1. Roles of agriculture in economic development
Lectures for the Master course in Non-Farm Activities and Rural Development in Developing Countries at the University of Rome “La Sapienza”
by Prof. Elisabetta Basile

2. Agriculture plays a major role in economic development
It can enhance economic growth, but it can also constraint it
It is legitimate to observe that each country in its process of growth has to solve its ‘agrarian question’ in order to reach a sustainable and balanced growth
The type and quality of growth depends on the ways in which the agrarian question is solved

3. Three major theoretical approaches explain the role of agriculture in economic growth
The theories that stress the passive role of agriculture as supplier of resources to the economy (Lewis, Fei-Ranis, Jorgenson; )
The theories that stress the active role of agriculture as a sector that is able to promote economic growth due to specific actions and behaviour (Mellor; )
The theories that stress the active role of agriculture as a sector that is able to promote sustainable economic growth (FAO, 2000)

4. The first approach is based on a dualistic view of the economy inherited by the Classicals
Agriculture is a backward sector, while industry is modern and advanced
Technical backwardness is due to institutional and social constraints and gives origin to productivity and income differentials among sectors
Technical backwardness is at the origin of the subaltern role of agriculture in economic growth

5. Agriculture produces a surplus that needs to be transferred to the economy
Food and primary goods
Labour-force
Capital and foreign exchange

6. The approach is based on the following hypotheses
Agriculture produces as surplus in relation to its internal needs
In agriculture there exists non-productive labour-force (non necessary to the sector) that is free to move among sectors
Peasants are in condition to save, then they can supply savings to the economy
Agriculture produces goods that are internationally tradable

7. This approach has provided a theoretical rationalisation for the extraction of agricultural surpluses
The major empirical support to this approach is provided by England
Yet
The historical specificity of the English experience is neglected
The long-run risks of the destruction of agriculture are neglected (see the case of the USSR)
The social costs of the extraction of surpluses are neglected

8. The extraction of agricultural surplus has created many problems
It has reduced the incentives to farmers
It has increased the pace of the decline of agriculture with serious consequences on environment and society
It has increased rural poverty and food insecurity

9. Also a ‘weak’ version of the approach exists
Agriculture is a surplus supplier
Yet ‘traditional’ agriculture might not be able to produce surpluses and then might not be able to transfer them to the economy
It follows that surpluses need to be produced first in order to be transferred
Only a ‘modern’ agriculture can produce surpluses

10. The ‘modernisation’ of agriculture implies a transfer of resources from the economy to agriculture
The aims are
To increase resource productivity
To introduce technical change
To orient production to market
‘Modern’ agriculture is in condition to produce surpluses in order to enhance economic growth

11. The second approach builds on the dualistic view of the economy but
Assumes the ‘modernisation’ of agriculture as the necessary starting step that creates the condition for the surplus to exist
Sees public intervention as necessary to ‘modernise’ agriculture

12. The approach of the active role is based on the following hypotheses
Among sectors linkages exist that are important for their implication in economic terms
Intersectoral linkages are activated by the market
Also agriculture has linkages with the other sectors
In the capitalist economy agriculture has important linkages with other sectors via input and output markets

13. J. Mellor (1976) introduces his theory of growth linkages taking as an example the case of the Green Revolution in India
The public intervention to ‘modernise’ agriculture increases farmers’ incomes
Farmers increase their consumption, both of production means and consumption goods
The increased demand leads to the emergence of local firms producing the newly demanded goods
The final result is that, due to the initial intervention in agriculture, the rural economy develops in a balanced manner

14. The growth of rural industry is a major factor for a balanced growth
It increases non-farm employment providing work opportunities for the labour-force that leaves the primary sector or is underemployed in it
It reduces the pressure on towns and metropolises, keeping under control the level of pollution
It exploits ‘traditional skills’ that are typical to each area
It exploit the competitive advantages of rural areas in terms of costs (labour-force and infrastructures)

15. The rural economy is a differentiated economy
Sectors co-exist in the same territory
Sectors share the same resources that are employed according to the needs of each sector
Sectors are market integrated (via input and output market)

16. The necessary condition for the growth linkages model to work is public intervention on agriculture
Agricultural ‘modernisation’ plays a central role
But the very concept of agricultural ‘modernisation’ raises many problems:
Mellor’s model emphasises the importance of modernisation in terms of technical change, but technical change is only one aspect of a ‘modern’ agricultural sector
Non-technological modernisation is also important
To react to market signals is important in economic activity, but self-sufficiency is also a major aim

17. Agricultural modernisation has raised many problems
On environment
Industrial pollution
Misuse of natural resources
On society
Pressure on families and communities
Migration from rural to urban areas
On the economy
Food insecurity
Food dependency

18. The joint consequences of surplus extraction and agricultural modernisation are
Rural and urban poverty
Increased inequality between the town and the country
Urban migration
Pressure on urban infrastructures
The widening of the informal sector

19. The third approach is based on the following hypotheses
Agriculture is, jointly, a social, economic, and spatial system
As such, it plays many roles
Because of its multifunctionality, agriculture contributes to collective welfare in many different ways, not only as surplus supplier or buyer of goods
In the past many of these contributions were not taken into account as they could not been valued in market terms

20. FAO (2000) stresses two major categories of non ‘conventional’ roles of agriculture
Economic roles that agriculture plays as a by-product of its primary role and that the market underestimates
Non-economic roles that agriculture plays as a consequence of its primary role and that the market neglects

21. Because of its non-conventional roles agriculture can contribute to sustainable economic growth
Economic roles underestimated by the market
Income generation
Poverty reduction
Food security
Non-economic roles neglected by the market
Management and conservation of natural resources
Social cohesion and stability
Preservation of culture