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Rural Development and Agriculture: Opportunities to Attenuate the Economic and Financial Crisis and to Resume Economic Growth

  • Otiman, Paun Ioan

    (Secretary General of the Romanian Academy, Institute of Agricultural Economics, Romanian Academy, Bucharest)

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    The growing interdependency of national economies within the world economy as well as the increase of sectoral connections and dependencies of Romania’s economy are processes that determine the connection of the Romanian economy and agriculture (rural development, in its broader sense) to the present financial and economic crisis. Taking into consideration the present world (and Romanian) economic background, the main dilemma referring to the agri-food economy position in the crisis context can be formulated as such: are rural development and agriculture factors contributing to crisis accentuation or (possible) solutions for crisis attenuation and economic growth relaunching? Starting from the present situation of the Romanian rural area (precarious infrastructure, deficient land management and technical endowment of the rural territory, localities and houses; agrarian rural economy; low absorption of agricultural labour force in the off-farm rural economy, etc.) and of agriculture (strong disequilibria at all levels of agricultural activities; very slow economic growth and great dependency on the weather conditions throughout the year (twice as high); technological and structural obsolescence of the capital stock; low investments that result in nonsignificant increase and modernization of fixed assets; low absorption of the European funds; low productivity and yields; still high share of close autarchic (subsistence) economy; still too low share of commercial agriculture; significant food safety disequilibria; market contraction; increased transformation of the Romanian agricultural market into an outlet for imported products; price distortion; food trade balance lacking equilibrium, with a negative balance of payments; totally imbalanced distribution in the participation of agricultural holdings to the final profit of the agricultural commodity chains, i.e. the farmers have the lowest share of participation to GVA while the traders get the highest share. All these lead to a low level of compatibilization and competitiveness of Romanian agriculture on the Common European Agricultural Market or in general on the world market. From the economic doctrine and practice it results that agriculture is an economic activity vital for society, and consequently it is a sector that contributes to maintaining the stability, continuity and economic grow and to the economic crisis attenuation in the present conditions; yet this contribution can be manifested only in the case when massive investments are made in the infrastructure that generates agricultural production increase (irrigation system, farm consolidation) as well as in the technical and technological equipment of the agricultural territory, of the rural area and localities, in the off-farm rural economy, agriculture and overall rural development, as economic growth factors.

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    Article provided by Institute of Agricultural Economics in its journal Agricultural Economics and Rural Development.

    Volume (Year): 5 (2008)
    Issue (Month): 3-4 (December)
    Pages: 97-128

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    Handle: RePEc:iag:reviea:v:5:y:2008:i:3-4:p:97-128
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