7. Policy Reform in History: Europe, the USA, and China

This chapter focuses mostly on Western Europe. See Chap. 12 for more on Eastern Europe.

For historical political economy studies in other regions of the world, see Anderson (2009), Anderson and Hayami (1986), Gardner (1987), and Krueger et al. (1992). Well-documented cases of dramatic changes in agricultural policy include the radical liberalizations of extensive agricultural regulations in Sweden and in New Zealand and Australia in the 1980s (e.g. Anderson et al. 2007).

“According to OECD calculations the Producer Support Estimate (PSE) to Chinese agriculture was 212 billion USD in 2016; and the Total Support Estimate (TSE) as 2.4% of Chinese GDP in 2014–16, thus about four times higher than the OECD average (OECD Agricultural monitoring report 2017).”

In the UK, where the industrial revolution started, agricultural employment had fallen to 20% of total employment by 1880. On the continent, the shares were lowest in Belgium and Finland (less than 30%) and the Netherlands (35%). In contrast, farmers and farm workers still accounted for almost one-half of the population in France and Germany in 1880. By the late nineteenth century the share of agriculture in GDP had fallen to around 10% in Belgium and the UK while it was around a quarter of total output in France and around a third in Germany) (see also Figs. 4.​2 and 4.​3).

In the UK, the share of the livestock sector grew from 55% in 1860 to 70% of agricultural output in 1900.

The agrarian crisis in the 1880s not only induced farmers to politically organize themselves to defend their interests against industrial capital and to demand protection but also to fight for changes in relationships within agriculture. In the UK, as farmers were forced off their land as they could no longer pay their rents with declining prices, the crisis induced social revolts by small farmers and tenants against the feudal relationships. In England tenants and small farmers organized themselves to defend their rights in the Farmers’ Alliance (1879) and the Society of the Land for the People (1883). Their main objectives were to get a better deal from landlords, rather than import tariffs, as reflected in their demands for ‘the Three F’s’: Fair land rents, Fixity of land tenure, and Free sale of commodities (Cannadine 1992). See Chap. 12 for a more extensive analysis.

Government initiatives to stimulate the shift to livestock production included: research and extension; the subsidization of activities that provided incentives for improved quality of livestock breeding; and compensation for farmers for the slaughter of infected animals.

See Swinnen (2009) for more details.

The political organization of farmers coincided with the establishment of a broad social and educational network of rural schools, hospitals, and other rural organizations. Village priests often played a key role in the local organization. This strategy was very successful in several countries. For example, in Belgium the Catholic Party created a dominant political and social network in the rural areas in collaboration with the Catholic Church and the farmers’ union. In France, conservative coalition of the Catholic Church and the (former) nobility was organized through the Societé des Agriculteurs de France (SAF)—and in reaction the Republican political movement established alternative farm organizations, focusing on small farmers. In Germany in the 1920s and 1930s, the National Socialist (Nazi) Party in Germany rose to power initially targeting urban areas. However, the Nazi Party soon realized the potential voting strength of a discontented peasantry and designed rural policies to address farmers’ concerns. While their strategy focused strongly on the broad rural population, which dominantly voted for them in the 1930 elections, at the same time they joined forces with the large Prussian landlords with whom they shared preferences about the importance of protecting domestic food production and an autocratic political regime.

Several key policies were introduced in the 1860s: the freeing of slaves, which radically altered southern agriculture; the Morrill Act and the start of land-grant colleges; and the Homestead Act that helped shape US farmland distribution.

Orden et al. (1999) document how real agricultural prices fell by almost 50% from the late 1920s to the early 1930s—a decline which is very similar to that in European agriculture in the same period (Swinnen 2009), triggering similar political economy interactions (see also Sect. 7.​2).

Farm subsidies, either linked to production or to land use, have spilled over into high land prices and rents in the USA (Goodwin et al. 2003; Roberts et al. 2003).

In the 1950s and 1960s a large share of wheat exports was part of a heavily subsidized “food aid” program PL 480 (Barrett and Maxwell 2007; Gardner 2009).

See also Swinnen and de Gorter (2002) on credibility and commitment in agricultural policy.

The growth in US biofuels was stimulated by tax exemptions and tariffs, and especially the introduction of mandates for the use of biofuels in transportation—the Renewable Fuel Standard (RFS) in 2005. After 2005, the US biofuel use grew rapidly: corn used for ethanol increased from about 1.2 billion bushels in 2004 to about five billion bushels (40% of US corn) in 2012 (de Gorter et al. 2015; Lobell et al. 2014).

Input prices—especially that of fertilizer—were still controlled by the state’s monopoly agricultural input supply corporations in China and Vietnam (Stone 1988; Pingali and Khiem 1995). Although in short supply, the governments in both countries controlled the price of fertilizer and other inputs (such as pesticides, diesel fuel, and electricity) as well as their distribution (Solinger 1987). Government-supplied, subsidized fertilizer was not sufficient to meet the needs of most farmers. Most farmers in China and Vietnam were not able to purchase fertilizer prices at subsidized rates. In fact, according to Huang and Chen (1999), during the 1980s the real price of China’s fertilizer was above the national price. Vietnam was in a similar position early during its reforms (Pingali and Xuan 1992). Input prices were liberalized later (Rozelle 1996).

For the case of rice, for example, the price was 50% below the above-quota price (Sicular 1995).

China was the first developing country to meet the Millennium Development Goals on reducing poverty population by half ahead of the 2015 deadline.

Lopez et al. (2017) confirm that structural changes in the Chinese economy, such as the declining share of agriculture, are correlated with the growth in subsidies.