, the problem is that when farmers hear that, almost none of them choose to get out. Instead they borrow and bid up farmland prices, trying to get big. A few years later conditions turn bad, or prices drop, or interest rates rise – it only takes one of those three – and the ones who took the silliest risks find themselves worse off than ever.
Now, if after all this, you still want to support struggling farmers with special assistance, here’s the thing: there are good ways and bad ways to do it. And among the very worst ways is a concessional loans scheme. That’s a scheme to help drought-stricken farmers get even deeper in debt. Do this, and you’re enabling their problem. Indeed, my bet is that within the decade we will see troubled farmers complaining that with this scheme, the government was encouraging them to take on more debt.
Note that this is bipartisan buffoonery: Labor set up such a concessional loans scheme last year; today’s announcement just makes it bigger and worse.
The Abbott government had the guts to turn off the drip-feed to the auto industry when it had demonstrated beyond doubt that it could not make itself long-term competitive. They deserve credit for that decision. But put today’s package together with the Graincorp decision and it becomes clear that agricultural policy is going to be a mess for … well, at least as long as Barnaby Joyce is in Cabinet, and probably longer.
One of the outstanding features of agricultural policy is the ritualistic repetition of the claim that agriculture is special and extraordinary. It’s not. It’s just specially and extraordinarily badly-analysed.
Update: I was impressed to hear the ABC’s World Today program interviewing Professor Linda Botterill on the dangers of concessional loans scheme. Botterrill and her colleague Bruce Chapman point out that if you want to support farmers, a better alternative to concessional loans is income-contingent loans that get paid back when the farmer has cash – a sort of HECS scheme for farmers. Australia pioneered income-contingent loan schemes in the 1980s, so putting one in place in the farm sector seems somehow fitting.
Update 2: The Botterrill interview sent me looking for Botterill and Chapman’s submission to the Productivity Commission inquiry. It’s excellent on several points, including our lack of understanding of rural poverty.
Update 3: I rewrote the top of the article and added a couple of sentences elsewhere. Sorry, but I keep thinking about this stuff after I stop writing.