The joke is on you, Europe!

The Economist is reporting an interesting story on the situation in Europe and their milk quotas. These restrict how much the farmers can produce in order to keep prices high and "protect" farmers.

Here is the history behind Europe’s quota system:

"They were designed in 1984, when low market prices and high subsidies were filling EU warehouses with surplus "butter mountains" and mounds of milk powder at even greater cost to the EU budget. Liberal-minded types wondered naively if cutting subsidies might be an idea. They were outvoted by the farm lobby, which chose to curb production via quotas so as to boost prices."

Obviously the better idea would have been to cut subsidies but that is beside the point now.

"Today, the conditions of 1984 are reversed. Steady growth in demand for cheese, yogurt and so on, whether in Europe or Asia, has pushed up world prices. Surpluses are long gone: last year the EU undershot its milk quotas by 2m tonnes. But because quotas cannot be traded between EU countries, go-ahead farmers in places ideally suited to dairy farming-the coastal areas of north-western Europe, such as the Netherlands, Denmark or Poland-cannot produce as much as they would like."

What a waste. Why don’t they just let the free market rule? If they did this would allow the farmers to compete on the world market and actually increase there profits. Pretty soon the Europeans will stop buying from these guys because they are charging way too much.

Published in: on March 18, 2008 at 3:51 am  Leave a Comment  

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