International Economic Disintegration

CHAPTER X CHANGES IN THE INTERNATIONAL LOCALIZATION OF AGRICULTURE

THE preceding chapter has made it clear how the increase and spread of agricultural nationalism in industrial countries, on an agricultural import basis, has contributed to the disintegration of world economy. Naturally, there arises now the question of how to explain this development of excessive agricultural nationalism during the last fifteen years. The first answer which suggests itself is that the counterforces acting against the policy of preserving the actual state of agriculture in the industrial countries must have grown correspondingly during the same period. That is to say: it is to be presumed that important changes have occurred in the international differences of the cost of production of the various branches of agriculture and in the competitive strength of agriculture in different countries, which, in the absence of increasing protection, would have necessitated more or less violent processes of agricultural re-adjustment. This leads us immediately to the problem of what changes in the fundamental factors of the international localization of agriculture in its different branches have upset the international competitive conditions during the last fifteen or twenty years. The importance of this problem can hardly be underrated, for by studying it we may hope to gain (1) a better understanding of the recent development of agricultural nationalism, (2) a measure of its costs and limits and thereby a better view of its general effects, (3) an approximate idea of that international distribution of agricultural production, which would correspond to a rational optimum division of labour among the various countries, so that we would have a standard by which to gauge the deviations from normality brought about by agricultural nationalism, and (4) a basis for a constructive programme of alternative policies to that of agricultural nationalism. Unfortunately, the importance of the problem is equalled by the difficulty of solving it. For this reason a special study of the problem is being undertaken, which is too extensive to be incorporated in the present report, so that only some of the main points can be mentioned here.

Roughly, during the last two hundred years, the international localization of agriculture has been fundamentally upset by three successive periods of major changes, of which the present one is the last. The first period is the agricultural revolution of the end of the eighteenth and beginning of the nineteenth century, which initiated a new technique of cultivation and saw a fundamental change in the structure of agricultural production brought about by the introduction of new crops like potatoes, turnips, beets, and green fodder plants and by the replacement of the medieval field systems by the new one of the scientific rotation of crops, which enabled agriculture to adapt itself more freely and swiftly to changing demand. The second period of major change was initiated around the middle of the last century by the rapid development of colonial farming overseas which, owing as much to lower transportation costs as to the lower cost of production of the vast stretches of virgin and uncommonly fertile soil cultivated by the new farm implements, became a source of ruinous competition for staple production in European agriculture. The advantages in cost enjoyed by oversea colonial farming in the production of staple agricultural products were so marked as completely to upset the old scheme of agricultural localization and to lead to a new one, to which European agriculture had to adjust itself, within the limits of the specialization possible in agriculture, by leaving such production more and more to the peripheral zones of world agriculture and turning to that of high-grade foodstuffs, except in those cases where agricultural protection acted against this process of readjustment. It is well known that it was precisely due to agricultural protection that this new scheme of international division of labour in agriculture did not work itself out fully.

In attempting to explain the main features of the third and last period of major agricultural change, the one in which we find ourselves to-day, it is well to be more explicit. This is all the more necessary, since the present period appears to be particularly complex and incapable of being described by a simple formula. The following are the main points to be considered, and in that order:

(1) Changes in the technique of agricultural production. This is made the first point, because the changes in technique of agricultural production which have occurred during the last twenty years have been especially spectacular and, therefore, familiar to practically everyone. For the same reason we can be rather brief, without going to the length of giving a complete account even of the principal innovations which have been developed and applied in our time. Some of these—especially the wide-spread use of the tractor, the combination-harvester and other mechanical devices—amount to the mechanization of labour processes which, under certain conditions, has gone far to reduce the average unit cost of production in those fields where a high degree of mechanization is possible. Since, however, the conditions for applying such a mechanization are far from uniform in the different countries, the technical innovations just named gave at least a temporary advantage in localization to the regions best fitted for mechanized large-scale farming. It was just this which, in the ’twenties, brought about the enormous extension of low-cost grain production to the wide semi-arid spaces in both Americas and in Oceania, and thus created a ruinous competition for that part of the world’s grain production which was less suitable or temporarily less willing to adopt this degree of mechanization.1 While mechanization is generally confined to crop cultivation, the electrical milking machine should be cited as a rare, but important, example of mechanization in the field of animal husbandry. Of another character is the progress made in the biological or biochemical field of agricultural technique (more and better use of artificial fertilizers, better handling and wiser use of manure, fodder silos, better feeding diets, better animal breeds, development of new plant varieties, &c.).

All these innovations meant better gross or net returns in agriculture, other things being equal. What interests us here, however, is the influence they had on the localization of agriculture and on the differences in cost of production, differences which they may create, enhance or diminish. Such an influence is obvious in the case of the growing of new plant varieties more resistant to an adverse climate or to unfavourable soil conditions, and therefore apt to lead to a wider spatial diffusion of production. This is clearly an innovation which tends to make for greater ubiquity of production. In other cases, the influence on localization depends on the conditions under which innovations can be applied. Here the size of farms, in particular, gives rise to very important and interesting considerations. It is obvious that some of the new technical devices cannot efficiently be utilized by the smaller farm and therefore raise the optimum size of farm for the special production in question. The smaller the farm, the more limited will be the profitable use of technical devices which, like the combination-harvester and similar machines, are expensive and at the same time restricted to seasonal use. In this respect, countries with small or average-size peasant farming are put to a disadvantage in the production of wheat on a large scale compared with colonial farming conducted on vast areas of soil. While even this statement cannot be accepted without serious qualifications, it has to be observed that there are other technical innovations which can be just as well applied by the average peasant farm, especially stationary machines driven by electricity. The electrification of agriculture and also the various uses of the internal combustion engine are clearly fortifying the competitive position of the smaller unit, in agriculture as well as in handicraft.

(2) Changes in the natural factors of agricultural production. The natural conditions of agricultural production as determined by the climate and by the physico-chemical qualities of the soil, represent the most elementary factors in the spatial differentiation of production, but at the same time they are the ones least given to change over shorter periods. It is, nevertheless, a noteworthy fact that a change has recently become more and more apparent in these natural conditions, a change which has been caused principally by human actions and which is likely very seriously to affect the future development of the world’s agriculture. The wasteful exploitation (“Raubbau”) of natural reserves, which is largely associated with the highly capitalistic type of colonial farming, is exacting retribution in the gradual deterioration of the soil in its chemical, biological and physical qualities and, as far as ruthless de-forestation has been allowed to assume vast dimensions, even in an adverse change of the climate. Europe, too, has no lack of signs of similar changes, brought about by an excessive use of artificial fertilizers, by exhaustion of the natural soil fertility through over-intensive cultivation, and by a decrease in the underground water level (due to swamp draining, excessive water demands of industrial and urban waterworks, regularization of rivers and other such interferences with nature). In all these respects, the most spectacular developments are reported from precisely those oversea areas which had been the scene of that highly mechanized low-cost grain production that upset international equilibrium in this field during the ’twenties. Gradual soil erosion has, indeed, become one of the principal worries in almost all areas of oversea field cultivation, especially in the United States with its famous Dust-Bowl and in Australia. At the same time, the reserves of further virgin soils would seem to be practically exhausted, so that the “fresh and joyous” period of wasteful exploitation of the natural reserves of the earth appears to have come to a close, at least in the temperate zones. This clearly points to the conclusion—already familiar to us from previous considerations—that the enormous advantage gained by colonial farming in extensive and highly mechanized grain production during the ’twenties, is bound to be whittled away by the increasing need for the “Europeanization” of oversea agriculture, i.e. for a more intensive kind of agriculture, and this is invariably equivalent to a change in favour of mixed farming. Since, however, soil erosion overseas is also being caused by overstocking of grasslands (for which Australia is an outstanding example) a similar statement has to be made also for extensive pastoral farming, where the need for serious adjustments and better balance of agriculture has become just as apparent. Yet, one must take into account the possibilities of changing natural conditions, especially water supply, by large irrigation or drainage projects in numerous parts of the earth wherever it is economically advisable and technically possible.2

(3) Changes in market conditions. The tendency towards a diminution of the difference in the structure of European and colonial farming, brought about by the growing “Europeanization” of the latter, is being very much strengthened by a change in market conditions. The theory of the localization of agricultural production, which goes back in its elements to the well-known analysis by J. G. von Thünen, teaches us that, other things being equal, the geographical arrangement of the various branches and systems of agricultural production will be pre-eminently determined by the location of the central market for the agricultural products, the most intensive kind of agriculture forming the inmost Thünen-circle while the bulk of staple production finds its natural localization in the more distant circles. As long as industrial Europe could be conceived as a central consuming market for the whole world, it was quite in accordance with this elementary principle to regard colonial staple production and extensive pastoral farming as the outer Thünen-circles, and European intensive agriculture as the inmost one. Whereas this picture of the previous arrangement of circles is itself rather crude and subject to important qualifications, we are now in the midst of fundamental changes brought about by the growing significance of new consuming centres, which have grown up outside Europe as a result of industrialization, urbanization and the agglomeration of population almost everywhere. Consequently, we are now going to have, instead of one big consuming centre, several ones like so many planetary systems. This means, first, that oversea staple production now represents the outer Thünen-circle of more than one system of circles—i.e. supplies not only the European, but also a growing African import market—and, secondly, that such regions are largely taking on the characteristics of an inner circle as, being nearer to consuming centres, they are becoming suitable for the intensive production of high-grade foodstuffs. Moreover, a more intensive system of agriculture, as it is developing to-day in so many oversea countries, becomes itself a better market for staple products, especially because of the need for buying staple products as animal fodder.

(4) Changes in transport. Transport is a highly important factor in agricultural localization and has also undergone recent changes that are far from being negligible. Whether it is the development of motor traction and the construction of highways in the outlying districts of the world, the use of refrigeration in land or sea transport, or the building of new and the improvement of old railroad systems, all these changes invariably mean a relative advantage in localization for the more distant agricultural areas and a higher market integration everywhere. This is equivalent to saying that, as far as transport is concerned, the zone of intensive farming is being widened. That dairy farms in New Zealand have become the leading suppliers of butter in England is a spectacular example. At the same time, it is a development which augments the range of products suitable for profitable production, from which the farmer may choose in order to adjust his farm to changing conditions.

(5) Changes in adaptability of agriculture. The last remark brings us to a further factor in determining the localization of agriculture: the degree in which agriculture in different countries is able or willing to adjust itself to changed conditions of production, whether they be changes in the technique of production, in natural conditions, in marketing prospects or something else. There is always a certain resistance to change which will vary not only from farm to farm, but particularly also from country to country, according to different mentalities or systems of farming. While it is not necessary here to stress again the fundamental difference in this respect between the European and the colonial types of farming, it should be noted that, with the drive for modernization, industrialization, and urbanization everywhere, there is a marked tendency towards a less traditional outlook on the part of peasant farmers in many parts of the world (“farmerization”). On the other hand, there is also a tendency for the colonial type of farmer to be more willing to lend an ear to those recommending a less speculative outlook and less smartness in adapting themselves (“peasantization”), so that both types are coming closer together and approaching from opposite sides a reasonable equilibrium in adaptability.

In this connexion, it is important to realize that it would be quite wrong to attribute the relatively strong resistance to change on the part of the peasant to nothing but his proverbial conservatism, or to pass on this mentality the condescendingly adverse judgments to which our time is so prone. Not only is there very much to be said in favour of such a conservative attitude, but, what is more, it has quite comprehensible reasons which are to be sought in the peculiar character of agricultural production, especially in the European countries with their long-established and very intensive agriculture. It is the complex and the long-term nature of agricultural production which makes it much more difficult for agriculture to apply new methods and make quick adjustments in production than it is for industry. For this reason, there is hardly any doubt that the sector of old-established, intensive and highly diversified farming is, in periods of great change, at a clear disadvantage compared with that of colonial farming, a fact which should be taken into account in judging the agricultural protectionism of the former. Experience seems to prove again and again that, more often than not, it is the more enterprising pioneer agriculturalist in the old countries who gets into difficulties, while the more conservative type fares much better.

(6) Changes brought about by non-agricultural competition. The undeniable tendency to replace some organic raw materials produced in agriculture by inorganic products of industry or mining, has recently led to further important changes, which affect the general position of agriculture. Among these, the most outstanding example is obviously the gradual replacement of oats by petrol, as motor traction takes the place of horses. This development has set free large areas of grain land and thereby contributed to the problem of surplus cereals. In this connexion, mention should be made of similar replacements of minor importance, like those of natural fibres by synthetic ones or of butter by oleomargarine, containing whale fats.3

(7) Temporary and lasting changes. It should be obvious that it is extremely important to know whether the changes in localization are only temporary or more durable in character. The more a change is temporary, the more questionable becomes the economic advisability of an adjustment, since it has to be followed in a short time by a readjustment, whereas, in the case of an enduring change, adjustment to the new conditions is economically rational. This has a great bearing on the question of whether agricultural protectionism can be justified on economic grounds. It should be added, however, that any concession made to protectionism in this way implies equally the temporary character of this kind of protection (“emergency protection”). Now, a further peculiarity of agriculture is that, in general, changes in localization are lasting rather than transient. Such occurrences as the previous cultivation of the present American Dust-Bowl, however, are very important exceptions to this rule.

Sketchy as this enumeration of the principal points must be, it at least gives the impression that the changes in agricultural localization occurring in our time are both particularly far reaching and complex. It is therefore difficult to summarize our findings in a few words. With all due caution, however, this much may be said: (1) the advantage colonial farming has in large-scale grain production and extensive grazing, compared with European farming, has been fundamentally preserved and largely even strengthened; (2) certain particularly spectacular developments in colonial farming are being revealed now as untenable exaggerations involving a wasteful exploitation of the soil, which has to be corrected by more conservative methods of farming; (3) the technical need of and economic prospects for intensive and diversified farming producing high-grade foodstuffs are increasing not only in Europe, but also in the new consuming centres overseas; and (4) this tendency together with the gradual Europeanization of colonial farming is at the same time leading to more integration within certain geographical sectors of world economy and to less integration and specialization between the distant parts of the earth. If we correctly interpret the natural tendencies working in the world’s agriculture to-day (which are largely being counteracted by state interventions of different kinds), it seems that against the undeniable differentiation in localization among countries and continents must be set the trend, which is setting in, toward a diminution of world-wide specialization, greater diffusion of the different kinds of agricultural production and a levelling-out of the differences between the European and the colonial type of farming. In spite of a large amount of economically rational inter-continental trade in staple products, international division of labour in agriculture will follow natural tendencies and become less general and world-wide and less based on speculation, capitalist exploitation and exaggerated specialization. Even without excessive protectionism, the agriculture of the world would, according to our interpretation, move in the direction of an all-round and diversified type of farming approaching that of the family-farm, which would correct certain exaggerations in specialization between farms, countries and continents which certainly existed in the past. Agriculture would be less submerged in the capitalist money- and exchange-economy, assume more of the character of the family and sustenance farm and become accordingly more stable and shock-proof. In this way it would make a decisive contribution towards rendering our economic and social system less complex, top-heavy and stilted. All this would happen in spite of the many innovations in agricultural technique, which, after all, have not changed the fundamental laws that agriculture cannot disobey without paying a heavy penalty for it in the end. It goes without saying that this is an interpretation which needs a number of qualifications, but there is a strong probability that it cannot be very far from the truth. It should be added, moreover, that also the special problem of tropical plantation farming has to be considered in the light of this tendency towards a better balanced agriculture. Particularly here, where a speculative capitalist conception of large-scale cultivation has brought about serious instability of production, many people have come to believe that there is no alternative beyond either an untenable policy of laissez-faire or planned production. Recent experiences—e.g., the tremendous advance of native peasant cultivation of cocoa in West Africa and of rubber in the Netherlands East India—are proving, however, that there is a third solution, which is not only better, but also more natural than planning, viz. the development towards well-balanced peasant farming on a small scale.4

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5 On these and other points, among the vast literature on the subject, brief and generally reliable information may be obtained from I. Görzel, “Technisch bedingte Standortsverschiebungen in der Landwirtschaft und Agrarprotektionismus in der Nachkriegszeit,” Zwischenstaatliche, Wirtschaft, ed. by Professor H. v. Beckerath, Berlin, 1934.

6 Among the vast literature on-the subject of land reserves and soil depreciation, see: Isaiah Bowman and others, Limits of Land Settlement, New York, 1937 (containing an extensive bibliography); O. E. Baker, “The Increasing Importance of the Physical Conditions in Determining the Utilization of Land for Agricultural and Forest Production in the United States,” Annals of the Association of American Geographers, vol. xi, pp. 17-46; H. W. Graf Finckenstein, 130 Jahre Strukturwandel und Krisen der intensiven europäischen Landwirtschaft, Berlin, 1937; Ehrenfried Pfeiffer, Die Fruchtbarkeit der Erde, Basel, 1938; The Depreciation of Soil Productivity, Circular of the Bank of New South Wales, vol. ix, 1939, No. 1; Report on National Planning, U.S. National Resources Board, 1st December, 1934; S. V. Jacks and R. O. Whyte, The Rape of the Earth, a World Survey of Soil Erosion, London, 1939; D. Lange and Paul S. Taylor, An American Exodus: a Record of Human Erosion, New York, 1939.

7 On the present state and future outlook of the whale oil industry and on its bearing on the world’s fat markets consult: K. Brandt, Whale Oil, an Economic Analysis, Food Research Institute, Stanford University, 1940.

8 See, however, p. 159.

• 1Cf. my paper “A Value Judgment on Value Judgments” in which I am explaining my attitude in this very important methodological question. It will probably be published in the “American Economic Review.”
• 2The following pages are largely based on a memorandum which the author wrote together with Professor Alexander Rüstow (University of Istanbul) in the summer of 1938.
• 3See also: W. Röpke, Die entscheidenden Probleme des weltwirtschaftlichen Verfalls, Zeitschrift für schweizerische Statistik und Volkswirtschaft, 1938, No. 4.
• 4In current literature there is already some evidence that the understanding of the scientific situation outlined above is growing. See E. F. M. Durbin, “Methods of Research—A Plea for Co-operation in the Social Sciences,” Economic Journal, June, 1938; A. Löwe, Economics and Sociology: a Plea for Co-operation in the Social Sciences, London, 1935: F. Akerman, Das Problem der sozialökonomischen Synthese, Lund, 1938. The essential things have been said on a wider scientific scale by A. N. Whitehead, Science and the Modern World, New York, 1926; and by Ortega y Gasset, El Tema de Nuestro, Tiempo, Madrid, 1923.
• 5The purpose of this book is to make a new and more promising approach to the diagnostics of that long-run crisis in international economic relations which is one of the most striking symptoms of the general economic, social, and political crisis of occidental society. I believe that the urgent necessity of such an approach has been enhanced rather than diminished by the outbreak of the war. However, I would betray my own philosophy if I regarded this book as anything more than a mere beginning, an invitation to constructive criticism, and a way of opening or furthering a discussion for which the world seems to be ripe. In submitting this book to criticism, I am not afraid to expose myself as one who believes not only in the scientific legitimacy but even in the utmost scientific necessity of employing a measure of judgments, which is ultimately based on a definite conception of what is wrong with the world, and of what should be done in order to put it right again. Those who are shocked by such an attitude may be reassured that I gave more thought to this methodological problem than I am able to explain on this occasion.
• 6(b) This crisis puts social science in a new situation, which is itself highly critical and which no partial investigation in any field of this science whatever can ignore without running the risk of missing its aim. Nobody conversant with the current development of the social sciences can overlook the fact that the feeling of being on insecure ground is becoming more and more widespread, until even the most tenacious followers of the traditional lines of approach sense the need for reorientation. The growing literature on methodological questions even in countries like England, where it was formerly distinctly unpopular, is a sure token of this scientific situation, as is also the fact that it has been felt necessary to open the present report in such a roundabout way as would have appeared rather strange even five years ago.
• 7As the present historical crisis finds its first, its most painful and its most conspicuous manifestation in the economic sphere, and since the nineteenth century has accustomed us to treat the economic problems as the main ones, it is easy to understand why the crisis is conceived primarily as an economic one and why, therefore, the traditional approaches of economics have been relied upon thus far. Whether or not this traditional conception corresponds to the inner convictions of our scholars and statesmen, it is at least exemplified in the character of by far the greater part of scientific activity in our field. Accordingly, men and means have been mobilized, during the last ten years, on an unprecedented scale. Facts have been piled up sky-high; conferences have been held in endless succession; economic analysis has been brought to an ever greater degree of refinement (and, incidentally, to an ever greater degree of unreality); vast and detailed programmes of research have been elaborated; a complicated machinery of institutionalized science has been set up; and questionnaires have been sent to almost every country and to every section of the population. It would surely be no pessimistic over-statement to say that nobody feels that this hectic activity has brought us any nearer the fundamental diagnosis which alone could serve as the basis for effective therapy.
• 8The real cause of this deficiency in the social sciences seems to lie just in the narrowness of our economic conception and the lack of courage and ability in really synthetic interpretation to connect the economic phenomena with the wider aspects of society. There is, in fact, increasing evidence that the real epicentre of the earthquake does not lie by any means in the strictly economic sphere, but rather that the economic disturbances are only the external manifestations of a deeper organic disease, of which overemphasis on economic matters—a legacy of the nineteenth century—is only one of the many symptoms. If that is true, then it becomes clear that the traditional approach is doomed to failure and that a new point of departure has to be found.