TRANSITION AND AGRICULTURE

The overall objectives of our proposed paper is to: (a) systematically document the post-reform trends in agricultural performance in Asia, Europe, and the Former Soviet Union; (b) identify the main reform strategies and institutional innovations that have contributed to the successes and failures of the sector; (c) analyze the mechanisms by which reform policies and initial conditions have affected the transition process in agriculture; and (d) draw lessons and policy implications from the experiment and identify the gaps in our understanding of the role and performance of agriculture in transition. As part of this effort, we attempt to address a number of intriguing and important questions on the performance of individual countries or regions during transition. Why has China been so successful in its reforms, while Russia has not? Why is it that some CEECs have rebounded and showing robust productivity growth, while others have not? Why has agriculture in so many FSU nations continued to perform so poorly? In addition, we will address questions about the process of reform. Why has land restitution predominated in Europe but not in Russia or China? Why did institutions of exchange collapse in the non-Asian economies in the early stages of reform but continued to function in Vietnam and China? What explains the apparent divergence in the performance effects after the first year of reform in China and Vietnam, on the one hand, and much of the rest of the transitional world on the other? In particular, how have land reform and rural input-supply/ procurement enterprise restructuring affected productivity? Which institutions of exchange and contracting have or have not emerged, and why? How has the structure of the economy at the outset of transition, and other initial conditions, affected the transition process? To meet our objectives and answer some of the questions, we will begin by laying out the record on performance - examining the main bodies of data that demonstrate the changes in agricultural output, income, and productivity in the years after transition. In doing so, we will show how some of the countries have recorded similar performances, while others have developed quite differently. We will identify several "patterns of transition" based on these performance indicators and much of our subsequent discussion will analyze the success of transition according to these classifications. Next, as the first step in our search for answers as to what explains these different patterns, we examine differences in the points of departure of the transition countries as well as the nature of the policy reforms that have affected agriculture. The initial conditions that we hypothesize may explain part of the transition period's performance include the nature of agricultural technology at the beginning of the reforms (its scale; its labor intensiveness; etc.), the structure of the economy (the extent of industrialization), the extent of collectivization, and the magnitude of trade distortions. The key policy interventions that we should expect to affect agriculture's performance during transition include land right reforms and farm restructuring; price and subsidization policies; the approach to the liberalization of agricultural commodity and input markets; general macro-economic and general institutional reforms; and the attention of sectoral leaders to the level of new and maintenance-oriented public goods investment (in agricultural research, irrigation, roads, and other infrastructure projects). After documenting the dramatic differences in initial conditions and in reform policies among the transitional countries, we seek to demonstrate which of the differences determine the path a country's agriculture takes. In other words, we offer answers to the question why transition in agriculture in some countries has been successful and not in others. Here, we seek to generalize about the main causes for differences between the countries and the mechanisms that have affected performance. In particular, we argue that the debate on the optimality of Big-Bang versus gradualism oversimplifies the reform problem. The empirical evidence suggests that the road to a successful transition is more subtle and successful transitions in Asia and Europe have elements of both gradual and radical reforms. To explain the reform successes and failures we emphasize the role of the political environment in the early reform years and the potential for agricultural growth that exists at the start of reforms. We find that both have not only influenced the choice of the reform policies, but also the effect of the reform policies. We also conclude that the initial level of price distortions and the pace of market liberalization were especially influential in explaining differences in the early stages of transition but that the influence of the factors has diminished over time. Investment, land rights, and farm restructuring policies, in contrast, are assuming a more important role as the agricultural reforms have matured. In the last section we draw policy implications and lessons from the agricultural transition experiences. We argue that one should be careful about which indicator to use for measuring success and failure of transition. We conclude that all reform strategies in order to be successful need to include some certain policy ingredients (such as continued investment, etc.). However, a powerful lesson is that although all the pieces are ultimately needed, there is a lot of room for variation in the form of institutions that can be successful, and optimal policies and institutions may vary according to initial conditions. In other words, there is no single optimal transition path