Accumulation and the Agricultural Surplus
The analysis of surplus and its role in the process of economic growth has mostly, as seen in Chapter 2, been carried out in terms of the general surplus. Since Adam Smith generalized the Physiocratic model, it has been recognized that several types of industries, apart from agriculture, may be productive in the sense that they may be capable of generating an output in excess of what is needed to keep the industry going at the current level of activity. However, modern (that is, post-war) development economics has focused on the agricultural sector in particular and several attempts have been made to locate the ultimate source of growth in the fact that the agricultural sector, for some reason, starts to produce food in excess of its own immediate needs.
Thus, for instance, Bela Balassa ( 1981, 4-6) notes that industrial development is impossible without a prior expansion of per capita agricultural production. When per capita food production increases, it becomes possible to support workers outside agriculture, that is, a labor potential, which may be used in the industrial sector while maintaining a necessary level of food production, is created. At the same time, however, incomes increase in the agricultural sector (provided, of course, that the agricultural sector is paid for its export of food), which probably triggers off a demand for non-food products. Hence, an agricultural surplus is a necessary precondition for economic growth, not only because it facilitates the transfer of resources into the budding manufacturing sector but also because it creates a market for manufacturing goods (cf. also the discussion in Chapter 5). Hence, it would be possible to argue, along with Kuznets ( 1961), Bien ( 1972), Fei and Ranis ( 1964), Ishikawa ( 1967), Morrisson and Thorbecke ( 1990) and several others that the agricultural surplus occupies a particularly important place in the process of economic growth, because without an agricultural surplus industrialization is simply not possible. The resemblance of this argument to the Physiocratic conclusion only emphasizes John Hicks' ( 1976, 207)