Half of European Union member states have leveraged the Common Agricultural Policy to substantially reduce poverty and raise incomes in farming, while other countries are lagging behind, according to a new World Bank study.
Released today, the World Bank’s “Thinking CAP” report assessed the impact of the EU’s Common Agricultural Policy (CAP) on inclusive growth. The report found that the CAP was associated with reduced poverty and the creation of better jobs for farmers across the EU, as well as with improved employment conditions in farming.
In newer EU member states, for example, the report found that agricultural labour productivity growth increased from 3.1% to 4.7% per year with a 10% increase in CAP spending on decoupled payments – annual payments based on how much land a farmer uses – and on-farm investments.
The EU’s CAP is one of the bloc’s oldest policies. With an annual budget of around €59 billion, it constitutes nearly 40% of the total EU budget. To help ensure that European agriculture remains sustainable and competitive, EU funds are used to balance impacts on vulnerable agricultural markets, to provide income support for farmers and to support rural development programmes.
“Today, about half of EU member states recognise that farming can boost shared prosperity, while the other half still has some work to do to provide the basic conditions to bring about necessary structural changes,” said Arup Banerji, regional director for European Union countries at the World Bank.
Member states that have converted agriculture into a key sector for shared prosperity include Hungary, Slovakia, Estonia, Denmark and the Netherlands. The countries have successfully modernised their agricultural sectors by providing the basic conditions required for agriculture to thrive, including advisory services, roads, secure property rights and access to education and health services in rural areas.
“Agriculture and poverty in half of the member states of the EU no longer go hand-in-hand. It’s clear that the income gap between agriculture and other sectors is narrowing and in some countries, such as the Netherlands, agricultural work can pay more than jobs in other sectors,” said Banerji.
Other countries, such as Bulgaria, Portugal, Romania, Slovenia and Greece, have work to do in order to break the link between agriculture and poverty. To reduce poverty and ensure that agricultural work pays, the World Bank recommended that those countries improve the basic conditions for a successful agricultural sector. Doing so would also improve the results of the financial investments available under the CAP and create better jobs for farmers, according to the report.
“Some countries are running before they can walk by issuing payments to farmers who don’t have the necessary infrastructure to effectively bring their products to market or to make the best use of their investment,” said Rogier van den Brink, lead economist at the World Bank.
“However, the processes the CAP has put in place are impressive,” van den Brink continued. “The CAP casts a very wide net and reaches farmers in every far-flung corner of the EU. Because of this, improvements in the CAP along the lines of the recommendations outlined in our report will further strengthen its role as a powerful instrument of structural transformation.”