University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Chains and Sustainable Development
Those of us who preach the gospel of agriculture with evangelical zeal find the text compelling and convincing. We are regularly possessed by the spirit only to look around and see out colleagues, in other sectors, in country management, or even our senior management doubting, yawning or subtly edging towards the door. We face the implicit query, “If agriculture can do such great things, why have they not yet happened? ”1 The past decade has been one of agro-pessimism. The promises that agricultural development seem to hold did not materialise.
This pessimism seemed to coincide with pessimism about Sub-Saharan Africa. Especially for Sub-Saharan Africa the hope was that economic development would be brought about by agricultural development. After the success of the green revolution in Asia, the hope was that a similar agricultural miracle would transform African economies. But this hope never materialised, agricultural productivity did not increase much in SSA (figure 1), and worse, the negative effects of the green revolution in Asia became more apparent, such as pesticide overuse and subsequent pollution. Also in Asia the yield increases tapered off.
The sceptics put forward several arguments why agriculture is no longer an engine of growth2. For instance, the liberalisation of the 1990s and greater openness to trade has lead to a reduction in the economic potential of the rural sector: cheap imported Chinese plastic buckets out compete the locally produced pottery. On the other hand, it does mean cheaper (imported) supplies. With rapid global technical change and increasingly integrated markets, prices fall faster than yields rise. So, rural incomes fall despite increased productivity if they are net producers3.
The integration of rural with urban areas means that healthy young people move out of agriculture, head to town, leaving behind the old, the sick and the dependent. It is often also the men who move to urban areas, leaving women in charge of the farm. This has resulted in the increased sophistication of agricultural markets (and value chains) which excludes traditional smallholders, who are poorly equipped to meet the demanding product specifications and timeliness of delivery required by expanding supermarkets. The natural resource base on which agriculture depends is poor and deteriorating.
Productivity growth is therefore increasingly more difficult to achieve. Finally, multiplier effects occur when a change in spending causes a disproportionate change in aggregate demand. Thus an increase in spending produces an increase in national income and consumption greater than the initial amount spent. But as GDP rises and the share of agriculture typically decreases, the question is how important these multiplier effects are, especially when significant levels of poverty remain in rural areas, which is the case in middleincome countries.
The disappointment with agriculture led many donor organisations to turn away from agriculture, looking instead to areas that would increase the well-being of poor people, such as health and education. Those organisations that still focused on agriculture, such as the CGIAR, were put under pressure to focus more on reducing poverty, besides increasing agricultural productivity. However, since the beginning of the new century, there seems to be a renewed interest in agriculture.
A review of major policy documents5, including the well-publicised Sachs report and the Kofi Annan report, show that agriculture is back on the agenda again. The most influential report, however, has been the World Development Report 2008 of the World Bank6. This report argues that growth in the agricultural sector 1 contributes proportionally more to poverty reduction than growth in any other economic sector and that therefore alone, the focus should be on the agricultural sector when achieving to reach MDG 1. A reassessment of the role of agriculture in development seems to be required.
This policy paper addresses several timely though complex questions: • First, how can or does agriculture contribute to economic development, and in particular how does it relate to poverty? • Second, the agricultural sector has changed considerably in the past decades: what are the main drivers of this change? • Third, what is the relationship between economic or agricultural growth and pro-poor development? • Fourth, how does agriculture relate to other sectors in the economy? • Fifth, who is included and who is excluded in agricultural
development, specifically focusing on small farms? • And finally, if agricultural development is indeed important to economic development, then why, despite all the efforts and investments, has this not led to more successes? 2. Agriculture and economic growth This section presents a number of factual observations describing how the agricultural sector changed in terms of productivity, contribution to economic growth, and indicating the relevance of the agricultural sector for poverty alleviation in different regions. Background: some facts
In the discussion of the role of agriculture in economic development, a leading question is how agriculture contributes to economic growth, and especially to pro-poor growth. There seems to be a paradox in the role of agriculture in economic development. The share of agriculture contributing to GDP is declining over the years (see figure 1). At the same time, the productivity of for instance cereal yields has been increasing (see figure 2). It seems that as agriculture becomes more successful, its importance declines in the overall economy. Of course, other sectors in the economy can be even more successful, such as the Asian Tigers.