Agriculture and Economic Development in the 1990s: A New Analytical and Policy Agenda

Article excerpt

In most societies the bulk of economic activity, prior to the modern stage of development, is concentrated in agriculture. Economists have therefore long recognized the importance of this sector in initiating and sustaining economic growth. Traditionally, following Kuznets' (1965) classic analysis, agriculture's contribution to economic development has been thought to lie in the following areas: (a) providing surplus labour to industry and to other sectors of the economy; (b) supplying food to the non-agricultural labour force and agricultural raw materials to industryl (c) providing savings andcapital resources for the development of industry and other economic sectors; (d) earning the foreign exchange needed for industrialization, infrastructure and other investment projects; and (e) providing a market and demand for the goods and services produced by the non-agricultural sectors.(1) Kuznets also argues that a rise in productivity in agriculture is a precondition for economic growth and structural change, since only then can agriculture generate a surplus and be in a position to fulfil its developmental tasks.

However, in view of the changes over the past several decades, the role of agriculture in economic development has evolved. The main purpose of this article is therefore to outline a new agenda for analytical and policy research for the closing decade of this century and beyond. This is needed for two separate reasons. The first is of recent vintage and is connected with the international economic environment. The 1980s were characterized by an extended crisis with serious adverse consequences for the Third World. These are likely to be prolonged, not only because it may be a long time before the international economy experiences another "golden age" of growth such as it enjoyed in the third quarter of this century, but also because of the way in which the crisis itself has been and is being managed, at both international and national levels. The second reason has to do with the long-term transformation of many developing economies which experienced relatively sustained growth for a period of two or three decades prior to and in some cases even during the 1980s. The consequent structural changes have often been profound and their implications for future development strategies need to be examined. This article discusses each of these factors in turn to identify their implications both for the development of agriculture itself and for the interactions of agriculture with the rest of the economy.

The order of discussion is as follows. Section 1 begins by outlining the chief features of the Third World's economic crisis in the 1980s, particularly its severe impact in Latin America and Africa, and broadly setting out the issues that arise in relation to the role of agriculture. From a global perspective, an analytically important question is whether the behaviour of the agrarian economy in the economic slow-down of the 1980s in developing countries was similar to what happened to the agricultural sector during the Great Depression of the 1930s. This is not merely of historical or academic interest; since it leads to the important issue of the aggregate supply response of agriculture to price changes, as we shall see below, it also has a direct bearing on the contemporary policy debate. The subsequent subsections comment on various aspects of this debate, which essentially centres on an important consequence of the economic crisis of the 198Os: the fact that a large number of countries became balance-of-payments constrained, especially in the two worst affected developing continents of Latin America and Africa, and were obliged to implement stabilization and adjustment measures, often under the aegis of the Bretton Woods institutions--the World Bank and the International Monetary Fund (IMF). Since, for many, agriculture accounts for a large share of export earnings, it must necessarily play a key role in any stabilization and adjustment programme. …