Regional Policies for Agriculture: The Effects and the Future: Discussion

Abstract

George Lee has provided a thought-provoking paper and has raised questions deserving of more attention than they typically receive in the policy formulation process. The topic is obviously a timely one in that the federal government has made a commitment to establishing food and agricultural development strategies which, while still embryonic and therefore clouded in a certain amount of confusion and lack of explicit specification, do clearly demonstrate two overriding concerns. First, that the development of the food and agricultural system is deserving of, and can benefit from, a more coordinated and systematic policy approach. Second, that, in developing such an approach, the active participation of the provinces (regions) as well as producer and consumer groups and the processing-distribution-retailing (PDR) groups in the food chain is a sine qua non. The major concerns of the agricultural and food strategies clearly have considerable political appeal, and, incidentally could well lead to a mechanism and model which is not substantially different from the Winch solution as applied to policy and program development. While Winch bases his ideas on the obvious importance of power concentrations and group activities in the operation of the mechanism, the ideas apply i fortiori to the activities of governments in augmenting or modifying these market mechanisms, particularly in a regional development context. From a practicing economist's point of view, the lack of consensus within the social science disciplines on the characterization of the regional development problem and, therefore, on the overall framework for its solution, demands an eclectic approach, and implies a Winch-type approach to the implementation of any solution. In attempting to place Lee's observations and ideas in the context of some overall framework for regional development, the lack of consensus or clear direction from the body of received theory and analysis quickly becomes apparent and, indeed, is reflected very accurately in the history of muddling through. For example, neoclassical economic theory essentially dismisses regional problems as symptoms of market failure, and prescribes the cure as involving the removal of distortions to interregional competition (which is said to be undistorted if it results in a distribution of economic activity which obeys the law of comparative advantage) and the improvement of factor (principally labor) mobility. Aside from the somewhat questionable performance of this laissez-faire solution to the problem, and apart from the extraordinarily difficult task of actually making the principle of comparative advantage time-dimensional and thus operational, the prescription, involvng often significant and continuing adjustment costs and interregional and off-farm migration, is seen by many as being part of the problem, not part of the solution. The dissatisfaction which Lee finds with the theory at the micro or farm level is thus reinforced at the more aggregate level. Nevertheless, the strength and power of the competitive ideology is certainly reflected in the typical characterization of the goal of regional development as one of enlightened welfare rather than efficient resource allocation and production (see, e.g., Economic Council and the goal of the Federal Department of Regional Economic Expansion in the Canada Year Book, which carries the caveat without interfering with a high overall rate of national growth). A major key in making sense of regional policies, and in developing alternatives, does seem to be the distinction between the short and long term and the adjustment costs incurred in changing economic and social structures. It seems clear that it is these undefined and even ill-understood adjustment costs (including political and social costs) which are a major deterrent to acceptance of the appropriately modified neoclassical solution as a longer-term strategy. On the other hand, the amelioration of perhaps necessary adjustment, which is often legitimately demanded by disDavid R. Harvey is a senior economist with the Policy and Economics Directorate, Agriculture Canada.