Agricultural Progress and Rural Development PDF

9.1 The Imperative of Agricultural Progress and Rural Development If the migration of people with and without school certificates to the cities of Africa, Asia, and Latin America is proceeding at historically unprecedented rates, a large part of the explanation can be found in the economic...

9.1 The Imperative of Agricultural Progress and Rural Development If the migration of people with and without school certificates to the cities of Africa, Asia, and Latin America is proceeding at historically unprecedented rates, a large part of the explanation can be found in the economic stagnation of outlying rural areas. Despite real progress, nearly 2 billion people in the developing world grind out a meagre and often inadequate existence in agricultural pursuits. Over 3 billion people lived in rural areas in developing countries in 2018, about a quarter of them in extreme poverty. And despite the extraordinary urbanisation taking place throughout the world (examined in Chapter 7), people living in the countryside make up more than 60% of the population in both low- and lower- middle-income countries on average. Latin America is highly urbanised, having reached the same level of urbanisation as the high-income Organisation for Economic Cooperation and Development (OECD) countries by 2011. But in sub-Saharan Africa, rural dwellers constitute 64% of the total population; in South Asia, some 69% of the population live in rural areas as of 2011, with the result that more than half the workforce is concentrated in agriculture. Countries whose population is more than 80% rural include Ethiopia, Nepal, Niger, Papua New Guinea, Rwanda, South Sudan, Sri Lanka, and Uganda. India remains more than two-thirds rural. Of greater importance than sheer numbers is the fact that well over two-thirds of the world's poorest people are also located in rural areas and engaged primarily in subsistence agriculture. Their basic concern is survival. Many hundreds of millions of people have been bypassed by whatever eco- nomic progress their nations have attained. The United Nations Food and Agri- culture Organisation estimated that in 2018, over 820 million people did not have enough food to meet their basic nutritional needs. In the daily struggle to subsist, behaviour of poor farmers in developing countries often seemed irrational to many observers, who until recently had little comprehension of the precarious nature of subsistence living and the importance of avoiding risks. If development is to take place and become self-sustaining, it will have to include the rural areas, in general, and the agricultural sector, in particular. The core problems of widespread poverty, growing inequality, and rapid population growth all originate in the stagnation and often retrogression of economic life in rural areas, particularly in Africa. Traditionally in economic development, agriculture has been assumed to play a passive and supportive role. Its primary purpose was to provide sufficient low-priced food and manpower to the expanding industrial economy, which is thought to be the dynamic "leading sector" in any overall strategy of economic development. Lewis's famous two-sector model, discussed in Chapter 3, is an example of a theory of development that places heavy emphasis on rapid industrial growth, with an agricultural sector fuelling this industrial expansion by means of its cheap food and surplus labour. Nobel laureate Simon Kuznets introduced an early schema, noting that agriculture made four "contributions to economic development": the product contribution of inputs for industry such as textiles and food processing; the foreign- exchange contribution of using agricultural export revenues to import capital equipment; the market contribution of rising rural incomes that create more demand for consumer products; and the factor market contribution, divided between the labour contribution (Lewis's manpower)-workers not needed on farms after agricultural productivity was raised could then work in industry-and the capital contribution (some farm profits could be reinvested in industry as agriculture became a steadily smaller fraction of national income). The capital contribution was mis- applied as a "squeezing of the peasantry," but it meant investing first in agriculture and later reaping profits that would be partially reinvested in industry. As can be seen from this description, however, the framework implicitly-and ironically still treats industrialisation rather than rural modernisation as the core development goal. Today, most development economists share the consensus that far from playing a passive, supporting role in the process of economic development, the agricultural sector, in particular, and the rural economy in general, must play an indispensable part in any overall strategy of economic progress, especially for the low-income developing countries. An agriculture- and employment-based strategy of economic development requires three basic complementary elements: (1) accelerated output growth through technological, institutional, and price incentive changes designed to raise the productivity of small farmers; (2) rising domestic demand for agricultural output derived from an employment-oriented, urban development strategy; and (3) diversified, non-agricultural, labour-intensive rural development activities that directly and indirectly support and are supported by the farming community. To a large extent, therefore, agricultural and rural development has come to be regarded by many economists as the sine qua non of national development. Without such integrated rural development, in most cases, industrial growth either would be stultified or, if it succeeded, would create severe internal imbalances in the economy. Eight main questions, therefore, need to be asked about agricultural and rural development as it relates to overall national development: 1. How can total agricultural output and productivity per capita be substantially increased in a manner that will directly benefit the average small farmer and the landless rural dweller while providing a sufficient food surplus to promote food security and support a growing urban, industrial sector? 2. What is the process by which traditional low-productivity (peasant) farms are transformed into high-productivity commercial enterprises? 3. When traditional family farmers and traditional (peasant) cultivators resist change, is their behaviour stubborn and irrational, or are they acting ration- ally within the context of their particular economic environment? 4. What are the effects of the high risks faced by farmers in low-income countries, how do farm families cope with these risks, and what policies are appropriate to lessen risk? 5. Are economic and price incentives sufficient to elicit output increases among traditional (peasant) agriculturalists, or are institutional and structural changes in rural farming systems also required? 6. Is raising agricultural productivity sufficient to improve rural life, or must there be concomitant off-farm employment creation along with improvements in educational, medical, and other social services? In other words, what do we mean by rural development, and how can it be achieved? 7. How can countries most effectively address problems of national food security? 8. What is the proper role for government in the agricultural sector? (What actions can lead to improvements through addressing market failure and what are likely to make things worse through government failure?)  In this chapter, after a look at broad trends, we will examine the basic characteristics of agrarian systems in Latin America, Asia, and Africa. Although there is considerable diversity among developing nations, as well as within developing countries, each region tends to have a number of characteristics in common. First, these regions typically reflect the agricultural patterns of agriculture-based economies (in Africa), agriculturally transforming economies (in Asia), and urbanised economies (in Latin America). Relatedly, agriculture in these regions often typifies the stages of subsistence, mixed, and commercial farming, with important regional exceptions and varying success at inclusion of the poor. With successful development, countries tend to move toward commercialised agriculture, though with different trajectories and differing economic, social, and technical problems to solve along the way. Regions that have high concentrations of poverty also often reflect patterns of traditional agriculture (in Africa), high population density and subdivided smallholdings (in Asia), and the sharp inequalities of very large and very small farms (in Latin America). We will identify the various challenges facing each group of countries and look at countries that are typical of their region and some countries and districts that deviate from the pattern. Over two-thirds of the world's extreme poor are involved in agricultural activities. We will therefore examine the economics of traditional (or peasant) subsistence agriculture and discuss the stages of transition from subsistence to commercial farming in developing nations. Our focus is not only the eco- nomic factors but also on the social, institutional, and structural requirements of small-farm modernisation. We will then explore the meaning of integrated rural development and review alternative policies designed to raise levels of living in rural areas. The chapter concludes with a case study of problems of agricultural extension for women farmers in Africa, with a focus on Kenya and Uganda. 9.2 Agricultural Growth: Past Progress and Current Challenges 9.2.1 Trends in Agricultural Productivity The ability of agricultural production to keep pace with world population growth has been impressive, defying some neo-Malthusian predictions that global food shortages would have emerged by now. And it has actually been output gains in the developing world that have led the way. According to World Bank estimates, the developing world experienced faster growth in the value of agricultural output (2.6% per year) than the developed world (0.9% per year) during the period 1980-2004. Correspondingly, developing countries' share of global agricultural GDP rose from 56% to 65% in this period, far higher than their 21% share of world non-agricultural GDP. Since 2005, the growth gap has widened further. And research by the International Food Policy Research Institute points up that a wide range of successful programmes have reduced hunger while raising agricultural productivity over the last several decades, including Green Revolution (The boost in grain production associated with the scientific discovery of new hybrid seed varieties of wheat, rice, and corn that has resulted in high farm yields in many developing countries) successes in Asia; containment of wheat rusts; improved maize and pest-resistant cassavas in sub-Saharan Africa; shallow tubewells for rice and homestead food production in Bangladesh; hybrid rice and mung bean improvement in East Asia; pearl millet and sorghum and smallholder dairy marketing in India; improved tilapia in the Philippines; successful land tenure reform in China and Vietnam; cotton reforms in Burkina Faso; and improvements of markets in Kenya. The degree to which general agricultural output grew significantly faster in developing countries in the 40-year period from 1970 to 2010 is reflected in Table 9.1. Output also grew in OECD regions; the sole exception was the poor performance in the transition countries. But growth in the value of output has not kept pace with population growth in Africa. As Figure 9.1 shows, low-income countries tend to have the highest share of the labour force in agriculture, sometimes as much as 80 to 90%. The share of agriculture in GDP is lower but can represent as much as half of the value of output. These shares both tend to fall as GDP per capita rises: this is one of the broad patterns of economic development (see Chapter 3). But attention to the time paths of the share of agriculture in specific countries reveals a great deal of variation, which is also informative. In particular, sometimes the share of labour in agriculture declines greatly even when GDP per capita does not increase much, if at all; examples are seen in the time paths of Nigeria and Brazil, as traced out in Figure 9.1. This finding parallels the observation in Chapter 7, that urbanisation is proceeding in many countries even when per capita income is falling or not rising much. Problems in the agricultural sector can suppress incomes, encouraging more migration to the urban informal sector. We will review the most important problems of developing-country agriculture in this chapter. Figure 9.1 also illustrates the time path of China, in which growth has been extremely rapid but the fall of the share of labour in agriculture has been unusually slow due in significant part to restrictions on rural–urban migration (though migration out of agriculture has greatly accelerated in the ensuing decade through to 2013). In marked contrast to the historical experience of advanced countries’ agricultural output in their early stages of growth, which always contributed at least as much to total output as the share of the labour force engaged in these activities, the fact that contemporary agricultural employment in developing countries is much higher than agricultural output reflects the relatively low levels of labour productivity compared with those in manufacturing and commerce. Agricultural production continues to rise around the world, broadly keeping pace with the rising population. But progress has been very uneven, as seen in Figure 9.2. In Asian developing countries, cereal yields per hectare in 2005 were nearly triple their 1960 levels. Production in Latin America also posted strong gains. Hunger in China fell. Agriculture in South Asia performed well, although hunger is thought to have increased in India in recent years. And in sub-Saharan Africa, yields increased by only about one-third. One of the causes is that in many areas of Africa, the population has reached a size where traditional slash-and-burn agricultural practices are no longer feasible without reusing land after too little rest, resulting in significant deterioration of soil nutrients. But subsistence farmers cannot purchase improved seeds, fertilisers, and other essentials of modern agriculture; the result can be a poverty trap in which farmers must work harder and harder just to stay in place.  TABLE 9.1 Average Annual Growth Rates of Agriculture, by Region (%) Region 1971–1980 1981–1990 1991–2000 2001–2010 1971–2010 High-income countries 1.83 0.97 1.25 0.47 1.14 Latin America and Caribbean 2.93 2.35 3.09 3.21 2.89 Northeast Asia 3.23 5.04 5.04 3.39 4.19 South Asia 2.19 3.7 2.76 2.8 2.86 Southeast Asia 3.66 3.32 3.41 4.23 3.64 Sub-Saharan Africa 1.05 2.68 3.11 2.97 2.44 West Asia and North Africa 3.31 3.84 2.61 2.75 3.13 Transition countries 0.81 1.42 -4.03 2.28 0.04 World 2.08 2.42 2.09 2.42 2.25 Recurrent famine, regional famine, and catastrophic food shortages have repeatedly plagued many of the least-developed countries, particularly in Africa. The 2011 drought and famine in the Horn of Africa, which affected over 13 million people, brought renewed attention to the problem (see Box 9.1). Of Africa’s 750 million people, more than 270 million suffer from some form of malnutrition associated with inadequate food supplies. The severe famine of 1973–1974 took the lives of hundreds of thousands and left many more with permanent damage from malnutrition across the continent in the Sahelian belt that stretches below the Sahara from Cape Verde, off the coast of Senegal in the west, all the way to Ethiopia in the east. Four times in the 1980s and 1990s, at least 22 African nations faced severe famine. In the 2000s, famine again seriously affected African countries as widely separated as Mauritania in the northwest, Ethiopia and Eritrea in the east, and Angola, Zambia, Zimbabwe, Malawi, and Mozambique across the south. Calls to mount a new Green Revolution in Africa like the successful one in Asia are now starting to get the hearing they deserve, with public, private, and non-profit sector actors getting involved—including major support from the Alliance for a Green Revolution in Africa (AGRA), chaired by former UN secretary general Kofi Annan. Technical advances are clearly needed, and institutional and social transformation on the ground will also be needed to achieve the goals of rural development. The African Union’s peer-review NEPAD initiative developed the Comprehensive Africa Agricultural Development Pro-gramme to emphasise investments and regional cooperation in agriculture-led growth as a main strategy to achieve the first Millennium Development Goal of halving hunger and poverty. It targets the allocation of 10% of national budgets to agriculture and a 6% rate of growth in the agriculture sector at the national level. One early success is in work at the Africa Rice Centre in Benin to develop varieties of New Rice for Africa (NERICA). These have so far proven beneficial in Benin, Uganda, and the Gambia, with apparently greater impact on women farmers than men farmers. It is not easy to replicate successes across Africa, however; for example, NERICA varieties have not helped in Guinea and Côte d’Ivoire. And food production will not automatically solve the problems of hunger among people living in poverty.  The food price spike of 2007–2008 and an additional spike in 2011 highlighted the continuing vulnerabilities. During the food price crisis, progress in reducing hunger ground to a halt and showed little improvement in the ensuing years. Some of the causes were temporary factors. But expert predictions are for high food prices in the longer term. Throughout the twentieth century, food prices fell at an average rate of 1% per year; but so far in the twenty- first century, food prices have risen on average. Figure 9.3 shows price trends for several key agricultural commodities; prices have generally returned to levels not seen since the late 1970s.8 From 2011 to 2016, prices trended downward, by which point they were nearing pre- crisis levels. Then, from 2016 to 2019 prices increased, but has not approached the highs of the crisis period. This is not a reason for complacency, however. As Nora Lustig has summarised, some of the causes of the 2007–2008 food price spike also reflect longer-term forces that will lead to high future food prices, including diversion of food to biofuels production, increase in the demand for food (particularly meat, which uses far more land than grain production) due to higher incomes in China and elsewhere, the slowdown in productivity growth of agricultural commodities, higher energy prices affecting agricultural input costs, running out of new land to be brought into farming, and the negative impact of climate change on developing-country food production. These are exacerbated by a number of unfavourable policies, including various forms of interference with food prices. Furthermore, there is not a large global market for food in relation to total demand. Most countries strive for food self-sufficiency, largely for national security reasons. Embargoes of food exports by such countries as Egypt, Vietnam, and Russia reflect this reluctance. In the late 2040s, the world will find itself having to manage to feed over 9 billion people. While highlighting impressive successes, we must also keep in mind looming challenges. One useful strategy debated during the last food price spike was to develop and ratify an international treaty to refrain from responding to food price spikes with import and export restrictions. Such an agreement could prevent an outcome in which all countries are worse off; but interest proved difficult to sustain. 9.2.2 Market Failures and the Need for Government Policy A major reason for the relatively poor performance of agriculture in low-income regions has been the neglect of this sector in the development priorities of their governments, which the initiatives just described are intended to overcome. This neglect of agriculture and the accompanying bias toward investment in the urban industrial economy can in turn be traced historically to the misplaced emphasis on rapid industrialisation via import substitution and exchange rate overvaluation (see Chapter 12) that permeated development thinking and strategy during the postwar decades. If agricultural development is to receive a renewed emphasis, what is the proper role for government? In fact, one of the most important challenges for agriculture in development is to get the role of government right. A major theme of development agencies in the 1980s was to reduce government intervention in agriculture. Indeed, many of the early interventions did more harm than good; an extreme example is government requirements for farmers to sell at a low price to state marketing boards—an attempt to keep urban food prices low. Production subsidies, now spreading like a contagion from high-income to middle-income countries, are costly and inefficient. Agriculture is often imagined to be a perfectly competitive activity, but this does not mean that there are no market failures and no important roles for government. In fact, market failures in the sector are quite common and include environmental externalities, the public good character of agricultural research and development and extension (farmer training) services, economies of scale in marketing, information asymmetries in product quality, missing markets, monopoly power in input supply, and monopsony power in purchasing farmer output. It may also be necessary to address the monopsonistic power where large farmers have wage- setting power over landless labourers in local labour markets. Moreover, a government role may be necessary for creating markets where they are missing—for weather insurance, credit, for example. All this is in addition to the more general government roles of providing institutions and infrastructure. Despite many failures, sometimes government has been relatively effective in these roles, as in Asia during its Green Revolution. But government also has a role in agriculture simply because of its necessary role in poverty alleviation—and a large majority of the world’s poor are still farmers. Poverty itself prevents farmers from taking advantage of opportunities that could help pull them out of poverty. Lacking collateral, they cannot get credit. Lacking credit, they may have to take their children out of school to work, transmitting poverty across generations. Lacking health and nutrition, they may be unable to work well enough to afford better health and nutrition. With a lack of information and missing markets, they cannot get insurance. Lacking insurance, they cannot take what might seem favour-able risks for fear of falling below subsistence. Without middlemen, they cannot specialise (and without specialisation, middlemen lack incentives to enter). Being socially excluded because of ethnicity, caste, language, or gen-der, they are denied opportunities, which keep them excluded. These poverty traps are often all but impossible to escape without assistance. In all of these areas, NGOs can and do step in to help (Chapter 11), but government is needed to at least play a facilitating role and to create the needed supporting environment. Policies to improve efficiency and alleviate poverty are closely related. Many market failures, such as missing markets and capital market failures, sharply limit the ability of poor farmers to take advantage of opportunities of globalisation when governments liberalise trade, for example. If these problems are not addressed prior to deregulation or making other structural changes, the poor can remain excluded and even end up worse off. A key role for government, then, is to ensure that growth in agriculture is shared by the poor. In some countries, impressive agricultural growth has occurred with-out the poor receiving proportional benefits. Examples include Brazil, with its extremely unequal land distribution, and Pakistan, with its social injustices and inequality of access to key resources such as irrigation. But by including the poor, the human and natural resources of a developing nation are more fully employed, and that can result in an increased rate of growth as well as poverty reduction. 9.2.3 Agricultural Extension Demonstration and training services for improving agricultural practices and raising farm productivity are known as agricultural extension (sometimes sim-ply “extension”). These systems are usually government-supported, frequently working with or through universities. For example, each US state has a designated “land-grant university” where, since 1887, government-supported agricultural experiment stations have developed improved inputs and techniques; since 1914, their extension (outreach) agents have taught farmers about new developments. These programmes sometimes go beyond agriculture to inform and train rural people in other activities including natural resources, health, nutrition, and sanitation practices. Involvement of universities, with government support, is a typical feature of such programmes, though many are standalone government agencies, or in some cases NGOs. Though there is always room for improved research methods, many such extension services are credited with making possible major positive effects on productivity, notably through introducing high- yielding crop varieties. However, in many developing countries, the extension services record is mixed, at best. A common approach in developing countries, which originated in Indonesia in the late 1980s, is to provide participatory, learning-by-doing adult education, through Farmer Field Schools (FFSs). An interesting variation is the Junior FFS, which adapts the general FFS approach specifically for farm children and youth, focusing on knowledge, skills, productivity, and food security for farm children along with their families. An aspect of such programmes is that children and youth may adopt techniques and learn more readily in some cases, so there could be an intra-household spillover: in this case, up from children’s knowledge to learning by adults in the household. For both approaches, some programmes have been found effective but others seem to have had little, if any, impact. Recent development economics and agricultural extension research has focused on the need to address multiple constraints to improving performance of low-productivity smallholder agriculture while enhancing food security. Many proven technologies and improved farming practices hold great promise for boosting agricultural production and reducing poverty in low- income countries. But the adoption of such technologies by smallholder farmers, in sub- Saharan Africa particularly, has been slow, and is a major explanation of the very slow growth of agricultural productivity. There is an even broader lack of adoption of relatively expensive agricultural inputs, such as high-yield-variety (HYV) seeds and chemical fertilisers. Causes of low adoption include lack of knowledge; lack of access to markets; farmers’ inability to distinguish genuine from counterfeit seeds, fertiliser and other products on the market; credit constraints and uninsured risks; and problems of coordination with neighbours. Often, there is limited adoption of even basic improved cultivation methods, including crop rotation and use of green manure. Yet these are likely to be extremely important for the poor, particularly marginalised smallholder women farmers, who are also those less likely to have the knowledge and opportunities to adopt improved cultivation techniques on their own. For decades, research has made clear that women farmers are underserved by agricultural extension. In the 1970s and 1980s, economists, including Carmen Diana Deere and Kathleen Staudt, were already documenting the gross unfair-ness, household imbalance, and, in some cases, potential harm that these inequities caused. Recent research in several countries has reached similar conclusions. The end-of-chapter case study explores problems facing women farmers and the response of agricultural extension in both government and NGO programmes in Kenya and Uganda.