The Main Problem of the Cap (Common Agricultural Policy) Is Considered to Be Finance Allocation. It Is Argued That for the Most Part Money Goes to Rich Landowners. Critically Assess This Issue and State Possible Solutions to This Problem.

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The Common Agricultural Policy (CAP) started it life in the 1960s and this it is now celebrating 50th anniversary. The main idea of the policy stayed throughout the years and was aiming at guaranteeing EU (European Union) farmers with income and their product prices to stay stable. To fulfil these aims, it is not surprising that the CAP budget has represented a large proportion of the overall EU budget and expenditure, as it takes the place of national policy and expenditure on agriculture. It is expected to be around 42% (€60 billion) of total EU budget in 2010. A combination of budget constraints and pressure from EU trade partners forced a major reform of the CAP. Firstly, in the 1990s so-called MacSharry reform. It was created in order to limit rising production, while at the same time adjusting to the trend toward a more free agricultural market. It reduced the amount of food EU had to buy, but at the same time it provided direct payments to farmers in order to compensate price-cuts. This kind of reform was carried out further into development by Agenda 2000 and the June 2003. Reforms did little change as farming population has continued to decline as most of the financial support, which is distributed to rich landowners or corporations. Reforms in 2003 moved the CAP into a less-price-support system to an income-support system with market determined system. This solved early problems of the CAP (Dumping and Food Mountains), however did not resolve one of the main concerns, as most of the funds still goes to rich landowners and agricultural sector population tends to decrease. In this essay, I would like to discuss the main issues related to finance allocation and what policies could be prepared before the end of the current Financial Perspective in 2013. The future of the direct payments has to benefit weak ones, but also encourage big farmers to stay in this business as well as encourage environmentally-friendly farming. As European Union has a budget of around €140 billion (2010 EU Commission data) and spends a great deal on agriculture, it appears that it should benefit farmers. Agriculture should be an attractive place to stay in and earn fair amount of money as farmers’ population is relatively small. Barely 5% of EU citizens work in agriculture (sharing ~40-50% of total EU budget), and the sector generates just 1.6% of EU GDP. It seems that it is not so true as the average income from farming per worker in agriculture averaged less than 40% of the income per worker in the EU-12 as a whole (European Commission 1994). The situation has not changed too much since 1994 and a lot of farms were connected to create even bigger farms and stay in business. Otherwise, as farming was considered to be a family business, it started disappearing and younger generation left to more urban areas in order to find jobs in service sector. Especially in 2000-2006 it was good time to liquidate assets farmers had, as land prices were high, and move into the other sectors or leave for an early retirement. Another problem which lies underneath the unattractiveness of farming is unequal distribution of the CAP benefits. Most of the EU farms get a very small share of CAP benefits, as the biggest share of finance goes into the farms owned by rich landowners or big corporations related to farming. The figure on the left is taken from the EU commission report on distribution of CAP payments in 2006 . The figure shows how uneven the payments are. On the left side of the graph are payments sized from €500.0000 euro and above, going down to €500 and less. So as to shows that, about a half of EU farmers (46.4%) get only 2.1% of the total payments. For these small farmers, the CAP is not really helping them – they get less than 500 Euros per year. At the other extreme, the larger farms or corporations, which account for one-hundredth of one per cent of all EU-25 farms, get 2.5% of the money. This is more than a half million every year....
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