The Irrational and Polyopolistic Land Use across the World: An Evolutionary Political Economy Approach to a Microeconomic Obstacle Ignored by Nobel Laureate Schultz and Nominee Hirschman

Section I challenges Schultz's assertions: (1) small farmers are rational; (2) low income countries saddled with traditional agriculture have not the problem of many farmers leaving agriculture for nonfarm jobs; (3) part-time farming can be efficient; (4) economies of scale do not exist in agriculture; and (5) investment in human capital counts much more than institutional changes and is the key to agricultural growth. It reveals that ever since the 1950s, after the land reform, the irrational and polyopolistic land use by able-bodied part-time and absent (mainly small) farmers earning higher off-farm income but unwilling to lease their insufficiently produced land beyond family consumption need to full-time farmers, has evolutionarily been a global obstacle with both public and private land ownership, traditional and modern agriculture, fragmented small and consolidatorily enlarged land, low and high income economies, food under-self-sufficiency and overproduction, and developing and developed countries, albeit land property rights have been well defined and sale/lease allowed, causing many negative consequences on agriculture, rural development, income distribution, government expenditure, competition, trade, environment, etc. (Polyopoly is designed by the author to mean the control by many sellers in contrast to monopoly and oligopoly). It has become a microeconomic root of the three persisting global macroeconomic problems: under-self-sufficiency, overproduction and agricultural protectionism. Evidence in Asia, Africa, South and North Americas, and Europe is cited. Section II argues that Hirschman ignores that it has hampered the linkage effects. Section III presents that only China has successfully exercised effective and appropriate solutions, but under public land ownership which may be unacceptable to others. Section IV indicates that effective and appropriate solutions have not been adopted under private land ownership world-wide. It presents two effective (but not appropriate) Western European legislations and their shortcomings at the under-self-sufficiency stage, and fundamental and derived dilemmas at the overproduction stage at which, without a solution, the EU (and many other developed nations) has exercised protectionism by a coupling between subsidies and production (which together with price supports, export aids and import restrictions has made their farmers less competitive and harmed their consumers and taxpayers and the developing countries). In July 2002 the EU proposed a complete decoupling, but retreated in June 2003 to allow the Member States to keep the coupling, due to no solution to avoid production abandonment caused by part-time and absent landowners' refusal to lease their irrationally and polyopolistically used land to full-time farmers at low rents, which has just exposed this microeconomic root of protectionism. Section V proposes effective and appropriate solutions for both developing and developed countries at both under-self-sufficiency and overproduction stages without changing private land ownership to achieve the following aims at the same time: minimize/abolish/prevent protectionism, while avoiding production abandonment and overproduction; reinforce full-time large farmers, whereas not crowding part-time and absent small farmers out of agriculture; reach/maintain basic self-sufficiency in cereals, meanwhile promoting multi-functionality of other agricultural and rural sectors and improving the environment. Section VI predicts the promotion of fraternity among nations if the proposed solutions could be adopted globally. The author's analyses and suggestions have received positive responses from the EU, EU accession countries, CABI, OECD, UN, CSD, FAO, UNEP and World Bank.

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Paper presented at the International Workshop on Evolutionary Economics, Buchenbach, Germany, October 4-8, 2005

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