GLOBAL FINANCE

Treaty of Rome was signed in 1957 more than 20% of workers in the
six original signatory countries were in agriculture, which was then
very depressed. The CAP was created to revive the industry, protect it
from imports, and provide stable incomes for its workers. Today the
average proportion of agricultural workers in EU countries is 3.9%, a
massive drop.

CAP guides farm production and guarantees incomes. Target prices

are set for each product based on a profitable price for the highest-
cost EU production area, rather than on world prices. The EU sets a
guaranteed price at 710% below the target price, and intervenes to buy
up produce if prices fall to this level. There are also separate target and
guaranteed prices for individual products in many small areas within
the EU. Guaranteeing prices to producers means that the EU must levy
tariffs on competing imports. In addition, EU farm exporters receive
subsidies to bring the export prices up to the guaranteed price.

Within a few years of the creation of the CAP, the output of small,

high-cost farms predictably surged. The system of price intervention
has created the well-known butter mountains, wine lakes, and so on,
consisting of unwanted surpluses of produce ultimately paid for by EU
consumers. Economists argue that CAP has resulted in resources being
applied inefficiently within the EU and also that it discriminates against
more efficient Third World producers that desperately need export
income.

By the late 1980s, reforms to CAP resulted in limits being set on

the production of certain products such as cereals, a reduction in
guaranteed prices and effort to discourage highly intensive farming
while protecting farm jobs and marginal farmers. Land has been taken
out of use, with farmers being compensated for what is not produced.
Arguments for further reform include the need to help the EU's 18.5
million unemployed (compared with the 7 million subsidized farmers)
and the financial impossibility of subsidizing farmers at current rates in
the potential new member states in Eastern Europe.

THE DEVELOPING WORLD: FOOD, DEVELOPMENT,
GROWTH, DEBT, AND AID

Conceivably, the developed world could ignore the plight of poorer
nations, turn inwards and still prosper. Many policy-makers believe,