 | Around the World in 80 Ideas |
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ENVIRONMENT 80: The incentive to grow Family responsibility in agricultural land use The problem: state bureaucracy in farming Post-war land reform in the emerging socialist countries was built around the communal ownership of land and farm enterprises. It did not take long to realize that this ideas was a disaster. Because individuals shared the fruits of their efforts with many others, they had little incentive to work harder or more productively. Because the communal farms were very large, they became bureaucratic and inefficient. The solution: allocate user rights to families Faced with such problems, outright privatization of farmland is one solution - a solution that can be found in a number of former Soviet-bloc countries. But for ideological reasons, others are more reluctant to give up communal land ownership entirely. China achieved some early productivity gains by allowing individual families to cultivate specific patches of land - although there were problems too. Now it is starting to introduce property rights over the use of land, even though it remains technically in communal ownership. Other countries such as Vietnam have adopted broadly similar solutions. Example: China's family responsibility system China faces the daunting task of feeding 22% of the world's population on 7% of the world's agricultural land. Agricultural and land-use and land-ownership policies are therefore particularly vital. In the 1950s, land was expropriated from its owners and distributed to landless peasants, creating a new class of smallholders. But these individual farmers were soon forced to join farming collectives on the Soviet model. The communes controlled the rights to use and work the land, imposed an egalitarian distribution system, and, in the process, destroyed farmers' freedom to work (and their willingness to do so). China broke with this disastrous Soviet model in the late 1970s, and instead brought in a family-based contract-working system, called the household responsibility system. This system proved a considerable success. It gave farmers freedom over land use and decision-making, and restored the link between performance and reward. With these new incentives in place, China's agriculture blossomed after thirty years of stagnation. Farm output in the early 1980s grew at several times the previous average, registering annual increases of nearly 5% for grain, 8% for cotton and 14% for oilseed. Problems: no incentive to grow However, this rapid growth did not last. The problem of feeding the population had been solved, but there was still no incentive for farmers to do more or become more efficient. It became clear that the system had a number of shortcomings. First, land had been distributed between the whole population, on the basis of family size. But each family was given several very small parcels as the authorities tried to equalize differences between soil fertility, access to water, and so on. With a family's land being divided into an average of five or six plots, it was impractical to introduce more efficient cultivation methods. Because each plot was so small, access paths between the plots took up a large amount of the cultivated area. Furthermore, the distribution took no account of the fact that some families were, and wanted to be, good farmers, while others were less able or enthusiastic. And the prospect of subsequent redistributions as some villagers die and others are born gives families every incentive to over-exploit their land parcels rather than conserve and maintain them. There followed a national debate on how to reform the system further in order to eliminate these problems while maintaining the gains already made. Some radicals argued for a complete nationalization of land; but it was clear that rural communities would be unlikely to accept this without some form of compensation. At the other extreme, some argued for individual ownership, but this seemed hard to reconcile with the socialist traditions of the country. A third view was to leave the technical ownership of land unchanged, but to modernize the system of land-use rights - the rights to use land, to obtain consumables and income from it, and to alienate those same rights. These changes would give families a more positive set of incentives to work effectively and to look after their holdings. But obstacles still remained. The state procurement and price-fixing system undermines farmers' ability to take decisions freely and enjoy the full fruits of their labours. In the absence of a real market in land-use rights, there would be little or no consolidation and the problem of fragmentation would persist. Results: making output grow However, it was clear that some reform over property rights was the most practicable and least risky option, and from the mid-1980s, there were a number of liberalising measures. Leases were extended to 30 years so that households had a greater incentive to look after their plots of land. Limited exchanges of labour were permitted. And there was more local experimentation with different models. In the county of Meitan in northern Guizhou, for example, villagers and officials agreed to fix the existing tenures for 20 years, regardless of changes in family size. Farmers were granted the power to bequeath and exchange their land-use rights, and to combine land parcels. There were also incentives to reclaim wasteland and create small family agriculture businesses. These policies clearly worked: more land was brought into cultivation, the quality of the land improved as it was more carefully conserved, and more modern equipment was brought in. In 1995, the national government urged other villages to consider the example of Meitan; so it is clear that the liberalization of land-use rights in China is likely to grow. For further information:
There was a picture of Ho Chi Minh on the mantelpiece. Its proud owner was the now retired area secretary of the Communist Party. He had fought with distinction in the Vietnam War, and had been rewarded with the allocation of a farm just to the north of Hanoi. He did not 'own' the farm because all land in Vietnam is owned by the state, which means the Communist Party. But he did own the development rights. He had the legal right to exploit the farm, and to make profits from what he grew there. Furthermore, he could bequeath those development rights to his children. He had invested a few hundred dollars to fit out and stock a fishpond, and made a good return from selling the fish at the local market. He considered it an excellent investment because it raised the value of what he would pass on to his children, as well as giving him and his wife a better standard of living during their own lives. If he had not had any children, he could have sold the development rights to anyone else, as he chose. Since passing this major reform, Vietnam has enjoyed an agricultural boom to match the economic boom that liberalization has produced in other sectors. All land in Vietnam remains owned by the state, but the right to develop and exploit its resources is in private hands, and can be sold or bequeathed. It may be no coincidence, that after years of poor agricultural performance, Vietnam is now a net exporter of foodstuffs, including rice. |
Copyright 2002: Adam Smith Institute
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