PL 357

AGRICULTURAL AND INDUSTRIAL

POLICY
J. OWUSU-ANSAH, PhD

ASSIGNMENT:
THE ROLE OF AGRICULTURE IN ECONOMIC
DEVELOPMENT
(DUE IN TWO WEEKS)
The Role of Agriculture in Economic Development, Bruce F.
Johnston and John W. Mellor, The American Economic Review, Vol.
51, No. 4 (Sep., 1961), pp. 566-593
WRITE A PROPER REFERENCE

POLICY FRAMEWORK

Visionary principles and long termgoals that guide decision making

Comprehensive and based on

stakeholder consultations

Consolidation of several programs

Communicates a common
understanding, gives direction,
consistency and accountability

Must be consistent with government

priorities and laws of the land

Provides for a broad audience

Eg. Medium Term National
Development Policy Framework
(GSGDA, 2010-2013)
Spatial Development Framework
Ghana ICT Policy
Ghana Energy Policy
Policy on Education, Employment,
Housing

Agriculture

Fisheries (aqua culture)

Crop production
Livestock

Access to
Roads
Markets
Farm inputs
Irrigated and potable water supply
Improved varieties

Boost the linkages between

agriculture and industry

Making agric productive (boost

farmers incomes and extract
surpluses

Water contamination by pesticides

Harmful to wildlife, disruption of
the ecosystem and possible harmful
effects
Displacement of traditional
varieties

Regenerative technologies (green

manuring, water management, soil
and water conservation

Agricultural Development Policy

Modern technologies (machinery,

fertilizers, pesticides

Environmental sensitivity

THE ROLE OF AGRICULTURE

Agriculture can contribute

substantially to economic
development
Main source of resources that can be
captured in some emerging countries

Diversity among nations

Physical endowment (Sahel as
compared to Forested Areas)
Climatic conditions
cultural heritage
Historical context
Natural resources
Differences in the level of importance
accorded to agriculture

In LDCs agriculture constitutes the largest

sector and can provide savings

Adequate production of adequate food

supplies stabilizes general prices

High productivity reduces the cost of food

and cheapen nominal wages

Rising farm family income represents a

major market for consumer goods
produced by domestic manufacturers

Part of the agricultural surplus can be

exported to finance the import of much
needed foreign capital goods.

 Alleviating foreign exchange

constraints
Generation and transfer of
agricultural surpluses to finance
capital expenditure and public
investments
Agriculture taxes (export),
Overvalued exchange rates

Technical and industrial change in

agriculture lowers the price of
food and helps to lower labor
costs

Examples: Agricultural surpluses

channeled into industry (Winters
et al, 1998)

Eightieth century England

France in 1860
Germany in 1850

High productivity in agriculture in

Taiwan and South Korea taxed to
finance industry
Green revolution helped support ISI
in India

What about Africa?

The relative decline of the

agricultural sector will not proceed as
rapidly in countries that have a
marked comparative advantage in
exporting agricultural products

Denmark and New Zealand are

leading agricultural exporters but
have less than 20 per cent of their
labor force engaged in agriculture

Surpluses depends on the price of

agricultural goods

Access to world markets and market

prices

Decline in the prices of agricultural

goods relative to other goods

Structural transformation
(necessary condition for selfsustaining growth?)

Declining share of agriculture

worldwide, accompanied by rapid
expansion of manufacturing and
nonagricultural sector

LDCs
Typically 40 to 60 per cent of the
national income is produced in
agriculture
Typically about 50 to 80 per cent of
the labor force is engaged in
agricultural production

 Low productivity despite large

quantities of land and labor
committed to it
Widespread disguised unemployment
and high rates of population growth

Surplus of manpower in agriculture

(subsistence sector)

 Two sectors:

Possibility of extracting labor from

agriculture without putting too much
pressure on the prices of food and raising
nominal wages for industry required
technological change in agriculture to
raise productivity of that industry

Increased agricultural productivity

and output

Traditional
Dynamic (nonagricultural, capitalist)
sector absorbs surplus agricultural
labor
Re-allocation of surplus agricultural
workers, whose contribution to output
may have been zero or negligible, to
industry
Agriculture must also grow if the
mechanism is not to grind to a
premature halt

Introduction of modern technology

Agricultural research (new crops, high
yielding crop varieties, pesticides),
increased use of fertilizers to raise soil
fertility
Improved farm implements
Education
Strengthen their capacity to make and
execute decisions on the basis of more
adequate knowledge of agricultural
technology

 Institutional arrangement for credit

If agricultural exports are the main

source of foreign exchange and
industry uses intermediate and
capital goods

Agric productivity very important

source of non-agricultural growth in
the early stages of economic
development

farmers associations,
Extension services
Irrigation and drainage

Rural roads
Institutions to disseminate
knowledge, provide extension and
create markets for both inputs and
outputs
Land reforms

Availability of agricultural surplus is

not necessarily a precondition for
economic growth
The size of that surplus and how it is
invested
The world market prices

Economies are relatively closed

There is surplus labor in agric sector
Agric sector constitutes a large share
of the economy