Agriculture and the Transition to the Market

Agricultural sectors in Eastern and Central Europe are large, and a substantial number of people are directly affected by changes in producer prices, farm employment, and land ownership. Retail food markets are among the most distorted in the pre-transition economies, and the needed adjustments are correspondingly large. The decollectivization of agriculture and return of land to former owners are among the most dramatic and emotive elements of the economic transition. The agricultural transition requires substantial adjustments on the demand and on the supply sides of the food economy. Decollectivization and distribution of property rights in land is an important component of the supply adjustment, and merits careful attention. The essence of the agricultural transition, however, is the withdrawal of the state from its traditional role as residual claimant of (positive and negative) rents to the use of agricultural resources. That role will pass in stages to owners of land, where it ordinarily resides in a market economy. In this paper we place the agricultural transition in its larger context, and treat the distribution of land more briefly.