Growing out of poverty

Severe threats have been issued recently and many of them have had to do either with the current financial or food crises, crises that have come to dominate the political debate globally this year. At the same time unfashionable ideas about how to solve these problems have gained new currency.

Until about a year ago neither issue was of particular import to the political class, unless you were a particular type of policy wonk who liked to plough lonely furrows in unloved fields of expertise. And the general public assumed that there was enough money to go around and there was plenty to eat. Then sub-prime loans became an issue, people started losing their homes and questions were being asked in the House on Capitol Hill and in Westminster too. The banks also started to get very nervous.

At about the same time international bodies such as the UN, NGOs and farmers’ groups started to warn that for various different reasons food was in shorter supply than it had been for decades. Urgent action was needed to be taken to avoid food shortages or famine in many parts of the world and investment was needed to improve production techniques and technology. Agriculture, which had been technology’s poorer cousin for a long time, now has become its poster-child.

There were some good reasons why agricultural investment had been in short supply for decades. Earlier phases had focused on agriculture’s economic role as a one-way path of resources production aimed at supplying industry and growing towns and cities. Green revolutions had led to more greenbacks.

However, as national incomes rise, the demand for food increases more slowly than for other goods and services. Therefore there is a decline after an initial burst of investment in the sector. The decline in agriculture’s GDP share was partly the result of post-farm gate activities, such as taking produce to market, that have become commercialised and are taken over by specialists in the service sector, and partly because producers substitute chemicals and machines for labour. Producers received a lower price and, in return, their households spend less time marketing. As a result, value added from the farm household’s own labour, land and capital, as a share of the gross value of agricultural output, fell over time.

However, demand is now greater than it has ever been. The world population is rapidly growing and Jacques Diouf, director-general of the UN’s Food and Agriculture Organisation late last year called for a greater investment in agriculture as a necessity to avoid famine. In September he reiterated this call as he backed a plan to use surplus European Union money to help those who face famine. The European initiative would see about one percent of the Union’s budget used to help the poor in the developing world. Fertiliser and seeds are two items that could be supplied to farmers under the plan.

With investment, new food technologies will improve agriculture production and help farmers to improve harvests and expand food supplies per hectare and per worker. Increasingly modern economies use more inputs to help grow more food.

Larger capital investments and increasing use of better-trained labour should also contribute to the success of agriculture. Biotechnology has also led to the development of seeds that are disease-salient and drought-resistant. Fertilisers and pesticides are commonly used to reduce potential losses before, during and after harvest.