Old Europe seems to be guarding the Common Agricultural Policy as if the EU would collapse without it. Any renegotiation of the Budget will be considered reluctantly and only if the CAP is sacrosanct, say the French president and German chancellor. This is curious economics and even curiouser politics

When the CAP was introduced a major objective was to maintain farm income. Ever since Roosevelt's New Deal, rich countries wanted to support farm income at a level comparable with manufacturing income. They supported farm product prices by tariffs on imports. The inevitable surplus was exported with further subsidy to reduce prices to world levels.

By the 70s we realized that not much income support went to poor farmers. Since returns were increased by subsidy, farmers could afford to pay more for inputs like fertilizer and machinery (offset as costs). Rents and the price of farm land increased. The relevant elasticities are hard to measure but farmers were lucky to retain a third to a fifth of the price support benefit. At the same time it was recognized that 80 percent of payments went to rich, large-scale farmers who did not need income support and were only 20 percent of the farm population. This is true today in France.

Some 20 years ago New Zealand removed farm support without catastrophic consequences. Without subsidy farmers paid less for inputs, got more for their products, and rents fell. The price of land also fell, increasing return on capital.

The CAP represents labyrinthine economics, but are the politics any more intelligible? Tony Blair now says that paying 40 percent of the EU budget to 5 percent of the employed is not sensible. The French want to defend the CAP. But why, if 80 percent of French farmers get practically nothing?

The French are only a generation away from the land, and seem to think that France depends on the CAP for survival. Americans are rightly sensitive to the rural vote in swing States like Ohio. Only the Brits, long urbanized, think farmers are feather-bedded and lack political clout. Few realize we need to lose half our farmers and perhaps cultivate our comparative advantage in Wilderness and National Park.

It would be ironic if the CAP, created as the raison d'etre for the Common Market became the vehicle of its demise. Perhaps the CAP is a totem preserved like some ancient icon, no longer relevant to the world, but revered as a symbol of heritage and history?