Different policy for agriculture

Contrary to your Dec. 6, 2017, editorial “Necessary push for agriculture,” farming is not a neglected sector of the Philippines. There are many government and business institutions that are constantly involved in developing and implementing programs that address the interrelated problems of low farm productivity, low and unstable farm income, and mass poverty. But these programs failed and will continue to fail in solving these problems for as long as
our economic leaders continue adopting the free market pricing system for agriculture.

This mechanism does not allocate resources efficiently in agriculture resulting in many market failures such as but not limited to the following cases:

Unfair distribution of benefits. Technology that improves farm productivity will ultimately result in the lowering of prices received by early adopters, late adopters and nonadopters at a rate greater than the rate of increase in supply because demand for farm commodities is price inelastic.

The process of technology generation, dissemination, adoption, reduction in farm income, low productivity and poverty is a repetitive process that involves many participants such as government agencies, research institutions, suppliers of farm inputs, schools, financial institutions, farmer organizations, traders, processors and media. Each has a hand in increasing the production capacity of the farmers without commensurate increases in demand at equivalent prices prevailing before their introduction.

Thus, the lowering of prices impoverishes farmers and benefits consumers.

Occupational immobility. Farmers who want to leave farming cannot easily do so because farming skills are not needed in nonfarm industries.

Resource immobility. Farmers who want to shift to alternative crops are discouraged from doing so because many of them are also low or negative profit enterprises. Moreover, the risk of failure is high. They might need new farming knowledge and skills, and resources in order to succeed.

Weak market and bargaining power of farmers relative to buyers. The root cause of generally low farm productivity, low farm income, and mass poverty in Philippine agriculture is the free market policy. This policy has been in place for many decades. If this is the appropriate policy for the farm sector, mass poverty in agriculture would have been gone long ago. But the fact that this problem persists means that it is not the right policy for agriculture.

We should learn from developed countries such as Australia, Canada, the European Economic Union, Israel, Japan, New Zealand and the United States. Some of these countries replaced the free market policy with regulated market policy as early as the 1930s. This policy allows their governments to intervene and correct market failures in agriculture. The absence of mass poverty in agriculture in these countries is proof that regulated market policy is the right one
for agriculture.

EDWARD S. TAYENGCO, [email protected]