The Common Agricultural Policy: a case study on the effects on the socioeconomic situation of Mecklenburg-Vorpommern

Abstract

To contribute to the discussion on reforms proposed by the European Commission to the European Parliament and the future of the Common Agricultural Policy (CAP), this research assesses the effects of the Common Agricultural Policy on the socioeconomic situation of rural areas, for which the German federal state Mecklenburg-Vorpommern is selected as a case study. The region is characterized by large scale farming, resulting in concentration of subsidy payments in relatively few farms that are large in operated land size. Employment in the sector is falling, and developments in the agricultural sector seem to negatively affect development of other sectors. The main findings are that farms remain dependent on the direct payment subsidies and continue to be incentivized to farm extensively with a small labour force and with little focus on diversification. Proposed reforms seem to barely change incentives, and capping the subsidies would only result in legally splitting up firms, leaving subsidy recipients ultimately unaffected. Stopping the subsidies would most likely result in further concentration of land in large farms, resulting in loss of more jobs. CAP subsidies increase the land prices and rent, aggravating the disadvantaged position of small farmers. Under current conditions the Rural Development Fund of the CAP cannot significantly alter structural developments of the socioeconomic situation of the region. More funds would be required for the second pillar to be effective in the region. The one-size-fits-all approach of the CAP has led to irreversible consequences for the agricultural sector, which do not seem to benefit other rural developments in the region. In order to address regional-specific needs, CAP-funds need to be employed in a less uniform manner.