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Subsidies + Malnutrition


This bucolic scene was captured near Narbonne as we meandered gently along the Canal Du Midi in the South of France, from one idyllic vineyard, fromagerie or boulangerie to the next. Wine, bread and cheese became our staple diet for a delightful week’s cruise. Only later we learnt that just a few weeks before our journey protesting winemakers attacked train and telecommunications installations while 8,000 of their comrades marched through the streets of the city to demonstrate against the state of their industry and demand yet more subsidies. Riot police using tear gas were required by late afternoon. Similar protests happened in neighboring cities, and these echoed marches, protests and violence in the region the previous year, when dynamite was used to blow up government offices.

The European Union spends .3 billion Euro on subsidies to wine producers, of which France takes the lion’s share. France has a complex system of government regulation of the wine industry which makes it difficult for winemakers to match changing consumer tastes and competition from the newer wine producing countries. Although France still makes outstanding fine wines, because of production subsidies and market constraints it also produces a flood of low quality wine that no-one wants to buy. At the last count the unwanted EU wine lake stood at more than one year’s production. While at the same time imports of wine from the Australia, New Zealand and South America now almost match exports from the EU, up from 1 to 3 a decade ago. As a consequence to protect the failing industry more subsidy is poured on perverse subsidy to turn unwanted wine into industrial alcohol. The EU has recently announced reforms to address some of the causes of this self-inflicted disaster but has been met by more protests from an industry that sees more subsidy as the solution as opposed to better product more suited to market needs.

The crisis is a microcosm of the way in which the global market for agricultural production has been distorted and prices depressed by subsidies in the world’s most advanced industrialized nations, notably in Europe, with France as leader, and in the United States. The World Bank has noted that the developed world spends more than $300 billion on agricultural subsidies but only $50 billion on aid. At the same time the United Nations Development Programme estimates these subsidies cost the developing world $50 billion because of their disproportionate reliance on agricultural exports. European subsidies of sugar and meat and US subsidies of cotton, rice, soybeans and wheat are especially damaging to developing nations. And ironically they ultimately damage the farmers themselves as with the French wine industry by creating counterproductive incentives.

At the same time as the developed world stores or destroys subsidised surplus agricultural production, converts it into industrial ingredients or dumps it into developing nations, the basic food needs of one third of the world's population are not being met. And by 2020 the world’s population is expected to grow 20% to about 8 billion. Currently nearly a billion people are malnourished of whom a quarter are children. Nearly all of these are in developing countries where levels of malnutrition are increasing and one in ten children dies from it. By contrast calorific intake in many OECD countries notably the United States far exceeds the healthy daily requirement, so levels of obesity are rising with consequent health risks. About 30% of adults in the United States are obese. So a dramatic increase in or more equitable distribution of food production is required.

To provide adequate food for the 2 billion people who currently do not have access and the next .5 billion that will inhabit the earth within the next 20 years a more sustainable form of agriculture will be needed. Dramatic increases in production [and reduced risk of reduction because of soil degeneration] through the use of biological and organic agriculture, agro-ecology are possible. Agricultural proximity to major urban areas and autonomy of food supply are likely to become increasingly significant issues in the light of increasing urbanisation, global security threats and the effects of global warming on agricultural production. This may well be compounded by changes in consumer preferences as the cost in money and greenhouse gas emissions of transporting food large distances [so-called ‘food miles’] becomes more embedded in the minds of the public.

These subsidisation issues constitute significant threats to the current mode of global agricultural production and marketing, which may well be facing a second agrarian revolution. At the same time there are outstanding business opportunities for those companies that can develop smart sustainable agricultural systems to feed the world’s burgeoning population.