Providing services to agricultural producers and rural people
Providing services to agricultural producers and rural people: Group discussion and a commentary
by Jerzy Wilkin
The agricultural sector and rural areas in Poland
Agriculture is a very important part of the Polish economy. It contributes approximately seven percent to the GDP and employs 22 percent of labour force. The role of agriculture in Poland is much more important than the structure of the GDP suggests. The situation in agriculture directly affects the standard of living not only of a quarter of the Polish population but also of all other families - through food prices. An average Polish family spends about 35-40 percent of its income on food. The performance of agriculture also significantly affects the rate of inflation, the balance of foreign trade and many other important elements in the Polish economy. Agricultural and food products account for 12 percent of total Polish exports.
Productivity of labour in agriculture is low due to the small average size of farms, shortage of adequate machinery and equipment, relatively poor farmers' education, and inadequate infrastructure and services in rural areas, among other reasons. Most farmers are dually employed, combining agricultural production with work in another area of the economy. In 1994, 2,026 farms of average size (6.7 hectares) existed. The number of farms are projected to decrease to 1,650 in the year 2010.1 Polish agriculture absorbs relatively more human resources than any other European country (except Russia). The high unemployment rate since 1990 stopped the migration from agriculture and forced some people to return to agricultural activity. In 1994, an agricultural survey indicated a higher number of people worked entirely in agriculture (3,721) than in 1988 (approximately a 13 percent growth rate). This represents an increase of employment per farm from 1.5 workers in 1988 to 1.8 workers in 1994. Between 1988-1994 the number of dual-occupational farmers declined by 12.7 percent. Since 1990, 444,000 rural family members lost their non-agricultural jobs. Almost half a million people living in farm households seek employment. However, while the rate of unemployment in rural areas is growing, the unemployment rate in urban areas is declining. Under the communist regime (1945-1989), 75 percent of the agricultural land remained in private farms, but the expansion of those farms was restricted due to ideological considerations. Twenty percent of agricultural land was used by state farms, and less than five percent by co-operative farms.
1 Szemberg, A. Przemiany agrarne w chlopskim rolnictwie. Warszawa: Instytut Ekonomiki Rolnictwa I Gospodarki Zywnosciowej, 1994.
According to the classification used by the Polish Central Statistical Office, rural areas account for 93 percent of the total Polish territory. Rural areas also include lakes, rivers, forests, and so forth. In 1995, 38 percent of Polish population lived in rural areas, with an average population density of 50 people per square kilometre. The highest rural population density is in southern Poland and in regions surrounding big cities.
The typical settlement unit in rural areas is represented by a village with 200-500 inhabitants. Fifteen percent of the rural population lives in small villages with less than 100 inhabitants2. In 1994, there were 42 thousand villages in Poland administratively grouped in 2157 counties (gminy). The county (gmina) is the basic administrative and self-government unit.
2 Kolodziejczyk, D. Insfrastruktura wsi a siec osandnicza. Wies i Rolnictwo. Warszawa: PAN, Instytut Wsi i Rolnictwa.
Historical background of the agricultural and rural development in Poland
Between 1795 and 1918, Polish territory was divided among three European powers: Russia, Prussia and Austro-Hungary. The territories under these countries' control underwent different patterns of development, and the part of Poland under the Prussian administration reached the highest level of development while the territory under Russia was very underdeveloped. Agricultural structures, settlement patterns, technical infrastructure and peoples' values and attitudes acquired during the 124 years of domination from different powers had a significant impact on the Polish agriculture and rural areas for following generations. The inter-war period (1918-1939) was too short to allow full integration of areas separated earlier. As a result of the Second World War, Polish borders were shifted to the west causing new integration and adjustment problems. Since the Second World War, one of the principal economic and political goals for the Polish governments has been the exploitation of the land and other economic resources in the regions that were formerly German.
Most of the state farms were established in western and northern regions of Poland, called 'Regained Lands (Ziemie Odzyskane).'
Agricultural policies of the communist regime (1945-1989) were aimed at fulfilling three principal goals:
· To transform private agriculture into a socialist system of agriculture, through collectivisation and nationalisation of land and other productive resources.· To secure sufficient deliveries of cheap agricultural and food products for the rapidly increasing urban population.
· To change the traditional character of rural areas and eliminate the great differences in standards of living between urban and rural areas.
Since collectivisation of agriculture failed and the 'forced collectivisation' ended in 1955 with rather meagre results, those goals have never been accomplished. Later attempts at socialisation of agriculture consisted of: a) establishing collective agricultural units to deliver services to private farms; b) expanding the state farm sector; and c) controlling upstream and down-stream industries. Government influenced private farms through indirect forms of control, such as administered prices, a system of rationing agricultural inputs and legal regulations (for example, regulating the size of private farms).
In the late 1970s income parity became another goal of Poland's agricultural policy programmes; that is, farmers should receive a similar level of income as workers in the industrial sector. That goal had to be achieved mainly through agricultural price support policy. In the 1970s and 1980s an income based entirely on agricultural employment reached 80-100 percent of the income outside of agriculture. The goals, income parity for farmers and cheap-food-policy (typical for centrally- planned economies), required high subsidies from the state budget. During the early 1970s, people working on private farms also gained access to publicly financed medical services and pensions.
Peasant farms represented the largest group of private economic activity in the entire Polish economy thus representing an exception among the socialist countries. That fact was proudly emphasised by the farmers themselves; however, this also caused certain illusions regarding the opportunities for the Polish peasant agriculture in the reconstructed market economy. During the round table debates (in March 1989) the private farmers representatives gave their support for the full liberalisation of the Polish economy and were against the far-reaching restriction of state interference into any economic affairs. They were convinced that in the market economy the farmers would manage much better than other occupational groups. Income effects of food price liberalisation, initiated by the Rakowski government in 1989, initially were favourable for farmers, thereby, strengthening their belief in the free market. Disillusionment with the market economy came somewhat later.
Although Polish agriculture had never been collectivised during the 45 years of Socialism, it could not be described as market-oriented. Throughout that period it operated within a centrally-planned economy and was subject to the majority of constraints and distortions inherent in the system. Farmers managed to adjust themselves to the conditions of the socialist economy and to survive under those conditions. However, the methods of dealing with the socialist system developed during that period turned out to be of little use under the changing conditions of the free market economy.
The condition of the Polish peasant farms was determined by the glass jar effect generated by the economic system and policies of the socialist regime. The glass jar had a dual effect on Polish agriculture On the one hand, it provided stable economic conditions for the functioning of agriculture (stable prices, guaranteed sales of farm products, low though predictable level of income, isolation from the world market interference), while on the other hand, it restricted farm expansion opportunities by imposing acreage limits for private farms, rationing of farm inputs and monopolisation of farm product purchases, to name a few.
The socialist state authorities in charge of economic policy controlled private sector agriculture by keeping full control over the agricultural inputs and output. They priced and rationed farm inputs, set prices for farm products and almost completely socialised the purchasing system and agro-processing plants. The authorities, furthermore, imposed the type or form of institution and organization dealing with agriculture and its environment. The economic parameters in agriculture, especially prices, were greatly distorted because they did not reflect market conditions including the scarcity of resources. Until 1990, the Polish farmers lived in an almost dream-like world, their beliefs concerning their economic strength were a great illusion.
Forty-five years of communist rule left farmers with deeply rooted beliefs: a) the state authorities are responsible for keeping agricultural prices at parity levels, b) all products have to be purchased through the procurement system, and c) farmers' well-being, in general terms, depends on the agricultural policy of the government These strong beliefs among farmers were confirmed by the surveys conducted in 1990 and in 1992.
TABLE 1. Share of households in urban and rural areas equipped with selected infrastructure installations in 1993
|
Type of installation |
Urban |
Rural |
|
Tap water |
942 |
727 |
|
Flushed toilet |
874 |
540 |
|
Bathroom |
851 |
586 |
|
Gas from the pipeline |
734 |
76 |
|
Central heating |
766 |
470 |
|
Telephone |
396 |
11 5 |
Source Gulbicka, B and Nieweglowska G., Poziom zycia ludnosci wiejskiej, Warszawa Instytut Ekonomiki Rolnictwa i Gospodarki Zywnosciowej, 1995
Access to infrastructure in rural areas
Under the communist regime, the technical and social infrastructure in rural areas was totally neglected, thus, the economic and social differences between urban and rural areas were not significantly reduced.
The major progress in the development of technical infrastructure in the 1990s is reflected in the water and gas supply and telephone installations. Water supply is one of the biggest problems in rural areas in Poland since 46 percent of villages still do not have adequate access to water, especially during certain seasons. The water quality in most of the villages is very poor. Forty percent of Polish villages have a water supply system serving the whole village and a quarter of those installations have been built during last five years. There are, however, strong regional differences In the northern and western regions some 70 percent of the villages have water supply systems compared to only 30 percent of the villages in the eastern and southern parts of Poland. The progress made in water installations is not accompanied by progress in building sewage treatment installations. Only two percent of villages are equipped with such installations, which leads to many environmental problems in rural areas. To improve the situation, public institutions financially supporting rural water supply projects make that support contingent upon the simultaneous installation of sewage treatment facilities in the same village.
The small size of many villages and the insufficient investments in infrastructure in the past make access to basic services for rural people difficult. Most villages lack services, forcing their inhabitants to travel to meet the needs of everyday life. (See Table 2.)
TABLE 2. The share of villages located five or more kilometres from the site of the selected services
|
Type of service |
Percent of villages |
|
Store with food and manufactured goods |
26.4 |
|
Bakery |
65.3 |
|
Barber |
73.7 |
|
Tailor |
82.0 |
|
Shoe repair |
82.0 |
|
Radio and TV repair |
76.5 |
|
Carpenter |
41.0 |
|
Electrician |
55.6 |
|
Blacksmith |
59.8 |
|
Mechanic |
45.8 |
Source: Ostrowski, L., Insfrastruktura techniczna i spoleczna oraz placowki uslugowe we wsiach badanych przez leiGZ w 1992 roku. Warszawa: Instytut Ekonomiki Polnictwa i Gospodarki Zywnosciwej, 1993.
The availability of services in the past six years has deteriorated because of the sharp reduction in public transportation services in rural areas. Due to financial problems many bus lines and railroads either have ceased to exist or have reduced the number of buses and trains servicing certain areas. Although an increasing number of rural households have a vehicle, still more than 60 percent of the households are without automobiles.
Public and private transportation in some rural areas is hindered by the poor road conditions. Only 35 percent of local roads (maintained by gminy3) have hard surfaces. Gminy have serious financial difficulties keeping the paved and unpaved roads in good condition. According to the latest survey, only one percent of local roads are repaired on a regular basis. Poor condition of local roads (seasonally or all year) makes it very difficult for 20 percent of farmers to reach their farms.
3 In Poland a gmina (pl , gminy) is the smallest territorial subdivision exercising administrate functions.
All villages have access to electricity, but the quality and the reliability of the electric systems in rural areas is rather unsatisfactory. In the period 1990-1995, there was almost total stagnation in the maintenance and modernisation of electricity supply systems. Most villages suffer periodically from an interruption in the supply of electricity. In some areas farmers have no access to high voltage electricity (380 V), which limits the use of many types of farm machinery and equipment. The high installation cost of alternative sources of energy (hydropower, windmills and biogas) prohibits their use. Electrical reconstruction and modernisation in rural areas is one of the most important prerequisites to rural development and business investment in those areas.
The quality of life in rural areas also depends on the social infrastructure which is needed to provide health care services, education, recreation and cultural activities. Statistics indicate access to health, education, cultural and recreational services is much lower in rural areas when contrasted with urban areas. (See Table 3.) These conditions are perpetuated by the neglected social infrastructure and lower incomes in rural areas. The gap between the standard of living of an average urban and rural family is the widest when comparing the health, education, culture and recreation services. The availability of infrastructure in rural and urban areas plays a decisive role in the differences shown in Table 3 The gap is smaller in housing and consumption of durable goods, and the food consumption patterns are almost the same.
TABLE 3. Basic indices related to health, education, culture and recreation in rural and urban areas in 1993
|
|
Urban |
Rural |
|
Health services/10,000 people |
||
|
Number of physicians |
19.5 |
2.7 |
|
Number of pharmacies |
1.9 |
0.9 |
|
Expenditures* for health care |
100.0 |
67.0 |
|
Educational service/1,000 children aged 3-6 |
||
|
Number of children in pre-school |
516.0 |
331.0 |
|
Percent of children attending high school (lyceum) after completing elementary school |
26.0 |
16.0 |
|
Percent of people with college education |
9.2 |
1.7 |
|
Expenditures* for education |
100.0 |
52.4 |
|
Culture and recreation |
||
|
Expenditures* for cultural services and goods |
100.0 |
45.1 |
|
Expenditures* for recreation |
100.0 |
18.6 |
Note: *Expenditures in urban families = 100.0
Source Gulbicka B., and Nieweglowska G., 1995 pp. 167-168 (See Table 1)
Access to public services in rural areas did not improve with the 1990 reforms in administrative structures and methods of financing in the public sector (including social infrastructure), in fact, access deteriorated Now most of the educational, cultural and a number of the health care institutions are administered and financed by the local (gmina) authorities The results of these reforms are mixed On the positive side, the efficiency of public spending on infrastructure and services has increased and local communities have become involved in decision making related to their local affairs The people's involvement with local decision making also has been linked to the democratisation processes introduced in Poland after 1989 On the less positive side, a great number of poorer gminy do not have access to resources needed for the maintenance and the development of social and technical infrastructure During the period 1990-95, this situation caused a sharp decline in the availability of basic public services It has been counterbalanced only partially by the increased number of services financed from private sources (for example, the development of private schools and clinics). The result is increasing and observable regional differences in standard of living, access to public services, to infrastructures and to public safety. These regional differences are in conflict with the prevailing and deeply rooted values and beliefs of Polish society.
Values and beliefs of Polish farmers at the beginning of the systemic transformation period
The state of mind of the average farmer at the beginning of the 1990s was very disturbing It was a mixture of pessimism, dissatisfaction, substantial passivity (psychologically supported by reliance on state assistance) and a sense of helplessness As revealed by Centre for Public Opinion Polling (CBOS) surveys presented in the book Rolnicy '924 as many as 93 percent of farmers saw the situation of Polish agriculture as bad and very bad, and only nine percent believed that the situation would improve within the year Polish farmers did not embrace capitalism (only 20 percent considered it a desirable system), but they had an even less favourable opinion about socialism (only six percent supported it). Fifty-one percent of the interviewed farmers declared themselves in favour of the third path. Perhaps this was the longing for 'capitalism with a human face.' The majority of farmers fear the mechanism of the capitalist economy. Only 34 percent believe that such a system provides opportunities for agricultural development, while 43 percent of farmers have a totally opposite opinion.
4 Rosner A Rolnicy 92 Rolnicy wobec zmian systemowych. Warszawa Centrum Badania Opinii Spolceznej, 1993.
The Polish farmers have a deeply rooted conviction that the state should have a very active role in agriculture. As many as 86 percent of farmers believe that the state should guarantee purchases of all farmers' products, and 74 percent of them declared that in the market economy agriculture should be privileged. Farmers, however still, were critical of the role of the government in relation to rural and agricultural issues. Only 16 percent of respondents believed that the activities of the government benefited the Polish rural and agricultural sector. They had a somewhat better opinion about the activities of the Minister of Agriculture (30 percent of positive opinions).
The selected results of surveys concerning the beliefs and attitudes of Polish farmers presented here perhaps do not reflect accurately the state of mind of the farmers, though the actual situation probably does not differ much from the picture just presented. The most important conclusion to draw from the information presented in these surveys is that farmers need to learn, understand and adopt a market mentality. This means they must: a) understand how the market functions; b) understand risk and how to manage it; c) cultivate innovative attitudes; d) learn to manage both rationally and efficiently; e) learn to adapt quickly to changing market conditions; and f) develop the ability to see change as an emerging opportunity. The second important and related conclusion is that farmers need appropriate institutions to help them adjust to the market economy.
It is difficult to identify and classify the values and beliefs underlying agricultural policies in Poland after 1989. At least in the first two years of the transformation period agricultural policy was subordinated to other goals and values expressed in the Balcerowicz Plan5.
5 L. Balcerowicz 800 dni. Szok Kontrolowany, BGW, Warszawa, 1992
Total economic liberalisation was considered the most effective tool to cure the economic disorder inherited from the communist period. The primary goal was macroeconomic stabilisation and most importantly the reduction of inflation which reached 600 percent in 1990. In order to stabilise the economy and enhance the competitiveness of Polish industry, the new government sought an open economy through price liberalisation, a break-up of the foreign trade monopoly and free access to the production sector.
In the early 1990s, because of a number of adverse macroeconomic conditions, particularly a decline in real incomes and a lower demand for consumer goods, there was an overproduction of agricultural and food products. The government, however, found it difficult to introduce programmes which would favour agriculture and farmers as a group. First, farmers were less likely to become unemployed while unemployment was a growing social and economic problem in Poland. Second, compared to the rest of the economy, the rate of price increases for agricultural goods was increasing at a slower rate and agricultural incomes were declining more slowly than in other economic sectors. Agriculture was considered a positive factor in Poland's anti-inflation programme.
The Polish farmers, meanwhile, were dissatisfied and disillusioned with the early results of the economic reforms. They pressured the authorities to introduce protective policies. Unfair competition from abroad became an important argument in the farmers arsenal. In response some broad protections related to agricultural trade were introduced.
The Agricultural Market Agency was one of the first agriculturally-focused institutions established after 1990. The Agency's mandate was market interventions aimed at the stabilisation of prices - which at that time meant a reduction of price fluctuation for the basic agricultural products. In post-communist Poland reducing price volatility for agricultural and food products was a comer-stone of agricultural policy.
One of the most powerful, although not sufficiently recognised, factors behind the shaping of agricultural policy in Poland, and in many other post-communist countries, is the demonstration effect. Basically, this means many farmers' groups and politicians cited the West European experience as the policy prototype to follow. This approach became increasingly important as the integration of the Polish economy into the economic system of the European Community became the focus. The farmers and their allies called for the introduction of 'CAP-like policies' in Poland to protect farmers from what they believed was the unfair competition of the heavily subsidised West European agriculture. The introduction of CAP-like policies in post-communist countries has been hampered by a lack of financial resources and the growing criticism of the CAP within the European Community.
Concerns about unfair competition in food and agriculture is often linked with the effectiveness of agriculture. Many agricultural policy decision-makers look to the modernisation paradigm as a method of addressing these concerns. Policy makers cite the need for an active structural policy to change rapidly the backward agrarian structure of Polish agriculture. They see moderation fostering a shift from peasant farming to modem commercial agriculture.
Modernisation is an important value for rural policy which is in statu nascendi in Poland. The agricultural modernisation is impossible without modernisation of the rural areas. Rural modernisation embraces a great number of issues, such as, access of rural people to education, welfare, health services, information and culture. Disparities in the availability of these services or elements, which to a great degree comprise quality of life, are considered a barrier to the development of rural areas, modernisation of agriculture, not to mention the fulfilment of the social justice criterion.
In terms of Polish rural policy, two new values are gaining attention and significance: a) full employment for rural people; and b) protection of natural and cultural environment. The problem of unemployment, especially high in rural areas, is becoming the key element of the newly emerging rural policy in Poland.
TABLE 4. The structure of agribusiness in Poland in 1990
|
Branches of agribusiness |
Employment (%) |
Gross product (%) |
|
Industries producing inputs for agriculture and food industry |
1.8 |
6.7 |
|
Agriculture |
84.5 |
52.2 |
|
Fishery and forestry |
0.1 |
0.4 |
|
Food industry |
7.6 |
33.9 |
|
Trade |
0.5 |
1.2 |
|
Material services |
5.5 |
5.0 |
|
Agribusiness total |
100.0 |
100.0 |
Source: Wos, A., Tendencje rozwoju rolnictwa w warunkach rynkowych.
Warszawa: Szkola Glowna Handlowa.
Institutional and organizational weaknesses of agriculture and agribusiness in Poland
The structure of agribusiness in Poland is regarded as relatively backward and distorted. Both down-stream and up-stream sectors of agribusiness are insufficiently developed. The greatest proportion of gross production of the entire agribusiness sector still originates in agriculture.
The rather low productivity of agriculture is partly caused by the weak support received from other sectors of agribusiness. Before 1990, most of the down-stream and up-stream industries were controlled by the state and cooperative organizations while agriculture was privately owned for the most part. A significant part of agricultural production was not processed and was channelled directly from farmers to consumers.
The systemic reforms introduced under the Balcerowicz Plan, in the beginning of 1990, accelerated transformation of agribusiness sectors, especially through the privatisation of the food processing industry and trade (both wholesale and retail). In 1996, almost 100 percent of food trade was handled by the private sector and 60 percent of the food processing was privatised. The collapse of many co-operative and state institutions serving agriculture represented an additional problem for the development of the agricultural sector. In the period between 1945-1989, most of the institutions providing agricultural services, trade, banking and procurement were of the co-operatives and were consequently controlled by the central or local state authorities. The farmers' influence on the activities of rural co-operatives was rather limited. This situation contributed to farmers' distrust of any form of co-operative organization suitable to fulfil the needs of farmers and the rural population. Most of the co-operatives have been in deep crises since the 1990s. In Poland and other post-communist countries, there has been a 'marginalisation' of the role of cooperatives in agriculture and in the economy as a whole.6 A 1993 survey showed that in Poland over two thousand co-operatives collapsed since 1988, and many of those have not been replaced by other, more effective, forms of organization serving rural people.
6 Kleer, J. Dzis jutro spoldzielczosci na wsi. W: Rynek, konsumpcjua, rolnictwo, Tom III. Warszawa: Szkola Glowna Handlowa
There are no intermediary institutions between the state and the farms and-this fact created an institutional vacuum. It is, therefore, not surprising that the Polish farmers rely heavily on state support, assistance and protection. Over the last four decades, they have come to believe whatever actions were taken in agriculture or in the economy were directly, or indirectly, dependent on the state's activities. In Poland, the various possible types of institutions which usually offer support to private farmers have not been formed and the ones that exist operate very poorly. In Western Europe farmers receive support from a great number of co-operatives and other organizations set up, controlled and protected by the farmers themselves: co-operatives, agricultural chambers, producers' organizations, processing companies, agricultural extension and marketing institutions. Furthermore, there is also an extension service system offering farmers production, economic and social advice. There are, in addition, stable forms of production relationships between agriculture, agro-processing and marketing of agricultural products. Additionally, there are state institutions that support agriculture.
In Poland, most of the relationships between the farmer and his environment formed during the period of state socialism have been dismantled. At the same time, many organizations from the previous economic and political system have disintegrated. This vacuum has not been filled by new farmers' associations or organizations, that would strengthen their position and enable them to profit from agricultural processing, marketing and international trade. However, the process of creating a new institutional structure of state support and protection for agriculture is close to being completed. The new structure includes the Agricultural Market Agency, the Agency for Restructuring and Modernisation of Agriculture, and the Agency for Agricultural Property of the State Treasury. The farmers, however, have been slow to establish their own support institutions. To date, there are no tangible results. This, again, confirms the weakness of the Polish farmers, including their elites.
The efforts and initiatives in establishing new links between the farmers' community and other components of the agricultural sector, such as the processing plants, companies supplying farm inputs and marketing agricultural products, are still very inefficient. Farmers fail to understand that in order to adjust to European Union conditions, they will have to develop modern patterns of cooperation with the Polish food and agriculture sector.
The transition to the market economy has made it very difficult for the majority of farmers to find effective marketing channels and methods of selling their products. Under the socialist system such problems did not exist because in an economy permanently afflicted by shortages, all products could be sold relatively easily. The socialist extension service was targeted entirely toward increasing agricultural production and the expansion of 'the socialist production relations.' In a market economy, new knowledge and new institutions are needed for farmers to survive and to progress. These must include the financial institutions serving farmers and food producers. At the onset of the transformation period, farms and food processing plants were serviced by 1600 co-operative banks subordinated to the Bank for Food Economy (Bank Gospodarki Zywnosciowej - BGZ) which was partly owned by the state and partly by the co-operatives. The co-operative banks, operated on the same basis as the state banks and they were used by the communist government as a tool for manipulating the food and agricultural sector.
In 1994, BGZ became a joint stock company. Current plans are to establish nine regional banks encompassing 1,200 co-operative rural banks. By the end of 1995, the Central Bank of Poland licensed five regional banks, only two actually have started operating. The financial situation of the entire rural banking system, and particularly the BGZ, was very poor, mainly because of the inadequate evaluation and monitoring procedures which allowed high-risk investors to receive loans. Most of the debtors were state-owned farms and food processing plants. To rescue the rural banking system, especially the BGZ from financial crisis, the government issued debt restructuring bonds worth ZL 17 trillion (about US$ 800 million). The debt rescheduling arrangements for the BGZ were criticised severely by both the opposition and the media.
Restructuring the rural banking system and making adjustments to a market economy is important if Polish agriculture and the food economy are to expand and prosper. Bank restructuring required government support since the rural bank crisis was caused, at least partially, by the agricultural policies of the former government which granted support to state farms and big food processing plants. The recovery of the rural banking system also is crucial for the effective distribution of subsidised credits to farmers and food producers. Since 1994, subsidised credits have become the most important government tool used to support agriculture.
The average Polish farmer is poorly equipped to face the competition in European or world markets. The farmers' means of production (land, machinery and equipment) are scarce and inadequate. Farmers have little knowledge about market behaviour and marketing mechanisms. Nor do they have the institutions that could support their efforts and strengthen their position in this area. Farmers are also disillusioned, disheartened and have no faith in the future. Some of this may improve relatively soon, but not without a struggle. Some farmers may require much longer to change. The situation in Polish agriculture is extremely complex, much more complex than can be presented here in brief. One thing is certain, the major problems involved in transforming Polish agriculture have yet to be faced.
From agricultural policy to rural policy: a shift in paradigms and goals
The political and economic revolution taking place in Central and Eastern Europe since 1989 has presented a challenge to agricultural and rural policies. The revolution coincides with a shift in agricultural policy patterns and goals of the European Community and in some other industrialised countries. A good example of the need for radical change of major paradigms of rural development is proposed in the Council of Europe document, entitled European Charter for Rural Areas.7 The reforms initiated in the EC by McSharry in 1992 lead in the same direction.
7 European Charter for Rural Areas. Preliminary Draft Report, 1995. Committee on Agriculture and Rural Development, Council of Europe.
Since 1989, Polish agricultural policy has gone through three stages:
Stage I: From the end of 1989 to mid-1991, was characterised by several fundamental reforms:
· Price liberalisation.· Breaking up of trade monopolies (both domestic and foreign).
· Opening up of the national economy.
· Removal of state subsidies for agricultural and food products.
· Lack of clear sectoral policies (including agricultural), and the subordination of all governmental policies to the realisation of the principal macroeconomic goals (principally the reduction of the inflation rate, and the accomplishment of other macro stabilisation programmes).
· Disintegration of the state farm sector.
· Breaking up of the existing monopolies, by breaking down some big public companies and by lifting barriers on competitive imports.
· Liberalisation of the land market and abolition of size limits for private farms.
As the result of those measures agriculture and other sectors of the economy became exposed to foreign competition. The state reduced its support to agricultural producers and protection of the agro-food sector to almost zero. This stage is commonly called the 'shock therapy' period of the post-communist transition. At the time, agricultural policy was almost non-existent. Mr. Leszek Balcerowicz, the main architect of the shock therapy reforms, strongly opposed government policies directed towards a particular sector of the economy (including agriculture). He accepted only limited macroeconomic policies, some forms of social policy and the most necessary systemic reforms. During this period, the Producer Subsidy Equivalent (PSE) fell from 23 percent in 1988 to minus 18 percent in 1990.8
8 Dabrowski, J. and A. Kwiecinski, Skutki wzrostu protekcjonizmu rolnego. W: Studia nad reformowana gospodarka, M. Okolski, U. Sztanderska (eds) Warszawa: Wydawnictwo Naukowe PWN, 1995: 315.
Stage II: From mid-1991 to 1994. The main features of the stage were the following:
· Introduction of several protectionist measures (high tariffs, import levies and non-tariff barriers).· Establishment of major institutions responsible for government policy in agriculture (Agricultural Market Agency, Agricultural Property Agency of the State Treasury, Agency for Modernisation and Restructuring of Agriculture).
· Signing the Association Agreement with the European Communities and the introduction of programmes aimed at the adjustment of the Polish economy (including agriculture) to the conditions in the European Union.
· The support for agriculture (excluding the welfare programmes) declined from 3.7 percent of the state budget in 1991 to 2.5 percent of the total state budget in 1994.
· Government had continued indirect subsidies in supporting the agricultural progress (subsidies to qualified seed, extension service, soil conservation, melioration, liming, etc.).
· No direct payments to farmers, production subsidies or export subsidies were introduced.
· Producer Subsidy Equivalent in agricultural production increased to 15 percent, mostly due to protectionist measures introduced in 1991-1992.
Stage III: From 1994 onwards:
Agricultural policy has been linked to the completion of the government's four-year Strategy for Poland programme, prepared by the team headed by the Deputy Prime Minister and Minister of Finance, Mr. Grzegorz Kolodko. In 1994, the Ministry of Agriculture and Food Economy published the document Principles of socio-economic policies for rural areas, agriculture and food economy up to year 20009. Both of these documents incorporated agriculture into a broader policy aimed at the development of rural areas.
9 Zalozenia polityki spoleczno-gospodarczej dla wsi, rolnictwa i gospodarki zywnosciowej do roku 2000. 1994. Warszawa: Ministerstwo Rolnictwa i Gospodarki Zywnosciowej.
For Poland, the shift from agricultural policy to rural policy is a positive phenomenon because:
· Most of the problems faced by 'the rural people in Poland can be solved only by much broader socio-economic policies which deal with various aspects of rural life, and more specifically policies geared towards:* Improvement of social and technical infrastructure.
* Creation of employment in the non-agricultural sectors.
* Protection of the natural environment.
* Introduction of housing projects suitable for the nature of rural areas.
* Protection of the cultural heritage of rural areas.· The present structure of Polish population and the projected demographic trends show that the rural population will grow, while the agricultural population will decrease. The creation of new non-agricultural job opportunities in rural areas, therefore, becomes imperative. According to recent studies, 75 percent of Polish farms have no potential to become viable, efficient productive units, able to survive under competitive market conditions.10 For the majority of these farms, pension or some other form of non-agricultural income is the main source of their income. In 1995, over two million people were receiving agricultural pensions (from Agricultural Social Insurance Fund - KRUS) almost equal to the number of farms in Poland.
10 Wos, A Tendencje rozwoju rolnictwa w warunkach rynkowych. Warszawa: Szkola Glowna Handlow, 1994
· The majority of the non-agricultural population more strongly supports government programmes which will provide basic services (i.e., health care, education, transportation or public safety) for people living in rural areas, than they support programmes that help agricultural producers (especially in the form of price and income support).· Thanks to an increased number of personal cars, easier and more flexible transportation facilities, rural areas are becoming an attractive location (cheaper land, clean environment, safer, etc.) for the new housing developments and for recreational purposes. The principle barriers to faster expansion of the rural areas remain, however, the poor conditions of technical and social infrastructure in rural areas - the legacy of the former economic system.
· In Poland, as in many Western European countries, attitudes toward rural areas are changing. These areas are treated now as a commonwealth for the nation to be appreciated and protected from degradation. Some values linked to a rural lifestyle, e.g., natural and cultural diversity, traditional family life, community identity and safety, are becoming popular and widely accepted. This also represents a reaction to the previously socialist industrialisation ideology and primitive urbanisation.
· The development of some theoretical concepts like: a) sustainable agriculture and development; b) multi-functional agriculture and multi-functional rural areas; c) ecological sustain-ability; and d) new theories of economic development, to name a few,11 also support a shift from agricultural policy to rural policy, including environmental and social infrastructure issues.
11 Breth, S.A. ed. Integration of Sustainable Agriculture and Rural Development Issues in Agricultural Policy, FAO and Winrock International, 1996.
In the post-communist countries where all elements of the political, social and economic systems are changing, the search for new agricultural and rural policies is of paramount importance. The implementation of new policies also represents a unique opportunity to avoid some of the mistakes made by the industrialised Western economies.
REFERENCES
Breth, S.A., ed 1996. Integration of Sustainable Agriculture and Rural Development Issues in Agricultural Policy, FAO and Winrock International.
Dabrowski, J. and A. Kwiecinski. 1995. Skutki wzrostu protekcjonizmu rolnego. W: Studia nad reformowana gospodarka. M. Okolski, U. Sztanderska (eds.) Warszawa: Wydawnictwo Naukowe PWN.
European Charter for Rural Areas. Preliminary Draft Report. 1995. Committee on Agriculture and Rural Development, Council of Europe.
Gulbicka, B. and G. Nieweglowska. 1995. Poziom zycia ludnosci wiejskiej, Warszawa: Instytut Ekonomiki Rolnictwa i Gospodarki Zywnosciowej.
Kleer, J. 1996. Dzis i jutro spoldzielczosci na wsi. W: Rynek, konsumpcja, rolnictwo, Tom III. Warszawa: Szkola Glowna Handlowa.
Kolodziejczyk, D. 1994. Infrastruktura wsi a siec osadnicza. Wies i Rolnictwo. Warszawa: PAN, Instytut Rozwoju Wsi i Rolnictwa.
Ostrowski, L. 1993. Infrastruktura techniczna i spoleczna oraz placowki uslugowe we wsiach badanych przez IEiGZ w 1992 roku. Warszawa: Instytut Ekonomiki Rolnictwa i Gospodarki Zywnosciowej.
Rosner, A. 1993. Rolnicy' 92. Rolnicy wobec zmian systemowych. Warszawa: Centrum Badania Opinii Spolecznej.
Szemberg, A. 1994. Przemiany agrarne w chlopskim rolnictwie. Warszawa: Instytut Ekonomiki Rolnictwa i Gosposarki Zywnosciowej.
Wos, A. 1994. Tendencije rozwoju rolnictwa w warunkach rynkowych. Warszawa: Szkola Glowna Handlowa.
Wos, A. 1996. Agrobiznes. Makroekonomika. Tom 1. Warszawa: Key Text.
Zalozenia polityki spoleczno-gospodarczej dla wsi, rolnictwa i gospodarki zywnosciowej do roku 2000. 1994. Warszawa: Ministerstwo Rolnictwa i Gospodarki Zywnosciwej.
by Frances Sandiford-Rossmiller
Rural policy in Britain is conditioned by a very different agricultural and rural situation from that in Central and Eastern Europe, and also from that in many Western European countries. Only 1.2 percent of the population is engaged in agriculture, compared with 2.3-2.5 percent some twenty years ago. There are 172,000 agricultural holdings, of which only 89,000 are classified as being full-time. So the rural scene is very much non-agricultural, in contrast to the rural scenery which is wholly agricultural. The pattern of living in the rural areas has changed drastically over the last twenty years. While the total population has increased by about 3.5 percent, the corresponding figure for the rural population is 17 percent so there has been (and still is) a substantial urban exodus. Were it not for the strict planning controls (see Chapter Seven) that prevent uncontrolled development, the rural areas would be home to a suburban-style sprawl.
What do these new rural dwellers do? Well, the pattern of employment has changed drastically. Big-city centres have been losing jobs and their 'white collar' populations as government offices, commercial firms and light industry relocate to the suburbs, smaller towns or rural areas, perhaps as a result of deliberate policies for regional development, or because of the decline of the old heavy industries, or to provide a more attractive working environment. Government statistics indicate that the pattern of employment in the rural areas, both 'remote rural' and 'accessible rural', differs very little from urban metropolitan areas in the country as a whole (although the figures do, of course, mask substantial local variation, and Scotland and Wales have greater divergences). In combination with relatively good transport infrastructure and widespread car ownership, and inner-city decay, these changes have encouraged the growth of commuting from places formerly considered too remote. But commuting is not always necessary for those who wish to live in the countryside. There are now more employment opportunities in the rural areas for semi-skilled and skilled workers, and the self-employed: the new business start-up rate is higher in rural areas than in the towns, and the communications revolution has led to the creation of jobs such as tele-working. The rural population has also been boosted by an inflow of retired people, and the growth of second-home ownership with weekend-only occupation, which may not be very large in total but has a tremendous impact in certain areas.
We can with equal justification ask what the old rural dwellers are doing, if getting on towards half of the agricultural holdings are part-time. Well, there are two distinct trends in the activities of the agricultural population. One is farm diversification, which refers to the use of agricultural resources for non-farming purposes. Examples include 'horsy-culture', farm shops, woodland management, countryside sports (e.g., hunting, shooting and fishing), and agro-tourism. The second is pluri-activity, which refers to income-generating activities that are not farm-based, such as factory, shop or office work.
Such changes in population and employment have led the Government to ask the question, "What now makes a rural area rural?" Since it clearly is no longer the predominance of farming, and it isn't a structural difference in employment patterns, then what is it? And really it has come down to a truism: rural areas are rural by virtue of the fact that they are greener than non-rural areas. This has made the formulation of a rural policy rather difficult, which is reflected in the existence of separate rural policy white papers for England, Scotland and Wales (the discussion in this section is based on that for England). It also has substantial implications for the values and beliefs that underpin and drive rural policy, and explains the very strong 'environmental amenity' approach to rural policy, which is based on a consumerist approach to the rural environment. Rural policy cannot be separated from environmental policy. I shall not repeat here the discussion about the rural myth in 'Revealed Beliefs and Values' in Chapter 7, my chapter on the English experience of protecting the rural environment: but it is equally valid in this context of specifically rural policies, and explains the conflicts between the traditional, agriculture-based rural population and the new rural population.
The degree to which the traditional agricultural community is being put under pressure by the working out of beliefs and values that are not rural in origin may be seen at its most extreme in England, but most countries in Western Europe are experiencing a variety of pressures on the traditional rural way of life. Very different understandings of the nature of rurality are found between, and sometimes within, each country. One thing that all have in common is a decreasing proportion of the population that is directly dependent on agriculture for a livelihood. In some places this is causing severe rural depopulation, high levels of rural unemployment, and an associated loss of rural commercial and social facilities. In other places new opportunities have prevented or reversed economic depression, but the demands for rural facilities may be quite different, as may the ability to supply them. Either way, the nature of rural life has changed. With agriculture declining in importance, agricultural policy cannot carry the full weight of rural development, and so we see in Western Europe a new importance being attached to rural policy. But whereas there has been a fairly general consensus about the objectives of agricultural policy, I should not expect to see a similar consensus about those of rural policy.
This may well cause tension within the EU over the next few years. As noted in Chapter 2, since 1988, the promotion of rural development has been included in the objectives of regional policy (the '5b objectives'). Attempts by agricultural interests, primarily in the richer EU countries where most of the agricultural support ends up, to hijack regional aid (structural funds) in order to ease the pain of CAP reform are likely to meet with strong opposition from the poorer, i.e., net recipient, EU countries who have most to gain from the structural funds.12 These tensions are not likely to be lessened by the access negotiations with the CEE countries, who, by and large, are more concerned with the problems of rural development as a whole, including the provision of services to all rural inhabitants, than with the narrower issue of supporting agriculture.
12 In the April following this workshop, a three-day conference was held in Brussels (the European Cohesion Forum) to debate the future of regional aid. The Financial Times of 28 April 1997 reported that the EU commissioner for regional policy will "reject calls for a big increase in aid to rural areas aimed at cushioning farmers against the coming shake-up in the Common Agricultural Policy." The regional commissioner said that "the CAP has not helped economic and social cohesion in the EU: most of the aid went to farmers in rich countries... rather than poorer countries." The proposals had been put forward by the EU commissioner for agriculture who "wanted to direct EU regional aid to help farming communities cope with reductions in subsidies," and had previously "pressed the idea of amalgamating the regional and CAP funds, which together comprise more than two-thirds of the total EU budget."
