Agriculture
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Agriculture has fared poorly in the transition. Most of the transition countries have experienced significant declines in output and these declines have been persistent. Only a few have seen agricultural output grow or stabilise at pre-1990 levels. The declines have varied widely from between 15-30 per cent in central Europe to more than 50 per cent in some of the Baltic and CIS states. Even in central Europe where GDP has recovered or exceeded pre-transition levels, with the exception of Slovenia, agricultural output still remains significantly below pre-1990 levels.
This chapter examines the reasons behind the relatively poor performance of agriculture in the transition. It finds that the distortions imposed by the centrally planned economy pre-1990– not least with respect to ownership and management of land– have continued to weigh heavily. Policies to eliminate those distortions have been implemented at a slow pace, often because of opposition by vested interests and groups fearful of the loss of employment and access to subsidised resources. This has resulted in limited improvements to output and productivity.
It is also evident that progress in general economic reform has been strongly associated with progress in agricultural sector reform. Such progress has in turn been closely associated with more democratic and competitive political systems. The more successful agricultural sector reformers have been located therefore in central Europe. By contrast, in much of the CIS major institutional and policy hurdles to increasing the performance of the sector still have to be overcome. Improving the performance of the agricultural sector requires the adoption of policies that can boost productivity through restructuring and investment. This will require greater clarity concerning title to land and the creation of a more efficient land and agricultural inputs market. In many cases, it will also involve overcoming significant political opposition to such reform from rural voters and their political backers. Improved performance also requires growth in trading opportunities. In this respect, there have been a number of promising developments. The establishment of new markets for trade other than the transition economies has proceeded rapidly as trade relationships have responded to market signals. However, most transition countries continue to record significant agricultural trade deficits. Part of this is due to their trading partners imposing restrictions on market access but an underlying problem remains the low competitiveness of many of the transition economies.
This chapter accounts for differences in performance caused by both economic and political reasons. Section 4.1 describes the initial conditions and the reforms that have been implemented since the start of transition. Section 4.2 accounts for the differing performance of the agricultural sector across countries in terms of both output and productivity. This is achieved by identifying the relative importance of initial conditions, policy reforms and other factors explaining the differences. Section 4.3 broadens the discussion to include the impact of political institutions and voting behaviour on the performance of the sector. Section 4.4 examinesthe international dimension, in particular the role of trade and market access, not least in the context of EU accession.
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