The newly adopted social market economic model would be highly beneficial to the agriculture sector, according to Policy Planning and Economic Affairs Deputy Minister Dr. Harsha de Silva.
“Why are farmers poor? Farmers are poor because agriculture markets don’t work. Farmers aren’t poor because they don’t work hard enough… or because they aren’t smart enough,” he said.
According to the German social market theory, competition is created through efficiently regulated markets and the resulting growth and wealth created in the country are distributed in a socially, politically and economically equitable manner.
Dr. de Silva said that if a proper regulatory framework is created, the marketplace would give signals based on price to allocated resources to the right nodes.
“If you start from the beginning, do they (farmers) know what crop to plant? A farmer has such asymmetry in the information he receives in making the decision on what crop to grow. If agriculture markets work, farmers would know ‘this is what I should plant, this is the kind of price I will get’.”
He said that volatility of food prices during the past regime was due to a lack of such information.
“It’s a simple thing but we have to get it right. When markets fail, governments have to intervene and more likely than otherwise, government intervention fails.”
Dr. de Silva further added that under this new market economy, farmers would be able to avail themselves of financial instruments to hedge their risks against the unexpected, such as the vagaries of the weather and government policies. He said that the previous regime had neither provided proper irrigation management nor advice through graduates of agriculture or post-harvest support such as cold storage facilities or sound transport policies and framework.
He also accused it of implementing ad-hoc policies, such as making all fruit and vegetables be transported in plastic containers, failure of which could have risked a prison sentence.
“You can’t take one thing and supplant it in a bigger, wider programme. If agriculture markets are to work, you have to make sure all aspects of the agriculture value chain have to work and unless you do that, those markets will fail. The weakest link determines how strong the chain is. If it breaks at one point, everyone who depends on the chain will be disappointed.” (CW)