Large plantations producing tropical cash crops based on hired labor represent a sharp contrast with small family farms, popularly called "peasants" in developing economies. The family farm is an old institution that has existed since time immemorial, but the plantation is a new institution introduced by Western colonialism for extracting tropical cash crops for export to home countries. Large-scale operation of the plantation was necessary for internalizing gains from investment in infrastructure needed for opening vast tracts of unused lands. However, where the communities of indigenous smallholders had already been established, family farms proved to be equally or more efficient producers of tropical export crops using the family labor of low supervision costs, relative to plantations based on hired labor. This advantage of family farms rose as population density increased and rural infrastructure improved, whereas not only economic but also social drawbacks of the plantation system loomed. However, reforms aimed to break down plantations to the operation of smallholders by a government's coercive power could be disruptive and inefficient. A better approach might be to support the initiative of the private sector to reorganize the plantation system into a more decentralized system, such as the contract farming system in which an agribusiness enterprise manages the processing/marketing process and contracts with small growers on the assured supply of farm-produced raw materials.
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