Food and agriculture have been subject to heavy-handed government interventions throughout much of the histor y and across the globe, both in developing and in developed countries. Today more than 500 billion (half a trillion) US dollars are spent by some governments to support farmers while at the same time some governments impose regulations and tax es that hurt farmers. Political considerations are crucial to understand these policies since almost all agricultural and food policies have redistributive effects and are therefore subject to lobbying and pressure from interest groups and are used by decision-makers to influence society for both economic and political reasons.
Some policies, such as import tariffs or export tax es, have clear distributional objectives and reduce total welfare by introducing distortions in the economy. Other policies, such as food standards, land reforms, or public investments in agricultural research, often increase total welfare but at the same time also have distributional effects. These distributional effects will influence the preferences of different interest groups and thus trigger political action and influence policy decisions.
The inherent interlinkage between efficiency and equity issues in policy-making made that for much of history, economics and politics were closely related disciplines and often written about by the same authors, as reflected in the works of the original architects of the economics discipline, such as Adam Smith , John Stuart Mill , David Ricardo , and so on. In the late nineteenth century the economics discipline started separated itself from the âpolitical econ omyâ framework.1
The revival (or return) of political econ omy started in the 1950s and 1960s and was referred to as âneoclassical political econ omyâ or ânew political economyâ, as economists started using their economic tools to analyze political processes and to study how policy prescriptions were influenced by a variety of factors before they became public policy (or not) (see, e.g. Weingast et al. 1981). Economists started modeling how incentives of political agents and constraints of political inst itution s influenced political decision-makingâand the effectiveness of various types of agents in influencing the outcome of that decision-making.
The start of this field is often associated with publications such as Anthony Downs â 1957 book, An Economic Theory of Democracy , Mancur Olson âs 1965 book The Logic of Collective Action and James Buchanan and Gordon Tullock âs The Calculus of Consent in 1962. In the following years important articles were written on ârent-seekingâ, including classic papers by Tullock (1967), Krueger (1974), a n d Bhagwati (1982). George Stiglerâs (1971) T he Theory of Economic Regulation and contributions by Sam Peltzman (1976) and G ary Becker (1983) formed the basis of the (new) âChicago school of political economy â. Related to the growth of the neoclassical political econ omy was the growth of the ânew institutional economicsâ based on the work of Ro nald Coase (1960), Dou glas North (1981, 1990), and O liver Williamson (1975, 1985).
These theor ies and insights have been used to study public policies generally, and have been applied to analyze food and agricultural polic ies. The 1980s and the first half of the 1990s were a very active period in the field of political econ omy of agricultural polic y. This research was not only triggered by the emerging general theor ies of ânew political econ omyâ, coming from Downs , Olson , Stigler , Becker , and so on but also by the puzzling question: why was agriculture subsid ized in rich countries and taxed in poor countries? New data, and in particular those collected as part of the World Bank study organize d by Krueger et al. (1991), showed that in countries where farmers were the majority of the population, they were tax ed, while in countries where they were the minority, farmers received subsid ies: the so-called development paradox (an issue I will address in Chaps. 4 and 6). The combination of an intriguing question, a rich set of new general theor ies to apply, and fascinating data induced a rich and vast literature on the political econ omy of agricultural trade and distortions in the 1980s and the first part of the 1990s.2
The past 15 years saw a revival of interest in the political econ omy of agricultural polic ies, sparked by a similar combination of factors as in the 1980s: new data, new theor ies, and new intriguing questions (Swinnen 2009, 2010). First, there were important new general insights and political econ omy models with important implications for the political econ omy of agricultural polic y distortions. Contributions in the late twentieth century and early twenty-first century (a) often focused on the role of institution s (political and other) and their interactions with economic policies ( e.g. Acemoglu (2003) an d Persson and Tabellini (2000, 2003)) a nd (b) tried to move beyond the structural economic factors on which most of the earlier research concentrated. These studies provided better micro-foundations for analyzing political-economic decision-making by establishing stronger links between theor y and empirics . This includes, for exam ple, Grossman and Helpmanâs me nu-auctions approach (1994; 1995) and their applications, studies by Acemoglu and Robinson (2001, 2008) o n t he interactions between institution s and policy-making, and applications of Baron and Ferejohnâs (1989) m odel of decision-making rules and the role of agenda-setting.3 An important new research area was in the economics of (mass) media and what it implied for public policy-making (McCluskey and Swinnen 2010; Mullainathan and Shleifer 2005; Strömberg 2004).
Second, new datasets on institutional and political variables and on agricultural and food pol icies have been particularly important. An important contribution was the World Bank âs project on measuring distortions to agricultural incentives, coordinated by Kym Anderson . This project created a much richer dataset on agricultural polic ies than had been available before (Anderson 2009, 2016). One of the important contributions of the dataset is that it provides evidence of important changes in the global distribution of policy distortions. Key findings are that tax ation of farmers has fallen in many developing countries, including in the poorest countries of Asia and Africa, and that at the same time trade-distorting farm subsid ies in rich countries have fallen as wellâsuggesting important new political econ omy questions (issues addressed in Chaps. 5 and 6).
The third reason of new interest was important new questions to be addressed. One key question was how major institutional and political reforms in the 1980s and the 1990s had affected agricultural polic y and policy reform s. Over the past 30 years major regulatory inefficiencies have been removed and important policy reform s have been implemented contributing to much more liberal agricultural and food markets than in the previous decades (Anderson 2009; Rozelle and Swinnen 2004). This includes the shift of a large share of the emerging and developing countries from state-controlled to market-based governance of agricultural and food systems. These dramatic political and economic changes raised many interesting and fascinating political econ omy questions, such as âWhy did the Communist Party introduced major econom...