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New Zealand's aid-free farm boom
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European and American farmers might fear that switching off the life-support system that supplies $350 billion in annual subsidies would destroy their incomes and their way of life, but New Zealand farmers say the sudden removal of their state aid 16 years ago had the opposite effect, revitalizing the rural economy from top to bottom - and benefiting the environment.
"You'd be hard-pressed to find one farmer in New Zealand who would want to go back to the previous regime," said Tony St. Clair, chief executive of the country's main farmers' group, Federated Farmers, which recently issued a report titled "Life After Subsidies" that details the New Zealand experience.
Government assistance to farmers in New Zealand, which provides a third of the world's dairy exports and more than half of lamb exports, was removed in 1984 by an incoming Labour government that inherited a heavily protected economy on the verge of bankruptcy.
At first farmers protested bitterly, but faced with less than a year to get used to the idea that assistance would vanish, they radically altered their practices, the Federated Farmers report says. Farmers who had maximized production to attract subsidies learned how to maximize efficiency instead. Productivity rose, profits remained strong and agriculture increased its share of New Zealand's gross domestic product.
"If you look at productivity in the farming sector since 1984," St. Clair said, "we've averaged 3.9 percent productivity growth, year-on-year, and the rest of the New Zealand economy has run at about 0.9 percent."
Farmers, who previously had seen themselves as natural enemies of "greenies," learned environmental pride as marginal land, once dosed with heavily subsidized fertilizer, went out of production and began reverting to native forest. The country's water quality also improved as fertilizer use dropped.
When the price of land fell dramatically after the removal of subsidies, an enterprising new generation was able to enter farming, broadening the sector's base to include such activities as rural tourism. And as farmers showed the rest of the country that they could not only adapt but also thrive in a subsidy-free world, public scorn for fat-cat aid-chasers gave way to a new appreciation for the place agriculture holds at the heart of New Zealand's livelihood.
The federation's report acknowledges that the changes were a struggle for many farmers in the short term. When incomes fell, farmers and their families had to supplement their earnings with nonfarm work. But banks put their faith in the farmers' ability to adapt, rescheduling loans to see them through the difficult transition, and government predictions that 10 percent of farmers would be forced off the land were not borne out: In the end only 800 farms, or 1 percent, faced forced sales.
St. Clair is proud that New Zealand farmers have made such productivity gains even though they are competing in the global marketplace with farmers elsewhere who remain heavily subsidized. New Zealand farmers do not want to tell their overseas counterparts what to do, he said, but the evidence is there for all to see. According to the Federated Farmers report, the country's experience has "thoroughly debunked the myth that the farming sector cannot prosper without government subsidies."
New Zealand's trade negotiations minister, Jim Sutton, used blunter language last month in commenting on the Farm Bill that is expected to increase U.S. agricultural subsidies to $180 billion over 10 years. It was "just ludicrous," he said, "that a modern, technologically competent, productive farm industry such as the U.S. farm business got about 30 percent of its annual net income from subsidies."
European and American farmers may be unwilling to cut their subsidy lifelines right now, but they are embracing the success of the New Zealand experiment in other ways. "We're seeing quite a large number of European farmers as well as American farmers coming down here to establish operations," St. Clair said.
"You'd be hard-pressed to find one farmer in New Zealand who would want to go back to the previous regime," said Tony St. Clair, chief executive of the country's main farmers' group, Federated Farmers, which recently issued a report titled "Life After Subsidies" that details the New Zealand experience.
Government assistance to farmers in New Zealand, which provides a third of the world's dairy exports and more than half of lamb exports, was removed in 1984 by an incoming Labour government that inherited a heavily protected economy on the verge of bankruptcy.
At first farmers protested bitterly, but faced with less than a year to get used to the idea that assistance would vanish, they radically altered their practices, the Federated Farmers report says. Farmers who had maximized production to attract subsidies learned how to maximize efficiency instead. Productivity rose, profits remained strong and agriculture increased its share of New Zealand's gross domestic product.
"If you look at productivity in the farming sector since 1984," St. Clair said, "we've averaged 3.9 percent productivity growth, year-on-year, and the rest of the New Zealand economy has run at about 0.9 percent."
Farmers, who previously had seen themselves as natural enemies of "greenies," learned environmental pride as marginal land, once dosed with heavily subsidized fertilizer, went out of production and began reverting to native forest. The country's water quality also improved as fertilizer use dropped.
When the price of land fell dramatically after the removal of subsidies, an enterprising new generation was able to enter farming, broadening the sector's base to include such activities as rural tourism. And as farmers showed the rest of the country that they could not only adapt but also thrive in a subsidy-free world, public scorn for fat-cat aid-chasers gave way to a new appreciation for the place agriculture holds at the heart of New Zealand's livelihood.
The federation's report acknowledges that the changes were a struggle for many farmers in the short term. When incomes fell, farmers and their families had to supplement their earnings with nonfarm work. But banks put their faith in the farmers' ability to adapt, rescheduling loans to see them through the difficult transition, and government predictions that 10 percent of farmers would be forced off the land were not borne out: In the end only 800 farms, or 1 percent, faced forced sales.
St. Clair is proud that New Zealand farmers have made such productivity gains even though they are competing in the global marketplace with farmers elsewhere who remain heavily subsidized. New Zealand farmers do not want to tell their overseas counterparts what to do, he said, but the evidence is there for all to see. According to the Federated Farmers report, the country's experience has "thoroughly debunked the myth that the farming sector cannot prosper without government subsidies."
New Zealand's trade negotiations minister, Jim Sutton, used blunter language last month in commenting on the Farm Bill that is expected to increase U.S. agricultural subsidies to $180 billion over 10 years. It was "just ludicrous," he said, "that a modern, technologically competent, productive farm industry such as the U.S. farm business got about 30 percent of its annual net income from subsidies."
European and American farmers may be unwilling to cut their subsidy lifelines right now, but they are embracing the success of the New Zealand experiment in other ways. "We're seeing quite a large number of European farmers as well as American farmers coming down here to establish operations," St. Clair said.
