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Finland Agricultural Policy
Finland's agricultural policy has long been inspired by
more
than purely economic considerations. The need to maintain
secure
food sources caused the Finns to subsidize uncompetitive
grain
production rather than to allow further specialization in
dairy
and meat operations. Social concerns drove policies
designed to
maintain family farms and to give farmers incomes and
working
conditions more equal to those of other workers. The
desire to
maintain settlements in the sparsely populated northern
provinces
led to heavy subsidies for farmers in those regions. Other
goals
included stabilizing retail food prices and increasing
farm size
and efficiency.
In the late 1980s, agricultural policy making involved
tradeoffs among these partially contradictory objectives. For
national
security reasons, the government gave priority to ensuring
selfsufficiency in basic foodstuffs. But self-sufficiency,
like other
farm-policy goals, resulted in costly agricultural
surpluses that
had to be dumped on international markets. Structural
reforms,
designed to increase farm size, could improve efficiency,
strengthen family farms, and increase farm incomes, but
they were
difficult to implement.
By the early 1960s, the first
goal--self-sufficiency--had
been achieved. By the late 1970s, however, surplus
production had
become a pressing problem. According to government
estimates made
in the early 1980s, crop productivity would increase by
about 1.5
percent per year, and productivity in animal husbandry
would
increase by about 0.5 percent per year. Because Finland's
consumption of agricultural products was stagnant, crop
and
animal surpluses would therefore continue to grow--unless
agricultural prices were reduced.
In the late 1970s, the government stepped up programs
designed to encourage farmers to shift production from
products
in surplus, such as eggs, milk, and meat, to products that
replaced imports, such as wheat, sugar, and vegetables.
Starting
in the mid-1980s, worldwide agricultural surpluses
depressed
prices and made agricultural exports especially expensive.
In
response, the government redoubled its efforts to control
output
and to encourage reforestation of surplus farmland. This
policy
had begun to make a significant impact by 1987.
Agricultural policy centered on target prices set by
the
Ministry of Agriculture and Forestry each spring and fall,
after
negotiations with the MTK. Administered under the periodic
farm
income acts, which defined general rules for setting farm
prices,
the negotiations included two phases. In the first phase,
farmers
received compensation for increases in input costs
according to a
formula laid out in the applicable Farm Income Act. In the
second
phase, the negotiations addressed how much farm labor
would be
paid. In general, farm pay settlements reflected
nonagricultural
wage agreements, and they were based on estimated hourly
wages in
agriculture
(see Human Resources
, this ch.). For example,
in the
spring of 1986 farmers received no compensation for input
costs,
which had been stable (largely as a result of falling
world
energy prices), but they did achieve a 6.1 percent
increase in
income, much higher than the 2.4 percent agreed to in the
1986
framework agreement for other workers. Observers
considered the
settlement to have been generous, but perhaps justified,
because
agriculture remained a low-wage sector.
Once the negotiation process had determined overall
farm
income, the Ministry of Agriculture and Forestry fixed
target
prices for individual crops. In response to overproduction
problems, the ministry reduced prices for surplus products
and
required that farmers pay part of the costs of subsidizing
exports. Programs to reduce surpluses by lowering target
prices
achieved only limited results, however, because increases
in
productivity often outweighed declines in target prices.
The
ministry established a dual-price system for milk and
eggs, which
made production beyond output quotas unprofitable, and
implemented a number of voluntary production controls,
including
contracts to increase fallow land or to limit production
of milk,
beef, pork, and eggs. In the summer of 1987, the
government
prohibited clearing fields, introduced measures to
encourage
reforestation, and began considering heavier taxes on the
agricultural earnings of part-time farmers as well as
increased
pensions for farmers who agreed to retire early.
Subsidies for agricultural consumption were partially
effective in increasing demand for surplus products.
Health
concerns, however, apparently limited consumers'
willingness to
eat more dairy and meat products. Surplus-reduction
measures were
having some effect by the late 1980s, but in 1987 farm
surpluses
remained a serious problem.
Structural reforms also received considerable
attention. To
slow the growth of large, "industrial" farms, the
government
required licenses for farms that exceeded certain
production
levels, hoping that limiting the size of farms would both
reduce
surpluses and help maintain family farms. The Agricultural
Development Fund provided low-interest loans and subsidies
for
investments in farm infrastructure; most of the loans from
this
fund went to farmers in northern Finland. Small farmers
who
wanted to enlarge their farms could also receive
low-interest
credits. In an effort to keep new farmers from falling
into debt,
the government also allowed farmers under the age of
thirty-five
to apply for state grants when they established a farm.
Moreover,
the state tried to make farming more attractive to young
people
by providing outside helpers to take over farm operations
temporarily. This arrangement facilitated maternity leaves
and
even annual vacations.
Farmer training programs, crop research, and extension
services helped farmers to improve agricultural practices.
Local
schools provided agricultural training for youths who
could later
attend specialized schools; university students could
major in
agriculture. The Ministry of Agriculture and Forestry and
the
universities undertook research projects that emphasized
the
development of frost-resistant crop varieties. The
ministry also
administered extension services that gave technical advice
and
communicated research findings to farmers. These training
and
research programs deserved much of the credit for the
progress
that farmers had achieved during the postwar period.
Data as of December 1988
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