The vicious cycle of underdevelopment

“Many villages in Poland, not only in the eastern part of the country, are depopulating at an alarming rate,” says Professor Monika Stanny from the Institute of Rural and Agricultural Development of the Polish Academy of Sciences.
The vicious cycle of underdevelopment

Skroblaki village, Podlasie, Poland (Adrian Grycuk, CC BY-SA 3.0)

CE Financial Observer: Your research on rural areas in Poland indicates that the changes previously occurring, for example, in Spain, where hundreds of villages are becoming completely depopulated, are also starting to take place here. Many villages in eastern Poland are being depopulated at an alarming pace. You write that in many peripheral municipalities in the countryside, not only in the eastern part of Poland, pensioners already account for 1/3 of the total population, with the average for rural areas being 17 per cent. In some communes in the Podlasie region, this share has even exceeded 40 per cent. The question is whether this trend can be reversed?

Professor Monika Stanny: You’re asking whether we can reverse the process of depopulation in these locations? Well, it should be noted that it is just a part of a larger mechanism known as the vicious cycle of underdevelopment. Mainly in the 1970s, but also later on, there were large migratory outflows from eastern Poland, and especially from the communes located near the Polish-Belarusian and Polish-Ukrainian border, but also from communes situated on the border between the Mazowieckie voivodeship and the Łódzkie, Świętokrzyskie, Lubelskie and Warmińsko-Mazurskie voivodeships. Large numbers of people were moving from these regions to the cities in search of work in order to improve their livelihood, and as a result, a vicious cycle of underdevelopment was created there. When the population — mostly young people — started leaving agricultural areas, this blocked the increase in demand for work outside agriculture in those places, which hindered the development of the local economy. Fewer young people also means fewer births, and as a result, a lower demand for local public services, schools, healthcare facilities, cultural institutions, etc. When that demand fell, it was followed by a reduction or regression in social infrastructure, such as schools.

The decreasing availability of public services deteriorated the living conditions, which was conducive to a further outflow of inhabitants. Young people were leaving these regions because they saw no professional opportunities for themselves and no favorable conditions to start a family. The structure of the local population, formed as a result of many years of migratory processes, is extremely unfavorable in these regions. This means that these areas are losing their capability for socio-economic development and their depopulation is continuing. The local governments are facing a great challenge of ensuring adequate access to public services for these aging and sparsely populated areas.

How can we break this vicious cycle?

That will not be possible without external support, without the influx of external capital and without entrepreneurial individuals or pro-development programs directed to areas with a low population density. In order to reverse this trend, we need to drive a wedge between the migrations and the labor market, between the labor market and the services, and between the services and the births. One could imagine that this could take the form of, for example, the construction of an industrial plant. But that will work only if there are employees with the necessary competencies in a given local community.

In order to make people stay in villages located “far away from the highway”, we need non-agricultural jobs. One opportunity for the renaissance of these areas are jobs supported by or based on digital and telecommunications technologies. Without such solutions, no one will convince young people to live in a place where they won’t be able to fulfil their aspirations.

You conclude that the changes taking place in the Polish countryside in recent years have been mainly influenced by internal migrations, that is, those occurring within the country.

People have always been migrating from less attractive to more attractive locations in order to improve their lives. Today the main motivation is work. The migrants mainly include young, well-educated, resourceful and entrepreneurial people. Older people tend to stay in the countryside. This applies in particular to areas located far away from larger cities and to agricultural communes. Communes with a predominant agricultural function have an agricultural labor market, which is not attractive for most members of today’s society, who have entirely different competences, also due to the current education system and the need to function in the digital world.

Farmers in Poland do not pay income tax, while agricultural tax is low and is not based on the profitability. This, in turn, hurts the finances of the agricultural communes, as the main source of municipalities’ income is their share in income tax and real estate tax.

Indeed, our research indicates that the more the structure of the local economy is tilted towards a mono-functional agricultural structure, the lower its level of socio-economic development. As part of the “Rural Development Monitoring” program, we created a map of rural communes in which we presented the communes’ revenues obtained from CIT and PIT per PLN1 of revenues from agricultural tax.

And this map shows that we have communes, mainly in eastern and northern Poland, where for PLN1 of revenues from PIT and CIT, there is PLN1 of revenues from agricultural tax. This means that there are no other jobs, except in the agriculture and jobs created by the municipal government, such as municipal offices, schools, kindergartens, health care facilities. The state is the main employer in these places. There is also no way to encourage investors to locate their investment in such a municipality, because in such places there is no proper environment or no proper conditions for that. For a business to be able to flourish in a given location, it must have a proper business environment.

However, this environment will not change, because the municipality is poor and can’t afford to create better infrastructure or better conditions for investment.

That is why areas suffering from long-term underdevelopment should be specifically included in the state’s development policy, and in its assistance programs. Such municipalities need help in maintaining their infrastructure, not only for the residents and people working in a given commune, but also for the potential investors. However, the investor also has to be certain that they will find employees in that location. They may also conclude that locating investments in a commune in which depopulation processes are already taking place is risky. Reviving such areas is not an easy task.

Let me give you an example. Let’s say that you will attempt to revive a given commune using medical services. We can build, for example, a facility for the treatment of certain diseases. The question is whether the spouses of the physicians that we want to employ in that facility will also be able to find a job in that municipality, and whether their children will have good access to social infrastructure, education and culture there. This process — the migration of people to areas with a higher concentration of access to services, goods, infrastructure — is a natural process and we can’t stop it.

So will we have increasingly large, sprawling cities and increasingly depopulated areas in the countryside?

Unfortunately, yes. However, we can reduce the scale of these phenomena, we can slow them down, skillfully managing this transition. We say that the suburban areas are becoming urbanized and that they are sprawling. However, the reality is different. Suburban areas are mostly being settled by people moving from the countryside, who cannot afford to buy or rent a flat in a large city, and instead choose villages surrounding the city. This stream of migration from the countryside villages to the suburban villages is definitely larger than the migration from the cities to the countryside.

This is also a matter of the sustainable development of the entire country. The rural areas that we are talking about also serve as the hinterland for the smaller towns, which would be in a much more difficult situation without them.

Fortunately, in Poland we have a polycentric structure of large cities. This means that we do not have a single central city sucking up the rural population from the entire country, as is the case, for example, in Mexico. However, development cannot only take place in large cities which are already strong enough to grow without any additional support. We certainly need to help small and medium-sized towns, but public interventions are primarily required in municipalities with a low population density. If they continue to depopulate, we will have a very big problem with maintaining their infrastructure, and especially the social infrastructure, and with ensuring an appropriate level of access to public services.

So the goal is to ensure that the mechanism of the vicious cycle of underdevelopment does not accelerate in these regions?

Yes, because that would cost us too much. That is why in our report we recommend that sectoral programs for rural areas should be replaced with programs for municipalities with a low population density. Such areas include not only depopulating municipalities, but also, for example, mountains — Bieszczady or Beskidy — which have a low population density, and consequently large infrastructure costs. Therefore, we shouldn’t be focusing on entire voivodships, as we currently do in relation to eastern Poland, but we should rather be targeting the support programs on the level of communes, focusing on those that really need help the most.

As I’ve already said, they aren’t only located in eastern Poland. We do not have any program that would support the areas of the former Communist-era state-owned farms. And these are all areas with severe social problems, facing very serious demographic challenges. Today the situation of the people living in these areas is even harder than that of the residents of eastern Poland, which enjoy higher levels of social capital, more social activity, and a greater sense of local identity.

So the territories of the former state-owned farms are still among the most “problematic” rural areas in Poland?

Most definitely. Today these are regions — which particularly applies to Pomerania, that is, the former Słupsk and Koszalin voivodships — where the process of population aging, and its entry into the post-production age, is occurring at a much faster pace than on the so-called “eastern wall”. Young people are leaving these regions, while the elderly, representing the baby-boom birth cohorts of the 1950s, are left behind. As a result, the local authorities have a problem with adapting the social infrastructure to the existing needs, and they are not building a new one. And so we return to the vicious cycle of underdevelopment.

We should definitely focus on the young people who have remained in the areas of the former state-owned farms. Therefore, it is necessary to provide them with good education and with a teaching staff that meets their expectations and addresses their needs, to create schools with social inclusion programs, to teach digital skills and to build future local jobs on that basis. I would recommend focusing on soft projects, because the local government will take care of the hard ones, such as technical infrastructure or roads, as that provides the most reliable political gains among the electorate.

Perhaps the best solution would be to strengthen the smaller towns in areas where there are many depopulating municipalities? So that people could commute to these towns for work?

That is a solution, which can be seen especially on the example of the Wielkopolskie voivodeship. The countryside in the Wielkopolska region is very strong because its residents commute to work, exhibit professional mobility, and shuttle between locations. That may sound strange, but this is partly a legacy of Prussia’s rule over this region, as it was the first to abolish peasant serfdom in the 19th century and introduced universal education. Consequently, peasant children, except for one who inherited the land, took up employment outside agriculture. Households had multiples sources of income. This tradition of combining employment outside agriculture with agricultural income is still strong. In addition, the Wielkopolska region is polycentric in a smart way. This means that across the region there are local urban centers located roughly within a 30 minute drive, which provide a local job market.

This multi-functionality, which is indeed the optimal model for rural areas, has been integrated into the lifestyle of the residents in the Wielkopolska region, and in other places as well.

The situation is a bit different in the Podkarpacie region, which has a high population density, many strong urban centers, as well as industrial traditions dating back to the interwar Poland (the Central Industrial District). For a hundred years this situation has favored the rural dual-occupation model. At present, due to the high fragmentation of agricultural lands, the relationship with agriculture is only really recorded in the statistics of direct agricultural subsidies, while paid employment is the main source of income.

Your research shows the slow pace at which structural changes are occurring in Polish agriculture and at which farming villages are transforming into multi-functional villages This is indicated by the unchanging unfavorable, agrarian structure, the excessive fragmentation of agricultural land and farms, and the fact that their average size isn’t growing.

We often hear that farmers have overestimated their capabilities, purchased equipment, and are now unable to pay off the loans taken out for this purpose. The fact that they are not required to keep accounting records, profit and loss accounts, as well as a balance sheet, certainly doesn’t help them with estimating the level of risk in their operations and in the undertaken decisions. When it comes to income tax for farmers, Poland is a peculiar exception in Europe. This is the only country where the owners of large farms do not pay income tax. The current shortage of workers in Poland creates the perfect opportunity to reform Polish agriculture and to transform the Polish countryside. More than 10 per cent of Poles are still associated with agriculture, and in rural areas this share reaches almost one quarter of the population. That’s still a lot, and that’s too much.

The current situation on the Polish labor market makes it possible to activate or encourage people living in places where agriculture still dominates to join the effort to develop the multi-functionality of the local economy. That multi-functionality is not only advisable, but simply essential. If someone cannot specialize in something, if there are no conditions for that, if they don’t have a large farm, then they must find their place in another profession, they have to secure another non-agricultural source of livelihood. However, the most important thing is for these people to support themselves through their jobs and not with non-employment sources of income.

Professor Monika Stanny is the director of the Institute of Rural and Agricultural Development of the Polish Academy of Sciences.

Skroblaki village, Podlasie, Poland (Adrian Grycuk, CC BY-SA 3.0)

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