Chapter Three: Theories, Models, and Approaches to Rural Development

 Introduction
 Rural development under the contexts of developing countries hinges upon
eliminating absolute poverty and inequality within the framework of sustainable
and growing economy.
 This in turn demands addressing situations, conditions, structures and relations which
either
 cause rural families' inability to adequately provide for themselves or
 limit the purchasing power of rural dwellers, or
 prevent rural dwellers from having easy access to the essential goods and services.
 Both the primary sources of poverty-generating variables such as assets, occupation,
employment, wages, demographic factors; and characteristic variables such as
income, health and status, all interact to constitute the overall process of rural
underdevelopment or poverty-generation.
 A theory is expected to perform two major functions, namely, explanation and prediction
of a phenomenon.
 There is no universally acceptable theory of rural development which can explain the
existing phenomenon of rural development and predict its future course.
 Lewis’s Model of Economic Development with Unlimited Supply of Labor
 Prof. W. Arthur Lewis has developed a very systematic theory of Economic
Development with Unlimited Supplies of Labour.
 He believes that in many underdeveloped countries an unlimited supply of labour is
available at a subsistence wage.
 According to him, a given economy has dual economic structure.
 Modern manufacturing industrial sector
 This sector uses reproducible capital.
 Production is for market and profits.
 There is a modern method of industrial organization, and labor is employed on
wage basis.
Agricultural sector: it is assumed to represent the subsistence or traditional sector.
 This sector uses non-reproducible land on self-employment basis (family base
without payment).
 Output is produced mainly for self-consumption with inferior techniques of
production.
 This sector containing surplus labor in the form of disguised unemployment.
 Economic development takes place when capital accumulates as a result of the
withdrawal of surplus labour from the “subsistence” sector to the “capitalist” sector.
 Lewis starts his theory with the assertion that the classical theory of perfectly elastic
supply of labour at a subsistence wage holds true in the case of a number of
underdeveloped countries.
 Such economies are over-populated relatively to capital and natural resources so that
the marginal productivity of labour is negligible, zero or even negative.
 Since the supply of labour is unlimited, new industries can be established or existing
industries expanded without limit at the current wage by drawing upon labour from
the subsistence sector.
 In the modern sector however, the productivity or output per head is assumed to
be much higher than that in agriculture due to low population density.
 Thus, the demand for labor is high in modern sectors of urban areas.
 In addition to this, since laborers are hiring on wage payment and output is
producing for profits, the modern urban industrial sectors will draw surplus labor
from the subsistence agricultural sector.
 To sum up, Lewis model with unlimited supply of labor illustrates that, high wage rate
in modern sectors will attract and absorb the surplus labor in the agricultural sector
and this leads to the increment in the profits of the industrial sectors.
 Profits in turn are the main source of capital formation.
 The greater the share of profits in national income, the greater the rate of savings,
capital accumulation and further expansion through investment.
 The process of transferring surplus labor from agriculture to industry (modern sector)
and reinvestment of profits helps;
 to change the productivity of backward agrarian economy
 to create industrialized modern economy which in turn helps the reduction of
unemployment.
The main shortcomings of this theory are:
 It is difficult to assume, there is high unemployment (labor surplus) in rural areas
and full employment in urban areas. In most developing countries the reverse is true.
 There is seasonal labor shortage in agricultural sectors even in densely populated
areas.
 In addition, even if the productivity in rural area is low in relative to urban areas
due to high population, it is not zero.
There is no guarantee that the capitalist will reinvest its profit.
 If it did, it may use labor-saving technologies.
 So, the creation of employment for surplus labor cannot be met.
 This model assumes, fixed wage rate in the modern sector by assuming competitive
labour market.
 In reality however, labour market is not competitive.
 For example, labour unions may have monopoly power over labour supply and
hence they can raise the wage rate.
 At high wage rate, firms demand less labour.
 As a result the absorption of surplus labour again cannot be met.
 In developing countries, the mobilization of labor from agriculture to industrial
sector is not an easy task. This is due to;
 extremely low capacity of modern sectors in absorbing all surplus labor –
traditional practice and customs of the community
 the problem of housing and high cost of living in urban sector, and so on.
 Lewis model neglect the importance agricultural sector in absorbing surplus labor.
 It is possible to increase the productivity and production and hence possible to
more employment opportunities through;
 Capital accumulation in agricultural sector
 Adaptation of proper and modern technologies and practices
 Institutional reform and property rights
 Skilled Labour not a Temporary Bottleneck.
 Given an unlimited supply of labour, Lewis assumes the existence of unskilled
labour for his theory.
 Skilled labour is regarded as a temporary bottleneck which can be removed by
providing training facilities to unskilled labour.
 No doubt skilled labour is in short supply in underdeveloped countries but skill-
formation poses a serious problem, as it takes a very long time to educate and train
the multitudes in such countries.
 Multiplier Process does not operate in LDC
 Again, the theory assumes that capital accumulation takes place when the capitalist
class continues to reinvest profits.
 It, therefore, presupposes the operation of the “investment multiplier” which is not
applicable to underdeveloped countries.
 For if profits are reduced somehow or the prices of wage goods rise, the process of
capital formation will stop before all the surplus labour is absorbed.
 Mobility of Labour not so Easy
 People are so intensely attached to their family and land that they do not like to
leave their kith and kin.
 Moreover, differences in language and custom, the problems of congestion, housing
and high cost of living in the capitalist sector stand in the way of mobility of labour
to this sector.
 This is the main weakness of the theory
 Productivity falls with Migration of Labour from the Subsistence Sector.
 Lewis assumes that when the surplus labour is withdrawn from the subsistence
sector to the capitalist sector, the agricultural production remains unaffected in the
subsistence sector.
 But the fact is that withdrawal of workers from the farms will reduce output.
 Human Capital Centered Model of Development
 The model stresses the importance of investment in human capital in the process
of economic and social development.
 Human capital implies the mental and physical quality or ability of people.
 This can be improved by education, training, health care and pursuit of some
spiritual methods.
 The implementation of any development policies and strategies are dependent on
the available skilled, experienced, innovative, and healthy human resources,
human capital formation must be the priority than physical capital formation.
 However, unnecessary emphasis on education without appropriate employment
creation is found to lead to the creation of unemployed people.
 So, in the formation of human capital it is necessary to give due attention;
 to the demand for educated person and their professions
 for provision of educational services and its qualities
 for the creation of self-reliable individuals rather than dependent and work seeking
individuals.
In rural development, the importance of human capital formation include;
 It directly improve the productivity of agriculture
 It improve the probability of getting off-farm employment
 It leads to improved family planning
 It improves the health and nutrition of the people
 It widens the horizons of knowledge and facilitates diffusion of new technologies by
reducing resistance of rural people
 It build the risk taking behavior and managerial (decision making) capacity of the
farmers, and etc.
 Unimodal theory (approach)
 The central element of a uni-modal approach is the development and diffusion of
highly divisible innovations that promote output growth through wide spread
increase in the productivity of land and labor in the agricultural sector.
 the argument for agricultural transformation on the basis of small-scale peasant
farms (unimodal or neo-populist approach).
 It helps to exploit the large potential that exists in the rural economy. That is, it
makes possible to raise the productivity of the agricultural sector by improving of
resource uses (use of labor and land).
 The approach's major strategy is maximum mobilization of labor and land
resources of the developing countries.
 In uni-modal theories, institutional innovations are essential to achieve the rural
development through efficient uses of the existing resources. That is,
 Creation and provision of cooperative services in order to increase the negotiation
power of farmers in the market .
 Creation of microfinance institutions to facilitate access to credit.
 Creation and use of civic societies and local community participation in order to
participate the potential human resource.
 Development of research centers and extension services to generate and diffuse
modern way of production and resource use are important.
  Bi-modal theory (approach)
 The central element of bimodal or capitalist approach to agricultural development is the
argument for the necessity of the development of large-scale units of farm production.
 Bi-modal approach is a modernization strategy that focuses on the transformation
of resources to the highly commercialized sub-sector.
 According to this theory, agrarian change in can be achieved by creating capitalist
farmers and agricultural wage laborers.
 Advocates of this approach argue that, large scale farms have strong advantage over
small scale farms.
 These advantages are related to technical, financial, and marketing economies.
 For example, large scale farmers have production economies of scale which related to:
 The use of modern and advanced machines
 Benefit from high level labor specialization
 Better utilization of their farm capacity
 Take advantage of research and development
 Thus, bimodal theory states that, large farm scale is important for the improvement of
the agricultural sector.
 Thus, peasant farming should be turned to capitalist farming since it helps
employment creation even for small peasants and landless society through
agricultural laborer on payment.
 According to this approach, once economic growth is achieved, it is possible to create
employment opportunities by expanding industrial sectors even when labor-saving
technologies are used in the agricultural sectors.
 However, the process of creating large farms may create high income inequality,
and also it leads to landless peasants which may result in higher unemployment
since it is difficult for the industrial sectors to absorb all surplus labor.
 If the non-agricultural (industry) sector does not develop and fails to absorb the
labor force displaced from agriculture due to mechanization, it can create economic
and social problems.
 These further result in political power imbalance between the rich capitalists and
poor peasants.
 In addition, there is no guarantee and a practical evidence that illustrates large
farms are productive and efficient than small farms in all aspects.
 This approach of rural development is difficult to apply especially in developing
countries. Its application is limited to the existing lack of human and physical
capital.
  Integrated rural development
 Integrated Rural Development (IRD) is an approach to poverty reduction which
aims to reach the poor through better co-ordination of development interventions.
 Towards the late 1960s, donors looked back at the impact of national agriculture
strategies in developing countries and found it to be disappointing in two ways.
 Firstly, it had seemingly had little impact on the productivity levels and incomes
of subsistence and poor farmers;
 Secondly, it had apparently failed to generate employment and incomes for the
landless poor.
 This failure was because an approach to raising productivity which focused
exclusively on improving crop production was clearly inadequate.
 The productivity of poor farmers and the incomes of the landless poor depend on
many factors and constraints both within and outside the agricultural sector,
including access to a wide range of services and the quality of health, education, and
rural infrastructure.
 Integrated Rural Development is a concept prevalent in Western donors in the 1970s,
which received renewed attention in the 1990s.
 This concept effectively combines multiple sectors and techniques from health care
service provision, agricultural expansion, education, and improvement of
infrastructure to technical transfer, regarding local governments as counterparts to
deal with the multidimensional causes of poverty.
 In an integrated system, local and central development systems should work in a
dynamic cooperation with each other.
 That is, both up-bottom (centralized) and bottom-up (decentralization) decision making
practices are important.
 Integrated rural development also focus on "area development schemes" which involve
a broad range of activities that designed to improve;
 production and productivity – infrastructural facilities and services
 living standards of the community in a given area, etc based on the existing
features of that area.
 That is, integrated rural development take into account geographical, political,
cultural, economical status and comparative advantages of each areas.
 The concept of integrated rural development is built based up on real facts;
 Rural development is part of the overall socio-economic development. But, it was
ignored in past development process.
 Development is a system of interrelated social change. That is, it requires the
overall changes in the existing practices, socio-economic and political conditions to
the better level.
 Agriculture has a multitude functions in the development process. Basically, it is
the source of food and raw materials for rural society, for non-rural community as
well as for growing industry.
 Objective of Integrated Rural Development
 Integrated rural development is a self-employment development process.
 It intended to raise the income generation capacity of the rural society.
 This can be achieved through rural institutional innovations to provide;
 productive assets, capital subsidy, credits and agricultural inputs
 education and health services to improve productivity and skills
 mobilization of existing human and non-human resources
Components of Integrated Rural Development
 Integrated rural development projects should consider the inclusion of the following
components.
 Income generating sectors
 Agriculture, including crop production and animal husbandry and the associated
hunting, fishing and forestry
 Manufacturing industry, including workshops, handicrafts, cottage industry,
traditional products, and products for which the region is particularly suited.
 Trade, including the encouragement of markets for local products, serving other
areas, sales through traffic etc.
 Tourism, including agro-tourism, special interest and environmental tourism
 Institutions
 Market for agricultural and processed manufactured products – Storage for
agricultural outputs and inputs.
 Transportation services for people and goods.
 Supplies of inputs and materials.
 Credit for investment and family requirements.
 Strong community and resource management systems
 Research
 It is necessary to conduct research in order to generate new technologies which
improve production and productivity of the society through efficient use of
resources.
 Education and Training
 Education and training are important to produce skilled labor force to raise
productivity in agricultural sector as well as to encourage manufacturing industry
and tourist development.
 Infrastructure
 Roads: transportation is among the most serious constraints that has to be
addressed.
 Utilities: infrastructural services such as water, telephones, sewerage, and electricity
are also essential for development and improved living standards.
 Irrigation: in arid and semi-arid areas irrigation is the major input for improved farm
productivity.
 Social Services
 Education: Including pre-school which is important for the labor supply
(releasing young mothers for work), primary, and secondary.
 Health: Provision of medical services, notably doctors, hospitals and medical
services
 Welfare: Research is needed on welfare needs (care for old and retarded people,
social problems of the very poor etc.).
 Recreation facilities
 The lack of recreation facilities in rural areas is a major factor causing young
people to migrate to urban areas.
 Advantages and Disadvantages
 Advantages
 The advantages of integrated rural development are described as;
(i) To enable multidisciplinary anti-poverty efforts in rural areas,
(ii)To enable solutions to regional problems, targeting impoverished groups, and
(iii)To promote the participation of local people, local administrative
organizations, and civil society.
 Disadvantages
 it is difficult to implement in practice.
 Effective co-ordination is not easy to achieve, especially when traditional sector-
based agencies continue to compete against each other, and with new coordinating
agencies, for power, influence and, above all, funds.
 Where new agencies were introduced, there was a risk of unnecessary and costly
duplication of activities.
  Models of Agricultural Development
 A number of agricultural development models were developed and introduced by
economists to give detail analysis about the ways to bring agricultural development.
 Those models are important and can give policy alternatives for the decision makers
in designing and implementing agricultural policies and strategies.
 In this section, we will see the following five important models.
1. The frontier model
2. The resource conservation model
3. The urban-industrial impact model
4. The diffusion model
5. The high pay-off input model
6. The Indian green revolution experience
  The frontier Model
 This model also known as resource expansion model.
 It suggests that, increase in agricultural production occurs as a result of the expansion
in area cultivated.
 The model assumes that, surplus land and labor capacity will enable peasant producers
to expand production rapidly under the stimulus of new markets even if they will have
poor technology.
 Population pressure resulting in the intensification of land use in the existing villages
should followed by pioneer settlement programs and the establishment of new villages,
and the opening up of forest or Jungle land to cultivation.
o The major problems (criticisms) of the model are:
 It doesn’t give any emphasis to the sustainability of natural resources.
 It also doesn’t give due attention for the generation and use of new technologies and
agricultural inputs in increasing production and productivity on small farm land.
  The Resource Conservation Model
 The model is based on two assumptions:
1. the model assumes that land and other natural resources for agricultural production
is scarce.
2. it also assumes that soil exhaustion to occur which result in reduction in production.
 This model also focuses on the conservation of biodiversity, organic and pollution free
agricultural product production.
 This model suggests that, high priority should be given to;
 resource-saving agricultural crop production that strives to achieve acceptable
profits together with high and sustainable production levels.
 maintaining soil productivity at its present level/to return soil to its original
productive capacity/; and this can be realized through integrated crop-livestock
husbandry since livestock will provide manures.
o This model explains the importance of resource conservation strategy for the
sustainable development.
o It also illustrates the importance of pollution free healthy environment and the
production of organic agricultural products.
o Besides to these importance, this model doesn’t explain the importance of industrial
inputs in increasing production.
o The production of organic fertilizer takes time and requires the balance between crop
and livestock production. Imbalance between the two will causes difficulty in getting
enough supply.
  The urban- industrial impact model
 Urban-industrial impact model asserts that, the urban industrial development
stimulates agricultural development since the demand for food as well as industrial
raw materials is become higher.
 According to this model, urban centers create markets for the agricultural products
and act as a motive force behind the emergence of agricultural intensification around
areas with proximity to urban centers.
 In addition to the creation of market for agricultural products, industrial sector
supports the agriculture sector through production and provision of agricultural
inputs.
Development polices based on the urban-industrial impact on agricultural development
appear to have limited scope in the poorest of the less developed countries.
 It may causes the problem of imbalance development between urban surrounding
areas and areas far away from urban centers.
 However urban industrial area helps in absorbing growing excess labor force from
rural areas, it may cause the problem of housing, sanitation, and requires high cost to
provide social services and utilities.
 The technology necessary for rapid agricultural growth is not available.

 The diffusion model

 The model suggests that, the diffusion of better husbandry techniques and practices
and of crop and livestock varieties has been a major source of productivity in
agriculture.
 Instead of generating new techniques and practices, this model illustrates the
importance of effective dissemination of existing experiences and technical
knowledge to narrow dispersion in productivity among individual farmers and among
regions.
 However, this model doesn’t give any attention for the importance of the generation of
new technologies and practices in assuring rapid growth in agricultural output.
  The High Pay-Off Input Model
 The model suggests that, economic growth from the agricultural sector of a poor
country depends upon the availability, distribution, and adoption of modern high-
pay off inputs (fertilizers, higher yielding seeds, technology, skilled human
resource).
 In order to provide those productive inputs and technologies, there is a need to
invest on;
1. agricultural experiment stations to produce new technical knowledge,
2. industrial sector to develop, produce and market new technical inputs, and
3. education to train farmers to increase their knowledge on the use of modern
agricultural factors effectively.
  The green revolution experience
 The Green Revolution was a period twhen 1960s.
 The Green Revolution is a term used to describe the transformation of agriculture
in many developing nations that led to significant increases in agricultural
production between the 1940s and 1960s.
 This transformation occurred as the result of programs of agricultural research,
extension, and infrastructural development, instigated and largely funded by the
Rockefeller Foundation, along with the Ford Foundation and other major agencies.
 During this period, new chemical fertilizers and pesticides were created and result in
higher productivity and hence increase yield.
 Green Revolution in India
 In India there were sever famine in 1940s, and around 4 million people died of hunger
by 1943.
 Thus, action to increase yield came in the form of Green Revolution to the period from
1967 to 1978 basically in the parts or Haryana and Punjab.
 At this stage concern was to change the traditional way of farming especially on Wheat
and Rice.
 Methods used in Green Revolution include;
1. Multiple Cropping System
2. Seeds with superior genetics (HYV seeds)
3. Proper irrigation system
4. Pesticides and fertilizers
5. Modern machines
6. Expansion of farming areas
 Effect of Green Revolution
 By the late 1970s, the Green Revolution raised rice yields by 35%, wheat yields by
70%, millet, and corn by 20% in India.
 The country became self-sufficient in food grains by 1974 and became grain exporter
in 1978-79.
 In general green revolution brought changes in India through;
 Increase in production
 Capitalistic farming
 Rural employment
 Import of food grains
 Development of industries
 Economic growth
 Change in thinking of farmers
 Issues regarding Green Revolution
o Green Revolution has done a lot of positive things, saving the lives of millions
peoples and exponentially increasing the yield of food crops.
o But, environmental degradation makes the Green Revolution an overall
inefficient, only short-term solution to the problem of food insecurity.
 Air and water pollution due to extensive use of chemical pesticides.
 Soil erosion due to extensive use of land, high exploitation of natural
resources and deforestation.
 Unemployment among uneducated farmers and deadly disease were a serious
challenges and harmful for farmers.
o So, more sustainable and environmental friendly system of cultivation needs to be
practiced.
“End of Chapter Three”
Thank you for your attention!