The overall objectives of our proposed paper is to: systematically document the post-reform trends in agricultural performance in Asia, Europe, and the Former Soviet Union; identify the main reform strategies and institutional innovations that have contributed to the successes and failures of the sector; analyze the mechanisms by which reform policies and initial conditions have affected the transition process in agriculture; and draw lessons and policy implications from the experiment and identify the gaps in our understanding of the role and performance of agriculture in transition. As part of this effort, we attempt to address a number of intriguing and important questions on the performance of individual countries or regions during transition. Why has China been so successful in its reforms, while Russia has not? Why is it that some CEECs have rebounded and showing robust productivity growth, while others have not? Why has agriculture in so many FSU nations continued to perform so poorly? In addition, we will address questions about the process of reform. Why has land restitution predominated in Europe but not in Russia or China? Why did institutions of exchange collapse in the non-Asian economies in the early stages of reform but continued to function in Vietnam and China? What explains the apparent divergence in the performance effects after the first year of reform in China and Vietnam, on the one hand, and much of the rest of the transitional world on the other? In particular, how have land reform and rural input-supply/ procurement enterprise restructuring affected productivity? Which institutions of exchange and contracting have or have not emerged, and why? How has the structure of the economy at the outset of transition, and other initial conditions, affected the transition process? To meet our objectives and answer some of the questions,stacking pots we will begin by laying out the record on performance — examining the main bodies of data that demonstrate the changes in agricultural output, income, and productivity in the years after transition.
In doing so, we will show how some of the countries have recorded similar performances, while others have developed quite differently. We will identify several “patterns of transition” based on these performance indicators and much of our subsequent discussion will analyze the success of transition according to these classifications. Next, as the first step in our search for answers as to what explains these different patterns, we examine differences in the points of departure of the transition countries as well as the nature of the policy reforms that have affected agriculture. The initial conditions that we hypothesize may explain part of the transition period’s performance include the nature of agricultural technology at the beginning of the reforms , the structure of the economy , the extent of collectivization, and the magnitude of trade distortions. The key policy interventions that we should expect to affect agriculture’s performance during transition include land right reforms and farm restructuring; price and subsidization policies; the approach to the liberalization of agricultural commodity and input markets; general macro-economic and general institutional reforms; and the attention of sectoral leaders to the level of new and maintenance-oriented public goods investment . After documenting the dramatic differences in initial conditions and in reform policies among the transitional countries, we seek to demonstrate which of the differences determine the path a country’s agriculture takes. In other words, we offer answers to the question why transition in agriculture in some countries has been successful and not in others. Here, we seek to generalize about the main causes for differences between the countries and the mechanisms that have affected performance. In particular, we argue that the debate on the optimality of Big-Bang versus gradualism oversimplifies the reform problem. The empirical evidence suggests that the road to a successful transition is more subtle and successful transitions in Asia and Europe have elements of both gradual and radical reforms.
To explain the reform successes and failures we emphasize the role of the political environment in the early reform years and the potential for agricultural growth that exists at the start of reforms. We find that both have not only influenced the choice of the reform policies, but also the effect of the reform policies. We also conclude that the initial level of price distortions and the pace of market liberalization were especially influential in explaining differences in the early stages of transition but that the influence of the factors has diminished over time. Investment, land rights, and farm restructuring policies, in contrast, are assuming a more important role as the agricultural reforms have matured.In the last section we draw policy implications and lessons from the agricultural transition experiences. We argue that one should be careful about which indicator to use for measuring success and failure of transition. We conclude that all reform strategies in order to be successful need to include some certain policy ingredients . However, a powerful lesson is that although all the pieces are ultimately needed, there is a lot of room for variation in the form of institutions that can be successful, and optimal policies and institutions may vary according to initial conditions. In other words, there is no single optimal transition path. Whatever the reason—either initial conditions, reform policies, or both—remarkable differences can be observed when examining the performance of agriculture in the transitional countries during the first decade of reform . From the start of the reforms, output increased rapidly in China. After 10 years output had increased by 60 percent. In Vietnam, output also rose sharply, increasing by nearly 40 percent during the first decade of reform.Output trends followed a different set of contours outside of Asia. Production fell sharply in the first 5 years of transition in both the CEECs and in the FSU countries. Since the mid-1990s, output stabilized in most of the CEECs. In Russia and Ukraine, however, the fall continued declining to nearly 50 percent of pre-reform output. Productivity trends, while similar to those of output in certain countries, diverged in others . For example, for the entire reform period, labor productivity in the agricultural sectors of China and Vietnam, measured as output per farm worker, rose steadily like output. The productivity trends for Russia and Ukraine also mirror those of the nation’s output: labor productivity fell over 30 percent between 1990 and 1999. Productivity trends for some CEECs, however, differ from those of output. For example, output per worker almost doubled over the first decade after transition in Hungary.
Labor productivity also rose strongly in the Czech Republic and Slovakia in the 1990s, even as output was falling. While reliable estimates on total factor productivity are scarcer, the general picture is similar as the one described by the labor productivity trends. In China and Vietnam, TFP rose during the reform era . In several CEECs, TFP in crop production started increasing early on in transition . What has been behind the observed trends? To the extent that we can better understand the sources of growth, decline, and recovery, we may be able to more precisely predict what is in store for the future and derive more accurate policy implications. We start by examining initial conditions,grow lights since they may affect how a country proceeds after a change. Next, we examine the impact of policy actions taken by reforms: the record on property rights, price and subsidy policies, and a large number of measures that can be labeled as actions taken to promote the emergence of institutions of exchange, including markets. The final subsection briefly examines the record of countries in the management of agricultural investment. Although comparisons of economies in transition are reasonable, given their common reliance on central planning and shared transition era goals of liberalization and faster growth, differences in initial conditions at the outset of reform may temper comparisons. In general, the Asian economies had a much lower levels of development than the transition countries in Europe. For example, the share of agriculture in employment was more than 70% in China and Vietnam. In contrast, less than 20 percent of the working population in Russia and most of the CEECs is employed in agriculture. The demographic structure of the countries also affects the way output is produced. Farms in China and Vietnam are much more labor-intensive. The man/land ratio was more than five times higher in Asia than in Central Europe or Russia . The length of time under collectivized agriculture also may affect transition. Although pre-transition agriculture was characterized by the dominance of large-scale farms in almost all the countries,the collectivization of agriculture occurred early this century in Russia, while only after the second World War in the CEECs and East Asia. Experience with private farming and any understanding of markets was more likely completely lost during several generations under Communism in most of the FSU nations. In contrast, private farming survived in rural households in many other countries.Land ownership prior to reform also differed among the countries. In China, the collective retained legal and effective property rights both before and after the implementation of HRS.
In Russia and other FSU countries, however, land was nationalized during Communism. In many CEECs much of the collective farm land was still legally owned by individuals, although effective property rights were controlled by the state or the collective farms . Paradoxically, while these legal differences probably had little impact on the operation of the land in the various countries in the pre-reform era, they had a much stronger effect on land reforms afterward liberalization. In particular, pre-reform ownership can be quite closely linked to the demand for land restitution in the CEECs . Finally, pre-reform tax, subsidy and trade policies differed significantly among the countries. In China and Vietnam, authorities heavily taxed agriculture . In contrast, leaders in most of the CEECs and the FSU nations supported agriculture with heavy subsidies . Moreover, while some of the taxes and subsidies were direct, some differences in rates of taxation and subsidy were related to trade policies. Trade policies also affect the degree of access that consumers and producers have to world markets and how much producers are subject to global competition. For example, FSU countries were strongly integrated into the CMEA system, and traded mainly with other communist countries. The share of CMEA exports as a percent of GDP amounted to around 30 percent in Russia and Ukraine. The CEECs also traded with other countries, but CMEA exports still made up around 10 percent of GDP in countries like Hungary and the Czech Republic. In contrast, China and Vietnam mainly traded with nonCMEA countries.The reforms in China and Vietnam started with radical decollectivization and reshuffling of property rights. Reformers in China re-allocated land rights from the communes, brigades and teams to rural households and completely broke up the larger collective farms into small-scale household farms. The resulting changes in incentives triggered both strong growth of output and a dramatic increase in productivity . Doi Moi, Vietnam’s reform program in the 1980s closely followed China’s strategy and land reform also positively affected the nation’s agricultural output . In contrast, many large-scale farm organizations survived the transition in the FSU and the CEECs. Large-scale farms, under a variety of legal organizations, still cultivated more than 75% of the land in Russia, Ukraine, most of the FSU nations, and a number of CEECs five years after the start of the reforms. The break-up of the former collective and state farms into individual farms has been strongest in countries in which the collective and state farms were least efficient and most labor intensive . Importantly, the shift also was higher in regions where at least some private farming survived during Communist rule. Although the share farmed by large corporate farms has fallen gradually over the past decade in most transition countries, it is a slow process and it is not obvious that they will disappear in the near future. In some countries, such as Russia and Slovakia, policies still heavily favor large corporate farms.The corporate farms also may be providing services that provide up- and downstream activities substituting for missing markets . In many countries, such as Hungary and Bulgaria, a dual farm structure is emerging with some large-scale farms and many small-scale individual farms .