Is Agriculture the Key to Development?

IMG_2499iiiOn World Food Day (October 16th) Owen Bardur posted some stimulating thoughts on agriculture and development (link) – arguing that poverty and lack of entitlements are the key causes of hunger and food insecurity – not low agricultural productivity. He then goes on to argue that the best way to tackle poverty is not to invest in agriculture (as advocated by a romantic pro-agriculture lobby). If most poor people  are rural farmers then one can either argue that we should concentrate on improving farming for them, or that we should concentrate on getting them out of farming: he advocates the latter approach.

There is much truth in these arguments. Poverty and lack of entitlements are the fundamental causes of hunger, and we would do well to remember that. Rural poverty is more widespread and deeper than urban poverty, and exits from farming are widespread features of historical and current economic development, and the focus of many poor rural  people’s aspirations, for their children of not for themselves.  However it is a false dichotomy to set agricultural development and exits from farming as alternative investment choices and development paths: they are not alternatives but complements, and agricultural development is in very many situations a pre-requisite for wider economic development that involves exits from farming.

Considering Owen’s argument in a little more detail, I am worried by a number of its threads:

  • the false characterisation of the pro-agriculture lobby as hypocritical romantics idealising peasant life,
  • the false characterisation of farmers (particularly food insecure, hungry rural people) as benefiting from higher food prices,
  • the absence of consideration of wider issues of coordinated economic growth where growth in supply and (effective) demand for farm and non-farm goods and services match each other.
  • The counter example of Singapore’s non-agricultural growth led path (Hong Kong is another example) –Singapore’s tremendous achievements need to be recognised, but there is also validity in the reported comment of a senior Indonesian government official that Singapore is only a city – and a very well connected one ….. we need to look at rural and urban poverty, hunger and growth together

If we take these together

  1. There are some in the pro-agriculture lobby who advocate the benefits of a romantic view of idyllic peasant life, but the majority see improved agriculture as a necessary but temporary step for getting out of poverty. I analyse livelihoods in terms of hanging in (maintaining a minimum), stepping up (doing more / better of what we are already doing) and stepping out (doing different things). We can then understand individual and household livelihoods and regional and national economic development in terms of (a) a shift from emphasis on ‘hanging in’ to ‘stepping up and out’  and (b) a massive ‘stepping out’ from agriculture to non-agricultural income and activities and expenditure and from rural to urban living. ‘Bashing’ of the agricultural lobby as romantics must stop – it is highly misleading. Labelling agricultural romantics or agricultural fundamentalists (a term used by some) serves to muddy and debase the arguments, not clarify and face them.
  2. Owen suggests that a plausible story is

When people leave farms and get jobs in manufacturing their incomes are both higher and more secure. Demand for food in the cities grows; the number of people working in agriculture falls; food prices rise; and the remaining farmers get higher incomes. Rising incomes enable farmers to invest more in irrigation, fertilizer, machinery and seeds. Agricultural productivity rises, not as a consequence of direct efforts to improve agriculture but as the indirect consequence of industrialisation.  On this view, industrialisation will drive improvements in agriculture, rather than the other way round.

This raises some very large questions.

  • First who is going to buy all the manufacturing output that the cities are producing if most people are poor rural people, spending 50% or more of their meagre incomes on food? Investors will not invest if this question is not answered, so where will the investment come from? State led industrialisation does not have much of a record.…  So where are these jobs in manufacturing going to come from and how will they be sustainable?  – Singapore’s and Hong Kong’s manufacturing export experience without competition from China in the 50’s and 60’s is not very relevant to much of Africa today and is not in any case the industrialisation pathway Owen outlines.
  • Second, rising demand leads to rising food prices which benefits farmers? I find this very difficult to understand – theoretically or empirically. It is well established that 50% or more of farmers in Africa are poor food buyers (eg Barrett, 2008) and I understand that the figure is similar for India. Rising food prices harm the poorest farmers directly by reducing their food security and real incomes, and indirectly by reducing their ability to invest in farming. It also damages the urban poor. The history of development is not one of rising food prices (damaging to the poor)– it is one of falling food prices benefiting the growing non-farming population. This is driven by growing agricultural labour productivity, so that increasing food can be produced by fewer people, releasing labour and capital for the non-farm sector at the same time as increasing farm incomes (from higher labour productivity) and non-farm incomes (from falling food prices) raise demand for non farm goods and services. If all goes well, with matching rates of change, this is then matched by a similar process of increasing labour productivity in the non-farm sector, and we have virtuous cycles of growth (until we hit environmental limits …….)

This is shown in the diagram below first for agriculture (start in the top left) …

pic1

 

 

 

 

 

 

 

 

 

 

 

 

and then for non-farm activities (start in the bottom right)

pic2

 

 

 

 

 

 

 

 

 

 

 

Note that these meet in the middle – the virtuous cycle if all goes well. Other aspects of the virtuous cycle are not shown (growth in capital,  technology, knowledge, health benefits, global trade can/should benefit both farm and non-farm growth). However negative feedbacks are also not shown (increasing natural resource use, waste, pollution, environmental degradation, biodiversity loss, health dis-benefits, inequity). We may expect the positive feedbacks to decline with time and the negative feedbacks to grow. (This would be a late development problem if we did not live in an increasingly globalised world – where late developers are impeded by the negative feedback from early developers.)

A critical issue in the farm versus non-farm argument is sequencing and coordination.  Growth in labour productivity in the non-farm (manufacturing or service) sector in poor economies cannot drive broad based income growth and poverty reduction as effectively as agricultural labour productivity growth because

  1. not so much labour and land are employed in the nonfarm sector in poor economies, so higher rates of non-farm productivity growth may have slower absolute effects on overall productivity growth,
  2. not so much income is spent on non-farm goods and services as on food  by poor people, so the real income effects of falling non-farm prices are not as extensive – or so poverty  focussed – as they are for falling farm prices, and
  3. price and income elasticity of demand are greater for non-farm products, so price falls are lower, again reducing real income effects.

(These latter two points of course assume some isolation of local markets from imports and exports – but that is an assumption shared with Owen’s argument: if it is not the case then we are still left with point (a) in my argument above, but not with the pro-agriculture feedback arguments in Owen’s pro-industrialisation argument).

It is critical that the sequencing issues raised here be addressed by those promoting non-farm investment as a driver of broad based growth and the reduction of poverty and hunger.

I conclude with a slight modification to Owen’s conclusion:

So on World Food Day let us remember Sen’s insight that hunger is not a problem of food production but of poverty. The fact that most poor people work in agriculture suggests that a good way to escape poverty is to get out of agriculture.  However that can only work in most countries if it follows increases in smallholder agriculture productivity. So the best way to reduce hunger and help people out of poverty may be to focus on improving agriculture, so that people who want to can then leave agriculture for other more rewarding work.

References

Bardur, O (2010)  Is agriculture the key to Development?  Owen Abroad: Thoughts from Owen in Africa. 16th October 2010.  http://www.owen.org/blog/3903

Barrett, C. B. (2008). “Smallholder market participation: concepts and evidence from eastern and southern Africa.” Food Policy 33(4): 299-317.
By Andrew Dorward
October 21, 2010

http://www.future-agricultures.org/index.php?option=com_content&view=article&id=7423:is-agriculture-the-key-to-development&catid=81:fac-news&Itemid=472

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