The public goods paradigm in agriculture

First, constructing a story to demonstrate why any given effect of agriculture constitutes a public good is only a matter of ingenuity. Food may look like a private good, given that rivalry in consumption is beyond doubt. But everybody feels better if his neighbor does not starve, and our collective interest in avoiding violent hunger riots is manifest. The essential issue, therefore, is not whether any public interest can be identified, but how strong the public interest in a given objective is, and to what extent the attainment of this objective is endangered. Such analysis shows, for instance, that food security is not threatened in the short run and can be subsumed under the long-term preservation of natural resources. More generally, all evidence suggests that the important public interests that require decisive action are ‘green’ (including climate, biodiversity, water, landscapes and animal welfare).

Second, the degree of cross-border spillover differs from one public good to another. The European interest in reducing greenhouse gases, preserving habitats for migratory birds or protecting species that are endangered throughout Europe is significant. It is much smaller when it comes to maintaining scenic landscapes and old farm buildings or enhancing the vitality of rural areas. A strong public interest in an objective does not automatically make it an EU priority. The right policy response is to demand differentiated co-financing from the member states: the greater the national compared to the EU benefits, the more the member states should pay themselves.

Third, even if a clearly European interest is at stake, opening the subsidy purse should not be the invariable reflex of policymakers. Emission trading schemes, taxes and regulation can be more efficient measures. Frequently, they are also fairer, as other sectors of the economy are already subject to much more stringent application of the polluter pays principle. Especially with regard to water quality and climate change – two of the most important European concerns about agriculture – vast improvements could be obtained with measures that would cost taxpayers nothing (and may even create public revenue).

Fourth, a serious commitment to public goods makes the existing division of the CAP into two pillars superfluous. Currently, the first pillar primarily serves to finance market intervention (that is, meddling with prices) and EU-wide direct income support for entitlement holders (whether they are rich or poor, active in farming or not, do more good or harm to public goods). The second pillar is a mishmash of dozens of measures (investment support for farm modernization, agri-environmental schemes, village renewal and the like) programmed by the member states. If all policy instruments were geared to promote public goods, adapted to local conditions, and co-financed by member states, the two-pillar separation would become useless (and any new structure would have much less importance).

Fifth, the public goods paradigm necessitates a radical redistribution of payments across member states – but not a move towards a flat(ter) rate for all agricultural areas in the EU, possibly adjusted for differences in GDP per capita and purchasing power. Instead, payments should go where the greatest return on investment can be expected (e.g. in terms of greenhouse gas capture per euro) and where member states incur the greatest costs in promoting European public goods (e.g. by limiting land-use through Natura 2000 status). The result will be ‘uneven’ but fair (contrary to the current uneven distribution, which is entirely arbitrary and unrelated to policy objectives).

Finally, Common Agricultural Policy is a misnomer for a policy dedicated to public goods related to land use. In attaining the objectives of the future ‘CAP’, non-agricultural areas – forests in the first place – are just as deserving of subsidies as agricultural land. ‘Food’ should not be added to the title, as food-related objectives generally do not require subsidies and are handled mostly by the Directorate General for Health and Consumers. Similarly, including ‘rural areas’ is not advisable, as rural development policies should either be transferred to the Directorate General for Regional Policy or be left to the member states. Something like ‘Sustainable Land-use Policy’ would arguably be the best solution.

‘Public goods’ is not an attractive tag with which to better sell the CAP to critical citizens. It does not stand for the limited strengthening of certain measures. The public goods paradigm means starting from scratch with new policy objectives and instruments, a new name and architecture, and new financing arrangements and payment allocations.