The case against the new corn laws
There was once a time when Peel’s abolition of the Corn Laws was regarded as an unqualified success, ushering in an era of free trade and prosperity hitherto unforeseen in human history. What was once taken as dictum, however, seems to be lost on the current generation of policy-makers. The Corn Laws, along with the general spirit of protectionism they represent, has once again become fashionable under the guise of the Common Agricultural Policy (CAP). Needless to say, there is no reason to suppose that a policy which was so disastrous in the 19th century, would be any less disastrous in the 21st. It is remarkable how similar, and how similarly conclusive, the arguments against agriculture subsidies remain. The case against this nefariously illiberal policy is made by simultaneously appealing to the needs of the consumer, the competitiveness of the producer, and the health of the international market more generally. The vote to leave the European Union on the 23rd of June offers the perfect opportunity for the government to repeal these new Corn Laws.
Subsidies are simply redistribution under another name – that of ‘protection’. By definition, subsidy requires the productive sectors to finance the unproductive sectors of the economy through general taxation. In the case of domestic agriculture, 1% of the employment market is financed by the remaining 99%. This is made all the more inefficient by the inequity of national contributions to the CAP, with the UK contributing £6 billion, while receiving half that amount in subsidy. The CAP does not even contain the one redeeming feature of redistribution – that of relieving the plight of the least fortunate. The CAP takes all the wealth of the whole of society (including societies poorest) and redistributes said wealth to a group of landowners, who predominantly belong to the upper middle classes. Moreover, the further effect of this subsidy is to inflate domestic food prices by artificially raising the barriers to entry for foreign imports. Regarding the discussion of the ‘cost of living crisis’ at the previous general election, removing domestic agricultural subsidies would be an effective way of pushing down the price of food without distorting the market.
The CAP does not even achieve what it purports to achieve: the goal of keeping the domestic agricultural sector strong. Rather, the effect of the CAP has been to starve the agricultural sector of much needed competition and free enterprise. Instead of farmers competing against one another in order to create the most efficient product in a free market, the sector is now make up of a rentier class, each competing for a subsidy from government (whether national or supranational). In 1984, the government of New Zealand gradually reduced all subsidies and import quotas on agriculture, with the process finally completed in 1990. The agricultural sector of New Zealand’s economy (which is far more important when relatively compared to the UK’s agricultural sector) consequently boomed, as fair and proper conditions were returned to the market.
Perhaps chief among the CAPs crimes is that it keeps developing countries poor, and in constant need of aid. Repealing the subsidy would enable imports, from African and South American countries in particular, to be sold at a competitive price in Britain. This would not only allow British consumers access to cheaper food, but increase the economic strength of developing nations. This would, in turn, allow western nations (the very nations which imposed the subsidy), to reduce their own foreign aid budgets towards these countries, enabling prosperity, and reducing embezzlement by corrupt officials in one fell swoop.
All that remains is for Theresa May’s government to emulate its Peelite forebears, by scrapping agriculture subsidies, without exception, over a gradual period of years. It may not be politically advantageous – it is in the nature of embedded interests to cause political trouble when their privileges are questioned – but the future benefits of such a policy would go a long way to cementing May’s legacy at a time when her premiership has yet to begin. Before the referendum on the 23rd of June, Paddy Ashdown attempted to boost the Remain campaign by threatening that leaving the EU would ‘open the door to cheap food world-wide’. Let’s take him at his word.