What is the agricultural sector


2. The agricultural sector in transition to a market economy

The agricultural sector of the CEE countries throughruns a profound, crucially from the transition from the plan to the Market economy specific change. At the beginning of the transformation, agriculture had to be anbeginning of the 90s Years, initially completely changedchanged macroeconomic frameworkgenes to cope with. Price liberalization, Submitdismantling, stability policy measures to combat inflation and the ondeclining income in the non-agricultural areas led to one in all formerly socialist countries Decline in demand for foodand as a result to a real vercase of agricultural producer prices (agricultural prices rose far less than the general price level). In addition, the agricultural input prices increased accordinglyso that the price-cost relationnen and thus the profitability of agricultureproduction deteriorated permanently (Figure 2, Appendix). This situation was initially reinforced by state and mainly centralized marketing and reference systems that both skimmed off monopoly rents and did not pass on price signals.

As a result of this combined development, agricultural production and farming went downeconomic income in the first half of the 90s significantly back (Diagram 1, Appendix). In most of the CEE countries, livestock production fell in particular, as the demand for meat fell the most due to the cut in subsidies. In addition, there were adjustment processes on the supply side, since the inefficient large farms had to introduce structural reforms, especially in animal production. Overall, the weight of plant production in relation to total agricultural production has increased significantly in recent years. Agricultural production and agricultural incomes stabilized only slowly in the course of the onset of economic growth. Favored by favorable weather conditions, a clearer growth in agricultural production in the CEE countries became apparent for the first time in 1995. Cheaper price relaand macroeconomic frameworkconditions are likely to be in in most of the CEE countries the basis for moderate growth in the agricultural sectoroffer production.

An exception to the macroeconomic and agroeconomic effects in the transition to a market economy are the East Asian agriculture in China and Vietnam when looking at the transformation processes in principle. In the course of the transformation, which is still taking place under communist auspices, considerable increases in production and income were observed in rural areas. Agriculture, which previously produced largely at subsistence level and was hardly subsidized, was able to mobilize considerable production potential due to the transition to private forms of cultivation and corresponding price incentives. In addition, the demand for food expanded in quantitative and qualitative terms, which was favored by the strong economic and population growth. East Asia's economic backwardness in the transformation process turned out to be advantageous insofar as "only" the task of a structural change induced by the industrialization processes (transition from agriculture to industry) is to be initiated, through which comparatively "easily" high growth rates can be generated. The economically more developed CEE countries, on the other hand, have to struggle with considerable structural adjustments, which are the result of a failed industrialization and, as a result, production slumps are inevitable.

Rural areas in the CEE countries continue to have low incomesmen, high debt of the Agricultural businesses and high unemployment, also as a resultnis of the rationalization effects of the previously clear overstaffed large companies to leithe. Scarcity prices, the expansion of the private sector, a stronger Independence of the state or cooperative producers (or their successor organizationsoptions) and the upstream and downstream Beempires, however, led to an efficientren use of the Factors of production and significantly less waste in producttion and sales. Evidence for this is that agricultural production has often fallen far less than the reduction in area, the decline in livestock and the reduced use of operating resources suggest. The same applies to private food consumption, which has fallen less than production and has settled down to a level (especially for meat) that corresponds to countries with similar per capita incomes.

Apart from a few exceptions and special regional conditions (countries with armed conflicts), the transformation did not lead to supply bottlenecks that would have resulted in an undersupply of the population. On the contrary: After a critical transition phase Above all, the quality of the food supply has improved significantly. The consumer goods markets have become in the mei"normalized" in most countries, as in the formerly socialist countries typical phenomena of the Shortage economy (queues and rationing) have disappeared. The money has thus regained its normal payment function. As usual in "normal economies", consumption is primarily dependent on income. However, a greater social differentiation can be observed, which has to be cushioned socio-politically in order to guarantee the basic supply of socially weaker groups. In view of the financial constraints in the national budget, this is only inadequate.

The changed macroeconomic and institutional framework conditions also led to adjustments in the Agricultural foreign trade. Most of the CEE countries ended with Ausincluded Hungary, Bulgaria and Estonia in the in recent years to net agricultural importsren. In addition, the collapse of the former Comecon trade (especially trade with the former Soviet Union) adversely affects the CEE agricultural trade out. For example, while the Soviet grain imports at the end of the 1980s comprised around 15% of the total world grain trade, Russia's grain imports fell drastically from 20 to 0.4 million t in 1992 to 1994. In trade with the West, which also rose to become the most important trading partner in the agricultural sector, the abolition of export subsidies and western trade restrictions as well as qualitative problems counteracted a dynamic export development for the CEE countries. In contrast, the EU in particular was able to significantly increase its agricultural exports to the CEE countries and has had surpluses with this group of countries since 1992. More favorable weather conditions and a certain degree of stabilization in the former Soviet Union meant that in 1994 and 1995 the CEE countries succeeded in structuring their overall agricultural trade balance positively.

The drastically increased input prices causehave positive environmental effects inasmuch as the through Operating subsidiescalled ecologically questionable use of fertilizers and Plant protection products declined. In addition, the declining industrial production to the fact that the Pollutiontion, especially air emissions, decreased in the CEE countries. Structural effects (Decline in heavy industry), a rationaler price system, international obligationas well as a changed environmental awarenesslet it be expected that the future geeconomic and agricultural growth is more environmentally friendly than in the past. especially the Labor-intensive Polish agriculture has the potential for ecologically oriented land management.

While the share of the agricultural sector in GDP declined in the course of the transformation in all countries, with the exception of Romania, there can be differences between the CEE countries Employment development to be watched. In some countries, agriculture took on a certain buffer function in the face of the macroeconomic crisis, as the number of agricultural workers and the agricultural quota rose. In Bulgaria, Romania, Albania and the Baltic States, the transformation or dissolution of the cooperatives has encouraged more labor-intensive agricultural production in private companies and has absorbed labor in the agricultural sector. In Poland and the former Yugoslavia, too, private farming, often part-time farming, was able to take on this buffer function, which is also clear in a regional comparison of the Polish agricultural structure (regions with the largest proportion of state-owned farms have the highest unemployment). The increase in the number of agricultural workers in Russia can certainly be explained on the one hand by a lack of operational adjustments and on the other hand by an influx of workers in the newly created private agricultural sector.

In the other economically more highly developed transition countries with collective agriculture, in which the reform process and economic recovery have advanced further (Czech Republic, Slovakia, Hungary), the share of employment in agriculture has decreased significantly. This process can be explained not only by the release of superfluous workers, but also by the restructuring of large companies. Some of the functions previously integrated in the cooperatives (services, repairs, sales) were outsourced to independent non-agricultural companies. In some cases, a new type of statistical record that registers non-agricultural activities more precisely also encourages these changes in the employment structure. The economic recovery emerging in some countries will favor positive structural changes in agriculture in the medium term. The underdeveloped supply and sales system as well as the service sector offer additional employment opportunities, but rural areas will face considerable social and labor market challenges.

© Friedrich Ebert Foundation | technical support | net edition fes-library | April 1999