Farming systems, food security, farm policy: triple jump through history

Niek Koning

Agricultural Economics and Rural Policy

Topics

1. What is agriculture?

2. Agriculture and population growth

3. Agriculture, commerce, and the Industrial Revolution

4. The turn to government intervention

1.What is agriculture?

Agriculture is based on cultivation of plants on the thin layer of biologically-transformed weathered rocks that we call soil

Consequences:• Total farm production is bound to a biophysical potential

that is determined by available land, water and sunlight

• Technical control of production and its organisation as a continuous process are more difficult than in industry

• Production without sufficient fertilisation and conservation leads to soil degradation

2.Agricultural and population growth

How population could grow while avoiding soil degradation (Europe)

Inhabitants / km2

Mode of land management

Techniques

Institutions

1-20 Long fallow Slash-and burn, digging stick, hoe

20-40 Fertility concentration on light soils

Separation of pasture and arable land, night

kraaling, ox-drawn hook plough

40-60 Fertility concentration on heavy soils

Mouldboard plough, new harnesses, horse

traction

60-200 Zero fallow New rotations with fodder crops

200-1000 Nutrient import

Artificial fertiliser & imported fodder

Small scattered villages, stateless societies,

collective non-tradable rights in land, individual

rights in people

Centralised states, individual tradable

rights in land & other non-human inputs

-2000

0

1000

1750

2000

Ricardian constraint

• Agricultural intensification involved shifts in techniques and technological progress

• Yet at each moment, agricultural growth involved rising costs per unit of production

So population growth increased the scarcity of farm products!

100

50

25

millions

200

400

-2000 1000 1750 19501500 18750

Medieval agricultural revolution (fertility concentration on

heavy soils)Classical agricultural revolution (fertility concentration on

light soils)

First modern agricultural revolution

(zero fallow)

Second modern agricultural revolution

(nutrient import)

Neolithical revolution (long fallow)

Fluctuations in population growth and agricultural intensificationin Europe

How to explain the fluctuations in demo-agrarian growth?

• Predator-prey model (ecology): interaction of slow and fast variables leads to cyclic dynamics

• However, farmers were learning predators, and agrarian societies were increasingly complex

100

50

25

millions

200

400

150

g silver/ 100 kg

50

100

-2000 1000 1750 19501500 18750

Medieval agricultural revolution (fertility concentration on

heavy soils)Classical agricultural revolution (fertility concentration on

light soils)

First modern agricultural revolution

(zero fallow)

Second modern agricultural revolution

(nutrient import)

Neolithical revolution (long fallow)

Some complications...

Rise of large farms

Roman villa

grain prices

populationgrowth

pricesmoderately

high large farmerinvestment insustainable

intensification

increase inlarge farms

fragmentation ofsmallholdings

lowwages

Tentative explanation

populationgrowth

pricesskyrocketing

large farmerinvestment insustainable

intensification

increase inlarge farms

fragmentation ofsmallholdings

lowwages

empoverishmentof smallholders

populationgrowth

pricesskyrocketing

large farmerinvestment insustainable

intensification

increase inlarge farms

fragmentation ofsmallholdings

lowwages

empoverishmentof smallholders

soildegradation

conflict

distrust

populationcollapse

pricesskyrocketing

large farmerinvestment insustainable

intensification

increase inlarge farms

fragmentation ofsmallholdings

lowwages

empoverishmentof smallholders

soildegradation

conflict

distrust

populationcollapse

pricescollapse

disinvestment

decline oflarge farms

consolidation ofsmallholdings

highwages

FarmerSociety: simulation 500 years, year 0 = 100

10

100

1000

10000

100000

1000000

0 50 100 150 200 250 300 350 400 450

food price soil fertility population technology

3.Agriculture, commerce, and the Industrial Revolution

100

50

25

millions

200

400

-2000 1000 1750 19501500 18750

Medieval agricultural revolution (fertility concentration on

heavy soils)Classical agricultural revolution (fertility concentration on

light soils)

First modern agricultural revolution

(zero fallow)

Second modern agricultural revolution

(nutrient import)

Neolithical revolution (long fallow)

Greece & Rome

Italian, Flemish & Hanseatic towns

Rise of European

world trade system

1st Industrial Revolution

Agricultural and commercial revolutions in Europe

2d Industrial Revolution

Effects of non-farm developments before the Second Industrial Revolution

• Non-farm activities influenced the geography of agricultural revolutions– More intensive farming systems around urban centres than in remote

areas

Effects of non-farm developments before the Second Industrial Revolution

• Non-farm activities influenced the geography of agricultural revolutions

• Non-farm activities reinforced the existing dynamics of agricultural revolutions– Non-farm development did not break the Ricardian constraint

• Industrial demand for farm-produced materials reinforced the effect of population growth on agricultural prices in the growth phases

• Increase in supply hampered by high transport costs and lack of new fertility techniques

– Urban unemployment exacerbated the crowding and soil degradation in the smallholders sector during the crises

Effects of non-farm developments before the Second Industrial Revolution

• Non-farm activities influenced the geography of agricultural revolutions

• Non-farm activities reinforced the existing dynamics of agricultural revolutions

• Non-farm activities did not affect the dynamics of farm structures– New techniques did not revolutionise agricultural economies of scale

(technical control of farm production remained more difficult than in industry)

Effects of the Second Industrial Revolution (c. 1875)

• Ricardian constraint was broken– electricity, petro-chemistry and internal combustion led to substitution of

minerals for farm-produced materials– transport revolution and industrial fertiliser boosted the increase in

supply– effect: recurrent falls in agricultural prices

100

50

25

millions

200

400

150

g silver/ 100 kg

50

100

-2000 1000 1750 19501500 18750

Medieval agricultural revolution (fertility concentration on

heavy soils)Classical agricultural revolution (fertility concentration on

light soils)

First modern agricultural revolution

(zero fallow)

Second modern agricultural revolution

(nutrient import)

Neolithical revolution (long fallow)

Fluctuations in population growth and in grain prices in Europe

Effects of the Second Industrial Revolution (c. 1875)

• Ricardian constraint was broken– electricity, petro-chemistry and internal combustion led to substitution of

minerals for farm-produced materials– transport revolution and industrial fertiliser boosted the increase in

supply– effect: recurrent falls in agricultural prices

• Ricardian constraint was broken– electricity, petro-chemistry and internal combustion led to substitution of

minerals for farm-produced materials– transport revolution and industrial fertiliser boosted the increase in

supply– effect: recurrent falls in agricultural prices

• Decline in large farms– non-farm activities did not revolutionise agricultural economies of scale

(technical control remained difficult)– but low prices and rising wages caused large farms to decline

• profit squeezed reduced investment in and technical lead of large farms• higher wages increased labour price advantage of family farms

• Ricardian constraint was broken– electricity, petro-chemistry and internal combustion led to substitution of

minerals for farm-produced materials– transport revolution and industrial fertiliser boosted the increase in

supply– effect: recurrent falls in agricultural prices

• Decline in large farms– non-farm activities did not revolutionise agricultural economies of scale

(technical control remained difficult)– but low prices and rising wages caused large farms to decline

• profit squeezed reduced investment in and technical lead of large farms• higher wages increased labour price advantage of family farms

• Turn to government intervention

4.The turn to government intervention

Evolution of farm policies

1750-1875 (1st modern agricultural revolution):

liberalising tendencies in farm policies• privatisation of government bodies for agriculture• enclosures (= liberal land reform)• agricultural trade liberalisation (1846: Corn Law repeal in UK)

1750-1875 (1st modern agricultural revolution):

liberalising tendencies in farm policies• privatisation of government bodies for agriculture• enclosures (= liberal land reform)• agricultural trade liberalisation (1846: Corn Law repeal in UK)

After 1875: (2d industrial revolution):

turn to government intervention• specialised ministries for agriculture• support for farm research and education• land reform measures for supporting viable family farms• agricultural protection

– late 19th century: most countries in Western Europe– from 1930: all western countries

Discussion on protection

• Economic theory: agriculture could have adjusted in a free market

Agricultural productivity in eight European countries, 1870-1910 (in wheat units and prices of 1870)

Experiences between 1875-1930:

Discussion on protection

• Economic theory: agriculture could have adjusted in a free market

Experiences after 1930:

• attempts at liberalisation in Denmark and the US in the 1950s failed

• liberalisation in New Zealand after 1984 had mixed results

• countries with moderate protection had stronger increase in productivity

Discussion on protection

• Economic theory: agriculture could have adjusted in a free market

• In practice, rather than leaving a depressed sector, many farmers adopted innovations to raise production technical treadmill

• Economic theory: agriculture could have adjusted in a free market

• In practice, rather than leaving a depressed sector, many farmers adopted innovations to raise production technical treadmill

• In a free market, a balance between supply and demand was only achieved when the treadmill squeezed its own fuel supply (by causing a profit squeeze that reduced investment)

• Economic theory: agriculture could have adjusted in a free market

• In practice, rather than leaving a depressed sector, many farmers adopted innovations to raise production technical treadmill

• In a free market, a balance between supply and demand was only achieved when the treadmill squeezed its own fuel supply (by causing a profit squeeze that reduced investment)

• In this way, the ‘Ricardian constraint’ was replaced with ‘Schultzian oversupply’

Import of government intervention

• Structural policies remedied weaknesses that family farms had for farm progress

• Protection secured that family farms retained margins for investment

Together, these policies paved the way for a new model of agricultural development based on family farms rather than large farms