“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Thus the famous dictum of Adam Smith, whose 1776 magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations, is the first modern work of economics. Smith remains to this day an influential thinker and laid the foundations of classical free market economic theory, something which seems to have escaped a later son of Kirkcaldy, former British prime minister, Gordon Brown. But I digress. Suffice it to say that if we are expecting fruit pie to form part of our dinner, we are out of luck.
A report by Poland’s Supreme Audit Office has concluded that Polish farmers planted fruit trees simply as an attempt to gain access to the EU subsidies available for organic fruit orchards, but that many did not actually manage to produce any fruit. Surely not? Although I do not claim to be an economist, I am certain that this is not what Adam Smith had in mind by folk having “regard to their own interest”. Of course, in Smith’s day political interference, special interest pressure groups, and crony capitalism of the sort that is undermining the western economic system did not stalk the land, and folk planted trees to grow fruit not money. How delightfully, innocently, old-fashioned.
Apparently, over the last decade some 14,500 Polish farmers have taken advantage of the subsidies available for organic fruit orchards. This has produced a result wholly in keeping with the baleful influence of state (in this case the EU) subsidy: although the area of land allocated to organic orchards increased eightfold over ten years, the yields of fruit per hectare fell from 15 tonnes to one.
Or, as the audit office prosaically puts it, “Although over ten years more than PLN 708 million (EUR 176 million) was given in subsidies for organic fruit farming, the production of fruit did not rise; farmers planted trees to gain EU subsidies, not to harvest the fruit.” The report concluded that there was no obligation to produce any fruit once the subsidy had been granted, something which changed only last year when subsidy did become dependent on output. As expected as it depressing, of the 20 farms investigated by the audit office, nine never produced fruit, and 13 withdrew from organic fruit production as soon as the subsidies ended. To add the inevitable insult to the taxpayer injury, many of the orchards were poorly maintained and planted on poor soil or in areas vulnerable to wild animals.
Still, as those subsidy junkies at the Polish ministry of agriculture were quick to respond, this kind of farming may take four or five years to produce fruit crops, and possibly even longer, so the output figures may have been misleading. And, in case you hadn’t realized, they informed us that “the idea behind ecological farming is that we do not look at the volume of production, but at its quality. The environmental aspect is also important.” Besides, “the payment of subsidies in this area are subject to EU regulation; EU audit institutions did not have any concerns over the way in which these payments were made.”
So that’s all right then. Except, of course, it isn’t. This is certainly not the worst example of misdirected subsidy or waste of public funds – have you ever asked yourself why, for example, if wind is free, those who wish to harvest it require so much subsidy? – but it does demonstrate why subsidy is harmful. After all, governments do not have money to dish out willy nilly, they have to take it from taxpayers and, in so doing, impose a burden on the productive to the benefit of the unproductive. This harms us all, not just in the long run when, as Keynes (who first showed the politicians how to destroy wealth) told us, we shall all be dead, but in the short run when we are very much alive.
All subsidy distorts the free market and politicians, who can always find plenty of drinking chums to dip their snouts in the trough of other people’s (that is your taxes and mine) money, should try a diet of honest money instead. Ask yourself, to take an example at random, which has created the greater opportunities for passengers to and from Poland to fly where they want at a price they can afford: state subsidized LOT, or subsidy free Wizz Air or Ryan Air?