WHEN I read that the International Monetary Fund (IMF), last week, had said when it comes to the agricultural sector, Zimbabwe’s Government should focus on irrigation, educational programmes and infrastructure and let the private sector supply the rest, as a way of dissuading the continued implementation of the Command Agricultural Programme, my first thought was: ‘Here we go again!’
The IMF and World Bank (WB) have a tendency of prescribing recipes that have proved to be disastrous, such as the structural adjustment programmes of the late 1980s and 1990s.
Many developing nations are in debt and poverty partly due to the policies of the WB and IMF, despite the two claiming these policies reduce poverty.
In her book, A Fate Worse Than Debt, Susan George wrote: “The IMF cannot seem to understand that investing in…(a) healthy, well-fed, literate population … is the most intelligent economic choice a country can make.”
And I concur with her assertion.
What the IMF prescribes for the developing world is new and untested.
Interestingly, the developed world’s economic might has not been a result of these warped policies.
Anyway, coming back to agriculture and food subsidies; my starting point is at the World Trade Organisation’s Doha Round in 2001, where many developing nations – including Brazil, China and India – opposed agricultural subsidies in the US and the EU.
They argued high subsidies were artificially driving down global crop prices, unfairly undermining small farmers and maintaining poverty in many developing countries.
However, now the developing world has caught on and is rapidly growing its subsidies to the agricultural sector.
Subsidies to that sector support innovation, help build a stronger middle class, feed the hungry, produce surpluses for export and pull millions of the rural poor out of poverty and into better living standards.
At the same time, they counteract the decades-long effects of the unfair advantages developed nations have had when it comes to food production.
The US Government, through the US Department of Agriculture (USDA), spends US$25 billion or more a year on subsidies for farm businesses.
The particular amount each year depends on the market prices of crops and other factors.
The US Government has been protecting farmers against unpredictable hardships such as bad weather since the 1930s, when drought and the Great Depression devastated the nation’s agriculture industry.
More than 90 percent of agriculture subsidies go to farmers of wheat, corn (maize), soybeans, rice and cotton.
These agric subsidy programmes counter adverse fluctuations in prices, revenues and production.
Other programmes subsidise farmers’ conservation efforts, insurance coverage, product marketing, export sales, research and development, among other activities.
Agriculture is no riskier than many other industries, yet the Government has created a uniquely large welfare system for farmers.
Agric subsidies in the US
l Insurance
Crop insurance run by the USDA’s Risk Management Agency has become the largest farm programme with annual outlays of about US$8 billion.
Subsidised insurance protects against various business risks such as adverse weather, low production, and low revenues.
It covers more than 100 crops, but corn, cotton, soybeans and wheat are the main ones.
l Agricultural Risk Coverage (ARC)
This programme pays subsidies to farmers if their revenue per acre, or alternately their county’s revenue per acre, falls below a benchmark or guaranteed level.
Generally, the lower the prices and revenues, the larger the subsidies paid.
More than 20 crops are covered, from wheat and corn to chickpeas and mustard.
ARC subsidies fluctuate, but they were about US$7 billion in 2016.
l Price Loss Coverage (PLC)
This programme pays subsidies to farmers based on the average national price of each particular crop compared to the crop’s reference price.
The larger the fall in a crop’s price below its reference price, the larger the payout to farmers.
PLC subsidies also cover more than 20 crops. PLC subsidies fluctuate, but they were about US$2 billion in 2016.
l Conservation Programmes
The USDA runs numerous farm conservation programmes which cost taxpayers more than US$5 billion a year.
The largest is the Conservation Reserve Programme which pays farmers about US$1,7 billion a year to keep millions of acres of their lands out of production.
l Marketing Loans
This is a price guarantee programme that began in the New Deal era.
The original idea was to give farmers a loan at harvest time so that they could hold their crops to sell at a higher price later on. But the programme has evolved into just another subsidy programme that delivers higher payments to farmers when market prices are low.
These subsidies were about US$400 million in 2016.
l Disaster Aid
The Government operates various disaster aid programmes for different types of farmers, from wheat growers, livestock producers, to orchard operators.
In addition to permanent disaster programmes, Congress sometimes distributes additional aid after adverse events. Disaster and supplemental aid costs about US$1 to US$2 billion a year.
l Marketing and Export Promotion
The Agriculture Marketing Service spends about US$1,2 billion a year on farm and food promotion activities. The Foreign Agricultural Service spends about US$1,4 billion a year on a range of activities, including marketing US farm and food products abroad through 93 foreign offices.
l Research and Other Support
Most American industries fund their own research and development, but the Government employs thousands of scientists and other experts to aid the agriculture industry.
The USDA spends about US$3 billion a year on agriculture and food research at more than 100 locations.
The department also provides other support services such as statistical information and economic studies.
After years of being ravaged by repeated droughts, the constant and persistent attempts by the West to ensure that the Land Reform Programme is a failure and Government deficiencies due to poor planning and lack of experience, Zimbabwe has an opportunity to grow the agricultural sector and become one of the few success stories in the developing world.
So when the IMF starts talking about the Government of Zimbabwe taking a step back from funding and capacitating the agricultural sector, one has to look at the bigger picture.
By introducing subsidies, Zimbabwe is cushioning itself from predatory practices of Western nations like the US, whose farmers over-produce, causing prices to fall and thereby short-changing farmers in the developing world whose governments rarely have the funds to meet the difference in prices.
Subsidies spur economic development, especially in an economy like Zimbabwe which is predominantly agro-based.
Success in Zimbabwe’s agricultural sector is expected to lead to success in other economic sectors.
In response to the IMF, I quote Franklin D. Roosevelt’s 1937 inaugural speech where he defended his proactive efforts to bring the country out of the Great Depression saying: “We refused to leave the problems of our common welfare to be solved by the winds of chance and the hurricanes of disaster.”