The original CAP was an attempt to stabilise farmers incomes by setting minimum prices for food.
It was an economic failure. (Though it was a wonderful case-study for those wanting to teach an example of government failure.) Essentially, the original CAP:
Minimum prices encouraged a large increase in supply, encouraging over-use of chemicals to enhance output.
To maintain these minimum prices, the EU had to buy the surplus food, which was then stored, destroyed or sold very cheaply to developing markets.
At the height of CAP, 70% of the EU budget was diverted into buying food we didn’t need.
It also involved high tariffs on food imports – harming trade relations and reducing the income of farmers in other countries.
The dumping of surplus food on world markets led to lower prices, and lower incomes for food producers and food exporters.
It also distorted long-term economic trends, preventing the agricultural sector respond to changing demand and supply. It also encouraged farmers to expect and rely on government subsidies. Subsidies which have become politically very difficult to reduce.
It was a classic example of a government policy which led to a deadweight welfare loss.
Reformed CAP
Very slowly, the Common Agricultural Policy was slowly reformed. Target minimum prices have mostly been reduced or removed – allowing some reduction in tariffs and ending the food mountains. However, although CAP was reformed, the total cost of CAP continued to rise (though it did fall as a % of EU spending)
The CAP was reformed by offering a different kind of subsidy, which included direct income payments to farmers. Essentially, people who owned agricultural land were given subsidies for having agricultural land.
In fact, the perversity of this direct income subsidy scheme is that, in some areas, it encouraged farmers to cut down trees and make wildlife areas nominally agricultural land – to enable the farmers to be eligible for more subsidies.
With no limit on farm subsidies, it has often been the richest landowners who have received the biggest cash handouts. With some estates receiving in the region of half a million pounds in CAP subsidies each year.
It is one of the worst transfers of taxpayers money to wealthy landowners. It is only surprising there is not more outrage about the waste of taxpayers money.
https://www.economicshelp.org/blog/2...ies-in-the-uk/