Abstract
The article presents the main aspects of the Common Agricultural Policy (CAP) while also exploring the contextual parameters and impact on agriculture and rural areas of the European Union (EU) member states. CAP is one of the most important policies of the EU, having for decades occupied the major share of the region’s budget and had profound effects on farm structures, agricultural employment and rural areas, as well as wider economic, social, political, environmental and cultural implications, for old and new member states. The article is organized in five sections. The introductory section offers a brief account of the basic dimensions of the newly reformed CAP, which suggest how the CAP is destined to evolve in the near future. The next section is dedicated to the analysis of farm structures, agricultural and regional employment, agricultural incomes and regional development. The third section deals with the evolution of the CAP objectives, as well as the drivers connected to the recent CAP reforms. Next, there is a comprehensive presentation of the CAP impact on agriculture and rural areas of the member states. Finally, a number of conclusions are drawn regarding the path dependency of the CAP and its continued inefficiency on lowering social and spatial inequalities in rural areas.
Keywords
Introduction
The Common Agricultural Policy (CAP) has been the single most important policy of the European Union (EU) since its formulation, due to its longevity and the financial resources channelled through it. Initially, the main objectives of the CAP, set out in the 1957 Treaty of Rome, were to increase agricultural productivity, ensure a fair standard of living for the agricultural community, raise the farm incomes of European farmers, protect them from international competition and support internal prices. Since its creation in 1962, the CAP has undergone several modifications, adjustments and reforms.
Despite the fact that the basic objectives have remained the same over the years, the CAP reform path since 1992—when the path-breaking MacSharry reform was launched—have led to a completely new policy structure. Consecutive reforms have gradually taken CAP subsidies away from product support towards producer support and rural development.
One of the main arguments of this article is that although the CAP has become a ‘mega-policy’—having gradually incorporated many policy components, such as rural, territorial, environmental and social—it has not overcome many of the pitfalls related to the uneven agricultural/farm and socio-economic structure of the EU member states. Also, as will be shown by an analysis of farm structures and employment in rural areas, there are different ‘peripheralities’ within Europe. One aspect is the old/new member state axis across which agriculture and rural economies of the new member states are considered as less developed compared to that of the older member states. Another aspect is the northwest/south member state axis which differentiates between less competitive and more competitive farm holdings and/or rural economies. Effectively, these peripheralities lead to the consolidation of an economic hierarchy between the rural regions that struggle to survive and seek ways to increase their resilience against the expansion of market mechanisms.
It will be shown that the CAP, far from addressing effectively issues, such as, inequity and territorial cohesion, rather intensifies existing inequities and territorial divergence among rural regions within the EU. Moreover, during periods of economic growth there are signs of improvement of economic indicators and territorial cohesion between rural regions, whereas in the recent period of economic recession the CAP does not manage to provide a remedy for agricultural and socio-economic inequalities. Therefore, the CAP seems to have integrated social objectives, but these are clearly subordinated to the market and economic objectives, which in the long-term cancel out any developmental trajectories benefitting the less favoured and remote rural regions.
This article is structured along five sections. The first section presents an overview of the evolution of the CAP reform process, up to the most recent budgetary framework of 2014–20. The second section is dedicated to the analysis of farm structures, agricultural and regional employment, agricultural incomes and regional development. The third section deals with the evolution of the CAP objectives, as well as the drivers connected to the various CAP reforms, which provide the context for understanding the path dependency of the CAP and its relative independence from the agricultural and rural development of the member states. In the fourth section, there is a comprehensive presentation of the CAP impact on agriculture and rural areas of the member states. Finally, a number of conclusions are drawn regarding the path dependency of the CAP and its continued inefficiency on decreasing social and spatial inequalities in rural areas.
The Evolution of CAP Reforms
Since the 1992 reform, the CAP has refocused its support with the aim of strengthening farmers’ income directly, rather than ensuring a fixed price for the products they produce. In the past, payments were linked either to the production of fixed yields (crops), or to fixed numbers of animals. This type of payment was referred to as ‘coupled payment’. With the Mid-Term Review of 2003, a movement to a real market orientation for the European agricultural sector was initiated. Since 2006, payments have been linked to entitlements based on the value of historical production (for many older member states), or on other systems (e.g., hybrid, regional), or on single area payment schemes (for the new member states).
The decoupled payments ensure basic income support for farmers, while the latter direct their production efforts to the competitive agricultural market. The basic precondition for issuing the direct payments to farmers is that they observe environmental, animal and plant health standards, set by scientific and administrative authorities in the member states. This system of ‘cross compliance’ applies in all cases, whether the farmer utilizes the land productively or chooses to leave it idle (EC 2010b). Decoupled payments and cross compliance operating together ensure that basic public goods are delivered as a result of sustainable farming. Moreover, this system ensured that farmers’ income would be stabilized; although their level of income still lags behind that of other economic sectors.
Agenda 2000 legitimized the territorial objectives of the CAP by establishing rural development as its second pillar and launched a single regulation to apply across the whole of the EU for the period 2000–06. Rural development included agricultural restructuring, but also concern for environmental issues and the wider needs of rural areas. The various rural development measures would be integrated appropriately in Rural Development Programmes (RDPs) prepared by the member states—at central and regional levels—accompanying as guiding principles the decentralization of responsibilities and flexibility of programming.
The Mid-Term Review of the CAP introduced measures relating to food quality and animal welfare, while strengthening rural development financially by transferring funds to rural development objectives by means of a reduction in direct payments to bigger farms (called ‘modulation’). In 2005, the new rural development regulation was implemented by means of a single fund, a single management and control system and a single type of programming. The aims of this policy were three: to improve the competitiveness of agriculture and forestry; improve the environment and the countryside; and improve the quality of life in rural areas and encourage the diversification of economic activity (EC 2013b).
In December 2009, DG Agriculture and Rural Development published a discussion paper on Why Do We Need a Common Agricultural Policy? (EC 2009). This document stressed that agriculture fulfills a variety of functions. The first and foremost function of European agriculture is to supply food. Agriculture, as the main land user, is the sector in which the ‘rural’ and ‘farming’ overlap. Moreover, agriculture is a vital part of viable rural areas. A major challenge for the agro-food sector has been to exploit newly emerging markets with high quality and high value-added products. At the same time, agriculture is particularly vulnerable to climate change, which in turn poses the issue of the public function of agriculture. It is, thus, recognized that the market alone cannot address all functions and roles, as well as the provision of services made available by agriculture. In short, it is argued that ‘[p]ublic support to farmers is needed to face increasingly volatile markets, to ensure the provision of public goods and to facilitate changes in farming practices in order to ensure a farming sector that meets societal demands’ (EC 2009: 4).
This rationale for the CAP is based on the need to provide a safety-net for the farming sector to survive bad years and ensure farming supply over time and the viability of the sector, while benefitting the upstream sectors like the processing industry, retailers and consumers. In addition, it should ensure the provision of public goods which are delivered by agriculture but not promoted by market mechanisms. Finally, opposing trends of agricultural restructuring, such as land concentration in the plains and/or abandonment of land which is more pronounced in mountainous areas, should be confronted in order to meet the social, economic and environmental demands of European society.
In the last two decades, the CAP has confronted a number of major challenges relating to the productive capacity of agriculture, environmental concerns of EU citizens, the increasing socio-economic and spatial diversity of agriculture and rural areas in the aftermath of successive enlargements, food safety and quality, healthy nutrition, animal welfare, plant health, the conservation of the countryside, biodiversity and climate change. However, the fairness and efficiency of farm subsidies in Europe have often been questioned (Tocco, Davidova, and Bailey 2013: 1). The recent CAP reform of 2013 set out three basic objectives (EC 2010a: 7) around which many more specific targets are organized: (a) viable food production; (b) sustainable management of natural resources and climate action; and (c) balanced territorial development.
These objectives and the more specific targets will be analyzed in a later section, but it should be mentioned here that public support does not only refer to the agricultural sector but also to rural areas. The two pillars of the CAP, agriculture and rural development, are thus maintained and the links between them have increased, while there has been an effort to offer a more holistic and integrated approach to policy support (EC 2013a). The new CAP envisions greener and more equitably distributed direct payments classified under Pillar I, but also stronger focus on competitiveness and innovation, climate change and the environment when launching the interventions included in Pillar II.
In 2010, the European Commission initiated a public debate on the future of the CAP (EC 2010a). By October 2011, a set of legal proposals were issued concerning the future CAP. After almost two years of negotiations, a political agreement was reached on 26 June 2013, and the new proposals came into effect as of 1 January 2014. In this context, the budget of the new CAP has been decreased and there has been a new process for the overall budgetary framework for 2014–20, the Multiannual Financial Framework (MMF), which includes the funds allocated for the CAP. The new CAP 2014–20 agreed by the European Council and the European Parliament retained the two-pillar structure and most of the essential objectives and approaches proposed by the Commission, albeit with a lower budget than that proposed by the Commission.
Allocation of CAP Commitments by Pillar, 2014–2020 (EUR Billions, Constant Prices 2011)
In the context of MMF, the maximum commitments for direct payments and market measures have been set at €277.9 billion (Pillar I) and €84.9 billion for rural development (Pillar II) (Table 1). Considering the 2008 Health Check and other modifications implemented in the previous programming period 2007–13, there is an overall 16 per cent reduction in total CAP funds, corresponding to a reduction of 17.5 per cent for Pillar I and 11.1 per cent for Pillar II. It should be mentioned that the increased amount of funding for Pillar II in the period 2007–13 was due to the modulation option which the member states exploited, especially towards the end of the period. This meant that the funds from Pillar I were transferred to Pillar II; a similar option is offered in the new period 2014–20.
On the basis of annual CAP commitments, a comparison of 2013 and 2020 shows that the reduction of funding under Pillar I was not as extensive as under Pillar II. More specifically, in 2020, €37.6 billion has been allocated to direct payments and market measures, compared to €43.2 billion in 2013, representing a reduction of 13 per cent—although €11.4 billion is allocated to rural development in 2020, compared to €13.9 billion in 2013, representing a reduction of 18 per cent (Figure 1).
The share of the rural development component of the CAP seems to be shrinking, despite the rhetoric of the Commission for its strengthening. In the new CAP, there are options to enlarge the share of Pillar II, but this would imply an increased amount of national funding—due to cofinancing of rural development—as well as reactions by the lobbies of farmers who will have their payments reduced. Overall, the vast majority of funding, that is 71 per cent, is allocated to direct payments, 23 per cent to rural development and 3 per cent to market measures.
The new CAP budget is significantly reduced as a share of the EU budget, but still remains the most important policy in terms of funding resources. In the period 2014–20, the CAP has been allocated 37.8 per cent of the EU budget, against 43.5 per cent for the period 2007–13. This is a significant reduction compared to previous decades, when the CAP accounted for 60 per cent of the budget in the 1990s and 70 per cent in the 1970s.
Agriculture and Rural Areas: Characteristics and Trends
The agricultural structures of the EU member states vary significantly due to differences in geomorphology, climate, and natural resources, but also to diverse regional activities, infrastructure and socio-political and historical heritage.
In 2010, the agricultural sector of the EU-28 contained 12.2 million farms. 1 The utilized agricultural land extended to 174.1 million hectares, accounting for more than 40 per cent of total land area. The average size of agricultural holdings was 14.2 hectares (Eurostat 2013a: 24). However, there is a very significant contrast between a large number (8.5 million) of ‘small farms’ (below 5 hectares), which account for 69.3 per cent of all holdings, and a small number of ‘large farms’ (over 50 hectares), which account for 5.9 per cent of all holdings. The group of small farms utilizes only 7 per cent of total farming area, whereas the group of large farms utilizes 66 per cent (Eurostat 2013b).
There is significant diversity among the member states. Those with a high share of small farms are Malta (97.8 per cent), Romania (93.1 per cent), Bulgaria (91.4 per cent), Cyprus (89.6 per cent), Hungary (87 per cent), Greece (77.1 per cent), Croatia (76.4 per cent), Portugal (75.6 per cent), Italy (72.9 per cent), Slovakia (64.4 per cent) and Slovenia (60 per cent). It is, therefore, evident that the Mediterranean and many Central and Eastern European states have retained a vast number of small farms.
On the other hand, a significant number of member states have high land concentration and a high share of large farms: Slovakia (94 per cent), Czech Republic (93.4 per cent), the United Kingdom (87.9 per cent), Bulgaria (86.9 per cent), Luxembourg (86.6 per cent), France (84.5 per cent), Denmark (82.2 per cent), Estonia (81.3 per cent), Germany (76.8 per cent), Hungary (74.3 per cent), Sweden (72.8 per cent) and Spain (70.6 per cent). It is mostly the Western European and many Central and Eastern European states which have an advanced process of agricultural land concentration in large farms (Eurostat 2013b).
Evolution of Landholdings and Utilized Agricultural Area in the EU-28, 2000–10 (Area in Hectares)
The agricultural land concentration process is evident in nearly all member states. Table 2 offers significant evidence with respect to the acceleration of this process among the older member states (EU-15), while in the new member states (EU-13) the pace seems to have increased between 2007 and 2010. The average size of agricultural landholdings in the older member states (EU-15) has increased from 18.7 ha in 2000 to 23.8 ha in 2010. This led to an increase of the average landholding by 27 per cent. With the addition of the new member states, the average holding of the EU-28—commencing at a lower level—increased by 13 per cent, from 12.6 ha in 2007 to 14.2 ha in 2010.
It should be underlined that not all new member states experienced a low pace of agricultural land concentration compared to the older member states. Notably, three new member states increased spectacularly the average size of their agricultural landholdings between 2007 and 2010: Slovakia (by 276 per cent), Bulgaria (200 per cent) and Czech Republic (170 per cent). This is only an indication of a more violent process of land concentration implemented in the new member states, due to their accession to the EU.
When compared to other countries, farms in the EU remain small. For example, the average farm size in Brazil is around 70 ha, in Chile 100 ha, in the USA 160 ha, in Canada 300 ha, in Argentina nearly 600 ha and Australia over 3,000 ha (EC 2013b: 24).
Furthermore, the ‘economic size’ 2 of the EU farms is significantly differentiated between old and new member states, as well as among southern European and north-western European member states. 3 Over 77 per cent of the agricultural holdings of the EU-13 has an economic size of less than €4,000, while nearly 38 per cent of the EU-15 is of a similar economic size. However, 19 per cent of EU-15 holdings have an economic size of over €50,000, while only 1.9 per cent of the EU-13 holdings belongs to this size class (Eurostat 2014a).
The majority of the EU-15 holdings with low economic size are mostly concentrated in the four Southern European member states (Greece, Italy, Portugal and Spain). These four member states, which account for two-thirds of the holdings of the EU-15, contain the vast majority (88.5 per cent) of the holdings with low economic size and only one-third of the holdings with large economic size. This implies that the Western and Northern European member states have two-thirds of EU-15 holdings with large economic size.
The new member states (EU-13), with the sole exception of Czech Republic, which resembles the more developed agricultural countries of the EU-15, contain three-quarters of the total number of holdings with low economic size.
Small farms, both in terms of land size and economic size, comprise the socio-economic basis for what is called ‘semi-subsistence farming’ (SSF) and includes those ‘holdings from which less than half of their agricultural output is sold, with the remainder being consumed within the farm household’ (Davidova et al. 2013: 11). It is estimated that nearly three-quarters of small holdings under 2 hectares, or under €2,000 of standard output, belong to this category. The distribution varies greatly among member states. On one end, the great majority of SSF holdings are found in Romania and other Central and East European member states, while on the other end, none of those holdings are found in Western and Northern EU countries.
The situation of EU agriculture should be also complemented by an analysis of agricultural employment. By 2010, nearly 25.5 million people were involved in agricultural production in the EU-28. These people are recorded as being regularly working in agricultural, but this does not necessarily imply that they are employed on a full-time basis. Therefore, the labour force in agriculture is converted into annual work units (AWUs), 4 which allow us to consider employment characteristics and trends. Moreover, we will use data from farm structure and labour force surveys, 5 in order to unveil the existing inequalities and diversity in agricultural employment among member states.
The large number of regularly employed in agricultural holdings is related to the fact that farming family members are the main source of agricultural employment in the EU-28. In terms of people employed in agriculture, 92 per cent are family members and the remaining are salaried workers. This means each agricultural holding employed on average 2.1 persons. However, these people are not working full-time in agriculture. Actually, many of them are underemployed in agriculture and/or divide their time between agriculture and other economic sectors, which is one of the main characteristics of small-farm holdings (Kasimis and Papadopoulos 2013).
By converting agricultural employment to full-time, the number of employed in agriculture is reduced to around 10 million, which means that 0.8 AWU is required on average per agricultural holding (EU Agricultural Economics 2013: 6). This conversion allows for a better analysis of the relationship between family and non-family labour at the level of agricultural holdings. Evidently, there is significant diversity in this relationship found between old and new member states, as well as between Southern European and North-Western European member states.
Nearly one-third of agricultural employment in the EU-15 member states is found in salaried employment, whereas only 13 per cent of agricultural employment in the EU-13 member states is based on salaried employment (Table 3). Apparently, in their vast majority, the new member states—with the notable exceptions of Czech Republic, Estonia and Slovakia—utilize family labour, and only the very large farms employ non-family labour. This confirms the earlier remark that many small farms in the new member states are categorized under SSF.
Family and Non-family Labour Force, 2010 (Persons in AWUs)
The inter-relationship between family and non-family labour is more complex than is normally stated. In fact, family labour is gradually being substituted by non-family labour which undertakes the manual work and the most arduous agricultural tasks. All non-family labour is, certainly, salaried labour employed on regular (permanent) or on seasonal basis.
Moreover, among the old member states there exist significant differences in the employment of non-family labour (that is, salaried labour), which relate to the inequalities between small- and large-farm holdings. One quarter of the agricultural employment of the southern European member states and approximately two-fifths of the Western and Northern European member states originates is non-family labour. The size of seasonal non-family labour is more significant than regular non-family labour in southern European member states. The size of the non-family non-regular labour force, that is, seasonal and/or precarious, is significantly underestimated due to its irregular nature. If the size of irregular employment were measured, then the complex mechanisms of agricultural employment would be better illustrated and, thus, the role of migrant labour would be widely recognized, not only in southern European agricultural economies, but also in many European rural regions (Kasimis, Papadopoulos and Pappas 2010).
A significant trend of agricultural employment is that of its diminishing nature. This is an old phenomenon related to the modernization of agricultural production, which includes two interrelated processes: first, technological innovation, which affects mainly the large farm holdings undergoing mechanization and substitution of menial labour; and, second, the eradication of small farms that cannot compete with the large farms in the production of cheap agricultural produce, thus leading to land consolidation and/or land abandonment.
In this context, it has been particularly evident in the last decade (2000–10) that the size of agricultural employment has significantly declined. More specifically, the size of agricultural employment—including family and non-family labour—declined by 23 per cent among the old member states (EU-15), from 6.4 million AWUs in 2000 to 4.9 million AWUs in 2010. The decline of agricultural employment was much harsher among the Mediterranean member states (26 per cent) than the Western and Northern European member states (19 per cent) (Eurostat 2014a). In the period 2007–10, the overall reduction of agricultural employment for the EU-28 was 16 per cent. When disaggregated between old and new member states, then the EU-15 experienced a reduction of 13 per cent and the EU-13 of 19 per cent (Eurostat 2014a).
Another facet of the overall decline of agriculture is the shrinking size of the labour force employed in agriculture and the diminished share of agriculture in the GDP of the EU-28 (Figure 2). Agriculture absorbs less than 5 per cent of the total labour force. Among the old member states, only Greece retains a numerous agricultural labour force (13 per cent), possibly also due to the recent economic crisis which has severely affected the country, together with many of new member states, namely, Romania (25.7 per cent), Poland (11.7 per cent), Croatia (9.4 per cent), Lithuania (8.4 per cent), Latvia (7.8 per cent) and Slovenia (7.2 per cent). The contribution of agriculture to the GDP of the EU-28 does not exceed 1.7 per cent, while agriculture plays a more prominent role in the economies of the new member states.
In the period 2000–09, agricultural income, measured as real factor income per worker, has improved for the EU-27 member states. There has been an increase of 0.6 per cent annually, but there are significant differences between old and new member states. More particularly, in the EU-15, agricultural income improved by 30 per cent in the period 1993–2007, but declined by 17 per cent in 2007–09. For the EU-12, in 2000–09, agricultural income improved by 67 per cent, or 7.4 per cent annually. The economic crisis of 2008–09 caused agricultural incomes in the EU-15 to plummet to the levels of 1994, while agricultural incomes in the EU-12 remained well above the levels before their accession (European Commission 2010b).
Apart from agriculture, rural areas are considered as the focus of policy actions in order to pursue rural development and/or territorial development. Based on a typology of rural areas, 6 predominantly rural regions in the EU represent over half of the territory, one quarter of the population and one-fifth of the employment. The share of the territory is quite similar in the EU-15 and EU-12, that is, 50 and 57 per cent, respectively. However, the share of predominantly rural regions in terms of population (40 per cent against 18 per cent) and employment (36 per cent against 17 per cent) is significantly higher in the EU-12 than in the EU-15.
In terms of territory, predominantly rural regions account for 90 per cent of the surface in Estonia, Ireland, Greece, Portugal and Finland; while only 2.1 per cent of the Netherlands is categorized as rural. The share of population in rural regions is highest in Ireland (73 per cent), Slovakia (50 per cent) and Estonia (48 per cent); whereas in the Netherlands, the United Kingdom, Belgium and Spain, less than one-tenth of the population lives in rural regions (DG Agriculture and Rural Areas 2013: 52–53).
The increase of employment and the preservation of jobs in rural areas has been set as one of the priority objectives of RDPs, which are designed under the second pillar of the CAP. There is specific focus on youth employment, women and the situation of rural areas as a whole (EC 2006: 3).
In the period 1996–2001, employment grew faster in urban areas compared to the rural. In 2004, employment rates in the EU-27 member states were higher in predominantly urban (64.7 per cent) than predominantly rural regions (60.1 per cent). There was also a widening urban–rural employment rate gap. Unemployment rates are, in general, significantly higher in rural than in urban areas. However, there are diverging trends of unemployment rates in the predominantly rural areas between old and new member states. Unemployment rates in the new member states (EU-12) has risen from 12.2 per cent in 1999 to 15.8 per cent in 2004; while unemployment rates in the EU-15 declined from 9.9 per cent in 1999 to 8.8 per cent in 2004 (EC 2006: 6–7).
In recent years, and especially since the start of the economic crisis of 2008, the EU has faced severe difficulties in maintaining its annual growth and the relatively high employment rates, due to the fact that many businesses were affected and unemployment started to rise quickly. In fact, the employment rate of the EU-27 fell from 70.4 per cent in 2008 to 68.6 per cent in 2010.
Unemployment has been steadily decreasing in the rural regions of the EU-12, especially after their accession in 2004. However, this trend was cancelled in 2009, for both the EU-12 and EU-15 countries, when unemployment rates started to rise. Female unemployment has been higher, especially in rural regions where, over the last fifteen years, there has been no progress in narrowing existing gaps with male unemployment.
Population growth in rural regions continues to be extremely limited when compared to urban population growth. However, demographic trends are opposite in the rural regions of old and new member states. The rural areas of the EU-12 tend to lose population, while those of the EU-15 attract newcomers (EC 2012).
Figure 3 provides some indication for the economic gap between rural and urban areas of the EU-27, as well as between old and new member states in the period 2005–10. There is a 56 per cent gap in the GDP per capita between rural and urban areas in the EU-27. When disaggregated between old and new member states, the rural–urban economic gap amounts to 39 per cent in the EU-15 and 59 per cent in the EU-12.
The urban areas of the EU-12 have seen the fastest growth over the period 2005–10. The GDP per capita increased from 86 per cent of the EU average in 2005 to 103 per cent in 2010. GDP increased in the rural areas of the EU-12, but at a lower rate, from 39 per cent in 2005 to 44 per cent in 2010. As a consequence, the difference in GDP per capita between urban and rural areas in the EU-12 has increased over the recent years, leading to a widening rural–urban gap in the EU-27 as a whole.
To sum up, despite the European Commission’s (2013b: 29–33) praise for the family-owned and family-labour-centred character of EU agriculture, there are significant differences which are demarcated by the land consolidation process, the diminishing number of small-farm holdings, the decline of agricultural employment, the substitution of family by non-family labour, and the increasing role of migrant labour in agriculture. The result has been that of growing socio-economic inequalities and disparities between small and large farms, as well as among various social groups in rural areas. Moreover, despite the aspirations for territorial economic convergence within the EU (EC 2006), the patterns of economic development vary significantly between rural and urban areas, due to the fact they follow diverging socio-economic trajectories. Consequently, the rural–urban economic gap has widened, instead of closing.
The ‘path dependency’ of CAP Reforms and Their Constraints
The CAP was initially organized as a protectionist system to ensure that farmers would obtain reasonable prices for their produce and also provide a protective umbrella against the volatility of international markets. At first, the main aim was to achieve food sufficiency at the EU level and, later, to ensure food sovereignty for the EU. Τhe CAP, which was initially conceived as an agricultural policy, gradually evolved to include various policy dimensions. These were integrated not only to justify the financial support dispensed to farmers, and to the benefit of agricultural markets, but also to enlarge the scope of the CAP. Thus, the CAP has become a ‘mega’-policy, by incorporating environmental concerns, wider social and economic demands, as well as territorial adjustments.
The environmental concerns were introduced in order to soften the implications of agricultural modernization promoted by the CAP. The introduction of environmental issues had already started in the 1980s and culminated in the MacSharry reform of 1992, which signalled a turn of the CAP towards the environment (Silva and Marta-Costa 2011). It is important to note that the agri-environmental measures (AEM)—whose main aim was the ‘extensification’ 7 of agricultural production—were incorporated into the corpus of the CAP by transferring funds from other agricultural policy measures. The environmental aspect has been added into the CAP as a complementary component, 8 which counteracted other policy measures aiming at agricultural intensification. The cost-effectiveness of the AEM, thus, has been questioned on the grounds of their consistency with other policy measures (Hodge 2013).
However, it has been argued that the cost-efficiency of policies is not the only aspect to be considered when analyzing a major policy. The CAP is seen as path dependent due to the fact that the distribution of budgetary costs and benefits of the CAP among the member states has remained more or less stable throughout the policy’s history, despite substantial reforms (Kay 2003; Ackrill 2008). Also, it may be argued that the organized agricultural interests—both at the EU and member-state level—have managed to retain the basic component of the CAP, which is the support of agricultural markets, despite the introduction of new thematic areas into the CAP. It is also evident that the policy instruments (e.g., decoupling, cross-compliance, direct payments, co-financing of rural development measures, etc.) have remained the same in the recent CAP reforms. Moreover, the evolution of the CAP has been considered as an example of strategic, programme, and support dependency, which in turn creates synergies among social actors that act against large-scale reforms (Harvey 2004).
The interpretive capacity of the path dependency approach has clear limits when it comes to explaining sufficiently the nuts and bolts of the specific changes to the design of the CAP. For that reason, it is suggested that the 1992 MacSharry reform triggered off a sequence of reactive reform events, which resulted in the 2003 Fischler reform (Daugbjerg 2009). Both Commissioners sought to put their own seal on the CAP reform. Therefore, policy options for each CAP reform can be seen as the outcome of interplay of the social forces behind various groups of interests. Taking the example of the 2003 CAP reform, three advocacy coalitions were allegedly identified: (a) the Agricultural Coalition; (b) the Moderate Reform Coalition; and (c) the Radical Reform Coalition. Given the policy-learning character of advocacy coalitions—which actually opposes the rational choice explanation of policy reform—the Agricultural Coalition was overcome despite the strong resistance and the support of the long established agricultural interests in the EU member states (Nedergaard 2008). This is an indication that the policy process for the CAP reform is not as straightforward as it is frequently considered either by technocrats or policy makers. Politicians have played a decisive role for the outcome of the CAP reforms in recent years. This is especially important when we consider that the policy process of the 2003 CAP reform and, more recently, the 2013 CAP reform, was prolonged and passed through long and painstaking discussions. The outcome of the recent reform can be considered as a balance between the radical reformers and the advocates of the ‘traditional’ CAP (Rutz, Dwyer and Schramek 2013). It is telling that the recent 2013 CAP reform took more than three years to conclude, while the parallel negotiations for the new MFF for the period 2014–20 and proposals for the 2013 CAP reform increased the complexity of the policy process (Greer 2013).
Two major policy shifts should be discerned. First, the incorporation of environmental concerns in the CAP initiated an agenda of an integrated and complex policy that was considered a critical policy turn, with significant implications for the agricultural vested interests (Buller 2002; Hodge 2013; Lefebvre et al. 2014; Papadopoulos 2005). Second, the emergence of a rural development policy has been considered a legitimate formulation of a territorial policy aiming to curb sectoral interests and address socio-economic and spatial inequalities (Hubbard and Gorton 2011; Lowe 2006; Mantino 2011; Papadopoulos and Liarikos 2007; Shucksmith, Thomson and Roberts 2005). The latter policy shift was over-optimistically heralded as a major policy shift, as a transition from a sectoral policy to a territorial policy (Cairol, Coudel, Knicke, Caron and Kröger 2009; Dax, Kahila and Hornstrom 2011).
Both of these major policy shifts have been accommodated in the CAP despite leading to a major transformation of the CAP. To account for the strategic orientation of the CAP reforms it would be helpful to mention Buller’s (2003) classification of four competing paradigms of agricultural support: first, the ‘classic interventionist paradigm’, that has largely dominated the CAP and its history for the first twenty years; second, the ‘free-market or liberalist paradigm’, which increased its momentum during the late 1980s and 1990s; third, the ‘multifunctional interventionist paradigm’, which emerged in the late 1990s; and fourth, the ‘rural development interventionist paradigm’ that was extracted from the CAP following a long process. Today the first two paradigms compete with each other for the upper hand, while the other two paradigms are placed in-between the former two by combining elements of the classic interventionist approach with various arguments from the liberalist approach (Papadopoulos 2005).
The policymakers’ motivation to present the CAP as an evolving policy is reflected in the institutionalization of the two pillars of the CAP, which attempts to accommodate competing policy interests under the umbrella of policy integration. In our understanding, Pillar I seems to lean towards the liberalist paradigm, whereas Pillar II is more relevant to the rural development and multifunctionalist paradigms. The latter promote a more territorial, regional and localized approach. However, within each paradigm there are various tenets which also pursue their specific policy interests, but the outcome of the CAP policy process in not predictable. For example, the continued fragmentation of the CAP has led to a pressure to renationalize support, a fact which is also related to the regionalization of the design and implementation of the RDPs (Dwyer, Ward, Lowe and Baldock. 2007; Rutz et al. 2013; Trouve and Berriet-Solliec 2010).
The main drivers for the CAP reforms are: first, the budgetary constraints posed by the member states and public opinion at the EU level; second, the international pressures related to the WTO and the push of the developing countries towards relaxing the interventions in agricultural markets; and third, the enlargement potential which increases the diversity within the EU and poses new political challenges to the CAP (Burrell 2009; Jensen, Lind and Zobbe 2009; Swinnen 2009).
All three drivers play an important role for the CAP reforms, but it is not possible to predict the timing and the extent of their influence. For example, the external driver, the international pressures and agreements, exerted significant pressure on the 1992, 1999 and 2003 CAP reforms. However, the budgetary pressures and the enlargement process played an equally important role in the more recent CAP reforms of 2008 and 2013.
Today, the internal drivers, such as the rebalancing of decision-making between the EU and member states related to the consecutive and projected enlargements, as well as the pressures to find alternative funding for the CAP measures, apart from the EU budget, are the decisive factors determining the CAP’s evolution (Burrell 2009). The political agenda of the CAP in the future will be negotiated between 28 member states and also between agricultural and non-agricultural interests in an evolving socio-political setting. The outcome is less predictable in the short run, although there is an increasing liberalization of the CAP policy process and the policy outcome. Despite the continuing ‘interventionist’ style regime of support, which is the stronghold of vested agricultural interests in the old and new member states, the CAP is evolving towards a less interventionist system. The long-living agricultural support system is highly resilient and is mostly justified on the grounds of sustaining small family farms and rural employment in rural areas.
Overall, it is admitted that the CAP reforms in the 1990s and 2000s have substantially reduced the trade distortions of the CAP (Matthews 2008; Swinnen 2009), mostly because of the decoupling of ‘single farm payments’ (SFPs) and ‘single payments schemes’ (SPSs) applied in the EU-15 and EU-12, respectively. However, it remains to be seen how the level of direct payments (under Pillar I) and of the other structural interventions (under Pillar II) impact on the agriculture and employment in rural areas.
Impact of the CAP on Agricultural Structures and Rural Areas
In the context of the discussion earlier, it is evident that the CAP has evolved considerably over the last decades, and therefore, it is not an easy task to measure and/or evaluate its effects on agriculture and/or the countryside in general.
It has been argued that the ‘main goal of the CAP was to modernize European farming and introduce highly intensive farming methods’, and that it ‘has created a culture of greed, which has led to the gradual demise of small farmers who are often ill-prepared for their off-farm futures’ (Crowley 2006: 39). According to Marsden (2003), the recent CAP reforms are essentially attempts to address the expanding crises of legitimacy of the dominant productivist model in agriculture. The alternative model of post-productivist agriculture that has developed in North-West Europe has gained significance due to its promotion through the reformed CAP. Both models, nevertheless, are promoted by a ‘mixed’ CAP, while the ‘peripheral rural regions’, which are least affected by the productivist or the post-productivist model, are given the opportunity to pursue an emergent sustainable rural development model.
Similar arguments have been raised by various writers, who stress the fact that the CAP faces for many decades a generalized ‘confidence crisis’, which leads to a political legitimacy crisis (Brehon 2011: 2). According to this view, the CAP no longer makes sense due to the fact that it has been transformed from an agricultural policy to a policy for supporting farmers. There is severe criticism upon CAP on three levels: first, it still absorbs a large proportion of the EU’s budget; second, there is an unequal distribution of aid between sectors and between beneficiaries; and third, the CAP is still production-oriented and, because of that, it has caused considerable damage on the environment.
The evolution of CAP has created a number of paradoxical situations which have been intensified by policy reforms in recent decades. One paradox is that farmers are often demonstrating against the CAP, while at the same time they remain as the main beneficiaries of this policy. Additionally, the CAP in recent years has become more liberal, but simultaneously it maintains aid and income support to farmers as its main intervention tools. Finally, the funds for financing the CAP originate from tax payers/citizens of the EU member states, whereas public opinion has increasingly been very sceptical about whether the funds of the CAP are invested in a rational manner and highly critical about the obvious effects of agricultural production on the environment and the health of the citizens.
While many of the CAP reforms are directed towards ‘internal’ problems of the EU member states, the impact of the CAP reforms on developing countries are very diverse. The CAP has been criticized in the past for not presenting policy coherence with the development objectives of the developing countries. There are winners and losers among the latter from further CAP reform. The ‘winners’ are concentrated in the more competitive middle-income developing countries, while the ‘losers’ in the more vulnerable, low-income developing countries (Matthew 2008: 397–98). Of course, the effects of the policy are both country-specific and commodity-specific, due to the fact that the CAP is a highly complex policy, encompassing diverse measures which are difficult to assess in their interplay (Klavert, Engel and Koeb 2011).
Looking inside the EU, the CAP in general has historically favoured farm incomes, and therefore, farm households depending on supported crops. However, there is significant evidence showing that farm incomes are still behind average incomes, while non-farm incomes make up a gradually larger proportion of farm household incomes due to the better integration of rural areas in the wider economy (Swinnen 2009: 9).
At the same time, agricultural employment in the EU has declined very significantly over the past years, despite the large sums of funding poured into rural areas because of the CAP. Various writers have argued that the CAP has a positive effect on retaining and/or stabilizing agricultural employment in rural areas, although the findings show a significant diversity among rural regions. More particularly, rural regions in the ‘new’ member states seem to have a better agricultural employment record than their counterparts in the ‘old’ member states (Efstratoglou, Giannakis and Psaltopoulos 2011; Mattas, Arfini, Midmore, Schmitz and Surry 2011; Olper, Raimondi, Cavicchioli and Vigani 2014; Tocco et al. 2013). The heterogeneous effects of the CAP on agricultural employment of various member states illustrates the diverse impact of CAP measures and also the contradictory effects of Pillar I and Pillar II upon local economies.
It has been argued that in the long run, agricultural protection under the CAP (and the direct payments) has not been effective at protecting satisfactorily EU farm family employment (Swinnen 2009: 12). Moreover, the CAP may have a diversified impact on agricultural employment by affecting farm structures. The expansion of farms and the intensification of agricultural production reinforced by the various CAP measures have a direct impact on the expansion of agricultural employment, but not necessarily of farm family members; rather they have expanded agricultural wage labour which is required to carry out non-skilled and arduous tasks (Kaditi 2013; Kasimis and Papadopoulos 2013).
Another important issue to be addressed is that the allocation of the CAP budget among member states, farmers, the different regions and types of production is not equitable (D’Oultremont 2012). Of course, this inequity has to do with the political economy and the historical development of this policy. The direct payments which represent 70 per cent of the CAP budget are not allocated in an equitable way. The ‘old’ member states receive higher amounts of direct support due the fact that this is related to a historic period. On the other hand, the ‘new’ member states receive lower amounts of direct support because the funding was allocated in the form of arbitrary financial schemes. For example, in 2008, the EU-15 received 91 per cent of the funds allocated to Pillar I, against only 9 per cent for the EU-12. By 2013, the EU-15 has been allocated nearly 81 per cent of the Pillar I funds, against 19 per cent for the EU-12 (D’Oultremont 2012: 8). Although the situation has somehow improved, there is still considerable inequity.
The most important inequality of CAP payments has to do with their allocation to farmers. The most important criticism of the current allocation of payments is the concentration of income support in the hands of large farmers who do not face problems of low incomes. In 2007, one-fourth of the largest farms received three-quarters of total support, from both Pillars, in the EU-27. Moreover, during the same year, the annual income of one-fourth of the largest farms in the EU-15 was €73,000, which represented around three times the average level of income of all beneficiaries (D’Oultremont 2012: 12).
In fact, direct payments which were designed to provide an income guarantee for farmers do not represent an effective instrument to provide a social safety net for poor farmers who mostly need this policy. The allocation of direct support to regions and farmers based on historical records has the reverse effect compared to the previous need. That is, the most productive farms in regions which are production areas of the most supported crops are more likely to receive the highest levels of payment, while those mostly in need of income support are less likely to receive enough payments (Swinnen 2009: 14).
Evidence from a study carried out a decade ago focusing on the territorial impact of the CAP shows that the latter has uneven effects across the EU-15, 9 and that it is not positively contributing towards the objective of balanced and sustainable development across Europe. The results suggested that the distribution of support (from both Pillars) tends to benefit richer regions with low unemployment rates and high population growth (Shucksmith et al. 2005). Moreover, it was particularly underlined that the rural development policy (Pillar II), which had been designed to meet the territorial targets, lacked a strong territorial dimension. Three reasons were identified as contributing to this situation: first, the diversity of member state priorities; second, the inadequate and uneven funding of rural development measures; and third, the co-financing requirement, which severely restricts the implementation of such measures.
A recent report points out that both the European Commission and the member states have not sufficiently shown what has been achieved in relation to the rural development policy objectives, and therefore, there is a lack of certainty on whether the EU budget has been spent well. This inability is due to the following reasons: the objectives of rural development expenditures were not sufficiently clear; there was no sufficient information and reporting of the results to see whether the objectives set at the beginning have been met; and the monitoring and evaluation information were not used properly to improve the rural development policy (ECA 2013).
To sum up, the criticism of the CAP has continued over the years due to the uneven character of the CAP impact on agricultural structures and the rural areas. The inequity of direct support and the inequalities injected on agriculture and rural areas because of the CAP have been a persistent characteristic of this policy.
Conclusions
The CAP is a highly complex and contradictory policy, having over the long run embodied diverse thematic areas, objectives and measures. The increased complexity of CAP sends mixed signs to EU citizens and farmers, while at the same time, it fails to address the pressing problems of increased inequities and territorial divergence of rural regions.
Three main elements of the reformed CAP are particularly pronounced. First, farm support is mainly decoupled and amounts to the main bulk of the CAP budget. Second, the role of market intervention mechanisms has been significantly reduced, although the market orientation of farmers is highly recommended. Third, rural development policy is strengthened with funds and policy instruments, while not all countries are equally keen to implement rural development measures (Haniotis 2009). Rural development policy has proved to be a major challenge for rural areas/regions because they are considered the new beneficiaries of the CAP (Dwyer 2013).
Admittedly, the CAP is a ‘multidimensional’ form of public intervention structured around two complementary pillars (Efstratoglou et al. 2011); but at the same time the societal challenges are important for the CAP’s future. It has been argued that further steps must be taken for CAP to become legitimate and fair for tax payers, consumers and people living in rural areas (Eriksson 2009: 22). The recent reforms have somehow improved the equity of the CAP, but they did not succeed in correcting all of its pitfalls.
The current CAP has been path dependent to some extent and, therefore, the older criticisms still hold true. It is striking that the recognition of CAP’s uneven nature and of its diverse and inequitable effects does not lead to a step-wise solution guided by consecutive policy reforms.
A major target of the CAP, that is, the survival of small-scale family farms, has been addressed by a number of rural development policy measures which complement agricultural policy measures (Davidova et al. 2013; Hennesy 2014). However, our analysis has shown that the large farms predominate in the western-northern old member states, and they become an increasingly prominent feature in the southern old member states and in a handful of new member states. This indicates that the CAP has probably accentuated the pre-existing inequalities and peripheralities within the EU, rather than offering a smooth way for increasing the resilience of farm holdings/rural economies in rural regions.
Finally, the recent CAP reform did not manage to change the allocation of payments among and within member states. The inequalities between the large and small farmers have barely been addressed, despite the heavy criticism on CAP for this problem. The CAP pays only lip service to the maintenance and strengthening of small family farms (Weiss 2007); while at the same time it safeguards and expands market policy at the expense of agricultural structures and rural areas.