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Lecture 1
Agriculture in Economic Growth
Introduction
In the next few lectures we will be examining the characteristics of agriculture
in developing countries and how these characteristics change through the
development process. Although we classify countries as LDC (Less developed
countries), DMEs (developed market economies) these crude labels belie the fact
that economic development is a process. We will see what happens to
agriculture during this process of development (and how and why it changes) and
its relationship to the rest of the economy throughout this process. As we do so we
will identify the factors that determine the rate of development.
Agriculture is a good place to start in examining economic development, since
contrary to what you may have heard outside this class it is agriculture that is
the ‘oldest profession’. It was the essential building block of development in the
now DMEs, and to a large degree still in the current LDCs. Why is this? People need
to eat and we need people to create wealth in economic activity . Although we could
import all food requirements what would the population do to create wealth- what
would they produce? Because humans require food as a fundamental requirement,
so it is this that they will devote their time to producing, at least initially.
Very often agriculture acts as the first step in industrial production providing the
basic skills and raw materials for elementary processing and manufacture in cottage
industries. Agriculture is the industry from which all others grow.
The Triangle of Population, Food
Production and Economic Growth
Economic
Growth
Food Populatio
Production nn
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That is just a taster of the contribution of agriculture - we will provide more detail
in other lectures. For now I want to impress upon you a very simply but essential
relationship : that between Population, Food Production and Economic
Growth. We will examine each component and the inter-relationships for the next
five lectures.
There are a number of points to realise:
1. Agricultural growth implies a larger provision of food and organic raw materials
(such as timber and textiles). This is part of the wealth creation process. Ceteris
paribus, a country with more food supplies is a country with greater riches,
greater wealth. Food is income. In the simplest of economic systems (peasant
agriculture) where there are no notes and coins and banks etc. food is both the
sole currency and the goods that are created. Even in some parts of the world
today food is exchanged for other types of food and cattle as used as a store of
wealth, rather like gold or stocks and shares are held in more developed
economic systems.
2. In the most primitive developing countries population is essentially governed by
food availability. The more food there is the larger is the population. There is
however no constant linear relationship between food availability and economic
growth. It is food availability per capita that is important. As food availability
increases population increases. Does this imply a larger but similarly poor
country? It may do, and in certain countries of the world (e.g. Ethiopia) this is
exactly what has happened. It is important to realise that population both
consumes food and is needed to produce food. Clearly, in order for food
production to lead to economic growth then there must be rising food per
capita. Where food growth exceeds population growth there is an increase in
food availability and a marketable surplus of food. This will constitute
economic development in the early phase, since if agriculture is the only
industry, there is precious little else to produce.
3. With the appearance of the marketable surplus, larger populations are
sustainable and some of the population are able to diversify in to non-
agricultural production. The appearance (and growth) of a marketable surplus is
the vital spark required for economic development to proceed. The marketable
surplus allows agricultural workers to become tradesmen producing the means
of production (primitive technologies) such as agricultural implements - ploughs,
tools transport etc. and the purchase of foreign products (trade). These simple
technologies improve yields significantly (it's not just combine harvesters and
biotechnology that improve yields).
Finally, it is interesting to note that the dawn of economic development that we will
examine marks the zenith of agriculture in some sense. Never again will it employ
as many people. From here on in, agriculture is an industry that is in decline. It is
not that agriculture wont produce more in absolute terms – indeed a modern
agriculture will produce many thousands times the output of a primitive system, it
is just that it will require a fraction of the labour to do it. By virtue of being released
from the land, people start other industries and thus agriculture’s share of GDP
must decline too. As technology improves, more people will leave the land – fewer
will remain and it will not be long before agriculture is overtaken by emerging
industries in the non-agricultural sector. As a result, it inevitable that agriculture
must change if economic development is to proceed. It is thus an irony that whilst
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transformation of agriculture is irrefutable, government intervention, which
characterises the agricultural sector in virtually all DMEs of the world (such as the
EU’s Common Agricultural Policy) seeks to maintain the status quo – keep
agriculture the way it was.
We will cover these issues in much greater detail as the module proceeds, but these
are the sorts of issues and relationships that we will be analysing in the first Section
of the Lecture Programme.
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