Getting Priorities Right: Structural Transformation and Strategic Notions
Bruce F. Johnston
Why focus on priorities? While much attention has been given in the literature on agricultural development to "getting prices right," relatively little attention has been given to the more fundamental question of "getting priorities right." In a given situation, policy-induced distortions of "macro prices" (exchange rates, interest rates, wage rates, food prices) may represent a major impediment to agricultural development ( Timmer, Falcon, and Pearson 1983: chapter 5). In Tanzania and Ghana, for example, removing such distortions was undoubtedly a precondition for renewed agricultural progress. But elsewhere price and related distortions may be only a minor impediment; and macroeconomic reforms can never be a substitute for the policies and programs needed to foster agricultural development and the transformation of an overwhelmingly agrarian economy into a diversified, increasingly productive economy capable of banishing poverty.
There is in fact considerable justification for the preoccupation with "getting prices right." It is a convenient short hand expression for emphasizing the advantages of moving toward greater reliance on the allocative mechanisms of a market economy, thus subsuming the broader goals of encouraging competition and getting markets to work properly. Roemer and Radelet ( 1989) state:
Bruce F. Johnston is a Professor, Food Research Institute, Stanford University, and Fellow, American Agricultural Economics Association. This paper draws heavily on a forthcoming book on the political economy of agricultural development and structural transformation by Bruce Johnston, Peter Kilby, and Thomas P. Tomich commissioned by the Economic Development Institute of the World Bank and also supported by the Stanford Food Research Institute and HIID. The author wants to especially acknowledge Thomas Tomich for the concept of "strategic notions," and Peter Kilby for helpful comments; but is solely responsible for this very condensed presentation.