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Natural Resource Governance around the World

NETHERLANDS: An interventionist agricultural policy intended to reduce regional inequalities

Documents of reference

DEVIENNE, Sophie. Doctoral thesis. Un-published.

The Netherlands possesses the most efficient agricultural sector in the European Union: with only 1.6% of its active population, this small country produces 8% of the EU’s agricultural output, and rivals with France at the international level for second place behind the USA among agro-exporting countries.

This high performance originates in Dutch agricultural history, since the coastal regions of the country have been at the forefront of agricultural development in Western Europe for more than three centuries. Also, Holland’s success is the fruit of its agricultural policy, which has been focused since the 50s not only on the most developed regions but also on the disadvantaged inland regions in order to offset the differences in terms of development and to use the country’s agricultural resources to their fullest.

Dutch agriculture is basically run by families and is characterised by relatively uniform farm structures. Farms are small (18 ha on average, 8.5 ha per farm worker) and grouped around this average. Two-thirds of farms now cover less than 20 ha, and only a mere 7% exceed 50 ha.

The Dutch public authorities have always sup-ported the development of small farms. In the coastal polder regions, the first drainage pro-grammes began in the 10th century and were initially carried out by the peasants themselves. They were later coordinated by the aristocracy and the clergy that set up farms of 15 to 20 ha, which were rented or sold to free peasants. At the beginning of the 16th century, these farms began very early to participate in commercial trading with advantageous conditions. This process was facilitated by water transport. During this period, the farms specialised in dairy production, and purchased cereals from Eastern Europe where they were produced on large feudal estates by a population of serfs. This transformation opened the road to an agricultural revolution in the coastal regions. These were drained by windmills, the meadows were fertilised, selective cattle-breeding was introduced, animal food-cakes were produced for dairy cows, etc. The Dutch and Friesian peasantry showed that they were capable of implementing technical innovations that considerably increased the productivity of agricultural labour. Having gained much power by the end of the 16th century, the urban middle classes seized the opportunity and invested massively in the development of this peasant economy, in fact three times as much capital as they invested in the West India Company, which was established at the same time. They began major projects to drain the deepest inland lakes (50% of Holland’s farmland surface area) to set up 20 ha farms, which were rented to tenant farmers. In order to maintain the profitability of its investments, it implemented taxation that allowed continued and rapid development of coastal farms during the 17th and 18th centuries.

At the end of the 19th century, during the agricultural depression, the Dutch government decided to maintain free-trade, though it applied an agricultural policy that aimed to reinforce the farming economy:

  • a system for agricultural research, education and widespread training, which addressed itself to all farmers (evening and winter classes), was put into place by the government;

  • supporting the development of cooperative ways to meet supply needs, to process raw farm goods and to provide agricultural loans: the government subsidised the establishment of agricultural mutual savings banks.

Furthermore, the public authorities intervened inland to facilitate and speed up the sharing of and clearing of the wilderness that took up nearly three quarters of the territory, by giving priority to the extension of small farms. This process was assisted by the possibility of borrowing real estate credit.

In the early 20th century, the small farmers of Holland’s inland regions were fully involved in commercial activities. They developed animal production on small farms (dairy, pork and poultry) by buying cheap cereals on the world market. They also purchased fertilisers, plant food and so forth. However, this integration in the world market occurred three centuries later than that of the coastal regions. The disadvantages faced by inland regions (transportation difficulties, much less advantageous taxation) led to unequal agricultural development, which had a cumulative effect that lasted until 1950 in spite of radical changes made by the farms of these interior regions since the end of the 19th century.

After World War II, the Dutch public authorities implemented a policy aimed at reducing economic and social disparities among farmers, especially across regions. This interventionist and systematic policy was applied without opposition from 1950 to the mid-1980s. It successively made use of different tools and was remarkably coherent: funding was distributed well among research, education, widespread training, modernisation, the development of rural land and support for food industry.

How was it possible to implement such an original policy, particularly for Western Europe?

Right after World War II, the Dutch public authorities started to intervene in the national economy, to such an extent that economists began to speak of a « semi-planned » economy. This intervention was part of a close partnership between the State, unions and civil society groups. The unions and civil society groups were equally represented in public agencies that were conferred a number of duties traditionally under the government’s realm of activities. The 1950 law that laid the framework for the national economy provided for the creation of such agencies within each of the sectors of the economy. The State continued to make the large, over-arching decisions regarding the political economy, whereas the agencies within each economic sector made their own interpretations. Three types of agencies within the farming sector were created:

  • a « horizontal » agency, in which farmers’ groups and farm workers’ unions were given equal representation,

  • field-specific “vertical” agencies, with equal representation of the different agents who work in this field,

  • « foundations » responsible for implementing the general measures of agricultural policy, of which both representatives of the Ministry of Agriculture and farmers’ groups are members

The rate of union membership in the agricultural sector is high: more than 80% of farmers are members of one of three farmers’ unions. One of the unions acts as spokesperson for inland farms. Dutch union pluralism is the basis of farmers’ democratic representation: the interests of small farmers in disadvantaged regions are expressed through the agencies that carry out an important role in defining and implementing agricultural policies. The government gives a positive response to the defence of their interests since one of its main objectives is to reduce economic and social inequalities.

The public authorities did little to intervene and correct the land market. The Land Administration Foundation, founded in 1950, above all intervened in rural development areas, in the framework of the policy to encourage farmers to cease their activity, though did little on the free market. From 1953 to 1963, farmland sales needed to be checked with respect to both prices and land use. Its closing down led to an increase of market prices, which, in this very densely populated country, reached high levels (23,000 to 30,000 Euro/ha today). Measures of control on tenant farming remained in place.

However, the agricultural policy intervened actively with respect to agricultural loans, to en-courage the modernisation of the most disadvantaged farms. An agricultural credit fund was founded in 1950 and it provided guarantees to farmers that proposed a viable development project but did not have enough assets to obtain bank loans. The project could comprise the expansion of the farm and investments are supported by substantial tax breaks.

Inequalities in regional agricultural development were reduced in several steps, by the successive implementation of different agricultural policy instruments:

  • regionally differentiated pricing policies, in favour of the most disadvantaged regions from 1950 to 1965;

  • limitation of poultry production disconnected from the territory to farms of less than 10 ha, thereby allowing them to offset their size disadvantage, from 1950 to 1960;

  • integrated development of rural land (merging plots, construction of new farm buildings, improvement of infrastructures) from 1958, that took into account three quarters of farmland until 2000, according to a plan that gave priority to the least favoured regions. These regions are those in which the highest increases of productivity could be expected, thereby ensuring optimal use of the large amounts of public funds invested. Overall the objective was satisfied and formed a powerful tool for reducing inequalities in regional development;

  • different levels of investment aid given to regions from 1978 to 1982, permitting much higher rates of subsidies in disadvantaged regions. These aids are only proposed to farms with incomes lower than the reference income, itself set below the average salary;

  • intervention by the public authorities in the land market via the Land Administration Foundation;

  • implementation of the research and popularising policy adapted to different regions’ problems: as early as 1932, specialised centres were set up to develop the small farms of the inland regions. From 1970, Dutch agricultural development policy relied on a dynamic research and development structure capable of proposing suitable types of farm organisation, by anticipating individual initiatives.

The implementation of this policy has allowed the farms of the inland regions to catch up with the rest of the country over the last forty years. Overall, it has modernised the country’s farm production while reducing economic and social disparities in the agricultural sector. The reduction of an entire range of inequalities related to the division of land and capital is the most satisfactory solution, both socially and economically since it permits optimal utilisation of these resources and, consequently, the highest productivity of labour. The performance of Dutch agriculture goes to prove this. This redistribution is the fruit of an audacious and original policy, whose formulation has been made possible by close collaboration with powerful unions that democratically represent the farmers.

Sophie DEVIENNE, Sophie is a Teacher-researcher Institut National Agronomique de Paris Grignon (INA-PG)

Translation: Mary Rodeghier (AGTER) 2007.