In midsummer a wave of farmers’ protests swept across Lithuania. Discontented with the adverse conditions and low prices of their products, Lithuanian farmers blocked a dozen roads across the country, doing harm to innocent road engineers and carriers.
To satisfy the requirements of the protesting farmers, the government dished out 60 million litas for agricultural products to be bought up. But was this move the best way out? Do not such measures remind us of curing the symptoms of a disease rather than the disease itself? Quite naturally, the allotted money will pacify the farmers for a little while and ease the government’s headache. But there is a danger that this step will set a precedent for other disgruntled groups by showing how easily money can be exacted from the state. What would happen if, for example, teachers barricaded the railways or librarians raided the airports? Supply always engenders demand. That is why there will be no lack of people willing to better their conditions at the expense of others.
But what action will the government take next? What criteria will it use to determine how much money should be doled out, and to whom it should be given? Finally, when will they recognise that the state budget not only is riddled with holes, but is also empty?
LFMI policy analysts have pointed out on many occasions that this kind of “fire extinguishing” will never improve the conditions of life and work. The only way to do this is to provide conditions wherein people can create their own well-being. This rule is valid for the whole market and especially for agriculture, where market sprouts have the most difficulty pushing their way up. It is obvious that the agricultural policy that has been pursued by all governments so far has failed. This policy has been a typical example of how government intervention in economic affairs not only discourages, but even thwarts reforms. Clearly, this line must be changed without delay.
The first step is to eliminate inconsistencies in the agricultural policy. Such inconsistencies are numerous. One of them refers to state aid extended to flax growers. Although local flax growers do not satisfy even half of the demand of the domestic textile industry, restrictions are imposed on imported linen. Textile companies are granted quotas to import raw materials tax-free. However, the distribution of these quotas is a complex, lengthy process. That is why the said measures are economically inefficient and cannot help flax growers.
Instead of dispensing subsidies and financing a mass of agricultural aid programmes, the government should take firm action in order to stamp out barriers that obstruct the rise of market relationships in agriculture. Market signals, unaffected by subsidies, quotas, customs duties, or other artificial regulations, would allow farmers to decide for themselves what to grow, how much to grow, and what services to offer.
For the time being, it can be asserted that agriculture is one of the most extensively regulated sectors of the economy. One frequently cited justification for such regulations is that EU member states are pursuing a similar policy. However, even pro-socialist EU governments are beginning to recognise its inefficiency and are contemplating reforms. It is time for our government to learn from other’s mistakes. And by doing so, to avoid correcting its own later on.
