Boerenbusiness Agricultural Congress
'Free market doesn't work in agriculture'
"The reason food prices don't keep up with inflation is because there's too much supply." With these words, economist Jaap van Duijn kicked off his lecture on Tuesday 18 December at the National Economic Agricultural Congress of Boerenbusiness.
Van Duijn drew the gloomy conclusion that the position of the farmers is deteriorating further and further. "The fact that an accountant earns 9 times as much as an average arable farmer means that the reward system is not good." According to Van Duijn, this could change if food becomes scarcer.
'The free market is a disaster'
According to Van Duijn, Dutch farmers have been in a difficult situation for at least 100 years. "The model in which farmers can only adjust the amount automatically leads to economies of scale and thus the collective creates its own problem." Although Van Duijn claims to be a liberal economist, he is not in favor of a free market in the agricultural and horticultural sector. "Letting go of the European milk quota is an example of this."
The farmer has specialized in recent years, but that is not the solution either. "By focusing on 1 product, there is no risk spreading, which means that incomes show strong fluctuations. The road of scaling up and specialization is coming to an end." The solution is to turn homogeneous agricultural products into homogeneous products. According to Van Duijn, this path is being taken more and more often, as various Dutch milk processors are fully committed to dairy brands.
The Rise of China
In his lecture, the economist also touched on a number of global economic developments; One of them is the rise of China. According to Van Duijn, the fact that the country has developed into the largest economy in the world is not a positive development for us as Europeans. "The cultural differences are too great to connect. In addition, China has a tendency to do production and services in-house." Van Duijn expects that the European economy can rely less on China than on the United States (US).
Despite the fact that economic growth in Europe cannot match that in China, it is not going badly. "Unemployment has fallen to its lowest point in years." According to the economist, therein also lies the immediate danger, because the past shows that low unemployment precedes a period of economic downturn.
New recession on the way?
Van Duijn signals a turnaround in the economy. He deduces this from consumer confidence, which has been declining for some time. In addition, the stock prices have been mainly in the red since the autumn. "These developments indicate a turnaround in the economic climate." Economic uncertainty is fueled by political unrest, such as Brexit and the trade war. According to him, another recession will probably blow over from the US, as has been the case for decades.
With an economic downturn approaching, the economist points to another problem: low interest rates. Van Duijn made no secret of the fact that he is not a fan of Mario Draghi, president of the European Central Bank (ECB). "I think his monetary policy is a disaster for Dutch citizens." Low interest rates mean that Dutch pensions are lagging behind inflation. "It is insane that after 9 years of economic growth, Draghi has still not raised interest rates." Van Duijn wondered aloud what the ECB would do if the next recession was a fact.
Land is guaranteed to be a good investment
However, according to Van Duijn, we do not have to mourn an economic downturn, because (agricultural) land is after all a reliable and good investment alternative for the fluctuating stock prices and low interest rates. "On average, land prices show an increase. You can assume that, especially in a small country like the Netherlands, where land is extremely scarce." According to Van Duijn, this development is at the root of the saying: "A farmer lives poor, but dies rich."
Wouter Job
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