The role of agriculture in economic development

In this fourth note in a five-part series*, Ron Sandrey, tralac Associate, discusses agricultural production in South Africa and the newly-industrialised East Asian economies

Agriculture, while declining in relative importance in most countries, nonetheless has played a pivotal role in the development of many countries. In general East Asia is no exception. Basically the pattern has been for resources (people) to be transferred out of agriculture and into the towns in order to participate in the manufacturing sector. Agricultural production is at least maintained and generally increased through the employment of significant investments in new technology and a sound economic and infrastructural base to build this increase upon. The real gains come because productivity in the manufacturing sector was higher than that in agriculture, and consequently we have experienced these high growth rates in East Asia in particular. Thus, agricultural technological increase is often regarded as precursor to growth.

Rather than undertake an exhaustive study of agricultural productivity over the last 50 years or so we discuss highlights of total agricultural production over the period for the countries under examination. Note that we have included Brazil in our examination, as we consider that as a fellow BRICS (Brazil, Russia, India, China and South Africa) and a Southern Hemisphere partner similarly searching for a road to becoming a developed economy it provides a useful comparison for South Africa. This production index snap-shot could be considered as being an indicator of success rather than an analysis of the foundations of that success. The overall data is revealing. We selected the four time periods of (a) the full period, (b) the early years from 1961 to 1980, (c) the years from 1980 to 2013 (the period when Chinese agricultural growth was generally assumed to take place), and (d) the final and most recent thirty year period that covers South Africa’s (and many of the Tiger Cubs) emergence from the troubled times. The data shows that:

• Over the full period only Japan has a lower agricultural growth than South Africa,

• The period from 19080 onwards has seen significant growth in most of the Asian economies, and especially so in China and the “Tiger Cubs” of Cambodia, Laos and Vietnam.

• South Africa has been a consistent under-performer across all periods show, and, furthermore, if we look at the population increase over a similar period the 2.7 increase in agricultural production is the same as its population increase. There is therefore no net gain. For Japan the situation is only marginally better.

• We conclude that the data suggests a reinforcement of the theme of agricultural productivity providing a base for the manufacturing-led economic development. We of course acknowledge that this quick synopsis needs significantly more research into a complex issue before definitive answers can be given, but there seems to be a prima facie case.

Further confirmation of this role of agriculture and the importance of sound ‘flanking’ policies to facilitate growth comes from tralac-related research of Sandrey and Edinger (2009) in an intensive study of Chinese agricultural technology where they outline the well known economic miracle of China. They found that China’s dramatic economic growth over the last thirty years or so (from 1980) was just one more example of the growth paths exhibited by several Asian economies over the last fifty or sixty years. In general, they considered that the recipe for this success has been: to open markets to facilitate sensible price signals but at the same time to operate trade and exchange rate policies that favour exports over imports in at least the initial stages; to provide a sound and stable government that inspires investment and secures property rights (including land tenure security); and to develop large-scale physical infrastructure. Given this, rural migration provides the labour force that drives the growth in manufactured products (exported to the final market of the US) and consequently agriculture becomes an increasingly small component of the economy. The key to achieve the same success as nations such as China is to have all of these factors operate in a coordinated manner, as they are mutually reinforcing. The Asian growth miracle reflects the above trends.

We have extended this analysis of agricultural production to cite Jensen et al. (2014), in other tralac research that puts the growth of Brazilian agriculture over the period from 1985 to 2010 in perspective by comparing the indexed growth of Brazil with selected other countries of particular interest to South Africa. Brazilian production in 2010 was 120.75 when assessed against the base of 1000 for the 2004-2006 periods. This is a commendable performance but still marginally below that of India. Conversely, while Brazil rose from a 1985 level of 47.89, the performance of China was even more spectacular over this earlier period. South Africa’s performance has been just above the world average since 2004-2006 but below the average before then. There are lessons for Africa in the Brazilian example of research organisation and funding, and they cite Hazell (2012) who stresses how African agriculture is ‘reaping the harvest of previous neglect” and reinforces the need for Africa to invest more heavily in meaningful research and technology to capitalise on the continent’s abundant resources. And, as Farmer (1966) explained at the start of the so-called ‘green revolution’, “it is all about new, high-yielding varieties (HYVs) of cereals, especially dwarf wheats and rices, in association with chemical fertilizers and agro-chemicals, and with controlled water-supply and new methods of cultivation, including mechanization”. All of these together were seen as a package to supersede traditional technology and to be adopted as a whole.

* This Discussion is part of a series prepared by Ron Sandrey examining specific issues raised in a new tralac Working Paper of the same title, available to download here: While South Africa slept: why is it not like an Asian economy?

Tell us what you think.

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References

Farmer, B. H. 1986. Perspectives on the ‘Green Revolution’ in South Asia. Modern Asian Studies 20 (01): 175-199. In https://en.wikipedia.org/wiki/Green_Revolution#Problems_in_Africa

Hazell, P. B. R., 2012, “Options for African Agriculture in an Era of High Food and Energy Prices” Elmhurst Lecture, 27th International Conference of Agricultural Economists, Foz do Iguaçu, Brazil August 2012

Jensen, H. G., Vink, N. and Sandrey, R. 2014. The rise of Brazilian agriculture: Some lessons for South Africa. Agrekon 53(3): 79-100, July 2014.

Sandrey, R. and Edinger, H. 2009. The relevance of Chinese agricultural technologies for African smallholder farmers: agricultural technology research in China. Stellenbosch: Centre for Chinese Studies.