VI A. AGRICULTURE and RURAL DEVELOPMENT

ECON 3508 November 16, 2015

See Textbook, Chapter 9, pp.437-462 and 468-476

Agenda:

I. Importance of Agriculture and Rural Areas in Development

II. Varying Agricultural Systems in Developing CountriesIII. The Agricultural RecordIV.Agriculture’s Contributions to DevelopmentV. More Contemporary Views Emphasizing AgricultureVI. Small scale "Peasant" or Subsistence AgricultureVII.Current Views Regarding Rural and Agricultural

Development Policies:VIII. Revised Strategies: Main ElementsIX. The Land Reform Issue

Kenya: Central Province

I. Importance of Agriculture and Rural Areas in Development:

1. Everybody has to eat; i.e. agriculture and food are of key importance

2. Large proportions of LDC populations are in agriculture: 3. Disproportionately large numbers of rural people are

poor, however this is measured4. Rural activities earn or save large amounts foreign

exchange5. Rural people usually constitute a large pool of

entrepreneurial talent 6. Rural people save and invest7. Rural areas may be the repositories of traditional

societies and their cultures

Rural and Urban Population of the World, 1950-2030Source: UN Population Division.

II. Varying Agricultural Systems in Developing Countries:

General Features:– Importance of non-agricultural rural activities– "Home-based enterprise”– Partial commercialization virtually everywhere– Role of women in farming

– Women provide 60% to 80% of agricultural labor in Africa and Asia, and 40% in Latin America

– Women frequently work longer hours than men in agriculture

– Government assistance programs tend to reach men, not women

II. Varying Agricultural Systems in Developing Countries, cont’d:

Latin America and the Caribbean: – The Latifundia / minifundia complex– “Modern" commercial farming– Plantations – Family farms– Co-operatives and state farms– Some “slash and burn” farming– Overall agriculture is doing well in many Latin

American countries. • E.g.: Chile (diversification), and Brazil (biofuels)

– Extreme rural inequalities still persist

;

Guatemala: Slash and Burn Agriculture

Africa: • Small-scale family farming • Herding in many places• Some export-oriented commercial small farms• Some large scale plantations

o Some locally ownedo Some massive, foreign owned

o E.g. rubber and palm oil in Liberia;o Tea in Kenya

• From "traditional" to "modern,“o partial commercialization everywhere

• Some “hunting and gathering” but very little

Subsistence or Semi-Subsistence Agriculture Intensive and Extensive Cultivation Low productivity due to use of simple technology Shifting Cultivation, in some places Seasonal demand for labor depending on rainy season High dependence on unimproved seeds sown on

unfertilized, rain-fed fields: i.e. little irrigation, fertilizer-use or improved seed varieties

Relatively high fraction of underutilized land – in some places, not in others

High concern about climate change impact

Need for an African new GREEN REVOLUTION; There are hopeful signs that it is getting underway

Asia: Plurality of systems: (See Table 9.3 in text.)– Fragmentation and Subdivision of Peasant Land

in Asia– Impact of colonial rule in strengthening land

tenure systems of private property rights and the consequent rise of moneylenders

– Contemporary landlordism in India and Pakistan involves absentee landlordism and persistence of sharecroppers and tenant farmers

– Rapid population growth resulted in more fragmentation and peasant impoverishment

High Income Countries:

– Large scale commercial agriculture: family farm and corporate

– Some smaller scale family farming– Highly articulated input provision and output

processing activities

Table 9.2 Distribution of Farms and Farmland by Operational Farm Size and Land Tenure Status In Selected Developing Countries in Asia and Latin America

Table 9.3 Changes in Farm Size and Land Distribution

III. The Agricultural Record1. The geographical pattern of agricultural production

expansion:2. Employment, agricultural output and agricultural

productivity3. Specific case of Africa

Some general explanatory factors:• "Green revolution” bio-tech. changes: uneven

incidence by country and food crop;• varying support from government policies and

programs• general economic policies (urban bias…)• geographical factors• political strife

Figure 9.2 Cereal Yields by World Region, 1960-2005

Figure 9.4 Expansion of Modern Inputs in the World’s Developing Regions

Table 9.1 Land Productivity in Developed and Developing Countries

Figure 9.1 As Countries Develop, the Shares of GDP and Labor in Agriculture Tend to Decline, but with Many Idiosyncrasies

IV. Agriculture’s Contributions to DevelopmentA. Earlier Views in theorizing of 1950's and 1960's (e.g.

Lewis; “Dependency” approach; Soviet model, ………)– Supplying foodstuffs to other sectors (the

“agricultural surplus”)– Releasing surplus labour to the “modern sector"– Providing a surplus for investment (savings) to the

“modern sector”– Earning foreign exchange– Providing a rural market for the urban industrial

sector[Note: these functions were largely passive and extractive,

with the main emphasis being focused on in the urban industrial modern sector.]

B. Policy Consequences of these views:• focus on modern industry in urban areas and ignore

agriculture and rural areas• use agriculture to service the modern sector with

outflows of people, food and savings• discriminate in favour of modern industrial sector and

against agriculture and rural areas (i.e. "Urban Bias”)• Food pricing policy• Taxation patterns• Infrastructure investment • Tariff and non-tariff barriers• Social expenditures • Credit policies• Exchange rate policies

V. More Contemporary Views Emphasizing Agriculture

Rural Development Agriculture should be emphasized for the following reasons:

1. To raise rural income, because poverty is over-represented in rural areas;

2. Rates of return are often higher in parts of agriculture than other sectors;

3. Rural entrepreneurship can serve as a strong foundation for economic improvement and “pro-poor” development;

4. Non-agricultural informal sector activities can also be valuable for economic improvement and income generation;

5. Food security

6. Increasing agricultural output can stimulate linked industrial and service sector activities such as food processing;

7. Reinforcing the traditional cultures (language, arts, music, handicrafts, and "ways of life") of a country which are often to be found in rural areas.

VI. Small scale "Peasant" or Subsistence Agriculture

1. Older views regarding peasant agriculture:

2. The theory of the optimizing peasant (Michael Lipton)

Subsistence farming: risk aversion, uncertainty, and survival– Traditional neoclassical model of profit maximization with

certainty is not adequate

– Price, weather, and other uncertainty, along with limited access to credit and insurance (and even savings vehicles), largely explains the extent of risk-averse behaviors observed

– Risk-averse subsistence farmers often (not irrationally) can prefer technologies that combine low mean-per-hectare with low variance to alternative high yielding but higher risk technologies

– Efforts to minimize risk and remove commercial and institutional obstacles to small farmer innovation are necessary

Figure 9.6 Crop Yield Probability Densities of Two Different Farming Techniques: an illustration

Omit

Issues in sharecropping: a long debate: Is share-cropping efficient?

– Intrinsically Inefficient due to poor incentives (Marshall)– Monitoring approach (Cheung)

(landlord would set minimum target output and replace tenant if target were not reached.)

– Empirical evidence for inefficiency from Ali Shaban (comparing same farmer, controlling for soil)

(farmers provided fewer inputs for rented land compared to their own land)

– Giving sharecroppers a larger share of the produce and security of tenure on land can increase efficiency

(Shared risk re crop failure; shared risk re minimized work incentives)

Omit

Figure 9.7 Incentives under Sharecropping: the “Marshallian case.

Omit pp 466-468

VII. Current Views Regarding Rural and Agricultural Development Policies:

– The heavy emphasis in the past on rapid industrialization was misplaced

– Agricultural development is now seen as an important part of any development strategy

– Farm people can be innovative in the right policy and institutional environment;

– Aim for “broad-based rural development” focusing on rural people;

– Design “pro-poor” rural development strategies

VIII. Revised Strategies: Particular Challenges

• Rural poverty, malnutrition and famine inspire calls for a new green revolution focused on Africa.

• Climate change poses risks and problems for food production, with harmful consequences for poverty

• General and rural population growth generates an increasing need for food production

Revised Strategies: Main Elements1. Support “Green Revolution” innovations:

– Improved seed varieties;[See CGIAR (Consultative Group on International

Agricultural Research) http://www.cgiar.org/]– Irrigation, maybe drainage, plus fertilizers – Emphasize agro-forestry; See:

http://www.worldagroforestrycentre.org/– Emphasize employment creation in agriculture

and related rural activities;– Avoid large scale labour -displacing mechanization

2. Don’t discriminate against agriculture and rural areas in general public policies;– Aim for a “level playing field” re specific

policies;

3. Focus on anti-poverty types of investment in rural areas: – (feeder roads, irrigation, agricultural extension,

credit, water availability, social infrastructure;)– i.e. rural public works, employing rural people;

4. Support rural non-agricultural and often “informal sector” economic activities in rural areas;

5. Agrarian and/or land reform where appropriate;

6. Supportive social institutions: schools, health centers, co-operatives

7. Emphasize also environmental sustainability in rural areas and in agriculture

Major Roles for Government in Agricultural and Rural Development

– Ensure shared growth in agriculture sector– Addressing poverty and income distribution issues– Health and appropriate education for rural peoples– Rural infrastructure– Providing institutions: coops, rural governance, land

reform in some cases…. – Manage environmental externalities– Agricultural research and extension services– Economies of scale in marketing– Health and safety re product quality

IX. The Land Reform Issue1. Land tenure and land reform: Definitions2. Complexities of land tenure structures in various

places3. Varieties of Land reform

a. Distribution of large sized units to smaller scale farmers;b. Conversion of large units to state collective or co-

operative farms or some mix thereofc. Consolidation of "minifundia“ or scattered parcels of landd. Land tenure "clarification"e. Rent reform reduction or controls

4. The politics of land reform5. Issues regarding “Plantation” Agriculture6. Some issues of dividing large scale agricultural

properties

Some Cases of Land Reform:– Revolutionary confiscations and collectivizations:

USSR; China; Cuba: Results?– Military-imposed redistributions: Japan; Taiwan

Results?– Moderate redistributions: Chile 1964-1973; Kenya; – Current cases: Brazil; Zimbabwe.

Conclusion

SUMMARY:• What can agriculture do for development?

Agriculture has effectively served as a basis for growth and reduced poverty in many countries, But many more countries could benefit if governments and donors were to reverse years of policy neglect and remedy their underinvestment and mis-investment in agriculture.

• What are effective instruments in using agriculture for development? They include – increasing the assets of poor households, – making householders—and agriculture in general—

more productive, creating opportunities in the rural nonfarm economy that the rural poor can seize.

Source: World Bank, WDR, 2008

SUMMARY:

• How can agriculture-for-development agendas best be implemented?

By designing policies and decision-making processes suited to each country’s economic and social conditions, – mobilizing political support, and – improving the governance of agriculture

Source: World Bank, WDR, 2008

X. The Six “I”s of Agricultural

Development: What Agricultural and Rural Development Need:

1. Initiative2. Incentives 3. Innovations4. Inputs5. Infrastructure6. Institutions