Betting on the Farm: Institutional Change in Japanese Agriculture

Betting on the Farm provides an institutional analysis of change within Japan's system of small-scale farmers’ local and regional co-ops, the national union of co-ops (JA-Zenchu), and the Japan Agricultural Cooperatives Group (JA Group), a hierarchical set of organizations and institutions that arose to regulate food supply and support food security goals in the immediate decades following World War II. Though the primary driver of change was the gradual liberalization of domestic agricultural markets, the authors’ focus is on what ultimately determines innovation and a successful response to greater competition and changing consumer preferences. They strive to explain variation in responses as the result of grassroots action among individual farmers and local co-ops in contrast to relative inaction and inertia in the national JA organization. These grassroots players cooperate with, co-opt, and transgress formal and informal rules of the game (including social norms) set by JA. But their relative success in shaping their economic outcomes varies widely, according to the authors, based on leadership and agency, and the range of strategies available to particular regions.Traditionally, every farming village had its agricultural cooperatives that served multiple purposes. Primarily, though, they provided farming inputs, collectivized labor, and equipment; established prices; and provided financing to small farms. In addition, a number of social and welfare services were offered by the co-ops, such as childcare, elder care, community centers, and banking services. The authors of this book focus on rice farmers (though single-purpose co-ops also exist for different types of livestock, sericulture, produce, etc.), which is especially useful for studying variation between similar organizations. The emphasis on rice explains, too, the relative passivity of farmers, in terms of entrepreneurial vigor, who were long the beneficiaries of controlled high rice prices. As markets liberalized, crop prices and farmer incomes declined, and as the price of inputs rose, farmer discontent with JA increased. But this has not led to a sudden break with JA. Why, the authors ask, has change been so slow?One compelling explanation is that JA has resisted change that would weaken its influence over the farming sector. A one-farm-one-vote rule continues to disincentivize consolidation of micro farms into more efficient landholdings. The expansion of membership in co-ops to nonvoting (non-farmer) “associate members,” who now outnumber official members, enabled some co-ops to remain viable despite the declining number of farm households. Associate memberships appeared to dilute the voices and interests of farmers, inhibiting change by downplaying the urgency of market-driven reforms. Additionally, JA tolerates an unbundled approach to its services, which prevents outright defection by many farms. Finally, because rural communities are electoral mainstays for the long-ruling Liberal Democratic Party (LDP), there was political support for maintaining the iron triangle of bargains between farmers, the LDP, and JA (and for a time the Ministry of Agriculture, Forestry, Fisheries as well). In sum, JA has been just innovative enough, making minimal concessions, to maintain the support necessary to continue its rent-seeking behavior. But it is not innovative enough to address the primary challenges of liberalization and rapidly aging and shrinking farming households.What, then, explains the ability of some co-ops to successfully break away from JA-induced inertia? The authors point to several factors, the most important appearing to be the capabilities of grassroots change agents among farmers and co-op leaders. Simply put, co-ops and farms that rely on the entrepreneurial and creative capabilities of these agents seem to fare better. A second major factor is the ratio of regular co-op members to associate members: the lower this ratio, the less responsive the co-op is to local needs. Problematic to their analysis, however, is the fact that co-ops that are weaker in the first place should be more likely to welcome associate members, muddying the direction of causality. Finally, the probability of success rests on the ability to diversify away from rice crops, verticalize, and add value to their output.A fundamental difficulty in conducting a study like this is in operationalizing intangible variables (such as personal traits related to agency, talent, and creativity) and tangible endowments that allow the pursuit of strategies such as crop diversification and verticalization. This book does not resolve these difficulties, apart from providing case studies of innovative managers and briefly explaining why some regions are geographically or demographically better endowed for diversification or adding value to output (for example, through processing). The case studies do point to an interesting aspect of agency that the authors do not belabor: the ability of leaders to overcome free riding and solve coordination problems. It is difficult to manage change from the production of a crop like rice, which lends itself to collectivizing risk and opportunities, to crops like vegetables or fruit that are more perishable, and where both supply and demand cannot be aggregated as easily. An interesting extension of the authors’ analysis would be to look more extensively at the ways in which the national agricultural and economic ministries facilitated diversification and marketing strategies, and how other national rules and regulations outside of JA structured incentives both for JA and for farmers.Betting on the Farm's nuanced description of institutional change, compared with rational choice institutionalism, successfully shows that not all actors have the capability of maximizing their utility within institutions. Initial power asymmetries, as the authors suggest, are path dependent. It is easier for JA to persist in its rational efforts to control the rules of the game and to maintain its rent-seeking institutional position than it is for farmers and local co-ops to change those rules or implement strategies that create a path to economic success for them. Farmers can be rational in their preferences regarding policies and incentives but, as the book makes clear, the personal traits of leadership and entrepreneurship are rare enough that many farmers are incapable and sometimes unwilling to respond in ways that maximize their economic utility. It is, therefore, a welcome addition to the literature on institutional change. The book is welcome in another respect: it is increasingly rare to see this kind of extensive fieldwork employed in political science, and the insights gleaned from the interviews and visits are informative. Students of development studies and of Japanese politics and economics will find this a worthwhile scholarly book that at times raises more questions than it answers.