By
S.Sivathasan
The challenge before a developing country is to transform the agrarian texture of the economy and to shift emphasis to industry and services. Such a change is known to be indispensable to move away from third world to first. But no sooner policy pronouncements are made or investment plans announced, forces of reaction unleash their collective wrath against any diversification.
Land seen as crucial to this process attracts the greatest attention and evokes the most irrational opposition. To lend credibility to this negative position, agriculture is tagged on to land and a dreaded spectre of starvation is flaunted. What is distressing is that the vocal elements hold sway with the intelligentsia too getting drawn into the maelstrom. In this context a dry as dust examination would seem relevant.
In many a country devoting land only to agriculture or not diverting agricultural land to any pursuit other than agriculture are equated with patriotic fervor. The notion that land tied to agriculture once, should remain so till eternity has become an obsession set in stone. This uncritical idea alive still, gathers populist momentum, invites political patronage and eventuates in flawed policy stances.
When such policy manifests in legislation the legal frame restrains growth. The sectors of Industry and Services, the most virile drivers of economic transformation suffer the most. The quantum of food in the world should never be reduced, therefore land area producing that food must remain untouched is the idea. Developments in the post war world would show how misplaced the conception is.
This phenomenon is seen more in developing countries where flexibility in land use is needed most. In this regressive process, the states of India and Sri Lanka are deeply engaged. The argument that is trotted out is that unstoppable population expansion spurs an illimitable appetite for food and land for this purpose is needed to an ever increasing extent.
Before developing more arable land, let us consolidate the agricultural land currently in hold is the thesis. How valid are the premises and how tenable are the deductions? More importantly, how disastrous is the outcome?
The last century has shrunken the globe. This necessitates that every economic activity of import be planned and executed with a global perspective. A global overview will therefore be illumining. Except in major economies, production in smaller states is constrained by the limits of the domestic market. If market limitation is considered unalterable, what is the prudent response? Judicious selection of the area of activity and efficiency in operations are the choice.
When such worthwhile options are examined and rational programs are formulated, the entrepreneur and the investor who come forward are confronted with land issues. A state not habituated to governing caves in. In such a situation infirmities of the democratic process allow easy passage to negative forces. The Nano fiasco over land in West Bengal is a pathetic example.
How well informed is one when making an assertion that arable land is inadequate for producing food if there be any reduction. World grain-land availability in 1950 was 0.23 of a hectare per person. In 2010 it had declined to 0.10. The decrease came about while the population increased by 4,378 million in those 60 years. However no food shortage came about because production increased 350 percent though area under grains grew by only 15 percent. Seen differently, for an area increase averaging 1.7 million hectares per year from 1950 to now, production increase averaged the equivalent of 21 million hectares per year at the 1950 level of productivity. The remarkable phenomenon is explained by high levels of productivity. What brought it about?
Judicious investment of resources in wisely selected areas conducive to increased production, worked the miracle. What were they? Irrigation, fertilizer, agro chemicals, improved seed and mechanization were among the most potent instruments. Never to be discounted is state support by way of subsidies encouraging the producer and benefiting the consumer.
The great leverage that irrigation has on productivity and thereby on production is well known. Hence the massive investments seen in irrigation, which took the acreage from 94 million hectares in 1950 to 306 million hectares in 2010. Together with irrigation may be seen the exponential leap in global fertilizer use rising from 14 million tons in 1950 to 163 million tons in 2010. Food production is inconceivable without crop protection and basic to it are agro chemicals. Global sales in2009 amounted to $38 billion and purchases were not for collective suicide. The world uses an average of 3 kg per hectare while Japan uses 11kg. If India uses .6 of a kg, it is not for environmental considerations. Farm mechanization has seen incremental additions in machinery and equipment to the tune of $140 billion per annum. What the above figures convey is that remarkable results in production are achieved when a complement of resources is coupled to land. Not realizing it and placing exclusive reliance on land leads to the disastrous idea of suffocating industry and services in the hope of fostering agriculture.
Food being indispensable for human existence, gives paramount importance to cultivation. It does not follow however that agriculture is not the all of human existence. Nor is it logical to say that it is an economically viable occupation to be pursued whatever the circumstances. The totality of activity may be expressed in economic terms through GDP data. The agricultural component of world GDP is 6.1 percent. Some country comparison is instructive. US is 1.2 %, Japan 1.4%, Germany 0.8 %, China 10.1%, India 18.1% and Sri Lanka 12.1%. It is instructive to know the strength of the workforce engaged in the three sectors and their value of production. Agriculture has 1.2 billion and produces $ 4.3 trillion worth. Services engage 1.38 billion and produce $ 44.4 trillion. Industry employs 700 million to produce $ 21.5 trillion. Statistics are illuminating, but the process of transformation is too complex a process and would demand perhaps the whole of the present century. An appreciation of the global orders of magnitude would however enable bearings being taken aright in fashioning a nation’s economy.
By value, the agricultural component is strikingly lower in developed economies. By contrast though it is higher in developing countries, labour productivity is low in value terms. The less developed ones have therefore a compulsion to expand the industrial and services sectors disproportionately, even as they develop agriculture. However this does not happen at the required tempo since the political elements lean towards a more numerous constituency.
Agriculture flourishes in the OECD countries. The subsidies paid at around $300 billion per annum in those countries approximates the total value of India’s annual agricultural production. It may be noted that the population of both entities is about equal. How prosperous is the Indian farmer? An average of 17,500 farmer suicides per year tells it all. If agriculture does pay it’s way there is no need for subsidies. If non OECD countries command the resources they too can and will pay. Why doesn’t that situation obtain?
Because they simply do not generate a disposable surplus that could be spread across agriculture. The realization needs to come about that massive resources have to be funneled into industries and services if agriculture is targeted for sustained growth. Cold storage chains and refrigerated transport requiring multi trillion dollar investments may be cited as a prime need for developing countries. Since they do not command such resources, FDI is the option. But what we see is an aversion to it. Stereotyped expenditure on agriculture decade after decade and without a balance can only impoverish all three sectors. This is a typical feature in most countries failing to transit from agricultural to industry and services. Sri Lanka is caught up in this snare.
It may be asserted that agriculture is better promoted through a benign neglect. Why and how? The services sector being by far the largest wealth creator at 63.3% of global GDP holds the prospect of being most benevolent to agriculture. On a global scale, precedence may be seen in many a country for such income generating activities as tourism, information technology, communication, trade, transportation and housing. In developed economies wealth created by this sector as well as industry supports modernizing of agriculture. Denial of land and swearing by agriculture squeezes them out. The peasantry derided by Karl Marx for its backwardness and which is mired in “the idiocy of rural life” cannot take agriculture to any heights. The well educated positioned to lead have to divest their minds of intellectual rubbish and chart a course of purpose