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No milk today

CAPFor the past year I have heard a lot of complaints. Complaints of farmers about the prices they get for their goods. Whether it is milk, grains or meat it is too little. More subsidy please. While I sympathize with the farmers I don’t think that’s the whole story. I remember very well how the EU started. One of magic terms was CAP. CAP? Yes, Common Agricultural Policy. CAP in action meant subsidies for farmers with the object to provide them a reasonable income. As it happens the designer of this policy was Sicco Mansholt. A Dutch politician. CAP lead to a huge over production of everything. Mountains of butter and meat, lakes of wine and milk. It was obvious that such a situation could not continue and that’s why we are where we are at the moment.

One of the things that made lives for farmers better in the past was their ownership of transport and production facilities. Farms used to pool their resources and built a company that could process their milk into butter and cheese. They got a second income from that. The problem is now that these companies don’t exist any more in this form. Farmers have for a variety of reasons sold their shares. Maybe they bought a new tractor with it if they were wise or bought a mercedes if they were less wise, but the end result is the same. No income from the intermediate products. That’s a problem. When I buy blue mould cheese in the shop the margin is higher than that on pasteurized milk. Yet the producer of milk gets only the benefit of that raw product. No wonder farmers are in trouble!

Now I hear you say, “happy that I am not a farmer!”. And you are right. I am also happy not to be a farmer. But consider what our future economy will be like. We are facing a new wave of robotization. This is initially a good thing. Our grey fathers need their pension. However much we want it, they will not be able to extend their working life a lot. Robots will help in this.

RobotEvolutionAfter this happy phase problems will occur. Suddenly robots will do almost everything leaving our population with lots of free time. That’s all very nice if we have income to spend, but where does that come from? Not from work! We are in a situation where unemployment and labor productivity are sky high! The benefits of that work will go the capital that is put into it. In other words the share holders reap all the benefits. If you are not a shareholder you will be poor! Begin to feel like a farmer already? Sorry it will be worse.

It’s not hard to envisage a society with an elite that has all the wealth and the middle class nothing. Capital is fluid. Tax evasion schemes easily set up when governments compete for the favor of major companies. Only an agreement on EU level can put an end to this behaviour, but when all is said and done this is just a stop gap. What is needed is fundamental shift in economics.

Some of my socialist friends argue that we should (re)nationalize some major companies. That sounds nice, but lessons from former communist states indicate that this usually ends in disaster. Governments should ensure functioning markets, not be an active participant in them. Yet, if we don’t want an impoverished middle-class some changes have to be made. A solution might lie in the way that muslims do business! In the islam it’s forbidden to ask interest. Also tax is problematic. In order to compensate for this it is required to give the state or a local citizen a 51% share in your business with a yearly fee that can be negotiated. This way the people in the country get their income from economic activity that is generated. This is new kind of economics. Better suited to modern needs than neo-liberalism or socialistic models. It marks a new approach for a new age.