2. Systems of Land Management
(Technical and Economic Agrarian Structure)

Agriculture - cultivation and use of the land - is a form of production based on the process of growth of animals and plants. In its original form, man creates food and other articles of consumption by using his labour to cultivate a piece of land. At a very early stage, he attempted to make this work easier by making simple implements and, thus, form capital. Traditional cultivation of the land utilizes, in other words, the conventional production factors labour, land, and capital.

In the modern world - and in rudimentary forms even much earlier - the farmer runs a type of enterprise. His goal is of an economic nature: he produces in order to cover his own needs, to barter, and in modern times, to sell. The modern farmer is tied to the overall society by his enterprise. He is dependent upon supplies and buyers and has to fulfill their wishes and conditions. Modern agriculture is not only an interplay between the soil, solar energy, and labour, but is rather determined by a number of modern factors that originate outside agriculture.

In the endeavour to cope with these factors and achieve as productive cultivation as possible, requirements emerge that cannot be met by the individual farmer. The success of his farming depends, therefore, upon the extent to which his efforts are supported by social institutions that help him in the areas in which he reaches the limits of his own possibilities.

Conventional Factors of Production

The basis of agricultural production and the most important production factor for the farmers is land . By means of it, they can use their labour (and capital) in order to earn their livelihood. In traditional agriculture, more land also means more income and a better life, and increasing the size of the farm was a simpler way of improving the living conditions than farming the existing land more intensively. This was the source of the inclination to buy land that is still found in agrarian societies.

The possibilities of increasing the area of land are, however, limited. Land cannot be enlarged or increased. Land cannot be enlarged or increased beyond that which it is, and when all of the land has been put under cultivation, growing populations lead to continually smaller farms. This is why land has the reputation of being a scarce production factor.

However, "scarce" and "abundant" are relative. Since mankind first began settling, land has changed in its role as production factor. While at the beginning only the natural fertility of the previously untilled soil was present, it was then put under cultivation. The soil has improved over the centuries through the work of man so that more products can be grown on the same amount of land, or ruthless exploitation and negligence have ruined it. In many regions, the productivity of the soil has been greatly improved by artificial irrigation systems, or the crop intensity was increased. These measures reduce the scarcity in the sense that on a given piece of land as much can be grown as previously only on a larger area of land. That this process has not remained without success even in densely populated areas can be seen from the frequently deficient utilization of the soil that can, in some cases, be called wastefulness. The prevailing land and land use laws may play a role in this context as well as the limited technical possibilities in traditional agriculture. This does not change anything in the fact that land in the scope of traditional agriculture is indeed limited, but that this can be overcome to quite an extent. In other words, if the system of land management is improved, the scarcity of land is reduced by more intensive cultivation. An improvement in the agrarian structure creates the precondition for appropriate management and land use systems, a purposeful integration of animal husbandry and much more.

The farmer's major instrument for achieving a good output is labour. Labour has a direct effect if by means of investing a greater amount of it the output is increased. Indirectly, labour can have an effect on the production via capital formation.

In densely populated agrarian societies, labour is an abundant production factor, especially in relation to land and capital. This results, in extreme cases, in land being substituted for by labour. In the case of a scarcity of land, e.g., fodder is not grown as the entire land is needed for growing crops to feed the people. The necessary fodder for the animals is collected by foraging weeds which demands the investment of a great deal of labour. A further consequence of the often unproportionally large supply of labour is rural underemployment. Manpower that is actually not necessary in the agricultural production process is nevertheless retained in the family members. By remaining together, the family supplies a basis for all of the members to exist upon, even if at a lower level. It must be mentioned, though, that that which is produced is consumed, and there is little left for investments.

While quantitatively abundant labour is available, narrower limits exist qualitatively. This has an effect when traditional agriculture is no longer practiced. One peculiarity of an occupation in agriculture is its many sidedness. In his function as a labourer, the farmer cares for his crops and animals in order to achieve a larger output. In his function as farm manager, he chooses between alternative crops and methods, whereby the people in his surroundings influence the type and possibilities of the choice. The family - along with the existing norms, traditions, and religion plays a particularly important role.

With their ability to work, learn , think, and strive for something, the farmers have continued to develop the cultivation of the soil from the digging stick culture of earliest times up to modern agriculture. The rapid introduction of innovations today, however, often takes them to their limits because the existing abilities are not adequate to comprehend the consequences of the changes and to plan and carry out the measures purposefully.

Under these circumstances, the productivity of the labour would be raised if the agrarian structure could develop a more balanced ratio between labour and land. One precondition for this would be to raise the abilities of those cultivating the soil to a higher level.

According to the general opinion, traditional agriculture utilizes little capital. This is also true if one thinks of modern forms of capital. However, if one looks at it more closely one finds that traditional forms of capital are indeed abundant so that a greater use would only lead to a slight increase in productivity. Soil amelioration, buildings, leveling fields, and other forms of capital that are created by the work of the farmer's family are examples. In the single cases they are only small increments in capital stock; however, they add up to significant quantities over the generations and on the many farms.

The need for capital created by work is large - and the chances of capital formation are correspondingly great - if the level of the individual farms is abandoned. However, this leads to unsolved organizational and allocation problems. At the village or regional level, the yield resulting from the invested labour no longer flows automatically to the labourer's own family.

The capital stock is even smaller when new forms of capital are considered, e.g., implements that have to be procured through the market. Adequate agrarian structure forms cannot only reduce the organizational problems involved in non-monetary capital formation but also create paths for the introduction of new forms of capital that could make a larger contribution to production.

Preconditions for Modern Agriculture

The conventional production factors land, labour, and capital are able to provide the farmers with a subsistence, especially if the population is not dense. However, if a noticeable and rapid increase in production is desired, they do not suffice. To do so, further factors are necessary, and these are those production factors that are actually scarce. They cannot be provided by the farmers themselves, but rather must be produced by the society in processes involving a division of labour. Agricultural development is not only dependent upon land, labour, and capital, but rather an interplay between these traditional factors of production and the new factors produced in other sectors of the economy. If agricultural production is to develop beyond the stage of self-sufficiency, an external demand as well as new technologies and inputs that are produced outside the agricultural sector are necessary.

A strong effective demand for agricultural products gives the farmer an incentive to increase his production beyond the level of subsistence. The achievable prices have to be high enough to cover the costs of production and be a satisfactory reward for the involved efforts. Especially the latter is dependent, among other thins, upon the existence of functioning markets.

In early stages of development, an effective demand for agricultural products - not the desire for more food - is often limited because the number of buyers (due to the widespread self­sufficiency in rural societies) is small and because of the limited purchasing power of the purchasers. Furthermore, the demand in most regions is limited to cereals. Perishable goods can, on account of the underdeveloped transport and storage systems, only be produced in the close vicinity of cities. In case no opportunities exist for exporting the produce, the size of the domestic demand sets the limits of the development in agricultural production.

Before the domestic demand can be stepped up, the non-agricultural sectors have to be developed in order for the necessary purchasing power to be there. This development in industry, trade, and crafts is, on the other hand, the precondition for an increase in agricultural production because inputs are necessary that are produced outside the agricultural sector such as commercial fertilizer, implements, and services. To quite an extent the modernization of agriculture is concerned with supplying energy. Fossil fuels play a particularly important role in production increases.

Modernizing agriculture .always means an increased interlacing of agriculture with the other sectors of the economy. In order to achieve lasting increases in agricultural production it is necessary to leave the level of an economy based on self-sufficiency and enter a stage of agricultural production interlaced with the market. In this process, the market prices are the incentive and orientation for the farmers; these, however, simultaneously raise the involved risk. Although farmers always had to face production risks, which could be mitigated if needed by tightening one's belt, the modern producer of agricultural products is additionally faced by a marketing risk and technical risks owing to the new procedures that are ill-adjusted. The risk is also much larger since the externally purchased inputs have to be paid. Functioning markets are a precondition to make the risk bearable. The agricultural commodities markets will have to be expanded and made more dynamic in order to fulfill the conditions of a demand backed by strong purchasing power that is needed to develop modern agricultural production.

A higher level of agricultural production, stimulated by the increasing demand, is the result of new technologies in agriculture, in other words, new methods of "how to do it". Techniques, methods, and varieties have to change continually in modern agriculture if stagnation is to be avoided. Such innovations can be copied from other farms and other regions. First and foremost, they are the result of research and experiments. The development of fertilizers and pesticides, new high yielding varieties, machines, implements, and irrigation methods are examples of new technologies in agriculture. Since in agriculture production there is a close interrelation between various factors and practices, changes should be made together if possible. The simultaneous introduction of a package of innovations has a greater effect. On the other hand, sometimes only one factor has a limiting effect and changing it can raise the productivity of the entire system. Frequently it is the question of new inputs that have to be purchased, and since these are often nondurable goods it is necessary to continually buy them. Usually it is necessary to simultaneously employ a whole package of new inputs. Therefore, many goods have to be purchased so that it results in a strong interlacement with the rest of the economy. Modern agriculture is no longer simply the result of the farmer's struggle with his land, but rather it is also influenced by the activities of factory workers, scientists, and merchants who make their contribution to agricultural production indirectly through the division of labour. Modern agricultural production is part of a closely knitted all-inclusive economic system.

For new inputs to be successful, it is important that they are available everywhere; in other words, that there are functioning supply markets. They also have an effect on the conventional production factors. If the innovations are lumped together, they often bring about a change in the entire production process and cropping system, e.g., as a result of economic and organizational considerations or conditions of crop rotation. The agrarian structure has to five the incentive for the development of such new technologies and for acceptance of innovations. The creation of an institutional framework that facilitates the interlacement of the agricultural sector with the rest of the economy is an important aspect.

Institutional Support for Agriculture

The incentive created by a demand backed by purchasing power results in the modernization of agriculture on the basis of the existing technological innovations. In this manner, a slow but steady increase in agricultural production has taken place over the centuries. If - as today all over the world - rapid development is the goal, it is not enough to leave this process to itself. Instead, it is necessary to intervene in this process by forming and promoting it. In order to do so, a number of service and support institutions are necessary.

The new technologies that are needed in order to modernize agriculture will only evolve and be developed to the extent needed if the agricultural research facilities are adequately developed. Traditionally, research has mainly been concerned with the problems of large farms and crops for export. The tasks and goals will have to be changed. In addition to central research facilities, an infrastructure of experimental stations that study the applicability of the innovations under local conditions is also necessary. The system character of agricultural production makes it necessary for agricultural research to not only study single smaller problems, but also to deal with the combination of individual results into applicable procedures that can be employed for practical purposes.

The more intensively new technologies are presented to the farmers, the sooner they are accepted in practical agriculture. Agricultural extension services are the indispensable tool for this purpose. Their organization and methods have to be adapted to the type of farm. Their content should not remain limited to the agricultural production aspects, but should also include economic and management questions and - as the farmer - keep the entire farm in mid. The more formal education the farmers already have, the easier the extension service personnel's job will be. School education accelerates the learning process, especially if it is relevant to development.

New technologies cost money. Industrially fabricated inputs that have to be bought play a role frequently. This creates a financial problem. The speed at which they are accepted and applied depends on how much credit is available to solve the financial problems and how easy it is to receive credit as well as whether the conditions of the loan meet the farmers' needs, especially regarding the important short-term credit loans. Credit, though, can only accelerate the process if the goods that have to be financed are available on the market.

Thus we come to the market for inputs and agricultural products. The existence of marketing and supply facilities; a system that allows mediation between producer and consumer; and an unproblematic, trustworthy market not only animates the farmers to take advantage of the potential in modern agriculture. Efficient distribution channels have an indirect effect on the prices and, thus, on the incentive to develop beyond the stage of traditional agriculture.

In view of the large number of fairly small producer sand buyers in agriculture, group activities are frequently necessary. At the least they present a good opportunity to offer services less expensively. Internationally, therefore, the various types of cooperatives have a good reputation. The more help in organization, management, financing, and technical aid granted to activities without the help being dictated from above or having a paralyzing effect on initiative, the sooner the joint activities will be accepted.

The form the support institutions take is in each case specific to a particular culture and dependent upon the historical development. The extent to which this support is given has an important influence on farming. The promotional institutions make up, therefore, an essential element in the agrarian structure.