Agritourism As A Business In Regional Rural Development

AGRICULTURAL ECONOMICS AND
RURAL DEVELOPMENT
Year XVII 2020 No
1
TABLE OF CONTENTS
Cecilia ALEXANDRI, Lucian LUCA, Violeta FLORIAN, Lorena CHIȚEA,
The Agrarian Reforms and Their Implications on Agriculture in the
Last Century ............................................................................................ 3
Cristian KEVORCHIAN, Camelia GAVRILESCU, Gheorghe
HURDUZEU, A Peer-to-Peer (P2P) Agricultural Insurance Approach
Based on Smart Contracts in Blockchain Ethereum................................ 29
Nataliia ANTONIUK, Oksana PERKHACH, Modelling Management of
Rural Areas under Conditions of Decentralization in Ukraine................ 47
Nicola GALLUZZO, The Changes to Rurality in European Farms and the
Role of CAP Subsidies in EU Enlargement............................................. 57
Jacques LOYAT, Faced with the Risks of Free Trade, Agricultural Policies
Necessary for Sustainable and Resilient Farming Systems. Application
to the Dairy Sector and Prospects for the Post-2020 CAP ...................... 69
Nino SACHALELI, Agritourism as a Business in Regional Rural
Development............................................................................................ 89
Violeta FLORIAN, Elisabeta ROȘU, Ecological Farming – Rural Realities,
Socio-Ecological Arguments and Comments. Cluj County Case Study.... 101
Tamás MIZIK, Anita KOLNHOFER-DERECSKEI, Are We Ready for
the New Challenges? The Case of the Hungarian Agriculture................ 113
Marioara RUSU, Violeta FLORIAN, Elisabeta ROȘU, Marketing the
Production of Family Farms Within Limits Imposed by the COVID-19
Pandemic ................................................................................................. 125
Agricultural Economics and Rural Development, New Series, Year XVII, no. 1, p. 1–134, 2020

Cecilia ALEXANDRI, Lucian LUCA, Violeta FLORIAN, Lorena CHIȚEA
Institute of Agricultural Economics, Romanian Academy, Bucharest
cecilia@eadr.ro
luca@eadr.ro
THE AGRARIAN REFORMS AND THEIR IMPLICATIONS
ON AGRICULTURE IN THE LAST CENTURY
ABSTRACT
The present paper attempts to make an analysis of the agrarian structures based on an
extensive bibliographic study in the period of the recent history of Romania. The 20th
century is, in
the history of the agrarian economy, dedicated to multiple endeavours to solve the social and
economic rural problem. The solution consisted of agrarian reforms that sought to alleviate rural poverty, to
decrease the small and medium-sized land property atomization, to counteract the persistence of large
properties, to reduce the precariousness of rural living conditions. The European context in which
Romania’s agriculture developed in the 20th
century was also generated by the pressures induced by
the technical changes; in this sense, the land operation modalities changed, the cropping systems
improved, livestock farming expanded, and advanced agro-technical measures were used.
Key words: agrarian reforms, agrarian structures.
JEL Classification: N54, O13.
1. INTRODUCTION
In the last century, agriculture went through periods of deep and contradictory
changes, under the background of political changes that affected the entire country.
In a period shorter than one century, not less than 4 agrarian reforms took place in
Romania, which definitely changed the farm production structures, the rural world,
deeply traumatised the peasantry and have finally changed the position of agriculture in
relation to the other economic sectors, as well as its role in the society’s economy.
Our approach divided the investigated period into three parts, namely:
The period 1919–1947: Transition of peasant farming to capitalism, which
includes the agrarian reform of 1920–1921 and its effects on the agrarian structure
and peasantry, the crisis of 1929–1930, which quite severely impacted agriculture
in Romania, due to its position as exporting country of agricultural products, in the
context of rising protectionism and falling grain prices, the agricultural debt crisis
and the solutions found to solve it, and the rural overpopulation problem.

Cecilia Alexandri, Lucian Luca, Violeta Florian, Lorena Chiţu 2
4
The period 1948–1989: Command economy in agriculture, which presents
the results of the agrarian reform of 1946, the forced collectivisation of agriculture,
and finally agriculture evolution in the communist period, with its contradictory
aspects in terms of production performance of state farms, cooperative farms and
individual farms, as well as the rural population’s living standard and the labour
and value transfers between agriculture and the industry and construction sectors.
The period 1990–2018: Agriculture integration in the market economy, which
focuses on agriculture transition to the private sector, following the agrarian reform
of 1991 and the privatisation of state farms, agricultural market liberalization and
finally the reforms meant to facilitate the Common Agricultural Policy adoption
and the integration into the Single Market, since 2007. The summary of the agricultural
policies implemented after 1990 highlights the hesitating and contradictory evolution
of the agricultural sector towards the economy of capitalist type, and its final result
materialized into the adoption of the Common Agricultural Policy with our country’s
accession to the European Union in the year 2007.
The final considerations at the end of the paper bring together the effects of
the three periods, presenting a series of long-term evolutions of indicators
regarding the agrarian structures, the production obtained on the state farms and the
individual farms, the changing fluctuations referring to agriculture importance in
national economy (as % in GDP and labour employment).
We think that part of the conclusions drawn from the analysis of these evolutions
on the long term can provide some ideas for solving up the current problems of
Romania’s agriculture and we should mention here the problems of agrarian structures,
of family farms, of rural poverty, of surplus labour and many others.
2. MATERIAL AND METHOD
This paper represents a synthesis of the efforts made by the team of authors to
consult, study and extract relevant elements from the works of the most important
economists, experts in social sciences and agronomy, on the evolution of agriculture in
the inter-war period, in the communist period as well as in the thirty years of
integration into the market economy. The authors tried to maintain a balanced and
neutral attitude with regard to the various approaches and theories presented in the
consulted bibliographic sources, mainly in the context in which certain topics were
quite delicate and therefore debatable.
The source of information on the demographic, physical and economic
indicators on the evolution of agriculture over time, is represented by the official
statistics, scientific studies published by the Romanian Academy, the Academy of
Agricultural and Forestry Sciences, the National Institute of Economic Research,
the Agronomic Research Institute of Romania, by other organizations or reputed
authors, experts in their field of activity. For the presentation of certain aspects

3 The Agrarian Reforms and Their Implications on Agriculture in the Last Century 5
from the recent period (after 1990), we used a series of results extracted from the
studies conducted by international organizations, which analysed the Romanian
agri-food sector situation, and we must mention here the World Bank, the European
Commission and OECD.
3. RESULTS AND DISCUSSIONS
3.1. THE PERIOD 1919 – 1947:
TRANSITION OF PEASANT FARMING TO CAPITALISM
Romania continued to be an agrarian country after the Great Union, with
about 75% of the population working in agriculture; this economic branch provided
staple foods for the population and significantly contributed to exports. At the same
time, the village continued to be the source of 1abour force for the other branches
of the economy. One can say that peasantry was “the main supplying source for
modern Romania’s construction” (Axenciuc, 1996).
The rural and agrarian characteristics of the Romanian rural area at the
beginning of the 20th
century were extended to the period between the two World
Wars. There was an imperious need for a new agrarian reform, as the basis of a
serious option for the capitalist progress of the entire economy.
In the early 1920s, the agrarian reforms based on land redistribution measures
focused on the agrarian ideal, i.e. independent peasants, owners of land, creation and
economic consolidation of the middle class, capable of ensuring rural modernization
(Maurel, 2011).
With the expropriation of large estates, the small-sized peasant holdings began to
prevail in Romania’s agriculture. Thus, 60% of the country’s arable area was operated
by holdings up to 10 hectares in size. At the same time, the development of the
capitalist sector continued in the new conditions created after the reform of 1921,
including rich peasant holdings (with 10–50 ha) and land holdings operated by
landlords (with 100–500 ha), which both produced food commodities for the domestic
and foreign markets. Thus, a parallel evolution emerged, i.e. the more dynamic
capitalist segment alongside with the peasant, subsistence segment.
The agrarian reform of the period 1917–1921 was inextricably linked to the
fulfilment of the Romanian nation’s ideal of unity. Certain historians consider that
the liberal initiators envisaged and achieved a limited agrarian reform, “aimed at
creating a class of peasants if not satisfied, at least grateful, politically serving
those who empowered them” (Fisher-Galaţi, 1998), arguing that the agrarian legislation
was less generous than peasants expected. In historical-economic terms, the reform
was considered a necessity, as it would contribute to the national state consolidation,
facilitate the economic recovery of agriculture, strengthen the position of the
bourgeoisie (to the detriment of landlords), with the desire to solve the agrarian-

6
peasant problem by creating a small-sized land property that would provide its
owner with the possibility of a decent living, relatively independent from the economic
point of view (Bozga, 1972).
In Romania, like in the rest of Eastern Europe, the agrarian reforms were
broader and deeper, targeting the dismantling of the large estates and their social
consequences, the deep transformation of the relations and status of agricultural
holdings, of the economic, political and legal institutions, in order to avoid the
bondage of peasants and agricultural workers to certain economic interests, the
advantages thereof being alien to peasants. On the other hand, the agrarian reform
of 1921 aimed at releasing part of the capital blocked into the large land property,
which, once it became available, would be invested in accelerating the country’s
industrialization process.
Practically, more than 6.4 million ha were expropriated (belonging to the large
estates with over 100 ha and to the Crown domains), and they were appropriated to
1.6 million peasant households (of the participants in the war and of those with
little or no land at all). The plots given into their property could not be sold. The
land appropriated to households summed up 3.5 million ha, and other 2 million ha
were assigned to the communes, in the form of communal grazing land (1.1 million ha)
and pastures (0.8 million ha). The remaining land areas became reserves or were
organized as state farms. However, about 30–35% of the 2.3 million peasants, entitled
to receive land, got no land at all, because there was no sufficient land in their
regions, while those who benefitted from this reform experienced numerous delays
until they finally got the land in their possession. This uncertain land possession
created difficulties in getting credits and inhibited the land improvement practices.
Demographic and social evolution. Romania’s population increased by 9%
in the first decade following the agrarian reform of 1921; rural population
represented 78.9% of total population. The relative overpopulation phenomenon in
agriculture grew worse over time, with numerous negative economic and social
implications. In economic terms, maintaining such a large segment of the country’s
population in agriculture, in the conditions of a high birth rate, corroborated with
the relative seasonality of agricultural works (it was estimated that the active labour
force effectively worked 120 days/year) limited the growth possibilities of the
living standard and capital accumulation not only in agriculture but also at national
scale. These economic aspects had social reverberations, in the sense that the
permanent “appetite for land” was maintained in the rural world, and the Romanian
village became a factor of social discontent. The latter phenomenon was also
sustained by the fact that in the period before the two World Wars, the Romanian
village was an electoral manoeuvre field.
This period was characterized by social polarization phenomena. The agrarian
reforms contributed, to a certain extent, to the attenuation of the extremely strong
contrasts that existed in the social life. The bourgeoisie of small towns and cities
keeps running ahead, achieving and borrowing, relentlessly and without making a

selection, all forms of new and changing aspects of civilization; it always forgets to
remember, to look back; and when it did that, it was only fast and superficial: it did
not turn positively to the villages, did not get the village closer to it either, it did
not narrow the distance of civilization between village and town, between the
peasantry and the bourgeoisie.” (Constantinescu, 1943)
The rural life quality, the daily life standard reached the limits of maximum
frustration, being a manifestation of the basic characteristic of the rural world, i.e.
social underdevelopment. The rural daily life was affected by the dramatic price
decrease of agricultural products, by the price scissors between the agricultural and
industrial goods.
Prevalence of very small holdings (Table 1), of holdings that provided
insufficient basis for the proper subsistence of one family (as the experts of those
times considered), worsened the agricultural overpopulation phenomenon,
highlighting the rural property atomization.
Table 1
Distribution of peasant agricultural land properties
%
Category 1930 1941
No. of holdings
(% of total)
Agricultural area
(% of total)
No. of holdings
(% of total)
Agricultural area
(% of total)
without land 17.7 – 30.8 –
< 1 ha 15.4 2.4 16.1 2.7
1 – 3 ha 27.8 16.6 24.4 18.6
3 – 5 ha 19.0 22.4 12.8 20.0
5 – 10 ha 14.2 29.5 11.8 32.2
10 – 50 ha 5.9 29.1 4.1 26.5
Source: Marcu, 1969.
The complementary data on land fragmentation, collected during the survey
conducted in the year 1938 (ISSR, 1941), reveal that the situation of peasant
equalization created by the reform of 1921 had considerably changed, also favoured
by the law of 1929 regulating the circulation of arable land. It was proved that the
holdings of the new landowners were less resistant than of those who owned land
before the reform. The possibility of selling/ buying the plots obtained by land
appropriation “resulted in the emergence of a thin layer, yet present in each
village, of peasants who became proprietors of their own farms, with more than 10
ha, extremely energetic and enterprising” (Gusti, 1968).
The results of the agricultural census of the year 1941 revealed the following
situation:
– the first category of holdings was represented by the peasant holdings that
totalled 1,009 thousand (44.7% of total), with an area of 4,667 thousand ha
(45.8% of total area), operated only by the family, with an average size of

8
4.6 ha. Out of these, only 32% had sufficient land into their ownership to
operate, and the remaining 12.7% of holdings leased in land to supplement
their own reproduction needs. In other words, only one-third of total
agricultural holdings of the country could be considered as having sufficient
land, which provided them economic autonomy.
– the second category of holdings, accounting for 40% of total, was represented
by those with an average size of 2 ha, operated only by part of the family
members, mainly due to the insufficient land (a significant part of the active
persons on these households worked outside the holding, in agriculture or
other branches).
– the third category included holdings with hired workers complementing the
family work; it accounted for 14.8% of total holdings, farming almost one-
quarter of the agricultural land area. The average size of these holdings was
9.17 ha and they belonged to rich peasants, employees or certain landowners
who had leased out a large part of their land and farmed the remaining land
with their family and hired labour.
– the fourth category included 1.1% of total holdings, operating 11.7% of
total agricultural area, mostly consisting of the capitalist holdings that
farmed their land using hired workers. Their average size was 46.7 ha.
The 40 % of total holdings with an average size of 2 ha provided labour force
to the large-sized holdings and at the same time represented the core of the agrarian
problem in the year 1945.
The agricultural production evolution in the inter-war period portrays an
agricultural sector where crop production prevailed, with cereals being the main
crop; cereals were cultivated on the largest part of arable land areas; the share of
maize crop in total cereal production was almost 50%, yet with modest yields in
general (less than 11 quintals/ha). The evolution of agricultural output reveals the
decline of the value of the livestock sector by about 10% in 20 years (1919–1939),
to reach less than 40% of the total value of agricultural output by the end of the
inter-war period. The livestock sector continued its historical trend: “...its dynamics
was even lower than cereal production. The causes behind this situation were the
diminution of livestock herds during the war and only its partial recovery in the
two decades of the inter-war period. As Virgil Madgearu said, the main causes of
the decline of livestock herds were the diminution of grassland areas, the
insufficient increase of the areas cultivated with fodder crops and the diminution of
average yields per hectare in these crops” (Murgescu, 2010). At the same time, the
efforts to diversify crop production, mainly the expanding of areas under industrial
crops, stimulated in the second inter-war decade, yielded certain results, the share
of cereals in crop production value decreasing by about 5 percentage points throughout
the period, yet remaining much higher than in all the other crops, i.e. around 60%
of total.
The world economic crisis of 1929–1933 also affected all the economic
branches, but its most serious effects were in agriculture, due to this branch lagging

behind, both compared to the rest of the economy and to agriculture worldwide.
Although worldwide the effects of crisis in the financial and industrial system were
dramatic, if we consider the surprising bankruptcies and the explosion of
unemployment, the effects on agriculture were long lasting and mostly experienced
in the countries exporting agricultural products, among which Romania.
Beginning as early as 1928, with a sharp fall in the prices of agricultural
products, the agrarian crisis extended over most of the fourth decade (Bozga, 1975).
Generally, the reaction to crisis of the countries that imported agricultural products
was to increase protectionism, while the reaction of exporting countries was to support
the development of regional links (yet without success) and the intervention on the
market to support prices, through export subsidies inclusively. In Romania, the
crisis put a significant pressure on the balance of external payments, as generally the
prices of exported products decreased (mainly in the case of agricultural prices), while
the prices of imported products remained at relatively high levels. Compared to the
period prior to crisis, the cereal prices experienced a spectacular decline, reaching
values from one-third to one quarter of their level in 1928. For the peasant
agriculture, where cereal crops prevailed, the evolution of prices generated a strong
deterioration of the agricultural inventory, livestock herds and cultivation methods
(with focus on the manual labour), but it also produced an exacerbation of the
problem of repaying the debts contracted by peasants before the crisis.
The magnitude of the debt problem and the tensions that accompanied it
captured the attention of numerous experts, and several debt relief plans were
debated, in an attempt to save both the peasant holding and the banking system.
The result was to solve the agricultural debt problem by extra-economic means.
Thus, under the pressure of peasants’ opposition to the forced executions for non-
payment of debts, in the years 1931–1932 measures were taken to suspend and
postpone payments. Then various conversion formulas were prepared, and the
suspensions were extended until the final law of 1934 was adopted. This law on
agricultural (and urban) debt settlement provided for the reduction by 50–60% of
the debts of agricultural debtors and payment rescheduling over 17 years, at 3%
interest rate, for the remaining debt. The conversion eased the situation of peasant
holdings, relaxed the tension at village level and revigorated the domestic market
for industrial products, yet it almost fully compromised the idea of agricultural
credit, for quite a long time (Kiriţescu, 1967).
Under the pressure of prolonged agrarian crisis that impacted the evolution of
Romanian agriculture in the period between the two world wars, the researchers
focused their attention on the structural drawbacks identified in the organization of
agricultural holdings, the crop production methods, the situation of debts and the
rural overpopulation. The close interconnection between these deficiencies made it
difficult to separate the causes from the effects, yet the overpopulation issue lay at
the core of concerns for reforming agriculture. The agrarian thinking inspired by
Alexander Chayanov, to which the Romanian thinkers related to the peasant doctrine

10
also contributed, linked the scourge of overpopulation to the underdevelopment of
agrarian economies, considering that the problem of the peasant economy is mainly
a population problem.
State interventionism in agricultural production materialized towards the
end of the fourth decade in stimulating the production of sugar beet and sunflower
(following the orders from Germany) and in the development of a cereal storage
system (in the period 1938 – 1940, 34 out of the 77 silos approved for construction
were built) as well as of silos for fruit storage.
The losses of territories in the year 1940 (Basarabia and Northern Bucovina,
Northern Transylvania and the Cadrilater in Southern Dobrudgea) had consequences
on agriculture, not only by the diminution of cultivated areas, but also by the
population exchanges that followed. Subsequently, the concentration of troops and
the requisition of traction means, imposed by the war preparations, created another
problem, i.e. that of the labour force in agriculture. After Romania entered the war,
all these problems were exacerbated, and the solutions to these problems (imports
of German agricultural machinery, prisoners’ work) were only partial. The
unfavourable war evolution (1944) resulted in extremely difficult situations in the
regions near the front line, which led to land remaining uncultivated. It is not an
exaggeration to state that by the end of the Second World War “Romania’s
agriculture was almost a total ruin, as a result of the military operations carried
out on part of the country’s territory, by the plunders committed by the German
army in retreat, then by the Soviet army on the offensive” (Șandru, 2000).
After August 23rd
, 1944, the Romanian Communist Party’s propaganda
exacerbated the theme of a new agrarian reform, urging the peasants to occupy the
great estates. The agrarian reform was legislated by the Decree-Law of March 23rd
,
1945 of Petru Groza’s government. The authorities of that time made the agrarian
reform with the declared objective of increasing the arable land areas owned by the
peasant holdings with less than 5 ha, of allocating land plots to peasants with no
land, of using certain agricultural areas for other destinations, i.e. for agricultural
schools and experimental farms. Yet the political purpose of the reform was to
abolish the great land estates and the semi-feudal forms of agricultural land
operation (Axenciuc, 1996). The land properties of persons considered undesirable
according to certain political and ethnical criteria were also confiscated, for
instance the agrarian properties of physical or legal entities of German origin, of
those who took refuge from Romania after August 23rd
, 1944, or those properties
that were not used in the previous 7 years. The land taken over mainly belonged to
natural persons, the size of which exceeded 50 hectares, regardless of their
category of use, arable, orchards, pastures, small lakes and ponds. The agricultural
inventory of these properties was also confiscated, i.e. tractors, threshers, harvesters
and combines, which passed into the property of the state, with the purpose to set
up agricultural machinery renting centers in each county.

Table 2
Agricultural property by categories of size and number of owners in the year 1948
%
Category of size % of properties Category of size % of properties
up to 0.5 ha 16.4 up to 10 ha 91.5
0.5–1 ha 20.0 10–20 ha 1.6
1–2 ha 26.8 20–50 ha 0.4
2–3 ha 15.2 Over 50 ha 0.3
3–5 ha 12.7
5–10 ha 6.6
Source: Golopenţia & Onică, 1949.
Following the implementation of reform, 1,444.9 thousand hectares were
expropriated by the year 1948, out of which 1,057.7 thousand hectares were distributed
to peasants, and 359.4 thousand hectares were established as state reserve. As a
result of the reform of 1945, land fragmentation increased, and in the year 1948,
about 5 million holdings (85% of the total number of farms) cultivated areas
smaller than 5 ha on the average.
The agrarian reform of 1945 had mainly a political goal, namely the attraction of
the poor peasantry by the new communist power, installed on March 6, 1945. A
detailed analysis of this “provides a lot of evidence that shows that land expropriation
and appropriation were part of a larger plan of measures initiated by the communists,
aimed at seizing the political power” (Șandru, 2000). The period after 1945 was
marked by the predominance of the small peasant holdings and the silence of the
authorities in relation to the collectivization of agriculture, whose programme was
suddenly launched in 1949, with the declared goal of socialist transformation of
agriculture.
3.2. THE PERIOD 1948–1989:
COMMAND ECONOMY IN AGRICULTURE
The agrarian reform of 1945 laid the basis of the state sector in agriculture,
through the land reserve from the expropriated land that remained at the disposal of
the state. In the year 1948 some other land areas of 50 hectares that had remained
to former owners were taken over. All the goods under the incidence of the law
(land and agricultural inventory) were confiscated, i.e. they were transferred into
the state ownership, immediately and with no compensation. This practically meant
the “liquidation of the class of great landowners” in economic terms.
In the year 1946, the Public Administration of agricultural, livestock,
industrial holdings and agricultural machinery was set up, which was transformed
in the year 1947 into the Administration of state farms and agricultural machinery
stations (Popescu, 2001). After the collectivization of agriculture, the agricultural
machinery stations were separated from the state farms, resulting in two types of

12
entities that existed until 1989, namely the agricultural state farms and the agricultural
mechanization stations. In the year 1989, the state farms operated a total agricultural
area of 2,055.5 thousand ha. The area of state farms increased gradually since
1960, when they totalled only 1,720.1 thousand ha, due to the inclusion of certain
areas belonging to cooperative farms, which made the process of agricultural land
restitution much more difficult after 1990.
The role of state farms was to put into value the advantages of socialist
agriculture, practised on large areas, with the application of modern technologies
and scientific results. At the same time, they were going to have an important role
in the establishment of the central fund of agricultural products. The agricultural
mechanization stations had the role to provide agricultural mechanization services
for the cooperative farms. By the year 1989, the number of agricultural mechanization
stations had reached 573, these having 116,653 physical tractors in total, as well as
other agricultural machinery (mainly combine harvesters, sewers, mechanical
harrows, machinery for the application of phyto-sanitary treatments).
Another important stage, which defined the economic framework in which
agriculture evolved in the communist period, was the collectivization of agriculture.
This was initiated following the decision of the Plenary Session of the Central
Committee of the Romanian Workers’ Party on March 3–5, 1949; practically, this
was an option imposed by the Soviet economic model and ideology, which did not
trust individual peasants and wished to create collective agricultural holdings in
which peasants and agricultural production could be kept under control and used
for the purposes arising from the objectives of centralized socialist planning.
The collectivization of agriculture started in 1949 and ended in 1962, marking
an extremely traumatizing period for the Romanian peasantry. Although at declarative
level, the membership in a cooperative farm was based on free consent, “in practice
extra-economic means were also used, constraining and forcing peasants to join
such association forms, which distorted both the content of the process as such and
the cooperative property” (Popescu, 2001). The cooperative farms in the communist
period were far from the current standards of a cooperative, being characterized by
the infringement of important principles such as autonomy in decision making and
management, democratic leadership and mainly the correct and fair distribution of
the results of peasants’ work. Practically, they were a modality by which the
communist state imposed its political and economic control over the peasantry. At
the end of the collectivization process, there were 5,398 collective farms, with a
total agricultural area of 9,084.7 thousand ha. Their number decreased later on, due
to land consolidation. At the same time, the sector of individual household farms
diminished accordingly, and they continued to exist mainly in the hilly and
mountain areas. In the year 1989, there were 411 state farms with an average area
of 4,900 ha and 3,776 cooperative farms with an average area of 2,557 ha.
The main types of farms in the communist period, i.e. the state farms and
the cooperative farms, benefited from a different treatment from the state, both in
terms of investment, endowment in fixed assets, in agricultural experts, as well as

in terms of labour force rewarding. Thus, out of total fixed assets of agriculture in
the year 1989, the state farms had 31.7%, the agricultural mechanization stations
20.8% and the cooperative farms 22%. This system, by which the state property
and the state farms enjoyed a preferential regime, actually disadvantaged the
cooperative farms, which operated most of the land and where the majority of the
population employed in agriculture worked. After the integration of agriculture in
the socialist planned economy, various coordinating institutions such as the
territorial agricultural councils were established, and since 1974 the unique state
agro-industrial and cooperative councils.
In the year 1989, the cooperative farms cultivated 58% of the agricultural land.
This percentage did not include the small parcels that the cooperative members were
entitled to cultivate for their own use. On the average, the privately cultivated area (by
the law this not being into private ownership) was estimated at 10% of the land of the
cooperative farms. Almost half of this area belonged to the agricultural research
network and to the local councils. About 14% of the agricultural land area was
privately farmed, by the small farms that existed mainly in the mountain area and on
the households that cultivated small parcels that belonged to cooperative farms. Unlike
the cooperative farms, the state farms were operated under intensive system, using a
large amount of capital. The capital/labour ratio (fixed assets/employee or member)
was 10 times higher in the state farms than in the cooperative farms. The state farms
had a relatively good endowment in agricultural machinery, tractors, agricultural
equipment and transport means, while the fixed assets of the cooperative farms mainly
consisted of orchards, vineyards and animals.
Structurally, the rural society and the agrarian system were completely
transformed due to the new communist policies. In this period, other economic and
social evolution frameworks were imposed, which led to deep changes in the rural
area, in its relations to global society: “...it is worth noting that the rural structure
before the cooperativization was impossible to preserve in the post-war world…
Romania in the post war period needed to concentrate its agricultural holdings and
to develop economic activities that would provide a mostly productive outlet for the
surplus of labour force released from agriculture”(Murgescu, 2010).
The new structural characteristics were generated by the intrinsic need for the
rural area to change and at the same time by the political requirements of the period:
“Cooperativization started in 1949 and ended up in 1962… The result was the radical
change of the land ownership structure… In 1962, there were 5,398 cooperative farms
with a total area of almost 9.1 million hectares and over 4.5 million members.”
Table 3
Share of different agricultural ownership forms in socialist Romania (% of agricultural area)
State farms Cooperative farms Private ownership
1960 11.8 62.5 25.7
1989 13.9 60.7 25.4
Source: Constantinescu, 2000.

14
At the same time, a particular attention should be paid to the production
obtained on the household farms of peasants that were not cooperatized and on the
individual plots of the members of cooperative farms, who although had only 12.1% of
the agricultural land, obtained 32% of the production of vegetables, 54% of the meat
production and 53% of the milk production in the year 1989. Similar conclusions on
the high economic efficiency of the individual household farms compared to the
entities of the socialist agriculture are also revealed by V. Axenciuc (2018): comparing
the global agricultural production per employed person by the three types of holdings,
the author found out that compared to the relative level of 100% country average, in the
state farms the percentage was 139%, in the cooperative farms 39%, while on the
individual household farms 332% in 1989.
Analysing this period from the perspective given by the passage of time, it
cannot be denied that in the period 1960–1980 sustained efforts were made to
modernize the Romanian agriculture, mainly in terms of endowment in mechanization
means for agricultural works (tractors, combines, other types of equipment), application
of most modern agricultural technologies, use of chemical fertilizers, of chemical
substances for pest and disease control, of quality seeds and crop varieties. By the
year 1989, as against 1950, the number of tractors increased 11 times, the amount
of applied chemical fertilizers 196 times, while the number of agricultural experts
increased 6 times (compared to the year 1960).
Since 1966, lots of investments were made for the enlargement of the irrigation
system. The area equipped with irrigation facilities increased from 42.4 thousand
hectares in 1950 to over 3 million hectares in 1989, much beyond the economic
efficiency threshold of this type of land improvement works. According to a report
from the year 1991, the enlargement of irrigated areas was many times made by
“ignoring the technical requirements of design and execution” (GR, 1991), which
led to significant water losses. Although part of the irrigation systems received
World Bank financial support, their economic viability was doubtful from the very
start, the level of water subsidisation being 75.7% in the period 1971–1975, to
reach 66.9% in the period 1986–1989 (Lup, 2017).
Under the background of these technological improvements adopted mainly
in the 1970s, production increased significantly. As an illustration, in the year 1989, as
compared to 1950, cereal production increased twice, sunflower production 3 times,
sugar beet 4 times and fruit production 3 times. Cereals continued to be the main
crop in Romania, but the yields per hectare maintained significant gaps compared
to those from Western Europe, despite the efforts that were made in these three
decades. Efforts were also made to develop the livestock sector, the industrial
crops, the fruit-tree and vine plantations, and agricultural production diversification
increased. The share of livestock production in the agricultural output increased to
46% in the period 1986–1989, from 29% in the period 1951–1955, while meat
production increased 3 times in the same period.
The increase of agricultural production was also partially reflected in the increase
of population’s food consumption, until 1975–1980. After 1985 in particular,

population’s food consumption decreased in quantitative and qualitative terms, due
to production decline and the forced export of agricultural products to pay the foreign
debt. Due to domestic supply diminution, population’s consumption was rationalized
in many staple foods. In a retrospective analysis of what happened in this period,
two essential processes that took place in those years that adversely affected the
socio-economic situation of agriculture and rural area must be brought to attention.
In the first place, the control exercised by the political power on the agricultural
units had the implicit goal of supporting the policy of capital accumulation in industry
through the transfer of value created in agriculture. The main modality to achieve
this was through the system of controlled prices for agricultural products. The main
“flaw” of the system “related to the fact that the agricultural products were always
similar, so that they were practically valued at the same prices, while the industrial
products benefitted from the advantage of new products, which included price
recalculations. Thus, the price scissors operated continuously and clearly to the
detriment of agriculture” (Gavrilescu, 1996). At the same time, the low prices of
agricultural products, maintained year after year, made those products extremely
competitive at export, which resulted in significant foreign currency receipts for the
Romanian state at that time.
As the agricultural prices (procurement or contracting prices) were established at
central level, below the production cost level, this led to important economic losses for
the cooperative farms in particular, as a well as for the state farms. This phenomenon
became endemic mainly in the 1980s, when the losses of cooperative farms increased
from 7,600 million lei in 1980 to 20,973.8 million lei in 1989 (Ionete, 1993). The
number of cooperative farms with losses ranged from 2,900 to 3,600, out of a total
number of 3,776 cooperative farms in 1989. The state farms administered by the
Ministry of Agriculture also had great losses, with yearly values ranging from
9.3 billion lei to 23.5 billion lei.
As their financial situation grew worse, the cooperative farms gradually
decreased peasants’ remuneration for their work, and these began to receive very
small amounts in cash; they managed to survive due to the incomes in kind that
they received from different sources, and mainly from the individual plots that did
not exceed several hundreds of square meters. The financial situation of the
cooperative farms was much more difficult than that of the state farms, which
eventually benefitted from financial support from the state budget.
Secondly, agriculture represented the main labour “supply source” to the
other branches, mainly to industry. The rural – urban labour migration was generated
by obvious socio-economic causes, namely the unstable and generally low incomes
obtained from agriculture on the one hand, and the advantages provided by jobs in
the urban area: stable wages, child allowances, direct access to the healthcare system,
possibility to obtain a dwelling from the state funds, town amenities and generally
a different quality of life, on the other hand. The population employed in agriculture
decreased by 3,196 thousand persons in the period 1950–1989, while the population
employed in the sector of industry and constructions increased by 3,749 thousand.

16
In conclusion, the production system based on large-sized holdings, which
characterized the communist agriculture, together with the investments that
induced technical progress, led to agricultural production increase, mainly in the
first decades of the communist period. Yet the centralized management and
decision system, mainly oriented towards the transfer of value from agriculture to
industry, the transfer of young labour force from the rural area to industry and
constructions, as well as the forced agricultural exports to cover the foreign debt
drained the resources of agriculture and led to slowing down the development of
this economic sector. As a result, since the 1980s, agriculture, like the other
economic sectors of the country, showed signs of slowing development and even
regress. At the same time, the communist state policy had adverse effects on the
peasantry and the countryside, both in economic and social terms, and even in
terms of identity. After all, the peasantry was a strongly traumatised social class in
the communist period, and the effects of this situation are felt to this day in the
farmers’ behaviour. It is worth noting the current reluctance of small farmers to get
associated, to set up cooperatives for selling their production together, in those
sectors where production is mainly obtained on small farms, like in the case of
vegetables, fruit and milk.
3.3. THE PERIOD 1990 – 2018:
AGRICULTURE INTEGRATION IN THE MARKET ECONOMY
The year 1990 marked the end of the centralized planning in Romania’s
agricultural sector and the beginning of the transition period. For agriculture, the
first important moment of the period was the year 1991, through the restitution of
the cooperatized agricultural land in the communist period to the former owners
and their heirs (according to Law 18/1991). The law provided for the restitution of
a land area up to 10 hectares in arable equivalent per household and the possibility
for the former cooperative members who had not had land into ownership, as well
as for the local civil servants to receive land in the situation when there was surplus
land. “As it was designed, the land fund reform passed most of the land (two-thirds)
into the ownership of elderly people, former owners forced to join the cooperatives
in the period 1949–1962 and to a very low extent to the young people from the
rural areas.” (Gavrilescu & Giurcă, 2000). Subsequently, the land area that could
be legally restituted was increased to 50 hectares (Law 169/1997 and Law 1/2000).
Although the private land ownership was preserved during the 45 years of
communism, the inheritance situation did not follow the same course, which increased
land fragmentation. The application of the post-communist agrarian reform laws
resulted in the emergence of more than 4 million individual household farms, with
an average size of 2.35 ha, divided into parcels with areas under 1 ha. Romania
became the country with the most fragmented agriculture system in Europe. As a
result, following the implementation of the 1992 reform, the agrarian structure in

Romania became more fragmented than that in the inter-war period: out of total
farms, those with under 1 hectares accounted for 18.6% in the year 1930 and 49.5%
in the year 2002. The other assets from the patrimony of the former cooperative farms
were either divided according to questionable criteria (animals, in particular) or
sold or demolished (buildings). The providers of agricultural services (agricultural
mechanization centers), which had the agricultural machinery and tractors, were
transformed into Agromec units, which were subsequently privatized, starting with
1998. In late 1992, there was a dual structure of agriculture: on the one hand, about
3.8 million private farmers, who operated about 8 million arable land and produced
mainly for self-consumption, and on the other hand about 1.8 million hectares
arable land that remained on the state farms, that produced for the market needs. In
early 1998, there were 490 state farms, 109 pig and poultry farms, 71 Comcereal
and Cerealcom units and 1682 Agromec units.
The period 1992–1996 was characterized by the attempt to perpetuate a
certain approach specific to the communist period, i.e. the “strong hand of the
state” in agriculture and food industry. Practically, a control of agricultural prices
in the main products was maintained, the differences between the fixed prices and
costs being covered through subsidies that were paid from the state budget by the
so-called “integrators” within the chains. The integrators, generally economic
operators from the storage and processing sector, favoured the large agricultural
producers, the former state farms and the associations established in the place of
former cooperative farms, being less interested in the small private producers. At
the same time, the consumer prices were liberalized in several stages, and by the
end of the year 1996, four products were still subsidised (milling wheat, milk, pork
and poultry meat).
The evaluations made at the end of the year 1996 revealed that agriculture
used important funds from the state budget, the support being achieved both through
relatively transparent transfers (price subsidies for basic agricultural products, interest
rate subsidies, allocations for inputs), as well as through less transparent transfers,
the so-called quasi-fiscal transfers (e.g. credits with preferential interest or write-off of
debts to the state budget of state enterprises). The subsidised credits granted to
agriculture mainly went to the state sector (92%) and only 8% to the private sector,
out of which only 3.6% to the 3.9 million peasant household farms. These data
reveal the lack of equity of the crediting system in agriculture, which excessively
supported the state farms, many of which were inefficient and had losses.
At the same time, the main reason why the basic agricultural products were
subsidized, i.e. to have accessible prices for consumers, did not reach its goal. This
indirect subsidisation of consumption provided support mainly to richer population
categories, emphasizing the higher incidence of subsidised products in the richer
population’s diet, rather than in the diet of poorer population. Summing up the
evolutions from that period, the evaluations (Gavrilescu & Teșliuc, 2000) revealed
that the “agricultural policy applied until late 1996 strongly distorted the incentives to

18
farmers, was costly both for consumers and producers, and it did not solve the
major structural problems in agriculture and food industry”.
With budgetary costs difficult to bear, at the end of 1996 this financing
system was abandoned, and the newly installed government took important steps
for an agricultural reform in which the market was to play the main role. The
reform, implemented in the period 1997–2000, by applying the measures provided
for in the ASAL programme, agreed with the World Bank, had in view to privatize,
restructure or liquidate the state farms in agriculture, the downstream enterprises
(cereal warehouses, silos) and upstream enterprises (units providing mechanization
services, producing certified seeds or chemical fertilizers and pesticides), to liberalize
and improve land market operation, to create equal conditions for all agricultural
producers from Romania. The reform of support mechanisms in agriculture focused on
the full liberalization of prices, a transparent and more reduced support to agriculture
(also due to the difficult macro-economic situation in that period), and mainly through
direct transfers (vouchers), transparent budget credits and stopping the preferential
financing of state agriculture. At the same time, the foreign trade with agricultural
products was liberalized, by giving up certain protectionist measures, reducing
import duties and eliminating export restrictions. However, these restructuring
measures were applied with delay and sometimes only partially.
The evolution of the terms of trade between agriculture and the industry
supplying inputs for agriculture during that period is worth discussing. The 1990–
2000 decade was characterized by a high inflation rate, mainly in the first part of
the period. In the year 1993, the inflation rate reached 250%, but it fell sharply by
the end of the period (59% in 1998). The agricultural input market got aligned
faster with the international prices, as many products were imported, these being
technologically superior to those from domestic production. At the same time, the
prices received by farmers for their products remained relatively low due to the
control on the supply chains. In this context, in many publications from that period,
the “price scissors” issue was debated, namely the worsening of the ratio of agricultural
price index to the price index of industrial products destined to agriculture (considering
1990=100), “with the input prices increasing by a factor of 3,200 and the prices of
agricultural production by 1,200 in the last decade” (WB, 2005). The comments on
these calculations bring to attention that the respective indicator should be analysed
in the context of the high inflation that existed in that period and of the control
exercised over the agricultural prices during those years, which led to distortions
on the markets. At the same time, the comparisons with other countries reveal a
general phenomenon: “worsening the outputs/inputs price ratio was produced in all
the countries in transition at the beginning of the reform process, and the relative
price changes placed Romania, together with the Czech Republic and Lithuania
among the countries where the price/cost scissors was not extremely wide”
(OECD, 2000).
The agricultural production indicators in the decade 1990–2000 were lower
than those from the period 1986–1989, both in terms of average yields per hectare

and of total productions and labour productivity, in the context of unstable
economic situation, of the land reform of the year 1991 (which led to excessive
fragmentation of agricultural land), destructuring of the input supply chains and of
the marketing chains of agricultural products, and last but not least, as a result of
the increase in number of the population working in agriculture after 1997, when
the reverse migration phenomenon began, i.e. from towns to the countryside, due to
the closing down of some industrial and mining units. In the year 1998, for
instance, labour productivity in Romania’s agriculture was 10 times lower than the
European average (Popescu, 2001).
After 2000, the accession negotiations were initiated and agriculture began
to receive support through assistance measures and programmes meant to prepare it
for implementing the Common Agricultural Policy (CAP). The SAPARD Programme
(2000–2004) was a key instrument, funded from EU funds with co-financing from
Romania, which helped the Romanian farmers to develop investment projects according
to EU rules. This programme was well received by farmers and was continued by
the Farmer Programme (2005–2006), funded from Romanian funds. The Treaty of
Romania’s (and Bulgaria’s) Accession to the European Union was signed in April
2005. The provisions on agriculture were similar to those benefiting the countries
that had joined the EU in the year 2004, i.e. granting direct payments per hectare,
established on the basis of the reference average yields from the period 2000–2002.
The minimum size of farms eligible for payments was 1 hectare, and the minimum
parcel size 0.3 hectares, these limits being adapted to Romania’s fragmented
agrarian structure.
The level of direct payments gradually increased after Romania’s accession
to the European Union, from 25% of the average calculated for Romania in 2007,
to 100% in the year 2016. To compensate the gradual implementation of direct
payments, the New Member States could provide payments from national funds,
which did not have to exceed 30% of the payments of the Old Member States.
Romania granted these complementary payments throughout the period 2007–
2016, to support both crop production (arable crops) and livestock production (for
the bovine and sheep species). The CAP financial package also included significant
amounts for rural development, which were received for investment projects in farm
modernization, investments in the processing sector, market integration of semi-
subsistence farms, rural infrastructure, development of non-agricultural activities in
the rural areas.
Looking back on the ten years since Romania’s accession, it can be said that
for Romania’s agriculture and rural area, the implementation of the Common
Agricultural Policy in the period 2007–2017 produced many positive effects, but
also some less satisfactory effects. First of all, Romania's accession to the European
Union brought a predictability of the value of the support for agriculture, due to the
multiannual financial programming of the European funds, with a positive impact
upon agricultural production and farmers’ incomes growth. EU contribution was
decisive in the continuous increase of total public funds destined to support

20
agriculture, which exceeded 3 billion euros annually, in the period 2013–2016,
cumulating the support provided through the CAP Pillar 1 measures (from the
European Agricultural Guarantee Fund), through the Pillar 2 measures (European
Agricultural Fund for Rural Development, with national co-financing) and under
the form of state aids (from national funds exclusively). In this context, farm
incomes significantly increased in this period (by 50% in the period 2007–2016),
mainly as a result of subsidies received under the form of direct payments, which
reached up to 40% of farm incomes. The average yields increased in certain crops,
mainly in cereals and oil crops.
Yet a secondary effect of direct payments was the increase of agrarian
structure polarization, the disappearance of many small farms and the consolidation of
the large farm segment. The way in which the direct payments were distributed
reflects the polarization of the agrarian structure in Romania. Thus, in the year
2015, 97% of farms received only 40% of the total amount of direct payments,
while the remaining 3% received 60%. In the period 2005 – 2013, the total number
of farms decreased, the total area operated by the farms under 10 hectares decreased by
about 2 million hectares, while the areas operated by the large-sized farms increased by
about 1 million hectares. The average farm size increased from 3.3 ha in the year
2005 to 3.6 ha in 2013, very great differences being maintained in terms of average
farm size between the farms without legal personality (with an average size of
2.2 ha/farm) and those with legal personality (with an average size of 207 ha/farm).
Another undesired affect was the decline of animal production year by year,
both in terms of total production and of share in agricultural output. This evolution
contributed to agriculture orientation towards low value-added products and
increased dependency on meat imports.
Another category of negative effects, mainly manifested in agriculture and the
countryside, originates in the opening of markets and the free movement of
commodities, labour and capital. Farmers had to suffer due to the low competitiveness
in certain products, mainly animal products, but also fruit and vegetables that could not
face the competition of similar products from other countries. Broadly, the entire rural
area had to suffer due to young labour force migration for better paid jobs in Italy,
Spain, Germany or other EU countries. Young labour force migration, the depopulation
of villages correlated with the strong ageing of the population working in agriculture
represent a phenomenon manifested not only in Romania, but also in the other Eastern
European countries that got integrated on the European Single Market. At the same
time, due to the free movement of capital condition, an important part of Romania’s
farmland (about one million hectares according to certain estimates) passed into the
ownership of foreign farmers or are operated by foreign farmers.
On the other hand, although the rural area and the farmers received significant
funds for production and investments, in the rural communities poverty continues
at an alarming rate, 55% of the rural population being at poverty or social exclusion
risk, alongside with a high share of monetary poverty (71%). A precarious endowment
in transport and technical infrastructure, with poor healthcare and education services

add to population poverty, complementing the overall picture of living conditions
in the rural area.
A synthesis of the essential elements of the agricultural policies after 1989
(Table 4) highlights the diversity of approaches from the transition period, leading
to the conclusion that “in the first 10 years of transition, Romania’s agri-food economy
had made its way to a capitalist-type economy slower and worse than most former
socialist countries, due to incomplete and oscillating reforms” (Cioloș et al., 2009), as
well as the continuity and coherence imposed by the preparations for the accession
to the EU and subsequently by the implementation of the Common Agricultural Policy.
Table 4
Defining elements of the agricultural policies in Romania (1990–2018)
Structural policy Pricing and trade
policy
Financial support Strategic vision
1990–
1992
Land reform
implementation
Low consumer
prices, low protection
Consumer and state
farm subsidies
Agriculture, “social
buffer”
1993–
1996
Development of
integrators
Chain control and
protectionism
Support to production
of industrial type
Reaching self-
sufficiency
1997–
2000
Privatization of
industrial agriculture
Internal and
external
liberalization
Targeting the small
farms, through the
voucher scheme
Promoting family
farms
2001–
2004
SAPARD Programme
(European funds
prevailed)
Stimulating prices,
low protection
Support to production
marketing
Enlargement of big
farms
2005–
2006
SAPARD, plus
Farmer Programme
Getting prices
closer to EU prices
Double support, for
investments and
production
Development of
family farms
2007–
2011
Launch of NRDP
2007–2013 (Axis 1:
competitiveness)
According to
Common Market
Organizations (CMO)
According to CAP,
plus transitory
measures for 3 years
Accommodation
with CAP
institutions
2012–
2015
Running the NRDP
2007–2013 (Axis 1:
competitiveness)
According to CMO,
with milk market
modifications
According to CAP,
plus notified state aids
Farm consolidation
2016 Launch of NRDP
2014–2020
(priorities 2 and 3)
According to CMO,
with support to pork
sector
According to CAP,
by the new rules for
direct payments
Development of
middle class
2017–
2018
Running the NRDP
2014–2020
(priorities 2 and 3)
According to CMO,
with the sugar
market modifications
According to CAP,
plus de minimis aids
(tomatoes, sheep, pigs)
Attaining food
security
Source: adapted from Cioloș et al., 2009 completed with authors’ appreciations for the period 2010–2018.
The current agrarian structure of our country is the result of the superposition
of all these measures that have shaped not only the distribution of land property
between the social actors but also their way of thinking and acting. The 50 years of
communism preserved the small peasant property at the level of the year 1948,
while in the post-communist period, the village and the small farm around the rural
household represented a safety net in the face of transition shocks: the acute and

22
perpetual lack of jobs generated by the communist industry restructuring and by the
poor capacity to develop non-agricultural occupational alternatives; decreasing
incomes and implicitly, lowering access to resources, for meeting the basic needs
(Tudor, 2017).
The social buffer role (Dumitru et al., 2004) of the small farms made it possible
for Romania to go through the difficult period after 1989 without major social
upheavals. The negative effects of unemployment on long term, resulting from
deindustrialization, were mitigated by subsistence farming. Furthermore, if we take
into consideration the high self-consumption level, as share in the agri-food
consumption of an average household in Romania (30% according to the family
budget survey data – NIS 2014), it results that these farms have a significant
contribution to the food security of the country’s population overall. Small farms
have had a significant contribution to food security both for the rural and the urban
population, based on the family relationships and the agri-food networks created on
their basis, through which the agricultural products obtained on the small household
farms in the countryside are transferred to the relatives who live in the urban area.
Thus, while in a rural household 50% of the household members’ food consumption is
covered by their own-produced food, in the case of urban households this percentage
can reach 20%.
The allocation of land resources in Romania has maintained its bipolar
structure: numerical concentration in the area of small and very small farms (under
5 ha) and concentration of land on the very large-sized farms (over 100 ha).
Many analysts consider that small-scale farming (on small household farms)
represents a loss of economic potential for Romania’s agriculture (Otiman, 2012),
arguing that the small peasant farm is a form of inefficient allocation of land
resources (Gavrilescu & Gavrilescu, 2007) by the removal from the agricultural
circuit destined for market production of about 30% of the country’s agricultural
land; the small farms maintain land fragmentation, which leads to low agricultural
yields (Steriu & Otiman, 2013). The same authors draw the attention on the need to
reform the agricultural system from Romania for an economically efficient
operation of land resources, which should represent, in their opinion, the primary
objective of agricultural policies.
4. FINAL CONSIDERATIONS
The transformations of the Romanian agricultural sector in the last century
were the result of the combination of the natural evolution of the economy and the
distorting administrative interventions from the socialist period. The evolution of
the farm structure (Figure 1), expressed by the way in which the agricultural area is
divided between small farms (under 10 ha), medium-sized farms (10–100 ha) and
large-sized farms (over 100 ha) highlights the contrast between the farm structure

in the market economy and the farm structure in the command economy. It is worth
noting the relative similarity between the farm structure in the inter-war period
(1930–1941) and the farm structure in the post-communist period (2002–2010),
even though the medium-sized farms in the latter period did not reach their share
from the former period. Compared to these, the farm structure in the early socialist
period (1948), when there were no large-sized farms any longer, or that after at the
end of collectivization (data from the year 1970), when there were no medium-sized
farms, provides an indication of the difficulty of transition to the market economy.
Source: based on data from (Axenciuc, 2018).
Figure 1. Distribution of agricultural land area by types of farm size categories.
In terms of agricultural production, the values of certain significant indicators
for the reference years of the investigated periods (Table 5) reveal a certain continuity
in production specialization (high share of cereal production nationwide), as well
as the decisive contribution of individual household farms to the potato, fruit and
vegetable production. On the other hand, the incentivisation of animal production
(meat and milk) in the socialist period is worth noting, even though the peasant
household farms had an important share at that time as well. The introduction of
high-performance technologies yielded good results both in the socialist period and
after Romania’s accession to the European Union, one example being the increase
of average wheat yields.
Besides the organization forms in agriculture, the secular evolution of Romania’s
economy modernization is briefly illustrated (Figure 2) by the diminution of the
share of this sector in total gross value added. Thus, Romania (with the share of
agriculture below 5%) seems to have been definitely inscribed on the evolution
trajectory of developed (industrial) countries, with a low share of agriculture in

24
gross value added, although this sector has a strategic importance in the economy,
by ensuring food security.
Table 5
Agricultural production indicators in the reference years of the three investigated periods
Indicator UM
1938 1989 2016
Total Total
State
farms
Coop.
farms
Pop.
household
farms
Total
Farms
with legal
person.
Indiv.
farms
Cultivated
area
000 ha 9420.0 9846.8 2107.1 6548.8 1190.8 8409.2 3426.3 4982.9
Cereal
production
000 tons 8982.5 18379.2 4109.9 12276.5 1992.8 21764.8 10343.8 11421.0
Potato
production
000 tons 1331.2 4420.3 465.7 1992.1 1962.6 2689.7 153.1 2536.6
Vegetable
production
000 tons 541.0 3726.6 1474.1 1063.7 1188.8 3358.4 144.8 3213.6
Fruit
production
000 tons 1380.9 1580.2 572.0 233.0 775.1 1241.5 79.6 1161.9
Meat
production
000 tons
live
weight*
763.0 1910.6 618.2 261.3 1031.1 1464.6 829.2 635.4
Cow milk
production
000 hl 21575 45254 7621 13487 24146 48133 3427 44706
Avg. wheat
yield
kg/ha 1310 3364 4093 3274 2504 3937 4448 3310
*live weight of animals to be slaughtered for consumption
Source: Romania’s Statistical Yearbook 1990 (NCS) and Tempo online database (NIS).
Source: based on data from (Axenciuc, 2018), completed by authors.
Figure 2. Share of agriculture in gross value added per total economy.
From the perspective of agricultural policies, it can be also noted that
Romania has followed the so-called development pattern, according to which the

more advanced a nation is, the more it favours agriculture, which is a pattern followed
by all the developed countries. Thus, with the accession to the EU, Romania could
make the transition to this pattern, with the contribution of EU funding, whose
level reached twice the national level (Figure 3).
Source: based on data from the Ministry of Agriculture and Rural development, processed by authors.
Figure 3. Financial support to agriculture and rural development
in the period 1991–2016.
The last agrarian reform in the years after the collapse of the communist regime
had common characteristics with the previous agrarian and land restructuring
processes from Romania’s modern history:
– focused mainly on land, i.e. on only one of the agricultural production factors
and neglected the other factors, mainly mechanization. This approach
forced farmers (and mainly the new owners of agricultural land) to use
traditional, non-efficient land farming methods;
– created significant disequilibria in relation to the human factor – labour
force in agriculture – by disparities between the land owners and the
number of people who can farm the land (only 40–50% of the agricultural
land area into private ownership after the post-communist agrarian reform
was actually in the possession of farmers);
– generated significant economic costs: drastic diminution of the purchasing
power of landowners, extended and deepened monetary poverty on the
basis of the state control over the prices of basic agricultural products in the
first part of Romania’s transition and agri-food market dysfunctionality;
– led to the fragilization of rural social structures by the emergence and increase
of unemployment and rural-urban migration (and subsequent migration to
foreign countries) of the younger and better educated rural population.

26
The difficulties currently faced by peasant households and agriculture in
general largely derive from the shortcomings of the land ownership restructuring
process, which in their turn result from the deficient way in which the agrarian
reform process was conceived and from the lack of a medium and long term coherent
strategy with regard to the organizational restructuring of agricultural holdings.
REFERENCES
1. Axenciuc, V. (1996), Evoluția economică a României, Cercetări statistico-istorice 1859–1947,
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28

Cristian KEVORCHIAN, Camelia GAVRILESCU, Gheorghe HURDUZEU
Institute of Agricultural Economics, Romanian Academy, Bucharest
cristian.kevorchian@unibuc.ro
cami_gavrilescu@yahoo.com
geo.hurduzeu@gmail.com
A PEER-TO-PEER (P2P) AGRICULTURAL INSURANCE
APPROACH BASED ON SMART CONTRACTS
IN BLOCKCHAIN ETHEREUM
ABSTRACT
Traditional agricultural insurance systems are mainly based on the relationship between two
actors: (i) a farmer, who purchases a crop insurance policy in exchange for a premium paid before
crop seeding, and (ii) an insurance company that provides compensation for crop damages caused by
extreme weather events. Many crop insurance schemes are a mix of procedures, aiming at covering
the weather risk by subsidizing (partially or totally) the insurance premium. Yet, the bureaucratic
mechanisms designed to evaluate the damages related to the insured crops lead to complex procedures
that result in significant delays in covering the damages and implicitly the disruption of the farms’
cash flow and production processes. The insurance system decentralization based on a P2P insurance
system implemented on the basis of a framework supported by blockchain technologies dedicated to
agricultural insurance through a smart contract system operated on the Ethereum platform can ensure,
besides a less bureaucratic agricultural insurance system, a smoother payment to the farmer in a
context of social economy that diminishes farmer's distrust of the risk coverage product. The paper is
intended to design a technological solution based on the Ethereum blockchain that supports a
financial product to cover the production risk through a structured framework on two levels: the
analysis-decision level and the payment level.
Key words: smart contract, P2P insurance, indexes, blockchain, Ethereum.
JEL Classification: Q14, Q54, G13.
1. INTRODUCTION
It is well-known that one of the most important sources of income volatility
in agriculture/crop production is the chaotic distribution of rainfall and temperatures
throughout the crop life cycle. The harvest losses caused by drought and by
excessive rainfall result in losses worth billions of dollars to farmers worldwide
and are almost always accompanied by agricultural commodity price increases,
most often with dramatic social consequences. The uprisings related to the Arab

Cristian Kevorchian, Camelia Gavrilescu, Gheorghe Hurduzeu 2
30
Spring of 2011 started with protests against food price increases triggered by
droughts in Russia, Ukraine, China and Argentina and also by the torrential rains
faced by large grain producers in Canada, Australia and Brazil. The conflict in
Syria was also fuelled by a severe drought that devastated the farmland in the rural
area in the year 2006 (Siddartha et al., 2019).
The traditional agricultural insurance systems roughly consists of two actors:
(i) a farmer, who purchases a crop insurance policy in exchange for a premium paid
before crop seeding, and (ii) an insurance company that provides compensation if
the crop is affected by weather or economic events that finally lead to quantitative/
qualitative damages (production losses) or value losses (cash losses in the process
of production sale). To evaluate the level of damages, the insurance company
agents inspect the cropped area. Beyond the simplicity of the insurance process,
there are great variations in terms of types of policy and level of subsidies provided
for these schemes in different countries. At the same time, the insurance companies
do not hoard the large amounts of money related to the premiums collected; they place
the collected amounts in a series of investments instead, aiming to obtain higher
returns.
Many crop insurance schemes are a mix of procedures intended to cover
different categories of risks through partial or total subsidization of the insurance
premium by specialized government agencies that monitor the development of
crops.
Although the agricultural insurance system has an important social function
as it ensures the quasi-stability of incomes from agriculture, it is not provided by
public institutions, but by private financial companies that act according to the profit
policies of their investors. The bureaucratic mechanisms used to assess the damages to
insured crops often lead to complex procedures that ultimately parasitize the social
dimension, generating significant delays in covering damages, thus disrupting the
farms’ cash flow and production processes.
All these aspects are reflected in various bad faith practices of the insurance
companies, such as unjustified delays and not infrequently refusal of payment.
Although certain companies try to reduce these dysfunctionalities through
administrative measures, the negative public perception can be modified only by a
deep change of the risk coverage processes.
To protect farmers’ investments, governments intervene with support
programs; but the level of the government subsidies is directly dependent on highly
volatile budgetary policies. In the emerging countries, farmers often do not have
economically viable insurance for their investment, because their governments do
not have enough funding to implement such programs. Damage assessment in these
countries is extremely difficult due to subjective evaluation that often expose
farmers to corruption acts.
For the governmental risk cover systems, checking up the reported damages
is a costly exercise, worth billions of US dollars globally, consisting of very high
subsidies and administration costs. For instance, in the context of using direct

3 A Peer-to-Peer (P2P) Agricultural Insurance Approach Based on Smart Contracts 31
payments both by the US and the EU, the crop insurance system in the US implies
subsidy costs of about 13 billion dollars per year associated with administrative
costs over 1 billion dollars per year (Buterin, 2016; Catlin and Lorenz, 2017;
Siddartha et al., 2019).
To solve many of these administrative issues, international insurance
corporations and international organizations such as FAO or the World Bank have
turned to index-based insurance services (World Bank, 2011; Adegoke, 2017; Tripoli
and Schmidhuber, 2018). This type of insurance is different from the traditional
compensation forms, where payments are explicitly based on the loss measured in a
specific location for a specific insured farmer. In the case of index-based insurance,
farmers can opt for an index associated to the type of factors that have caused
losses, such as the rainfall amount in a certain period of the crop vegetation cycle,
(weather indices) or average yield losses on a large-sized area (yield indices per
area). Payment is triggered when the index value falls in a tabulated range based on
historical data.
This aspect proves that the index-based insurance does not protect farmers
against any category of damages, but it represents an efficient tool for the situations
when there is a risk at regional level (in the case of production risks on a large
area) or there is a well-defined weather risk (meteorological risk) that significantly
influences the production level and the farmer’s income implicitly.
A key difference from traditional crop insurance is that agents are not sent to
assess a specific incident related to a crop physical or value loss in the field. Insurance
projects based on index assessment were conducted in India, Kenya, Malawi and
Mexico (Ge et al., 2017; World Bank, 2011) as an antidote to the high subsidies of
the traditional crop insurance schemes and to the fact that the administrative
regulatory structures operate high-cost risk cover processes in agriculture, also
widely exposed to acts of corruption. In the developed countries, the index-based
insurance system has the advantage of eliminating the qualitative decisions
involved in the calculation of damages by insurers and government agents.
However, the index-based insurance system in agriculture is still constrained by the
lack of capital for its operationalization. And also, the complexity of insurance
processes discourages many farmers in using this form of weather risk coverage.
More recently, solving these significant administrative issues can be done
through the large-scale involvement of artificial intelligence, Big Data and
blockchain technologies (Scholl et al., 2016; Gupta and Giri, 2018; Sultan et al.,
2018). Surveys show that almost half of the public would do nothing if they found
out about fraud in an insurance process, while 24% even consider this fraud as
acceptable (Foucart, 2019). The anti-fraud measures are costly and often hostile.
Finally, the result is an unfair, bureaucratic and non-transparent treatment, with
much higher costs than expected by farmers. Both the high costs of the insurance
products and the bad faith practices can be significantly avoided by implementing a
P2P insurance system for risk coverage.

32
The P2P insurance is a risk-sharing network, where a group of farmers, on
the basis of an automatic risk assessment and monetization system, set up a
common fund to cover that type of agricultural risk, under the form of a premium.
The P2P insurance mitigates the conflict that arises between the insurer and the
insured, when the insurer keeps the premiums that it does not pay out in claims.
The P2P insurance is a particular case of parameter insurance also referred to as
social insurance. The basic idea in P2P insurance is that a group of farmers with
similar types of farms, and with common economic interests, base their risk coverage
policy on a commonly accepted control mechanism, trust and transparency, thus
lowering the costs related to risk coverage (weather, production, market, policy
risks, etc.). This new insurance model combines the traditional insurance with the
index-based insurance and allocation of compensations on algorithmic basis by
using innovative technologies, providing a product at farmers’ request that requires
full transparency and full trust in what risk assessment and coverage means.
The participants, who share exposure to a certain category of risks, decide by
vote on each decision and are free to delegate their votes to the other partners,
creating a trust relationship between participants. As long as there is no central
money management authority, any reimbursement payment to a partner is in fact a
payment of premiums from the other partners. Although the total value of
premiums is not fixed, the partners have full control over the expenses, which can
be, on the average, twice as low (Herings, 2018).
Although there is one beneficiary and one or several payers for each claim, it
is in the interest of each payer partner to proceed in a fair manner. Therefore, the
payer sets the approach standards that would underlie the risk coverage in the event
of an incident. This operation mode practically limits the conflict of interests and
significantly reduces the payment burdens imposed to the insured persons.
The present paper is intended to design a technological solution based on the
Ethereum blockchain that supports a financial product to cover the production risk
through a structured framework for the organization and management of P2P
agricultural insurance system on two levels: the analysis-decision level and the
payment level. The analysis-decision level is a system of risk assessment and
monetization and consists of a cluster whose nodes are used for transacting,
communication and voting. The payment system is intended for the payment level
and is based on the Ethereum platform. (Davis, 2018).
2. STATE OF KNOWLEDGE
The socio-economic inadequacy of classical agricultural insurance schemes
requires a new orientation of farmers to a new model and practice appropriate to
the current economic and technological reality. Blockchain technology in general
and smart contracts in particular can generate a paradigm shift that supports an
innovative type of P2P insurance based on FinTech concepts like crowdfunding.

Blockchain technology is a “mathematical structure” for data storage that
limits corruption and falsification of information. According to Ariane Rodert
(member of the European Social and Economic Committee, and rapporteur for
Blockchain and the Single Market), blockchain technology could help re-invent the
socio-economic models, thus supporting the social innovation needed to address
current challenges. Gonçalo Lobo Xavier (co-rapporteur), considers that the
technology behind the blockchain is a transformative force at the level of the entire
society, bringing values such as trust, transparency, democracy and security.
The high pace of innovation in FinTech (European Commission, 2018),
based on the large-scale use of mobile technologies, cloud computing, Big Data,
machine learning, blockchain and DLT (Distributed Ledger Technology) allowed
for a simplified access to funding and a significant improvement of digital banking
and self-banking services.
The report of the European Commission (2018) stated that the Commission
has established links with ISO/TC 307 Technical Committee on Blockchain
Technology and DLT (Distributed Ledger Technology) of the International
Organization for Standardization. The European standardization organizations were
invited to play an important role in identifying the specific characteristics of the
European Union in the use of blockchain technology. Among these roles we can
mention:
 The Commission will conduct a public consultation on the digitization of
information on listed companies on the EU regulated markets, on the possible
creation of a European Financial Transparency Portal based on Distributed
Ledger Technology (DLT).
 The Commission will continue to work on the development of a
comprehensive strategy, taking into consideration all the relevant legal
implications on Blockchain and Distributed Ledger Technology, which
will target all the sectors of the economy and promote the use of FinTech
and RegTech applications in the EU.
 The Commission launched an EU Observatory and Forum in February
2018, as well as a study on the feasibility of an EU public blockchain
infrastructure for the development of cross-border services. It will be assessed
whether or not blockchain technology can be developed as an infrastructure of
digital services within the European Interconnection Mechanism. With the
support of the EU Observatory and Forum on blockchain and of the European
standardization organizations, the Commission will continue to evaluate
the legal and governance aspects and to support the standardization and
inter-operability efforts, among which the continuous evaluation of the
cases of blockchain technology use and its applications in the context of
the Next Generation Internet.
On April 9, 2019, 25 EU member states, among which Romania, signed the
common declaration “A smart and sustainable digital future for European

34
agriculture and rural areas” (EC, 2019), which practically reiterated that the EU
agricultural sector is one of the main producers of agri-food commodities
worldwide, the guarantor of food security and safety and provider of millions of
jobs for Europeans, but currently facing many challenges in the field of digital
technologies, such as artificial intelligence, robotics, blockchain, high performance
computing (HPC), IoT (Internet of Things) and 5G that have the potential to increase
farm efficiency, while improving their economic and environmental sustainability.
The large-scale use of digital technologies should have a positive impact on the
quality of life in the rural areas and can attract a younger generation to new
agribusiness models (OECD, 2019).
The declaration is part of the efforts made by the member states to facilitate
and accelerate digital transformation in the EU’s agricultural sector. An example in
this sense can be the analysis of the blockchain technology impact on the processes
in agriculture made by the researchers from Wageningen (Ge et al., 2017).
The problem of the modernization of agricultural structures in Romania
cannot continue to be treated starting from the historical hypothesis of “Romania’s
agricultural potential”, an abstraction which is difficult to monetize in the absence
of a system of coherent policies for the management of resources, production and
agricultural markets rigorously substantiated and harmonized with the Common
Agricultural Policy (CAP).
Due to the strong social character of the CAP, it is very difficult to conceive a
package of policies that does not include a system of risk management and
coverage that provides protection to investors in agriculture, regardless of their size
and importance, as it is known that investments in agriculture are exposed to a
wide range of weather, production, economic and political risks. Agricultural
insurances are financial risk cover instruments provided by the financial industry,
yet unfortunately very little used by farmers.
It would be beneficial for agri-business to treat the risk cover issue as a
problem of agriculture, yet this cannot be achieved by agriculture itself, out of lack
of financial resources, nor by the financial industry through specific products, due
to the limited attractiveness of financial markets for these types of products.
Apparently paradoxically, the solution comes from the IT industry, which
using artificial intelligence platforms for the assessment of multi-risks that affect
agricultural businesses and delivering values of aggregated indices for various
categories of risks, proposes smart contracts associated with a parameter insurance
transacted in the Ethereum blockchain. This way the risk will be covered with an
amount of money equivalent to the losses estimated by AI and paid through the
blockchain electronic payment system. All this is done without the intervention of
a third institution that approves or rejects the transaction. The “Technology of
Trust” associated with the blockchain is considered by Marc Andreessen Horowitz
(Netscape co-founder) as “one of the most important inventions in the history of
computer science”, while Walter Isaacson (professor at Harvard and Tulane
Universities, USA) stated that the great missing element of the Internet was a “trust

protocol”. Practically, „the technology of trust” represents a modality by which a
transaction is verified and authenticated, without being affected by bureaucratic
practices that lead to mistrust between the insurer and the insured.
A series of important researches of the academic and technological
community is dedicated to the blockchain phenomenon and its applications to the
democratization of agriculture financing (Ge et al., 2017; Hang et al., 2020), but
beyond all these, a form of agribusiness financing (peer-to-peer lending) can be
discussed, free of excessive bureaucracy, alongside with a form of investment
protection through multi-risk insurance (Cafiero et al., 2005) specific to agriculture.
3. MATERIAL AND METHOD
Based on the newest literature and practice in the agricultural insurance field,
the paper tries to design and describe in detail a technological solution based on the
Ethereum blockchain that supports a financial product to cover the agricultural
production risk through a structured framework on two levels: the analysis-decision
level and the payment level.
4. RESULTS AND DISCUSSIONS
4.1. INDEX-BASED INSURANCE IN BLOCKCHAIN
The parametric insurances implemented through smart contracts and
transacted on a blockchain data structure such as Ethereum are forms derived from
index-based insurances and generalized as parametric insurances.
Unlike conventional insurance, the parametric insurance does not indemnify
the pure loss, but triggers a payment established following the occurrence of an
objective triggering event, such as the farm liquidity index, which below a given
level would lead to losses on all the farm business lines. This type of insurance is
sometimes identified with the index-based insurance. This type of risk coverage
has been present on the insurance market for about 20 years, but now with the
InsurtTech technology it can reach a new level of popularity, as many companies
are looking for additional risk transfer options. An example is a particular case of
parameter insurance called pandemic insurance that has experienced an
unprecedented demand once the coronavirus (COVID-19) pandemics broke out.
This type of insurance is not the only one that will benefit from the blockchain
technology advantages, but it is probably the representative product for this class of
decentralized applications. The parametric insurance uses data sources and algorithms
for underwriting, claims and payments made by the policy holder based on a

36
specific family of parameters – therefore, the parameters together with the
monetization associated to the pre-established risk replace the traditional claiming
process.
For instance, in Germany, Etherisc has developed a solution for crop insurance
with automatic payments in case of drought or flood.
The offer of insurance companies for farmers in emerging economies is limited
due to low profit margins obtained in this insurance category. Applying innovative
technologies, such as Blockchain, and accepting paradigm changes in policy and
risk management may result in lower operational costs and improved profit rates
implicitly.
The key to parametric insurance is to find indicators that act as proxy for the
type of damage that has to be covered. Once proxies are identified, the policies that
should be qualitatively adjusted could be reduced to simple “if-then” situations. For
instance, the value of Selyaninov index (proxy) outside the [1.4, 2] range determines
the level of claims according to the production losses generated as a consequence.
While production losses may be higher or lower than the specified value of
payment, the insurer gains certainty in forecasting losses and the policy holder
gains from the acceleration of payment. Both parties benefit from the automation
of the process and as a consequence from lower costs.
4.2. PEER-TO-PEER AGRICULTURAL INSURANCE
According to the study KPMG (2019), InsurTECH consolidates a trend that
in the conventional insurance system was not attractive due to high administration
costs of financial products that had to cover low but highly diverse risks (e.g.
production or market risks in agriculture). The high administration costs have
definitely imposed the digitization of insurance processes in parallel with programs
to increase IT skills for insurance consumers from the self-insurance category. This
also implies the need for a cultural change and getting in line with the “sharing
economy” principles. Nevertheless, the peer-to-peer insurance is a model that has
significant chances of success both on mature western markets and in the context
of emerging economies.
According to Investopedia, the peer-to-peer (P2P) insurance is a risk-sharing
network in which a group of individuals pool their premiums together to insure
against a risk. Peer-to-peer insurance mitigates the conflict that inherently arises
between a traditional insurer and a policy holder when an insurer keeps the
premiums that it does not pay out in claims. P2P insurance is also referred to as
“social insurance”. Peer-to-peer (P2P) insurance enjoys a growing interest from the
insurance industry that is facing dramatic changes, mainly due to disruptive
technological, economic and political changes.
In the case of conventional insurance, the insured pays the premium to the
insurance company to cover the financial loss risk. If the insured event does not

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