A DECADE after the Soviet Union collapsed, confirming the moral and economic failure of socialism, Australian agriculture continues to harbour vestiges of it. Ironically it is the party of Robert Menzies, who in 1951 tried to ban the Communist Party, that persists in defending it.
Under the WA Marketing of Potatoes Act, growing potatoes in WA for sale to consumers is prohibited except by registered growers in accordance with conditions determined by the Potato Marketing Corporation (PMC).
Those conditions are Orwellian, if not Stalinist. Potato growers must be registered and their farms licensed. They require a permit to grow an approved quantity of potatoes of approved varieties, must complete a ‘planting declaration’ form within seven days of completing planting, submit a ‘Notice of Intention to Harvest’ at least seven days prior to beginning harvest, and submit a ‘Notice of Harvest and Delivery’ within seven days of completing that harvest.
Merchants must also submit ‘Notices of Deliveries Received’, ‘Consignment Advices’ (containing detailed information of varieties received, intended destinations, grower details and so on) and various other forms and returns.
All potatoes grown in WA, other than those for processing or export, must be sold to the PMC which sells them at a higher price. The difference is what funds the PMC bureaucracy ($2.2 million in 2010/11, or $42.74 per tonne of potatoes). Growers deliver the potatoes to buyers, but it is an offence to buy potatoes unless they are accompanied by the prescribed paperwork.
And in true Soviet style, PMC inspectors have the power to stop and search a vehicle if it is suspected to be carrying more than 50 kg of potatoes. The inspector can demand the name and address of the driver plus any paperwork related to the journey, and impound the documentation plus any potatoes and associated packaging. Inspectors also have the power to search premises, confiscate equipment and crops and prosecute farmers. It is an offence to delay, hinder or obstruct them.
If this all sounds onerous to potato growers, think again. Just as in the Soviet Union there were insiders and elites who benefitted handsomely, the same applies here. The effect is to protect existing potato growers from competition and price fluctuations. Subject to seasonal conditions, growing spuds is a good little earner, and growers are in no hurry to see the system changed.
The losers are other farmers and consumers. A farmer who wants to switch from pumpkins to potatoes, for example, cannot do so except by buying the licence of an existing grower, with the approval of the PMC. No matter how competent or efficient he or she might be compared to existing growers, and whether the farm is more suited to potato growing or they have found themselves an attractive market, it’s not on.
Consumers pay for this socialist nirvana in the form of higher prices and reduced choice. Apparently there are 66 varieties of commercially grown potatoes around Australia, yet the PMC only permits 13 varieties to be grown in WA. It argues that these satisfy the bulk of the market, but bureaucrats would say that. Innovation and niche markets, including growing the other 53 varieties, are not amendable to central planning.
As for the price, the PMC argues that Perth consumers paid less for potatoes in 2010 than they did in Sydney. That is almost certainly complete nonsense given how much it costs to operate. But if were true, it would indicate the organisation was not even of benefit to existing growers.
In reality, consumers pay more overall. Prices are adjusted to discourage imports from other states, but do not fluctuate to reflect local supply and demand. If there is an oversupply in the other states, prices fall and consumption rises. Not in WA – prices there are designed to keep growers in business through orderly marketing.
Indeed, orderly marketing was once the justification for all kinds of schemes aimed at protecting farmers from competition. But times have changed. Apart from rice growers in NSW, who are subject to a monopoly export desk and licensed domestic buyers, as far as I know WA potato growers are the only Australian farmers who cannot freely sell their crop.
And just to confirm how much times have changed, the Labor opposition in WA has announced a policy of repealing the Marketing of Potatoes Act, pointing out that it is out-dated and excessively bureaucratic. So far the Liberal government, traditionally the party of free enterprise, says it does not intend to alter the status quo.
In NSW a review of the rice marketing legislation recommending retention of the rice single desk has apparently been accepted by the new Liberal government. If NSW Labor promises deregulation, socialism might never be the same again.
David Leyonhjelm is an agribusiness consultant with Baron Strategic Services. He may be contacted at email@example.com