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Agriculture and development: The principal theme of the World Development Report 1982

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
September 1982
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Harry E. Walters

There has been remarkable agricultural growth over the past three decades. Growth has been twice as rapid as in any previous period. Output has been fueled largely by the developing countries’ increased capacity to produce more food and by continued growth in the developed countries. World agriculture has been transformed. Unprecedented technical progress was a major factor in this transformation.

Despite this remarkable and sometimes unrecognized achievement, the “world food problem” continues to haunt mankind. Population growth, more rapid than agricultural growth in many poor countries, has sharply reduced the per capita benefits of increased food production and the associated increases in income per capita in many countries, particularly the lower-income ones. As a result, many people in the developing world are still without enough food.

This paradox—the poverty of some coexisting with the plenty of others—has long plagued popular understanding of the role of agriculture in economic development. On the one hand, it has led to a sense of hopelessness that food production cannot keep up with population growth; on the other, to overconfidence among those who anticipate still greater technological achievements.

Output patterns

World agricultural output rose at 3.1 per cent a year in the 1950s, 2.6 per cent in the 1960s, and 2.2 per cent in the 1970s. The broad pattern was one of declining growth rates in the industrial economies, particularly the nonmarket ones, while rapid growth was maintained in the developing countries as a group. Within the developing countries, however, output growth has been highly variable among regions, countries, and regions within countries. The tendency has been for growth to be slowest among the lowest income regions and countries. (The table shows the pattern for the 1960s and 1970s.)

World Development Report 1982was prepared by a team led by David Turnham and comprising Chandra Hardy, Dale Hill, William Jones, Homi Kharas, Gary Kutcher, Per Ljung, Christopher Redfern, Harry Walters, and Arshad Zaman. The work was undertaken with the assistance of the Economic Analysis and Projections Department, the Economics and Research Staff, and the Agriculture and Rural Development Department. The work was carried out under the general direction of Bevan Waide. See the back cover of this issue for information on how to obtain the Report.

In the industrial market economies, agricultural growth has been led by rising demand for high-value products such as meat. Today, the grain fed to livestock accounts for 70 per cent of grain consumption and the livestock-feed sector accounts for over 60 per cent of gross agricultural output. Recently, output growth has been falling, however, as slow population growth and progressively higher income levels (which mean proportionally less income spent on food) have dampened demand. In the nonmarket economies of Eastern Europe and the U.S.S.R., output grew rapidly in the 1950s and 1960s. Virgin land was opened up, the use of fertilizers and machinery increased rapidly, and a large pent-up demand existed. Since 1970, however, agricultural growth has slowed sharply in the two largest countries—the U.S.S.R. and Poland.

Agricultural output in the developing countries as a group grew at historically high rates of about 2.7 per cent a year during all three decades. Unfortunately, the rate of growth of population continued to be unprecedentedly high. The outcome was an average per capita increase of about 0.4 per cent a year in food output. There was an acceleration of growth of agricultural output in many middle-income countries in Southeast Asia and Latin America, but growth of output in low-income countries and many other middle-income countries was slower. The yearly rate of growth of total agricultural output in Africa declined (from 2.7 per cent in the 1960s to 1.3 per cent in the 1970s) and the rate of population growth accelerated, so output per capita was falling by 1.4 per cent a year in the 1970s. The growth of food output per capita went from a modest increase in the 1960s to a severe decline of 1.1 per cent annually in the 1970s.

In South Asia, the balance between population growth and agricultural growth remained essentially unchanged. In spite of high growth rates of total agricultural production, output per capita grew at only 0.1 per cent in the 1960s and was practically static in the 1970s. This performance—disappointing, since South Asia had been one of the major beneficiaries of the Green Revolution and of massive investments in irrigation and fertilizers—is a salutary reminder of the consequences of high and sustained rates of population growth. Recent evidence suggests that per capita food output is growing again.

The international environment

The rapid growth of the world economy has been a powerful stimulus to agricultural growth. More buoyant overall growth provided both strong demand for agricultural products and the finances to permit an expansion of productive capacity.

During the period of fastest growth in the world economy—1955 to 1973—international trade grew at 8 per cent a year and was dominated by manufacturing exports. Aggregate agricultural trade increased at less than half that rate. In the developing countries the proportion of agricultural exports fell from 60 to 30 per cent of total exports due to the dramatically increased exports of the oil producers and the new exporters of manufactured products. For the two thirds of the developing countries that export neither of these, agriculture remained the most important export category.

The early 1970s were a turning point in agricultural trade. Between 1973 and 1978, the growth in world trade slowed, but agricultural trade accelerated. New demand for agricultural imports arose in the oil exporting countries, Eastern Europe, and the fast growing middle-income countries. Although much of this new demand was met by exporters in the developed countries, the oil importing developing countries increased their trade surplus on food and beverages between 1973 and 1978 by US$15 billion. The industrial market economies contributed little to this growth in demand (1.1 per cent a year between 1965 and 1978), while exports to the oil exporting developing countries grew at 6.3 per cent, to high-income oil exporters 8.9 per cent, and to centrally planned economies 4.9 per cent. These countries now represent the most dynamic and open markets for the agricultural exports of developing countries, weakening the historical link between commodity trade and the growth of industrial countries.

Foreign capital, particularly development assistance, also contributed to agricultural growth in developing countries. A large part of official development assistance for agriculture was food aid in the 1960s, but this element dropped dramatically in the 1970s as official assistance for agriculture (for projects and technical assistance) doubled from $4.5 to $10 billion in 1979 prices between 1973 and 1980.

Growth rates of agricultural and food output, 1960–80(In per cent)
Agricultural outputFood output
TotalPer capitaTotalPer capita
Region and country group1960–19701970–19801960–19701970–19801960–19701970–19801960–19701970–1980
Developing countries12.82.70.30.32.92.80.40.4
Low-income2.52.10.2–0.42.62.20.2–0.3
Middle-income2.93.10.40.73.23.30.70.9
Africa2.71.30.2–1.42.61.60.1–1.1
Middle East2.52.70.00.02.62.90.10.2
Latin America2.93.00.10.63.63.30.10.6
Southeast Asia2.93.80.31.42.83.80.31.4
South Asia2.52.20.10.02.62.20.10.0
Southern Europe3.13.51.81.93.23.51.81.9
Industrial market economies2.12.01.11.22.32.01.31.1
Nonmarket Industrial economies3.21.72.20.93.21.72.20.9
Total2.62.20.70.42.72.30.80.5
Source: Food and Agriculture Organization.Note: Production data are weighted by world export unit prices. Decade growth rates are average annual growth rates, based on midpoints by five-year averages.

The policy nexus

The link between agricultural development and economic growth was close; countries with rapid agricultural growth had rapid industrial growth; where one was slow, they both were. In the 1970s, agricultural growth exceeded 3.5 per cent a year in 18 of the 31 countries whose gross domestic product (GDP) growth was above 5 per cent a year. During the same period, in 15 of the 22 countries with GDP growth below 3 per cent a year, agricultural growth was only 2 per cent or less. Meanwhile, agricultural and GDP growth differed by less than two percentage points in 15 of 20 countries experiencing moderate growth. There have been exceptions, of course, but they prove the rule: fast growth in GDP and sluggish agriculture were evident only in countries with oil- or mineral-based economies, such as Algeria, Ecuador, Mexico, Morocco, and Nigeria.

The parallelism between agricultural, industrial, and GDP growth suggests that the factors that influence agricultural performance may be linked to social and economic policies that affect the whole economy. In the many low-income countries where agriculture predominates, effective policies, institutions, and investment programs for agriculture are virtually synonymous with effective economic development policies. In most middle-income economies, where agriculture is less dominant, agricultural policies are only slightly less influential.

That policies make a big difference is indicated by the dramatically different performance of countries with similar agro-climatic and historical conditions and potential for development. Agricultural production has increased twice as fast in Cameroon and Liberia as it has in neighboring Guinea and Ghana, and four times as fast in Tunisia and Colombia as in Morocco and Peru.

Incentive policies exerted a pervasive influence on this pattern of agricultural production and trade. The developed market countries strongly support their agriculture and have further protected large parts of it from international competition. The costs to governments and consumers of these support and protection measures have risen rapidly in the past three decades as the agricultural sector has declined as a source of employment and income. This overstimulation is one factor in the continued high growth of agricultural output in these countries and in the rising levels of protection-induced exports by some of them. Overall, the net food deficit of the industrial market economies narrowed from 16 per cent of world food trade in 1955 to less than 5 per cent in 1978.

By contrast, relative prices and other incentives are often biased against the farmers in many developing countries, a bias that has shifted in some developing regions in the 1970s. Overvalued exchange rates, taxation of agricultural exports, heavy protection of fledgling industries, and inefficient parastatal processing and marketing agencies contribute to this bias. These disincentives weigh particularly heavily on agriculture in sub-Saharan Africa.

International development trends and prospects

A brief review of the analysis in World Development Report 1982 of the international economic environment during the 1970s and the 1980s.

The world economy is at a low ebb, weakened by difficulties in adjustment and by faltering growth in the major industrial countries. In these countries, economic policies that had successfully coped with earlier cyclical downturns, and even to some extent with the recession of 1974–75, are proving inadequate. Large fiscal deficits, tight monetary policies, and concern about inflation have raised real interest rates to unprecedented levels, curtailed growth, and thus depressed the export earnings of developing countries. With their ability to buy imports and service their debt thus reduced, many developing countries have had little alternative in the short term but to reduce growth. But even though some have had their worst year in over three decades, the developing countries as a group have been much more successful than the industrial countries in adapting to present conditions. Moreover, their investments in human resources, productive capacity, and infrastructure have been laying the foundations for more rapid growth in the future.

The 1982 World Development Report reviews the development experience of the 1970s and the prospects for the 1980s, supplementing the extensive discussion of adjustment issues in last year’s Report. It finds that although international prospects have worsened over the past year, during the remainder of the decade the middle-income countries should be able to continue narrowing the income gap between themselves and the industrial countries. The prospects for many of the low-income countries, however, remain a matter of grave concern.

Despite the shocks of the early 1970s, in 1973–80 the developing economies managed to grow roughly twice as fast as the industrial ones, where depressed investment and differences in interest rates among industrial countries induced wide fluctuations in exchange rates and capital flows. This brought a new element of uncertainty to the international environment of the early 1980s. On balance, it appears that a number of external factors that helped developing countries to adjust in the 1970s are now operating less strongly and that others are working against them.

Throughout the 1970s, world trade continued to grow faster than world output, though less rapidly than previously. Markets in industrial countries remained open, except in agricultural products, and the growth of world imports of manufactures doubled. Outward-looking economies were able to capture growing shares of the market for manufactures by vigorously promoting exports and diversifying into new products, laying the basis for further expansion even during the recessionary period 1973–75. The volume of exports from oil importing developing countries is still growing faster than that of the industrial countries—but their terms of trade are worsening. Further, commodity prices are now at their lowest levels for many years, affecting low-income countries in particular.

For countries that were creditworthy, much more private capital became available in the mid-1970s, and real rates of interest were low through 1980. In the later 1970s rapid inflation and negative real interest rates eroded the nominal value of developing countries’ debt. But the debt burden grew rapidly in 1981. By 1982, the interest payments of all developing countries are likely to be three times the level of 1978. About a third of the total external debt of these countries now carries variable interest rates, and the high fixed interest rates of much other new debt reflect an allowance for expected future inflation. Net new borrowing has slowed down because several countries have been squeezed for liquidity. Debt renegotiations through the Paris Club and by commercial banks increased sharply in 1980 and 1981.

Though flows of aid rose markedly over the 1970s and played a crucial role in easing adjustment for low-income countries, since 1980 growth in official development assistance has remained weak, with direct detrimental effects on the poorest countries.

Trends and prospects

The Report makes use of alternative scenarios, developed from the Bank’s global model, to illustrate some of the factors that will determine growth in the world economy in the remainder of the 1980s. The table shows a likely range of outcomes: the actual course of events will depend largely on government actions. The high case illustrates the consequences of a rapid recovery in the world economy. To make this possible, the industrial countries would need to raise their own investment and output, eschew increases in trade barriers, allow capital to move more freely among nations, and raise their contributions of aid to low-income countries. The prospects for achieving the high case now seem dimmer than they did last year.

If growth in the industrial countries remains sluggish and world economic recovery is further delayed, the middle-income countries would continue to make progress, but slowly. In the low case, for the average person in the middle-income countries, income would rise by only 25 per cent in ten years. Compared with past performance, present potential, needs, and expectations, such a rate is clearly inadequate.

The low-income countries, considered as a group, would also maintain some momentum of growth in the 1980s even if world economic conditions remain as unfavorable as they are now. China’s growth record has been above average for a low-income country, and India’s recent increases in savings and investments and its improved agricultural productivity should lead to continued increases in per capita incomes during the 1980s. But even in the high case, average income per person in many other low-income countries would probably show negligible growth—for the second consecutive decade. The prospects for most sub-Saharan African countries remain poor and many are in a situation even more desperate than a year ago. To raise their per capita incomes in the 1980s, these countries need to undertake further investments in human resources, in development institutions, and physical infrastructure, as well as to improve their agricultural policies. These needs will be difficult—and, in some countries, virtually impossible—to meet without more concessional assistance than now appears likely to be forthcoming.

Growth in developing countries, 1960–90(Average annual change, in per cent)
Country groupGDP

1960–70
GDP

1970–80
Projected GNP

1980–90
Projected GNP

per capita

1980–90
HighLowHighLow
All developing countries15.95.15.74.53.32.2
Oil importers5.75.15.44.13.11.8
Low-income4.23.04.13.01.80.7
Sub-Saharan Africa4.02.43.01.90.1–1.0
Asia4.33.24.43.22.11.0
Middle-income26.25.65.64.33.42.1
Oil exporters6.55.26.55.44.02.9
Source: World Development Report 1982.

Sources of growth

The reasons for patchy progress in agriculture go well beyond differences in policies; other, often critical, factors are climate, soils, technology, and the willingness of governments, the private sector, and farmers to invest in agriculture. The World Development Report 1982 examines these sources of agricultural growth, paying special attention to such factors as: the role of science and technology in discovering new farming methods; the task of adapting those discoveries to the circumstances of particular countries and people; disseminating the results and encouraging farmers to adopt them; and providing the numerous support services that are then needed to turn good intentions into concrete results. Agricultural success flows from a unique combination of private and public endeavor in the provision of these services. Government can supply some of the support and incentives from which all farmers can benefit but which none could organize independently. Farmers and the private sector must then take the inevitable risks associated with increasing production.

Differences in soil and climate have produced an almost infinite variety of cropping systems in developing countries. Five main crop zones are identified in the Report on the basis of the staple food crop that predominates in each—rice, starchy root crops, maize, sorghum, and wheat. Two other large “mixed” zones in China and India are also discussed (see Chart 1).

Chart 1Major crop zones in developing countries

Sources: International Food Policy Research Institute, and Food and Agriculture Organization.

Note: Because of limited data for subdivisions of countries, the borders between crop zones have been adjusted to coincide with national boundaries.

For centuries, farmers increased their output mainly by increasing the amount of land they farmed. This is no longer the case: in the past two decades, increased acreage has accounted for less than one fifth of the growth in agricultural production in developing countries and for an even smaller fraction in developed countries. Nonetheless, there is still a lot of unused arable land—estimates for developing countries range from 500 million to 1.4 billion hectares, compared with about 820 million hectares currently under cultivation. The unused land is not where the people are, however, and only 10 to 15 per cent of unused arable land in 1980 might be cultivated by 2000.

The imbalance between population and land reserves is often hard to rectify. Disease has discouraged permanent settlement in large parts of the tropics and subtropics, particularly in sub-Saharan Africa where riverblindness (onchocerciasis) and sleeping sickness (trypanosomiasis) have caused large fertile areas to be left un-farmed and have limited the use of animals for traction power. Land settlement projects have proven costly, while severe deforestation, soil erosion, and desertification problems are emerging in areas where land is scarce and population dense (the Andes, Himalayas, and the Sahel).

Removing constraints on the expansion of the land frontier would be one way of increasing agricultural output. A more dramatic way is opened by the emergence and rapid expansion of science-based biological and chemical sources of agricultural growth supported by investments in research, land improvement, and industrial inputs which have transformed agriculture in large parts of the world since 1950. Overwhelmingly dominant in the past two decades, these will be even more significant sources of future growth.

New seed technologies, access to water (adequate rainfall, irrigation, or drainage), and industrial inputs, particularly fertilizers, have been the crucial sources of growth. Each by itself is of limited significance but the three in combination have accounted for more than 50 per cent of the increase in agricultural output in the past two decades. Rice, maize, and wheat are the dominant food grains in the developing world, and in each zone where these predominate, output increased at about 3 per cent a year. In the rice and maize zones, area increases account for one third of growth; in the wheat zone, less than one sixth. Much less progress was made in the root crop, sorghum, and millet zones—less than 2 per cent a year of output growth, half of which was due to land expansion. In the mixed cropping zones of India and China—which account for half the developing world’s population, 30 per cent of its cultivated area, and more than 50 per cent of its irrigated area—intensification accounted for virtually all the growth (see Chart 2).

Chart 2Contribution of area expansion and intensification to output growth, 1961–80

Source: Food and Agriculture Organization.

1 Constant 1974–76 world market prices.

Irrigated area has expanded by 2.2 per cent a year, mostly in Asia, North Africa, and the Middle East. Investment in irrigation reached $15 billion annually by 1980. Where new technology and related inputs were available, small farmers invested heavily in their own irrigation pumps. In South Asia small farmer investments in irrigation amounted to $15 billion from 1960 to 1980, equaling the total investment in irrigation in North Africa, the Middle East, and Latin America.

There was a high payoff to research in agriculture, identified in the public mind with the Green Revolution in wheat and rice—the development of new plant varieties that had short stems, were highly responsive to fertilizers, and were not affected by the short day lengths common to tropical areas. These new seed technologies emerged from the first of the international agricultural research centers (the Centro International de Mejoramiento de Maiz y Trigo (CIMMYT) in Mexico and the International Rice Research Institute (IRRI) in the Philippines) in the mid-1960s and within a decade farmers had adopted them and transformed their production practices and results in all regions where they could be used. More gradual but equally impressive gains were made in maize and some other tropical crops. But research on other tropical food crops—particularly roots, tubers, millet, and sorghum—received little attention until the late 1960s. Progress in these crops and in rain-fed food crop agriculture in general has been much slower. This technology lag, along with disease problems, low levels of development, limited infrastructure, lack of support services, and inadequate incentive policies have all combined to account for sub-Saharan Africa’s slow growth.

Agriculture, poverty, and growth

Building on the 1980 World Development Report on poverty and human development, this year’s Report examines ways in which agricultural policies and programs can help the absolutely poor. The great majority of this group—over 90 per cent—are rural people who operate or work on farms, or do nonfarm work that depends in part on agriculture. More than half are small farmers who own or lease their land; another 20 per cent are members of farming collectives, mainly in China. The remaining one fifth to one quarter are without access to land. The livelihood of this last group is particularly precarious. While often no poorer than the poorest farm operators, landless laborers are more likely to see their jobs disappear in periods of stress and they lack the final option of mortgaging or selling their land. Most landless laborers live in low-income market economies with high rural population densities—over 80 per cent of them are in Bangladesh, India, and Pakistan, and the remainder in similar areas such as Java (Indonesia).

One way in which agriculture can contribute to poverty reduction is indirect. Economy-wide growth that provides new, more productive nonagricultural employment opportunities is essential for the long-term alleviation of poverty. Strong agricultural performance can stimulate the process of economy-wide structural transformation. Combined agricultural and economy-wide growth simultaneously generates more employment in the urban and rural sectors. This type of simultaneous development has led to quite spectacular transformations in some rapidly growing middle-income countries over the past 20 years. Despite the rapid growth of population and labor force, agriculture’s share of employment and the absolute size of the agricultural labor force have fallen or will soon begin to do so in countries such as Brazil, Colombia, Indonesia, Republic of Korea, Romania, Turkey, Venezuela, and Yugoslavia. If the momentum of growth is maintained, earnings and productivity in agriculture itself should accelerate. And if the lagging growth of other countries is stimulated, more countries will have this option.

But agriculture can also make a direct contribution to alleviating poverty. Prominence is given in the Report to programs emphasizing production by small farmers as a major means of extending the reach of agriculture to affect the poor. It emphasizes the capacity of the small, family-centered production unit to use its labor and management capacities to overcome the presumed advantages of larger farms—economies of scale, better access to capital, new technology, and inputs. Numerous Bank projects that demonstrate the success of such programs and how these have changed with experience are cited in the Report.

The large but too often unexploited possibilities of converting low-cost labor into high-value capital through well-designed rural infrastructure projects are discussed in the Report. Particular reference is made to China’s capacity to accomplish such undertakings—which suggests the need to develop more effective institutional structures elsewhere.

Agrarian reform—in its broadest context, the establishment of clear ownership and use rights to land (whether private or communal) as well as land consolidation and distribution in some cases—is discussed as a critical element in stimulating the incentive to invest in land as a contributing factor to the reduction of poverty through improved rural income distribution, and as a means of improving the capacity of governments to tax efficiently and redistribute the benefits of agricultural growth.

The Report also considers the options available to governments and international agencies to improve food security and food distribution through programs that provide food to those unable to buy an adequate diet. The importance of designing these programs so that they are efficient and complement productive efforts is stressed. Too often, broad-based food subsidies provide low-cost food to those with adequate incomes and are a major burden on government development budgets. Research on the crops raised and consumed by the poor, food distribution to truly needy groups, and prompt and efficient actions in the face of emergencies are some of these options.

Policy issues and priorities

The Report concludes that in an uncertain and possibly less supportive international environment, both low-income and many middle-income countries can gain substantially from strategies that better exploit their potential for agricultural growth. Agricultural performance was poor over the past two decades in these countries—and so their growth record and achievements in reducing poverty were also poor—but they can substantially improve their situation even in an international environment that is no better, but no worse, than in the past.

Farmers the world over have demonstrated that with suitable technology available and appropriate domestic policies they will do much of the investment themselves and exert the effort needed to raise agricultural production. This is a far cry from the static view of farmers as tradition-bound peasants, slow to change. And from the view prevalent three decades ago that, compared with industry, agriculture was a weak source of growth.

Continuing progress in agriculture is vitally important to the developing world for two main reasons:

  • Close to two thirds of the population draws its livelihood from agriculture as farmers and farm workers. These groups include the vast majority of the world’s poorest people.

  • Driven by population and income growth, the demand for food in the developing economies is likely to increase by at least one third over the next decade. If more rapid progress is made in raising the incomes of lower income groups and in low-income economies, the increase could be much sharper.

The coming increase in demand for food has profound implications that go well beyond agriculture itself. Currently only about 8 per cent of the food consumed in developing countries is supplied by imports. Few countries could see this ratio increase rapidly without encountering severe balance of payments problems. To meet the growth in demand for food, they will need to supply the bulk of it themselves.

Whether they can meet this challenge is a critical question for the future of hundreds of millions of people. There is no ready answer to it, except to note that, if the past is used as a guide, then policy improvements and a strong national concern for agricultural research, infrastructure, and incentives could achieve dramatic results. The rise in agricultural output over the past two decades has confounded the predictions of widespread famine that were common in the 1950s and 1960s. It has also disproved the Malthusian notion that agricultural growth is subject to iron laws of diminishing returns beyond the control of man. If agricultural technologies can be improved, additional resources mobilized, and appropriate policies adopted in both industrial and developing countries, then faster agricultural growth will be achieved. Economic development, particularly in the poorer countries, will speed up. And poverty will be reduced.

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