What is rural development?

The crisis of modern agriculture

For more than a decade European agriculture has been struggling with an ever deepening crisis. This crisis is strongly related to the modernisation approach to agriculture that became the dominant model of agricultural development throughout the second half of the 20th century. This model has been largely driven by the Common Agricultural Policy (CAP) of the European Union which, through subsidies and technical support, has supported the development of a highly intensive and productive agricultural sector and stimulated farms and regions to specialise in the production of a limited range of products.

The modernisation model has been very successful in meeting its original objectives: preventing the recurrence of food shortages that bedevilled Europe in the post-war years, and guaranteeing the cheap supply of food for a growing non-agrarian working population. In recent decades, limits to this approach have been encountered, manifesting in a range of environmental, economic and social problems.

• The pollution burden on water, air and soils has increased dramatically due to intensive production techniques and the widespread use of chemicals in agriculture. Beside this the scale enlargement of farming practices contributed to the decline of characteristic landscapes and habitats, that were often created, and maintained, by traditional farming.

• The role of agriculture as the mainstay of the rural economy has been eroded as farms become larger and require less labour input. Changes in the structure of food supply chains mean that less of the ‘value-added’ in food production is retained on farms and in rural areas, while a larger share goes to processors and retailers. Highly even patterns of rural development emerged, giving rise in some areas to problems of depopulation.

• The farming community has become disconnected, both from rural society and with its main markets. Fewer rural inhabitants now have involvement with farming, which sometimes gives rise to conflicts between agricultural and other land uses. Impersonal marketing structures, designed to achieve logistical efficiencies, have eroded the important links between consumers and producers.

Modern agriculture and the ‘price-squeeze’

These developments have dramatically influenced the economic viability of conventional agriculture. Nowadays farm families are confronted with a market situation that can be characterised as a ‘price-squeeze’. This is illustrated by Figure 1 below. The left side shows the economic logic of the, once, successful modernisation model. Productivist agriculture for a long time effectively exploited an increased margin between the revenues and costs of farming. This was done by enlarging production volumes and opening up new markets (within Europe and overseas), but also by raising technical efficiency levels through improved farm management and the diffusion of new technologies.

The right side of the figure shows the dimensions of the economic crisis that the modernization model is presently experiencing. From the 1980s onwards revenues from farming have started to stagnate (and in specific sectors and regions even declined), due to market saturation and falling prices. Europe had reached self-sufficiency for nearly all products and consumer demand for food (literally) met its physical boundaries. Exports to world markets served as an outlet for some time, but could not provide a long-term solution due to the high cost of export subsidies and increased opposition to the ‘dumping’ of surpluses. Equally export led strategies were also vulnerable to economic downturns in other parts of the world. More recently the downward trend in farm revenues has become aggravated by the growing consumer mistrust in the quality and safety of intensively farmed food

Figure 1. The Price Squeeze

While revenues from farming stagnated, production costs sharply increased, particularly due to the need to utilise more external inputs (cattle feed, fertilizers) and to invest in new and more expensive technologies. Other contributory factors included regulatory costs needed to meet new policy standards for the environment, animal welfare and food safety. Taken together the trends in revenues and costs create a ‘price squeeze’, in which the economic margins of farming are continuously decreasing. As a consequence it has become less attractive (and sometimes even risky) for European farm households to base their livelihoods exclusively on the production of conventional agricultural commodities. While the ‘price squeeze’ has not occurred everywhere at the same time, the general trend is clear and can be seen throughout Europe.

The Contours of Rural Development

In recent years farmers in different parts of the European countryside have developed new initiatives to overcome the crisis associated with the modernization model. These Rural Development (RD) practices can be understood as a response to the ‘price-squeeze’ described above (see dotted lines in figure). RD practices generate new sources of income to augment otherwise stagnating farm revenues. These practices can take many forms: through producing foods with distinctive qualities that attract premia prices, or through diversifying the farm business into new activities on non-food markets (tourism, nature and landscape management, energy production, care etc). On the other hand RD practices also involve new and innovative methods of cost reduction.

All these types of RD practices have one thing in common: they seek to reconstruct the eroded economic base of both the rural economy and the farm enterprise. They offer opportunities to farm families to create new economic margins and thereby strengthen their livelihoods, at a time when the chances of doing so on conventional commodity markets are decreasing. This also explains why the recent strong growth of RD practices, contrary to what is often thought, is by no means solely a policy-driven transformation. Policy certainly matters, but RD practices have been largely initiated and sustained by farming families themselves. For them, RD practices are a ‘way out' of the limitations and lack of prospects of the modernisation treadmill.

RD practices provide new livelihood opportunities for European farm families, but at the same time they have the potential to develop new relationships between farming and society at large. Throughout the modernisation era farming has increasingly become a specialised economic activity, disconnected from ecology, from other rural inhabitants and from consumers. In many respects RD practices embody a counter-movement to these trends. It is exactly by responding to new societal needs that new opportunities are opened to improve the economic viability of farming. The demands to which farmers respond with RD practices may be highly diverse, ranging from consumer demand for food products with distinctive qualities to the supply of services such as the management of nature and landscape, tourism and leisure facilities or care provision. In all instances RD activities contribute to a re-integration of farming with its physical, cultural and market environments.

Typology of Rural Development Practices

To better understand the underlying mechanisms and strategies of RD practices throughout Europe, the IMPACT research programme has elaborated a detailed typology of RD activities (see Figure 2). The typology distinguishes 9 specific Fields of Activity (FoAs), which can be classified within 3 main categories. The starting point of the model is that conventional agriculture (the production of food and fibres) which remains the ‘core’ activity of farming, but one in which different RD strategies are playing a growing role. Farm businesses are beginning to reposition themselves in wider social, economic and ecological networks. This repositioning of farm businesses may follow 3 main strategies.

Figure 2 A Typology of Rural Development Strategies

Deepening: This group of activities seeks to reposition the role of the farm enterprise within agri-food supply chains, and extend the involvement of the farm with different stages of food production and supply. Rather than delivering raw materials to industrialised and centralised food supply chains over which they have little control, farmers themselves take up activities beyond the farm-gate (processing, marketing etc) and play an active role in defining the specific qualities of products produced on the farm. In so doing they aspire to capture more of the value added value that would otherwise accrue to food industries or retailers. Involvement in deepening activities may also increase employment opportunities on the farm and in neighbouring localities. Newly created food supply chains often leave more space for direct contacts and communication between producers and consumers. Deepening activities also otherwise can be seen as a response to consumer demands for food safety, traceability, and food with distinctive qualities. Within the Deepening category three specific Fields of Activity (FoAs) can be identified:
Organic Farming
High Quality Production and Regionally Specific Products
Short Supply Chains

Broadening: This group of activities repositions the role of farms in the wider countryside by taking up forms of economic enterprise that tap into newly emerging markets in rural areas. These include activities as diverse as: nature and landscape management; agri-tourism; leisure and sports; care provision and energy production. Though apparently diverse, these activities have in common that they are all non-food oriented activities. The new activities may occur on the farm or in its surroundings, alongside food production. Some of these activities may relate closely to conventional agricultural production, such as nature and landscape management on farmland or diversification into production of non-food crops (energy crops, horse breeding etc). Other activities such as agri-tourism or care provision at first sight appear more of a departure from farming. Nonetheless, they benefit considerably from their location in a farm environment and the flexibility in resource use that is characteristic for family farming. Broadening activities are clearly a response to new societal demands that are articulated to farming and the wider countryside. Within the Broadening category four specific FoAs can be identified:
New on-farm activities
Nature and landscape management

Regrounding: This group of activities refers to a shift in the mobilisation, and use, of resources (land, labour, capital, inputs) within the family farm household. Through realigning use of these resources the viability of the family enterprise is strengthened and new livelihood opportunities are created. An important regrounding strategy focuses on reducing the costs of farming, by substituting externally provided inputs with more efficient uses of internal farm resources. This may include reduction of the use of agro-chemicals, but also cutting down on hired labour or external credit. Cost reduction activities serve to enlarge the share of returns from farming that are retained as family income, and simultaneously contribute to more environmentally sustainable, low-input forms of agriculture. Another, completely different, regrounding strategy aims at the mobilisation of off-farm income, mostly by taking up paid employment off the farm (pluriactivity). This is often part of a conscious strategy of the family household to diversify income sources, while external earnings may also serve to source new investments in (future) activities on the farm. Off-farm employment also results in new relations between the farm and wider society. These social networks can sometimes play a crucial role in facilitating new on-farm activities. The category therefore covers 2 specific FoAs:
New forms of cost reduction
Off-farm income