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2nd Revision

Introduction

 
Arguments - Intervention Costs
Agricultural Policy
From time to time it seems necessary to remind ourselves that nothing can be more costly than a wrong policy. In the 20th century alone, hundreds of millions of people have been killed in wars, have been victims of genocide, have been murdered in concentration camps, have died in man-made famine, or have died prematurely because of poverty and untreated illness. No natural catastrophe in recent history comes close to the death toll of wrong political decisions, unrealistic political programs, and hate-based ideologies. Two world wars, numerous regional conflicts with millions of casualties, a few dozen deadly famines triggered by policy failure, and the ongoing economic development disaster in some parts of the world can all ultimately be traced back to faulty political decisions and ideologies - usually made or promoted by a ruling "elite." China has had its share of policy-made disasters, from the the "Great Leap Forward" to the "Cultural Revolution."
On a smaller scale, we can also say that a wrong agricultural policy can be more devastating than any hardship imposed on the farmers by Nature. The big agricultural disasters in our century have usually been caused by unrealistic policies based on utopian ideologies, such as the consistently disastrous consequences of collective farming in regions as diverse as Russia, Mozambique, Cuba, Cambodia, and China. On the other hand, there is clear evidence that a relatively small set of low-cost policies can almost immediately trigger agricultural growth. The following are a few low-cost policy measures that could be implemented to further improve China's agriculture:
WB00860_.gif (262 bytes) The privatization of agricultural land would certainly strengthen sustainable forms of agriculture. If farmers owned their land and could pass it on to their children, they would make more long-term investments in soil quality, irrigation systems, or the physical characteristics of their fields (terracing, removal of stones, leveling).
WB00860_.gif (262 bytes) A market for agricultural land would eventually solve the structural problems of China's small-scale farms. A free land market would facilitate the efficient allocation of this very scarce resource. In the long run, only the concentration of cultivated land in a smaller number of farms that are economically viable will increase productivity. Of course, a market-oriented land policy in China would have to include checks to prevent some of the expected negative side effects. First, there would have to be restrictions to prevent the sale of agricultural land for nonagricultural purposes. Second, free land markets could be only introduced in those regions where rural industries have created nonagricultural job alternatives for the farmers.
WB00860_.gif (262 bytes) A price-based system of water allocation could help to reduce waste and accelerate the development of more efficient (irrigation) infrastructure. Here again, only a gradual introduction of price elements within certain sectors would be possible. It also would make sense to separate markets for urban, industrial, and agricultural water withdrawal; otherwise, the agricultural sector might have no chance to compete with capital-rich industrial and urban users. 
WB00860_.gif (262 bytes) Investment in education, training, and research is usually one of the most cost-efficient policy measures, because it has numerous positive side effects and its impact is long term. The Chinese government recognized this opportunity some time ago, and has invested heavily in basic agricultural and bio-technology research. However, training of farmers in modern agricultural technology and management, especially in more remote areas, could certainly be improved. Even more important would be additional opportunities for technical and business-oriented training in rural areas to prepare the sons and daughters of millions of small farmers for new jobs outside the agricultural sector.
Of course, all these measures have costs that can and should be calculated in detail. However, experience from other developed countries suggests that the benefits of these measures would certainly outweigh the costs.
Related Arguments

Agricultural Policy:   Trends     Impact    Data Quality    Prediction Error    Intervention Possibilities    Intervention Costs

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Revision 2.0 (First revision published in 1999)  - Copyright 2011 by Gerhard K. Heilig. All rights reserved. (First revision: Copyright 1999 by IIASA.)