Ludwig von Mises Institute

Agriculture

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Agriculture is the science, art, or practice of cultivating the soil, producing crops, and raising livestock and in varying degrees the preparation and marketing of the resulting products.[1]

Agriculture by countries[edit]

European Union[edit]

In the EU, the agricultural sector produces about two percent of the economic output. However, agriculture is the single largest item in EU's budget, 44.2% in 2012.[2]

New Zealand[edit]

Faced with a budget crisis, New Zealand’s government decided to eliminate nearly all farm subsidies. It was a dramatic reform because New Zealand farmers had enjoyed high levels of aid and the country’s economy is more dependent on agriculture than is the U.S. economy.

Despite initial protests, farm subsidies were repealed in 1984. Almost 30 different production subsidies and export incentives were ended. It created a tough transition period for some farmers, but large numbers of them did not walk off their land as had been predicted. Just one percent of the country’s farmers could not adjust and were forced out.

The vast majority of New Zealand farmers proved to be skilled entrepreneurs — they restructured their operations, explored new markets, and returned to profitability. Today, New Zealand’s farming sector is more dynamic than ever, and the nation’s farmers are proud to be prospering without government hand-outs.

Prior to the 1984 reforms, subsidies stifled farm productivity by distorting market signals and blocking innovation. Many farmers were farming for the sake of the subsidies. For example, nearly 40 percent of the average New Zealand sheep and beef farmer’s gross income came from government aid.

When the subsidies were removed, it turned out to be a catalyst for productivity gains. New Zealand farmers cut costs, diversified their land use, sought nonfarm income, and developed new products. Farmers became more focused on pursuing activities that made good business sense.

Official data supports on-the-ground evidence that New Zealand greatly improved its farming efficiency after the reforms. Measured agricultural productivity had been stagnant in the years prior to the reforms, but since the reforms productivity has grown substantially faster in agriculture than in the New Zealand economy as a whole.

More efficient agricultural production in New Zealand has also spurred better environmental management. Cutting farm subsidies, for example, has reduced the previous overuse of fertilizer. And cutting subsidies has broadened farm operations to encompass activities such as rural tourism that bring management of the rural environment to the fore. Unsubsidized New Zealand farming is globally competitive, with about 90 percent of the country’s farm output exported.[3]

References[edit]

  1. "Agriculture", Free Merriam-Webster Dictionary, referenced 2013-02-18.
  2. Silke Mülherr. "Agrarsubventionen – die letzten heiligen Kühe der EU" (in German: Agricultural subsidies - the last holy cows of the EU), Die Welt, 06.02.13. referenced 2013-02-19.
  3. Mark Ross and Chris Edwards. "In New Zealand, Farmers Don’t Want Subsidies", Cato Institute, July 17, 2012. Referenced 2013-02-19.

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