ONE of the characteristics of socialist economies is central planning. The former Soviet Union was famous for its five year plans, in which agricultural and industrial production was supposedly coordinated in minute detail. Fulfilling the plan became the watchword of Soviet bureaucracy.
The same approach was adopted by most other socialist states including the People's Republic of China. Nazi Germany (which was National Socialist) emulated the method in its Four Year Plan designed to bring Germany to war-readiness.
Market economies generally prefer to leave it to those who actually make and buy things, subject to the laws of supply and demand. The idea that a bureaucrat in a remote office can coordinate how many and what kind of new tractors, combines and augers are needed for this year’s wheat crop is just a tiny bit unbelievable.
In fact, it was utterly unbelievable in the countries that tried it. Even if they got the number of tractors right, which was rare, they were never the right size or in the right location. The resulting economic stagnation is what led to their eventual collapse.
When the free market think tank, the Centre for Independent Studies (CIS), suggested the federal government could save money by abolishing the department of agriculture, there were howls of derision. Among those objecting was the federal Minister for Agriculture, Barnaby Joyce.
This is his first ministry and perhaps it is understandable that he would be a little sensitive at the idea of losing his department. But in a newspaper op-ed in which he discussed the significance of agriculture to Australia and the “incredible future” it has in providing for the Asian middle class, he also claimed that this future depends on his department playing a vital role.
“Agriculture relies on policy, which influences bilateral trade agreements, taxation, biosecurity, infrastructure, interest rates, exchange rates, drought mitigation and consumer laws,” he wrote. “If Australia wants to be a food producing power, we will need a powerful Australian Agriculture Department”.
He asked, “Is agriculture something of national worth that is best co-ordinated at a national level?”, answering his own question with, “The more co-ordinated the plan, the better the outcome.”
It is difficult to avoid the impression Mr Joyce was advocating some kind of central planning for the agriculture industry. At the very least he seems to think our agriculture industry is incapable of benefiting from increasing Asian prosperity without “coordination” by him and his department.
Actually, while his department has responsibility for biosecurity and drought mitigation, it does not set policy on trade, taxation, infrastructure, interest rates, exchange rates or consumer laws. And if it stopped propping up producers who fail to prepare for drought, taxpayers would not only save money but the net result would be positive for agriculture. But I digress.
The proposal by the CIS was part of a series of recommendations aimed at addressing Australia’s $30 billion (and growing) budget deficit, a problem the Abbott government has described as a budget emergency.
Among the other recommendations were reforming the Family Tax Benefit, shutting down or selling SBS and ABC3, ending industry assistance, abolishing the federal Department of Education, and bringing back Medicare co-payments. Total ongoing savings from all the proposals were around $20 billion a year, not even enough to return the budget to surplus.
In the case of agriculture, it recommended transferring the Australian Fisheries Management Authority and Australian Pesticides and Veterinary Medicines Authority to the Industry portfolio and abolishing the remainder of the department, leading to savings of about $1.3 billion per year. Well over half of this would come from ending the funding of six research and development corporations.
Some would inevitably protest at that idea, especially those whose incomes would be affected, but the states are also funding research. If you want to save money, removing duplication is a no-brainer.
Even then, taxpayer funded research is dubious no matter who does it. In theory it is only supposed to occur when there is “market failure”, but that is not what happens. The private sector is often willing to invest in research but quickly steps back because the government offers.
And when the private sector is not willing, it begs the question as to why taxpayers should pay. If there are no foreseeable commercial benefits, why is it being done at all? Is it simply a case of too much “coordination”?
What the Soviet Union and countries like it discovered is that markets cannot operate when buyers and sellers are coordinated by the government. Only when they can operate freely do they have the incentive to seek each other out and engage in mutually beneficial exchange. In that respect agriculture is no different from any other market.
And just as we have no need for a powerful department to “coordinate” our coal or iron ore industries, or our large and growing exports of services, we do not need such a department for agriculture. Even if it means the Minister might lose his job.
David Leyonhjelm has been an agribusiness consultant for 25 years and was recently elected to the Senate for the Liberal Democrats. He may be contacted at email@example.com