Rice, Policy Addiction, and the Black Elephant

Professor Kevin Theakston of the University of Leeds, who studied British economic policy in the 1960s and 1970s, described the tendency of governments to persist with or repeatedly return to mistaken policies as “policy addiction.”

Theakston analyzes the factors that make policy change difficult and argues that, during this period, Britain was under a kind of “policy addiction” that prevented the government from adopting appropriate responses to economic change and challenges and made effective policy adjustment difficult.

“Black elephant” is a term often used by futurists to mean a major threat that is foreseeable but ignored or disregarded. It refers to situations in which a huge black elephant is clearly rampaging through a house—or is obviously about to tear it apart—yet everyone pretends not to see it. Globally, the environmental crisis caused by climate change would be a good example; domestically, the national crisis caused by low birthrates would be another.

As a problem that fits both of these terms, I would argue that agriculture in Korea, especially the rice issue, is a perfect example. Korea’s agricultural policy, immediately after liberation, sought to resolve the exploitation of tenant farmers under the long-standing tenancy system of the Joseon Dynasty by shifting at once to a structure of small-scale family farming through land reform, and even after 80 years, that small-farm system remains in place.

Korea rose into the ranks of the world’s top 10 advanced countries on the strength of its export economy. In this process, Korean agriculture and farmers achieved self-sufficiency in rice, the staple grain, through the Green Revolution of the 1970s, and through the White Revolution of the 1980s (vinyl greenhouses), they have stably supplied fresh vegetables and fruits throughout all four seasons.

In the 1990s, Korea joined the WTO (World Trade Organization), a trade system based on the market economy, and although agriculture was given some exceptions or delayed application, it ultimately entered an open economy.

Immediately after the conclusion of the Uruguay Round, on December 15, 1993, Prime Minister Hwang In-sung said in a report to the National Assembly regarding the rice negotiations: “Rice imported in this way will be managed by the government or a government-designated agency completely separately from domestic rice, and will be used as raw material for export processing and the like, or a certain amount will be stockpiled against bad harvests or reunification, so that domestic rice prices will not fall and rice-producing farmers will not suffer damage. In addition, the government will maintain the current grain management system for the time being, while preparing rational improvement measures in a direction that does not harm farmers.”

Rice consumption has declined for 37 consecutive years since 1984. Compared to 116.3 kg in 1991, 30 years ago, rice consumption in 2021 fell to 56.9 kg, less than half. Under an open economy, the international price of rice is more than three times lower than ours, while the rice tariff rate is fixed at 513%. Agricultural promotion zones, where only rice farming is allowed, remain unchanged, and even now, when rice prices fall, the government is expected to step in. Everyone knows there is a rice surplus, yet everyone acts as if rice production support policy is somehow unavoidable and pretends not to see the problem. This is a classic case of the “policy addiction” Professor Theakston describes.

In Prime Minister Hwang In-sung’s 1993 response, one can already see the refusal to acknowledge the massive “black elephant” called rice that was fast approaching. Once the WTO system was ratified by the National Assembly in 1995, there was already a national consensus that agriculture would transition to an open system, and large financial resources have been poured into agriculture for that purpose.

Nevertheless, policymakers seem trapped in irresponsible policy addiction, leaving rice to become a “black elephant” that shakes agriculture and the nation. The black elephant has grown larger and more violent, and recently matters escalated to the point that the National Assembly, led by the opposition, passed an amendment to the Grain Management Act that made mandatory state purchases a legal obligation. It is at least fortunate that the president exercised his veto and nullified it, thereby at least temporarily caging the “black elephant.”

The solution to the rice problem is simple and obvious: reduce supply and increase demand. Let us first look at the demand side. I say unequivocally that it is impossible to increase demand for Korean rice to any meaningful level. Domestic demand can only continue to decline, given both the downward trend in per capita rice consumption and the overall decline in population. External demand, that is, exports, is also impossible except for some niche demand, given rice prices that are three to four times higher than those abroad.

The conclusion is clear: reducing domestic supply is the answer. Domestic supply consists of rice cultivation area and yield per unit area. Reducing cultivation area means reducing farmland, and agricultural promotion zones should be relaxed so that farmland can be used for other purposes by easing regulations. As for reducing yield per unit area, a highly effective measure would be to end the government seed distribution system in order to encourage the production of high-quality rice.

The way to implement the above policy tools effectively is precisely to revive the “market mechanism.” No matter how much the government tries to solve a problem entangled with countless economic and political interests through institutions and budgets, it will only make the problem bigger and bigger. If future generations in the 2030s come to regard rice as a “poison” (carbohydrate addiction), and we still fail to recognize that Korea’s birthrate is the lowest in the world while continuing the policies of the past, the black elephant will only grow larger and more violent.

The rice issue must be brought into the market. Market prices must be allowed to send signals for production and consumption. Rather than continuing the clumsiest of policies—adjusting supply and demand only after rice has already been put on the market—the proper approach is to adjust supply and demand before production, and the easiest way to do that is to restore the market mechanism.

This administration is promoting innovation in various sectors on the basis of the market and freedom. Following the three major reforms in education, labor, and pensions, I would urge agricultural policy reform as well. I hope for an agricultural policy that becomes a source of strength for the people, not a burden on them.

Now is the time to drive the black elephant out of the house.

Sungmin Kim, Adjunct Professor, Yonsei University Graduate School of Public Administration

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Original title: 쌀, 정책중독 그리고 검은 코끼리

Author: Seong-min Kim

Date: 2023-07-18

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=25889