It’s amazing how quickly a recession makes you rethink your priorities. The organic food industry has fallen on hard times. Even though total food sales rose 6% in the 12 weeks to the end of November (according to researcher TNS), sales of organic goods fell 10%. As belts tighten and purses empty, people just don’t have the cash to spend on the hand-reared, corn-fed, sung-to-sleep duck breasts that they used to consider an indispensable part of the weekly shop.
That’s bad news for organic farmers. Their produce now sells for the same price as ordinary food, but their costs are higher, as organic animal feed is dearer than the bog-standard stuff. So what’s to be done? You’d think that farmers would have to find cheaper ways to produce organic goods, or just opt out. But no. This is bail-out Britain, so instead they want to change the rules. The Times reports that organisations including the Soil Association want government approval to let farmers use non-organic feed. They could no longer label their food organic, but it would allow them a little “holiday” until the good times returned. Others in the movement are up in arms. Richard Sanders of the Organic Research Centre told the paper that proper organic farmers should be growing their own feed anyway, so the “vagaries of the feed market” shouldn’t matter.
Why am I telling you this? Because this little spat sums up what’s wrong with the government stepping in to ‘save’ any company. The organic industry, the car makers and the house builders, for example, are all suffering because we have decided we can live without their products. Like it or not, that means they need to make fewer of them. That doesn’t have to be a bad thing – if organic farming was whittled down to producers who are both passionate and efficient, then they would make higher profits at the expense of the less-committed farmers. Instead, the whole ‘organic’ concept faces being diluted, surely bad news for everyone in the industry.
By the same token, what message does a bail-out for GM, or Jaguar, send to the likes of Nissan or BMW, who have managed to do without government help by negotiating with staff and making cars that people want to buy? Why innovate with electric cars, for example, if your prehistoric rivals are going to be propped up for ever by public money? It also makes it harder for investors to choose which stocks to buy – is it worth backing a company that has to compete for a smaller piece of pie with nationalised rivals? The government might think that it’s trying to cushion the hard landing, but by squeezing productive firms out in favour of inefficient state-backed ones, it risks making the recession longer and more painful. Sadly, 2009 looks like being at least as tough going as 2008 was.