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The document Agenda 21 of the United Nations on Sustainable Development in Chapter 14 calls for "major adjustments in agricultural, environmental and macroeconomic policy" and for the integration of different policies. A great number of similar calls can be found in documents of other international organisations (FAO, OECD, Council of Europe, EU etc.). Still, it seems that no real progress has been achieved so far in reforming agricultural policies and in integrating different policies.


The author believes that the main reason of this situation is the prevailing false concept of agriculture and rural areas which is a result of the disintegration and substitution processes in the development of industrialized agriculture. Disintegrating agriculture from its natural environment and the rural area in which it was operating, the substitution of industrial inputs for natural resources became an aim just for its own sake to make agriculture more “modern” or more “industry like”. Finally, agriculture and rural areas became just mere receptacles or markets for products and services of industrial companies located in towns and industrial centres. The utilisation of local natural and human resources decreased, less and less value added was produced by agriculture. In this way its contribution to the maintenance of rural areas decreased rapidly. This so called “development” proved clearly not being sustainable.


In order to have a really sustainable agricultural development a radically new approach is needed. Agriculture has to be reintegrated with its natural resource base and with rural areas. The main objective of sustainable agriculture has to be the production of the greatest amount of value added by the efficient utilisation of local natural and human resources. To translate this new concept of agriculture into practice a radical reform of agricultural policy and intensive research to find new possibilities to utilize local resources is needed. The paper explains in more detail the non sustainable "industrial input transforming" and the sustainable "resource utilizing" concept of agriculture.


The need for a real progress towards sustainable agricultural and rural development


The Agenda 21 document of the United Nation on sustainable development declares that "Major adjustments are needed in agricultural, environmental and macroeconomic policy at both national and international levels." It also stresses the need to integrate different policies into "a coherent national policy framework".


A great number of similar statements and declarations can be found in the documents of other international organisations. There is also a vast number of books and journal articles on different aspects of sustainable agriculture and the relationships between agriculture and rural areas. Here only a few examples can be mentioned.


OECD has paid increasing attention to agricultural policy reform during the last two decades. Ministers of agriculture of the OECD member countries adopted a set of policy principles in March 1998 including the need of governments "to take actions to ensure the protection of the environment and sustainable management of natural resources in agriculture” (OECD, 2001). This most recent report concludes that agricultural policies have not changed enough and calls for integrating the different, sometimes contradictory policies (i.e. agricultural, environmental and other policies).


The situation is similar in the European Union, however the need for policy integration and for a radical reform of the CAP is well recognized. The often cited Cork Declaration in Point 2 calls for an integrated approach to rural development. It would be too long to overview the great number of statements and declarations of EU leaders and politicians which all call for more reform of the CAP in order to move agriculture towards sustainability and to ensure a greater contribution of it to rural development. Franz Fischler (2001), the Commissioner responsible for agriculture and rural development, declared: “common agricultural policy has also changed, but not enough”, and: “We must ensure that the much-touted sustainability is translated into practice”. Molterer (1998) for example emphasizes that the European modell of agriculture is a sustainable and multifunctional agriculture in which the different functions must not be separated but have to form a whole (i. e. should be integrated). The Committee on Agriculture and Rural Development of the Parliamentary Assembly of the Council of Europe has also been intensively working on the problems of sustainable agricultural and rural development and has produced a major document, the “European Charter for Rural Areas” (Council of Europe, (1996)).


In spite of all these works and declarations no real progress has been achieved yet. The CARPE (Common Agricultural and Rural Policy for Europe) concept presented by a group of experts during the discussions on the Agenda 2000 document (European Commission, 1997) in which the removal of all the subsidies coupled with production was finally rejected by the European Council (Berlin, March 1998). Willis and Bryden (1999) in their analysis of Agenda 2000 drew the same conclusion: “When compared to the vision expressed in the Cork Declaration on Living Countryside, what is called rural development in Agenda 2000 seems better described as agricultural policy paying lip-service to rural development”.


These few examples show that sustainable agriculture and rural development are mostly just a fashionable topic for scientific discussions and declarations of politicians rather than a concept realized in practice. It seems to be right time now to try to answer the question: Why has so little progress been achieved in “translating sustainability into practice”?


2. The present situation: non-sustainable agriculture


As a result of disintegration and substitution processes in the course of the development of agriculture it has become separated from its natural environment, and from the rural areas in which its operates. Different branches of production has become specialised and separated from each other. Food processing was removed from rural areas into towns. In this way, value added produced by food processing has also been removed from rural areas. Parallel to this disintegration process, industrial means of production and industrial inputs have been substituted for natural, human, farm produced and other local resources to an ever increasing extent. In this way, the scope of agriculture has been narrowed to transformation of industrial means of production and inputs into some fresh food and raw materials for industries located in towns. Agricultural labour, natural resources and other local resources has become less and less important and for this reason they have got devaluated or completely lost their value while industrial inputs are relative more and more expensive (i.e. the well-known problem of price disparity). The relative role of agriculture in the national and rural economies has decreased dramatically. Rural people were forced to move to towns to find jobs, depopulation of rural areas in some cases reached a frightening level. While specialisation and the use of more productive means of production can be justified to a given extent by the need of feeding more people but later on, the use of more and more industrial inputs, larger and larger machines, more and more industrially processed feeds for animals, substituting artificial resources for natural ones has been continued just for its own sake following the directives of the prevailing economic development and modernisation theories according to which agriculture is just one among the other branches of industrial activities, and farms have to be organised and operated as business enterprises.


As a result of this so called “development” or “modernisation”, agriculture and rural areas have become just mere receptacles or absorbing markets for industries located in towns. The only function of agriculture and rural areas is to take up the maximal possible amount of industrial products for consumption or to transform them into agricultural products even if there is an overproduction of these products and the natural environment and rural areas are deteriorated or destroyed. We call this concept of agriculture “industrial input transformer agriculture”. This kind of agriculture and the rural areas housing it are just auxiliary to towns and industries and they are clearly not sustainable.


The EU is still following this “modernisation” concept and try to help and force the candidate countries to follow the same direction in spite of the nice talks about rural development and agricultural environmental programs. The internal relations among the element of this “non-sustainable” concept of agriculture and rural areas can be summarized as it is show by Figure 1.


Figure 1: The system of non-sustainable agriculture


This system is not sustainable because sooner or later it would completely exhaust its rural base. This is very vaguely recognised in the concern about the maintenance and development of rural areas. But still there is not strong enough political will to break up this system in which subsidies intended to help farmers are in fact supporting the industries located in towns and causing further decline of rural areas. Agricultural policies which keep up this mechanism including the CAP of EU are deemed as typical cases of “government failure” by some authors in Environmental Economics. (See for example: Turner et al., 1994.)



3. The concept of sustainable resource utilising agriculture


To achieve any real progress towards sustainability we have to depart from the above described concept of agriculture and modernisation. An integrated and multifunctional agriculture has to be developed. The main function of this type of agriculture is to utilise the human, natural and other local resources available in rural areas to produce a diverse mix of products and services in order to supply the highest amount of added value for the maintenance of rural areas. This means that the disintegrated parts of agriculture have to be reintegrated, agriculture has to be reintegrated with its rural and environmental base, and its dependency on external input and output markets has to be decreased. Farming has to be based on the creation, modernisation and efficient utilisation of local resources. Industrial means of production and inputs are to be used only as auxiliary factor to such extent necessary to increase the productivity of local resources, but not for the sake of substituting them. In short, the traditional exogenous way of “modernisation” which is forced on agriculture from outside has to be changed into endogenous type of development.


This concept of agriculture can be termed as “resources utilising agriculture” which is sustainable because it is built on the maintenance and development of its own local resource base. The system of this resource utilising agriculture is summarized in Figure 2.


Figure 2: The system of sustainable resource utilising agriculture.


This “new concept” of agriculture is really very old and the one which had existed before “industrialised” agriculture became dominant. It can be realised only if radical changes in agricultural policies can be achieved. First of all, farmers have to understand that present agricultural policies (including the CAP) in fact are not supporting them but subsidies finally go to industries. Secondly, the politicians forming agricultural policies have to be persuaded that agricultural policy supporting “resource utilising agriculture” is much cheaper than the present system in which first industrial input intensive agricultural production is subsidized, then a great amount of money is spent on repairing environmental damage caused and on rural development. Subsidizing agriculture to produce more value added from its local resource base simultaneously help to maintain viable farms, to protect the environment and to develop rural areas in one coherent supporting system. In this way, integration of different policies called for in Agenda 21 can be realized. Besides, taxpayers’ money could be saved and the agricultural policy would be more efficient.


We can just regret that the basic problem of the concept or the definition of agriculture and rural areas is given very little attention in discussion on sustainable agriculture and on agricultural policy reforms.


Still, it has been encouraging to find a similar approach in a recent presentation of van der Plough and Rooij (2001). They use the term “Capitalist commodity production” for the type of non-sustainable agriculture in which even labour is used as a commodity, and “petty commodity production” for the “resource utilizing agriculture” outlined here. They contrast industrialization with repeasantization as alternatives of agricultural development. But “repeasantization” might easily be rejected as being old fashioned and regress. While the concept of integrated, multifunctional and resource utilisating agriculture is a “modern” concept in the real sense which is using any kind of “high tech” means of production but only to increase the efficiency of mobilizing, maintaining and utilising local resources. The issue of the need to redefine the meaning of agriculture has already been raised in some other publications but there has been almost no response from agricultural experts and researchers. (See for example: Szakál (1997) and Szakál (1999).)


4. Conclusion


According to general economic or modernisation theory, agricultural development means the substitution of industrial means of production and inputs for local human and natural resources. As a result of this kind of “development” agriculture and rural areas became just mere receptacles and transformers of industrial products and inputs. It we want to move towards sustainability the concept of agriculture has to be redefined. In contrast to the industrial input transformer concept, the basic function of agriculture should be the utilisation of the human and natural resources available in rural areas to produce marketable goods and services in order to contribute to rural development with the maximum possible amount of values added. To develop such a “resource utilising agriculture”, which would be really sustainable, agricultural policies have to be changed accordingly.




  1. Council of Europe (1996): Recommendation 1296(1996) on an European Charter for Rural Areas, Strasbourg
  2. European Commission (1997): Towards a Common Agricultural and Rural Policy for Europe. European Economy, Reports and Studies, No.5. Eur-OP, Luxembourg
  3. Fishler, F. (2001): The CAP after Agenda 2000. The achievements and challenges. Opening address for International Green Week, Berlin, 18 January 2001
  4. Molterer, W. (1998): Statement at the Congress of European Agriculture, Ljubljana, 30. Sept.– 2. Oct. 1998. Proceedings of the Congress, 31-35 p.
  5. OECD, (2001): Improving the environmental performance of agriculture: policy options and market approaches, Paris, 51. p.
  6. Plough, van der, J. D. and Rooij, de, S. (1999): Agriculture in Central and Eastern Europe: Industrialization or repeasantization? In: Rural Development in Central and Eastern Europe, Proceeding of Research Conference, 6-9 December 1999, Podbanske, Slovakia, 45-53 p.
  7. Szakál, F. (1997): The need to redefine the meaning of “Agriculture”. Information document. Committee on Agriculture and Rural Development, Parliamentary Assembley of the Council of Europe, Strassbourg, Doc. No. AS/Agr.(1997) 7. 12 p.
  8. Szakál, F. (1999): A fenntartható mezőgazdaság és szerepe a vidéki térségek fejlődésében, A falu, XIV. évf. 23-37 p.
  9. Turner, R.K., Pearce, D. and Bateman, I. (1994): Environmental Economics, Harvester Wheatsheaf, Hemel Hemtead. 328 p.
  10. Willis, P. and Bryden, J. (1999): The implementation of Agenda 2000. In: Rural Areas of Eastern and Western Europe. The Arkleton Trust, Eston, Oxon, 35 p.

The main reason of the slow progress in reforming agricultural policies and farming practices towards more sustainable agricultural and rural development is that the subsidy system is still based on increasing production. The profit or gross margin figures used as indicators of the efficiency of farming activities give wrong signals for farmers.


From the aspect of sustainable and multifunctional agriculture, a value added calculating model radically differs from the traditional accounting approach which is unable to make difference between the origin of inputs and services used up in the production process.


The substance of the value added calculating approach lies in that the actual agricultural supporting system must be changed to be conforming to the multifunctional agriculture’s requirements. Those components of the ongoing supporting system (e.g. products or production methods) which are not multifunctional-conform, must be eliminated from the system. Therefore, not only the supporting system must be modified but the Hungarian agricultural policy’s priorities and the accounting guidelines as well. In a supporting system based on value added analysis, inputs of the farm’s production process are accounted as positive value whereas inputs and services originated from cities and urban regions are accounted as negative value.


For sustainable agriculture the added value produced by farms is suggested as such key-indicator. For the application of this new approach agricultural policies have to be changed accordingly and a number of methodological problems have to be solved.



1. The need for more efficient measures to accelerate the reforms of the European agricultural policies and farming practices: the multifunctional agriculture’s concept


There is a vast literature on sustainable and multifunctional agriculture, a great number of different definitions for it but still no generally accepted definition exists and suggestions for the practical realization of the sustainability concept in agriculture is very scarce. At the same time some experts and responsible politicians express their dissatisfaction at the delay in reforming agricultural policies including the CAP of the European Union. They call for more radical reforms to remove most or all the subsidies coupled with production. This is considered necessary in order to put into practice the “European Model of Agriculture” which is meant to be multifunctional and sustainable agriculture.


To realize sustainable agriculture in practice would need a radical reform of existing agricultural policies both in individual countries and in the European Union at the level of the CAP. To introduce the required radical reform is extremely difficult because it seems to be in contrast with the inte­rests of farmers, but even more with the interest of other groups within the agribusiness sector.


The agricultural policies influence the relationships in the agricultural sector and the environment and determine the direction of agricultural development towards sustainability. Nowadays, to solve the ongoing problems and to create the basis of the multifunctional agriculture, in the European Union and in Hungary, too, there is a need for integrating different, sometimes contradicory policies because on European level the agricultural production supporting system exists parallel with agri-environmental policy, rural development policy and environmental policy. The need for integ­rating different policies and the reform is well recognized.


On the European Union level, there are a lot of efforts to accelerate the reform process which are much highlighted in the reports, speeches and the official documents, and this reform process parallel with the reform of the CAP can lay down the basic of the rural development and the environmental protection, too.



2. Multifunctional agri­cul­tural and rural development


To result the contradictions between the multifunctional agriculture’s priorities, the market orientation and the socials problems of the rural development first of all, we have to define rural areas as the overall systems which has to be sustained and developed. This means that the agricultural sector is just a sub-system of rural areas, which by itself is also a very complex adaptive system having a set of versatile relations with the natural environment and with other sub-systems of the rural area in which it ope­rates. We have to break away from defining the objective of agriculture in particular part objectives which usually are in contradiction with each other (i. e. increasing production, improving the technical level, enhancing the natural environment, increasing rural employment, etc.). We can declare that the overall objective of agriculture is to maximise the welfare of rural people and to contribute to the development of the rural areas. How to make it?


According to systems theory approach, the best solution of the problem is the application of the concept of heuristic self-management in which the controlling organisation uses only a few or ideally only a single key-indicator to influence the behaviour of the whole controlled system. A key-indicator should be chosen which can comprehensively embrace the oveall objective of the agriculture and which has a decisive relationship with all the basic elements of the agriculture. This means, that any change in the level of such a key parameter would result in the change of the whole agriculture accordingly.


We suggest that the produced value added can be the chosen as the key-indicator to measure the efficiency of farming. Consequently, increasing the amount of value added should serve as the priority basis for giving any subsidies to farmers. While value added is not an exact indicator of welfare but there is a deterministic correlation between the increase of value added and the increase of welfare.



3. The added value as a key-indicator for sustainable agriculture


It can be stressed again that without any doubt the increase of value-added results in the increase of welfare for the people concerned, but it still needs some explanation how it can help development towards sustainability of agriculture. First, we have to define the meaning of value added as the concept is used here. For an individual farm value added has to be calculated in the following way:


The total amount of revenues got from the sale of products and services, from subsidies or direct payment got for environmental services, for the maintenance of natural resources and landscape features have to be taken into account. Then, material inputs bought from outside of the farm, depreciation of durable assets which were not built or produced from own resources and the costs of capital borrowed from commercial banks have to be summed up and deducted from the total amount of revenues.


From the aspect of sustainable and multifunctional agriculture, it’s indispensable to set up a value added calculating model which radically differs from the traditional accounting approach. This approach is unable to make difference between the origin of inputs and services used up in the production process.


According to the author, the substance of the value added calculating approach lies in that the actual agricultural supporting system must be changed to be conforming to the multifunctional agriculture’s requirements. Those components of the ongoing supporting system (e.g. products or production methods) which are not multifunctional-conform, must be eliminated from the system. Therefore, not only the supporting system must be modified but the Hungarian agricultural policy’s priorities and the accounting guidelines as well.


In a supporting system based on value added analysis, inputs of the farm’s production process are accounted as positive value whereas inputs and services originated from cities and urban regions are accounted as negative value.


Value added calculated in this way can be increased only by taking one or more of the following possibilities:

  • improving the quality of products and services so that higher prices can be achieved for them
  • using more environmental friendly production practices (which in turn improves product quality as well)
  • rendering more environmental, nature protection, landscape main­te­nance, cultural and social services for the society which are compen­sa­ted through direct payments
  • using more internal inputs produced from own farm resouces (i.e. farm yard manure instead of artificial fertilizers, own produced fodder instead of industrially produced feed mixes, biogas instead of electricity, etc.) Remember that the costs of such inputs are not deducted when calculating value added.
  • diversification of the production structure into existing or new products of higher value added producing capacity.


By choosing any of the above listed alternatives farms clearly would move towards sustainability from the traditional non-sustainable industrialized agriculture and at the same time agriculture would increase its contribution to rural employment and to rural development in general. However, this holds true only if agricultural policy would change accordingly.


The setting up the model contains some methodological problems. The value added as defined above is not easy to calculate from usual input and cost records applied in the present recording and accounting systems. These systems are oriented to record data according to the character of the input or cost items (i.e. materials, labour and depreciation) and not according to their sources or origin. Sometimes it is very difficult to separate the inputs which are produced from own farm sources and which are from outside sources. This means in practice, e.g. how to account in data recording pro­cess those inputs such a seeds or a fodder-plants which are made produced by an improving firm.


In addition, some inputs are produced within the farm but as a result of a few or in special cases of several vertically built up part-processes each using the output of a previous part-process as an input. (E.g., home produced feed mix can contain grain from own production which again was produced both from own and from outside resources.)


Additional problems arise also in calculating objective function coefficients when linear programming models are used to optimalize the pro­duct mix of farms.


Despite of the methodological problems, the advantage of this calculating method is:

  • improving the efficiency of the agricultural supporting system by giving only support or subsidies to the products and services which are complying to the multifunctional agriculture’s requirement, 
  • reducing the number or quantities of those products which are not marketable without any subsidy, 
  • developing the number of complementary products which have got comparable advantage over supported products, and can use the fundamentals of the rural region and the local inputs without compelling the farmers to produce non-marketable products or services, 
  • improving the efficiency of the agri-environmental and rural deve­lopment measures without reducing parallel the social welfare of the rural areas.