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Scientific Papers Series Management, Economic Engineering in Agriculture and Rural Development
Vol. 14, Issue 1, 2014
PRINT ISSN 2284-7995, E-ISSN 2285-3952
171
MODERNIZATION OF AGRICULTURE VS SUSTAINABLE
AGRICULTURE
Dariusz KUSZ
Rzeszow University of Technology, Faculty of Management, Rzeszów
al. Powstańców Warszawy 10, 35-959 Rzeszów, Poland, Phone: +48 17 865 11 20, Fax: + 48 17
862 81 93, E-mail : dkusz@prz.edu.pl
Corresponding author: dkusz@prz.edu.pl
Abstract
The paper shows the correlation between the need to modernise agriculture and sustainable development.
Modernisation of agriculture aiming only at increasing the efficiency of production, if implemented in accordance
with the principles of sustainable development, enabled reduction in the negative external effects. Modernisation of
agriculture is supposed to ensure productivity growth without imposing any threats to the natural environment and
the well-being of animals, reduced impoverishment in rural areas as well as to ensure food security, growth in the
profitability of farms, improvement to the efficiency of use of natural resources. Therefore, in the near future, the
agriculture – environment relation will be subject to change taking into account, on the one hand, concern about the
natural environment, and, on the other, pressure on increasing the efficiency of production. The above challenges
will be addressed by the need to implement efficient and, at the same time, environmentally-friendly production
technologies and relevant legal instruments which oblige agricultural producers to protect the natural environment.
Key words : modernisation of agriculture, production technologies, sustainable development
INTRODUCTION
Modernisation of agriculture is a process of
transforming agriculture from traditional
labour-based agriculture to technology-based
agriculture [25]. It is one of the fundamental
issues in agricultural policies, particularly in
countries, where agriculture is less developed.
We can see that in many countries agriculture
is a sector of economy which keeps a greater
distance than the remaining sectors from
modern solutions in the areas of: production
technology and organisation, implementation
of modern technological and IT solutions as
well as management methods, but also with
regard to the utilisation of the institutional
setting. The speed and the scope of the
creation and implementation of modernisation
of farms ensure their permanent competitive
edge. We can also see that low-income
countries are burdened with primitive
technologies, which is both a reason for, and a
consequence of low incomes [3]. Therefore,
the modernisation process and technological
change are regarded as the driving force
behind economic growth. As a result of an
appropriately implemented process of
modernisation of farms, the effectiveness of
management improves, the working
conditions improve and, finally, the level of
satisfaction from the performed work
increases. However, inappropriately designed
or inappropriately implemented modernisation
may bring unfavourable effects.
MATERIALS AND METHODS
The aim of this study is to demonstrate the
correlation between modernisation of
agriculture and sustainable agriculture.
The research was based on mass statistical
data from the World Bank and the Main
Statistics Office in Poland. In the study, the
following research methods were applied:
1. 1. critical and cognitive analysis of the
theoretical frameworks found in the literature,
2. analysis of mass statistical data.
RESULTS AND DISCUSSIONS
Modernisation of agriculture is a continuing
process and it is the essence of progress in
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agriculture and in rural areas. Constant
creation and implementation of new
technologies is used as a standard reference in
differentiating modern agriculture from
traditional agriculture [23]. Agriculture in
economically developed countries has
changed significantly thanks to broadly
understood progress. Implementation of new
solutions in the organisation of farms and of
new production technologies has increased
production volumes, decreased employment
levels in agriculture and lessened the
burdensomeness of work as well as has
brought a better quality of products and has
decreased the environmental nuisance of
agriculture. Beside the increase in the
effectiveness of management in agriculture,
technological progress contributes to the
reduction in the level of risk of management
[16].
Modernisation of production methodology in
agriculture through implementation of new
technological solutions follows from the
presence of the so-called “technology
treadmill” [3, 8, 10]. This results in a constant
need to keep up with technological progress,
or even the need to spearhead this race. When
new technology is being implemented in
agricultural practice, the first farmers –
innovators are those who benefit most. The
advantages of being “the first” are related to
the possibility of increasing agricultural
income. This is a consequence of decreasing
individual costs of production with the market
price typical of the old technology. With time,
the economic gains obtained by innovators
attract new farmers who hope to achieve
similar effects. However, when most farmers
introduce new technological solutions, supply
of a given product increases. The low
flexibility of food demand and the higher
price flexibility of supply often lead to price
reductions. A case in point is the data
describing real prices of selected agricultural
products in Poland in the period 1990 – 2011.
During the restructuring and modernisation of
Polish agriculture, a decrease in real prices
was observed (Fig. 1). Similarly, J.P. Chavas
[7], analysing the evolution of real prices of
agricultural products on the maize, milk and
wheat market in the USA over the past 100
years, reported a persistent downward trend.
Fig. 1. Real prices (PLN) on the wheat, rye and maize
market in Poland in the period 1990 – 2010 (constant
prices in 2010)
Source: author's own data based on statistics from the Main Statistics
Office in Poland
As a result, the main beneficiaries of the
modernisation of agriculture are consumers
and not agricultural producers (Fig. 2). The
area of field Q3Q4BC indicating the
advantages of the growth in production when
new technology is being used is smaller than
the area of field P2P3AC indicating reduction
in the advantages on the part of producers
resulting from price decreases. Only in the
case of producers who experience endlessly
elastic demand are higher profits arising from
technological change wholly attributable to
producers (Fig. 2).
ST0 – aggregate supply in the case of old technology; ST1 –
aggregate supply in the case of new technology; DE – perfectly
elastic demand; DNE – inelastic demand
Fig. 2. Technological change vs. producers' gains in the
case of inelastic and perfectly elastic demand
Source: author's own data
The majority of agricultural products show
low price flexibility of demand and it is for
this reason that in the long run agricultural
producers seem not to benefit from
technological progress. Agricultural producers
adapting new technologies which reduce
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individual costs, and increase productivity.
New technologies cause a transfer of
aggregate supply, as a result of which prices
go down. In the end, farmers may face a
situation which is worse than that existing
prior to the technological change [3, 8, 10,
12]. Empirical data suggest that an increase in
well-being resulting from technological
progress in agriculture is captured” as
consumer surplus resulting from lower prices
and not as producer surplus [1, 12, 20].
The importance of agricultural progress
results from its effects, including, above all:
(i) quantitative increase in production, (ii)
reduction in individual costs of production
and (iii) increase in production potential. The
benefits of farms arising from the
modernisation of production methods
consisting in the implementation of broadly
understood technological progress in the short
term lead to an increase in agricultural income
and/or a decrease in demand for factors of
production. However, in the long run, due to
the technology treadmill mentioned above, the
benefits are difficult to maintain. Because of
the low flexibility of demand for agricultural
products, the benefits are obtained mainly by
food consumers. In the long run,
technological progress does not always lead to
an increase in agricultural income. After a
certain kind of innovation is commonly
introduced, all farms may have lower
profitability than prior to this change. Despite
this effect, however, farms are doomed to
permanent modernisation. Ignoring this
process may result in an even greater
reduction in income than in the case of
continuous implementation of modernisation.
Industrialisation and modernisation have
significantly changed agriculture, shifting it
towards new technologies which enable
production of a substantial number of
products in the most effective way possible.
This has caused a substantial increase in the
concentration and specialisation of
production, changed the structure of factors of
production, caused a reconstruction of
agrarian structures as well as has created a
new organisation of production processes.
Over the past few decades, modernised
agriculture, thanks to an increase in the
volume of agricultural production, has
brought the possibility of feeding an
increasingly greater number of people
worldwide as well as famine reduction [2, 3,
5, 6, 7, 18, 19, 24, 26]. However, the
industrialisation and modernisation processes
have upset, in many respects, the ecological
balance. Industrialised agriculture has caused
a radical decrease in the number of farms and
employment levels in agriculture, reflected in
greater migration from the countryside and
the growing problem of overt and covert
unemployment. Modernisation of agriculture
may also equal a greater threat to the natural
environment, lowering of the quality of food
products and increased social costs of
production [4]. In connection with the above,
apart from the many benefits related to the
modernisation of agriculture, we may witness
undesirable ecological as well as social and
cultural effects, and those related to food
consumption, particularly in the case of an
inappropriately implemented modernisation of
agricultural production (Fig. 3).
The direction of the development of
agriculture which has been pursued so far and
which has been based on the criterion of
microeconomic effectiveness (aimed at
maximising economic gains) has been subject
to criticism.
Fig. 3. Inappropriate modernisation of agriculture vs.
social and cultural as well as environmental problems
Source: author's own data
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The dominance of economic goals, including
the pursuit of the maximisation of profit, leads
to an upset ecological and social balance.
Private and economic understanding of the
rationality of conduct usually does not
correspond to general social (global) rationality.
What is beneficial to individual entities, i.e.
on the microeconomic scale, is not always
beneficial to all, that is on the macroeconomic
scale. For this reason, it is necessary for one
to seek a compromise, taking into account
both the producer's interests and the interests
of society. Figure 4 shows a theoretical model
which enables the determination of a social
optimum. This model entails a comparison of
economic gains with the costs of
environmental nuisance. The producer's
optimum is at N2, where the volume of
production results in the maximum profit
(marginal profit equals zero). At the same
time, social costs, such as, for instance, soil
erosion, elution of nitrates, disappearance of
species, poorer product quality, deterioration
of the well-being of animals and growing
environmental pollution. The social optimum
N1 is found at the intersection of the marginal
gains and the marginal social costs. Thus, it is
the optimal level of intensity of production,
taking into account not only the producer's
interests, but also ecological and ethical goals.
The goal of sustainable agriculture is to
ensure the possibility of attaining the greatest
gains possible, both private and ecological. At
the same time, the level of the achievable
private goods in the case of sustainable
agriculture is lower, but it allows one to
achieve social benefits (public goods).
Fig. 4. Determination of the social optimum from the
point of view of an individual producer depending on
environmental nuisance
Source: author's own data based on: [17, 22]
An essential question arises here: do the
regulations and restrictions related to
environmental protection or the well-being of
animals lead to increased individual
production costs, decreased individual
efficiency, reduced agricultural income and,
as a consequence, reduced effectiveness of
management? The idea of constant conflict
between environmental goals and economic
goals stems from the static view on
environmental regulations, where products,
technologies, processes and consumers' needs
are constant. In this static vision economic
entities minimise individual production costs,
while environmental protection regulations
inevitably increase these costs. However, over
the past few decades, the competitiveness
paradigm has been shifted from the static
model towards the dynamic one. In the
dynamic model, the new paradigm is based on
innovativeness. Appropriately designed
environmental protection regulations may
lead to innovations which can balance the
costs related to compliance with these
regulations. Environmental protection
regulations should aim at improving the
effectiveness of the management of resources,
rather than focus on limiting pollution. Such a
policy promotes both ecology and
competitiveness of economic entities [21].
The necessity of sustainable development in
agriculture is motivated by the dissatisfaction
with the present state of affairs, but it also
follows from the benefits arising from the
implementation of modern, environmentally-
friendly technological solutions. Drastic
changes which have occurred in agriculture
over the past 100 years have resulted from
external stimuli and they have been a response
to social needs. It is difficult to agree with the
claim that science and technology are by
nature anti-environmental [26]. Studies by Y.
Hayami and V.M. Ruttan [13] as well as Z.
Griliches [11] have demonstrated that
technologies have evolved and have been
adopted in response to external stimuli. In
situations, where new production technologies
harmed the natural environment, this was
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often a result of the absence of legal
regulations or the lack of incentives
promoting harm prevention. The reasons
behind this state of affairs can be found in
misguided policies, dysfunctional institutions
and a dysfunctional control and management
system. An exceptionally high number of
negative external effects related to the
modernisation of agriculture can be seen in
developing countries, particularly in the south
[9].
Fig. 5. Global grain crops in the period 2002 – 20012
(Hg/ha)
Source: author's own data based on statistics of The World Bank
Fig. 6. Consumption of mineral fertilisers [kg/ha of
arable land] in the period 2002 – 2009
Source: author's own data based on statistics of The World Bank
A vital role in ensuring sustainable
development of agriculture is played by
present-day research which enables mitigation
of many unfavourable external effects related
to modern agriculture. A case in point is that
of grain crops in the period 2002 – 2012 (Fig.
5), which show an upward trend both globally
and in individual regions (global growth by
17.7%, EU 4.3%, USA 6.8%, high-income
countries 11.7%, low-income countries
12.0%). At the same time, consumption of
mineral fertilisers showed varied trends (Fig.
6). Worldwide, an increase by 26.1% in the
consumption of fertilisers was reported;
however, a significant rise in the consumption
of mineral fertilisers was observed in low-
income countries (25.2%). On the other hand,
in countries like the USA, consumption of
mineral fertilisers grew by 7.8%, while high-
income countries recorded a mere figure of
0.9%. In the EU, consumption of mineral
fertilisers decreased during the period under
analysis by 12.7%, with an increase in the
level of crops by 4.3%. This may indicate
that, especially in rich countries witnessing
social pressure on environmental protection,
one implements production technologies
which enable reduction in the negative effect
on the natural environment and maintenance
of high production efficiency. Concern about
the natural environment should lead to
technological change oriented both towards
“repairing” the environment and preventing
the negative impact that agriculture has on the
natural environment. Priority should be given
to production technologies which ensure
increased efficiency and sustainable use of
natural resources.
What is also significant is the search for
optimal technological solutions taking into
account local conditions of agricultural
production. The variety of environmental and
climate conditions as well as social and
economic conditions suggests that
technological solutions must be diversified in
space and time as well as adjusted to the
specific conditions of a given location.
Uniform solutions to production problems
which occur in agriculture are impossible.
Development of strategies which promote
initiative and enterprise among farmers,
facilitate adaptation of new technologies and,
further, facilitate farmers' application of
knowledge and practical skills in the
development of new technological solutions is
a key challenge for scientists, political
decision-makers and local activists.
One of the ways in which problems related to
the modernisation of agriculture can be
solved, consisting in the need to combine an
increase in the effectiveness of production
with the reduction in the harmful effect of
agricultural production on the natural
environment, is the application of high-
precision technologies. They are technologies
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which enable the application, from the very
beginning, of the exact number of means of
production according to the real needs of
animals and plants, taking into account
variable environmental conditions.
Comparing the profitability of different
production technologies in agriculture, M.
Khanna and D. Zilberman [15] demonstrated
that high-precision technologies lead to an
increase in income, reduction in variable costs
and less environmental nuisance, but, at the
same time, that they also contribute to an
increase in constant costs. The possibility of
using these technologies depends on whether
an increase in efficiency, reduction in the use
of means of production and reduction in
environmental pollution are greater than the
increase in constant costs. Whether net
positive results are obtained depends on the
level of acceptance of high- precision
technologies. One of the reasons why these
technologies are not so commonly adopted,
which is socially optimal, is the fact that
environmental pollution does not affect
directly the farms that generate it. The main
reason for environmental protection problems
in agriculture is the fact that producers do not
take into account in their economic
calculations the social costs related to their
production choices. This, in turn, results in the
lack of interest in investments in production
technologies limiting the negative impact on
the environment as well as excessive use of
means of production in the applied
technologies (e.g. excessive irrigation,
excessive use of chemicals) [26]. In this
situation, it is necessary to implement legal
solutions which enforce environmental
protection as well as an increase in prices of
agricultural products or an increase in prices
of means of production, thus contributing to
greater economic effectiveness of investments
in high-precision technologies. An additional
factor which brings about the need to take into
account ecological aspects in decisions related
to production is the growing ecological
awareness of consumers. Obtaining
information about the pro-environmental
activity of economic entities may increase
demand for its products and, at the same time,
force these entities to take initiatives aimed at
self-regulation and limitation of activities
which harm the natural environment [14].
CONCLUSIONS
What matters in the development of
agriculture is the search for sustainable
agricultural systems taking into account not
only economic and social goals, but also
ecological ones. This task is a difficult
enterprise because the goals often exclude
each other. On the one hand, one strives to
achieve a high rate of production efficiency
growth, but on the other, there is a need to
ensure just distribution of income and to take
into account environmental aspects when
making economic decisions. Identification of
potential areas of conflict enables one to seek
a compromise as well as to pursue a relevant
development policy and design its
instruments. One should also reject the notion
that economic growth is permanently linked
to degradation of natural resources, while the
lack of growth equals preservation of these
resources.
Modernisation of agriculture which aims only
at increasing production efficiency, if it is
implemented in accordance with the
principles of sustainable development, will
enable one to limit the unfavourable external
effects. Development of agriculture based on
the industrial model encounters obstacles
related to the finiteness of natural resources
and the capacity of the environment in terms
of the consequences of the anthropogenic
impact. Another factor which limits the
industrial development model is the pressure
to include external effects in the economic
calculations in agriculture alongside the
“rights” of farm animals as well as the social
and cultural consequences, such as those
related to the viability of rural areas.
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