Whether one looks at protectionist policies of Europe and America or
the free-market approach of Australia, rural sectors are in decline in
mature economies. Orthodox economic theory appears unable to provide an
analytical framework that can explain this phenomenon in the real world of
mature growing economies.
For almost three decades Australia has pursued ad hoc rural policy
underwritten by market economic theory advocating increased efficiency,
rising productivity, and free international trade. The legacy of this
policy approach is a battered and debilitated rural sector characterised
by industry crises, volatile commodity prices, inadequate farm incomes,
declining services, rising levels of poverty, suicide rates of
international significance and population relocation.
To throw some light on how rural Australia has arrived at this sorry
situation, we should eschew the rhetoric and do a reality check by shining
the statistical spotlight on farm incomes; tracing rural policy
development since the 1980s and examining an alternative analytical
framework while recognising the reality of political economics. We might
then be in a position to say what needs to be done for regional
The current improvement in cattle and wool prices is being heralded by
the metropolitan media as evidence of a booming rural sector and the
success of free-market policies. Analysis of purchasing power discloses
that in terms of national income distribution, rural Australia is not
booming. Indeed, real income of broadacre agriculture has markedly
declined over time.
If one examines rural industry terms of trade (using figures from ABARE),
the real net value of farm production and the consumer price index over
the period from 1978 to 2001, it becomes obvious that farmers' terms of
trade have declined markedly while prices in the wider community have
risen i.e. prices for farm production have risen more slowly than prices
measured by the CPI.
Looking at the relationship between costs, production, debt and nominal
farm income for the same period, it can be deduced that costs drive
production that is debt financed. Also demonstrated is that policy
directed to increasing efficiency and rising productivity has made little
difference to the value of farm income that remains in farm hands. The
increasing divergence between gross value of farm production (GVFP) and
net value of farm production (NVFP) confirms the rising proportion of farm
production that is being redistributed to the wider community. In other
words, policy directed to rising efficiency and increased productivity has
not improved the relationship between GVFP and NVFP.
The policy response under market economics has been to reduce the
number of farmers. This way NVFP is shared among fewer and fewer farmers.
Mathematically, average farm income should rise. An alternative
interpretation is that the increasing divergence between GVFP and NVFP
represents discretionary policy redistributing income from the farm sector
to underwrite incomes and living standards in the wider community.
In 1994 Jonathan P. Sher and Katrina Rowe Sher published a paper in the
Journal of Research in Rural Education. It was based upon work they had
been commissioned to undertake for the Australian DPIE and was not so much
an economic analysis as a narrative outlining their findings and
conclusions drawn from wide international experience.
Sher and Sher had been asked to prepare a paper outlining a strategy
for rural development based upon rural education and entrepreneurship.
When they began to review existing Australian literature on the subject,
they were astounded to find that very little was available. They found
detailed material on specific rural places, rural groups and individual
industries but they could not source a single convincing contribution that
addressed the reality of life beyond cities and suburbs. They came to the
conclusion that in 1993 for Australia, there existed no rural development
strategy at all.
They changed their original task from rural education and
entrepreneurship to one of writing a program for rural development. They
used their experiences from OECD work and observations of applied
empowerment strategies to compile their contribution to Australian rural
What is clear from their paper is that the Australian agro-political
movement and major political parties enthusiastically embraced market
theory from the early 1980s without a substantive rural development plan
or understanding of likely outcomes. It appears ideology was the driving
According to Sher and Sher, empowerment should not be understood as a
policy option in which government has no role. Empowerment of communities
is based upon some central concepts - all involved parties agree on some
important fundamentals and an operational strategy; each stakeholder must
be empowered to contribute specific skills and the activity must be
appropriately funded. It would be necessary for government to develop
empowerment-promoting policies and accept a role as a partner in rural
This is an edited version of a larger paper, available from the New Country Party website.
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