The Performance of Agriculture in Transition Economies: Evidence from Poland and Belarus, 1990-2004
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The Performance of Agriculture in Transition Economies: Evidence from Poland and Belarus, 1990-2004 Aksana Yarashynskaya Thesis submitted for assessment with a view to obtaining the degree of Doctor of History and Civilization of the European University Institute Florence, 18 May 2015 European University Institute Department of History and Civilization The Performance of Agriculture in Transition Economies: Evidence from Poland and Belarus, 1990-2004 Aksana Yarashynskaya Thesis submitted for assessment with a view to obtaining the degree of Doctor of History and Civilization of the European University Institute Examining Board Prof. Govanni Federico, EUI and University of Pisa, Supervisor Prof. Youssef Cassis, EUI Prof. Vicente Pinilla,University of Zaragoza Prof./Academic Director, Alexei Pikulik, European University of St.Petersburg/ Belarusian Institute for Strategic Studies © Aksana Yarashynskaya, 2015 No part of this thesis may be copied, reproduced or transmitted without prior permission of the author ABSTRACT This study contributes to the existing literature on the agricultural reforms that took place in Central and Eastern European countries during the transformational period (1990- 2004) and on the agricultural development in Europe in general in the long-term (1960- 2004). The thesis explores the history of the agricultural transformations in Poland and Belarus through a detailed analysis of the agricultural production and productivity dynamics, aiming to answer (i) whether the reforms succeeded or failed in terms of agricultural production and agricultural productivity; and (ii) what were the determinants of the agricultural reforms’ success or failure. The research is centered on a comparative analysis of Polish and Belarusian agricultural performance, but it also incorporates the other CEE countries (Czech Republic, Hungary, Slovakia, Russia and Ukraine), as well as the advanced Western European economies. v List of acronyms (abbreviations) AWU Annual Work Unit (estimated by Eurostat) CEEC Central and Eastern European Countries – in the context of this PhD research this includes the following seven countries: Poland, Hungary, Czech Republic, Slovakia, Russia, Ukraine and Belarus FSU Former Soviet Union countries – in the context of this PhD research this includes the following three countries: Russia, Ukraine and Belarus V4 Vysiegrad Four countries - in the context of this PhD research this includes the following four countries: Poland, Hungary, Czech Republic and Slovakia WB World Bank OECD Organization for Economic Co-operation and Development FAO Food and Agriculture Organization of the United Nations PSE Producer Support Estimate (estimated by OECD) NRA Nominal Rates of Assistance (estimated by WB) vi CONTENTS CHAPTER 1. General introduction 1.1. Research background and scope of the analysis..…………………………………… 1 1.2. The selection of the countries’ case-studies (the geographical scope of the research)..……………………………………………………………………… 3 1.3. General literature overview..………………………………………………………… 4 1.4. Data. ………………………………………………………………………………… 5 1.5. Methodology outline………………………………………………………………… 9 1.6. Contribution to the field of the study...……………………………………………… 10 1.7. Thesis outline………………………………………………………………………… 11 CHAPTER 2. CEEC agricultural performance during the transformation period 2.1. CEEC agricultural transformation history overview...……………………………… 15 2.2. CEEC agricultural production during the transformation period...………………... 25 2.3. CEEC agricultural productivity during the transformation period………………….. 37 2.4. Empirical assessment of the agricultural production and productivity dynamics….. 43 2.5. Conclusion..…………………………………………………………………………. 48 CHAPTER 3. Polish agricultural performance during the transformation period 3.1. Poland agricultural transformation history overview………………………………. 49 3.2. Agricultural production in Poland during the transformation period……………… 65 3.3. Agricultural productivity in Poland during the transformation period……………. 71 3.4. Conclusion…………………………………………………………………………. 78 CHAPTER 4. Belarusian agricultural performance during the transformation period 4.1. Overview of Belarusian agricultural transformation history……………………... 79 4.1.1. Overview of land-reform progress in Belarus, 1990-2004.………………………… 79 4.1.2. Belarus land reform constraints, or why Belarusian peasants do not want to be the private farmers………………………………………………...... 91 4.1.3. Overview of state support and price policy developments in Belarus in 1990 -2004……………………………………………………………………………….. 103 4.1.4. Conclusion for Section 4.1.……………………………………………………………… 111 4.2. Agricultural production in Belarus during the transformation period...…………… 115 4.3. Partial agricultural productivity in Belarus during the transformation period……. 125 4.4. Empirical assessment of agricultural production and productivity dynamics……... 131 4.5. Conclusion.…………………………………………………………………………. 136 vii CHAPTER 5. Polish and Belarusian agricultural performance, from a centrally- planned to a market-oriented economy: the determinants of reform success…..……………………………………………………………………….. 137 5.1. Explanation of the similarities in agricultural production and productivity dynamics………………………………………………………………………………….. 139 5.2. Explanation of the differences in the agricultural production and productivity dynamics………………………………………………………………………………….. 145 CHAPTER 6. General discussion and conclusion 6.1. Synthesis of the research…………………………………………………………….. 149 6.2. Suggestions for further research……………………………………………………... 150 BIBLIOGRAPHY……………………………………………………………………….. 151 APPENDIXES…………………………………………………………………………… 171 viii CHAPTER 1. General introduction. This “Introduction Chapter” provides general information about the thesis, and consists of a description of the research background, an explanation of the selection of country cases, a literature overview, data description, methodology and thesis outline sections. 1.1. The research background and scope of the analysis In 1989, a transformation process was launched to set the centrally-planned agricultural sectors of Central and East European countries onto a path of sustainable economic growth. The key elements of these reforms were privatization, liberalization of markets and prices and the creation of market institutions. Fifteen years later, these tasks were essentially accomplished: privatization (i.e., adoption of privatization laws and the implementation of privatization) was implemented, liberal, free-market economic principles were introduced, the old centrally-planned institutional structure was dismantled, and a new institutional framework emerged and started to function. Thus, in a formal “bureaucratic” sense, the transformation process could be considered a success. But can the transformation process be considered a success in terms of its (reforms’) efficiency? This question is important because the ultimate goal of the transformation was to transform the (presumably) inefficient centrally-planned agricultural system into a more efficient, market-oriented one. But has this happened? Have the implemented reforms resulted in substantial efficiency improvements in agricultural performance? Further, what factors drove the success or failure of the reforms? These are the research questions I would like to address to in my thesis. To be more precise, the research questions in this work might be formulated as – (1) whether the reforms succeeded or failed in terms of two standard measures of economic efficiency: agricultural production and agricultural productivity, or in other words, an assessment of reform outcomes in terms of agricultural production and agricultural productivity; and (2) what were the determinants of the agricultural reforms’ success or failure? These two standard measures of the economic performance (production and productivity) were chosen due to their dual (Socialist, “centrally-planned” and liberal, “free- market”) nature and relevance. Output (agricultural production) is usually considered to be relevant to the centrally-planned economy measurement of agricultural performance because according to conventional wisdom, the main objective of agricultural policies in pre-transition 1 CEE countries was to produce as much output as possible in order to achieve self-sufficiency vis-a-vis agricultural products. Agricultural productivity is considered to be relevant to the free-market economy measurement of agricultural performance because it refers not only to the simple increase in quantity of agricultural output per unit of selected input, but also refers to the efficiency with which agricultural producers use the available resources in order to produce a given quantity of output, which is relevant to the main “cost-minimization” (“profit-maximization”) target of a free-market economy. Moreover, some scholars even suggest that output is a misleading indicator of reform success/failure “because the decline of the agricultural output (in most transition economies) has been a necessary consequence of the market liberalization” (Lifert & Swinnen, 2002, p.12). 1 Therefore, the use of both “Socialist” and “free-market” measures of success provides the possibility to assess the reform outcomes from two points of view – from the “centrally- planned economy” standpoint by using the output indicator as a measure of reform success or failure, and from the “free-market economy” vantage point by using the productivity indicator as a measure of reform outcomes. Regarding transformational periodization, we note that although