A framework for analysis production innovation institutions

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To understand why pesticide problems are so persistent, what the reasons are for 'regulatory failure', and how these problems might be solved or circumvented, is a complex and challenging endeavour. It is further complicated by the facts that the pesticide debate has become highly politicised and that the positions of several participants in the debate have become rather entrenched. It is simplistic to one-sidedly blame either the agrochemical industry or farmers for all the problems and uncertainties. Indeed, a large number of often interrelated factors have forced farmers increasingly to rely on pesticide products (Pretty et al. 1998). In our view, a workable starting point for this task is to take a broader view. In order to understand pesticide use and the difficulty of controlling and regulating external effects of their use, one should consider a complex, dynamic and interactive system of agricultural production, agricultural innovation, and socio-economic institutions (Fig. 1.1). Broad lines of analysis should focus on these three subsystems or 'spheres', as well as their interaction. In the following we discuss the separate spheres as well as their interactions.

In the first sphere, agricultural production takes place - crop rotations are decided upon, investments made and seed sown, in the prospect of making a profit. Under conditions of uncertainty, farmers make ex ante decisions that impact on the level of income they might gain and the level of risk they wish to run. Pesticide products have become an important variable in such decision making, and hence in agricultural production. To some extent, farmers' decisions on pesticide use are guided by the products and services of pesticide producers and extension services, as well as structural characteristics of their business environment: regulations, prices and subsidies.

However, this sphere is not static; it has evolved over time. New technologies have become available for pest control. One particularly important setting is the chemical industry. In the public research laboratories, also, agronomic knowledge has provided new insights, partly in response to practical problems in agricultural production. Each of these innovative processes is denoted with the second sphere of agricultural innovation.

In order to complete this picture we argue that many of the processes in agricultural production and innovation have a direct relation to political and economic processes that take place in a wider context of socio-economic institutions: our third sphere. Production and innovation are confined and restricted by socio-economic institutions, but simultaneously, the latter develop in response to internal and external problems of agricultural production and innovation. The eventual success of suggestions for improvements upon, and alternatives to, current pesticide use depends on how well they are received within the context of current socio-economic institutions, or to what extent the latter may be changed to increase the viability of promising improvements and alternatives.

In order to set the scene for the type of interactions between the three spheres we will discuss briefly the interaction between agricultural production and the socioeconomic sphere. Over the past century, agricultural production has changed dramatically (den Hond et al. 1999). Before World War II agricultural production was

Agricultural production

Socio-economic institutions

Agricultural innovation

Fig. 1.1 A conceptual framework of three 'spheres'

characterised by a relatively low input of capital, by high labour input, mixed farming and relatively low yields. For most crops, yields were restricted by local climatic, geological (soil) and ecological conditions, although mineral fertilisers were known and applied already in the second half of the nineteenth century. In the period of reconstruction just after World War II, political and socio-economic pressure changed the nature of agricultural production. Food security at low prices for a growing population, self-sufficiency in agricultural production and securing farmer income at acceptable levels became political priorities. These policy objectives translated into the maximisation of yields through the specialisation and rationalisation of agricultural production, by means of increasing scale, minimising labour input (for example, through increased mechanisation) and maximising the efficiency of various inputs, such as improved cultivars, better timing of farming operations, and management of soil moisture. The large-scale and low-cost availability of inputs such as pesticides was instrumental in minimising labour input. In this way, the traditional limits on agriculture were eliminated. In Western Europe, EEC and EU agricultural policies have significantly enhanced this development, notably by ensuring minimum prices and subsidising exports to world markets.

In certain respects, this policy was highly successful. The shift to intensive farming systems in the aftermath of World War II has allowed a break from dependence on crop rotations and livestock. For instance, world-wide cereals production has increased more than 2.5-fold, a growth rate higher than that of population growth (Brown 1994). Similarly, Vos (1992) reports a more than doubling of tuber yields in potato production in The Netherlands since 1950. Countries that adopted agricultural policies to stimulate this shift obviously enhanced the competitiveness of their agricultural exports.

But undesired consequences must be pointed out as well, which relate to (1) pressure on farm profitability and (2) increased vulnerability of the farming system in terms of sustainability. The processes of specialisation, rationalisation and technological innovation have advanced to the extent that farm profitability has been adversely affected. By the late 1980s, political concern became widespread that self-sufficiency had turned into overproduction, incurring high social cost. Farmers' incomes were under pressure from low prices for most agricultural crops. According to many observers, because of increased specialisation the agricultural production system had become vulnerable to calamities, such as unexpected outbreaks of pests and diseases, extreme weather events, and the development of pest resistance. Pest resistance causes reduced marginal returns to pesticide and fertiliser input, increased costs to the farmer, and increased public concern about the preservation of landscape and the pollution of natural habitats. It is understood that such effects are a consequence of the intensive cultivation of a small variety of crops in large areas of monoculture.

Current agricultural policy - for example the new European common agricultural policy - is aimed at the reduction of overproduction, liberalisation of world trade, and the protection of landscape and natural habitats. Farmers have to increase the quality of their output in terms of product appearance, delivery and nutritional value, while reducing the environmental risk of the decisions they take regarding crop management. Simultaneously, they have to control cost because of increased competition from the world market. This should be accomplished by, among other measures, a reduction of fertiliser and pesticide inputs and by the stimulation of more sustainable forms of agricultural production. Pesticides should be more effective at lower application doses, less toxic to non-target organisms, non-persistent and not pose a threat to groundwater quality. Such demands pose a serious innovation challenge to the agrochemical industry, traditionally a major supplier and innovator of pest control technology. One could speculate about the industry's willingness and capability in redressing its innovative activity to address such changing market and social demands, as yet another causal factor for the persistence of the pesticides problem.

Countries which are now trying to restructure their agriculture along ecological lines, with incentives for reduced dependence on chemical inputs, are facing the prospect of World Trade Organisation (WTO) action against trade barriers. For example, European Commission rulings against national bans on the imports and sales of Bt corn in Austria, Italy and Luxembourg may be partially understood from the fear of violating WTO/GATT free trade rules. And even today the shift to intensification continues as horticultural production is moving to where labour costs and climate allow lowest cost production and year-round availability on supermarket shelves. This has consequences for pesticide use, worker protection, externalities of longdistance transport, and suppression of local (seasonal) production. Thus, one may argue, the scope for pro-active pesticide policies is limited. Authorities are trapped in a set of administrative procedures which were designed in an earlier period, and which are limited in their concerns as exemplified by current registration procedures.

In our discussion, 'socio-economic institutions' thus comprise, but are not restricted to, the regulatory system around the introduction and application of pesticide products. The regulatory subsystem has also evolved enormously over time. On the one hand, evolution in the regulatory system can be seen as a reflection of societal concern over external effects of pesticide use (Howard 1940; Carson 1962), which depend on the products themselves and how they are being used in practice. Apparently, acceptance of external effects has steadily decreased over time, forcing the regulatory system to lower risk levels. On the other hand, science, notably analytical chemistry and systems ecology, has achieved considerable progress, allowing for earlier detection of increasingly more subtle external effects. Relative inertia in the agricultural production system may be caused by its slow response to regulation, or by the relative dynamics of the regulatory system imposing shifting objectives onto the agricultural system.

Further limitations to regulatory control of the environmental impacts and other externalities of agricultural pesticide use are likely to include their incompleteness and the constant need of renewal and revision, if only because potential externalities of new active ingredients and new formulations cannot be fully known beforehand. Additionally, pesticide authorisation and regulatory control is likely to be restricted as far as it has traditionally considered farmer behaviour as a constant factor, rather than as a variable; there are indications that farmers may apply pesticides in ways that differ significantly from label instructions, not to mention illegal use. Moreover, it is likely that the societal definition of what are undesirable externalities will continue to evolve, partly in relation to the further development of ever-refined analytical techniques to detect residues.

This conceptual framework of three spheres allowed us to raise broad questions about potential causes of the persistence of the pesticide problem. Why are pesticide products applied in agricultural production in the first place, and how serious is the pesticide problem? How responsive is agricultural production to regulations attempting to reduce external effects? To what extent are socio-economic institutions, among which the pesticide authorisation system is eminent, setting the proper conditions for desired farmer behaviour and more sustainable agricultural production? How effectively do innovations develop and diffuse into actual agricultural production activities? How tailored is agricultural innovation to solving internal and external problems in agricultural production, such as external effects of pesticide use? What are the more likely directions of innovation under the conditions set by prevailing socio-economic institutions?

The brief sketch provided here has been used as a guiding tool for the invited contributions in this book. We have asked the authors to submit a first paper that was discussed in a workshop held in June 2000 in Egmond aan Zee, The Netherlands. We used the workshop to strengthen the contributions, establish links between chapters and identify what approaches we needed to establish a more complete discussion. Subsequent rewriting and a round of comments by reviewers have resulted in the present volume. Not all of these questions will be covered by the chapters in this book, and we will return to the insights that can be generated by combining different expert views at the end of this volume in the concluding chapter.

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