The recent speech made by Mrs. Fischer Boel, European Commissioner for Agriculture, in which she stated that in the future European farmers will be forced to find a second job in order to make a living, has to be commended beyond any debate, however legitimate, for bringing up the question of labour compensation.
But we must also bring up the question of prices, because Mrs. Fischer Boel’s declaration, by officially recognizing the fact that being a farmer no longer enables him to “feed” his own family, also institutionalizes the extremely low levels of agricultural prices that no longer even cover production costs.
In fact the debate over prices does not only relate to farmers. It also concerns other professions. The press and Internet were amongst the first to be affected by the “no cost syndrome”, which normalizes in the minds of people the right to consume without paying.
Tomorrow, other economic sectors will be affected if political leaders allow payments that are not real payments to become established in our society! Although the debate about what should be classified as payment has always existed and will always exist, institutionalizing the non-payment of a profession that is as strategic as the one that feeds people, does not bode well for the future of other professions!
Michel Feneyrol, member of the Autorité de Régulation des Telecommunications (Telecommunications Regulation) until 31st December 2006, has become a sponsor of WOAgri because in his opinion these two sectors, which appear to be very different, are nevertheless travelling along paths that could well cross one day!
WOAgri would like to thank Mr Feneyrol for his expertise and the interview he has agreed to give us.
I - You are one of the seven members of the Collège de l’Autorité de Régulation des Communications électroniques et des Postes (College of Electronic Communications and Posts Regulation), and you have agreed to sponsor WOAgri.
Why and what parallels do you make between these sectors and the agricultural sector?
At first sight, telecommunications and agriculture are two totally opposed economic sectors. Telecommunications produce immaterial services, whereas agriculture produces goods. The former is highly capitalistic and is characterized by low labour intensity. By comparison, the latter, which is to some extent capitalistic, needs a large work force.
Nevertheless, both the agriculture and telecommunications sectors have for a long time been administered and regulated with the same objective, which is to encourage development for the common good.
The CAP, by enabling agriculture to develop, has given all Europeans the assurance of a high-quality and self-sufficient food supply. In the second case, massive investments by public powers in telecommunications infrastructures have resulted in the deployment of a network adapted to the economic challenges facing companies.
During the 1980s, politicians tried to introduce competition in several sectors such as telecommunications and energy, because the public support and regulations policy had produced major public monopolies, which, it was believed, contradicted the liberal model.
This liberalization, accompanied by the creation of regulatory bodies, the ARCEP (College of Electronic Communications and Posts Regulation) for telecommunications and the CRE (Energy Regulation Commission) for energy, could nevertheless pose certain problems in the future because of insufficient investment in network infrastructures.
In agriculture, plans for liberalization appeared later, from the middle of the 1990s. However, for thirty years European farmers have lived within a highly administered framework to protect them from high market price volatility.
Eliminating these regulatory tools on a European level will probably lead to hundreds of thousands of farmers with small farms closing down, or at best joining the ranks of the working poor, like the Americans or the Europeans from the former Soviet Block, who need two jobs to survive!
In both telecommunications and agriculture, deregulation could affect future ability first to transport data, and second to feed people.
Because these two sectors are evolving in a globalized environment that is on the way to becoming totally liberalized, they could have a common destiny.
Although telecommunications have always more or less functioned on a global market, they have been facing an intensification of global interdependence for 25 years.
Today, industrial processes are both cross border and cross continental: globalization, tourism and even nomadism need a harmonization and a coherence of telecommunications systems to ensure that the world telecommunications network functions efficiently. This is one of the reasons why it is today inconceivable to ignore the consequences that any evolution of the world telecommunications market could have on African countries and more generally on the poorest countries.
In the same way, it is necessary to understand the agricultural and food problem on a world scale, at the risk of exacerbating the North-South agricultural and food divide and of impeding the development of the poorest, which would only lead to the destabilization of all countries in the world.
Establishing a connection between these two sectors is helping us draw interesting conclusions for the future, and this is why I have decided to sponsor WOAgri.
II – What are the challenges facing the Electronic Communications and Posts Regulation sectors in the twenty years to come?
This is an interesting point because I think that the challenges facing telecommunications in the coming years are to some extent the same challenges that agriculture has to face today.
These challenges could be summed up in one question: how can we finance a strategic activity that is essential for the global economy to function efficiently, in a world where free services are becoming more and more widespread or where at best prices are dictated by the lowest bidder?
The telecommunications sector is based on innovation and technical progress. In the 1960s, fewer than two million French homes had landlines, two television channels and two radio stations. Today, 34 million telephone lines are installed in 24 million homes, and nearly 50 million people have mobile phones. In comparison, in 1990, fewer than a million people had one. ADSL was accessible to about 500,000 people in 2000 compared to 12 million today.
In three decades, we have gone from a shortage economy to an abundance economy, with real problems concerning the distribution of this abundance in different areas: the digital divide that Bill Gates is attempting to reduce within the framework of his Foundation poses serious risks in the middle-term of destabilizing the entire world network.
One of the main causes of this digital divide is a result of the lowest price philosophy, which, in high-density population areas, results in rates that are becoming closer and closer to real prices. The result of this price policy is that resulting margins are not sufficient to finance the necessary networks in rural or poor areas. The only solution therefore is to use taxes to finance network infrastructures. I would like to outline the seriousness of this situation, which in the name of liberalism leads public powers to increase compulsory deductions in the poorest regions.
This can also be said for agriculture because an agricultural and food divide separates industrial countries that “suffer” in a way from a kind of over-abundance of food supplies, from the poorest countries in which more than 800 million people go to bed every night with empty stomachs, victims of food shortages!
Therefore the divide between abundance and shortage carries risks of instability or major breakdown.
And it is precisely in times such as these that we need models and simulations that enable us to understand changes better so that we can adapt to them. And I have discovered from WOAgri that agriculture is suffering from the same incoherence concerning forecasts as the telecommunications sector!
Some economic models based on pure and perfect competition are today officially recognized as being totally ill adapted to the telecommunications sector. In fact, this sector of activity, in which scale effects are important, uses linear models that do not take into account oligopolistic behaviour.
It is vital that those who develop such models should not be purely “mathematically-minded”, or the sector could be led along a dangerous path!
In this respect, the most serious example the telecommunications economy has experienced is due to a series of analyses, which extolled the virtues of free services as a development model. This is why during the 1990s, capital was invested massively to increase data stream capacity and generate “no-cost” traffic.
It is as though we have forgotten that someone has to pay for no-cost services offered to the consumer: it could be public powers through subsidies or a member of the value chain who is investing, hoping, as in the case of Internet, to earn money through advertising. No-cost services can also be obtained by “stowaways”, who, for example with SKYPE, can use infrastructures paid for by others to telephone free of charge to the four corners of the world.
In the short term, no-cost services can only work on the basis of a strategy linked to volume. This type of model thus eliminates in the medium-term all the “small” structures, leaving room for only the larger ones. Monopolistic market structures like this also create higher risks of instability and breakdowns in supplies if one of its operators fails to function efficiently.
In this respect the explosion of Internet clearly illustrates the risks of turning a blind eye to the no-cost system.
But in the long term, no-cost models and the need for a sector of activity to make heavy investments are obviously incompatible.
All economics students know the famous Y = C + I equation. The non-payment by a consumer of a service or product automatically has repercussions on one of the following three factors:
> No-cost services can lead to a consumer explosion (C) and create shortage situations.
> No-cost services can lead to a drop in production (Y) because the activity is not profitable.
> And/or finally no-cost services can be reflected on the reduction of investments (I), because of a lack of available capital.
If no-cost services are no longer subsidized, meaning that no public or private body makes up the deficit caused by the difference between the price and production costs:
> in the telecom sector, networks become obsolete, leaving users vulnerable to breakdowns;
> In the agricultural sector, less competitive farmers disappear benefiting those living in regions of the world that have unwarranted advantages (inexistent social welfare, unsustainable environmental practices), concentrating world production in a few countries.
In all cases, we are exposing our society to serious risk of instability, even destabilization, when, as in the case of agriculture or telecommunications, strategic sectors are involved. This is why a regulatory system appears to be the solution, reconciling liberalization, security of supplies and development.
It is high time we stopped unproductive ideological debates and found pragmatic solutions adapted to each sector of activity so that society can regain confidence.