Economics of Agricultural Development

World Food Systems and Resource Use

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

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000417623
• Edition: 4
• Topic: Economía
• Subtopic: Economía del desarrollo

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:

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• Means for utilizing agricultural surpluses to further overall economic development

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• The sustainability of the natural resource environment

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• Gender issues in relation to agriculture and resource use

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• The contribution of improved technologies to agricultural development

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• The importance of agricultural policies and institutions to development and trade

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• Actions to encourage more rapid agricultural and economic development

This new edition reflects the following developments:

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• Growth in environmental challenges due to climate change

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• Continued progress in agricultural and economic development in many low-income

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• countries while other countries and regions are being left behind

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• 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. It contains a wealth of real-world case studies and is accompanied by a website.

PART 1
Dimensions of world food and development problems

Rural family in Colombia

1 Introduction

This chapter

1. 1 Examines the basic dimensions of the world food situation
2. 2 Discusses the meaning of economic development
3. 3 Considers changes that occur during agricultural and economic development

Overview of the world food situation

One of the most urgent needs in the world today is to solve the persistent problems of hunger and poverty in developing countries. Despite significant progress in reducing these problems over the past few decades, millions of people remain ill-fed, poorly housed, under-employed, and afflicted by a variety of poverty-related 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? How severe are they, and what are their causes? What role does agriculture play in economic development and how might it be enhanced? What does the globalization of goods, services, ideas, technologies, and capital mean for agriculture, poverty, and environment around the world? How do policies in developed countries affect developing countries? And, how does the situation in low-income countries affect wealthier nations? An understanding of the fundamental causes of the many problems in poorer countries and the progress that has been achieved is essential if solutions are to be recognized, encouraged, and implemented.

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, and it has for a long time, even during the COVID-19 pandemic. 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 population has more than doubled over the past 50 years, but food production has grown even faster.

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

If total food supplies are plentiful, why do people perish every day from hunger-related causes? At its most basic level, hunger is a poverty problem. Only the poor go hungry. They are 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 under-employed landless laborers; the elderly, handicapped, and orphans; and people experiencing temporary misfortune due to abnormal weather, agricultural pests, health crises, 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. About 9 percent of the world’s population (roughly 700 million people) lives on less than $1.90 per day (the World Bank definition of extreme poverty), and about half the world lives on less than $5 per day. These people are found primarily in sub-Saharan Africa and South Asia, although poverty is also prevalent in East and Central Asia, Latin America and Caribbean, and Middle East and North Africa. Significant strides have been made in reducing global poverty, with the proportion of the world’s population living in extreme poverty cut by more than half over the past three decades. However, much remains to be done to alleviate poverty-related problems.

While hunger and poverty are found throughout the world, over the past 40 years per capita food production has grown steadily in most regions, and in the last 20 years it has grown in every major region, including Africa (Table 1.1). The result has been substantial progress in reducing hunger and poverty, although 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 climatic, economic, and political causes, and rapid population growth have combined to create a precarious food situation in these countries.

Annual variation in food production is also a serious problem in several countries, particularly in Africa. This variation has meant periodic severe food shortages in some 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.

Table 1.1 Food Production Index and Average Dietary Energy

Year	1997	2007	2017
Food Production Index (2004–06 = 100)
World	82	106	131
Asia	77	109	140
Africa	74	104	135
Americas	83	106	126
Europe	99	98	111
Oceania	87	92	119
Ave. Dietary Energy Supply (KAL/Cap/Day)
World	2716	2792	2908
Asia	2580	2650	2840
Africa	2432	2537	2561
Americas	3125	3210	3279
Europe	3237	3362	3380
Oceania	2889	2988	3023

Source: FAOSTAT, 2020, www.fao.org/faostat/en/#country

Food prices

From 1970 to 2000, the real price of food for most people trended down slightly, and from 2001 to 2020 it exhibited a slight upward trend. U.S. prices (in nominal or “current” dollars) of maize, rice, and wheat (the world’s major food grains) are shown in Figure 1.1. Despite peaks in 1972, 1981, 1996, 2008, and 2011, the average prices of all three grains fluctuated around a relatively constant level. The prices of most other things rose more steadily over the entire period, so for most people the relative price of food fell slightly, except during the peak years noted above. This reduction in the 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.

The three grains shown in Figure 1.1 have exhibited sizable year-to-year price variations. Food price fluctuations directly affect the well-being of the poor, who spend a high proportion of their income on food. Food price instability can increase human suffering and threaten political stability. Food price swings have resulted from a combination of factors that shifted supply and demand. Supply factors included such items as adverse weather conditions and fuel and fertilizer costs. Demand factors included items such as demand for grains for bio-fuel use, population and income growth in many developing countries, changes...