CHAPTER THREE

3. AGRICULTURAL TRANSFORMATION AND RURAL DEVELOPMENT

3.1. The Imperative of Agricultural Progress and Rural Development

In most of developing countries, majority of the people live in rural areas being engaged primarily in the
agricultural sector. People living in the countryside comprise considerably more than half of the
population in Latin America and Asia whereas in Africa, the ratio is much higher with most countries
having rural dwellers in excess of three-quarters of the total population. The fact is that over two-thirds
of the world’s poorest people are also located in rural areas and engaged primarily in sub-subsistence
agriculture. Their basic concern is survival. It is estimated that more than 800 million of these people do
not have enough food to meet their basic nutritional needs.

Hence, if development is to take place and become self-sustaining, it will have to include the rural areas
in general and the agricultural sector in particular. The core problems of widespread poverty, growing
inequality, rapid population growth, and rising unemployment all find their origins in the stagnation and
too often retrogression of economic life in rural areas. This shows the imperative of agricultural progress
and rural development. In other words, economic policies of developing nations should considerably
concern the development of the agricultural sector in particular and the rural area in general.

Traditionally, the development of agricultural sector was not a concern; rather much emphasis was
given for the development of the industrial and service sector. The role of agriculture in economic
development has been viewed as passive and supportive. Based on the historical experience of Western
countries, economic development was seen as requiring a rapid structural transformation of the
economy from one predominantly focused on agricultural activities to a more complex modern
industrial and service society. As the result, agriculture’s primary role was to provide low-priced food
and man power to the expanding industrial economy. This strategy was reflected by the Lewis’s famous
two-sector growth model. The implication of such a strategy is that the industrial sector is expected to
develop at the expense of the development of the agricultural sector on which majority of people of
LDCs are engaged.

However, today, development economists are less sanguine about the desirability of such heavy
emphasis on rapid industrialization. They have come to realize that far from playing a passive,
supporting role in the process of economic development, the agricultural sector in particular and rural
development in general must play an indispensable part in any overall strategy of economic progress for
developing countries.

An agriculture – and employment based strategy of economic development requires three basic
complementary elements:

i) Accelerated output growth through technological, institutional and price incentive changes
designed to raise the productivity of small farmers,

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 ii) Raising domestic demand for agricultural output derived from an employment-oriented
urban development strategy, and
iii) Diversified, non-agricultural labor-intensive rural development activities that directly and
indirectly support and supported by the farming community

Agricultural and rural development has come to be by many as the “sine-quo-non” of national
development. Without such integrated rural development, industrial growth either would be stultified
or, if it succeeded, would create such severe internal imbalances in the economy that the problems of
wide spread poverty, inequality and unemployment would become even more pronounced. Therefore,
five main questions need to be asked about agriculture and rural development relative to overall
national development.

a) How can total agricultural output and productivity per capita be substantially increased in a
manner that will directly benefit the average small farmer and the landless rural dwellers while
providing a sufficient food surplus to support a growing urban and industrial sector?
b) What is the process by which traditional low-productivity peasants are transformed to high
productivity commercial enterprises?
c) When traditional family farmers and peasant cultivators resist change? Is their behavior
stubborn and irrational, or are they acting rationally within the context of their particular
economic environment?
d) Are economic and price incentives sufficient to affect output increases among peasant
agriculturalists, or are institutional and structural changes in rural farming system also required?
e) Is raising agricultural productivity sufficient to improve rural life, or must there be concomitant
off-farm employment creation along with improvements in educational, medical, and other
social services?

3.2. Agricultural Stagnation and Growth Since 1950s

It was observed that many developing countries experienced respectable rates of GNP growth during
the past few decades. However, the greatest proportionate share of overall occurred in manufacturing
and commerce sectors. In contrast, agricultural output growth rate for most developing regions was
relatively lower during these decades, and the share of agricultural output in total GNP declined. The
following table (table 3.1) reveals that in spite of the fact that the agricultural sector accounts for most
of the employment in developing countries, it accounts for a much lower share of the output.

Table 3.1 Output and employment in developing world agriculture during the specified decades

Region Percentage of the labor force in Output of agriculture as a

agriculture percentage of GDP
South Asia 64 30
East Asia (including China) 70 18
Latin America 25 10
Africa 68 20
Source: From World Development Report, 1997

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 Table 3.1 shows that employment in agricultural sector, in developing countries, is two or three times in
proportionate to the total agricultural output. This reflects the relatively low levels of labor productivity
in the agricultural sector compared with the sector of manufacturing and commerce. This is a marked
contrast to the historical experience of advanced counties, where agricultural output in their early stage
of growth always contributed at least as much total output as the share of the labor force engaged in
agricultural sector. This implies agricultural labor productivity was relatively better at the early stages of
growth of advanced countries.

Between 1950s and 1970s, per capita food production and per capita agricultural production increased
on average by less than 0.1% and 0.6%, respectively, per year in the developing world as a whole.
However, the rates of growth of both of these measures of agricultural performance were much slower
in the 1960s than in 1950s, as shown in table 3.2. But later, the situation improved somewhat during the
1970s as developing countries increasingly turned their attention to raising agricultural productivity. As
the result, from 1970s to 1980s, per capita food production and agricultural production grew at an
annual rate of 0.5% and 0.9, respectively, even accelerated in the 1990s till the end of the decade.

Table 3.2 Annual changes in per capita food and agricultural output in developing regions and developed countries 1950-1994

Region Change in per capita food production (%) Change in per capita agricultural production (%)
1950-1960 1960-1970 1970-1980 1980-1994 1950-1960 1960-1970 1970-1980 1980-1994
Latin America 0.4 0.6 0.9 0.8 0.2 0.0 0.7 0.5
Far East (excluding Japan) 0.8 0.3 0.7 1.7 0.7 0.3 0.6 1.7
Near East (excluding Israel) 0.7 0.0 0.7 1.3 0.8 0.0 0.4 1.1
Africa (excluding South Africa) 0.0 -0.7 -0.2 0.0 0.3 -0.5 -1.4 0.0
All developing countries 0.6 0.1 0.5 0.9 0.6 0.0 0.8 0.8
Developed countries 1.1 0.9 1.3 1.0 1.0 0.6 1.2 0.5
Source: Keith Griffin, “Agrarian policy”: The political and economic context. World Development I (November 1973): 3: United Nations
Conference on Trade and Development. Annual Report, 1981 suppl.tav 6.5A. International Institute for Environment and Development, World
Resources, 1987 (New York: Basic Books, 1987). Tabs 4.1- 4.3; Population Reference Bureau, 1987 World Population Debt Sheet (Washington
DC: Population Reference Bureau, 1987). World Resources Institute, World Resources, 1996-97 (New York: Oxford University Press), tab 10.1.

The trend of the growth of agricultural productivity varies across different regions of the developing
world. In spite of some impressive rates of per capita GNP growth recorded in LDC regions during the
past few decades, per capita growth in the agricultural sector improved substantially only in parts of
Asia (notably China) while showing spotty progress in Latin America and significant declines in Africa.

Some reasons for the disappointing negative growth of African per capita agricultural production
include:

- Insufficient and inappropriate innovation

- Cultivation of marginal and sensitive lands
- Severe deforestation and erosion
- Sporadic civil wars
- Misguided (incentive-reducing) pricing and marketing policies, and
- The exacerbating situation of higher rate of population growth in Africa and the world

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Consequently, the magnitude and extent of poverty has improved at best only marginally in Asia and
Latin America and has steadily worsened in Africa. The situation in sub-Saharan Africa is particularly
acute.

Generally, we can conclude that a major reason for the relatively poor performance of agriculture in
LDCs has been the neglect of the agricultural sector in the development priorities of their governments.
As the result of this disappointing experience, there has been a marked shift in development thinking
and policy making starting from 1970s, in realization that the future of LDC countries will depend to a
large extent on what happens to the agriculture.

3.3. Gender Issue in Agricultural Development (the Important Role of Women)

A major and often overlooked feature of LDC agrarian systems, particularly in Africa and Asia, is the
crucial role played by women in the agricultural production. Easter Boserup examined many studies on
African women’s participation in agriculture and found that in nearly all cases recorded, women did
most of the agricultural work. In some cases, they were found to do around 70% and in one case nearly
80% of the total. Typically, these tasks are performed only with the most primitive tools and require
many days of long, simply to produce enough output to meet the family’s subsistence requirements,
while the men often attempt to generate cash income through work on nearby plantations or in the
cities.

The diversity of women’s duties makes it difficult to determine their share of agricultural production,
where much less is placed in economic value on their work. In addition, due to the time consuming
nature of their diverse responsibilities, women tend to work longer hours than their male counterparts.
However, current estimates underscore the importance of women’s agricultural labor. Hence, it has
become clear that since women produce a large share of agricultural output, successful agricultural
reform will require raising women’s productivity.

Perhaps the most important role of women is providing food security for the household. This is
accomplished through the supplementation of household earnings, diversification of household income
sources and raising of livestock to augment household assets. These supplementary activities are very
important particularly during the periods of slack income. Women’s investments in revenue-generating
projects and livestock are crucial to stabilizing household income, especially in female headed
households where resource constraints are the most severe.

However, financial investment are inherently risky, and the poorer the household, the more averse its
members are to taking any kind of risk. When credit and resources are unavailable, reducing the
variability of household earnings generally entails choosing less efficient methods of production thus
lower income. This trade-off occurs frequently in female-headed households where resource constraints
are greatest. Thus, as a consequence of their restricted range of choices, women tend to retain
traditional modes of economic activity. The upshot is that their productivity has stagnated while that of
men has continued to improve.

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In developing countries, women are still unremunerated for the long hours they contribute to the
tending of commercial crops. As revenue-generating cash cropping rises in importance, the proportion
of resources controlled by women tends to diminish. This is largely due to the fact that household
resources, such as land and inputs, are transferred away from women’s crops in order to promote the
production of cash crops. Government extension programs that provide resources exclusively to men
tend to exacerbate existing disparities between men’s and women’s access to resources.

If credit is provided solely or preferentially to men for the purpose of cash cropping, commercial
production will increase at the expense of women’s vegetable gardens. Since homegrown vegetables
must be replaced by purchased substitutes, significant increases in a male spouse’s cash contribution
are necessary to offset a woman’s losses. If the market price of vegetables increases markedly, there are
now fewer producers and the increase in the husband’s contribution is not sufficient to compensate for
the increased need for cash, the welfare of the woman and her children will decline. This fall in the well-
being of household members is due to the fact that a considerable higher proportion of women’s
income than men’s is used for nutrition and basic necessities.

Yet government-sponsored programs continue to exclude women, often because women lack collateral
for loans or are barred by law from owning property or conducting financial transactions without their
husband’s permission. Agricultural inputs and training are rarely provided to female applicants. Even
efforts to reduce poverty through land reforms have been found to reduce female income and economic
status because they distribute land titles only to male heads of household. Cultural and social barriers to
women’s integration into agricultural programs remain strong because in many countries, women’s
income is perceived as a threat to men’s authority. In terms of training, while men taught new
agricultural techniques to increase their productivity, women, if involved at all, are trained to perform
low-productivity tasks that are considered compatible with their traditional roles, such as sewing,
cooking or basic hygiene. All these have the tendency to exacerbate the income disparity (between men
and women) and the incidence of poverty in developing countries.

However, recently, the few development projects especially designed to increase the productivity of
women have produced impressive results. For example, the Grameen Bank in Bangladesh, which offers
small loans to poor rural entrepreneurs, has experienced remarkable loan performance and higher rate
of return on women’s investments. Hence, since the active participation of women is critical to
agricultural prosperity, policy design should ensure that women benefit equally from development
efforts.

3.4. Policy Approaches for Agriculture and Rural Development

If the major objective of agricultural and rural development in developing nations is the progressive
improvement in rural levels of living (which is achieved primarily through increases in small-farm
incomes, output and productivity), it is important to identify the principal sources of agricultural
progress and the basic conditions essential to its achievements. These are necessarily interrelated. But

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for the purpose of description, we may separate them and further divide each into three components.
These are stated as shown below.

Sources of small-scale agricultural progress include:

 Technological change and innovation

 Appropriate government economic policies
 Supportive social institutions

In order to realize the efficient and effective achievement of the aforementioned sources of small-scale
agricultural progress, the following conditions have to be fulfilled.

 Modernizing farm structures to meet rising food demands

 Creating an effective supporting system
 Changing the rural environment to improve levels of living

Assignment I

1) Discuss briefly how “technological change and innovation”, “appropriate government economic
policies” and “supportive social institutions” can bring small-scale agricultural progress.
2) Explain briefly how these sources of small-scale agricultural progress are interrelated with the
above three conditions for general rural advancement.