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Economics of Agricultural Development:

Transformation from Peasant Subsistence Farming to Specialized Farming:

In respect of agri. production and agri. development the economists present three stage, which are as:

(1) The subsistence farming: It is most primitive type of farming which is characterized with low productivity and the produced output is just for the sake of subsistence.

(2) The mixed farming: Where the farmers not only produce for their personal consumption but also for the sale in the market.

(3) The commercialized farming: In such stage of farming the agri. productivity is higher and whole of the produced output is sold in the market. Now we discuss them in a turn.

(1) Stage I: Subsistence Farming:


This type of farming has following salient features:

(i) Most of the output is produced for family consumption.

(ii) The agri. production is mostly consisted of a few staple food crops like wheat, barley, sorghum, rice and corn etc.

(iii) The traditional methods and tools are used – leading to a lower level of output and productivity.

(iv) Land and labor are the only factors of production, and the capital investment is minimal. Accordingly, law of diminishing return applies in agri. sector as more labor are employed with fixed lands.

(v) The farmers are always worried of inadequacy of rains, appropriation of their lands and appearance of the money lenders to collect outstanding loans.

(vi) The agri. labor are fully employed during planting and harvesting seasons while they remain unemployed during most of the year.

(vii) The peasants cultivate only that much of land which they could manage without hired labor.

(viii) The agri. environment is mostly tough, harsh and static.

(ix) Technological limitations, rigid social institutions, fragmented markets and reduced communication net-work between rural areas and urban centers often inhibit the higher level of production. The cash income attained by peasants mostly comes from non-farm wage labor, as the salaries and wages earned by the off springs of peasants working in urban centers or in military in case of India and Pakistan.

(x) The farmers are surrounded by uncertainties. They just want to survive. Thus because of rigid behavior, poverty and illiteracy the farmers exist in the atmosphere of uncertainty.

(xi) Subsistence farming is highly risky and uncertain venture. They resist the use of new techniques, new seeds and new machinery on farms because they do not want to put their lives at stake.

(xii) The farmers are hardly aimed at maximizing their profits; they are just desirous to save their families from starvation. Sometimes they are worried of rains. On other occasions they are afraid of drought and famine. In such state of uncertainty they would hardly bother about inventions and innovations. Moreover, in the state of risk and uncertainty the poor peasants will be reluctant to surrender those techniques which they have inherited from their forefathers. Accordingly, when sheer survival is at stake the peasants will prefer low production to those technologies which are concerned with higher production etc.

Now we present a diagram which shows that the attitudes towards risk among the small peasants may militate them against the use of economically justified innovations.


Here the lower horizontal line shows the MCR which is necessary for the farm family’s physical survival. This may be taken as the starvation minimum fixed by nature. Any output level below MCR would mean a catastrophe for the farmer and his family. The upper, positively sloped straight line represents the minimum level of food consumption that would be desirable in the presence of given cultural factors which could affect the village consumption standards. The MDC curve slopes upward which shows that MDCL rises as the traditional societies are influenced by the external factors. This fig. also shows that at time X, the farmer A’s level of output is close to MCR. Here he is not prepared to take any chance of crop failure. He is having a greater incentive to minimize the risk than farmer B whose output performance has been well above the minimum subsistence level and is near to the level of consumption – MDCL.

Accordingly, it is obvious that the farmer B is more innovative than the farmer A who is occupied of risk and uncertainty.

In addition to above discussed risk and uncertainty, following reasons are given regarding subsistence farming in the poor countries.

(i) All the measures taken regarding economic development only benefited the big land lords.

(ii) The Mahajans and Money-lenders captured all the profits earned by small farmers.

(iii) The govts. procurement prices did not benefit the poor peasants.

(iv) The supply of complementary inputs like credit, water, pesticides, high yielding varieties of seeds and crop insurance were never granted to the poor peasants.

From the above discussion it is concluded that it does not mean that the poor tillers have been found resistant to change but the real matter is of circumstances and the environment where the orthodox and traditional environment serves to be a big obstacle in the way of growth of traditional farmer. In this respect Prof. Griffen writes:

“If peasants sometimes are found hostile to technical changes it is because that risks are high, the returns to the farmers are low perhaps because of local customs or land tenure system or because of inadequate credit and marketing facilities”.

Therefore, if the risks are minimized the commercial and institutional obstacles facing poor farmers are removed the poor farmers will be prepared to innovate and rural development would become possible. In addition to the factors discussed regarding subsistence farming, the ‘Share cropping and the Interlocking of the factor markets’ also check the small farmers to use modern techniques on their farms. Share-Cropping occurs when a peasant farmer uses the land owner’s farm land in exchange for a share of food output, such as half of the rice or wheat what ho grows. The economic and social framework in which sharecropping takes place is one of the extra-ordinary social inequality and far-reaching market failure. Again when the peasant faces his landlord whom he has to pay the rent he also looks like an employer for the peasant Moreover, he is to face the loan officer and the Arthias, to whom he is bound to sell his produce even at reduced prices because he had borrowed from him, These all conditions are known as ‘Inter locking Factor Markets’, and they provide the rural land lord with abundant sources of monopoly and monopoly power. To remove such problems the ‘Land Reforms’ are required.

(2) Stage II: Transition to Mixed and Diversified Farming:

It is not so easy to transform that agrarian system which has been in operation since centuries, and the traditional agri. system could assume the shape of commercial farming just in a shock. Thus the mixed farming is a first step to commercialized farming from subsistence farming. In such stage of agri. development the cash crops like vegetables, tea, coffee, cotton and fruits are produced, rather staple foods. In addition to these the dairy and live stocks are developed. Those labor which remained unemployed during the major part of the year go on getting employed. In this way, the demand for labor goes on to increase on the farms, particularly at the time of harvesting and sowing. This leads to increase the real wages of farm labor.

Accordingly, in such situation the tractors and threshers are used to substitute labor. In order to boost the staple crops the fertilizers are used. Along with the more production of foods the stress is laid upon to produce more of cash crops. In this way, the agri. sector goes on to earn ‘Surplus’. With such surplus the farmer can uplift the standard of living of its family. When mixed or diversified farming starts the farmers some how are prepared to take risks. But all this depends upon the abilities and competence of the farmers as well as on the social, commercial and institutional setup where the farmer resides. If the farmer is in a position to get the complementary inputs and he is convinced of that the agri. improvement will benefit him and his family he will welcome the new changes. The agri. history of Pakistan, India, Philippine, Columbia, Mexico and Nigeria confirms that if the farmers are sure of the profits they are prepared to move from subsistence farming to Mixed farming. The use of better seeds, fertilizers, and simple irrigation devices will not only enhance the production of staple crops but it will also lead to free the land which would now be available for cash crops. The farm surplus can also bo used to make investment in the farms. Diversified farming will also lead to minimize the impact of staple crop failure, and provide a security of income which was not available earlier.

Thus, we conclude that the transition from subsistence farming to diversified farming depends upon reasonable and reliable access to credit, fertilizers, water, crop information, and marketing facilities, fair market price for agri. produce and provision of extensive services.

(3) Stage III: From Diversed to Specialization or Modern and Commercial Farming:

In the free market economy the specialized farming is the last and final stage in agri. development. It is the most prevalent type of farming in advanced industrial nations. It comes into being along with the development of other sectors of the economy. The biological and mechanical changes, improvement in living standard of the people and extension in domestic and foreign markets played an important role in such type of farming. In such farming it is the motive of profit which plays an important role, rather than the personal needs for foods. The farmers are highly aimed at maximizing their outputs per acres. The growers keep in view the costs, fixed as well as variable, the revenues, the support prices and investment in lands while determining the prices of agri. produce. The farmers have to be acquainted with the scientific inventions, harvesters, modern fertilizers, cropping techniques and marketing trends etc. These specialized farms differ in their size and operation. In such type of farming the orchards of fruits and vegetables are also included where there is the intensive type of cultivation. Here there are vast wheat, corn and rice farms. In most cases, the sophisticated labor saving techniques are followed furnished with air spray, combine harvesters, bulldozers, huge tractors and tube wells etc., where a single family becomes capable enough to cultivate thousands of hectares of land – the case of North America etc.


The followings are the common features of specialized farming or commercialized farming:

(i) A single crop is produced from these farms ranging from staple crops, cash crops, vegetables and fruits.

(ii) The agri. technology applied on such farms is of capital-intensive or labor-saving nature.

(iii) The farmers (big) rely upon economies of scale to reduce their costs of production and maximization of profits.

(iv) The big and specialized farms are in no way different from big industrial concerns. In certain cases such farms known as ‘Ranches’ are owned or controlled by large agri. business multi-national corporate enterprises.

The followings are the implications of such commercialized farmings:

(a) When one crop is produced and cultivated the economies of scale will be accrued and the goods would become available to domestic and foreign consumers at lower prices Such big production becomes very much helpful during world supply shocks, shortages, famines, sectarian and ethnic violence’s and civil wars.

(b) As the commercial farmings is made on big farms the use of modern agri. machinery, superior chemicals and hybrid seeds is increased. In this way, not only agri. sector, but the industrial concerns of the country would also expand. The employment will increase boosting the national outputs. In this way, both agri. and industrial sectors will support each other.

(c) The commercialized farming is like a business where highly efficient and experienced farm managers are employed. The entrepreneurs get themselves engaged in inventions and innovations. The production functions are prepared; the predictions regarding inputs and outputs are made; and the projections regarding outputs and prices are made.

Despite the above mentioned benefits there exist the following apprehensions regarding commercialized farmings:

(a) The small farmers and their business enterprises are coming to an end. Such situation is not only rising up in DCs but also in UDCs.

(b) The entry of MNCs in agri. business will lead to create their monopolies. As a result, the farmers as well as consumers will be exploited.