Economics of Agricultural Development

World Food Systems and Resource Use

George W. Norton, Jeffrey Alwang, William A. Masters

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781135124069
• Edition: 3
• Topic: Negocios y empresa
• Subtopic: Negocios en general

Economics of Agricultural Development examines the causes, severity, and effects of poverty, population growth, and malnutrition in developing countries. It discusses potential solutions to these problems, progress made in many countries in recent years, and the implications of globalization for agriculture, poverty, and the environment.

Topics covered in the book include:

• Means for utilizing agricultural surpluses to further overall economic development

• The sustainability of the natural resource environment

• Gender issues in relation to agriculture and resource use

• The contribution of agricultural technologies

• The importance of agricultural and macroeconomic policies as related to development and trade, and the successes and failures of such policies

• Actions to encourage more rapid agricultural and economic development

The globalization of trade in goods, services, and capital has been fundamental to changes being experienced in the agricultural and rural sectors of developing countries. It has major implications for the fight against poverty and food insecurity and for environmental sustainability. Recently, agriculture has returned to a position of center stage in the development dialog as food price volatility has increased along with water scarcity, and concerns grow over the effects of climate change on food supply and food security.

This new edition of the essential textbook in the field builds on the 2010 edition and reflects the following developments:

• Growth in foreign demand for land and other natural resources

• Significant progress in agricultural and economic development in some low-income countries while others are being left behind

• Continued growth in demand for higher-valued farm products

This book is essential reading for undergraduate students seeking to understand the economics of agricultural development and the world food system, including environmental and human consequences, international trade, and capital flows.

PART 1

Dimensions of World Food and Development Problems

Rural family in Colombia

CHAPTER 1

Introduction

Most hunger is caused by a failure to gain access to the locally available food or to the means to produce food directly.

– C. Peter Timmer, Walter P. Falcon, and Scott R. Pearson¹

THIS CHAPTER

1 Examines the basic dimensions of the world food situation

2 Discusses the meaning of economic development

3 Considers changes that occur during agricultural and economic development

OVERVIEW of the WORLD FOOD PROBLEM

One of the most urgent needs in the world today is to reduce the persistent problems of hunger and poverty in developing countries. Despite many efforts and some successes, millions of people remain ill-fed, poorly housed, underemployed, and afflicted by a variety of illnesses. These people regularly suffer the pain of watching loved ones die prematurely, often from preventable causes. In many countries, the natural resource base is also being degraded, with potentially serious implications for the livelihoods of future generations.

Why do these problems persist in some countries but not others? How severe are the problems, and what are their causes? What does the globalization of goods, services, and capital mean for agriculture, poverty, and environment around the world? And, how does the situation in poor countries feed back on industrialized nations and vice versa? An understanding of the fundamental causes of the many problems in poorer countries is essential if solutions are to be recognized and implemented. What role does agriculture play and how might it be enhanced? What can rich countries do to help? How do the policies in developed countries affect developing countries? These are some of the questions addressed in this book. Globalization will continue, and a key issue is how to manage it to the betterment of developing and developed countries alike.

Much has been learned over the past several years about the roles of technology, education, international trade and capital flows, agricultural and macroeconomic policies, and rural infrastructure in stimulating agricultural and economic development. In some cases, these same factors can be a two-edged sword: they contribute to economic growth on the one hand, but lead to price and income instability or environmental risk on the other. These lessons and other potential solutions to development problems are examined herein from an economic perspective. The need is stressed for improved information flows to help guide institutional change in light of social, cultural, and political disruptions that occur in the development process.

World Food and Income Situation

Are people hungry because the world does not produce enough food? No. In the aggregate, the world produces a surplus of food. If the world’s food supply were evenly divided among the world’s population, each person would receive substantially more than the minimum amount of nutrients required for survival. The world is not on the brink of starvation. Population has roughly doubled over the past 40 years, and food production has grown even faster.

If total food supplies are plentiful, why do people die every day from hunger-related causes? At its most basic level, hunger is a poverty problem. Only the poor go hungry. They go hungry because they cannot afford food or cannot produce enough of it themselves. The very poorest groups tend to include: families of the unemployed or underemployed landless laborers; the elderly, handicapped, and orphans; and persons experiencing temporary misfortune due to weather, agricultural pests, or political upheaval. Thus, hunger is for some people a chronic problem and for others a periodic or temporary problem. Many of the poorest live in rural areas.

Hunger is an individual problem related to the distribution of food and income within countries and a national and international problem related to the geographic distribution of food, income, and population. Roughly one-seventh of the world’s population (about one billion people) lives on less than $1 per day (about one-third lives on less than $2 per day). These people are found primarily in South Asia and Africa. The largest number of poor and hungry live in Asia, although severe hunger and poverty are found in Sub-Saharan Africa and in parts of Latin America. Good strides have been made in reducing global poverty; over the past 30 years, the proportion of the world’s population living on less than $1 per day has been cut by more than half. However, more remains to be done to alleviate poverty-related problems.

While hunger and poverty are found in every region of the world, over the past 40 years per capita food production has grown steadily in most regions except for Sub-Saharan Africa. As Figure 1-1 shows, per capita food production in Africa has been relatively stagnant, but it has begun to show a small upward trend over the past 20 years. South America and particularly Asia have experienced relatively steady increases. The result has been significant progress in reducing hunger and poverty in the latter two regions, while per capita calorie availability remains below minimum nutritional standards in many Sub-Saharan countries. Low agricultural productivity (farm output divided by farm inputs), wide variations in yields due to natural, economic, and political causes, and rapid population growth have combined to create a precarious food situation in these countries.

Many farm workers in Asia earn between one and two dollars per workday

Figure 1-1. Index of per capita food production (Source: FAOSTAT data, 2012)

Annual variation in food production is also a serious problem in some countries, particularly in Africa. This variation has meant periodic famines in individual countries, especially when production problems have been compounded by political upheaval or wars that have hindered international relief efforts. Production variability causes wide price swings that reduce food security for millions who are on the margin of being able to purchase food. If the world is to eliminate hunger, it must distinguish among solutions needed for short-term famine relief, those needed to reduce commodity price instability (or its effects), and those needed to reduce long term or chronic poverty problems.

Food Prices

For many years, for most people in the world, the real price of food fell relative to the prices of other things. The U.S. prices (in nominal or “current” dollars) of maize, rice, and wheat, the world’s major food grains, are shown in Figure 1-2. Despite peaks in 1972, 1981, 1996, and 2008, the average prices of all three grains fluctuated without strong trends for several years. The prices of most other things rose more steadily with inflation, so for most people the relative (or “constant”) price of food fell slightly, with exceptions during the peak years. This reduction in the real price of food was both good and bad because prices affect economic growth and social welfare in a contradictory fashion. Lower food prices benefit consumers and stimulate industrial growth but can lower agricultural producer incomes and reduce employment of landless workers. To the extent that lower prices reflect lower production costs, impacts on producers may be mitigated.

Figure 1-2. U.S prices of major feed grains in current dollars (Source: FAOSTAT, 2013)

Instability in local and world food prices is a serious problem affecting food security and hunger in developing countries. The three grains shown in Figure 1-2 have exhibited sizable year-to-year price variations. This instability was most severe during the 1970s and since 2008. Food price fluctuations directly affect the well-being of the poor, who spend a high proportion of their income on food. Governments are finding that food price instability increases human suffering and also threatens political stability.

As shown in Figure 1-2, grain prices rose sharply in 2008. Since then they have fluctuated at higher levels than in preceding years. These higher prices have been due to a combination of factors that shifted supply and demand. Supply factors included such items as adverse weather conditions and higher fuel and fertilizer costs. Demand factors included items such as increased demand for grains for bio-fuel use, continued population and income growth in many developing countries, changes in currency values, and policy changes in countries that increased their demand for imported food. Also, speculative investments in commodity markets may have amplified commodity price swings for brief periods of time.

Malnutrition

Hunger is most visible to people in developed countries when a drought or other disaster results in images in the news of children with bloated bellies and bony limbs enduring the pain of extreme hunger. Disturbing as such images are, in a sense they mislead. The less conspicuous but more pernicious problem, in terms of people suffering and dying, is chronic malnutrition. While accurate figures of the number of malnourished in the world are not available, and even good estimates depend on the definition used, a recent estimate is that roughly 870 million people suffer from chronic or severe malnutrition associated with food deprivation. Adverse health effects due to micronutrient deficiencies affect about 2 billion people. More than 10 million people, many of them young children, die each year from causes related to inadequate food consumption. Increasing per capita food production has allowed more of the world’s population to eat better. But for those in the lower income groups, the situation remains difficult.

Health

People born in developing countries live, on average, 13 years less (in Sub-Saharan Africa, 26 years less) than those born in developed countries. Health problems, often associated with poverty, are responsible for most of the differences in life expectancies. Mortality rates for children under age five are particularly high, often 10-20 times higher than in developed countries (Figure 1-3). Though countries with ...