<<

. 13
( 21)



>>

Nicaragua 23 42
Rwanda
25 45
Ghana ethiopia
Kenya 56
28 Malawi
30
Cuba Guinea 88
37 92
Benin Burundi

Source: Pingali and Stringer 2003: Figure 3.
Agriculture and development 353
has been dubbed Dutch disease, because its effect was first noticed following discoveries of
natural gas reserves by the Netherlands in the 1960s and 1970s.4
When the price of the commodity export turns down in future, then export revenues will
decrease, and as a result of both lower domestic income and the decrease in the exchange rate
of the currency, imports will become more expensive. Thus domestic producers of import
substitutes will once again find a market, as the decrease in income and in the value of the
currency leads domestic consumers to be able and willing to import less. However, some
firms are likely to have been priced out of the market on the upside of the “boom-and-bust”
cycle, and they may not be able to swing back into production, perhaps because their busi-
nesses have been bankrupted and sold off. Machinery and equipment may now be dispersed
into other parts of the economy, or have fallen into disrepair. Worse, the labor force formerly
used to produce for the local market in the import substitution industries may no longer be
available, even if a firm wished to expand or re-start production. Thus the domestic economy
is weakened and its productive base reduced as a result of the twists and turns of the boom“
bust cycle and the phenomenon of Dutch disease, and these effects are strongest for countries
that are mono-exporters. But, with the strategy of export diversification, the risk of Dutch
disease can normally be reduced or eliminated.5


FOCUS 11.4 AN AGRICULTURAL-LED DEVELOPMENT
STRATEGY?
Can agriculture be a leading sector rather than a follower? Until the era of the Green Revo-
lution of the 1950s and 1960s (discussed below) there seemed to be no reason to enter-
tain such a notion. And “ as we have seen in earlier chapters “ no development theorist
ever suggested an “Ag-led” development strategy. Yet Robert Fogel™s research on British
economic growth demonstrates that from 1790 to 1980 a truly impressive thirty percent of
all economic growth arose from better nutrition and increased human capability arising from
the improved ability of the labor force given greater energy from their food consumption
(Fogel 1994). Rising productivity in agriculture, then, appears to induce rising productivity in
the remainder of the labor force as food prices fall “ this is an important externality “ engen-
dering a virtuous circle. In addition, a booming agricultural sector can be an important source
of domestic industrial demand both for consumer goods which farmers will buy and farm
inputs which can create economies of scale in the production of manufacturing products.
An “Ag-led” strategy can also be appealing because of the daunting needs for infra-
structure in agriculture. Dams, irrigation canals, water storage facilities, roads, bridges,
etc. can all be produced under very labor-intensive methods “ more so than easy import
substitution activities such as the textile industry. At the same time, with agricultural output
growing rapidly, the demand for landless workers in the countryside will grow “ thus, an
“Ag-led” strategy will target some of the poorest people. Developing nations, particularly
when they seek to industrialize, find that they need foreign exchange to fund needed
imports. But agriculture is less import-intensive.
Research shows that if the “Ag-led” strategy is concentrated on small landowners there
is a high degree of stimulus to the remainder of the economy “ the “multiplier effect” of
increasing agricultural output by $100 is to create an additional $80 of total output as
a result of the need for both more consumer goods and farming inputs. But agriculture
cannot move ahead without a serious commitment to rural education, and, many argue, a
sustained effort to “reform” the agricultural sector with policies that enable smallholders
and especially the landless to gain access to land by breaking up large estates “ which are
known to be less productive per unit of land.
Continued
354 The Process of Economic Development
However, signs of a possible reversal are to be noted, particularly with the publication
of the World Bank™s Reaching the World Poor “ A Renewed Strategy for Rural Develop-
ment (World Bank 2003), which advocated for a stronger focus on agriculture and the
fact that the 2007 World Development Report is devoted to agriculture. World Bank
loans to the agricultural sector increased by more than to any other sector 2001“6,
rising to 7.4 percent of all loans by 2006.
Peter Trimmer credits Indonesia™s development success in the 1970s and 1980s to
an “Ag-led” strategy which used the rural economy as the motor force for growth.
Noting that the poverty rate fell from 50 percent of the population in the 1960s to only
20 percent in 1990, he found that 40 percent of the new jobs acquired by the growing
labor force between 1969 and 1994 occurred through agricultural development.
Indonesia™s success combined adoption of the Green Revolution in the 1960s and
support for the agricultural sector that centered on the needs of small landholders. An
Ag-led, pro-poor development strategy focused on raising public sector investments in
the agricultural sector promises to engender a virtuous circle of forces, and could be
envisioned in the following manner (see diagram below). First, initiate investment in the
agricultural sector, primarily through a state-led process of large-scale investments in irri-
gation, roads, bridges, storage facilities, canals, and research and development in seeds,
cultivation techniques, animal breeding and conservation/sustainability methods. The
central thrust of the Ag-first strategy would be to initiate a broad-based agrarian reform
(discussed later in this chapter). Initially this will increase the demand for rural workers as
cultivators and laborers, thereby quickly lowering malnutrition and food security concerns.
At the same time this will raise food transfer capacity out of the agrarian sector into the
urban areas. In the short-to-intermediate time-frame, supply expansion in agriculture will
lower food prices which will improve the living standard of the urban working class and
critically benefit the “informal sector” workers.
In order to expand farm production, urban inputs of tools, cement, and simple machinery
will be needed, raising the demand for urban (and rural) workers. As fewer workers exit
the rural areas the surplus of labor in the informal sector will dwindle, facilitating a rise in
wages. All this will serve to enhance “human capital” by increasing longevity and health,
reducing/eliminating micronutrient deficiencies among children, reducing the need to keep
children working in the rural areas and thereby improving school attendance. All these
factors combined in the course of a year will start to raise the GDP, which will thereby
increase the amount of funds and perhaps even the percentage of GDP devoted to agri-
cultural investment in subsequent years. This simple model will generate even higher and
faster social and private rates of returns if supplemented by strategically placed foreign aid
(an issue discussed in Chapter 17).
Using a “food first” strategy, Indonesia was able to shift from being the world™s biggest
importer of rice to food self-sufficiency in only sixteen years! While there seems to be a growing
interest among agricultural specialists in the possibilities of an “Ag-led” policy (at least for some
nations) the major aid institutions, such as the World Bank, shifted away from supporting agri-
culture until very recently. Through 1980 the World Bank had devoted 23 percent of its loans
and grants to agriculture, but by 1999 this sector received less than 10 percent of total funding,
which practically disappeared by 2001, when only 4 percent of all lending went to agricultural.

The decline in attention to agriculture in foreign aid has the greatest impact on
countries that are lagging developmentally, currently the bulk of Africa and a few
Asian countries. The front runners in development have already benefited from the
period when agriculture was uppermost in technical assistance. In Asia, for example,
agriculture is moving, and now rapid industrial growth is providing a demand pull to
agriculture. The laggard countries are still largely agricultural, with weak institutional
structures for agricultural growth and limited human resources.
Agriculture and development 355

Initiate
investment in
Increase
agricultural
GDP
sector


AG FIRST PRO-POOR Initiate
STRATEGY agrarian
reform
Raise
Improve human
employment
capital
in agriculture
(faster
regions
learning, Raise yield
Lower
longer work and output
malnutrition
lives, improved levels
Raise food
school
transfer
attendance)
capacity




Lower food prices
Raise urban
labor conditions
(less competition
for jobs, lower
Raise demand for urban
living cost)
inputs


Sources: Mellor 1998b: 62; Trimmer 1998; United Nations, Department of Economic and
Social Affairs 2000: 131“55; World Bank 2003


Peasant agriculture and small-scale cultivators
It is commonplace to find reference to “peasants” as a principal category of cultivators in
the less-developed world who operate in a milieu of traditional agriculture. exactly what
these two terms “ peasant agriculture and traditional agriculture “ are intended to convey is
too often left unstated. Unlike the peasants of medieval and feudal times in Europe, small
cultivators in the less-developed nations are not tied to any particular landowner as serfs
were bound to feudal manors. It is rare to find compulsory labor imposed on particular days
or in particular seasons on small cultivators by large landholders. Nor do large landholders
have “reciprocal obligations” to peasants as was the case in feudal Europe (for example, to
provide protection).
Rather, what the terms are meant to convey is an emphasis on the self-sufficiency of the
peasant farming operation: production for family consumption is thought to dominate deci-
sion-making. “Traditional” appears to be utilized to suggest a certain timelessness in the
production process. In one telling phrase, Walt W. Rostow maintained that traditional agri-
culture was “pre-Newtonian” (Rostow 1960). He meant, apparently, that small cultivators
farmed without regard to trial-and-error methods of cultivation, harvesting, irrigation, and
seed selection. He also used the term to imply that there was a ceiling on the peasant produc-
tion function, meaning, apparently, that farmers quickly encountered diminishing returns,
and even absolutely diminishing returns, when they sought to raise output by working their
356 The Process of Economic Development
land harder or longer. In any case, the image of traditional agriculture conveyed was one
wherein productivity was abysmally low and did not rise over time, except in the most
intermittent and unpredictable manner, where pure chance might bring an improvement in
cultivation techniques. The application of science and technology to improving productivity
or of investments in human capital were presumed to be absent from peasant or traditional
farming.
Is this a realistic portrayal of the poorest and most numerous cultivators in the less-
developed nations? Probably not, certainly as a generalization. First, peasants and other
small-scale cultivators do not produce solely for family consumption, selling only any
surplus that might remain. Peasant farms typically combine both non-market and market
production. Small cultivators also often maintain modest numbers of animals and a vege-
table garden for their own use to supplement what can be earned by marketing their cash
crops. Since small cultivators are almost without exception very poor, and since they are
very poor in large part because they are small cultivators without access to large areas of
productive land, they do not need to spend all of their time cultivating the crops cultivated
on their land. Maintaining animals and gardening usually occurs in an environment in
which there are few other claims on the time of the cultivator. To the degree that peas-
ants can find work elsewhere as day laborers on public works projects or larger farms at
harvest or planting time, alternative employment is often sought, while other members of
the cultivator™s family, particularly women, maintain the family™s non-cash production.
While non-market activities are an important source of real income to the small cultivator,
it is very rare to find small cultivators consuming all of what they produce, or having all
their consumption limited only to what they themselves produce.
Thus, the concept of “self-sufficiency” has a relatively limited meaning in describing agri-
culture in most less-developed nations today. As a defining characteristic, it would be more
accurate to emphasize the relatively low degree of specialization of small cultivators. They
often combine the roles of small market producer with that of family production, artisan
producer, day laborer, and migratory worker, and in this categorization should be included
the labor activities of most, if not all, the family members.
Traditional agriculture has virtually no applicability today if it is intended to suggest the
image of a rigidly set pattern of cultivation determined by custom and impervious to change,
even when a change in the method of cultivation has clearly been demonstrated to be more
efficient. Anyone traveling in the less-developed world today certainly can encounter culti-
vators utilizing some methods of cultivation which have been employed for centuries, if not
a millennium. Wooden ploughs drawn by oxen, for example, abound. Cultivators often use
a “digging-stick” to plant, pushing soil over the indentation in the earth with their feet after
planting a seed. Machetes are ubiquitous. Yet these same cultivators, seen with digging-
sticks and machetes, may return to their crops a few weeks after planting to douse them with
synthetic fertilizers produced by one of a handful of giant transnational oil companies. They
may, and often do, use herbicides and insecticides on their crops, often indiscriminately
and with little apparent regard to their own health or that of the ultimate consumer (see
Focus 11.3). Today the seeds in use by peasants quite often come from giant agro-industrial
corporations which have spent millions of dollars to create new strains of crops to increase
agricultural productivity.
If traditional agriculture means anything, then, perhaps we can take it to mean farming
activities that combine the marketing of a modest-sized cash crop and some self-consumption
of production, all organized around family labor. These are operations which are small and
quite labor- and land-intensive in their production methods; they lack much capital, and the
Agriculture and development 357
land in use is often marginal at best. Traditional agriculture tends to be low-productivity, low
value-added, certainly as measured by output per worker, but it would be incorrect to suggest
that there is no innovation or no capital in use, or that peasant farmers cannot learn-by-doing
or by observing, or that they will not undertake change which can be demonstrated to be
worth the risk involved.

Attitudes toward risk and change
With regard to production methods used by peasant farms, then, what is to be noted is the
unevenness of production techniques. Combinations of some quite advanced methods with
techniques which are ancient are not unusual or unexpected. Yet cultivators rarely cling to
ancient methods simply out of some desire to maintain customs and traditions. The degree
of resistance to change may often be noticeably higher in less-developed nations, but this
observation is different from an assertion that cultivators are mired in unchanging techniques
of production which are hopelessly out of date. Change is often slow to come in peasant
agriculture for three very important reasons.
First, there is cultural resistance, as there is in any society, to change; these are the
Ayresian “ceremonial” structures and institutions that are backward-looking but which exist
in any society (see Chapter 6). The pace of change is likely to be slower than in the more
developed, industrial nations, but peasant society is far from static.
Second, given the fact that small cultivators are very poor, they are often extremely risk
averse. Unproven changes in production methods or the introduction of new seed strains
or new crops may mean the taking of risks that, if the gamble is successful, can increase a
family™s income and perhaps take them out of poverty. On the other hand, risky changes can
result in decreases in income, when the risk does not pay off, which takes the family from
near-subsistence to below subsistence income.
The possibility of the down-side of the risk, with its devastating consequences, may
for the rationally calculating peasant simply outweigh the potential gains of the projected
change.6 Consequently, prudence often leads small cultivators to hesitate in innovating,
not because they cannot envision the conceivable benefits of change, or because they
are irrational, but rather because they can only too well balance the costs and benefits
of change and must do so carefully; that is, near-subsistence peasant producers may not
change, thus sticking to “traditional” methods, precisely because they are rational and
because they have evaluated the risks involved in changing production. However, even
within the classification of “small cultivators,” one finds peasants with somewhat more
land and other means of economic survival, who, given their relatively greater access to
resources, are more likely to accept new innovations, because failure is less likely to result
in destitution.
Third, many small cultivators remain mired in production techniques which are clearly
obsolete, not out of any choice they make, but because they have little or no access to cash
or credit which would enable them to finance more advanced technologies, even though it
is clear these could increase productivity. Or, even if financing were to be available, farm
technologies appropriate to small-scale farming operations may not be available because of a
paucity of demand for such technology. With only a limited number of small cultivators able
to make such purchases, forms of “appropriate technologies,” such as small tractors, may be
unavailable because it is not profitable to provide them via the market. On the other hand,
large- and medium-scale capitalist cultivators find a wide spectrum of farming technologies,
and financing, more readily available on the market.
358 The Process of Economic Development
Are peasants efficient producers?
Development economists have expressed great interest in the question of the efficiency of
small cultivators. The issue has been approached from three distinct perspectives. First,
several of the early developmentalist economists took the position that a lack of efficiency
in agriculture actually reflected another area in which less-developed nations had “hidden
potential” which could be quickly and easily tapped to propel the nation on to the path of
greater development. Their potential productivity simply needs to be released through proper
policies. Second, one encounters the argument that peasants are, in fact, true maximizers in
the neoclassical sense, who behave no differently from any other market participants. And,
third, one encounters the position that peasants endure even though they are inefficient by the
standards of neoclassical economics, because there is a special logic to peasant cultivation.
Below we consider each of these three positions.


The hidden potential of peasant producers
The argument that there is hidden potential within the agricultural sector because of the
inefficiency of peasant cultivation is rather straightforward, though the inefficiency of the
peasantry is often assumed, rather than demonstrated. This was not always the case. Gunnar
Myrdal, particularly in Asian Drama, took great pains to discuss a multiplicity of factors
which he felt led to inefficient production in small-scale agriculture. If agriculture is ineffi-
cient, then there are structural changes which could lead to a rapid increase in output without
any increase in inputs. Once these blockages or bottlenecks in agricultural production are
identified and corrected, output should rise steadily, at least until maximum efficiency is
attained.
The Lewis model is one such theory with this underlying perspective. Recall that Lewis
asserted that the marginal product of labor in agriculture was zero and was certainly less
than the marginal product of labor in industry (Chapter 5). Consequently, shifting labor from
agriculture to the industrial sector would not reduce farm output, while industrial output
would rise. Thus agriculture was viewed as a hidden reserve for development. The structural
inadequacy, or bottleneck, was the surplus of labor in agriculture, and thus transferring labor
from agriculture to industry was the means to overcome the barrier to progress. Quite a large
number of cultivators could be withdrawn from the agricultural sector, and the remaining
farmers could work a bit harder and a bit better to generate a food surplus to feed the growing
number of workers in the industrial sector. Clearly, this process could not go on and on;
there were limits to Lewis™s virtuous circle. But such limits were not Lewis™s main concern
or focus. He understood quite well that agriculture would reach its limits somewhere in the
not too distant future, but in the meantime he envisioned a successful transition to a semi-
industrialized economy which would have much greater possibilities to improve the long-run
productivity of agriculture, releasing its hidden potential.

The Chicago School approach: efficiency attained
In 1964, Theodore Schultz published Transforming Traditional Agriculture to challenge the
idea that small-scale farmers were inefficient at all, particularly in their use of labor (Schultz
1964). Schultz took the position that small farmers were efficient; given their knowledge and
access to information, and given their income levels and stocks of tools, implements and draft
animals, and given their command over labor power (primarily the family unit), one could not
Agriculture and development 359
recombine the inputs which peasants controlled so as to increase output. Nor could one reduce
inputs and maintain output at the same level, as Lewis had argued. Furthermore, according
to Schultz, if prices for agricultural products were increased, peasants would respond by
increasing their inputs to production for those goods, just as neoclassical market analysis
would predict. Consequently, Schultz concluded, small-scale agriculture was efficient.
This interpretation essentially argues that there is nothing which is unique about small-
scale agricultural production in the less-developed nations. Small farmers are assumed to be
quite poor, but through no fault of their own. Nor is their poverty the result of any particular
cultural impediments which might be linked to a pre-capitalist or pre-modern ideology or
to land ownership patterns. Rather, small farmers are poor because of government policies
which either inhibit the workings of a free market in agriculture, such as price-setting for
crops, or they are poor because of government policies which insufficiently assist in the
workings of the market. Although this approach generally tends to emphasize the negative
impact of government, Schultz also highlighted the neglect of government-provided agri-
cultural extension and agricultural research, and the need for rural schools which would
improve the managerial abilities of small-scale producers. How, then, in this view, is the
low level of productivity in agriculture to be improved? New and better inputs, such as
high-yield varieties, will raise output per hectare. The elimination of price ceilings and other
government-imposed policies which reduce the rate of return to farmers will serve to eradi-
cate rural poverty by removing the sources of low productivity behavior in response to the
“wrong” price signals.
Schultz™s interpretation has been challenged on several grounds. Most directly, the
economic anthropologist Polly Hill, who spent long periods painstakingly observing peasant
cultivators in Africa and Asia, rejects Schultz™s analysis as being based on second-hand
studies which fail to prove his argument. Hill (1986) notes that Schultz relied on only two
empirical studies: one conducted on Guatemalan peasants and the other on an Indian village.
She rejects the finding of the Guatemalan study because the village observed was a trading
village, not a village of commodity producers. Traders, she maintained, would surely have
acutely attuned responses to market incentives or they could not survive, but this proves
nothing regarding the behavior of producers such as peasants who do not survive solely
on the basis of trade. Further, she states that the absence of disguised unemployment or
underemployment in this particular village was unrepresentative of Guatemala and of less-
developed economies in general.
Second, she rejects the study of Indian farmers, because it failed to differentiate between
the behavior of rich and poor small farmers. Based on her research in India, and the work of
others, Hill maintains that the poorest farmers are inefficient in relation to relatively richer
farmers. Rich farmers and poor farmers are not equally motivated, equally skilled, or equally
informed. Hill points out that, in India, the poorest farmers are inefficient from the standpoint
of the village™s standards, since they cannot afford to buy manure, thus reducing their yield
per acre and engendering soil exhaustion. And, even in the case of the rich small farmers,
who come closest to fitting Schultz™s ideas, Hill rejects the notion of the ubiquity of prof-
it-maximizing responses. She mentions, for example, the stability of rural wages for farm
laborers in spite of the seasonality of agricultural labor. Using a hypothesis based upon the
universality of market-driven behavior, such as that espoused by Schultz, one might predict
that wages would rise and fall with the changing demand for that labor (Hill 1986: 22). She
also noted the general lack of a properly functioning market in credit and land. Hill quotes
the work of two economists who had sought to demonstrate the validity of Schultz™s gener-
alizations in Palanpur, India.
360 The Process of Economic Development
We are unable to confirm that neoclassical economics is alive and well and residing in
Palanpur ¦ Farmers were not doing the best that they could do given their resources.
(Bliss and Stern 1982: 291, 293)


Peasant agriculture as a special category
According to modernization theory, particularly as presented by Rostow, the agricultural sector
should move rapidly forward with the dissolution and consolidation of traditional or backward
agriculture, as inefficient, small-scale farming is phased out with structural transformation.
Small farmers should be found migrating, en masse, to the industrial and service sectors. This
had not been the case, until recently, in most of the Third World, despite the rapid growth of
urban centers. Rather, large numbers of peasant cultivators have clung tenaciously to their
landholdings. Once landless, many have continued to reside in the countryside. Small cultiva-
tors may migrate to urban areas, or they may migrate internationally, for one or more seasons
per year. Yet their base often remains in the agricultural regions of the countries where they
originated. Without doubt, the number of small cultivators is declining, and the realm of purely
capitalist farmers is expanding, as is the extent of urbanization. But the pace of this change had
been relatively slow, at least until the 1980s. To try to explain the tenacious hold land has on
small cultivators, a large body of literature has emerged, some of which is summarized here.
In one study of the phenomenon, Alexander Schejtman defines “peasant economy” in the
following manner.

The concept of the peasant economy encompasses that sector of domestic agriculture
activity in which family-type units engage in the process of production with the aim of
ensuring, from one cycle to another, the reproduction of the living and working condi-
tions, or, to put it another way, the reproduction of the producers and the unit of produc-
tion itself. Achieving this objective generally means generating, firstly, the means of
subsistence (biological and cultural) of all members of the family, active or not, and
secondly “ a fund designed to pay for the replacement of the means of production used
in the production cycle and to deal with the various eventualities which may affect the
existence of the group.
(Schejtman 1992: 278)

Peasants, then, seek to attain survival or to sustain themselves. In commercial agriculture,
on the other hand, the objective is to maximize profits, or to leave the agricultural sector if
the market rate of return is higher in other pursuits. Peasants do not utilize the pure logic of
profit maximization. Nor do they concern themselves with the “opportunity cost” of farming,
exiting the agricultural sector if the wage to be obtained in the industrial or service sector is
higher, as in the Lewis, Fei-Ranis, and Harris-Todaro models, or if the rate of return in the
non-agricultural sectors of the economy is higher.
Exactly how widespread this behavior may be is not specified. Yet the imputation is clear;
family-size farms are most likely to be part of the peasant economy. Table 11.4 provides
some idea of the division of land ownership on the basis of farm size in the 1970s. For Latin
America, smallholdings were defined as less than 10 hectares, while large holdings were
above 100 hectares. For the Near East, the division between these two categories was taken
to be less than 5 hectares and greater than 20 hectares. For Africa and the Far East, the divi-
sion was less than two hectares and more than 10 hectares. In all regions, small-sized peasant
farms dominate the total number of farms.
Agriculture and development 361
Some researchers who have studied the peasantry have defined these cultivators as either
subsistence or semi-subsistence producers. In the latter category, it is assumed that only
agricultural surpluses are sold in the market. Thus, there is an attempt to define the peasantry
not merely in terms of its behavioral patterns, which fail to fit the model of standard market
participants, but also as producers who generally operate outside a market context. There are
such economic entities, but Hill believes “such communities are statistically so rare in the
world that they (can) be ignored” (Hill 1986: 19). In general, a very high quotient of total
production will be marketed, not merely some residual which is not consumed, and this
marketing usually takes place at the peak harvest time when prices descend to their lowest
point. The need to make payment on borrowed money and/or the inability to store crops for
sale at a more opportune time, if the crops so permit, typically forces the smallest cultivators
to sell at the worst moment.
While peasants do draw on unpaid family labor which can allow them to devote a large
mass of labor power to their small plots, it is not always true that small cultivators are the
most efficient in terms of yield per acre or hectare, as is sometimes supposed. For the poorest
of the small cultivators, it appears that management of family labor is weak; poverty and
duress force many family members to seek outside employment to support a fragile exist-
ence. This employment can come at the very moment when the family™s land needs the
most attention. Furthermore, since peasant farmers generally sell at peak harvest time, their
return has to be balanced against the fact that the price earned on the quantity produced
typically will be less than that of the richer small farmers. This is because more well-to-do
small farmers are able to manage their family labor with an eye toward pushing their yield
upward, while being able to afford manure and other inputs which will tend to enhance yield.
Moreover, they may well be in a position to store some of their cash crop in order to await a
rise in the market prices as seasonal surpluses dwindle.
As tenacious as the peasantry has proven to be, it is certainly the case that migration from
the agrarian South to the industrial North has exploded in the early twenty-first century.
Mexico alone sent more than 400,000 per year into the US in the 2001“6 period. The term
de-agrarianization has been used by Cristóbal Kay and Jonathan Rigg to capture the
essence of the processes currently under way in the rural sector (Kay 2006; Rigg 2006).
They maintain that a profound transformation is unfolding in the countryside, with signifi-
cant portions of the populace now completely de-linked from farming and land ownership,
drawing their livelihood from non-farm activities including bouts of migration. Occupational
“multiplicity,” rather than the drive to maintain peasantry status is now widespread.

Table 11.4 Land tenure relationsa
Smallholdings Large holdings

Average number Area Size Average number Area Size
% % ha % % ha

Latin America 66.0 3.7 7.9 80.3 514
2.7
Africa 66.0 22.4 1.0 3.6 34.0 28
Near East 50.0 11.2 1.6 10.3 54.7 50
71.1 21.7 4.0 31.1 17
Far east 0.7

Source: Dixon 1990: 71.
Note
a Medium-sized holdings not included in the table.
362 The Process of Economic Development
Numerous studies of the countryside in Asia, Africa, and Latin America show that non-farm
forms of income have risen dramatically from the 1970s or 1980s to 2000. Frequently the
share of non-farm income has been found to average 40 percent, and in some regions most
rural families receive the major part of their income from non-farm activities. Increasing
land shortages, declining yields/profitability, environmental degradation and new opportuni-
ties for employment in rural assembly/manufacturing or in internal/international short-term
migration are all factors driving this process, bringing into question current understanding
of the role and permanence of the peasantry. Rigg concludes that “land has lost its strategic
value in the countryside” for some families in Laos “ a view that, if more broadly confirmed,
will hold deep implications for the rural poor, particularly the peasantry (Rigg 2006: 194).
More generally, Rigg concludes that:

No longer are agriculture and farming the desired, default position of rural households.
No longer do parents desire a settled, farming life for their children. And no longer
should we assume that agricultural development is the best way to promote rural devel-
opment, and rural development the best means of raising rural incomes and improving
livelihoods ¦ The best means of promoting pro-poor growth in the countryside may
have less to do with supporting small-holder farming, whether through land redistribution
or policies of agricultural development, and more to do with endowing poor people
with the skills so that they can escape from farming and, perhaps, escape from the
countryside.
(Rigg 2006: 195“6)

Kay, however, finds that poor peasant households are using non-farm income as a key means
to retain possession of their small plots in Latin America, suggesting that the peasantry is not
dissolving at a rapid pace (Kay 2006: 471).


High-yield varieties, biotechnology, genetically modified food crops,
and rural productivity
Concern for the precarious economic position of small cultivators, combined with the fear
that they might become a politically active group if their living standard was not improved
as they gradually lost land ownership, led to attempts to improve seed varieties which could
be employed in the less-developed economies on small plots to increase productivity. Such
seeds, of course, were not limited to usage by or for smallholders. Nevertheless, there was
widespread hope that such seeds, termed high-yield varieties, would contribute to reducing
rural poverty. Research on new wheat seeds conducted in the 1940s and 1950s in Mexico
provided the basis for a breakthrough in scientific plant breeding. Later, the revolution spread
to rice and has more recently been extended to corn, millet, and sorghum production.
Widespread application of these new plant varieties did not occur until the 1960s, however.
In 1968, the term Green revolution was first applied to these efforts. This term constituted
not only the recognition of a major technological change undergoing rapid diffusion, but
most importantly a strategy wherein it was hoped that seed technologies could be substituted
for missing land reform and for more radical “red revolutions” of the socialist variety threat-
ening to sweep across the globe at the time. In the view of those who advocated the Green
Revolution (GR), the absence of high-yield varieties, coupled with growing population pres-
sures in rural areas, would eventually result in a situation where the pressures and burdens
of the small cultivators would be released in a political explosion. Poor peasants with few
Agriculture and development 363
alternatives and little hope, it was feared, would seize plantation and estate lands, as well as
those lands held by agribusiness conglomerates and transnationals.
Critics of the GR strategy predicted that the diffusion of high-yield varieties would,
however, further exacerbate rural poverty and accelerate the tendency toward the concentra-
tion of landholdings. They foresaw peasants driven out of rural areas by falling prices for
their crops as supplies rose as a result of better technology and higher levels of production.
In this view, only rich peasants, mid-size capitalist farmers and larger landholders would be
able to take advantage of the Green Revolution™s promise. Critics took this position because
the cultivation of these new varieties usually required irrigation and the intensive use of ferti-
lizers. Thus the necessary complements to high-yield cultivation were thought to be beyond
the reach of the mass of poorer peasants. Furthermore, such new varieties were prone to pests
and plant disease, which might destroy most or all of a crop. From the theory that poorer
peasants are most likely to resist change, since they can least afford the risk involved if there
is a crop failure, it was argued by some that even if peasants might be able to afford to adapt
to the new varieties, they could not afford to accept the risk such varieties entailed and thus
the rural income divide would widen.
In some respects, the results of the GR were correctly anticipated by critics of the policy.
As Keith Griffin summarizes:

The main beneficiaries in the rural areas have been producers who control optimal
production environments, i.e. farms on good soils in well-irrigated regions, and in some
countries optimal production environments are frequently controlled by the larger and
better-off farmers.
(Griffin 1989: 147)


Michael Lipton and Richard Longhurst, in their analysis of the effects of the GR, have
isolated four phases of response to the issue of high-yield varieties:

First came the “green revolution” euphoria of 1967“70. In the second phase, there were
growing fears that the MVs (modern varieties) enriched large farmers at the expense
of small farmers and landowners at the expense of labourers. The later 1970s saw a
third phase; several reassessments suggested that in MV-affected areas the poor gained
absolutely, but lost relatively. Small farmers adopted after large ones “ but did adopt and
raised yields. Farmworkers found that the effects of MVs in boosting the demand for
their labour seldom brought much higher wage rates “ but employment rose. Above all,
poor consumers gained, as extra cereals supplied by MVs restrained food prices. The big
exception to this rather happier verdict on the MVs was that producers in the non-MV
areas, including many poor farmers, gained nothing from the new technology.
(Lipton and Longhurst 1989: 19)

Kathleen Baker and Sarah Jewitt conducted an evaluation of the impact of the GR in a
state in India (Uttar Pradesh) covering a thirty-five-year period when the Green Revolution
was broadly applied (Baker and Jewitt 2007). Their findings are generally positive, but the
broad positive impact of the GR in this important state needs to be carefully interpreted:
Uttar Pradesh has had adequate access to water and canals, and “ most importantly “ in
1996 the state imposed a cap on land ownership of only 7.35 hectares for irrigated land. In
effect, this constituted an application of agrarian reform (discussed below) along with GR
364 The Process of Economic Development

FOCUS 11.5 AGRICULTURE AND THE ENVIRONMENT:
PESTICIDES AND THE CIRCLE OF POISON
Pesticides are used moderately in Sub-Saharan Africa, but elsewhere in the less-devel-
oped world their use is widespread, commonplace, and subject to rapid growth. For
example, in the period 1980“5, the rate of growth of pesticide application exceeded 10
percent per year in Indonesia, Pakistan, the Philippines, and Sri Lanka. Often pesticide
use has been stimulated by government subsidies which, along with technical assistance
in applying these chemicals, have been extended to large- and medium-sized farm opera-
tions. Pesticide use often is problematic, because it can poison groundwater supplies,
disrupt ecosystems and cause serious harm to humans and animal life. Alternatives to
widespread pesticide use do, however, exist: Integrated pest management calls for care-
fully timed spraying of pesticides, combined with the introduction of natural predators,
pest-resistant crop varieties, and crop rotation, measures which are more environmentally
friendly and which can contribute to sustainability of fragile ecosystems.
One study of farming in Guatemala indicated that peasants used three times the amount
of pesticides per hectare as did large- and medium-sized cultivators. And they applied
pesticides as a precaution, without regard to specific pest infestation. Furthermore, they
generally failed to leave an adequate interval between spraying pesticides and harvesting.
As a result, their crops often were unacceptable for export because of high concentrations
of toxic agents; such commodities were sold, however, in the local market. Other agri-
cultural products from the less-developed countries with lower levels of contamination,
however, continue to be exported.
This so-called circle of poison occurs when industrial nations prohibit the domestic
use of certain pesticides, but continue to allow their chemical corporations to produce
and export these banned poisons to other countries. The United States, for example,
controls 25 percent of international trade in pesticides, but approximately one-quarter
of this output cannot be sold in the United States. Many of these pesticides re-enter the
United States, however, via food exports from the developing nations which utilize the
banned pesticides. The US imports as much as half of certain fresh fruits and vegetables
from Mexico between December and March each year. Less than 1 percent of these items
are tested for pesticide contamination. Mexico, however, continues to use DDT and BHC,
more than twenty years after their patents were revoked as a result of the health dangers
associated with their use. Other dangerous herbicides and pesticides such as paraquat,
parathion, and ethylmercuric substances are regularly utilized to dust crops.
Indiscriminate and widespread use of insecticides and herbicides is creating new,
complex, and expensive public health problems, which poor nations are ill-equipped to
remedy. For example, in some of the cotton-growing regions of Central America, DDT
residuals in breast milk are the highest ever recorded in humans. These are passed on to
young children, with potentially devastating consequences.
Sources: Barry 1992: 269; Pingali 1998; Russell 1994: 252; World Bank 1992: 140


technologies. The imposition of land size limits did not occur through the guidance of the
central state or through the agricultural ministry, but rather as a result of political pressure
from organized political groups that were really social movements advocating for the peas-
antry. Small farmers benefited directly through self-consumption, planting HYVs of wheat
and rice in alternative seasons (while working as farm laborers, construction workers, or
urban informal workers when time away from farming made this possible). Average yields
in Uttar Pradesh have exceeded the national average yields by roughly 50 percent since
the GR began, and even the smallest farmers have experienced sustained yield increases
over 100 percent. By virtue of the land cap imposed on GR cultivation large farmers
Agriculture and development 365
have frequently sold parcels of land, and overall land distribution among the villagers has
improved, while in one village the number of landless declined by 25 percent (Baker and
Jewitt 2007: 324“6).
Meanwhile the amount of irrigated land increased by 66 percent from 1972“2003, although
the distribution has been skewed toward larger farmers, with small farmers unable to afford
wells being forced to pay very high prices for water (ibid.: 328“9). As one would expect,
small farmers have not had the income (from their labor jobs) to buy adequate amounts of
fertilizers “ they use about 50 percent less than large farmers and as a consequence their
yields are 50“60 percent less than the largest farmers. Fertilizers have been heavily subsi-
dized, but with India™s turn toward neoliberalism in the1990s it is anticipated that this subsidy
will be phased out. In any case yields are declining in the most heavily fertilized areas as a
result of salt deposits.
even though land distribution among the villagers is more equal than before the GR, and
hunger has disappeared, income distribution has widened for two reasons: (1) the small
farmers have much larger families than the medium and large farmers, and this results in
the further division of land into smaller plots, cutting effective per-family income from
self-cultivation; (2) yields are substantially higher on larger plots of land. As a result, in
2001 medium and large farmers owned 75 percent of the wealth of the villages studied,
while in 1972 they owned 45“50 per cent of the wealth. In general, the share of the wealth
of small farmers went down from 40 to 20 percent, while that of the landless went up from
0 to 10“15 percent because the rising prosperity in the region created jobs in agriculture, the
villages, and in the surrounding urban areas which improved the conditions of the landless
(ibid.: 331“4).
While numerous other factors played an important role in the rural conditions of Uttar
Pradesh, the aggregate impact of the GR technologies has been mixed “ large farmers have
benefited the most, but the land cap constrained this tendency to a great degree, while “multi-
plier effects” from higher levels of income have spilled over, creating new opportunities for
the landless, and the standard of living for small farmers has improved in an absolute, though
not in a relative sense. Nonetheless, doubts remain regarding the impact of salt deposits and
the poisoning of well water through fertilizers, pesticides, and insecticides.
Africa was largely left out of the GR, but from 1999 to 2007 the Rockefeller Foun-
dation focused on the development and propagation of a new GR rice, NERICA, that
has brought GR yield increases to much of Africa (Strom 2006: A16; WARDA 2007).
NERICA combines the yield capacities of GR rice plants developed in Asia with resistance
characteristics common to Africa rice. NERICA has been identified as the major cause for
six years (2000“6) of substantial and consecutive increases in rice production in Africa.
Nigeria, the largest rice importer in the world, was able to reduce its 2005 rice imports
by 800,000 tonnes as a result of the adoption of NERICA. Use of NERICA is spreading
rapidly, with at least thirteen African nations actively cultivating this breakthrough plant
in 2007.
Returning now to Lipton˜s analysis, above, it is possible to locate a fourth phase of plant
technologies which began in the 1980s and has gathered momentum ever since. This time the
emphasis is on the promise of nitrogen fixation, coupled with breakthroughs in biotechnology
(including the explosion in genetically modified food crops). All this has been combined with
the renewed faith that in breaking up the public sector and imposing the rule of the market
(see Chapter 7), the dilemmas of the rural sector will be overcome at last. Skepticism, based
on the limited impact of the GR, appears warranted. Nonetheless, the positive accomplish-
ments of the technological burst coming from the GR also are beyond dispute: food yields
366 The Process of Economic Development
did rise in many areas of the developing world. Still, the GR has not achieved the success that
once appeared inevitable; in many poor regions, physical and social infrastructure is insuf-
ficient to support major yield increases. In these regions, farm advisers are lacking, roads can
be non-existent, and the subsidies often needed to stimulate a shift in production technolo-
gies are unavailable (Goldman and Smith 1995).
In the early twenty-first century transgenic crops were being introduced into the devel-
oping nations at a faster rate than any agricultural technology had been applied before. Some
38 percent of all transgenic crops grown (or genetically modified food crops) were under
cultivation in developing nations in 2005. In 2003 there were 67.7 million hectares of
transgenic crops planted in developing nations “ an area slightly smaller than Japan. By
2005 the rate of growth in planting of transgenic crops was higher in the developing nations
than in the advanced industrial nations of Europe, Japan, the US, Canada, and Australia.
However, this technology has overwhelmingly been utilized to solve production problems in
high-tech agribusiness in the industrial nations. Hence the focus has been on cotton, maize,
soy, and canola, with relatively few applications to food and fodder grown in the developing
nations, such as cowpeas, millet, sorghum, and cassava. As was the case in the 1960s, the
arrival of transgenics has created waves of research and storms of controversy in develop-
ment economics (Lipton 2007; Bouis 2007; Graff, Roland-Holst and Zilberman 2006; Raney
2006).
While there has been much speculation regarding the introduction of transgenic crops
(TCs), little high quality comparative research has yet been published. Terri Raney summa-
rized several existing studies that show substantial improvements in yields (11“65 percent),
and reductions in pesticide costs (’47 to ’77 percent) in the planting of insect resistant
cotton versus conventional cotton. However, seed costs went up substantially (17 to 530
percent), with the extreme variance in seeds related to whether a nation had the ability to
either negotiate with the agribusiness transnational corporations who own patent rights to
the genetically modified seeds or the ability to largely circumvent these corporations. The
level of profit increased in the areas studied (Argentina, China, India, Mexico, South Africa),
but the benefits to small farmers were mixed: only when a nation has institutions designed
to insure that those benefiting will include small farmers (such as national R&D capacity
that can independently produce forms of TCs as in China) will the new technologies have a
“pro-poor” impact (Raney 2006: 2“4). Michael Lipton, however, maintains that the reduction
in pesticide usage carries anti-poor implications because the TCs reduce the demand for
agricultural laborers, impacting the landless most of all (Lipton 2007: 45). Yet he also notes
that in the case of transgenic rice, developing nations have succeeded in negotiating with a
transnational corporation to make the seeds almost part of the “public domain” (Lipton 2007:
48). This leads him to the position that for the small cultivators to benefit from TCs it will
likely be necessary to recast the relationship with the agribusiness biotech firms to one where
a single fee would be paid for the unlimited use of TCs, as opposed to the current situation
where these firms seek royalties in perpetuity for the use of their seeds. If suitable measures
can be instituted regarding the low cost application of TCs, Lipton foresees wide applica-
tions in developing nations in agro-ecologies that have been inhospitable to the standard
seed-fertilizer-irrigation formula, such as applications of TCs where water is scarce or where
soil salt content is high. Others, such as Howarth Bouis and Gregory Graff et al. emphasize
the possibilities of improving the micronutrient content of TCs, thereby addressing the issue
of malnutrition affecting over 50 percent of the population in the developing nations (Bouis,
2007: 80“2; Graff, Roland-Holst and Zilberman 2006: 1434).
In analyzing the above studies regarding the application of TCs it is necessary to keep
Agriculture and development 367
in mind the fact that similar positive impressions were quickly gathered at the onset of the
Green Revolution “ it was only much later that evidence accumulated as to the difficulties
arising from the GR. By the late 1990s there was growing evidence of a slowdown in produc-
tivity in the GR areas of Asia, and this has spurred interest in TCs. Many farmers shifted to
rice intensification strategies “ planting two or three crops per year instead of the customary
one “ and this practice has degraded the ecological system of the rice paddies. Frequently,
agricultural specialists have warned that Asia™s great success with the GR is coming to an
end. Investment in irrigation slowed in the 1990s as more investment went into land reha-
bilitation.
Monocropping has led to a build-up in pests and a growing expenditure on pesticides.
As fertilizer use and pesticide expenditures climb to maintain yield the gains of the Green
Revolution are declining. In some instances farmers have increased their use of fertilizer at a
10 percent per year rate. India™s public sector expenditures for fertilizer absorbed 80 percent
of the subsidies devoted to agriculture in the early 1990s (Morris and Byerlee 1998: 470).
Prabhu Pingali™s research points to a number of growing weaknesses in the GR strategy.
Among the problems he highlights are soil compaction, changes in soil composition, soil
toxicity, increases in soil salinity because of flooding techniques employed in rice cultiva-
tion. Phosphorous and potassium depletion in the soils has been a negative externality of
intensive use of nitrogen fertilizers. Loss of these soil nutrients has given rise to an unbal-
anced soil composition. Perennial flooding, meanwhile, has leached out micronutrients
such as zinc. Pests are showing increasing resistance to pesticides, and herbicides are under
scrutiny due to indications of weed resistance. Across Asia Pingali found many instances
of yield declines in the 1980s, compared to the 1970s. Where yields were maintained or
increased the growing use of inputs (declining productivity) was often noted (Pingali 1998).
In the case of TCs, critics believe that it is merely a matter of time before pest resistance is
degraded and/or adverse health implications are documented as a result of animal or human
consumption.

The developmental problems of cash crop farmers
Caught between the two extremes of the agrarian dualistic structure are the cash crop cultiva-
tors, typically with mid-sized farming operations. These cultivators produce almost entirely
for the market with the aid of four to twelve agricultural workers hired on a permanent basis.
Such farmers are important to any successful development strategy, both because they control
a significant portion of the land (23 percent in Latin America, for example) and because they
provide an even higher percentage of the food domestically produced and marketed. In short,
such farmers normally constitute a vital source of food for the urbanized workforce. Since
food purchases constitute a very high portion of the expenditures of the industrial workforce,
quite often 50 percent or higher, the search for policies which attempt to harmonize the
developmental needs of the cash crop farmers with those of the industrial work force is of
utmost importance. Some of the factors that make cash crop farming distinct from peasant
agriculture are highlighted in Table 11.5.
Cash crop farmers face several alternatives in their decision to plant and market their
output. In production, they can cultivate either staples of the population™s basic diet, such as
rice, beans, corn, wheat, lentils, oats, and manioc, or they can produce specialty crops, such
as fruits and vegetables or export crops, including tropical products, such as coffee and tea or
bananas, or non-traditional exports, such as fresh-cut flowers or wine destined for consump-
tion at home by the more wealthy and in developed countries.
368 The Process of Economic Development
Table 11.5 Peasant production conditions versus cash crop farming
Concept Peasant production Cash crop farming

Profit maximization
Production objective Survival of the family
Labor force Family members Hired wage labor
Maximize output, without Productivity > wage rate
Productivity of labor
regard to labor quantity
Marketing Home use plus cash crop Production for market
(low level of specialization)
Risk extreme risk-aversion Risk accepted, based on estimated
profitability
Technology extremely labor-intensive, uneven Capital intensive, dynamically
adoption of new methods adaptive



Staple production
Staple crops are often referred to as wage goods, because they form the bulk of the diet for
working people in the industrial, government, and service sectors of the economy. In many
developing nations, the government forms a purchasing board to set the price of such wage
good crops. Often, the purchasing board™s decisions reflect urban bias in that the “buy price”
is set at an extremely low level. The one-sided logic of this strategy is to favor the industrial
workforce with cheap wage goods. Such a strategy allows employers to keep wages low, and
profits higher, without affecting the urban standard of living, but this comes at the expense of
both the cash crop farmers and their employees.
For the cash crop farmers, the low buy price paid by government, acting in its role as
a monopsonist, creates a potent disincentive which can lead cash crop farmers to switch
production toward speciality and export crops. Then, to compensate for a shortfall in the
domestic production of staples, the government may adopt a policy of importation of cereals
and legumes to make up for the shortage of domestic production brought on by its own
policies. Large-scale agribusiness corporations in the advanced industrial nations often can
produce these crops at a lower average price than domestic cultivators, due to the use of
more advanced levels of mechanization, chemically assisted production, and a variety of
subsidies. When food imports form an important part of the consumption of basic foodstuffs
in a developing nation, domestic cash crop farmers will tend to be driven from the market. A
vicious circle may then ensue. Urban bias leads to a shift away from basic foodstuff cultiva-
tion, which leads to cheap food imports, which leads to a further reduction in the production
and marketing of basic foodstuffs (Byerlee 1992). This can lead, in the future, to a crisis in
the balance of payments if total imports exceed exports for too long.

Speciality crop production
When cash crop farmers shift production toward fruits and vegetables and meat and dairy
products, they both avoid the urban bias implicit in government control of the staple food
markets and are, at the same time, responding to the highly unequal distribution of income in
most developing nations. Luxury meat and cheese products and wines, for example, may be
readily available and relatively cheap by international standards, but at the same time, there
may be shortages in the domestic production of food staples that must be met by imports.
Rectification of this situation may entail difficult choices and policies, such as luxury taxes
on certain food products, or income taxes which could be used to support targeted entitlement
Agriculture and development 369
programs to transfer income to the poor, instead of utilizing a too-low “buy price” program to
attempt to subsidize low-income consumers. Income transfers would increase the demand for
food staples via an injection of purchasing power into the hands of the poor, and the quantity
supplied of such staple products would be expected to increase as the market price received
by producers would rise in the absence of a government-imposed “buy price.”

Export crops
In addition to the problems created when cash crop producers shift from food staple produc-
tion to fruits, vegetables, and food luxury items for high-income domestic consumers, cash
crop producers can also switch to export crops. Once again, such a situation can be critical
when policies which have been imposed to favor the urbanized population lead to a strong
counter-reaction in the countryside. emphasis on export crops can lead to a diminution of
land planted to food staples, thereby necessitating expanded food imports. In such a situa-
tion, a nation may be forced to deal with a series of exchanges and structures (in the nations
from which they now draw imported food staples) which it cannot control, and may not
be able to influence, in order to provide basic foodstuffs. First, there is the difficulty of
obtaining foreign exchange. Second, imported food products can be affected by export tariffs
and quotas (from the supplying “ exporting “ nations) which are beyond the control of the
importing nation. Third, the vagaries of planting and domestic consumption in the exporting
nations can have a devastating impact on the food-importing nations. However, the difficul-
ties inherent in food exports are hardly new; virtually all less-developed nations, because of
their colonial history, are highly involved in the export of tropical food products, as we saw
in Table 11.3. The issue, then, is normally not one of pure food self-sufficiency, but whether
such nations should travel further down the path wherein much of their land, and a much
higher portion of their best land, is devoted to exports.


Production problems in cash crops
Medium-sized cash crop producers face a variety of barriers to production that tend to
increase their costs of production, three of which are briefly considered here.

Appropriate technology
Cash crop farmers combine the use of wage laborers with a certain degree of mechanization.
However, most mechanized farm implements have been engineered for use in the advanced
industrial nations, where relatively high wages prevail. Thus many available forms of agri-
cultural capital tend to be labor-saving in their design, to economize on wages. In the less-
developed countries, however, labor tends to be relatively abundant compared to capital,
so labor is relatively cheaper. This means that the optimal combination of labor and capital
in production in most less-developed countries would utilize more labor relative to capital
when compared to developed-country production techniques. Appropriate technologies in
agriculture, that is, appropriate to the labor and capital mix of less-developed nations, can be
of fundamental importance in finding new combinations of capital and labor which would
both provide relatively more employment and capture the advantages of the relatively cheap
labor so abundant in such economies. Furthermore, such technologies need to be “appro-
priate” in the sense that the mechanical devices in use should be relatively simple to operate,
easy to repair, and durable.
370 The Process of Economic Development
Sometimes, finding the appropriate technology is a simple matter of selecting off-the-shelf
products. For example, in facing the issue of irrigation, there are several ways in which culti-
vators can proceed. To take a simple and perhaps overdrawn case, imagine that the options
are between choosing a high technology or an intermediate technology. In the high-tech
scenario, laser-guided irrigation machines, integrated to computers, could be employed. Or,
with intermediate technology, pipes and tubes, which can be locally produced and easily
repaired without a reliance on foreign technicians and imported parts, can be employed with
a much better “fit” in the developing society. Here we can view already existing alternative
technologies in use, and one would suspect that few examples of the high-tech method would
be utilized in the less-developed world.
In viewing the choice to plough a field, however, we do not actually see the appropriate
technology. Instead, the choice is often between a modern tractor and a team of oxen pulling
a wooden plough. What less-developed countries require might be a particular type of tractor
which is more versatile in the often uneven terrains of small, marginal farm land, and one
less prone to needing repair than the machine which best fits the production needs in a more
advanced nation. But it is the latter tractor which is likely to be available, not the former.
Thus engineering of the alternative tractor is waiting to be done; it typically is not available
on the market as a choice for the small to medium-sized farmer. Creating such an alternative
technology, however, entails a commitment to agricultural research, to mechanical research,
and most particularly to basic education in the less-developed economies.
Yet as a result of urban bias and many of the factors discussed earlier, the commitment to
agricultural research and development (R&D) is extremely small: in 1975 for every $100 of
agricultural GDP production developing nations spent only 48 cents on agricultural R&D.
Industrial nations spent $1.55 for every $100 of output in 1975, and $2.68 in 1995. Mean-
while, in 1995 developing nations spent only 62 cents per $100 of agricultural output (UNDP
2001: 110). Furthermore, it demands a commitment to the long run. Alternative technologies
are too rarely developed precisely because of their distant pay-off, because of their smaller
potential market, and because most less-developed nations have not yet created the required
cadre of scientists and engineers who can undertake to adapt technologies to the needs of
their countries.
Those few scientists and engineers who are available in less-developed nations often
have received their education abroad, and this education rarely prepares them for the
task of confronting the particular production problems of poor nations. Compounding the
problem is the brain drain; many promising students, once they have received their educa-
tion abroad, decide to remain in the advanced industrial nation, where they perceive they
have greater opportunity (Adler 1987). Still, research on the impact of 85 public research
institutes in 81 developing countries found that the average rate of return on a dollar
invested in agricultural research, over time, was 80 cents “ nearly twice the rate of return
achieved in agriculture in the industrial nations (UN, Department of Economic and Social
Affairs 2000: 183).

Labor supply
Cash crop farmers are further constrained by the available labor supply in the rural areas.
Landless peasants and smallholders will form the basis of their labor force. But the effects
of urban bias, which severely limits educational spending in the countryside, mean that the
rural labor force will be likely to have limited educational skills, thus reducing their potential
productivity. Irregularities in labor supply will also present a structural barrier to cash crop
Agriculture and development 371
farmers, who must compete for the labor-time of peasants who need to tend to their own
small plots, particularly at peak times such as harvests. Landless peasants will often hire out
to construction projects or in a variety of other activities such as unloading cargo, hawking
products in nearby villages, selling artisan wares, and so on, thereby further restricting the
cash crop farmer™s access to hired labor. Furthermore, low wage levels and the irregularity
of employment of occasional workers, combined with the general lack of adequate public
health care, again particularly acute in the rural areas, often translate into a workforce which
is burdened with malnutrition and chronic gastrointestinal disorders. As a consequence, the
output per worker per day can be quite low, thereby creating major impediments to the effi-
ciency of cash crop production.


Credit markets
The financial sector tends to reflect urban bias, in that bankers infrequently establish banks
in the small and medium-sized villages and towns near where cash crop farmers operate.
Bankers are rarely trained in agricultural production or its special problems, and they are
not necessarily receptive to the petitions of farmers for credit, particularly small and medi-
um-sized landholders. The formal credit market tends to be urban-based and sophisticated
in terms of extending business loans, financing real-estate transactions, facilitating foreign
investments, and investing in the local stock and bond markets. But rural lending tends to be
outside the expertise, or interest, of urban center banks with loanable funds.
Credit, then, is too often of limited availability in rural areas. As a stop-gap measure,
informal credit markets tend to develop; moneylenders surface in the rural areas, who know
their clients and their production capabilities and risks quite well. Two new barriers may
arise, however, in dealing with this curb-side banking, as it is sometimes called.
First, as local monopolists, the moneylenders, who are often merchants or owners of
larger farming operations, may be able to impose exorbitant interest charges which drain
off a significant portion of the net proceeds of the farm income of small borrowers. Second,
informal moneylenders normally have a very limited supply of liquid funds to lend. Conse-
quently, the level of borrowing from such sources will likely be highly constrained. Recog-
nizing this, many governments have specifically channeled credit through agrarian devel-
opment banks, the purpose of which is to target the borrowing needs of smaller cash crop
farmers who lack access to formal channels of credit. Such a policy can be highly successful
in meeting the special credit needs of farmers, but, as is true of so many other programs,
it needs to be targeted carefully to meet the special needs of small and medium-sized farm
operators.

Large landholdings and agrarian backwardness
Throughout the less-developed world, large tracts of land owned by domestic landowners
are rarely utilized to produce agricultural output in a purely capitalistic manner. What typi-
cally is found are two widespread forms of land usage, renting and sharecropping. Large
owners may divide their lands into a multiplicity of small plots and either rent them out to
small peasants for a fee or have sharecroppers who divide their output with the landowner.
If the rental/sharecropping arrangement results in a lack of adequate mechanization, and/or
increased erosion, and/or underutilization of fertilizers because the renter, or tenant, is forced
to take a very short-term view, then both the renter or tenant and the landlord are likely to be
utilizing the land in a sub-optimal manner, both privately and socially.
372 The Process of Economic Development
The early classical economists, particularly Adam Smith and David Ricardo (see Chapter 4),
criticized the “unproductive” landlord class and strongly believed that sharecropping and land
rental farming were inefficient. Later, Alfred Marshall took much the same position, arguing
that sharecroppers would have little incentive to make improvements to the land. Current
research, however, is much more cautious in approaching the question of efficiency. Several
studies and models have indicated that it is possible to have a relatively efficient land tenure
arrangement involving tenants and landlords, or at least to have a production arrangement
which does not fulfill the dire anticipations of Smith, Ricardo, and Marshall (Stiglitz 1992).
Keith Griffin (1974), on the other hand, has emphasized the issue of land and income
distribution, rather than that of optimal production, in his research on agriculture. He has
drawn the conclusion that it is not land tenure arrangements per se which lead to agricultural
retardation, but rather that the crucial issue is how the benefits of greater output are shared
between renters or tenants and landlords.

In our view, the problem in India and in other agrarian economies is not that some types
of tenure systems are inflexible and inhibit innovation but that as long as the ownership
of land is unequally distributed, and access to investment opportunities restricted, the
benefits of whatever innovation does occur will be captured largely by the more pros-
perous landlords.
(Griffin 1974: 91)

In Griffin™s view, what precedes sharecropping “ unequal power relations in the countryside
“ rather than the question of sharecropping per se is what is fundamental. He describes a situ-
ation in which, if production increases due to improvements made by sharecroppers, most or
all the net increase in output ends up being captured by the landlord.
Why? Because while the total yield may go up, the share received by the sharecroppers
can be adjusted downward, to the benefit of the landowner. This can result when the supply
of potential sharecroppers steadily increases every year, as more and more peasants are
forced off their land, or have to engage in sharecropping as part of their survival strategy.
Thus, the bargaining power of each individual tenant farmer declines as their total supply
rises, allowing landlords to renegotiate distributive shares in their favor. Alternatively, the
net amount of the harvest received by the tenant may remain relatively constant in spite of
increased output, if the growth in production is achieved via mechanization and/or fertilizers
and herbicides, with the landlord acting as the “middleman” in providing these inputs. Land-
owners also can gain a larger income share by requiring their tenants to rent tractors and
to buy other agricultural inputs exclusively from them. It is via such processes that Griffin
maintains that the benefits of technical change will be captured, in large degree, by the land-
lords and not the tenants, so that it is the distributive question which must logically precede
the optimal production issue.
The issues surrounding the question of land ownership, however, continue to attract atten-
tion, and some researchers have found reason to continue to align themselves with the tradi-
tion of Smith, Ricardo, and Marshall, although not necessarily for the same reasons which
those authors cited. For example, an econometric study of four districts in India, conducted
by Radwan Ali Shaban (1987), compared sharecropping production results with the level of
output achieved on land owned by small farmers. The results quite clearly show that where
property and distribution rights are clearly defined, that is, on privately owned land, both the
intensity of production and the level of output exceed the corresponding levels from less-
secure production and distribution schemes, such as sharecropping:
Agriculture and development 373
• Both inputs and outputs were greater on the land owned by cultivators than on share-
cropped land.
After controlling for variables such as irrigation, plot value, and soil quality, it was

found that output was 16 percent higher on the owned land.
• Family male labor use was 21 percent higher and female labor use was 47 percent higher
on owned land.
• Draft animal usage was 17 percent higher on owned land.

Summarizing the results of this study, Stephen Smith concluded: “The theory and evidence
considered in this study suggest that sharecropping is less technically efficient than owner-
farming or fix-rent farming in many, but not all, instances” (Smith 1994: 35). The dispute
over the efficiency of different land tenure forms has not been resolved fully, but the domi-
nant view may be once again shifting toward the classical economists™ perception that the
precise nature of the land tenure system and the property and distribution rights accompa-
nying these are of fundamental importance in considering the efficient use of land.

The structuralist view
In Latin America, particularly through the 1960s, structuralist economists (see Chapter 6
for other details) argued that backward land tenure systems were at the heart of the lack of
development in agriculture. Alain de Janvry nicely captures the essence of the structuralist
argument.

Structuralists claim that agricultural prices have not been particularly unfavorable in
the last 40 years and that stagnation results from producer behavior under archaic land
tenure systems. Survival of precapitalist relations of production imply rigidities in supply
response; ¦ absentee management and autocratic, hierarchical labor relations impede
the spread of innovations. The high degree of monopoly of productive resources and of
institutional services (credit, information, etc.) permits the landlords to derive enormous
economic rents and social advantages even while using the land highly extensively. As a
result, behavior of the landed elite is oriented more toward maintenance of the economic
and social status quo than toward profit maximization and capital accumulation.
(de Janvry 1981: 146)

de Janvry strongly disputes this structuralist depiction of agrarian structures in Latin
America, not as an institutional“historical description, but as an adequate analysis of recent
trends. His research suggests that the social structures which were conducive in the past to
the landed elite™s misuse of land are quickly breaking down. The semi-feudal use of land is
being replaced by capitalist land usage, as the last vestiges of a bygone era are swept away by
the intrusions of the logic of the purely market-based economy. The old hacendado mentality,
wherein land was a symbol of social stature, is being replaced by a new ethos wherein land
is simply another capital asset, and the rate of return on land must be maximized through
optimal production techniques.
If this is a correct depiction of current land usage, the dilemmas of development may, to
some degree, be compounded rather than relieved. An unfettered capitalist strategy in agri-
culture will likely lead to the substitution of capital for labor, to further concentration in land
ownership, and to the expulsion of large numbers of peasants from their small plots and from
374 The Process of Economic Development
their status as intermittent farm laborers. A new dynamic then ensues: labor expelled from
rural areas gravitates toward the urban areas, circling less-developed world cities in ever-
expanding belts of misery and human degradation. Restructuring in the rural areas, then,
may lead to increased yields in agriculture and an increase in the marketable surplus of crops
either on the domestic or international market, as a result of the increasing displacement of
small cultivators from the agrarian regions. Thus far, the employment absorptive capacity
in most urban areas has been deficient in relation to the need to incorporate the population
flow migrating from the rural areas. International migration has surged, too, as this process
of creating landless workers has accelerated. And this new migration of labor from less-
developed countries, some of it illegal, has created new forms of social stress and dissent,
particularly in Western Europe and the United States.

Transnational agribusiness
Since the Second World War, and particularly since the mid-1960s, a new link has been
formed with some corporations in the advanced industrial nations and the agrarian sectors
in the less-developed world. Modern agriculture is increasingly dependent upon research
and development of herbicides, fungicides, insecticides, and synthetic fertilizers, most of
which are produced by the huge petroleum transnationals through their enormous petro-
chemicals divisions. The bulk of the original research on these new chemical combinations
was conducted during, or shortly after, the Second World War. At first, diffusion of the new
products occurred principally within the advanced industrial nations. By the mid-1960s,
however, market saturation led to the desire by the agro-transnationals to extend their sales
into the less-developed world. This coincided with increasing concerns with a “population
time-bomb” in the less-developed world and the need for agricultural output to increase
faster than the rate of growth of population. Widespread usage of, and often dependence
upon, new fertilizers, pesticides, and hybrid seeds provided by the new transnational agri-
business interests has sometimes been encouraged and financed by governments in the poor
nations. Another source of such technological diffusion has been the spread of contract
farming, whereby large and intermediate-sized farmers agree to plant, cultivate, and harvest
according to the terms set by a contractor, often a large food-processing corporation based in
the advanced industrial nations.
Agribusiness corporations have also made new incursions into the less-developed world
in order to control cattle ranchers who are suppliers for the hamburger chains, such as
McDonald™s, and other fast-food restaurants in the more developed nations. Thus vertical
integration in the increasingly concentrated restaurant business has had a profound impact on
certain less-developed nations, sometimes taking good agricultural land out of the available
domestic supply in order to export beef, which requires a land-intensive form of production.
In the process, such farming operations can contribute to deforestation, land degradation, and
environmental pollution, ranging from soil erosion to global warming.
Finally, largely as a result of the increasingly sophisticated network of transportation,
including automated docks, ship containerization, roll-on-roll-off truck trailers and cargo
jets, exotic crops are increasingly being grown for the high-income recipients of the advanced
industrial nations. Thus an array of both tropical products and traditional luxury fruits and
vegetables are now generally available year-round to those who can pay. ernest Feder
described this new phenomenon as “strawberry imperialism,” partly because a northern
seasonal “exotic” such as strawberries could be brought to Stockholm in the dead of winter
from a distance of perhaps 4,000 miles via airfreight.
Agriculture and development 375
Unlike the older plantation economy arrangements, the new agribusiness conglomerates
tend to make minimal commitments to high fixed cost assets such as land, docks, and rail-
roads in the countries in which the production is derived. Rather, they emphasize contract
farming, relying on existing infrastructure, rather than financing their own projects. Thus
labor problems and the risks of weather, as well as long-term problems such as soil erosion
or contamination of groundwater and streams, along with soil exhaustion, become the prob-
lems of the medium and large farmers who contract with the agribusiness TNCs, who can
then simply contract out their purchases elsewhere. In the case of the new emphasis on
cattle ranching for hamburger chains, many environmentalists have voiced concern over
the tendency to push back rainforests in order to open up grazing land. The fear is that deli-
cate environmental structures, where rainfall patterns are interrupted and where the holding
capacity of the ground cover is now insufficient because of the elimination of much of the
natural plant life, will be further adversely affected. Soil erosion can be an extremely serious
negative externality in the cattle-ranching areas, as forests are cleared and grasslands lose
their capacity to hold water. This can set up a vicious circle, whereby governments dispose
of large tracts of rainforest for a modest payment, ranchers convert the land to cattle-grazing,
erosion makes the land unsuitable within a few years, and the ranchers then pressure the
government for access to new tracts of forest and savannah lands.
In the case of so-called exotic crops, though hard currency is earned via exports, a less-
developed nation will have to share such new forms of revenue with the agribusiness trans-
national. Net foreign exchange earnings may well be quite modest, particularly when
balanced against the opportunity costs of land shifted out of domestic food consumption and
the possible adoption of cultivation practices which may not be sustainable, and/or which
incur large external costs in the form of erosion which fouls stream beds, water supplies, and
fish-spawning areas or environmentally important wetlands.
One example of a possible outcome under the new arrangements being formed by agri-
business TNCs in the less-developed world is Senegal™s alliance with the giant Castle &
Cooke operation.

In 1972 Bud Antel Inc., a large California-based food conglomerate (taken over in 1978
by Castle & Cooke), formed a joint enterprise with the Senegalese government. The
subsidiary, Bud Senegal is an affiliate with the House of Bud in Brussels. Bud Senegal
grew vegetables, using a virtually labor-free drip irrigation system, with plastic tubes
continuously supplying water to each plant individually, to tap the vast reserves of water
just below the Senegal™s dry soil. Three times a week from early December until May,
a DC-10 cargo jet takes off from Senegal loaded with green beans, melons, tomatoes,
aubergines, strawberries and paprika. The destinations are Amsterdam, Paris, and Stock-
holm. The vegetables are not marketed locally, but in any event few Senegalese have
enough money to buy them. Local people gained few jobs from the project, and in
laying out the 450 hectare plantation Bud uprooted the indigenous baobab trees which
were an important village resource, having previously provided local families with rope,
planting materials, fuel, and wind erosion protection.
(Dixon 1990:42)

TNCs have tended to focus on expanding their market concentration in recent years.
For example, by 2005 only three firms controlled 90 percent of the global coffee trade.
Increasing concentration allows the agribusiness giants more leverage over millions of
small suppliers. In 1992 global coffee sales were $30 billion, with producers receiving
376 The Process of Economic Development
40 percent of this total. By 2002 sales had increased to $50 billion and the producers™
share had been cut to only 16 percent, and their income actually declined by one-third (FAO
2005). In general the introduction of neoliberal policies in developing nations has proven
advantageous to agroindustrial transnationals as they have been freer to transport and sell
food products, as many nations have abandoned goals of food self-sufficiency and have
ceased to nurture their own agricultural sector through subsidies, tariffs, directed credit,
and other means. This has led to higher levels of concentration of the giant agribusiness
firms devoted to processing, transporting, and distributing agricultural commodities, as they
have been able to introduce new technologies and capture the benefits of scale economies
in processing and distribution. For example, “controlled atmosphere” technologies are now
commonly used to prolong freshness of fruit and vegetables over vast distances, giving
rise to the concept of “permanent global summertime” permitting fruits and vegetables to
become the fastest-growth area in agricultural commodities in recent years and enabling
China and India to rise to first and second place in terms of production. All this has led to
the take-over through mergers and acquisitions or joint-ventures of higher portions of the
agricultural sector, particularly at the wholesale/retail level by agribusiness TNCs (Reardon
and Barrett 2000).
In developing countries growth in the agricultural system is strongest at the retail level,
with supermarket sales growing at the rate of 20 percent per year in some nations. This has
led retail giants such as Wal-Mart, Carrefour, Metro, Royal Ahold, and a few others to rapidly
advance their marketing position. Much of this growth has been due to major agroindustrial
firms restructuring their production and marketing on a global basis. For example, foreign
ownership of Brazil™s booming agribusiness sector is soaring: from 1994 to1998 soy produc-
tion went from 30 percent TNC production to 48 percent, pork leaped from 11 to 40 percent,
and poultry from 8 to 34 percent (Jank and Franco 1999: 365). As production methods,
diets, and transporting and distribution methods change, agribusiness has repositioned its
activities to find new opportunities, always focusing on four high value-added areas: (1)
inputs such as pesticides (ten firms, none from developing nations, controlled 80 percent
of sales in 2004) or seeds (nearly half the world market was controlled by ten firms, none
from developing nations); (2) growth areas such as fruits and vegetables and meat products;
(3) food processing (dominated by US firms, including seven of the top ten in 2004); and
(4) food retailing, the fastest-growing of all segments in developing nations. Setting aside
China and India, where growth in expenditures has been very strong, agricultural research
and development (R&D) expenditures have grown modestly in developing nations in the
1980“2000 period. Transnational corporations are commonly understood to derive much of
their advantage from their ability to develop and control technology “ a situation that extends
to the agribusiness TNCs. Developed nations spend eight times more on R&D per $100 of
agricultural GDP than do developing nations, and this is a primary reason for the continued
expansion of the role of TNCs in the agricultural sector of developing nations (Alston and
Pardy 2006: 22).

Government in agricultural development
Although some economists have recently turned to free markets in the hope of accelerating
the development process (see Chapter 7), major agricultural specialists have long maintained
that a successful development strategy in agriculture must at a minimum have some state
intervention to foment needed changes. In the forefront of this discussion is the research
work of Bruce Johnston and John Mellor, who, according to Peter Trimmer, advocate a
Agriculture and development 377
“market policy” approach which would combine the advantages to be found through active
government policies toward agricultural development with the benefits to be derived from
properly channeled market forces.

[The strategy] calls for government policy interventions into market outcomes but uses
markets and the private marketing sector as the vehicle for those policy interventions.
This “market policy” approach recognizes widespread “market failures” in agriculture
as well as extensive “government failures” in implementation of economic tasks. The
strategic dilemma is how to cope with segmented rural capital and labor markets, poorly
functioning land markets, the welfare consequences of sharp instability of prices in
commodity markets the pervasive lack of information about current and future events in
most rural economies, and sheer absence of many important markets.
(Trimmer 1989: 358)

One of John Mellor™s major concerns has been the general lack of output response when
increasing demands have been placed on less-developed world agricultural producers (this is
the problem of low elasticity of supply). Mellor argues that in most instances higher prices
and profits will not call forth much of an increase in the quantity supplied, as the neoliberals
believe, because cultivators have tended to reach the limits of existing technologies and
traditional inputs. Thus to increase agricultural output, a major shift toward new and appro-
priate technologies is needed, as well as massive investments in infrastructural elements
that will relieve some of the bottlenecks on the supply-side of the agricultural sector. Mellor
believes that a strategy which brings agricultural needs into the foreground will also have a
impact on the demand for labor by increasing wages. This will, in turn, create more dispos-
able income, which will, for the most part, be spent on food.
While Mellor does not believe that a strategy of development which pushes agriculture
into the foreground will solve the unemployment or underemployment dilemmas in agri-
culture, it will contribute to a significant reduction in the ranks of the unemployed. Mellor
would, in fact, provide more governmental support to agriculture than to industry, and he
emphasizes that the success stories in food production are to be found precisely in those
nations where the state was actively involved in the diffusion of food-growing technologies,
particularly through a technically competent extension service.

Agriculture, with its small-scale orientation, is more in need of public-sector support
than industry. The sharp turn-around in Asian agriculture “ resulting in a 30 percent
increase in growth rates in basic food-staple production from the 1960s to the 1970s “
impressively demonstrates the results of turning the public sector™s attention to the
requisites of technological change in agriculture.
(Mellor 1998a: 144)

While Mellor™s emphasis on the need for technological diffusion and massive infrastruc-
tural investments in agriculture is certainly well-reasoned and supported by the successes
of the East Asian economies and other examples, the problems of agriculture are not purely
technological. The countryside needs to be understood as an arena where gross injustices have
often been perpetrated, and the powerful have behaved with impunity, often for centuries. In
this environment, it is important for those engaged in economic development to understand
the grievances of small cultivators. This will not be easy for “outsiders” to comprehend,
because small cultivators have usually nurtured a profound distrust of anyone who, in an
378 The Process of Economic Development

FOCUS 11.6 AGRICULTURE AND THE ENVIRONMENT:
PROPERTY RIGHTS AND RESOURCE DEPLETION
Many environmental problems are traceable to issues of property rights and a lack of
property rights enforcement. Throughout the developing world, vast tracts of land are
held as common property resources and as state property. If policy regarding land use is
ill-defined, either at the community level and/or at the level of the national government,
environmental problems caused by the overuse of resources are likely to arise, creating
vicious circles of desertification, famine, and increasing poverty. This is the problem known
as the tragedy of the commons.
In Africa, pastoral arrangements often allow for overgrazing, unbalanced forestry prac-
tices, and forest depletion through the scavenging for fuel. In India, the rural poor derive
as much as 20 percent of their income from foraging and from grazing their animals on
commons areas. In Latin America, vast tracts of tropical forests are national property, but
the use of this land is subject to little systematic management, and the predicted over- and
misuse with which the tragedy of the commons literature abounds is the consequence.
In Nepal, for example, population growth led to the expansion of peasant agriculture into
forest regions, resulting in the loss of 20 to 50 percent of all forests within a decade.
Neoliberal economists have often argued that overgrazing, desertification, and defor-
estation on common and national lands can be resolved through the establishment of
private property rights. Without well-defined private property rights, it is believed, indi-
viduals will have little incentive to conserve resources. Sometimes a compelling case
can be made for the market-based solution which they advocate. In other instances,
however, redefining communal practices, strengthening pastoral associations, or
creating governmental oversight agencies can be a solution which strengthens long-
standing institutional arrangements.
There are alternatives to simply privatizing all land, forests, and the seas to prevent
overuse and the tragedy of the commons outcome. Nepal, for example, has reversed its
policy of open access to woodlands by strengthening village and community control over
these resources.
Current research suggests that a resolution of these issues arises only when prop-
erty rights are well defined and enforced. Adequate management of such resources can
proceed using either a private property-based distribution or a combination of communal
and national ownership, but with a critical eye on the socially optimal use of such
resources. What this implies if such resources are not privately held is either limits on use
of commons resources and/or fees for use.
Source: Tomich et al. 1995: 33

official capacity, arrives in the countryside with the intention of “doing good” or “fostering
development.” Based on a study of agrarian issues in ten poor nations, David Lea and D.P.
Chaudhri concluded that:

To us it seems that the role of modern inputs, infrastructure and other enabling institu-
tions is important but grossly exaggerated. More important than these inputs is local
participation, local organization and skillful use of historical experience by the policy-
makers. The role of the human element, individual and collective, can hardly be over-
stated in this respect.
Rural development successes ¦ on a national scale are likely to be glaring exceptions
and would be the result of a balanced growth strategy pursued by an enlightened and
sensitive national leadership who can inspire confidence and a sense of participatory
economic justice among the rural peasantry and landless poor. Such conditions cannot
Agriculture and development 379
be created in a hurry. The strength of the past and continuity seems rather formidable.
Change can be induced successfully if, and only if, the policy-makers and planners
understand the working of the rural socioeconomic system and are prepared to hasten
slowly.
(Lea and Chaudhri 1983: 337“8)

Land reform
Land reform has been used to describe a very wide variety of changes in land ownership.
For example, colonization programs, where land is given to small farmers who are willing
to conquer wastelands, jungles, and other unsettled areas of marginal productive value, often
fall under this heading. Likewise, programs that are designed to partition extremely large
neo-feudal landholdings into smaller parcels, while leaving virtually untouched all other
large landholders, have been considered as land reforms. And land reform has sometimes
meant the break-up of village agrarian systems, where land is farmed in common without
individual land title; such policies often also entail the sale of previously unclaimed forests
and grazing lands which had been utilized on an as-needed basis by subsistence cultivators,
much as commons lands had been used in europe centuries before.
Nonetheless, the most common usage of the term land reform refers to the conversion of
most, or all, large estates and privately held tracts of land to smallholder shares. Such a shift
can, but need not, entail the direct entitlement of land ownership to smallholders. Rather,
land title may reside in the hands of a village system; periodic redistribution can be made
as the number of families grows or declines, and to suit other demographic changes at the
village level. Normally, land reform sets strict limits on the maximum size of smallholdings.
While some specialists argue that land reform is a dead issue, others believe that negotiated
land reform may give new life to this issue. Under negotiated land reform there is an attempt
to create a responsive market for large landholdings and to give both grants and loans to
smallholders/peasants to buy land at fair market value. This approach, which demands the
participation of either federal or state governments, avoids the politically explosive issue
of condemnation and confiscation of large estates. Some countries are seriously engaged in
negotiated sales, such as Brazil, Colombia, and South Africa (Deininger 1999).
These programs fall more broadly under the heading of market-led agrarian reform
(MLar), and they include a strong focus on the setting up of viable markets in land. Some
of the methods used include “titling” programs to clear land-ownership documents, an issue
of extreme importance where women may be able for the first time to gain full legal title to
plots of land they farm. Other approaches seek to rationalize sharecropping arrangements.
Yet another approach, backed by the World Bank in countries where large estates are farmed
inefficiently, is to advocate progressive land taxes, possibly applicable only to farms above
a certain minimum. The MLAR approach is thought to be more efficient, from the World
Bank™s perspective, than earlier state-led agrarian reform schemes because no costly ministry
of agrarian reform is required, and no entrenched bureaucracy will result. Nor will the state
be burdened with the funding for the acquisition of land because peasants and small culti-
vators will obtain loans from the private banking sector or from aid agencies to finance
purchases of land. The most important factor and guiding principle of MLAR is cooperation
with landlords. Another aspect of MLAR is the privatization of farm extension services “
another approach to shrinking the role of the state. Saturnino Borras has conducted a broad
assessment of land reform in the Philippines, where 10 million hectares of land “ one-third
of all land “ became the target for land reform in 1988 (Borras 2005). Furthermore, 2 million
380 The Process of Economic Development
hectares of sharecropping land would be converted to a leaseholder arrangement. The
project was scheduled to affect 4 million peasants, 80 percent of the agricultural population.
According to the official agency charged with the land reform, by 2001 5 million hectares
had been redistributed to 2 million poor families “ although critics put the numbers much
lower (Borras 2006: 101). All the above occurred via either a mandated land transfer arrange-
ment or via a voluntary land transfer scheme that reflected the new approach of MLAR.
Although not stressed by the government, increasingly the main focus turned to voluntary
land reform. But, at this point “landlord bias” came into the process, with a very large share
of the “new owners” under the voluntary scheme actually being fictional or unqualified as
large landholders proceeded to transfer “reformed” land back to their possession via their
children and other relatives (Borras 2005: 103“10). One top administrator estimated that up
to 70 percent of the land transfers were fraudulent (ibid.: 116). Nor did the “titling” program
work as the World Bank anticipated: in one flagrant case the agribusiness giant Dole effec-
tively took control of 20,000 hectares of prime land when Dole advanced the loan funds for
a land transfer to 20,000 peasant households, but only on the condition that the peasants
“owners” lease the land to Dole and that they would work for Dole as long as twenty years as
laborers on “their” land at the minimum wage ($3.20 per day). Officially this might appear a
successful “titling” program within the concept of MLAR. In reality Dole locked in a captive
labor force at subsistence wages, effectively continuing to control the land and its use (ibid.:
111“12). More generally, Borras found that in Brazil, Colombia, and South Africa under
MLAR projects landowners managed to overprice land by 30“50 percent while frequently
selling only marginal or excess land (ibid.: 123). In Brazil, where the state for some time
since the 1990s has been engaged in the process of purchasing land for land settlement,
large landowners have refused to sell to the state. Most state purchases (82 percent) have
come from small and intermediate-level farmers who have sold underutilized or abandoned
land (Borras 2003: 377). Most of the land acquired was in remote, roadless areas without
irrigation or electricity, condemning most “beneficiaries” to income levels lower than their
pre-ownership levels (ibid.: 378, 380). Hence, where large landholders farm or utilize only
17 percent of their vast holdings of 360 million hectares, the goal of reducing the power of
the landed agroexport elite is not being realized.
Given the research by Borras and others into the applications of the MLAR approach,
and given the renewed thrust of governments and social movements for distributing land to
peasants without burdening them with loan payments and privatized farm extension serv-
ices, some specialists are now advocating a return to state-led agrarian reforms that do not
involve full compensation to landlords. Most adamant has been Keith Griffin, who has vigor-
ously marshaled an array of theoretical arguments and empirical evidence urging a return
to state-led land reform schemes that offer limited or no compensation to large landholders
(Griffin, Khan, and Ickowitz 2002, 2004). The premise behind such an approach is that large
landholders have reaped the advantages of controlled labor markets which have unjustly
lowered farm-workers™ incomes, often for generations. Large landowners have frequently
managed to avoid justified land taxes, they have received subsidies in the form of irrigation
projects, electrification and roads, and they have often acquired lands through manipulation
and “arranged” land deals orchestrated by friendly governments.
As do the advocates of MLAR, Griffin et al. maintain that when properly measured, there
are no linear economies of scale in agriculture (Figure 11.1), and that peasant farms of an
indeterminate but small size are the best way in which a poor nation can achieve higher
levels of food production. Figure 11.1 is presented for illustrative purposes; it is not based
directly on empirical evidence. The least controversial and best established portion of the
Agriculture and development 381
Yield per hectare

(10“50 ha)
(5“20 ha) 10“20,000
ha)

(75“100 ha)




agribusiness
micro peasant intermediate
holdings
holdings holdings holdings


Farm Size

Figure 11.1 Farm size and yields.


curving function portrayed is that which differentiates “micro holdings” from peasant hold-
ings. As we have noted above in analyzing the Green Revolution in India, very small hold-
ings, in some countries those below 5 hectares “ but in India even lower “ are less efficient
than larger holdings. Further, Griffin et al. maintain that while peasants can deploy a great
deal of labor to raise yields at little opportunity cost, intermediate farmers are at a double
disadvantage “ they are too large to obtain most of the labor needed from large families and
must pay wages for labor inputs, yet they are too small to use machinery and equipment at
full advantage and will probably pay a premium for loans either from banks or large land-
holders who also function as moneylenders. Then, as farms become larger “ perhaps in the
region of 100 hectares “ economies of scale are to be found. Most important to Griffin et al.
is the fact that while these economies exist, the average yield is never as high as that achieved
by the peasantry.
Thus there is a social rate of return to agrarian reform as the farm land in a nation is distrib-
uted in a manner that will ensure maximum yield. This analysis is supported by empirical
studies of Brazil, showing that peasant families have a yield more than 50 percent higher
than commerical/agribusiness operations, where the average size of the peasant plots is 26
hectares and the commercial operations utilize on average 433 hectares (Griffin, Khan, and
Ickowitz 2004: 369). Griffin et al. are careful to argue that the “inverse relationship” shown
in Figure 11.1 is a tendency “ not something one should anticipate universally.
These authors further maintain that while state-led land reform is currently needed in many
nations such schemes will not be permanent, because as nations successfully engage in the
process of economic development rural workers will eventually be drawn into industry, as
the Lewis model presented in Chapter 5 anticipated (Griffin, Khan, and Ickowitz 2002: 318).
The approach of these authors seemed to resonate in 2006, when the government of Bolivia
announced that it would confront the unequal distribution of land, wherein 10 percent of the
landowners hold 90 percent of the land. Bolivia™s planned agrarian reform would impact
77,000 square miles of land if carried out (Romero 2006). But Griffin et al. have created a
strident controversy, with their most adamant critics claiming that their advocacy of land
382 The Process of Economic Development
reform is quixotic. Terrence Byres, for example, seems to echo Bill Warren (see Chapter 6)
in arguing that there are in fact economies of scale in agriculture. If so, it is merely a matter
of time before the peasantry are swept away and capitalist agriculture, either of the agribus-
iness-type or family-based cash crop farming, or both, replaces peasant agriculture and the
vast reservoir of the underemployed in the countryside shifts to industrial and service sector
employment (Byres 2006: 239“45).
In evaluating land reform schemes, it is important to keep in mind the fact that such
programs typically seek to achieve a combination of political, social, and economic goals
simultaneously. At the political level, land reform is often seen as a means to forestall or
eliminate potential threats of a thorough-going social revolution by the landless. At the soci-
etal level, peasants may feel that the goal is social justice; they disregard the “big picture”
issues such as “Is this socialism?” At the economic level, care needs to be exercised in
assessing the outcome of a land reform program. Smallholders will, with the rarest excep-
tions, appropriate a larger share of agricultural output for themselves as they gain land and
improve their own diets. This can mean, and often does mean, that the surplus of agricultural
production above that which is consumed in the countryside can actually decline initially
following land reform. For the mass of people living in the urban areas, and for the central
government, land reform can create great difficulties if food scarcity becomes an issue. Such
a situation can lead to a reliance on food imports and create a broad range of new political
and social problems. Particularly if “urban bias” is present, critics will be quick to argue that
land reform is a failure, though staying the course usually results in the marketable surplus
rising.
Another issue of fundamental importance needs emphasis. The switching of ownership
titles in the countryside, without an accompanying agricultural development strategy, will
lead to failure and is not real land reform. Smallholders need not only title to their land; they
also need the services, information, and training from agricultural extension services that can
help to make them more productive. They need to be involved in research and development
projects, and they need help in locating appropriate forms of mechanization, in learning
about irrigation and water control projects, in gaining access to effective infrastructure, such
as roads and schools, they need fertilizers and help in obtaining reasonable access to credit
for future development.
In closing this chapter on agriculture, we will briefly examine two large land reform
programmes: Mexico™s ejido system, which is generally thought to have failed, and South
Korea™s model of agricultural development, known as the Saemaul Undong. But bear in
mind that land reform has been achieved in a great number of other nations, such as Taiwan,
China, ethiopia, Bolivia, eastern India, Chile, and Iran. Currently land reform efforts are
under way in Zimbabwe, Malawi, South Africa, Guatemala, El Salvador, Brazil, Bolivia,
Venezuela, and Colombia.

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