Opening remarks (edited) presented at the opening ceremonies of the first seminar of the Russian - American Agribusiness Training Partnership in Moscow (Kocino) by Dr. Roy E. Chapin
24 October 1995
Opening remarks (edited) presented on 24 October 1995 at the opening ceremonies of the first seminar of the Russian - American Agribusiness Training Partnership in Moscow (Academy of Retraining at Kocino) by Dr. Roy E. Chapin, Texas A&M University's International Agribusiness Education Coordinator.
Let me introduce myself. My name is Roy Chapin. I come from the state of Oregon in the Western United States. I am the International Agribusiness Education Coordinator for Texas A&M University. Texas A&M is the U.S. partner in this Russian - American Agribusiness Training Partnership. As the resident coordinator, I have the good fortune to live in Moscow. I've been here since the middle of August and I will live here until April of 1997. I'm pleased to be working with the Russia Ministry of Agriculture and the Academies of Retraining, who are our Russian partners. This seminar is the first of six or eight that we will hold during the next eighteen months. We expect to have over 120 to 160 teachers from the Russian Ministry of Agriculture's Academies of Retraining attend our seminars with twenty four retraining educators earning trips to the USA for additional training.
As we start our seminar there are some general observations that I would like to make. This seminar has at least two objectives. We want to talk about agribusiness decision making in a free market economy and secondly we want to look at the methodology of teaching these principles so that our efforts, through you, can be leveraged to many people. Let me state up front that none of us are here to tell Russians what to do or to try and Americanize Russia. The Russians and the Americans come from different backgrounds with different conditions. What works in the United States may or may not work in Russia. It is up to the Russians to decide what is applicable to Russia and then to apply this knowledge to improve the productivity of the Russian agribusiness complex. What we will attempt to do is to explain what has worked for us in the United States and then we'll ask you to think how this could be adapted and used to create wealth in Russia. We will supply facts, figures and ideas. It is up to you to use creative thinking - problem solving - to apply them to Russian agriculture. You know what your conditions are better than we do. We encourage you to challenge our comments, including the ones I'm making right now, rather than to accept them at face value. Please understand that this will be a participatory seminar. We will encourage all of you to contribute. We want to learn about your agribusiness environment as we tell you about ours. You share the responsibility, along with the U.S. instructors, for the success of this seminar. Successful learning takes the hard work of both the teacher and the student. We ask that both the teachers and the students accept their responsibilities and take an active and aggressive role in this learning process.
There are two levels at which we think Russia can make progress: the farm level where someone makes production and marketing decisions and the political level where legislation favorable to a strong productive agriculture is made. As teachers, some of your students will end up in policy making positions; some will continue in agribusiness and some will choose other professions. We encourage you to work at both the rule making and the agricultural production levels. In other words, help make rules favorable to agricultural productivity and then play the game of creating wealth in the agricultural sector of Russia.
We are all interested in the creation of wealth for our countries. Let's define what creation of wealth means. The oil producing gulf states are wealthy but they don't create wealth; they mine it by pumping oil from the ground. They sell a natural resource and when it runs out, their source of wealth is gone. Compare that to Japan, a country poor in land (natural resources) but rich in labor, capital and management. The Japanese have one of the strongest economies in the world because they create wealth by importing resources and converting them into products of higher value, such as electronics and automobiles. Japan's wealth is sustainable. From my work in China and South Korea, I know that parents in Oriental countries will do anything to further the education of their children. (This emphasis on learning is apparent as the children of Oriental parents that have recently moved to the USA win more than their share of academic honors in our school system.) They know that education improves the value of the "labor" resource that can then be combined with capital and management and imported natural resources (from land) to create great wealth.
As I read the Moscow papers one of the alarming concerns expressed is that Russia is selling more and more of her natural resources to other countries. These buying countries then use these resources to create value added wealth, not for Russia, but for themselves. Said more directly; Russia is de-industrializing. This needs to change. It is important that Russia industrialize more, rather than less, and use its own natural resources themselves to make value added products and therefore create wealth for Russia and Russians. Russia needs capital to do this and that means Russia must become attractive to investors who will want to feel that they can make a return on their investment. They will want to see stable policies favorable to business. Investors don't like surprises.
Russian agriculture can create more wealth than it is doing now. From my work in Samara I learned that half the pigs in the Samara Oblast are fed rations that contain only grain. We know that pigs thus fed consume over eight kilograms of feed to produce a kilogram of live weight. We also know that if the ration is balanced with amino acids, vitamins and minerals to go along with the energy from the grain, that it will take less than four kilograms of feed to produce a kilogram of pork. This means that by balancing the rations we can more than double the production of pork from the same weight of inputs. This is real creation of wealth. Animals not fed balanced rations are inefficient in their metabolism at the cellular level and thus resources and the potential to create wealth are lost forever. Russia has a great opportunity to create greater wealth in the agribusiness sector by (1) applying known methods for improving livestock production, such as balanced rations; (2) improving crop production, such as cutting forage before it is too mature; (3) improving its marketing and distribution, etc. We agree with Deputy Minister Dr. Anatoly Ogarkov that there are many opportunities in agriculture to dramatically increase the creation of wealth in Russia. That is one of the big attractions and reasons for being here.
Let me make some rather obvious observations. People always want more than the limited resources available to them can provide. It is therefore important to use these limited factors of production efficiently to maximize wealth. What are these factors of production? You all know them as Land, labor, capital and management. On the plus side, Russia is rich in land and the natural resources contained in and on this land. Russia is also rich in intelligent and well educated people. On the minus side, Russia needs capital and it needs to improve its decision making within a free market system. To attract capital, Russia needs to make political and economic decisions favorable for investment by those who have money to invest. The Russian - American Agribusiness Training Partnership hopes to help Russians improve their decision making process.
There are two basic systems of managing these factors of production: 1. CENTRAL PLANNING - also referred to as a command economy and 2. FREE MARKET - or simply market economy. During our lifetime the experiments have been run on the effectiveness of these two systems and it is no longer debatable as to which system will create more wealth. You need only to compare the economies of North and South Korea and East and West Germany and observe the transformation in Chile (which I have personally seen) that has taken place since it became a free market economy, to reach your own conclusions. The U.S. and other free market economies have successfully produced wealth with a market economy. It should also be mentioned that agriculture is one of the hardest industries in the world to effectively manage via a centrally planned economy. People at the ground level, the animal level and the plant level need to be empowered to make their own decisions to combat the vicissitudes of the weather and other variables and they will do this best if they own their own land and have the freedom to make their own decisions. The big question and challenge facing Russia and the countries of the former Soviet Union is how do you convert from a command economy to a market economy while maintaining a food supply and satisfying other basic human needs? The Russian people have chosen to make one of the biggest peaceful economic transitions in the history of mankind (humankind) in the promise (hope) of improving their standard of living over what it has been.
Rather than debate the values of a market economy vs. a command economy, we need to study why the free market system produces more wealth than a command economy and then refine our political and economic environment to allow and encourage this greater creation of wealth.
Governments by nature seem to want to "protect" their citizens by controlling their lives. They generally don't act as if they believe that "those who govern least, govern best." (Obviously we need some government and "least" would be none, so the real question is how much government do we need and what do we want the government to do? My answer would be that we want them to make good laws and to enforce them fairly and thus encourage stability but let private citizens working in a free market place play the game of business.) People around the world have now been able to observe the results of these two very different economic management systems. Even in supposedly market economies such as the USA, there is a growing understanding of the different results produced by these two economic systems and thus there is a greater general desire to become even more market oriented in an attempt to produce even greater wealth. For example, many policy makers in the USA would favor no farm subsidies in the USA or in any countries (this is presently a source of conflict between the USA and the European Union). This would let the "invisible hand" of the free market place determine what is produced and by whom. That encourages the efficient allocation of resources. (The USA has a vested interest in this because of the production potential, and therefore international competitiveness, of its efficient agribusiness complex.)
A population that is well educated about the functioning of a market economy and its greater wealth creating potential (in comparison to a command economy) is more likely to support the free market approach to allocating the always limiting factors of production. Financially successful countries are more prone to choose democracy vs. dictatorship, peace vs. war and honest labor vs. crime. In addition they make better trading partners. The world therefore has a vested interest in Russia's financial success. This helps explain the strong Western support of humanitarian aid and technical assistance. We want Russia to be financially successful. Educators, such as yourselves, have an important role to play in the future financial security of Russia and in particular to helping increase the productivity of Russian agribusiness.
It should be pointed out that in a free market system the only constant is change. A market economy is very "dynamic" as opposed to the "static" nature of a command economy with its five year plans. The "engine" that drives change in a market economy is the entrepreneur's desire to satisfy the customer better than his/her competitors. Since the customer's needs are a moving target, we must constantly be alert for ways to adjust and improve the product and service that is offered. Adam Smith called this continual re-allocation of the factors of production in an attempt to improve customer satisfaction "the invisible hand of the market place." Those who do it most successfully will prosper. Those who fail will no longer control these resources, freeing the under-employed resources for use by those who are more successful in efficiently satisfying customer needs. In this manner greater wealth is created for a society from the limited factors of production. When this re-allocation of resources is impeded, such as in a command economy, society has fewer goods and services available to it and thus less wealth. This continual re-allocation of land, labor, capital and management is painful for those who fail or are negatively affected by this "natural" process of the re-allocation of resources, but this "pain" is a necessary evil in order for a society to have resources used efficiently to produce goods and services. The successful entrepreneurs and society as a whole benefit when a market economy is allowed to flourish.
When you look at agricultural production, the USA is the envy of the world. Less than two percent of our population is engaged in farming. Each farmer produces enough food and fiber for 130 people world wide. Our government actually pays farmers NOT to produce certain commodities. If turned loose by the government, the U.S. farmer could improve on these already impressive figures of agricultural productivity. Our entire agribusiness complex, which employs many more people, is also highly efficient in responding to the needs of the market place, making the American population among the best fed people in the world. In addition, they use a smaller percentage of their incomes to buy this food than in most other countries. That is a nice combination - high quality and low price. A (mostly) market economy has allowed it to happen.
In the 1860's three significant events took place in the USA that have enabled us to develop such a productive agriculture. 1. The United States Department of Agriculture was formed. 2. The land grant colleges were established to teach agriculture, do research and through the extension service, help farmers to use the latest methods; all focused at creating more wealth from agriculture, and 3. The government gave substantial hectares of land to anyone who would farm it. In other words, the farm land was privatized. Almost all the farm land in the USA is privately owned and much of it is owned by the farmer who farms it. Besides private ownership that allows decision making by the owner, these farmers are allowed to make business decisions in a mostly free market environment.
Russia until recently has chosen a different route. While Russia has a ministry of Agriculture that corresponds to our USDA, Russia has not had a well developed extension system to help their farmers increase their ability to create wealth from the land and it has not allowed the private ownership of land. I am impressed with the work that Dr. Anatoly Shelepov and others are doing through AKKOR to encourage private farming and who are working so that these farmers can own the land they till. They are working at both the farm level and the political level. I applaud them.
From my five previous trips to Russia I have been most impressed with the educational level of the Russian people. In fact, it is this intellectual part of Russia that really draws me back. I like what you do to my mind. We are meeting in a great academy of retraining with people we know to be qualified to be here. We also know that you are underpaid and in transition as to what your function in the newly emerging market economy really is. You should all examine the product you "sell" and what your customers need and for what they will pay. I suggest you should take a pro-active, rather than a passive, approach to adjusting to the market conditions for education in the new Russia. I won't be the first one to suggest that you can increase your contribution to Russia and therefore your earning power, in a free market economy (that is hopefully creating enough wealth to pay you adequately) by becoming the "extension" service for Russia and taking your considerable knowledge to the farmers to help them increase their productivity. We hope to help you visualize how this could work.
The transfer of technology from the institutions of higher learning to the farmer is important if you are serious about increasing agricultural productivity. I'm pleased that the World Bank is making it possible for twenty Russian agricultural leaders to study for a month in Holland, the United States and Canada after spending a week at this Academy studying the nature of extension services in these three countries. My interest in agricultural extension goes back a couple of generations as my paternal grandfather was the first county agent west of the Rockies in the Western United States and helped introduce the raising of corn there.
Russia needs to increase its ability to create wealth so that education, medicine, the arts, etc. can be better paid. If this doesn't happen, people will leave these professions and more profoundly the young people won't enter them in adequate numbers. That would be a tragedy, for Russia has such a rich and enviable history of contributions to knowledge, the arts, etc. I should mention that education in the USA faces the same challenges of finding adequate funding.
We ask you to attend this seminar with an open mind and continually ask yourself, "How can I use this information to help improve agricultural productivity in Russia?" You'll need to select what you can use and reject what you can't use, but don't be too quick to throw away new ideas. Accept the cards that have been dealt to you and personally take the responsibility to make the changes necessary to help improve agricultural production in Russia. Leaders must first look at things realistically and see them as they actually are. After taking a realistic inventory of the situation you can and should dream about how you would like things to be. You can then decide on a course of action to realize those dreams. Finally, you must take action to make the desired changes.
The moment of truth for this seminar is when and to what extent you, as retrainers, transfer the knowledge learned from the instructors to others who eventually use it to make intelligent agribusiness decisions to create wealth in what we hope will be a market oriented economy. At that point we can begin to talk about "cost recovery" for this program. When the seminar ends your work really begins. If you fail to follow through aggressively, this seminar and the Russian - American Agribusiness Training Partnership can not be economically justified. The U.S. taxpayers along with Texas A&M University, who is the American partner and the Russian Ministry of Agriculture, who is the Russian partner are all betting on your effective performance. Don't let this partnership and Russia down.
After lunch we're taking off our coats, rolling up our sleeves and asking you to go to work with us. We'll start by asking you to help re-arrange the tables so that we can be more informal and more productive. There is great opportunity in Russia for increased creation of wealth in Agriculture and other industries. We're delighted to be working with people here who can help make the changes that will create this wealth. We hope that our inputs will be of value and that you will share your ideas with us so that we may also learn. We look forward to a productive partnership that will hopefully have benefits for all of us long after our two years here is over. Training trainers means that our inputs are sustainable if the trainers follow through to teach those who will eventually apply and use this information in the Russian agribusiness complex. Both partners in this Russian - American Agribusiness Training Partnership , have great responsibilities. We're glad to be here and we hope that you are also. Ivan Perov, our deputy director, and I have a permanent (until April 1997) office at this academy to further the partnership objectives. Please use us. Now let's go to work.