By John Pickford

BBC, New Zealand



Twenty years ago, the New Zealand government announced it was stopping all subsidies for farmers. At the time, those farmers thought the effects would be disastrous, but things panned out rather differently.

The sheep population in New Zealand is around 40 million

When you ask a question as a reporter and get blank silence back it usually means, in my experience, one of two things: either you are heading up the wrong track completely or you are on the threshold of some interesting territory.

It happened to me in Karamea, a remote rain-washed valley facing the Tasman Sea on the north-west coast of the South Island of New Zealand.

I had been talking to Bevan and Caroline, a young farming couple who had just finished the morning milking of their 180 dairy cows.

As we sat round the kitchen table drinking coffee, the conversation turned to the high value New Zealand dollar, which in 2004 has made trading conditions difficult for the country's food exporters.

It was impressive how well informed these young dairy farmers were about the global economy and financial markets, and how developments in the wider world can influence their ability to make a living in remote Karamea.

Alien mindset

This, I thought, would be a good moment to raise the topic of farm subsidies, or rather of their absence in New Zealand.

Twenty years ago a quiet revolution swept through this country when they were abolished.

Subsidies were once as significant a proportion of farm income in New Zealand as they are today in the European Union and the United States.

But since 1984, New Zealand's farmers have had to get along without any direct financial support from the government.

"How do you manage?" was my question to Bevan and Caroline.

"How is it you are able to farm without subsidies, when so many subsidised farmers in a country like Britain are struggling?"

The older generation had recalled how creative some farmers had been with the government cash on offer



That was when I became acutely conscious of the hum of the washing machine.

But seeing their nervous glances to one another as they struggled for an answer, it dawned on me that these young New Zealand farmers were not being evasive; they just could not conceptualise what having subsidies might mean.

They could talk fluently about the impact of international currency movements on their markets. But subsidies?

They did not know and they did not want to know.

Creative cash

We got the conversation going again by moving up a generation.

"Oh yes", they said, trying to be helpful, "we remember our parents talking about that, perhaps you should ask them about subsidies."

In fact I had already, over a few beers the previous evening at the small motel they now run in their retirement.

And the older generation had talked and talked, and chuckled quite a bit when they had recalled how creative some farmers had been with the government cash on offer.

Dairying is now a bigger foreign exchange earner than sheep for New Zealand



There was what had officially been known as the "livestock incentive scheme" - a direct payment to encourage farmers to increase the size of their flocks - and was soon nicknamed the "skinny sheep scheme".

And there was the case of the farmer who had named his smart new boat SMP, after the "supplementary minimum prices" subsidy, the backbone of the system.

They can laugh about them now, but these and the many other subsidies on offer in the late 70s and early 80s were providing some New Zealand farmers with up to 40% of their income.

Today government financial support for farmers amounts to less than 1% of average farm income across New Zealand.

And most farmers are thriving without the subsidies.

'Revolutionary moment'

Their removal, far from destroying New Zealand agriculture, appears to have re-energised it.

Agriculture contributes slightly more now to the total economy than it did in the era of subsidies and there is plenty of evidence the land is being farmed more creatively.

Twenty years ago the wine industry was too small to be measurable. Today in some areas grapes have replaced sheep as the main source of revenue.

I met several younger farmers like Bevan and Caroline who could barely get their heads round what subsidies were!



Dairying is now a bigger foreign exchange earner than sheep for New Zealand and there are more than two million farmed deer across the country.

And the farmers themselves?

Well I did not meet a single one who wanted to go back to subsidies.

But I met several younger farmers like Bevan and Caroline who could barely get their heads round what subsidies were!

The chief architect of New Zealand's quiet revolution - to many nervous farmers at the time he was the revolution's Robespierre - was a politician called Roger (now Sir Roger) Douglas.

Twenty years ago, as finance minister of a new Labour government, Douglas announced the budget that would bring the subsidies era to an end.

In another remote corner of New Zealand's South Island, I was given a vivid child's eye view of that revolutionary moment.

Ewan, an agricultural consultant in his 30s - so too young to have experienced subsidies firsthand - remembers his father emerging gloomily from the sitting room where he had been listening to the "Douglas Budget" on the radio.

"They've just stuffed the farmers," he had said.

Well, 20 years on, far from "stuffing" New Zealand's farmers, the withdrawal of their subsidies turns out to have revived them.

It has restored the "pioneer spirit", I was told on more than one occasion, that helped our great-grandparents build the country.

From Our Own Correspondent was broadcast on Saturday, 16 October 2004 at 1130 BST on BBC Radio 4. Please check the programme schedules for World Service transmission times.