The Farm Size – Productivity Issue

During the discussion of the pros and cons of land reform, the old debate on the relation of farm size to productivity experienced a revival.

After World War II, the consensus was that small farms exhibited the highest productivity while physical output and labour investment decreased with increasing farm size. This assumption corresponded with the empirical findings. It is worth mentioning that at the time landlords, large farms and smallholders employed – with only a few exceptions – traditional technology.

There are indications that this opinion no longer holds true to an increasing extent. The many technological changes and the expansion of commercial farming seem to have changed the picture. Using the same technology as employed on the large farms, the smallholder was more productive in the past because of his greater labour input. During the 70s, however, progressive and commercial farmers started to employ a higher level of technology. The small farmer was frequently unable to compete, especially as the rapid sequence of new technological inputs required investments that went beyond his capacity. During the initial years, in particular, the new technology was not accessible to him, and the low level of information led to false investments resulting in financial losses which prevented future investments.

An indication of this process is the sequence of rapid technological inputs within the process of the so-called ‘green revolution.’ The new varieties required the purchasing of expensive seed at the beginning. Soon the existing irrigation facilities had to be improved by the addition of tubewells in order to ensure the availability of a timely and adequate supply of water. The low resistance to insects and pests necessitated the use of chemicals. Once seed and water were under control, the traditional bullock plough proved to be the next bottleneck in the attempt to increase productivity, and thousands of tractors with machines were bought within a short time. This made it unnecessary to employ great numbers of tenants who owned bullocks, and very many were dismissed. This, once again, led to the substitution of herbicides for manual labour, and the introduction of mowing and threshing machines to carry out the harvest work.

It is obvious that most of the smallholders could not cope with such a large volume of investment requirements within a short time. Quite a number had to give up farming following financial losses due to failure, or because they realized that they could not cope with the new requirements.

This was at least in part due to the absence or imperfection of institutions for assisting smallholders to overcome their limitations. A more efficient cooperative system of credit, supply and marketing as well as of supporting production by group activities, the use of machinery etc., could have led to other results than those which we experienced during the 80s.

But most likely the process will go on; perhaps it will even increase on the basis of a second ‘green revolution’ caused by biotechnical development. Who will be able to pay for the improved seed that will be primarily offered by private firms?

Today it appears as if middle-sized farms turn out the highest productivity, while smallholders are increasingly unable to provide their cultivating family with a decent living. Due to shrinking farm size, they have to look for additional income, thus taking labour input away from the farms. The younger generation in particular is losing interest in cultivation, a process that will be discussed in detail later.

One can certainly still find traditional landlords with all of the consequences of the system, but more and more frequently they (and their sons) take up intensive commercial farming instead of extensive cultivation employing small tenants. By doing so, they increase, or at least maintain the size of their standard of living even after the size of their landed property has been reduced. At the same time, they do what governments have always asked them to do: increase the production of food in order to satisfy the needs of the urban population. As a result, an important argument in the land reform discussion – the low productivity of large farms – ceases to exist.


next: 4. On Ownership and Tenancy