Food and agriculture
policy in Poland
From peasant agriculture to
market economy
Franciszek Tomczak
Poland was the first post-socialist
country in Eastern Europe to move towards a market-oriented
economy.
Problems of the food economy and of
agricultural policy in Poland during the
current transitional period are discussed and positive and negative results of
the attempted transformation
are presented. Stress is laid on the additional
problems caused by Poland’s 12-year
recession. The country’s food and agricultural policy changes and problems
facing agricultural production, the process of adaptation of peasant agriculture to market economy, the possibilities and limitations of the development
of agriculture and the food economy
are discussed.
Franciszek Tomczak is Professor, Central
School of Planning and Statistics (Warsaw
School of Economics), Department of Agricultural Economics and Food Economy,
Niepodleglosci Str 162, 02-554 Warsaw.
The free food and agricultural
market is the first dramatic result of the
historic decision to restore the market economy in Poland. The idea of
the restoration
of the free food market has been and is still arousing
enormous
hopes and expectations.
There was no other solution
to
the market disequilibrium,
food shortages,
rationing
systems, queues,
everyday shopping problems
and the resulting
social frustration.
The
free food market and the functioning
of the most fundamental
economic
laws of supply,
demand
and price were expected
to lead to the
normalization
of the whole economy,
restricted by commonly
accepted
principles of state interventionism
including,
for instance, assistance to
families in the worst financial conditions.
At the beginning
of 1990 a decisive step towards a market economy
was made. The problems of the free food market became more evident
and larger from then on. The transition
revealed fully the enormous
drawbacks
of the whole Polish economy:
its poor organization;
the
uneconomic
functioning
of the non-agricultural
sectors (industry,
trade,
finances,
services);
obsolete
methods of work in industry
and trade;
misunderstandings
about the simplest elements of the market economy;
market frustration
and impatience;
fear of changes; political interference in the food market;
lack of productivity;
growing revindication
demands;
reappearance
of inflation;
etc. All these point to the great
importance
of principles and possibilities
for state interventionism
in the
market for the success of the present concept of a transition
to the
market-oriented
economy.
From the Round Table to peasants’ protests
The concept of a transition
to a market economy in the food market has
long been considered
by Polish rural economists
as a possible way of
recovering
from the economic and food difficulties of the country. This
has been reflected in discussions
about the economics
of production,
prices, incomes,
etc, as well as in official reports
and documents
published
by research
and advisory centres.
The principle
of a full
206
0306-9192/91/030206-07
0
1991 Butterworth-Heinemann
Ltd
Food and agriculture policy in Poland
Table 1. Salient features of Polish agricultural
Population (milllons)
Employment in agriculture (%)
Agriculture as percentage of national income
Global agncultural production in constant
prices (1971-75 = 100)
Per capita consumption of cereals (kg)
Per capita consumption of meat (kg)
Per capita consumption of milk (I)
Per capita consumption of sugar (kg)
production and food consumption.
1950
1960
1970
1960
1969
25.0
53.6
60.3
29.8
43.3
34.5
32.7
34 3
22.7
35.7
29.7
12.9
38.0
26.4
12.8
54 5
166
36.5
206
21 .o
68 8
145
42.5
227
27.9
86.5
131
53.0
262
39.2
95.2
127
74.0
262
41 4
112.4
118
68.6
260
46.9
transition
to a market
economy
for food was formulated
at the
beginning
of 1989 and met with common and widespread
recognition
and support from different circles, in particular from farmers. It found
its most explicit expression
in the unanimity
on the principle
of a
transition
to such a market adopted by the Round Table committee for
agriculture.
Government
and opposition
agreed in March 1989 that in order to
stabilize and adjust market prices as well as to establish the proper
connections
between
agriculture
and the remaining
elements
of the
economic
environment,
it was necessary
to apply both legal and
economic policy instruments.
The creation of the market also required a
consistent
removal of the order-distribution
system and a simultaneous
gradual restoration
of market equilibrium,
accompanied
by the introduction of appropriate
means of agrarian policy. The main actions were:
0
0
0
0
“Opinion
economy
on
the
transition
to
a market
in foodstuffs’ (in Polish), Round
Table Sub-Committee for Agriculture, Warsaw, 27 February 1989.
FOOD POLICY June 1991
a simultaneous
shift to a market economy in agriculture
and other
sectors of the economy;
use of economic instruments
(supply. demand, prices) to restore
equilibrium
to the agrarian and food market;
demonopolization
of market institutions
and organizations,
abolition of administrative
methods of regulating the agrarian and food
market; and
introduction
of new interventionist
solutions
(minimum
prices,
interventionist
deliveries,
control
of means of production
and
prices, abolition of compulsory
mediation
in foreign trade).’
Several questions
arose about the transition.
The first concerned
the
main driving force of the material
and structural
development
of
farming. International
experience
shows that this driving force lies in
the overall economic development
of the country, expressed in the level
and rate of growth of the national income, which is the only source of
resources for consumption
and accumulation.
This in turn implies that
Polish agriculture
as a whole must be interested
in this development.
The production
and economic conditions of development
of present and
future Polish agriculture
will be largely dependent
on Poland’s recovery
from the economic
crisis and its achievement
of stabilized
economic
growth of at least 64%
annually.
Only this will ensure the growing
prosperity and standard of living of the whole society. However, during
the first year of the market-oriented
transformation
of the Polish
economy,
the economic recession was deepened
- it is calculated
that
during 1990 the country’s national
income decreased
by about 20%.
(See Table 1.)
The second external factor with a drastic negative impact on villages
and agriculture
was increasing
inflation.
In particular,
inflationary
pressure directly threatened
the income principles and economic rules
207
Food and agriculture policy in Poland
of management
in agriculture.
The decrease in inflation is recognized as
the main achievement
of the present period of the economic reform.2
The prospect of a full and rapid transition
to the free market in the
whole food economy or its main segments,
where free prices were to
govern both the purchase of agricultural
products and the price of food,
was to be a factor in reversing the imminent
danger of a large drop in
agricultural
production.
There was also a common
awareness
that
without the abolition of official prices and related administrative
actions
in the agricultural
market it would be impossible
to accelerate
the
transition
to the free market in other sectors of the national economy,
which would mean the inhibition
of the economic reform, production
restrictions,
low effectiveness
of the economy,
increasing
costs, etc. A
free market in the whole national
economy
was becoming
a simultaneous condition
in solving the country’s food problem.
It should be
emphasized
that the agricultural
market in Poland was the best prepared
to accelerate
such changes.
There is an argument
that problems
of inflation,
wages, the market
and increasing
effectiveness
and efficiency will not be solved without a
radical reduction
of the enormous
subsidies for food. The reduction
of
subsidies would increase the direct interest of farmers in the increase
and rationalization
of agricultural
production
in the hope of freer and
higher market prices. The abolition of subsidies would help to achieve a
real level and structure
for food prices and would make possible the
rationalization
of the level and structure of food consumption,
enable
the fixing of real non-agricultural
wages and free the budget from the
need to accumulate
enormous
sums for subsidies.
First experiences of the transitional period
‘W. Rembisz and D.K. Rosati, ‘Poland:
dilemmas and strategy of agricultural reform’, paper presented at the World Bank
Conference,
Budapest,
29 August-l
September 1990.
It is of great significance
that the first result of the market reforms was a
dramatic
increase in prices and the appearance
of the food demand
barrier.
The inflation
rate reached 94% for consumer
prices during
1990, whereas wage and salary incomes increased
only by 20%. The
demand barrier which appeared with the introduction
of the free food
market
became
the main obstacle
to achieving
a healthy
level of
consumption
for society as well as a permanent
and profitable agricultural food export industry. This made a combination
of interventionism
in
the food economy
combined
with protectionism
(just as in Western
Europe or Japan) irresistible.
In Poland, as in other post-socialist
countries,
there arises the basic
question of the costs of the new agricultural
policy and interventionism:
how can the financial means for increasing the scope of interventionism
and protectionism
be ensured? The possibilities
are and will be distinctly
limited. In other words, there are no practical chances for a significant
increase in the scope of financial intervention
in agriculture.
This has
for example for the present agricultural
direct practical
significance,
policy which is in direct conflict with the interests of large groups of
farmers producing food and the consumers
of food. Any Polish government will have to determine
the scope of intervention,
limited by the
existing possibilities,
and the level of liberalization
of the agrarian
market, the rate of structural transformation
as well as the efficiency of
agriculture
achievable
within budget constraints.
Any increase in the
scope of interventionism
must invariably
result in the reinforcement
of
the
existing
structures,
weakening
of the
dynamics
of transformation,
FOOD POLICY June 1991
Food and agriculture policy in Poland
and a preference
for traditional
organization
and production
solutions.
Poland must therefore face the fact that such a transformation
will be
regarded as a technological
and structural
revolution
by some, and a
policy of liquidating
family farms by others.
The threats and risks resulting from the market economy have left the
Polish farmer helpless, without any support from the trade, service or
government
infrastructure.
Government
departments
have failed to
respond to the challenges emerging in agriculture
and have tended to
shift their own problems
onto agricultural
producers
(for instance by
increasing pressure for a reduction of the share of agricultural
producers
in the price of foodstuffs paid by consumers).
In the face of mounting
problems
arising from the present
transition
to a free market
in
agriculture,
farmers have tended to resort to well known and tested
which have appeared
in crisis periods.
But
strategies
of survival,
the free market was meant to be an instrument
to fight the crisis, not a
factor aggravating
it.
Poland’s example, where the transition to a market-oriented
economy
is most advanced, shows that market shock must be considered the main
experience of the transition to a market economy so far. Both society as
a whole and in particular agriculture have failed to find effective ways of
adjusting to the market or of adopting new rules of economic management. A longer period of time may be necessary to achieve this.
In the present
transition
period
the market
means not only a
price-income
shock. It also signifies a need to change the production
and decision making of every farmer. The nature of the reforms is, after
all, such that the process of production
and economic decision making
becomes pervasive - in agricultural
production
as well as in industry and
crafts. It is an economic game of very simple rules: you must decide on
your own how to produce more, better, at a lower cost, how to put to
the best use the production
means, time and financial resources you
have at your disposal. The fundamental
questions of the economics of
agricultural
production
must now be answered: namely, where and how
to produce,
what outlays to make, how to organize
the farm as a
production
unit, how to decide on the choice of the present and future
condition
of the farm. All Polish agricultural
producers
and food
consumers
must now find the answers to these questions.
Another
problem
of economic
development
is the simultaneous
development
of the transition to a market economy and the depth of the
economic recession. The recession is perhaps the biggest danger facing
the transformation
of the Polish economy.
The recession is already 12
years old (national
income per capita in 1990 is lower than it was in
1978). There are high expectations
for economic recovery.” If there is
no economic recovery in the short term the whole economic programme
and the new political democracy will be in danger.
As far as the strategy for developing
Polish agriculture
is concerned
the official government
documents
have been discussed.4
As far as
Polish agricultural
and food economists
are concerned
there is a
consensus on the following aspects of the strategy:
0
31bid.
4Agricultural Strategy for Poland, World
Bank, Washington, DC, July 1990.
FOOD POLICY June 1991
0
the development
of agricultural
and agrofood processing industry
in all its aspects (marketing,
infrastructure,
farms, etc) must be
stimulated;
the cornerstone
of the Polish agricultural
development
is the
family farms, which have been changing into commercial farms too
slowly;
Food and agriculture
policy
in Poland
Table 2. The number and structure of peasant farms in Poland.
Size of farms
Size in ha
Number
(thousands)
Very small
Small
Medium
Larger
l-5
5-7
10-15
15 or more
1 108
692
293
183
0
0
0
0
%
Agricultural land
(million ha)
%
Average
size of
farm
48.7
30.4
12.9
8.0
2.7
4.4
3.2
3.3
19.9
32.4
23.5
24.3
2.4
6.4
109
18 0
the government
should find a way to introduce a limited agricultural intervention
policy; some kind of government
intervention
should be allowed despite the very limited financial resources for
such an intervention
and despite a fear that it would be against free
market rules;
the process of privatization
is a key issue for improving productivity and the general performance
of all agricultural
systems;
Polish agriculture
has a great export potential;
and
a new trade strategy with a special reference to the EC and USSR
must be established.
Adapting peasant agriculture to the market economy
Poland in the period of the socialist economy did not have a collectivized agricultural
system. Individual
(private,
peasants,
family) agricultural farms represent more than 75% of the agricultural
land and are
characterized
by their small size. The average size of private farms is
about 6.4 ha, and the data from Table 2 illustrate the structure of these
farms. The size of the farmers’ economy determines
its significance
for
the acceptance
and implementation
of the market economy.
For this
reason also all the strategic plans for the development
of agriculture,
its
reforms and agrarian policy concern first of all individual peasant farms.
It is the individual
family farm that performs the main role in Polish
agriculture.
Because of this the strategies and concepts of state interventionism must concern mainly individual
farms. Economic-agrarian
sciences continue to stress the thesis that the family farm possesses its own
internal mechanisms
of development
and adaptation.
Nevertheless,
it is
the external
impulses
that are of decisive importance,
not only to
particular
individual
farms but to agriculture
as a whole. This means
that the present-day
family farm, although undergoing
transformations
and evolution,
maintains
its two faces. The first, internal and traditional, aims to satisfy its own needs and ambitions.
It is thanks to this aspect
that the family farm has succeeded
in surviving
in most difficult
conditions
and circumstances,
meeting the needs of the family as well as
the production
requirements
of the farm itself, isolating it from external
conditions
and difficulties.
In the course of economic development
this
face of the farm is changing rapidly. New traditions appear, followed by
greater
openness
to social needs and problems
as well as greater
understanding
of common and interrelated
interests and dependences.
This evolution
reflects a transition
from traditional
to modern ways of
thinking, as well as a shift from mere satisfaction
of internal needs to an
active response
to external
social needs and conditions.
All these
tendencies
are visible in the present stage of the development
of Polish
agriculture
and the food economy.
The process
of adaptation
reinforces
the development
and the
development
conditions
of the family farm. This is the second. external
210
FOOD POLICY June 1991
Food and agriculture policy in Poland
face of the development
of the family farm. It will be interesting
to see
how the market economy,
with its all typically Polish conditions,
will
affect this development.’
Possibilities and limitations of the transition period
The conviction
5The authors of the World Bank report
(ibid) are right to draw attention to behavioural peculiarities of the rural population. First, farming is based on the logic of
survival rather than development, which is
reflected in a prevailing tendency to take
minimal risk rather than to aim for maximum profit. There is also a tendency to
assure self-financing
through additional
employment
and using the labour resources of the whole family. Second, there
is an entrenched
attitude of resistance
towards the state and at the same time a
dependence on it. This conservative dualism finds its expression in the rejection and
lack of trust evident in relation to everything that comes from the state, and simultaneously in full dependence on the administration
%ee for example the reservations of the
World Bank report cited above, op tit, Ref
4.
FOOD POLICY June 1991
that farms and the society of the farmer will decrease as
part of Polish society has not yet taken hold. This specific decrease in
the relative and the absolute size of the agricultural
population
and the
related consequences
is a natural expression of the current stage of the
agrarian revolution.
It is the result of socioeconomic
developments
and
only depends on economic policy to a limited degree. This process can
be neither radically inhibited nor changed. It is the condition of general
social and economic progress, an increase in the efficiency of work, an
improvement
in the standard
of living, etc. However,
this does not
mean the negation of the need for structural and production
changes to
the economy,
particularly
with methods
adopted
from the highly
developed countries of Western Europe.
A few points should be emphasized
about the possibilities
and
limitations
of the development
of the Polish agrofood economy in the
market economy. First, agriculture
and farms are undergoing
a process
of thorough and extensive diversification.
This concerns or will concern
production
and incomes
as well as the size of the later market
institutions.
As in other sectors of the economy egalitarian
tendencies
must be checked if they lead to pressures for a return to widespread
state intervention.
Second, economic and agricultural
policy will be forced to address the
essential question of how to combine the development
mechanism
with
state interventionism
and subsidies (protection)
in relation to agriculture. International
experience
shows that this will give rise to new
solutions
and new institutions.6
The emergence
of new institutional
solutions is the simplest method of ensuring a collision-free
transition to
an agricultural
market economy.
Third, the present transition period has once again confirmed the well
known theory of the fundamental
importance
to agricultural
policy of
the service system (supply,
services,
processing
and sale). A poor
service system with no definite prospects for improvement
may constitute a serious limitation
upon the development
possibilities
of Polish
agriculture.
Furthermore,
such a situation
may contribute
to new
economic pressures for the development
of rural cooperatives,
cooperation between
farmers and new forms of supply and services, which
would in turn constitute
a positive phenomenon.
Fourth, the problem of regional development
and rural policy is also
gaining importance
under the new market conditions,
both with regard
to the grounds
of economic
selection
and allocation
of production
resources
and to the conflict between
regional development
and the
need to gain maximum economic benefits from outlays. The experience
of countries with developed
market economies
seems to indicate that
there are negative (migration of people from some rural regions) as well
as positive
impacts
(increased
financial
possibilities
in the case of
economic development
and an extension of the scope of state intervention in view of the popular idea of developing
neglected regions) from
this conflict.
Fifth, the market
economy
signifies
a more realistic
level and
Food and agriculture policy in Poland
structure of prices for the means of production
in agriculture.
At present
this mainly means a dramatic increase in the prices of all production
factors. The new input prices, if measured in producers’ output prices,
eg tons of wheat per tractor or harvester or ton of fertilizer, are close to
Western
ratios, but for the Polish peasant they meant a doubling
or
more of the ratios to which he has been accustomed.
This is important
to
farms not only from the point of view of the economics
of production
(rising prices of production
factors increase the costs of agricultural
production)
but also because of the system governing the take-over and
creation of new farms. As in the West one becomes a farmer and the
owner of a farm mainly by inheriting the land. A large proportion
of the
young candidates
for farms have not got the slightest
chance
of
developing
a modern farm. This raises the question of the future of this
group and the establishment
of a new generation
of farm owners.
The future
Leaving aside theoretical
considerations,
decisions have been made and
the process is in progress. The social frustrations
which are becoming
more evident testify to mistakes that have been made. Restriction
of
demand,
unemployment
outside agriculture,
high prices of industrial
goods and market
disintegration
in neighbouring
countries
do not
engender
optimism.
One should have no illusions;
if the recession is
overcome, the market economy will soon become the main driving force
of changes to the traditional
family farm in Polish agriculture.
The
potential
to protect
this economy
will undoubtedly
dwindle
as the
market creates pressures for efficiency, profitability
and commerciahzation. Everything
seems to indicate that only some farms will be able to
cope with the new conditions,
and interventionist
steps can only delay
the actual liquidation
and disappearance
of many traditional
family
farms. Paradoxically,
this will also contribute
to the strengthening
of
Polish agriculture
and its new development.
The market economy also necessitates
a new approach to demands on
the part of farmers for the stabilization
of prices, credits, production
structure and farm structure,
which now have no chance whatsoever
of
being fulfilled. If they could not be fulfilled within the centrally planned
order-distribution
system, there is even less chance that they will be in
the market economy.
As has already been mentioned,
this poses a
dilemma for the agrarian management
and policy centres which have to
make promises and formulate
programmes
to be accepted by farmers
and their organizations.
The future must be determined
by overall
development
trends and by a balance of profits and losses resulting from
such developments.
This means that no economic and social group can
either demand or secure for itself all the benefits ensuing from development. In agriculture,
the diversification
of these results and benefits
may even be wider and more painful than in other sectors of the
economy.
212
FOOD POLICY June 1991