Friday, May 15, 2015

The Economic Problem of Rural Towns

The  main pressure on rural lands emanates from   urban  en­croachment.  Changing  needs  and trends encourage  urban dwellers to move outward to rural towns, carrying with  them their urban lifestyles and tendencies. Businesses follow  when critical  mass is reached to sustain high levels  of demand  for products and services. The rural towns, somewhere  along the  process, lose their character and slowly  become  urba­nised. Since, urban-related land uses can offer returns  way above what  can be realise if lands are  used  in  farming, farmlands are indeed susceptible to the pressure. Moreover, the  changing  policies as regards land-use  creates  and/or reinforces what planners call  the  "impermanence  syn­drome",  which  causes farmers to resort  to  low-input  farm practices and to ultimately give up farming.

Non-sustainable  land  uses can  likewise  exert  additional pressure to rural lands. Extractive industries for  instance can  realise massive profits compared to other  more  tradi­tional uses. These pressures are actually external to the farm. A  number of economic factors, which  internally affect farm  opera­tions, may be the real culprits that exacerbate the susceptibility of these farms. 

The economics of time, for instance, may assist in weakening the  intent of farmers to continue with production.  Invest­ments  in  primary  production  are  long-term  investments (Cook, 1994). Realization  of  returns can take a long  time  compared  to secondary  sectors  like manufacturing and processing.  For instance, investments in backyard piggeries can take  some years  to  break even and fully recoup the  initial  capital investments.  Given this fact,  and while at the same time,  the farmers do not feel secure about the land-use policies which define  the security of tenure of farming in a  given  area, the tendency to give up the farm is strengthened.

Changes in the national economy can also affect the viabili­ty of farms (Cook, 1994). As the economy expands, it is often accompanied by  increases  in real wage rates, which  means  that  labor becomes more expensive to employ in farming. Moreover,  real prices  may  also  increase  such that  the  price of  farm products sometimes can not keep pace with the rise in  costs of  farm  inputs thus there is a net decrease in  real  farm incomes.  

A natural fall in the inherent productivity of  bio-physical resources  can  also occur as a result of  intense  use  and degradation (Cook, 1994).  The  usual tendency of farmers is to  turn  to better  technology which more often would entail  additional capital  outlays.  Health risks and  negative  environmental effects  may  also be faced if farmers decide  to  intensify their usage of farm chemicals to boost productivity.

Cyclical and random changes in the prices of goods and input costs are also factors which can adversely affect the finan­cial  standing of farms (Cook, 1994). Changes in prices of goods  may  be caused by many factors. Financial  deregulation could increase volatility of  inter­est  rates and currency exchange rates, which in  turn,  in­creased  the  fluctuations   in the prices  of  farm  goods. The restructuring of former East  Bloc  countries from 1992 following the fall of communism in Europe  changed demand  patterns  for several farm  commodities in Asia and Australia. Trade and protectionist policies of major  economies could also inhibit  some farm products to enter  those markets.  

Lastly,  natural  calamities and changes in weather patters as what is happening now can spell disastrous effects to the farms' finances performance.

The interplay of these factors complicates the farming predicament.  It may be noted that except for natural events,  all others  of the above-cited  factors are economic  in nature.  They have a singular effect on the  farming  opera­tions  and  that  is the weakening of  the  farm's  economic viability  and financial standing. The financial  difficulty faced by farmers make them very prone to the external pres­sures e.g. the monetary benefits that developers and  specu­lators can offer in exchange for their lands.

There  are  only  two options for farmers  to  choose  from. Either  they cling to their farms amidst economic  difficul­ties  or  simply sell out. Farmers tend to  cling  to  their farms  for  a number of reasons, among others,  because  the farm is synonymous to home, due to peer pressure, the  availability of off-farm income which enable them to cross-subsidise farm losses,  and  the notion that to leave the farm is  to  fall into the poverty trap, that is, they have no better place to go  and therefore they will have to continue farming by  all means.  When they decide to continue with farming,  farmers may  need  to resort to  cost-cutting,  diversification  and partial sale of other assets. Those who are eligible turn to government for assistance.

(from R. Azanza's academic paper)

1 comment:

  1. Interested to read the entire paper, Kuyang.