September 20th 2003

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Articles from this issue:

COVER STORY: Wind turbines : coming to a farm near you

EDITORIAL: Changes needed to preserve our democracy

CANBERRA OBSERVED: Carr for Canberra?

WA Government stands up to National Competition Policy

STRAWS IN THE WIND: Rank and bile membership / ALP middle class

ETHANOL DEBATE: Eminent doctors and scientists call for ethanol biofuel blends

COMMENT: Behind the fall of Pauline Hanson

LETTERS: After Anderson (letter)

LETTERS: Missing history (letter)

AGRICULTURE: The issues behind the rural crisis

MILK: Calls to re-regulate WA's dairy industry

ECONOMICS: US prosperity and growth in the 1990s

ASIA: Taiwan and United Nations membership

BOOKS: Hitler and Churchill : Secrets of Leadership, by Andrew Roberts

BOOKS: The Homosexual Agenda, by Alan Sears and Craig Osten

BOOKS: Return of the Heroes : The Lord Of The Rings, Star Wars, Harry Potter And Social Conflict

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The issues behind the rural crisis

by Patrick J. Byrne

News Weekly, September 20, 2003
"Twenty years ago, if a local dairy farmer was in trouble, we would all chip in and help him out. Today the attitude is, let's sit back and let him go under; one of us will get his farm, another his cattle and another his dairy. As a result, the once remarkable community life of rural areas is gone. The new economics of farming is tearing our communities apart."

That is how one farmer recently described the recent dramatic changes in rural Australia.

An earlier generation or two of dynamic, community-minded farmers had created across Australia rural co-ops, marketing boards, single selling desks, regulated authorities and rural credit unions, to ensure farmers received a just price for their product and access to adequate finances. These bodies ensured farmers would not be exploited by monopolistic traders, processors and supermarkets abusing their market power.

These various organisations were built on the age old understanding that farmers are price takers, not price markers, on recognition of the importance of the family farm as a viable economic unit best capable of also looking after the land, and on the understanding that family farms were an ideal place for raising a family.

Farm policies were based on the idea of widespread ownership of land (not plantation farming by powerful elites, as in Latin America), on the principles of working cooperation (not just blind competition) between farmers, and solidarity of local communities.

Those principles, on which strong rural communities were built, have been stripped away in less than a generation. This loss reflects secular cultural changes underway across Australia, which powerfully underpin the economic changes that have pitted farmer against farmer and torn the social heart out of rural communities.

Ironically, many leading farm peak organisations and large farmer cooperatives have championed these changes.

These bodies have been corrupted by the ideology of Globalism, the false idea that somehow farmers can get a fair and just price after their industries have been deregulated. In some industries, ordinary farmers have lost control of their own peak bodies and their cooperatives, which are now operated by elite clubs.

After 15 years of radical economic change, the fight for the rural sector is now a fight for the productive heart of Australia. The bulk of Australia's manufacturing is the processing of food and fibre off the farm.

To lose farmers is to lose manufacturing. To lose manufacturing is to lose the industries our farmers need to process their product.

If Australia loses its rural and manufacturing sectors, it can no longer remain a first world nation.

Key Elements

The key elements of the rural crisis include the following:

First, Economist Dr Mark McGovern (Queensland University of Technology) has definitively shown that governments have wrongly identified the export market as the primary market for agriculture. In fact, the bulk of agricultural product is sold into the domestic market.

On the false assumption that the export market was the most important, governments and farm peak bodies have sought to deregulate rural industries, to make them more competitive so as to export more. But these policies have seen imports undermine our farmers' domestic market, and allowed powerful supermarkets to exercise market power over farmers.

Second, the deregulation process has taken place under National Competition Policy, where the states are offered financial carrots to deregulate industries, and are penalised if deregulation is not pursued. Supposedly, competition would make our farmers more efficient so as to boost exports.

The problem is that farmers are price takers, not price makers. Deregulation leaves them open to exploitation. In the face of deregulation and falling prices, the natural reaction of farmers is to produce more. But producing more only floods the market and forces down prices.

Third, the Australian Competition and Consumer Commission, which administers the Trade Practices Act, has failed to curb the excessive power of the supermarkets, leaving them with the power to bargain down prices to farm industries, many of which now suffer from over production in a deregulated environment.

Fourth, successive governments and many farm peak bodies have backed free trade, including the slashing of tariffs, arguing this would reduce the cost of imported farm inputs. But this has also allowed highly subsidised imports to flood in and erode the domestic market for food and fibre. Politicians want more "downstream value adding" (i.e., manufacturing), but imports are destroying manufacturing.

Some farm sectors may have become more "integrated into the world economy", but this has meant that the value adding to their product has shifted offshore. For example, value added meat processing in Australia has been replaced by live animal exports, where the value adding takes place in the Philippines, Indonesia or Saudi Arabia.

Fifth, farmers' water rights are under threat. Farmers need their water rights defined and protected in order to reliably invest in future production. Farmers water rights are under threat from: (a) some states wanting to regularly review farmers' water rights; (b) proposals for a national water trading system that threatens to create a water market where water barons could buy and sell water, forcing up the price of irrigation water; (c) proposals to increase environmental flows down rivers by reducing farmer's water entitlements, which would put farmers into "permanent drought". These moves must be stopped.

Sixth, excessive environmental regulations are strangling many primary producers, threatening the viability of their industries.

Seventh, Australia's necessarily strict quarantine standards have been threatened by a number of Biosecurity Australia decisions. Lowering the quarantine bar will leave Australia vulnerable to the entry of exotic diseases. The US also wants Australia to lower its quarantine standards as part of a Free Trade Agreement.

Eight, when fees and charges are taken into account, many farmers are paying exorbitant interest rates. Hence, News Weekly strongly supports the establishment of a new development bank to provide long-term loans at reasonable interest rates, with repayments tailored to cash flows, for farmers, small to medium business, home buyers, and infrastructure expansion.

Many grassroots farm leaders have been left to fight for their industries outside their peak organisaitons and spend more time fighting bureaucrats and governments than farming. To overcome the crisis facing agriculture, they will have to first revitalise their own industry peak bodies and co-ops, or set up new ones.

It is time governments woke up to not only the economic destruction underway, but the terrible social disintegration their policies are wreaking on rural communities.

  • Patrick Byrne

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