Search

The 1980s and first half of the 1990s were a very active period in the field of political economy of agricultural protection. While the past decade has witnessed a slowdown in this area, there have been very important developments on political economy in other parts of the economics profession. This paper reviews key new insights and developments in the general political economy literature and draws implications for the study of the political economy of distortions to agricultural incentives.

During the 1960s and 1970s most developing countries imposed anti-agricultural policies, while many high-income countries restricted agricultural imports and subsidized their farmers. Both sets of policies inhibited economic growth and poverty alleviation in developing countries, while doing little to assist small farmers in high-income countries. Since the 1980s, however, many developing countries began to reduce the anti-agricultural bias of sectoral policies, and from the early 1990s the European Union began to move away from price supports to more-direct forms of farm income payments. This paper summarizes a forthcoming book that seeks to explain this evolving pattern of distortions to incentives conceptually and econometrically by making use of new political economy theory and a new globally comprehensive and consistent set of estimates of the changing extent of annual distortions over the past half-century. The distortion estimates involve more than 70 products that cover around 70 percent of the value of agricultural output in each of 75 countries that together account for over 90 percent of the global economy, and they expose the contribution of the various policy instruments (both farm and non-farm) to the net distortion to farmer incentives. Such a widespread coverage of countries, products, years and policy instruments has allowed this collection of studies to test a wide range of hypotheses suggested by the new political economy literature, including the importance of institutions. As a set it sheds much new light on the underlying forces that have affected incentives facing farmers in the course of national and global economic and political development, and hence on how those distortions might change in the future - or be changed by concerted actions to offset political pressures from traditionally powerful vested interests.

This chapter begins with a brief summary of the long history of national distortions to agricultural markets. It then outlines the methodology used to generate annual indicators of the extent of government interventions in markets, details of which are provided in Anderson and appendix A. A description of the economies under study and their economic growth and structural changes over recent decades is then briefly presented as a preface to the main section of the chapter, in which the nominal rates of assistance and consumer tax equivalents (NRA and CTE) estimates are summarized across regions and over the decades since the 1950s. These estimates are discussed in far more detail in the regional chapters that follow. A summary is also provided of an additional set of indicators of agricultural price distortions presented in chapter eleven that are based on the trade restrictiveness index first developed by Anderson and Neary (2005). In chapter twelve the focus shifts from countries to commodities, and all the various distortion indicators are used to provide a sense of how distorted are each of the key farm commodity markets globally. Then chapter thirteen uses the study's NRA and CTE estimates to provide a new set of results from a global economy-wide model that attempts to quantify the impacts on global markets, net farm incomes and welfare of the reforms since the early 1980s and of the policies still in place as of 2004. The chapter concludes by drawing on the lessons learned to speculate on the prospects for further reducing the disarray in world agricultural markets.