The alternative, or at least complementary, route is to focus on agriculture as a developmental pathway. Agriculture, unlike oil or minerals or even many forest products, is a renewable natural resource. By using a few natural inputs—such as water and recycled organic waste—it is possible to continue to produce modest crop yields on the same piece of land for many hundreds, if not thousands, of years (see Chapter 13). Moreover, while there have been conflicts over ownership of arable or grazing land and for control of lucrative export crops such as rubber, tea, or cocoa, they have not been as severe as those involving oil or minerals. Significantly, as Paul Collier and Benedikt Goderis of Oxford University note, there is little evidence of the resource curse applying to agriculture. Agricultural commodities can be produced in many different locations, unlike oil and minerals, so reducing the source of conflict.8
Agricultural development has been key in the early stages of the development of the industrialized countries and, indeed, of the newly emerging economies. The United Kingdom began its development journey with a major agricultural revolution in the eighteenth century, and more recently the eastern tigers, such as South Korea and Vietnam, have similarly invested heavily in agriculture as part of the development process. These experiences amply demonstrate the power of agriculture as an engine for economic development. Increased production and employment in agriculture and natural resources can generate, directly or indirectly, considerable employment, income, and growth in the rest of the economy.
Not surprisingly very few countries have experienced rapid economic growth without preceding or accompanying growth in agriculture.9 As Michael Lipton, an economist at the University of Sussex, notes: “No country has achieved mass dollar poverty reduction without prior investment in agriculture.”10 In the early stages of development, it is often the lead export sector and foreign exchange earner since much of the manufacturing is agriculturally related.
Agriculture dominates the least-developed countries; it typically accounts for over 80 percent of the labor force and 50 percent of GDP. While this may be seen as a sign of “backwardness,” it is a potential strength because any individual small improvement, say in a crop yield, can be multiplied throughout the agricultural economy. Productive innovations can lead to fast and inclusive growth. This was true of the Green Revolution where the new short-strawed wheat and rice varieties were taken up on a large scale. It has also been true of more recent agricultural transformations; for example, in Malawi where government subsidies for fertilizers and modern seeds greatly increased production (see Box 4.2 in Chapter 4).
Analysis of data from forty-two countries during the period 1981 to 2003 shows that a 1 percent gain in GDP originating from agriculture generates a 6 percent increase in overall expenditure of the poorest 10 percent of the population; in contrast, a 1 percent gain in GDP originating from nonagricultural sectors creates zero growth.11
The Virtuous Circle
In effect there is a virtuous circle generated by agricultural development. As agriculture develops—resulting in greater yields for both subsistence and cash crops—farmers become more prosperous, and the rural poor, whether landless or on smallholdings, also benefit through wage labor. Chronic hunger decreases. The rural economy also grows—through the creation of small rural businesses—providing more employment and improved rural facilities, especially schools and health clinics. Roads and markets develop so that the rural economy connects to the urban economy and to the growing industrial sector. Free trade provides opportunities for greater imports and exports. High-value agricultural exports (e.g., coffee, cocoa and cotton) in particular can accelerate agricultural development, further intensifying the virtuous circle.