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	Alternative Law Journal

How ya gunna keep ’em down on the farm?

Giving it all away: the role of the state in the intergenerational exchange of the farm.

Malcolm Voyce
Malcolm Voyce teaches law at Macquarie University

Recently the federal coalition government passed measures specifically to help farmers pass on their farms to the younger generation. The Social Security and Veterans’ Affairs Legislation Amendment (Retirement Assistance for Farmers) Act 1998, which embodies this measure, brings into focus the role of the state in:

The particular facets of the rural crisis facing Australia received much exposure during the recent election and the rise of the One Nation party to prominence. The features of the rural crisis include the long-term deterioration of prices, rising costs, drought, rural depopulation, the decline of services and, in particular for my focus, the increasing age of farmers and the accompanying difficulties of farm succession.

As a response to the perceived needs of the rural section, the coalition government introduced its Agriculture — Advancing Australia policy to develop the economic wellbeing of the sector to provide an adequate welfare safety net for farmers and to help rural adjustment in the form of encouraging aged farmers to retire and to transfer the business to younger farmers.

The media release which accompanied the new policy noted how the aged pension test discouraged older farmers from gifting ownership of the farm to their younger offspring. Current gifting provisions mean that would-be applicants for the pension may be excluded from receiving a pension or allowance or have their entitlement reduced for five years should they give away assets of more than $10,000 a year. The announced policy, in general, introduced a moratorium on such gifts or ‘disposal provisions’ laws to assist the transfer of the farm.

The Act is instructive as it brings into focus the question of the state maintaining political and social control in the rural sector and the role the state in fostering intergenerational continuity of family farms.

The problem of rural succession in Australia

The ‘handing over’ of the family farm occurs at a particular stage in the life cycle of the family. To facilitate this there must be a successor willing to take over the management of the farm. The success or failure of this process depends on a wide variety of factors, chief amongst which must be the availability, capacity and willingness of an heir and the prospect of a viable economic unit. Not all these factors necessarily come together at the same time, so in this sense the reproduction of the farm may depend on macro conditions as well as micro. In this sense the organisation of reproduction may be shaped by the state and how agents of the state seek to promote the outcome of the reproduction process.[1]

One commentator recently wrote how the succession/reproductive process represented a double bind. The problem is there is the increasing likelihood the next generation does not want to farm. One report showed 54% of a survey cohort in Western Australia did not want to farm.[2]

Farming is increasingly difficult and returns are hard to predict. Moreover, farming is increasingly technical and multi-skilled which does not suit everyone and it is no longer acceptable that a dim-witted son will want to be a farmer. Importantly farmers are aging (the average age is 62 years). Frequently older farmers want to retire but there has been the problem, identified by Haslem-McKenzie, of the farmer being ‘asset rich and income poor’ and thus unable to get a pension.

The Western Australian survey also reported on the problems of succession. Only 14% of farmers had a firm succession plan. Many had reported the process had been traumatic (51 out of 67) and often had led to family disagreements and a failure of family continuity. In many cases failure meant the family had left the community, the farm being sold to neighbours.

The new measures for ‘gifting’

In 1996 the coalition government constituted the Special Rural Task Force to investigate the impact of social security assets tests on farmers. The Task Force also considered the effect of social security assets tests on the intergenerational transfer of the farm. The Task Force Report[3] found the ‘disposal provisions’ meant farmers were frequently unable to transfer the farm, as they could be precluded from the pension for five years. The Report noted existing provisions hindered rather than encouraged this process. One farmer quoted by the Task Force observed: ‘if I give the farm away my wife and I will have no money to live on for the next five years until we become eligible for the pension ... due to harsh conditions we don’t have enough profit to support two families’ (Report, p.34).The Task Force found that structures to support long-term planning have either not been available or have been too expensive for farmers to access. It recommended that in order to ease the transfer of the farm a temporary exemption from the disposal provisions should be provided where farms were to be transferred to the children. Accordingly the Task Force recommended:

To facilitate inter-generational transfer of farm assets, a short-term (e.g. two year) moratorium on the five-year gifting provisions be applied for farmers planning retirement (from 63 years) or of pension age to give individual families a one-off ‘window of opportunity’ to plan and transfer the family farm. Qualification would be conditional upon:

• Active involvement of the second generation in the farm operations over a minimum previous three years;
• An off-farm assets test not exceeding the applicable assets test threshold;
• An income test consisting of average income over the previous three year period being less than the pension rate; and
• Application to one farming enterprise.

Following on from the release of the Special Task Force report the government released its Agriculture — Advancing Australia (AAA) package, announced on 14 September 1997.

The proposed Bill released in the form of a draft proposal took the form of amendments to the Social Security Act 1991. The subsequent legislation is the Social Security and Veterans’ Affairs Legislation Amendment (Retirement Assistance for Farmers) Act 1998.

The purpose of the legislation has been described as necessary in:

an environment where, firstly, over 90 per cent of farms in Australia are owned by farm families, and secondly, the average age of farmers is presently around 53 years, the issues around intergenerational transfer and succession planning of the farm loom large in terms of helping to create a sector which is structurally sound, competitive and profitable in the long term. So that was a major consideration in both the Special Rural Task Force deliberations recently and also in setting up the Agriculture — Advancing Australia package, which was launched late last year.

Many farmers argue that they are not able to gift the farm or pass the farm in a succession planning context to their younger generation because of financial difficulties and so forth, and they argue that they have got no choice but to retain the farm under those circumstances. That of course has an impact on structural adjustment and the flow of resources in the sector.

That was the focus of some of the deliberations of the Special Rural Task Force established in September 1996. Indeed, several of the recommendations of the task force were directed towards this issue of succession planning. One recommendation in particular — recommendation 15 — called for a moratorium on the existing gifting provisions and suggested that this should be included in separate legislation. Subsequently, as I said, the government launched its Agriculture — Advancing Australia package, which provided the umbrella within which the retirement assistance for farmers scheme sits, and I will refer to that as RAFS from now on. I just add that the AAA package, Agriculture — Advancing Australia, came into being after very extensive consultation with stakeholders and after the implementation and examination of the recommendations from a number of task forces and special inquiries.

Two of the four key objectives of the AAA were, firstly, to ensure that in agriculture we have an adequate welfare safety net and, secondly, to ensure there are sufficient incentives for farm adjustment to ensure that we end up, as I said before, with an efficient and competitive farm sector. RAFS achieves these two sub-objectives in a number of ways. The first is that it provides a three-year window of opportunity for eligible, low income — and I stress that — pension age farmers and their partners to access the age pension following the gifting of their farm to the younger generation. This is an age pension safety net and should contribute to alleviation of poverty, particularly where more than one farm family has been trying to eke a living off a farm when in fact the farm should only sustain one family.

The second is that the retirement from farming of the older generation of farmers should assist their process of adjustment through creating an environment where the younger generation is able to introduce innovative practices and explore new ways of doing things, which is very important as agriculture approaches the 21st century. Another aspect which at times is overlooked is that a scheme of this type will raise the importance with farm families of, as I said before, succession planning, the need to obtain advice on how to transfer the farm between generations and the need for business planning generally.[4]

Some of the features of the legislation are:

(a) Farmers must take advantage of the scheme before 15 September 2000.

(b) The whole of the farm must be transferred which is held by the farmer and his spouse. The transfer must be made by way of gift and divest the farmer of the whole of the legal interest. The exception relates to the home.

(c) The value of the farming interest must not exceed $500,000.

(d) The transferor must be a natural person, but may be a farmer alone, or the farmer in conjunction with a spouse.

(e) To qualify, the farmer must have been in farming for 15 years, or, if he/she has been in farming for at least 20 years, have acquired the relevant interest in the farm prior to 15 September 1997.

(f) The farmer’s income is means tested. It is based on a comparison of the farmer’s income three years preceding the completion of the transfer and compares it with the pension entitlement on 14 September 1997.

(g) As regards the eligibility of the transferee, the transferee must be a natural person, related to the transferor (narrowly defined), and have a farming background. Furthermore, the transferee must, for three years before the transfer, have been actively involved in farming.[5]

The aim of the Act is to deliberately target low income farmers who are experiencing the most serious financial hardship. These families, it is argued, have not been able to afford the transfer of the family farm even in the States where there is an exemption from stamp duty.

The measure is aimed at assisting a full retirement from the farm. The intention is that to be eligible for this scheme, the farmer and their spouse must transfer all assets. Farmers may retain other assets, although they will be assessed by the usual assets tests.

Comments so far on the legislation make the general criticism that the eligibility criteria are too restrictive:[6]

• The ceiling value of a property of $500,000 is very low for an average retiring couple given the average level of farm business equity for broadacre enterprises is $968,000 (Farm Survey Report 1997). Farmer groups have been advocating a figure of $800,000.
• While the Minister claimed 10,000 farmers would benefit from the scheme, Social Security officers have reported to a Senate Community Affairs estimate hearings that they expected only 6000 farmers to apply and that only 600 would be successful.[7] The NFF has estimated that the government has allocated $27 million but that only 35% of this allocation will be spent.
• The scheme is only available to those couples whose income is less than the maximum pension income for a couple, which is currently $15,085.20 a year. This low level is likely to exclude many families who, while not destitute, are not well off.
• The involvement test for the younger generation needs to be more flexible for the situation where the younger generation has worked off the farm.
• The window of opportunity of three years provided for this program is too short given the length of time it will take to get the scheme up and running. Five years has therefore been suggested to enable people to start their succession planning earlier.[8]
• The requirement that the farmer must have owned the land for 15 years is too restrictive.[9]

The ‘new disposals provisions’ as ‘rural governance’ and as mechanisms to foster intergenerational continuity of family farms

To describe the greater significance of these measures I firstly describe a particular view of the state and how administrative decisions in the context of social security enable reproduction of the family through the enforcement or encouragement of norms that assist the reproductive process.

My starting point is to reject the usual conception of the state as a taken for granted or self-explanatory category which is epitomised by the notions of centralisation, a monopoly of force and legal institutions which have an undisputed control over people and area. It is further unhelpful to view the state and the legal system as either solely repressive (against being productive) or being the product of increasing enlightenment and progress.[10]

Rather we should realise the limitation of this conception of the state as it, in short, envisualises power being exercised by some sovereign body (monarchy, community, elites) or indirectly by some representative body (parliament, estates) from which power is delegated to administrators of various kinds. In this state it is envisualised power that is exercised through the law over a legally undifferentiated population.[11]

Skinner has sketched the historical circumstances in which this abstract conception of the state first arose. In tracing the history of the idea of the state, Skinner shows the above conception of the state where supreme authority within the body politic came to be identified with the authority of the state was the outcome of the English revolution of the 17th century and the influence of Hobbes and Bodin. Skinner indicates it is time we transcended this ‘master noun of political argument’ this ‘undefinable monster’[12] or in Foucault’s words ‘we must eschew the model of the Leviathan in the study of power ... and base our analysis of power on the study of the techniques and tactics of domination’.[13]

Rather, as I later conclude, we should conceive of the state as consisting of dispersed capillary fibres which codify local power networks and social and economic norms in a particular way.[14]

Several justifications[15] or rationales have been given for social welfare, such as that it attempts to buy off working class dissent,[16] or that it attempts to restore equity. Two justifications deserve special mention here. The first is the famous Marshall account which emphasised citizenship based on reciprocal rights and obligations. The second is based on the notion of preserving political stability against potentially disruptive groups or those illustrating deviant behaviour.[17]

My preferred approach to social welfare is that legal decisions about the ‘government of families’ are not necessarily against the family but work through the family by allowing it to utilise the advantages and disadvantages of such legislation. This approach also respects the family’s desire for autonomy and successful socialisation[18] and is of value for two reasons:

• it allows us to incorporate the now reworked notion of citizenship found in the Marshall notion of reciprocal duties and now located in the ‘new contractualism’ literature[19] and embodied in the form of the ‘activity test’ (the requirement for social security is that applicants for work ‘are willing and ready’); and
• it does not force us into a line of functionality or causality running in either direction between the state and the family as both agents are involved in the process of constituting each other.[20]

I, therefore, argue that social security decisions show features of the modern state in that not only are they regulatory and administrative but they are normative, educative and productive, rather than coercive or repressive. By educative I mean in the sense indicated by Donzelot and his description of tutelage where families are bought into a relationship of dependence by welfare and educative agents.[21] As Donzelot also showed this influence may not be coercive but may help citizens to organise their own welfare in a better way.[22] Foucault writes ‘each individual receives as his status his own individuality’. His theory of ‘productive power’ he argues is not negative, it ‘produces domains of objects and rituals and truth’.[23]

By normative I mean that the state has increasingly adopted authoritative local norms or standards. Thus normalisation is the process where social forms, or standards of conduct (norms) become authoritative. Normalisation in the disciplinary sense, implies ‘correction’ of the individual and the development of a casual knowledge of deviance. In this sense then norms become colonised or recoded by the discipline of law.[24]

Several examples may be seen in this article of social security decisions working with or reinforcing local norms as regards ‘work’ and ‘community wellbeing’. For instance, social security decisions under the activity test require farmer applicants for benefits to demonstrate the rural norm or expectation that they are hard working or deserving.

This requirement coincides with transplanted European culture in rural Australia and the notion of hard work and independence. In Australia those who would not work were seen as a threat to the community.[25]

A reflection of this ethos is found in the ‘activity test’ for the newstart allowance in that ‘farming’ applicants must be seen as ‘productive’ on rural land and in the sense that farmers not providing for themselves on marginal or hobby farms will not get allowances. Likewise, in the case of forgone wages: where a close relative proves he has worked on a farm or contributed financially to a farm, this may be taken into account as ‘productive work’. In this case a son who has not been paid can be backpaid up to the level he would have received and this does not affect the income and assets test.

A similar test is also now current with the ‘new disposals provisions’ by which an applicant must establish they have been contributing to the farm for a period of years.

These administrative decisions also show the self- educative or productive features of the modern state where norms-with-disciplines allow a family to take up initiatives provided by social welfare policies to give the family the capacity to reproduce itself over time.

In the intergenerational sense then, the state is actively involved in the reproduction of rural society. I use the term reproduction to describe the way the family perpetuates itself intergenerationally. This process represents itself by the perpetuation of both physical and cultural aspects of family life. Such a process replicates both the cultural and economic capital of a family and its normative or authoritative structure.[26]

Conclusions

I have described the delicate nature of the handover process depending as it does on many micro and macro factors.

In this light the enabling policy behind the role of the law becomes clear. Farmers may utilise the opportunity of the social security law to ensure continuity. Thus, the new disposal rules give considerable help to the succession process to allow a relative to be gifted the farm and not disqualify the parents from receiving a pension.

Thus, by assisting this process the state is not only active in absorbing, or colonising rural expectations that a farming son should inherit the farm in exchange for work, but also gives hegemonic support to the notion that work on a farm is done by men. The state is also governing through rural norms or ‘responsibilities’ that an inheriting son and father be facilitated and structured through an ordered controlled succession. Such procedures I suggest are part and parcel of rural governance.

References

[1] The term reproduction has become a convoluted term far removed from its biological reference, see Robertson, A.F., Beyond the Family: the Social Organisation of Human Reproduction, Polity Press, 1991, p.153. Marxist writers have used the term in relation to the reproduction of labour power or the reproduction of the conditions of production. As is clear from the above, I use the term to describe how families perpetuate themselves over time and how families regenerate patterns of dominance. See Althusser, L., ‘Ideology and Ideological State Apparatuses’ in B. Brewster (ed.), Lenin and Philosophy, Left Books, 1971, p.123; Clignet, R., Death, Deeds and Descendants: Inheritance in Modern America, Aldine, 1992; Engels, F., The Origin of the Family and the State, Chicago University Press, 1902; Meillasoux, C., Maidens, Meal and Money: Capitalism and the Domestic Community, Cambridge University Press, 1981; Moore, H.L., Femininism and Anthropology, Polity Press, 1990, pp.47-54.
[2] Haslam-McKenzie, F., ‘Diminishing Rural Community: Infrastructure and its Influence on Social and Economic Viaibility of the Central Wheatbelt in Western Australia’, paper for World Congress of Sociology, Montreal, 1998.
[3] Special Rural Task Force, Impact of the Social Security Assets Tests on Rural Customers, monograph, DSS, Canberra, 1997.
[4] Senate Hansard Reports, Community Affairs Legislation Committee, 15 May 1998, p.11.
[5] Brown, B., ‘Retiring the Cockies into Good Pasture’, NSW College of Law Paper 98/2.8, 1998.
[6] Here I draw on comments from the Rural Affairs Committee of the NSW Law Society of which I am a member, and from Senate Hansard Reports, Community Affairs Legislation Committee, see ref. 4.
[7] Senate Community Affairs Committee, Nov./Dec. 1997.
[8] Senate Hansard Reports, above.
[9] Senate Hansard Reports, above, p.67.
[10] See Foucault, M., ‘Nietzsche, Genealogy, History’, in P. Rabinow (ed.), The Foucault Reader, Pantheon Books, 1984, p.85; Lyotard, J.F., The Postmodern Condition: A Report on Knowledge, University of Minnesota Press, 1984; Litowitz, D., ‘Foucault on Law: Modernity as Negative Utopia’, (1995/6) 21 Queens Law Journal 1.
[11] Tulley, J. ‘Review Article: The Pen is Mightier than the Sword: Quenton Skinner’s analysis of politics’, (1989) 13 British Journal of Political Science 489 at 500. See similar notions in Foucault, M., in Colin Gordon (ed.), ‘Two Lectures’ in Power/Knowledge: Selected Interviews and other Writings 1972-1977, Harvester Press, 1980, pp.92-108.
[12] See Skinner, Q., The Foundations of Modern Political Thought, Cambridge University Press, 1978; Skinner, Q., ‘The State’ in T. Ball (ed.), Ideas in Context: Political, Innovation and Conceptual Change , Cambridge University Press, 1989, p.90. On Foucault’s approach to the state see Constable, M., ‘Foucault and Walzer: Sovereignty, Strategy and the State’, (1991) 24(2) Polity 269. See also Bolingbroke, Lord, ‘Letters on the Study and Use of History in the Works’, 4 Vols, Vol 2, Cass, 1967.
[13] Foucault, ref. 11 above, p.102.
[14] For a full critique of Foucault’s conception of the microphysics of power, see Dean, M. Critical and Effective Histories: Foucault’s Methods and Historical Sociology, Routledge, 1994. For an account of this conception in a rural context, see Mackenzie, F., ‘The Worse it Got the More We Laughed: A Discourse of Resistance among Farmers in Eastern Ontario’, (1992) 10 Environment and Planning: Society and Space 691-713. Other scholars have emphasised the ways law might be conceived as dispersed and localised. See for instance the legal pluralism tradition, see Merry, S., ‘Legal Pluralism’, (1988) 22 Law and Society Review 869.
[15] See reviews in Head, B., ‘Inequality, Welfare and the State: Distribution and Redistribution., in Australia’, (1980)16(3) Australia and New Zealand Journal of Sociology 44; Fraser, D., The Evolution of the British Welfare State: A History of Social Policy since the Industrial Revolution, MacMillan, 1984.
[16] See George, V. and Wilding, Ideology and Social Welfare, 1976.
[17] See Marshall, T.H., Citizenship and Social Class, Cambridge University Press, 1950; Watts, R., ‘Rethinking the Employment/Citizenship Link’, (1995) 1(1) Political Expressions 83 at 85; Fraser, D., ref.15, above, p.xxvi-xxx.
[18] Donzelot, J., The Policing of Families, Pantheon, 1979, p.92.
[19] Carney, T., ‘Welfare Appeals and the ARC Report to SSAT or not to SSAT: is that the Question?’ (1996) 4 Journal of Administrative Law 25; Carney, T., ‘Contractualisation Citizenship and `New Welfare’, (1997) 7(3) Polemic 114; Yeatman, A., ‘Interpreting Contemporary Contractualism’, (1996) 31(1) Australian Journal of Social Issues 39.
[20] Watts, ref. 17 above, p.109.
[21] Donzelot 1980?? p.xxi or is it the same one as in ref 18?
[22] Hodges, J. and Hussain, A., ‘La Police des Familles’, (1979) Ideology and Consciousness 81.
[23] Foucault, M., Discipline and Punish. The Birth of the Prison, Penguin, 1977, p.194.
[24] O’Malley, P., ‘Risk Power and Crime Prevention’, (1993) 21(3) Economy and Society 252; Foucault, M., ref. 23 above, p.144; Ewald, F., ‘Norms, Discipline and Law’, (1990) 30 Representations 138; Hunt, A., ‘Foucault’s Expulsion of Law: Toward a Retrieval’, (1992) Law and Social Inquiry 1 at 19.
[25] Evans, R., ‘The Hidden Colonists: Divorce and Social Control in Colonial Queensland’ in J. Roe (ed.), Social Policy in Australia, Cassell. 1976.
[26] Clignet, R., ref. 1 above, pp.32-41.