[Outlook]False assumptions on farmland

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[Outlook]False assumptions on farmland

The law must be abided by. Those who break the law must be punished in accordance with the law, regardless of their social standing. This is a basic principle of constitutionalism.

Recently, a scandal erupted over rice farm subsidies. Some people who own farmland but don’t actually engage in farming received the subsidies from the government. They broke the law, and they should be punished accordingly. If they are civil servants, who are supposed to execute the law, they must bear even more responsibility.

But that is not sufficient to make the law function as it should in the market. The law is bound to have an impact on the markets. Without consideration for this, certain laws can cause the opposite of their intended result, or a small matter can create tremendous social conflict. The rice farm subsidy system is a good example of this type of situation.

The system is to meant to compensate farmers suffering from a shortage of income because our agricultural markets are being opened. Of course, the subsidies are supposed to help farmers, not landowners.

But when thinking about the structure of the market for farmland and the relationship that exists between landowners and tenant farmers, one wonders if there is a need to separate farmers from non-farmers who own farmland, and if such separation does any good.

Tenant farmers divide the income they earn from the land with the landowners. Farm subsidies can also be counted as income produced from the land. The law may define who receives the subsidy, but how the money will be divided is decided in the marketplace.

Say a farmer receives a rice farm subsidy, as is his legal right. As the gains of tenant farmers increase, the competition to rent rice paddies becomes fiercer and the rents go up. As rents increase, owners of rice paddies also benefit from farm subsidies in the end.

Statistics support this theory. According to a 2007 study on farmland rental fees released by the National Statistical Office in March this year, rents for rice paddies have consistently been on the rise since 2005. In contrast, the rent for land used to farm other crops has been falling since 2004. The fact that subsidies were given to the tenants of rice farms must have had a bearing on this statistic.

On the other hand, we can assume that if the landowners took the rice farm subsidies, rents for rice paddies would have probably gone down, although this hasn’t been confirmed. The farmland market is not as sensitive as the housing market or the real estate market, of course. But as it is still a market, it is governed by the principle of supply and demand. Farming subsidies, an additional source of income, must have an impact on farm rents.

Therefore, land owners are bound to benefit from subsidies, whether they take them directly or not. In this sense, the purpose of the law which only allows farm subsidies to be given to farmers is flawed.

The current scandal gives us a window through which we can re-examine prejudices in our society about those who own farm the land and those who rent it out.

People tend to believe that only those who farm themselves should be able to own farmland. But this idea doesn’t work in the reality of our times. The principle might have worked in the old days, when tenant farmers were subordinate to landowners. But nowadays, landowners do not act as the masters of their tenants, just as a factory owner is not the lord of his renter. Farm renting is just another type of commercial transaction.

In fact, it is often the farmers who have been disadvantaged by this principle. Many farmers have to quit farming because of old age. Their only asset is their land, but its value depreciates because only farmers can own farmland. As they can’t sell their land for a good price, things are tough for them after they retire.

Further, if they keep the land but rent it out, they’re breaking the law as well. But if they become owners of farmland who are not carrying out farming activities, should they still be allowed to take farming subsidies?

Our principles about the ownership of farmland needs to be reviewed in order to develop our agricultural industry. As we are opening our markets, we need large corporate farmers with millions of acres of farmland in order to become competitive.

How many farmers can afford to buy such wide expanses of property? Statistics reveal the answer. Among farms that are bigger than 12 acres, 64 percent are rented out. Such large-scale corporate-style farms can be operated because someone bought the farms and rented them out to farmers.

Koreans tend to become very emotional over agricultural issues. But if we can calm down and look at things rationally, we will be able achieve our goals.

*The writer is the president of the Center for Free Enterprise. Translation by the JoongAng Daily staff.

by Kim Chung-ho
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