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Keith Rankin: Political Economy of Foot and Mouth

Political Economy of Foot and Mouth

Keith Rankin, 12 April 2001

Although it no longer dominates the news in this country, Britain's foot and mouth epidemic continues to rage and many thousands of healthy animals continue to be slaughtered. Further, we are told that the introduction of foot and mouth disease into New Zealand, through malice or carelessness, would be tantamount to economic treason.

But is foot and mouth really the disaster that it's painted as? Who are the victims? In any century before the 20th, the loss of so much food would have meant famine. Now, in an era in which the global food supply relative to global food demand is higher than it's ever been, the losers are the taxpayers who have to compensate farmers for the slaughtered animals.

New Zealand has already suffered a greater percentage cull to its sheep flock than foot and mouth will bring about in Britain. The disease was called, among other names, Rogernomics. In a period in which the global demand for sheepmeats and most other products was rising (the late 1980s), the combination of high exchange rates, high interest rates and a non-level global playing field saw the New Zealand flock fall by 30% in a few years; 40% over the last 17 years, including 55% of the North Island flock.

A number of people did see the machinations of Roger Douglas as economic treason. Nevertheless, the loss of the flock was not a great national disaster. The resource - the soil was still there. Traditionally, the dominant economic pursuit in New Zealand has been to use soil to grow grass upon which animals graze. If one kind of animal suffered a blight - whether caused by political, natural or market forces - it could always be replaced by another animal. Or the land could be replanted in a different crop, such as pine trees.

In New Zealand's case, much land is not well suited to crops other than grass. That is less true of Britain. In the worst-case scenario, the cost - to British producers and consumers - should be no more than the opportunity cost of the best alternative use of the land plus the premature write-off of the smitten livestock.

But it's not even that bad. Imagine that foot and mouth was endemic globally, much like influenza is amongst humans or fire-blight is amongst apples. Everywhere, we would simply vaccinate livestock at risk and get on with our lives.

Why don't we just do that now? It's all about the political economy of inter-country rivalry; it's a manifestation of a now derided form of economic nationalism called "mercantilism". The war-cry of mercantilist governments and chambers of commerce is "export or perish".

If just one country that exports animal products loses its foot and mouth disease-free status, its exports will command a lower price than will its rivals' exports. This is especially so on account of the fact that, globally, oversupplied meat and milk products are subject to a buyers' market. Foot and mouth is a zero-sum game played by farmers and governments.

If just one country that exports animal products keeps its foot and mouth disease-free status, then that country can expect to gain a premium price vis-a-vis its rivals. From each country's point-of-view, there is a long- term zero-sum gain to be made by that country keeping its disease-free status, despite the short-term cost of pursuing a policy of slaughtering rather than vaccinating healthy animals.

But is this zero-sum gain very large? Consider apple fire-blight. Australia claims disease-free status. New Zealand does not. Yet it is not clear that Australian apples command higher prices than New Zealand apples in third-country markets.

Locally endemic diseases have become globally endemic at least since Mediterranean countries bought silk from China more than two millennia ago. Bubonic plague remains endemic, even in California, waiting to strike once again when conditions are right. We learn to live with and adapt to infectious disease. Our and our animals' immune systems are testimony to that. When no country is able to exploit disease-free status, then all countries just get on with managing their resources so as to maximise their consumers' and producers' well-being.

Diseases that pass from animals to humans are somewhat different, of course. Thus "mad-cow disease" remains a much more significant problem than foot and mouth. But even there, the real issue is to intelligently manage the risks.

One of the major sources of risk is the intensity of livestock farming in places like Britain and western Europe. This intensity has nothing to do with the need to feed an overpopulated world. If food was scarce, we would not be quibbling over whether perfectly good food comes from countries with a 100% disease-free status. In fact, this is a wasteful style of farming that is funded by massive subsidies. These subsidies - like the panic over foot and mouth - are a manifestation of mercantilism.

Globally, far too many resources are allocated to intensive livestock farming. The developed world produces substantial amounts of edible vegetable matter, much of which is used to feed European animals so that European countries can produce an oversupply of subsidised meat for export. The developed "west" and "north" should reallocate - indeed is now reallocating - its resources to produce more products that people want more of. The land in north-west Europe is best suited to sustainable market gardening, organic farming and recreation.

If European Union (EU) countries were to import more meat and "corn" from outside countries with agricultural surpluses (including third world countries), then agriculture would become more profitable and sustainable in those countries. The ensuing investment in agriculture would mean that third world countries will be both better able to feed their growing populations and better able to feed other nations.

Britain and Europe are already rethinking their approaches to food production, looking eventually to adopt a cosmopolitan rather than a nationalistic approach. Further, it is global interdependence rather than food self-sufficiency that minimises the risk of war in Europe.

New Zealand must also think globally. Biosecurity is about enabling safe and sustainable land use, and not about protecting farmers from global market forces.

If we in New Zealand ever find ourselves having to cull our herds and to cull our flocks beyond the cull that's already happened, our land will still be there. We will still be able to utilise our land and our human resources and make a good living from so doing. We depend on our soil and our brains, not our sheep and our cattle.

© 2001 Keith Rankin

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