The ESoF project within its policy context: CAP reform, global change and the response of farmers

Introduction

As noted elsewhere the ESOF project was funded to identify and to analyse the economic, social and cultural factors that stimulate the development of entrepreneurial skills, and it aimed at developing strategies and tools to improve those skills. These objectives were related to the personal skills of farmers, but were also researched within political, social, economic and cultural frameworks relevant in participating countries and with reference to the wider European Union and beyond. This chapter discusses the policy context for the development of entrepreneurial skills for farmers, focusing in particular on agricultural and rural development policy at the European Union level whilst acknowledging some of the cultural and global issues that help shape and challenge policy.

Changes in the Common Agriculture Policy (CAP) since the MacSharry reforms from 1992 and the Cork Declaration of 1996 (EC, 1996)) have encouraged a reduction in farmers’ dependence on public sector support and a reorientation toward the market. These changes have been pursued through a shift in policy instruments from price support and production based payments to the direct support of farmers, decoupling farmer support from production and developing the role of agriculture beyond narrow sectoral concerns. Hence, Multifunctional Agriculture as a policy concept has gained traction in parallel with policy objectives to open the agricultural sector to greater market influence (e.g. Moyer and Josling, 2002).

Whilst it has developed in a number of ways that reflects the perspectives and prejudices of different actors, one of the common perceptions of multifunctional agriculture is that of a sector in which actors have greater freedom to reorganise and to develop new market and business configurations than had been possible under a regime of state subsidy and policy-led production preferences. Along with greater freedom agri-food sector actors, including farmers, take greater responsibility for the development of the sector. For farmers, reform may be presented as encouragement to be less dependent on the state and to contribute to more general socio-economic objectives than simply ones of food supply.

Changing perceptions of agriculture have led to a repositioning of the farmer as an economic actor within a richer and more nuanced socio-economic environment than had been the case in the post-war productivist era. Within this shift in perspectives the farmer has become regarded as a potentially more autonomous agent, and the business skills of the farmer have, therefore, come under greater scrutiny. Ideas about the farmer as an entrepreneur and of what farmer entrepreneurship might entail have developed in lieu of this repositioning. However, increased interest has not resulted in consensus on these topics, in large part because of the heterogeneity of farmers, their experiences and motivations, and because of the heterogeneity of the agricultural sector (McElwee, 2005).

Whilst the main body of the project has examined farmer entrepreneurship from the point of view of individual farmers this chapter reviews the politico-economic context within which the concept and practice of farmer entrepreneurship may be considered. The chapter, therefore, considers the broad changes in agricultural policy within the EU and also, with reference to global changes in the agri-food sector, attempts to relate these to the concepts of entrepreneurship as developed in the ESOF project.

Harnessing multifunctionality to rural development

Concepts of Multifunctional Agriculture have become important in the debate about agri-food in the EU over a number of years leading up to the end of the 1990’s and beyond, and have been accompanied by the intrusion of wider sets of concerns into agri-food and trade policy. As a productivist agricultural paradigm has given ground to a post-productivist conceptualization, so too has the dominance of producer and trade interests retreated somewhat in favour of consumer and environmental actors. A multifunctional conceptualization places the agri-food system in a more dynamic and diverse policy environment, although it is itself subject to different definitions and understandings of what it encompasses and entails (Wilson, 2007).

Much of the debate about what Multifunctionality means and how it may be developed makes reference to the distinction drawn by the OECD (2001) between a positive and a normative approach: the first based on joint production of commodity and non-commodity outputs of agriculture whilst the latter sees multifunctionality as having value in itself and relates to social concerns with agriculture. This distinction creates different policy responses (Potter, 2006): the former approach achievable through policies aligned directly with farming activity, while the normative approach may allow for policies that are directed at non-farming activities and non-farmers. EU policy, as it emerges through the reform of CAP, may be seen to have allowed for a mix of approaches following from a set of measures that promote the normative approach as the focus of CAP reform is moved toward the increased importance of Rural Development.

As many commentators have observed2 concepts of Multifunctional Agriculture can be seen to have contributed to the process of CAP reform through the 1990’s to the Agenda 2000 reforms and the creation of the Rural Development Regulation (RDR) that constitutes the so-called Pillar II of the CAP. The RDR associates rural development more directly with agricultural policy by the creation of Rural Development Plans (RDPs), which are designed in part to encompass the multifunctional influences on, and contributions of agriculture to the rural economy (Dwyer et al, 2007).

The 2003 Mid-term review of the CAP reform process begun by Agenda 2000 brought further change to Pillar I measures in addition to enhancements of Pillar II. Agenda 2000 and the Mid-term reforms of 2003 aimed to consolidate measures and to simplify the administration of rural development policy with the intention of making it more efficient and coherent. The major changes to Pillar I saw the introduction of the Single Payment Schemes (SPS) that weakened the direct linkage of support payment to production. The SPS also have cross-compliance conditions attached to ensure that land is maintained in ‘good agricultural order’, and supports ‘good agricultural practices’, which include soil  conservation and pollution reduction measures (EC, 2003a). The cross-compliance conditions for Pillar I support agricultural multifunctionality (‘positive’ in OECD terms), which may be contrasted to the rural development multifunctionality of Pillar II, provided through direct support of activities that relate to environmental and social impacts of agriculture, and also to support rural enterprises that may not be directly associated with farms and farming, and towards which the focus of CAP reforms has moved3 (EC, 2004).

The overall strategic basis of the RDR is to achieve a balance between policies that reflects the economic, social and environmental situation and needs in each country, and structured so as to support three main objectives of the regulation (see Community Strategic Guidelines in EC, 2006), namely

· Improvement to the competitiveness of agriculture and forestry through restructuring, development and innovation

· Protection of the environment and countryside by land management practices

· Safeguarding and improving the quality of life in rural areas and encouraging the diversification of economic activity

These three objectives are allocated to the first three of four so-called Axes along which Member States organise their Rural Development Plans; the fourth Axis being a partnership approach for Axes 1-3 based on the experience of LEADER projects. RDPs are designed to strengthen the partnership approach through close consultation of regional, local and other public authorities as well as NGO and other parts of civil society (EC 2004).

In a review of these aims the ‘Health Check’ consultation process launched in 2007 by the EC (EC, 2007a) examines the major reforms of the CAP to date including the SPS and its implementations; the effectiveness of the Cross-Compliance tests in Pillar I; the remaining partial coupling of subsidy to production and its gradual elimination; upper limits in direct payments; the abolition of Set-Aside; and the relaxation of dairy production quota limits with a view to final elimination (see Box 1). This reform pathway continues with prospective rounds of policy changes leading up to 2013 and the prospect of greater, or even of the final, decoupling of agricultural subsidies and production.