Free-Market Policy Root Cause Of Mass Poverty in Agriculture
The story is told about a country leader who divorced his wife because she could not bear him his child. Medical investigation later revealed that the fault did not lie with the wife but with the leader who was sterile. This story, whether true or not, is a good analogy on who Filipinos should blame for the mass poverty in agriculture, a phenomenon that accounts for 70 percent of the total poor and the basis of the statement that poverty in the Philippines is agriculture-driven.
Many of the country’s economic leaders blame farmers for their impoverished state. They say that farmers are lazy, lacking in education and capital, stubborn, and resist the adoption of modern farming technology.
In the course of writing the book “Eradicating Mass Poverty in Agriculture” the author’s investigation revealed that the fault for the massive poverty in agriculture does not lie with the farmers, but with the economic leaders who adopted the free-market policy for agriculture. This policy place many farmers under a harsh competitive environment called near perfect market competition that subject them to a perpetual cost-price squeeze phenomenon, wherein prices received by farmers are persistently equal to or sometimes even below production cost. As a consequence, farmers who rely mainly on agriculture for their livelihood generally earn low income, with many of them earning below the poverty threshold.
In this regard, two findings of the investigation are presented to support the allegation that the fault for mass poverty does not lie with the farmers but with the policy makers who adopted the free-market policy for agriculture. These findings are Masagana 99 and the evolution of economic policy of developed countries for agriculture.
Masagana 99 is a Filipino word for bountiful and 99 was the average production target of 99 cavans per hectare per season for irrigated rice fauns. The objectives of this 10-year program in the 1970s were to attain self-sufficiency in rice and raise the income of rice farmers. The strategy to attain these objectives was to accelerate the adoption of a package of technology involving the use of high-yielding varieties developed by the International Rice-Research Institute (IRRI) and the applications of fertilizers and chemicals through extension service and provision of credit.
Masagana 99 mobilized 6,000 agricultural technicians, all agricultural credit institutions in the Philippines, P2 billion in funds, and 530,000 irrigated rice farmers. Although Masagana 99 made the country self-sufficient in rice during the initial years, it failed to raise real farm income because the increase in total supply intensified the cost-price squeeze phenomenon that removed the intended profits in rice farming.
The evolution of economic policy for agriculture in developed countries is another revelation on the root cause of mass poverty of agriculture.
Before 1929, the free-market policy dominated the thinking of most economic leaders of developed countries such as Australia, Canada, New Zealand, the United Kingdom, and the United States of America. They accepted the philosophy that governments should have minimal direct intervention in marketing decisions. They believed that free-market prices were the most efficient mechanisms for coordinating supply and demand for farm products. In pursuit of the free-market policy, governments of developed countries limited their intervention in marketing activities to infrastructure development, development of grades and standards, collection and dissemination of agricultural market information, plant and animal quarantine, and dismantling of monopolies.
By 1929, policy makers of developed countries realized that the free-market prices were poor coordinating mechanisms that impoverished producers. This realization compelled them to replace the free-market policy with the public utility policy for agriculture.
The public utility policy is based on the philosophy that farm products, especially food, are essential to the survival and security of society. Farming therefore should be treated like public utilities to keep commercial farmers economically healthy and reliable suppliers of raw materials and food at reasonable costs to industries and consumers.
A powerful and proven tool used by developed countries to implement the new policy is called producer-controlled marketing boards. This system involved organizing farmers into compulsory cooperatives and legally vesting them with monopoly powers to organize the marketing of commodities. Their objective is to control supply in order to raise faun prices and income, producer market power, and production and marketing efficiency.
The following lessons can be learned from the two cases described earlier.
LESSONS FROM MASAGANA 99
Since 1993, rice farmers in the Philippines have operated under a de facto free-market policy because the National Food Authority (NFA) and its predecessors NGA, ACA, and NARIC have consistently failed to defend the support prices that they set year after year.
As demonstrated by Masagana 99, rice farmers that operate under the free-market policy (de facto or not) earn low income whether or not farmers are lazy or industrious, lacking or sufficient in capital and education, stubborn or flexible in using antiquated or modern farming technology.
LESSONS FROM THE EVOLUTION OF AGRICULTURAL POLICY OF DEVELOPED COUNTRIES
Mass poverty thrived among fainters of developed countries when they adopted the free-market policy and vanished after they adopted the public utility policy for agriculture.
In the Philippines, mass poverty is flourishing because the country’s policy makers continue to adopt the free-market policy for agriculture.
There is a symbiotic relationship between the agriculture sector and the industry sector. Agriculture supplies raw materials and food to industry and serves as market for products of industry. Under a free-market policy this symbiotic relationship is weakened since farmers would be economically unhealthy, unreliable suppliers of food and raw materials and a weak market for industrial goods and services.
Under a public utility policy, the symbiotic relationship is strengthened because the farm sector will be economically healthy, reliable supplier of food and raw materials and an adequate market for 7roducts and services from industries. This strengthened relationship contributed to the rapid and stable economic growth of the developed countries.
There is also a growing trend towards liberalization among countries. s means countries have to open their markets by reducing, if not eliminating, re and non-trade barriers. In the field of agriculture and agribusiness, developed countries that adopted the public utility policy for agriculture will have production and marketing efficient advantages over developing countries like Philippines who have adopted the free-market policy for agriculture.
Among the safety nets that the Philippines should take to enhance its competitive capability is to adopt the public utility policy for agriculture and tools such as producer-controlled marketing boards for implementing the policy.
This article will end with an analogy. Passengers of a leaking boat can keep the boat afloat by throwing water out. However, the danger of the boat sinking is always there for as long as the leak is not plugged.
Under the free-market policy, agriculture is like a leaking boat. The government, the private sector, international agencies, NGOs and other institutions develop and implement anti-poverty programs and projects to alleviate mass poverty in agriculture with little success because the free-market policy of government generate and maintain poverty among farmers. For as long as there is massive poverty in the country, the possibility of a bloody revolution or civil war is always a threat to the survival of Philippine society.
Let us hope that our leaders are as wise as the leaders of developed countries who, as early as 1929, changed the economic policy in agriculture from a free-market policy to a public utility policy.