CHAPTER 5 INCOME PROTECTION FOR FARMERS

Improving the income of farmers and rural people
Improving the income of farmers and rural people: A commentary
Group discussion on "improving the income of farmers and rural people"
Appendix to chapter 5

Improving the income of farmers and rural people

by Leszek Klank

Agriculture always was a very sensitive political issue in all communist countries, including Poland. The agricultural issue was even more important in Poland than in other communist countries because the largest private sector among all communist countries was in Polish agriculture. It had real political power. All major political changes in Poland after World War II were connected, directly or indirectly, with food and agriculture. The problems which arose in feeding the nation in the years of crisis forced subsequent governments to modify the goals of their agricultural policy.

Until 1980, the principal goal of agricultural policy in Poland was to achieve the highest possible rate of farm output growth. After 1980, this goal was changed to achieving self-sufficiency in farm and food products. After 1989, the main goal of agricultural policy was changed again, this time to provide off-farm employment for farmers and rural people. During this entire period farmers' incomes were the most important issue both for farmers and decision makers. Both farmers and politicians believed that by solving the income issue, they could solve all other problems associated with the sector.

Principles of income policies

For many decades farmers and politicians, acting as their representatives, have been calling for farmers' incomes to be equal to those of other social groups. The demand to earn equal incomes is based on the concept of equal opportunities for all social and occupational groups and was heard before World War II. In Poland it also had a very strong religious and ideological background. The concept was referred to as parity.

This concept became the foundation of one of the most fundamental principles of income policy in agriculture. It was defined for the first time in the USA in 1933 legislation as a way to measure prices that would provide farmers with a 'fair' income.¹ These 'parity' prices were based on the belief that parity prices would provide farmers with fair incomes. Parity prices were defined as those prices that would provide the same ratio of prices received by farmers to prices paid by farmers for products used in production and living as the ratio between August 1909 and July 1914. It was assumed that if farmers received parity prices for their products, it would yield enough net income that the relation between incomes per head of population in farm households and non-farm households would be as favourable as during the base period.

¹Black, J.D.: Parity, parity, parity. Cambridge, Massachusetts, 1942.

The adoption of this concept of price parity did not mean, however, that the incomes of farmers and non-farmers would be equal. In the base period, American farmers were receiving only 67 percent of the per capita income of non-farmers.² The parity price principle only tended to prevent increased disparity between incomes in farm households and non-farm households due to declining relative prices for farm products.

²Hams, C.C.: Parity income prices. Journal of Farm Economics 1962 Vol. XIV No. 7.

Leaving aside the issue of achieving the goal of parity prices, in fact, it meant that the goal became one of having incomes of farmers and non-farmers increase at the same rate. It was a major contribution to the process of defining income principles for agriculture in many advanced industrial countries, as well as in Poland.

The next very important concept which influenced income policy in agriculture was introduced in the USA in 1936. It was the concept of parity income defined as income necessary to maintain the ratio between the purchasing power of the net income per person on farms and that of the income of persons not on farms that prevailed during the five year period August 1909 to July 1914. In 1948 parity income was redefined as the gross farm income necessary to guarantee the standard of living in farm households equal to persons dependant on other occupations. Many scientists talk about parity between incomes of farmers and non-farmers if the levels of welfare for the two groups are equal. In other words, parity means that a welfare level of a person or group, dependent on income, is the same for farm households and non-farm households. The difference between income received and parity income is called income disparity. It can be either relative or absolute.

Over time there was an evolution from the principle of parity prices to the principle of equal living conditions for farmers and non-farmers. Thus, the history of agricultural income policy in advanced industrial countries saw three goals of income policy, namely: 1) a goal of stable price ratios for farm products fixed at some historical period; 2) a goal of parity incomes, that is an equal level of incomes; and 3) a goal of parity living conditions, that is of equal living standards for different social and occupational groups. However, there is a possible fourth option, no income policy.

Most developed, industrial countries, as well as Poland, tried to implement their income policies for agriculture using the changing objectives. Poland, for instance, adopted two principles of income policies for agriculture, especially towards private farmers (on state farms and later in co-operatives the principles of incomes policies were similar to those in industrial state enterprises). In 1956, a so-called new agricultural policy introduced the principle of equal rate of growth of incomes for farm and non-farm households. At that time the relation between a farmer's income and that of a full-time employee in other sectors of the economy amounted to 75 percent. It is obvious that that principle would maintain relative differences in incomes and lead to increases in absolute differences in incomes. Farmers would be at a disadvantage from the beginning. But, in fact, their incomes increased much faster than non-farmers' incomes. Until 1981, when the principle of equal rate of growth of incomes was replaced by another concept, the relation between incomes of the two groups was much higher than at the beginning. Even in 1980, which was a very bad year for Polish agriculture due to bad crops, the relation of farm to non-farm income was equal to 84.2 percent, and in 1978-79 it amounted to 90 and 93 percent, respectively. Between 1981 and 1984, relative incomes of farm population were near parity, that is, the relation between incomes of farmers and non-farmers was almost equal to one. One has to remember that in these calculations off-farm incomes were not taken into account.

In introducing the parity income formula for agriculture, Polish politicians believed that:

· It would be the best measure of the income situation of farm households.

· By achieving parity of incomes, food shortage issues would be solved. As a result of the latter, the social tensions would be eliminated.

They did not care that it was not easy to define income parity or that theoretical definitions present many problems. In practice notions which are understandable and easy to use were adopted.

The early 1980s brought essential changes in income policy in Poland towards private farms. The principle of equal rate of income growth was replaced by the principle of parity incomes, which meant equal incomes for farmers and non-farmers. This principle was thus very similar to those followed by EEC.

The adoption of parity income policy in 1981 in Poland was not successful. It was introduced together with a policy of increasing prices at the time of severe decline in the production of agricultural products (1989) and chaos on the market. The decision to implement the principles was both economic and political. With this move politicians hoped to bring about an increase in the scope and volume of agricultural production. However, at that time, as well as in 1982, there was no longer any connection between prices and goods on the market. The purchase price of agricultural products increased 67 percent, whereas the price of consumer goods for farmers increased only 28 percent. This caused farmers' incomes to rise above parity. The relation of income for consumption in a farm household to that of a full-time employee in a non-farm household was 90 percent in 1981. The following year it increased to 106 percent, and in 1983 it amounted to 99 percent. Since 1983, the difference between incomes of farmers and non-farmers has been decreasing. In 1989, it was around 84 percent. In August 1989, the government formally stopped following the principle of parity incomes. The introduction of market prices, as demanded by farmers, resulted in a rise in incomes for a short period.

In the last quarter of 1989 the nominal income per head of population in a farm household was 33 percent higher than in non-farm households. This situation did not last for long, and in the second quarter of 1991, farmers' incomes were at the bottom in comparison to other social and occupational groups in Poland. In 1994 and 1995, the ratio of farmers' to non-farmers' incomes was 87.6 and 91.3 percent, respectively. On the whole, the new economic policy did not provide any income policy for agriculture. The agricultural policy was based on the principles of market economy.

Comparison of relative incomes

When comparing incomes of farm and non-farm populations, researchers usually take into account total incomes, that is the amount per physical person (or per capita) instead of the amount per full-time employee. The adoption of this basis of calculation results mainly from the difficulty in establishing the number of full-time employees, especially in agriculture. Many researchers claim that it is better to compare real figures than calculated ones as the former are more likely to be error-free. Moreover incomes expressed per head of population have a different economic interpretation from the same incomes expressed per full-time employee.

As mentioned, income parity is perceived basically as the principle of equal incomes. We can ask whether this principle is valid. From the point of economy it is justified only when equal payment is provided for equal work. In other words, incomes are equal when productivity is equal.

However, productivity in agriculture is usually lower than in other sectors of the economy. For example, in Poland the labour productivity in agriculture is about one-third the average in the non-farm economy.

Moreover, differences in incomes within agriculture raise doubts and questions regarding the principle of income parity. Hence the next question: does achieving income parity in agriculture mean equal incomes and equal satisfaction for all farmers? The answer is no because:

· Farmers are usually not aware of what parity is. What they, in fact, want are not equal incomes, but maximum incomes. If they compare their situations with those of workers in other sectors of the economy, they compare living conditions and not incomes. It appears that the principle of parity has more importance to politicians than to farmers.

· Differences between incomes within agriculture are usually greater than in other sectors of the economy. In many countries a small percentage of farms have very high levels of production and incomes. In other words, the concentration of incomes within farming in these countries is very high. As a result, many farmers with lower incomes are not satisfied with their income situation, even though on the average the agricultural sector receives income parity. Thus, achieving parity has little to do with achieving equal incomes.

· Because of the difficulties in obtaining proper data on incomes, the income parity concept can be subject to political manipulations. In the 1980s, Poland experienced such manipulations.

· Implementation of the income policy which is based on a parity formula can be very expensive in case of very low efficiency in agriculture. In other words, achieving parity incomes will require large money transfers from taxpayers or consumers to farmers.

The previous discussion shows that income parity may be defined in a number of different ways; moreover we can measure it using various methods. One of the pioneer works in this respect was done by J. R. Bellerby³, an English economist. Before World War II he measured relations between incomes in twenty countries using the concept of the ratio of the farmers' incentive income. According to his definition, the income ratio is the relation between the incentive income per man equivalent of a person employed in agriculture and the incentive income per man of the other sectors of the economy. Incentive income meant the return for the worker's effort and his undertaking. In agriculture this was defined as the total factor income after the deduction of the net rent, interest costs and wages paid to agricultural workers.

³ Bellerby, J.R.: Agriculture and Industry - Relative Income. McMillan and Co.. London, New York 1956.

Bellerby's research on the incentive income ratios in the agriculture of Great Britain during the periods between 1867-69 and 1911-14 and between 1923-29 and 1936-38 showed a very big difference in this ratio in the periods considered. In fact, the income incentive ratio, which was up from 35.5 percent in 1892-96 to 81.1 percent in 1933-1935. The lower ratio in the first period was due to the recession in agriculture in 1880s and early 1890s, increasing competitiveness from overseas agriculture, and very low prices for wheat. During the second period, the relatively more favourable agricultural situation was due to the great economic depression between 1929 and 1933, which brought low incomes in non-farm sectors of the economy and high protection for agriculture. The subsidisation of wheat producers begun in 1932, and the 1931 and 1933 legislation enabled farmers to form marketing boards.

In 1938, Bellerby reported his first international research using 28 countries. He grouped them into five sets on the basis of the probable real incentive income ratio. The first group composed of only four countries, Australia, New Zealand, France and China, had the highest ratio, over 75 per cent; the second group with a ratio of between 60 and 75 percent had six countries, among them Great Britain; the third group, with a 45 to 60 percent ratio, included Sweden and Canada; the fourth group composed of the USA and The Netherlands, with a ratio of 35 to 45 percent; and the last group with a ratio below 35 percent, included Egypt and Mexico. On the basis of his research, Bellerby claimed that there was no positive correlation between the level of economic development and relative incomes of farm households.

To verify Bellerby's claim, we have used FAO data and a formula, which is the relationship between the share of the agricultural GDP and the GDP of other economic sectors divided by the share of agricultural population to non-agricultural population.

FAO data in Appendix Table 1A shows that in 1980 only seven percent and in 1961 approximately two percent of the countries under examination recorded parity or incomes above parity in farm households. (Please see Appendix at the end of this chapter.) The unweighted average of the countries concerned was 41.2 percent of parity in 1980. In approximately 30 percent of cases the relation between the farmers' and non-farmers' income was not higher than 20 per cent, irrespective of the period analysed. The countries with the income parity for the two groups included the USA, Australia, New Zealand, Switzerland, the former German Democratic Republic, and, surprisingly, Ghana, Kampuchea and Cuba. Assuming that the statistical data of the latter three countries are reliable, we can conclude that the income parity is incidental and is the result of some specific social and economic or political conditions.

In the present analysis the most interesting relations are those between the national income and the relative incomes of farm households, as well as those between the economic growth and the increases in relative incomes. It should be pointed out that these relations are also affected by other factors. To measure the relationships the coefficients of simple correlation have been used. The correlation coefficient between the per capita GDP and the relative incomes has been calculated as follows:

· 1961 r= 0.663 R² = 0.440
· 1980 r= 0.464 R² = 0.215

They turned out to be statistically significant with a very high probability level: p = 0.999.

It should be noted that the correlation between the level of economic development and relative incomes was higher in 1961 than in 1980. However, even in 1961 the relative incomes were affected far more by factors other than economic growth. A study based on 1980 data showed very little relationship between the two. In 1980, only just over one-fifth of the relative income variation was associated with the level of economic development. These results demonstrate that the relative incomes and the economic growth are not highly correlated.

The next analysis examined the correlation between economic growth and the changes in the farmers' relative incomes. In other words, does economic growth produce income parity between the farm households and the non-farm households? Based on the same FAO statistical data source for 1961 and 1980, a correlation was calculated between two variables: a) the rate of economic growth, measured as increase in per capita GDP; and b) the increase in relative incomes, defined as the point difference between the periods analysed.

The coefficient of correlation between the two factors amounted to r = -0.103 and turned out to be not statistically significant. In other words, there is no correlation between the economic growth and the increase in the relative income of the farm households. Many scientists, among them E.O. Heady, claim that the economic growth even worsens the relative economic position of farm households.

This assertion may be correct, but it is the relative income that declines and not the absolute income level. Economic growth produces income increases for all social groups, but not at the same rate. Increases in farmers' incomes may be slower than some of the other social and occupational groups. Our analysis shows this as a general tendency all over the world. However, the opposite can be observed in some countries.

TABLE 1. 'Reward' of agricultural workers in selected countries - 1985 (standard: USA 1985 =100)

Country	Rate of reward
Belgium	85
Bulgaria	195
Canada	89
Czechoslovakia	136
Denmark	87
Finland	234
East Germany	160
West Germany	87
Great Britain	90
Holland	88
Hungary	153
Italy	185
Japan	331
Norway	258
Poland	182
Portugal	331
USSR	269

Source: L. Klank: Instruments and efficiency of income policy in USA agriculture, Warsaw, 1988 (in Polish)

Ways of improving incomes in agriculture

Economic development and income in agriculture

The relation between the level of economic development and the relative incomes between agriculture and other sectors of the economy is a complex phenomenon. It is affected, among other factors, by a country's economic policies toward particular population groups (social and occupational). The distribution of income among groups, and later within them, is influenced not only by economic, but also by ideological, political, psychological, and social factors. Hence, income parity can be achieved both by political decisions, as in most socialist countries, and by economic development.

Different approaches related to the agricultural incomes in particular countries can be demonstrated by the level of 'reward' of the labour efficiency, that is by the relation between the national income (GNP) per agricultural worker and the final agricultural output per agricultural worker. Research conducted by the Institute of Rural and Agricultural Development of the Polish Academy of Sciences shows that agricultural labour efficiency was rewarded relatively better in the communist countries than in other countries. However, the range of the "reward" within the industrial countries was rather broad, with the exception of the nations where the efficiency in agriculture was very high. Using the reward in the USA in 1985 as 100, the following figures are obtained.

A comparison of these figures leads to the conclusion that the agricultural policies of almost all communist countries were primarily socially oriented. In developed capitalist countries, where the agricultural productivity is high, the income policies correlated better with the economic performance in agriculture than in the communist countries. However, this does not mean that all capitalist countries follow the same agricultural income policies.

According to the Hungarian economist B. Csikos-Nagy, "The full success in the fight with price and income disparity is a historical process, which is closely connected with the integration of agriculture and industry, higher level of agricultural yields, and intensive development in agricultural production. Thus, the reason for the living conditions of the farm population approximating those of the non-farm population is not the development of industry, which improves the material condition of the city dwellers, but better conditions of work in agriculture. Incomes of farmers and peasants can reach parity only when the primitive conditions of their work undergo thorough transformations. Economic and price policies can accelerate this process. Those who think that the issue can be solved entirely by political decisions are mistaken."⁴

⁴Csikos-Nagy, B.: Socialist price theory and price policy. Akademiai Kiado. Budapest 1985.

Many economists agree with that the differences in incomes of the farmers and non-farmers can not be eliminated overnight and automatically. These differences should be abolished gradually by social and economic development of the country. M. Pohorille⁵ claims that the income disparity issue will not be resolved either by the introduction of a legislative act or by an economic manoeuvre.

⁵ Pohorille, M. Ceny i dochody w rolnictwie. PWRiL, Warszawa 1972.

This implies that economic growth is only one of the many factors required to overcome the income disparity between agriculture and other sectors of the economy. Economic growth alone is not sufficient to achieve this goal. Adjusting agriculture to the new economic conditions created by economic growth also may be insufficient to resolve the issue of income disparities.

It is desirable that the governments should not try to resolve the issue of the income disparity between farmers and non-farmers solely by political decisions, even though the latter may be successful. Many governments have tried this, but in most cases unsuccessfully. The failure was generally attributed to the budgetary problems, and to the unwillingness of the consumers, who are also taxpayers, to cover the additional costs of supporting the farm population.

Structural changes in agriculture and their impact on incomes

The problems of farm household incomes cannot be disassociated from the issue of agricultural structural changes. The latter are to a great extent determined by the incomes policy adopted by the authorities. Both land consolidation and capital investment increase farm mechanisation and bring an increase in productivity. Increased productivity should be the main source of income increases in agriculture.

In most countries the agricultural policies aim to encourage structural changes in this economic sector. The desired changes may be defined in a number of various ways. In Poland, for example, structural changes underwent several different phases: in the 1940s, it was land reform; in the 1950s, collectivisation of agriculture; in the 1960s, the changes called for the socialist remodelling of villages; and in the 1970s, technical reconstruction. In the 1980s, there was no precise and commonly denominated policy, which is nowadays described as the system of transformation.

Irrespective of its name, the policy of structural changes in agriculture of industrialised countries, including Poland, aim at:

· Reduction of agricultural employment.
· Farm consolidation and enlargement.

From the income policy standpoint, both aims should lead to an income increase for farm households. The reduction in agricultural employment implies higher productivity, even when the structure of farms remains unchanged. Consolidation and enlargement of land area and of other means of production should also result in a higher productivity. Communist theoreticians assumed that increase in the scale of production would bring higher profits, but they did not take into account that at a certain point the additional land and machinery may cause diseconomies of scale, and thus increase the costs of production. This factor was ignored when big farm enterprises were formed in the former communist countries. Both processes, the reduction of the farm employment and land consolidation should be implemented only when justified by the economic factors and not by ideological or political factors.

In Poland, as well as in other communist countries, structural changes were driven primarily by ideological and not by the economic forces. A simple positive correlation was assumed between productivity and land consolidation, irrespective of the ownership and management of the land in question. In other words, land consolidation in Council for Mutual Economic Aid countries (CMEA), could only take either the form of co-operative farms or state-owned enterprises. Since the latter were regarded as more suitable for accomplishing the process of collectivisation, the official ideology preferred the state farm ownership to co-operative ownership. Economic factors were of minor importance for collectivisation in agriculture. The priority of ideology over economics resulted in very high subsidies channelled to the state and the co-operative sectors, which, nevertheless, recorded constant losses.

In Poland the majority of the cultivated land remained privately owned. However, the government followed a policy of freezing the structure of private farms. Changes in the number of farms and increases in farm size were minimal and did not change the agricultural land structure. The average size of farm remained constant and in 1995 this was approximately eight hectares (ha). In developed countries the changes in structural policies have aimed at consolidation of land and capital. The restructuring, however, is supposed to strengthen, and not to weaken, the private sector in those countries. Land consolidation has become one of the major goals of the advanced industrial countries, especially in the European Union. This is exemplified by changes in average size of farms in EU between 1960 and 1985.

TABLE 2. Changes in average size of farms in EU countries - 1960-1985

Country	Average size of farm (ha)		Average change
	1960	1985	per year (%)
Belgium	8.2	14.1	2.2
Denmark	16.0	30.7	2.6
France	17.0	27.0	1.9
West Germany	9.3	16.0	2.2
Great Britain	37.0	65.1	2.9
Holland	9.9	14.9	1.6
Ireland	17.1	22.7	1.1
Italy	6.8	8.6	0.9
Luxembourg	13.4	28.6	3.1

Source: Agricultural Structure 1950-1976, Eurostat, Brussels, 1977 and Farm Structure Survey 1985, Eurostat, Brussels, 1986.

At present, in all EU countries, with the exception of Greece, the average size of farms is bigger than in Poland. The same applies to the rate of increase in the average size of farms. In Poland it does not exceed one percent. In Western Europe, only Italy and Ireland recorded similar low rates of increase. In Finland, a new UE member, in 1994 the average farm size was 13.2 ha (including forest).⁶ In the period between 1980-1994 the annual rate of average farm size growth did not exceed 1.5 percent. In Denmark the rate of growth was much higher than in Finland. In the period 1982-1990 it reached 2.8 percent annually.⁷ In 1990, the average Danish farm was about 35.9 ha. On the whole, however, changes of land structure in agriculture are very slow, much slower than in other sectors of the economy.

⁶Kettunen, L.: Finish Agriculture in 1995. Helsinki 1995.

⁷Agriculture in Denmark in 1991. De Danske Landboforeninger, Copenhagen, 1991.

Concentration of land and capital in advanced industrial countries would not be possible without reductions in employment in agriculture. And the latter are determined first of all by the growth of the whole economy. Economists usually agree that reduction of employment in agriculture has a positive impact both on agriculture and on the whole economy since the productivity level is usually lower for agriculture than for other sectors of the economy. Therefore, the transfer of the workforce into other sectors stimulates overall growth in national income. Furthermore, smaller employment in agriculture enables a more flexible price policy.

Agricultural employment and incomes

The following conclusions emerge from the analysis of the data on changes in agricultural employment in developed countries shown in Table 2A in the Appendix at the end of this chapter.

Over a long period of time very rapid decreases in agricultural employment (over four percent per year) was achieved in countries where the level of economic development is higher than in Poland. This confirms the claim that structural changes are affected by the development of the whole economy.

Poland recorded the slowest reduction in agricultural employment of all European countries. Of all 28 countries, only China recorded employment increase in agriculture, and in comparison to Poland, the pace of employment decrease was slower only in South Korea, New Zealand and Argentina. However, in New Zealand and Argentina the productivity is much higher then in Poland. The fastest decline in agricultural employment was recorded in the six countries which formed EEC in 1957, (except The Netherlands), countries in which the governments took very strong interest in agriculture.

Data on agricultural employment changes in Hungary, GDR, and Czechoslovakia show the role of the state in restructuring agriculture, in terms of changes in employment. (The non-economic effects of the agricultural employment reduction in the countries where agriculture was collectivised are not taken into account here. These were namely the destruction of the whole social class of peasants and, consequently, the creation of land ownership problems.)

As stated previously, the reduction of employment in agriculture usually brings about an increase in the farmers' per capita incomes. The rate of increase of per capita incomes in agriculture depends on the pace of increase in total incomes and on the pace of the employment changes.

Why are those relations so important in agriculture?

The rate of income increase in agriculture, that is the rate of increases in national income generated by agriculture, is usually much slower than in other sectors of the economy. For example, over a long period of time national income generated in Polish agriculture increased a maximum of one percent per year, whereas net national product increased by 1.3 percent. The advanced industrial countries do not show rapid increases in agricultural income either. For example, in the USA, between 1940 and 1980 the national income generated in agriculture increased by only 1.1 percent per year, whereas the whole economy increased by 3.6 percent However, at the same time the USA recorded a decrease in agricultural employment and an increased employment in other sectors of the economy. The average decrease in agricultural employment was 2.6 percent per year, whereas employment in other economic sectors increased by about 1.8 percent. As a consequence, national per capita agricultural income increased by 3.7 percent per year and in other sectors of the economy by 1.8 percent.

Even though in the USA the increase in productivity was higher in agriculture than in other sectors, it did not solve problems related to the living conditions and consumption of the farm population. This is due to the fact that a part of the productivity gains in agriculture are transferred to other economic sectors by the market. Moreover, a part of the productivity gain is needed for farm development. And the less productive a farm is, the more funds are needed for farm development. Unfortunately, the Polish agricultural sector is characterised by slow increases in productivity. The average total productivity factor for Polish agriculture is estimated at 0.2-0.9 percent per year; whereas in advanced industrial countries, it reaches over 1.5 percent (in The Netherlands, for example, the productivity factor amounts to 3.5 percent over a long period of time). Therefore, it is not surprising that the investment rate for Polish agriculture, both in the private and in the state sectors, increased from approximately four to five percent in the late 1950s to 15 percent in the 1980s. In advanced industrial countries the period of very rapid investment increases in agriculture seems to be over. This is shown by figures in Table 3A in the Appendix at the end of this chapter.

In Poland the modernising of agriculture is in its initial stage. Thus, supposing Poland follows a similar model of development, the investment rate should increase further as it did in advanced industrial countries. This will be an additional factor requiring farm income increases, especially since it cannot be expected that the incomes will increase solely as a result of a higher productivity in agriculture.

Achieving income goals in agriculture

There are two ways to attempt to equal incomes in farm households to those in non-farm households:

· political decisions;
· economic growth.

Communist politicians believed that income parity could be rather easily achieved by political decisions. However, many economists believed that the only way to achieve this goal is economic growth. There is still no clear solution this difference of opinion on this issue. As Bellerby's research and our analysis have shown, increase in incomes due to economic growth is a long-term and complex process. Income derived from agricultural production is influenced both directly by bringing down the costs of production, and indirectly by creating new sources of income in other sectors of the economy. This method is much more difficult than simply making political decisions. Moreover, it is less conspicuous. The act of making certain political decisions intended to help farmers usually has special appeal for the party in power.

The use of politics in influencing farmers' incomes was wide-spread in communist countries. The level of economic development in those countries, measured, e.g., by national income per head of population, was much lower than in advanced industrial countries. For example in the early 1980s, the level of national income in European communist countries was about 45 percent of that in industrial countries. Nevertheless, incomes of farmers were nearer parity in communist countries, which is shown by figures in Table 4A in the Appendix at the end of this chapter.

At the same time in USA and West Germany the relation between incomes per head of population in farm households and non-farm households was 78 and 68 percent, respectively.

Prices as an instrument of income policy

As mentioned, in advanced industrial countries the faster productivity increases in agriculture than in other sectors of the economy did not solve the issue of incomes of farm households. The reason for that, among other things, was the continuing decline in the real prices of farm products in most countries, which put the farmers at a disadvantage.

Free markets, if applied to agriculture in developed countries are believed to have a negative impact on farmers' incomes. The reason is very low (even zero) price and income elasticity of demand for food products. As output increases free markets can produce a continuing decline in relative prices. Therefore, it is argued that it is necessary for the state to intervene and take measures such as:

· Protecting domestic markets from low priced imports (import restrictions, customs duties, tariffs, quality norms, etc.).

· Increasing domestic demand (food coupons, special food programmes for children and the elderly, purchase of surpluses of agricultural products, etc.).

· Subsidising exports.

· Government intervention to maintain the level of internal prices and incomes.

· Creating new jobs for farm population.

Research in most developed countries shows that in the long run the economic conditions, in terms of relative prices, are disadvantageous for agriculture. In only a few countries (Ireland, Finland, Italy, Japan, Hungary) have the relationship between prices of goods purchased and of goods sold by farmers been favourable to farmers. Most countries recorded declining terms of trade for farmers, sometimes very large declines.

In Poland the situation was completely different from that in the developed market economies. In spite of unfavourable changes between 1982 and 1989, prices of agricultural products increased rapidly over a long period. In the 1960s prices of products sold by Polish farmers increased by 15.8 percent while the prices of products and services purchased by farmers increased by about 12 percent. Even though the increase of prices was not very large, nevertheless, relative price changes were favourable for agriculture. Between 1970 and 1980, the prices of products sold by farmers increased by 120 percent while the prices of products and services purchased by farmers increased less than 82 percent. However, by the end of the period, namely in 1978 and 1979, the ratio of the index of prices of purchased products compared to the index of products sold was slightly unfavourable for farmers, 0.98 and 0.99 respectively.

Until 1990, increasing prices were the basic source of increased farm incomes in Poland. There is a very simple explanation for this phenomenon. In advanced industrial countries the basic aim of agricultural policy was to increase the efficiency of agriculture, not to increase output, or more precisely, to increase the efficiency of productive factors in agriculture (total factor productivity). In Poland, however, until 1990, the issue of increasing agricultural output took priority over the question of efficiency. Because structural transformations of private farms were blocked and priority was given to developing a capital-consuming nationalised sector, it was necessary to implement special price policies. Price policies, however, were not developed according to scientists' suggestions. Decisions concerning prices often had very little effect because they were taken ex ante, which means in response to some phenomenon that had already occurred (usually after significant agricultural output decrease). Because of the slow decline in the farm work force, it was necessary to raise prices of agricultural products in order to maintain the rate of income increases for farm households equal to that of non-farm households.

In developed countries, fast decline in the farm workforce brought about increases in incomes per head of population even though the level of agricultural output was more or less the same, and real prices of agricultural products fell. In OECD countries between 1960 and 1985 average employment in agriculture decreased by 3.2 percent, whereas average prices of agricultural products fell by 1.1 percent in a year. It meant increase in farmers' incomes by 2.2 percent in a year. In Poland, however, assuming a decrease in agricultural employment of 0.7 percent and an increase in prices of agricultural products of 1.8 percent (between 1970/72 and 1984/86), we arrive at the increase in farmers' incomes of 2.5 percent. It is thus only slightly higher than in OECD countries. The significant difference, however, lies in the way the increase was brought about. In OECD countries the whole rise was accounted for by decrease in agricultural employment; in Poland, only 28 percent was. The increases of incomes of farm households in OECD countries was achieved by improving productivity, whereas in Poland the same goal was achieved by increasing prices. Other communist countries followed the pattern of Poland.

Between 1981 and 1984, relative incomes of the farm population in Poland were near parity, that is, the incomes of farmers and non-farmers were almost equal. However, over the period 1982-1989, the influence of price rises on increases in incomes was reduced, both in Poland and other communist countries. The relation between prices received and those paid by farmers worsened in Poland between 1982 and 1989 (with the exception of 1987).

The situation became very serious in 1990, resulting in social tensions within the population of private farmers. In the period of 1989-1994, agricultural prices were as shown in Table 3.

TABLE 3. Prices received/paid by Polish farmers - 1989-1994

	1989	1990	1991	1992	1993	1994
Prices Received (Prior year = 100)	354.9	378.7	128.4	159.8	132.6	137.1
Prices Paid (Prior year = 100)	330.7	764.3	173.0	138.9	136.1	126.2
Prices Received/Paid	107.3	49.9	74.8	115.0	97.4	108.6

Source: Rocznik statystyczny (Statistical Yearbook) 1995.
GUS, Warszawa 1996 s.308.

The price ratios worsened at the time when farmers who also were employed in other sectors of the economy were laid off from work. At that time approximately one-third of all farmers in Poland were part-time farmers and part-time workers. Until now, incomes derived from work other than agricultural production have represented a substantial proportion (about 40 percent) of total incomes in farm households.

Growth in agricultural production in Poland was capital consuming; it was connected with increased demand for means of production and hence for incomes. It is therefore not surprising that an economic crisis in the beginning of the 1990s had a greater negative influence on farm households, and especially on part-time farmers, than on non-farm households.

From the above analysis we could draw the conclusion that in countries characterised by high agricultural productivity income problems of farm households have been solved. That is, however, not the case. As we have demonstrated already, over a long period of time the level of incomes in farm households in those countries approximates the level of incomes in other sectors of the economy. The living standards of the two groups are becoming equal. One of the factors that contributes to this phenomenon is the still increasing proportion of income derived from work other than agricultural production. In many farm households this proportion is quite substantial, and amounts to 40 percent in Great Britain (1989), 42 percent in France (1981), 68 percent in Sweden (1980), 75 percent in Japan (1979).

Beliefs and values surrounding income protection for farmers in Poland during period of transition

In Poland, as in every country, agricultural policy has its advocates and opponents. These groups represent a different approach to solving major agricultural problems. The first group strongly advocates state intervention on behalf of agriculture. The other group, called liberals, is not only against state intervention in agriculture, but against any intervention of the state in the national economy.

The first group is represented mostly by people working very closely with agribusiness; e.g., farmers, peasant parties members, and many agribusiness professionals. They usually represent a so-called microeconomic approach, with agriculture as corn. As ideology, they use the eighteenth century slogan "They feed and defend." This means that farmers have special rights and should be given special attention. The second group, called liberals, macroeconomists, are advocates of free market and many of them claim that the laissez faire rules should be applied to the national economy without any sectoral exemptions. The discussion on the development of Polish agriculture, its restructuring and the role of the state became very intensive during the period of the transition of the national economy from centrally planned to the market-oriented economy.

In Poland, agriculture can not be ignored by any political party. Its position is still very strong, especially in terms of population and political power. Poland has a population of over 38 million, of whom 38.1 percent (14.7 million of which 1.07 million registered unemployed) live in rural areas. In 1994, only 1.8 percent of the rural population had a university education, 44.5 percent, an elementary education and 28 percent, a vocational education. In 1995, agriculture's contribution to the GDP was under seven percent. When Poland started its economic reform in 1990, agriculture seemed to be the only sector which would not require too many adjustments. At that time, more then two-thirds of arable land was owned and cultivated by private farmers. Thus only 25 percent of agricultural land required privatisation and restructuring. The main weaknesses of the private agricultural sector were too many small holdings (more than 2 million), a very high share of agricultural employment to total employment (exceeding 26 percent), and very low efficiency, especially productivity of labour.

However, the major problem was the level of subsidy, both to agricultural production and to food purchases. The subsidy had almost become an economic monster in the food economy in Poland. Under communism Polish agriculture was a fully protected and regulated sector with guaranteed prices for producers, suppliers, consumers, low interest on credit, etc. Poland, like other communist countries, was a country of shortages, including food shortages. In 1989, the state subsidies to the food sector consisted of 10.8 percent of GDP and 28.3 percent of the total state expenditures. The result of such state policy towards the agricultural sector and consumers was a relatively high level of food consumption and farmers' incomes. The latter almost reached a parity level.

These state agricultural policies were appreciated very much by farmers. At present, the farmers claim that the period of the 1970s was the most favourable for them, in contrast to the current period of transition.

However, this form of agricultural policy had a very negative impact on the structural changes of Polish agriculture; the average farm size, about eight hectares, stayed almost unchanged for more than 40 years. As mentioned earlier, in August 1989, price controls on food were lifted. Once price controls were lifted, the agricultural sector received little attention, and there was no clear agricultural policy. It was generally felt that agriculture would act as a stimulus to Other sectors of the national economy. In October 1989 and January 1990, government subsidies granted to the food sector and primary agriculture were withdrawn. In 1992, the state expenditure on the rural sector was about nine percent of the total state expenditures, however, only 2.5 percent for agriculture itself (ca $200 million).

All of the measures taken forced the agricultural sector to be market-oriented. However, the transition towards a market economy created a number of problems in the agricultural sector:

· Agricultural production fell as a result of problems such as high interest rates on credit, expensive investments, falling sales opportunities and privatised businesses going bankrupt.

· Terms of trade worsened for agricultural producers. Inputs such as pesticides and fertilisers became more expensive while revenues fell as a result of a reduction in subsidies. Hence, the actual income of the primary sector decreased more sharply than other sectors (40 and 20 percent, respectively).

· Marketing channels were, and still are, not well developed.

· The restructuring process and privatisation of state agricultural enterprises has led to uncertainties regarding ownership and a place to work.

· Domestic food consumption fell as subsidies were withdrawn and incomes fell.

All of these pressures resulted in a change of the government from the solidarity party to social-democrats in 1993. A majority of farmers voted against the solidarity government, against the market-oriented economy. A new coalition, consisting of social-democrat and peasant parties has introduced a new agricultural policy, more oriented toward state intervention. This can be confirmed by the data on the state expenditure on the rural sector (PLN million).

All these measures taken by government aim to reduce the cost of agricultural production and raise farmers' incomes. One should note that agricultural pensioners contribute less than 10 percent to the social fund, which provides pensions to them. More than 90 percent of the pensions for farmers are financed by the state. Since the transition, farmers have been aided through the development of various compensation schemes, starting at a very low level but in most cases still providing a positive direction for farmers.

In order to bring about a change in the difficult situation in agriculture, an agency, Agencja Rynku Rolnego (AMA), was set up to stabilise agricultural markets, as a method of supporting farmers' incomes. Minimum Guaranteed Prices legislation was introduced for wheat, rye, sugar, meat and milk. The new agency is responsible for implementing this act. An additional argument used by state intervention advocates are subsidies provided to the agricultural sector in the developed countries, especially the European Union. In fact, agricultural subsidy levels in Poland, expressed as producer subsidy equivalent (PSE) is about one-third of those in the EU (in 1993,16 and 48 percent, respectively).

TABLE 4. State expenditure on rural sector - Poland 1992-1996

		1992	1993	1994	1996
Rural Sector Total (PLN million)		3,490	4,572	6,400	11,486
Rural Sector Total ($ million)		2,146	2,146	2,623	4,254
Divided as follows:
	Agriculture (PLN million)	1,045	1,405	1,800	2,859
	Pensions (PLN million)	2,445	3,167	4,600	7,817
Share of Rural to Total State
	Expenditure (%)	8.7	9.1	9.2	9.7

Source: Ministry of Finance and own calculations.

According to OECD statistics, in 1995, the level of subsidies in agriculture was as shown in Table 5.

In 1996, the level of all subsidies to Polish agriculture per farmer, including social payments, will not exceed $1,100, and excluding social payments, is $260.

TABLE 5. Agricultural subsidies for selected countries -1995 (In 000 $ per farmer)

Switzerland	51
Japan	28
UE-12	20
OECD	15
USA	13
Canada	13
New Zealand	2

Source: OECD.

During the transition period, the relative incomes of Polish farmers were not so low as their labour productivity. In the transition period, the per capita incomes of the farmers, were as follows (Table 6).

TABLE 6. Incomes of Polish farmers - 1990-1995 (nominal incomes of workers = 100)

	1990	1991	1992	1993	1994	1995
Relative incomes of farmers	102.5	84.2	82.1	89.3	87.4	93.7

Source: Central Office of Planning, CUP, Warsaw 1996.

The above data do not confirm farmers' dramatic complaints about their relative economic situation. Despite a significant growth of state expenditures on the rural and agricultural sectors, Polish farmers are still not satisfied with agricultural policy. One has to remember that farmers in Poland and elsewhere are usually unhappy with agricultural policy. However, the so-called liberal economists are not in favour of current policy either, as these policies stand in the way of a free market. For them, a structural policy to improve the agrarian structure will provide a solution for the problems in agriculture. Their arguments also refer to the recent achievements of the national economy. In this respect they are right. Compared to other Central and East European countries, Poland has made significant progress in the last six years towards the establishment of an open dynamic market economy. Only in the years 1990-1991, was there a decrease in the GDP growth, by 7.5 and 7.0 percent, respectively. In the period of transition, 1990-1996, the growth of GDP was as follows:

1990	-7.5
1991	-7.0
1992	2.6
1993	3.8
1994	5.2
1995	7.0
1996 (predicted)	6.5

Since the start of the transition, high inflation rates and unemployment have been the primary sources of problems. In the years 1990-1996 the inflation and unemployment rates were as follows (Table 7).

TABLE 7. Polish inflation and unemployment rates - 1990-1996

Year	Inflation rate (%)	Unemployment rate (%)
1990	553.6	6.3
1991	76.7	11.8
1992	45.3	13.6
1993	36.9	16.4
1994	33.3	16.0
1995	24.8	14.9
1996 (predicted)	17.0	13.9

Source: Central Office of Planning, CUP, Warszawa and Statistical Yearbooks (selected years), Central Statistical Office, GUS, Warszawa.

For the macroeconomists the main factors of the growth of the national economy are:

· Human capital.
· Export.
· Investment.
· Domestic consumption.

As already pointed out, the human capital in agriculture in Poland is not well developed. Investment ability of farms is also limited. According to recent statistical data, less than 10 percent of the individual farms are able to accumulate their own funds for investment. Foreign investors are not very interested in investing in agriculture. They invest, first of all, in the food processing industry, which is much more stabile and predictable than the agricultural sector. Internal consumption of food will depend on the growth of incomes of the population.

Since the income elasticity for food is still rather low the only possibility for the development of Polish agriculture is the development of the food processing industry and the expansion of agricultural exports.

Conclusions

Problems connected with the level of incomes derived from agricultural production are very complex. They are intensified by the fact that it is extremely difficult to predict the situation on agricultural markets. However, governments can influence incomes in farm households by:

· Facilitating increase in productivity of the agricultural sector.

· Supporting schemes designed to create sources of incomes for farmers in other sectors of the economy.

There are no other ways. It is not possible to influence incomes over a long period of time by administrative decisions, such as subsidies, guarantees, etc., because of the objections raised by consumers-taxpayers. Despite many administrative programmes designed to control the income situation in agriculture, the proportion of farmers' incomes derived from work in other sectors of the economy is still increasing. This phenomenon can be observed in the whole world. We may even say that agricultural production is becoming marginal for farmers' incomes. It seems to me that this tendency is the one that will prevail for the coming years for Polish farmers.

Improving the income of farmers and rural people: A commentary

by Michel Petit

In France, as in Poland and many other countries, many government interventions have been undertaken to improve the income of farmers and rural people. These interventions reveal beliefs and values, which in fact have been widely shared across countries over the last century. But, they have changed through time and, of course, the pattern of their evolution has varied from place to place depending on specific geographical and historical circumstances.

A key belief in France, and perhaps also in other continental Western European countries, has been that we have an income problem in agriculture because farmers are inherently disadvantaged by market mechanisms. That belief goes back to the nineteenth century. The feeling was then that the competition from the new lands in America and in Oceania was unfair: why should we accept the destruction of our agriculture from this? Whether or not that proposition was an excuse or a real belief can be debated. Indeed, the industrialists at one point wanted protectionism and required the alliance of the farmers. Still, the belief has a lingering impact today.

That belief was strengthened by market instability in the 1930s. This led to the creation of the wheat board - Office National Inter-professional du Blé (ONIB) in 1936. After the Second World War, surpluses began accumulating in the 1950s, stressing the national budget, and again prices were depressed. The income problem was then attributed to malfunctioning markets or unfair markets, whatever that may mean.

In this context, where concerns of fairness and equity play such a critical role, it may be somewhat paradoxical that although the income disparities within agriculture were obvious, no real attempts were made to correct those inequalities within the agriculture sector. It would indeed be paradoxical if one assumed that beliefs and values directly determine policies in a simple, rational fashion. A political economy approach provides a better explanation. First, small, poor farmers had little voice, anyway. But farmers formed an alliance among themselves. If all these desperate farmers had brought the internal disparities to attention, they would have created great internal problems and weakened the ability of the farmers' alliance to lobby. So even if these small farmers recognised that, in a sense, they were providing an army to the rich farmers to fight the common battle, in which the bigger ones benefited more, the small farmers felt very clearly that by fighting for higher prices they were also fighting for their own benefit. In addition, since they directly provided many of the factors of production, particularly labour, purchased inputs were a small fraction of their total cost. An increase in product prices would lead to a higher proportionate increase in their income than if they purchased most of their inputs.

In any case, the battle for prices and price intervention was clearly carried into the creation of the Common Market, which was welcomed by the French farmers. The budget constraint in the 1950s in France was such that there was a limit on how far farm prices could be increased. The big attraction of the creation of the Common Market and the Common Agricultural Policy was that the budget constraint would be relieved. Since then, great attention has continued to be paid farm incomes, as revealed by the debates around the poor quality of farm income indicators.

In the 1950s and 1960s, the farm accountancy data were very poor and available only for a very biased sample of farms. The result is that the main indicators of farm income have come from national accounts. The main indicator used in the policy debate has been average value added per worker, which in fact is not a measure of income but of productivity. Sometimes average gross income per farmer is used. The problem with it is that all costs are not deducted from gross receipts. I do not need to go further into technicalities. Many countries have faced the same limitations. First of all, the indicator is an average, and this immediately raised the question of what constitutes a farm. With more and more part-time farmers, that issue becomes even more critical. Such indicators are sectoral, they relate to farm activities but do not include the family income from non-farm sources. In spite of these limitations, many policy debates were conducted in terms of parity indices which we, like the Poles, tried to import from the USA where there is a very rich literature on the topic. I am not sure how enlightening these debates were. Nevertheless, they addressed problems which were and continue to be serious in France. But parity indices never really 'caught on.' The debates they generated were probably seen as too technocratic and as not really getting to the core of the issue. As a result, the main debate on average farm income issues has been around year-to-year variations in farm incomes, a close parallel to a point made by Leszek Klank in his paper.

The concerns for disparities within the agricultural sector, although secondary as discussed above, have not been totally eliminated. They have led large farmers and their organizations to demonstrate their solidarity with their less fortunate colleagues in concrete ways. Thus, for instance, cereal growers have funded UNIGRAIN, a fund investing in livestock production and, thus, an instrument to show support to and solidarity with livestock farmers. Recently, because of the budget costs of compensating beef farmers affected by the 'mad cow' affair, grain farmers contributed financially to a fund to help beef farmers. In addition, issues described as income disparities across regions, are also very prominent in the EU policy debate. They directly impinge on the attitudes vis-a-vis the environment and regional development measures, issues which have become critical in the emergence of a new social contract between farmers and society at large.

Group discussion on "improving the income of farmers and rural people"

Some of the discussion centred on the expectations held by persons in Central Europe regarding whether joining the EU and adopting the CAP would solve the income problem for farmers in Central Europe. There was widespread agreement among participants from Western Europe that the Central European countries would make a huge mistake if they tried to adopt the CAP. They pointed out that the policy has created all sorts of problems in Western Europe and that it is not sustainable. Farm organization leaders know this, but they are fighting to keep as much of the income transfers as possible.

There was a general agreement that the problem of the lack of a safety net for the elderly, poor, and others at the low end of the income scale in Central Europe was creating significant political problems. Moreover, it was argued that the heritage of the past leads people to save little and invest little because they are doubtful about the certainty of future events. There is no tradition of passing property to children so there is little incentive to save. However, this lack of saving means that older people depend on the government to provide a safety net in their retirement years.

Persons from the Central European countries agreed that the major push for joining the EU was not the expectation of higher incomes. The push comes from political desires to have the safety of belonging to Western Europe in a political sense, although most projections show that income growth will be faster if Central European countries join the EU.

Appendix to chapter 5

TABLE 1A. GDP per capita, share of agriculture to GDP and total employment and relative incomes - 1961 and 1980

Country	GDP per capita ($)		AGDP/GDP (%)		Employment agr./total (%)
	1961	1980	1961	1980	1961	1980
Afghanistan	121	230	70	47	85	78
Albania	146	744	44	26	71	60
Algeria	240	2343	17	7	66	50
Angola	156	494	49	35	69	58
Argentina	700	5430	11	9	20	13
Australia	1580	10148	12	8	11	6
Austria	978	10245	11	4	23	9
Bangladesh	73	143	59	49	87	84
Belgium	1296	11892	7	2	8	3
Bolivia	121	989	33	17	60	50
Brazil	227	2050	15	13	51	38
Bulgaria	508	2694	32	17	55	33
Burma	71	170	37	7	67	52
Cameroon	101	778	42	30	87	81
Canada	2167	10597	5	4	13	15
Chad	75	206	51	38	94	84
Chile	618	2508	10	7	30	19
Poland	343	1826	29	16	47	30
Portugal	301	2474	23	10	43	26
Greece	471	4174	23	15	55	37
Spain	439	5640	20	7	40	17
Italy	833	6997	13	7	30	11
China P.R.	68	829	42	30	74	60
Colombia	283	1301	32	25	50	27
Congo	136	874	13	13	51	34
Costa Rica	383	2120	26	18	50	35
Cuba	397	1401	33	20	38	23
Czechoslovakia	1724	5848	15	9	25	10
Denmark	1426	12948	11	4	27	7
Ecuador	207	1417	30	13	57	44
Egypt	163	576	32	16	58	50
El Salvador	218	746	32	28	62	54
Ethiopia	55	137	64	45	88	82
Finland	1271	10450	17	8	36	14
France	1385	12134	10	5	21	9
Gabon	174	328	32	6	84	76
Germany, East	988	5731	15	10	17	10
FRG	1458	13258	5	2	14	4
Ghana	166	1175	37	62	64	31
Guatemala	263	1085	26	23	66	55
Guinea	141	368	62	40	99	80
Haiti	57	250	46	34	79	67
Honduras	179	674	33	25	70	63
Hungary	495	2346	22	14	40	17
India	76	237	45	33	74	63
Indonesia	55	482	47	25	74	59
Iran	204	2300	27	18	52	38
Iraq	260	2834	19	7	52	40
Ireland	675	5276	21	12	36	21
Israel	1378	5430	10	5	14	7
Ivory Coast	166	1248	37	30	88	79
Jamaica	433	1224	10	8	38	21
Japan	572	8913	12	4	31	11
Jordan	127	1143	19	7	43	26
Kampuchea	115	143	42	80	81	74
Kenya	102	421	33	23	85	78
Korea P.R.	203	1062	22	13	61	46
Korea	89	1531	40	16	65	39
Laos	43	115	50	50	83	74
Lebanon	476	1569	11	9	37	10
Libya	222	11845	12	2	51	16
Madagascar	103	367	37	40	92	83
Malawi	53	256	56	35	92	94
Malaysia	228	1718	39	24	61	47
Mali	30	204	42	27	94	87
Mexico	341	3137	17	8	54	36
Mongolia	440	1144	42	20	69	49
Morocco	170	889	19	18	62	51
Mozambique	136	235	52	41	80	64
Nepal	59	133	79	62	94	93
Netherlands	1091	11866	8	3	10	5
New Zealand	1709	7469	17	11	14	9
Nicaragua	234	786	24	23	60	42
Nigeria	115	1057	46	22	70	53
Norway	1358	14050	10	5	19	8
Pakistan	83	324	40	27	61	54
Paraguay	177	1404	36	29	56	49
Peru	261	1131	21	8	54	40
Philippines	263	732	26	24	60	46
Romania	402	1911	33	14	64	47
Rwanda	45	226	80	47	95	90
Senegal	221	505	24	20	83	74
Somalia	65	298	43	31	87	80
RSA	419	2795	12	6	32	28
Sri Lanka	152	280	31	25	56	53
Sudan	123	434	58	29	85	77
Sweden	2016	14889	8	3	15	6
Switzerland	1744	15948	9	7	11	5
Syria	197	1548	24	20	54	48
Tanzania	56	257	55	44	89	81
Thailand	101	720	39	25	83	75
Tunisia	204	1356	21	14	56	41
Turkey	196	1271	37	22	77	54
Uganda	186	1144	50	70	89	81
Great Britain	1436	9308	3	2	4	2
USA	2872	11412	4	3	6	2
Uruguay	612	3543	14	8	20	12
USSR	779	2693	21	15	40	16
Venezuela	1014	3821	6	6	34	18
Viet Nam	78	173	30	32	61	71
Yugoslavia	253	2550	24	13	62	37
Zaire	66	212	30	37	83	74
Zambia	187	672	20	13	70	67
Zimbabwe	233	747	21	14	69	59

TABLE 1A. (cont.) GDP per capita, share of agriculture to GDP and total employment and relative incomes - 1961 and 1980

Country	Exports: agr./total (%)	Relative income (%)
	1980	1961	1980
Afghanistan	58	0.08	0.25
Albania		0.32	0.23
Algeria	1	0.10	0.08
Angola	10	0.43	0.39
Argentina	69	0.50	0.66
Australia	44	1.10	1.36
Austria	4	0.40	0.42
Bangladesh	25	0.24	0.18
Belgium	10	0.86	0.65
Bolivia	10	0.33	0.21
Brazil	47	0.17	0.24
Bulgaria	15	0.39	0.42
Burma	52	0.29	0.82
Cameroon	51	0.11	0.10
Canada	11	0.35	0.79
Chad	71	0.07	0.12
Chile	9	0.26	0.32
Poland	7	0.46	0.44
Portugal	10	0.40	0.32
Greece	27	0.24	0.21
Spain	17	0.38	0.37
Italy	7	0.35	0.61
China P.R.	16	0.35	0.29
Colombia	78	0.47	0.90
Congo	1	0.14	0.29
Costa Rica	66	0.35	0.41
Cuba	87	0.80	1.34
Czechoslovakia	5	0.53	0.89
Denmark	30	0.61	0.55
Ecuador	25	0.32	0.19
Egypt	22	0.25	0.19
El Salvador	77	0.29	0.33
Ethiopia	92	0.24	0.18
Finland	5	0.36	0.53
France	17	0.42	0.54
Gabon	1	0.26	0.02
Germany, East	3	0.86	1.00
FRG	5	0.33	0.48
Ghana	65	0.33	1.56
Guatemala	68	0.18	0.24
Guinea	8	0.22	0.17
Haiti	50	0.23	0.25
Honduras	75	0.21	0.20
Hungary	23	0.42	0.80
India	32	0.29	0.29
Indonesia	12	0.31	0.23
Iran	1	0.34	0.36
Iraq	0	0.22	0.11
Ireland	37	0.47	0.51
Israel	16	0.68	0.70
Ivory Coast	64	0.08	0.11
Jamaica	14	0.18	0.33
Japan	1	0.30	0.34
Jordan	34	0.31	0.21
Kampuchea	44	0.17	1.40
Kenya	50	0.09	0.08
Korea P.R.	14	0.18	0.17
Korea	4	0.36	0.30
Laos	8	0.21	0.35
Lebanon	21	0.21	0.89
Libya	0	0.13	0.11
Madagascar	86	0.05	0.14
Malawi	88	0.11	0.10
Malaysia	31	0.41	0.36
Mali	94	0.05	0.06
Mexico	11	0.17	0.15
Mongolia	43	0.33	0.26
Morocco	25	0.14	0.21
Mozambique	57	0.26	0.39
Nepal	29	0.24	0.12
Netherlands	22	0.78	0.59
New Zealand	66	1.26	1.25
Nicaragua	76	0.21	0.41
Nigeria	2	0.37	0.25
Norway	2	0.47	0.61
Pakistan	40	0.43	0.32
Paraguay	74	0.44	0.42
Peru	10	0.23	0.13
Philippines	34	0.23	0.37
Romania	12	0.42	0.18
Rwanda	90	0.21	0.10
Senegal	24	0.06	0.09
Somalia	94	0.15	0.11
RSA	10	0.29	0.16
Sri Lanka	62	0.35	0.30
Sudan	93	0.13	0.12
Sweden	3	0.49	0.48
Switzerland	4	0.80	1.43
Syria	13	0.27	0.27
Tanzania	71	0.15	0.18
Thailand	51	0.13	0.11
Tunisia	6	0.21	0.23
Turkey	63	0.17	0.24
Uganda	100	0.12	0.55
Great Britain	7	0.74	0.98
USA	20	0.65	1.51
Uruguay	56	0.65	0.64
USSR	4	0.40	0.92
Venezuela	1	0.12	0.29
Viet Nam	29	0.10	0.19
Yugoslavia	12	0.19	0.25
Zaire	14	0.09	0.21
Zambia	1	0.11	0.07
Zimbabwe	31	0.12	0.11

Source: FAO.

TABLE 2A. Changes in farm population and employment in agriculture 1961 and 1985

Country	Total population (000)		Farm population (000)		Employed in n agriculture (000)
	1961	1985	1961	1985	1961	1985
Argentina	20939	30564	4106	3518	1616	1340
Australia	10584	15710	1162	765	466	325
Belgium & Luxembourg	9501	10225	754	249	291	98
Canada	18269	25390	2327	997	861	428
China P.R.	668173	1044025	405068	579851	238322	269399
Denmark	4610	5109	798	283	365	138
Finland	4461	4910	1621	520	712	246
France	46163	55160	9847	3751	4219	1645
West Germany	56175	60930	7604	1785	3583	871
Israel	2190	4270	305	246	109	88
Italy	50523	57110	14984	4837	6016	1836
Japan	94944	120800	29753	9594	14405	5064
South Korea	25672	40872	16641	13403	5578	5274
Holland	11637	14480	1220	629	443	247
New Zealand	2427	3260	349	267	131	108
Spain	30618	38833	12132	5164	4721	1884
Sweden	7520	8350	1126	367	444	144
Switzerland	5512	6520	603	274	277	139
Great Britain	53144	56510	2078	963	967	450
USA	183691	238840	11576	4108	4680	1886
East Germany	17134	16640	2934	1360	1462	737
Czechoslovakia	13780	15500	3427	1227	1624	615
Hungary	10030	10640	4016	1425	1779	631
Romania	18567	22710	11807	9734	6770	5337
Yugoslavia	18612	23120	11612	7314	5253	3364
USSR	218145	277600	88166	37198	44978	18484
Poland	29965	37260	14168	9860	6784	5522

TABLE 2A. (cont.) Changes in farm population and employment in agriculture 1961 and 1985

Country	Average change in one year
	Farm population (%)	Employed in agriculture (%)
Argentina	-0.6	-0.8
Australia	-1.8	-1.5
Belgium & Luxembourg	-4.7	-4.6
Canada	-3.6	-3.0
China P.R.	0.7	0.5
Denmark	-4.4	-4.4
Finland	-4.9	-4.5
France	-4.1	-4.0
West Germany	-5.9	-5.7
Israel	-0.9	-0.9
Italy	-4.6	-4.8
Japan	-4.6	-4.3
South Korea	-0.9	-0.2
Holland	-2.7	-2.4
New Zealand	-1.1	-0.8
Spain	-3.5	-3.8
Sweden	-4.6	-4.6
Switzerland	-3.2	-2.8
Great Britain	-3.2	-3.1
USA	-4.2	-3.7
East Germany	-3.2	-2.8
Czechoslovakia	-4.2	-4.0
Hungary	-4.2	-4.2
Romania	-0.8	-1.0
Yugoslavia	-1.9	-1.8
USSR	-3.5	-3.5
Poland	-1.5	-0.9

Source: 1986 Country tables basic data on the agricultural sector FAO, Rome 1986, and my own calculations.

TABLE 3A. Fixed capital formation ratio in the economy and in agriculture for advanced industrial countries

Country	In the economy1			In agriculture2
	1973-79	1979-86	1986	1973-79	1979-86	1986
USA	18.8	18.3	17.3	25.7	19.5	12.1
West Germany	21.2	20.8	19.4	30.8	33.9	32.2
Belgium	21.4	17.2	15.9	20.3	17.6	17.4
Holland	21.3	19.4	20.3	25.0	24.6	24.4
Denmark	22.5	18.0	18.8	34.7	22.9	21.2
Australia	23.7	24.4	23.5	21.6	23.3
France	23.8	20.8	19.4	19.1	16.5	14.4
New Zealand	25.0	23.4	21.2	27.0	28.2	19.6
Japan	32.4	29.4	28.9	45.9	54.7	51.9

¹ Relation of gross fixed capital formation to national income GDP.
² Relation of gross capital formation to GDP.

TABLE 4A. Average payment in agriculture and industry - 1960-1980 (in currency of each country)

Country/currency		1960	1970	1975	1980
Bulgaria/leva
	agriculture	74	107	138	167
	industry	80	124	150	197
	agriculture: industry (%)	92.5	86.3	92.0	84.8
Hungary/forint
	agriculture	1,416	2,122	2,717	3,822
	industry	1,604	2,089	2,816	3,884
	agriculture: industry (%)	88.3	104.6	96.5	98.4
East Germany/mark
	agriculture	370	529	700	727
	industry	467	588	748	783
	agriculture: industry (%)	79.2	90.0	93.6	92.4
Romania/lei
	agriculture	703	1,205	1,531	2,160
	industry	829	1,288	1,602	2,307
	agriculture: industry (%)	79.2	93.6	95.6	93.6
USSR/rouble
	agriculture	55.2	101	127	149
	industry	91.6	133	162	185
	agriculture: industry (%)	60.3	75.9	78.4	80.5
Czechoslovakia/koruna
	agriculture	1,113	1,806	2,221	2,488
	industry	1,442	1,967	2,338	2,653
	agriculture: industry (%)	77.2	91.8	95.0	93.8

Source: Nazarenko, V.: Economic Development and Social Justice. Experience of Developed Countries within the Socialist System. Jakarta 1982.