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[Column] Gov¡¯t policy leaves farms in debt cycle

Posted November. 24, 2000 15:15,   


About 100,000 farmers demonstrated Nov. 21 throughout the nation, in one instance blocking traffic on an expressway, as they called for the enactment of special laws to relieve debt-ridden farmers and for the stabilization of the prices of agricultural goods.

The sheer scale and extent of the rallies by the farmers succeeded quite well in forcing the attention of the media and the government toward the needs of the farmers. The farmers expressed their anger through a show of physical solidarity aimed at the incompetence of the government, the irresponsibility of the ruling party, and the indifference of the media and the citizenry.

The over-burdening farm loans lie at the heart of the rallies. According to the National Agricultural Cooperative Federation (NACF), the debt held by the farmers as of July stood at an astronomical 39. 8 trillion won (14.3 trillion from government loans as part of farm subsidy and 25.5 trillion from mutual financial institutional loans).

The crux of the matter is not really the astronomical amount of the debt of the farmers, but the fact that the amount of the debt has surpassed the ability and the possibility of the farmers to repay a long ago. With the maturing of the government loan subsidy, the burden on the farmers has increased without halting. In order to repay the maturing debt, the farmers are forced to take out more loans at high interest rates, a vicious cycle. With many of the farmers laden with heavy debts, some have taken the option of suicide as relief from the burden.

At every election and afterward, the candidates and the government pledged their support for the farmers and called for the "return to the farms and fisheries" and "livelihood of the farms and fisheries." However, the promises have remained nothing more than promises. Although a great deal of funds has been injected into the farms and fisheries, the problems faced by the farmers continued to worsen and the periodic capital injection in an attempt to reduce the farmers' debts has become the main governmental policy.

From 1993 to 1998, 42 trillion won was injected in an attempt to restructure the farms and fisheries. Also, since 1995, an annual investment of 1.5 trillion won has been made through a special tax revenue to help the farms and fisheries. With so much money fed into the farms, why has the policy failed to improve the farmers' situation but has boomeranged and brought on such retaliation by the farmers? Simply put, it is the accumulation of the failure in the farm policy by the successive administrations.

The direct cause that forced the farms and fisheries into overburdening debt was the comprehensive market liberalization to foreign agricultural goods and the reform policy, which arose from market liberalization. Since the 1980s, the farmers were well attuned to the supremacy competition of farm goods.

With the market liberalization unavoidable, the farmers were well aware that the survivability depended on fostering internationally competitive agricultural system and products. For the promotion of production and international competitive edge, the government supported the expansion of farm management, scale and facilities as well as nurture cream of the crop human resource in the area of agricultural science. However, the government's support started off on a wrong foot and served to only calm the fears of the farmers as they faced market liberalization through financial support or low-interest loans.

The scale of the aid was increased periodically without any analysis of the farmers' competence, the ability to run an efficient farm, nor the market situation. Needless to say, the unrestricted imports of farm products, the oversupply of domestic products due to expansion of farms, the added pressure of the price increase of the imported feed and other necessities due to the effects of the foreign currency crisis, and the fall in the prices of domestic farm products due to lowered demand have all worked in conjunction to deprive the farmers of the very ability to repay even the interest on the debts. This is an unavoidable consequence of the investments into the farms to increase production without establishing a price control.

The government needs to acknowledge that the ballooning of the farmers' debts was a direct consequence of the failed governmental policy toward the farms, and the solution must be sought. The government must quickly adopt special laws for the farm debts to roll back the maturity date or allow a long-term loan repayment schedule, to lower the interest on the farm loans, and to resolve the loan defaults and joint liability questions.

However, the adoption of the special laws for farmers' debts to douse the current crisis will not be enough to solve the underlying problem of the farmers. The government must break the vicious cycle of the increased farm investment, increased farm debts and periodic debt-reduction policy. Prior to such, the question of responsibility must be answered. Without the eradication of the moral laxity of the civil servants, who deny all responsibility but blame the failure of the government policy on the people and the farmers, the current crisis of the farmers will be repeated. Also, the responsible parties must take full responsibility of the failed policy and must revolutionize the organization and ideology as a new direction is taken for the farms and farmers.

The government agencies related to agriculture must rethink its pursuit of a competitive edge over method and purpose, but promote the well-rounded growth and expansion of farms in line with the needs of the people while providing a certain safety net to guarantee a certain level of standard of living. Also, the non-democratic farm systems, such as the "elite" farms, the central government-run farm systems and the city-run farms, must be closed down, and the government must keep to its pledge to pursue a farm policy for the farmers where they are the owners and direct actors in the policy.

Without the independence of the farmers, the vicious cycle that leads to over-burdening debt by the farmers cannot be severed.

Prof. Park Jin-Do/ College of Economics & Management, Chungnam National University