**Policy, Research, and External Affairs**

**0-** : **Agricultural Policies** WPS 793

This paper - a pioduct of' the Agricultural Policies D)ivision, Agriculture and Rural Development DLepartment --- is part of a larger eflort in PRE to analyze changes in Eastern and Ccntral European agriculture. Cop)ies arn available f'rcc 1romi the World Bank. 1S18 H-1 Street NW, Washington, DC 20433. IPlease contact ('iccly Spoonier. room .N8-037, extension 30464 (4() pages). October 1991.

The agriculItral1 transition in Eastenl anid Ce ntral Europe is about a ear anid a hal 'old, if wc daite its start from **the** Polish big bang of Januar\ 1990 Likc many a recalcitrant to1ddlcr, it rcluses IL behavc ais expected.

'I'hc agricultural tranisitioin is an essentiial pirt ot stabilization and adjustment in Eastem and Central Europc becausc agri.ultural sectors are large and food is important. But ihc transitioni is not the stor book variety. Agricultural producers cannot spin collectivized straw into marketoriented gold and deliver it in the monming to the ministcr of linance. Thr -upply responsc that many within and outside **ihc** regioni expected to emergc early and cxpeditiously is complicated by the removal of consumner subsidics and constrainied cxport demand.

In an atmosphere of acute economic uncer- **uiuili) wid** d&Jin-ling farm incomes, the distribution of agricultural land is proceeding. Brooks traces thc liberalization of food prices and the disitibutioni olf'asricultural land to date. A detailc(i exposition of the gencral framework for thc agricultural transition describes the conticxt in "mif **1p1f** ile Iml i.tl/.utilliad die dimsiliullon of laind can be understood. Changes in land tenure and use in Eastcrni and C'entral Europe in 1991 cannot be properl) uliderstood out of'conitext. The essence of' the agricultural transition is the state's withdrawal from its traditional role as residuai ciaimant of (positive and negative) reiits for thc use ol' agricullural resources i'hiis role w ill pass in "tIags to owvners of land. _A_ discussion of the new land laws and distribution ol' land would be incomprehensible without attention to conditions that shape the value of land and the income that owners can carn from it.

The countries of iFastem anid Central Europe operated under a common ideology in the past, but within bounds set by that idcology they exhibited significant diffcrences in agricultural policy and farm organization. To draw lessons that transcend those particularities. Brooks creates a stylized countrN with thc general featurcs of each and the uniqueniess of none. She takes that stylized country though an agricultural transition, indicating how the initial conditions affcct thc path of trans'lion.

Shc concludcs that an agricultural transition when demand is constrained is more difficult to manage than one in which the fruits of instituiiomial cliwaige aund pioductivity growth f-ind rcady outlets. Moreover, although price movements arc not Net clear, it appears that removing subsidics Ol feed, credit, fertilizer, machinery, and energy will movc thc terms of' trade againist agriculture - particularly against the large livestock sector. Tile LicCCi Lo increasc procuctivity win inus be even greater than in the past.

Productivity grovth will be difficult to achieve if'demand is conistrained. An) progress on the demand side - by increasing domestic demanid or improving lperlormance in export markets - \ ill thus **a** ve t major impetus to the institutional clhanges needed on thie suppl) side.

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