Oromia State University

College of Development
Studies
Department of Economics
Development Economics II
Lecture

Chapter-Four (4)
AGRICULTURE & ECONOMIC DEVELOPMENT
 Topics to be covered in this Chapter
4. Agriculture and Economic Development

4.1 Agricultural Progress and Rural Development

4.2 The Structure of Agrarian systems in the Developing World

4.3 The Important Role of Women in Agriculture

4.4 The Economics of Agricultural Development

Special features of agriculture
The contribution of agriculture to development
Constraints of agricultural productivity
Agricultural strategies and the role of the government in the
agricultural sector
4.1 Agricultural Progress and Rural Development
 Despite real progress, nearly 2 billion people in the developing
world grind out a meager and often inadequate existence in
agricultural pursuits.
 Over 3.1 billion people lived in rural areas in developing countries
in 2010, a quarter of them in extreme poverty.
 i.e, more than two-third of the world's poorest people are also
located in rural areas and engaged primarily in subsistence
agriculture and their basic concern is survival.
 If development is to take place and become self-sustaining, it will
have to start in the rural areas in general and the agricultural sector
in particular.
 Contd…..
 The core problems of widespread poverty, growing inequality,
rapid population growth, and rising unemployment:-

 all find their origins in the stagnation and often retrogression of

economic life in rural areas.

 Traditionally, the role of agriculture in economic development has

been viewed as passive and supportive.

 Agriculture’s primary role was to provide sufficient low-priced

food and manpower to the expanding industrial economy,

 which was thought to be the dynamic "leading sector ’’ in any

overall strategy of economic development.
 Contd…..
 Therefore, the agricultural sector in particular and the rural
economy in general must play an indispensable part in any overall
strategy of economic progress, especially for the low-income
developing countries.
 The three basic complementary elements of agricultural strategy:-

Accelerated output growth through technological, institutional,

and price incentive changes designed to raise the productivity of
small farmers;

 Rising domestic demand for agricultural output derived from an

employment oriented urban development strategy; and
Contd….
diversified, non-agricultural, labor-intensive rural development
activities that directly and indirectly support and are supported by
the farming community.
• Therefore, agricultural and rural development has come to be
regarded by many economists as essential element of national
development.

• Without such integrated rural development, in most cases,

industrial growth either would be stultified or,

• If it succeeded, would create severe internal imbalances in the

economy.
 4.2 The Structure of Agrarian Systems in the Developing
Countries
 Three quite different situations are found among developing
countries.

1)Agriculture-based countries:
Agriculture is still a major source of economic growth mainly
because agriculture makes a large share of GDP (32% of GDP).

More than 2/3 of the poor of these countries live in rural areas.

Some 82% of the rural population of sub-Saharan Africa lives in

these countries. It also includes a few countries outside the region
2) Transforming countries:
The share of the poor who are rural is very high (almost 80% on
average) but agriculture now contributes only a small share to GDP
growth (7% on average).
 Most of the population of South and East Asia, North Africa, and the
Middle East lives in these countries, along with some outliers such as
Guatemala.
3) Urbanized countries: rural-urban migration has reached the
point at which nearly half, or more, of the poor are found in the cities,
and agriculture tends to contribute even less to output growth.
The urbanized countries are largely found in Latin America and the
Caribbean, along with developing eastern Europe and Central Asia, and
contain about 255 million rural dwellers.
 In many cases, the position of countries within these groups is not
stagnant.

 Many countries that were in the agriculture-based category

moved to the transforming category in recent decades, most
prominently India and China.

 Brazil has moved from being a borderline transforming country

to a solidly urbanized one according to the World Bank
classification.
 Peasant Agriculture in Latin America, Asia, and Africa
 In Latin America, in a number of poorer and more backward areas,
the peasants’ plight is rooted in the latifundio–minifundio system.

 In Asia, it lies primarily in fragmented and heavily congested dwarf

parcels of land.

 In Africa, both historical circumstances and the availability of

relatively more unused land have resulted in a different pattern and
structure of agricultural activity.

 Thus, in all three regions, the nature of their agrarian systems

differs markedly.
 Agrarian Patterns in Latin America:
Progress and Remaining Poverty Challenges
 The agrarian structure that has existed in Latin America since colonial
times and is still widespread in a substantial part of the region is a
pattern of agricultural dualism known as latifundio-minifundio.
 Latifundios
 are very large landholdings.
 They are usually defined as farms large enough to provide
employment for more than 12 people, though some employ thousands.
 Minifundios: are the smallest farms.
 They are defined as farms too small to provide employment for a
single family (two workers) with the typical incomes, markets, and
levels of technology and capital prevailing in each country or region.
 But latifundios and minifundios do not constitute the entirety of
Latin American agricultural holdings.
A considerable amount of production occurs on family farms and
medium-size farms.
The former provide work for two to four people (recall that the
minifundio could provide work for fewer than two people), and the
latter employ 4 to 12 workers (just below the latifundio).
 These farms use a more efficient balance between labor and land,
and studies show that they have a much higher total factor
productivity than either latifundios or minifundios, as the law of
diminishing returns would suggest. b/c smaller farms are more
efficient (lower-cost) producers of most agricultural commodities.
 Contd……
 A major reason for the relative economic inefficiency of
farming

The fertile land on the latifundios is simply that the wealthy

landowners often value these holdings not for their potential
contributions to national agricultural output, but rather for the
considerable power and prestige that they bring.

Much of the land is left idle or farmed less intensively than on

smaller farms.

Latifundio transaction costs, especially the cost of supervising

hired labor, are much higher than the low effective cost of using
family labor on family farms or minifundios
Contd.........
 It follows that raising agricultural production and improving the
efficiency of Latin American agrarian systems in traditional areas
will require much more than direct economic policies that lead to the

 provision of better seeds, more fertilizer, less distorted factor prices,

higher output prices, and improved marketing facilities.

It will also require a reorganization of rural social and institutional

structures to provide Latin American peasants,

 Particularly indigenous people who find it more challenging to

migrate, a real opportunity to lift themselves out of their present
state of economic subsistence and social subservience
 Transforming Economies: Problems of Fragmentation and
Subdivision of Peasant Land in Asia

 If the major agrarian problem of Latin America, at least in

traditional areas, can be identified as too much land under the

control of too few people,
 The basic problem in Asia is one of too many people crowded
onto too little land.
 The land is distributed more equally in Asia than in Latin America
but still with substantial levels of inequality.
 Throughout much of the 20th century, rural conditions in Asia
typically deteriorated.
• The three major interrelated forces that molded the traditional pattern
of land ownership into its present fragmented condition as
identified by Nobel laureate Gunnar Myrdal are:
The intervention of European rule,
 The progressive introduction of monetized transactions and the
rise in power of the money lender, and
 The rapid growth of Asian populations.
 The traditional Asian agrarian structure before European
colonization was organized around the village.
 Local chiefs and peasant families each provided goods and services,
produce and labor from the peasants to the chief in return for
protection, rights to use community land and the provision of public
services.
 Decisions on the allocation, disposition, and use of the village’s
most valuable resource, land, belonged to the tribe or community,
either as a body or through its chief.
 Land could be redistributed among village members as a result of
either population increase or natural calamities such as drought,
flood, famine, war or disease.
 Within the community, families had a basic right to cultivate land
for their own use and they could be evicted from their land only
after a decision by the whole village.
 The arrival of the Europeans (mainly the British, French, and Dutch)
led to major changes in the traditional agrarian structure.
 As Myrdal points out, “Colonial rule acted as an important catalyst
to change,

 both directly through its effects on property rights and

 indirectly through its effects on the pace of monetization of the

indigenous economy and on the growth of population.”

 In the area of property rights, European land tenure systems of private

property ownership were both encouraged and reinforced by law.

 Sharecropping is widespread in both Asia and Latin America but more

pervasive in Asia. It has been estimated that of all tenanted land, some
84.5% is sharecropped in Asia but only 16.1% in Latin A.
 The creation of individual titles to land made possible the rise to
power of another dubious(unsure) agent of change in Asian rural
socioeconomic structures, the moneylender.

 Once private property came into effect, land became a negotiable

asset that could be offered by peasants as security for loans.

 Asian agriculture was being transformed from a subsistence to a

commercial orientation,

both as a result of rising local demand in new towns and more

important in response to external food demands of colonial European
powers.
 With the development of commercial farming, however, the
peasant’s cash needs grew significantly.
 Money was needed for seeds, fertilizer and other inputs.

 It was also needed to cover his food requirements if he shifted to the

production of cash crops such as tea, rubber, or jute.

 Often moneylenders were more interested in acquiring peasant lands

as a result of loan defaults than they were in extracting high rates of
interest.

 Largely as a consequence of the moneylenders’ influence, Asian

peasant cultivators saw their economic status deteriorate. and

 rapid population growth often led to fragmentation and

impoverishment.
 Subsistence Agriculture and Extensive Cultivation in Africa
 Subsistence farming on small plots of land is the way of life for the
majority of African people living in agriculture-based economies.

 The great majority of farm families in tropical Africa still plan their
output primarily for their own subsistence.

 African agriculture systems are dominated by three major

characteristics:

the importance of subsistence farming in the village community;

the existence of some (though rapidly diminishing) land in excess of
immediate requirements, which permits a general practice of
shifting cultivation and reduces the value of land ownership as an
instrument of economic and political power; and
the rights of each family (both nuclear and extended) in a village to
have access to land and water in the immediate territorial vicinity,
excluding from such access use by families that do not belong to the
community even though they may be of the same tribe.

 Where traditional systems are breaking down, inequality is often

increasing further.
The low-productivity subsistence farming characteristic of most
traditional African agriculture results from a combination of three
historical forces restricting the growth of output:

1) Only small areas can be planted and weeded by the farm family
when it uses only traditional tools
In some countries, use of animals is impossible because of the tsetse
fly or a lack of fodder in the long dry seasons and
traditional farming practices must rely primarily on the application
of human labor to small parcels of land.

2) Given the limited amount of land that a farm family can cultivate in
the context of a traditional technology, these small areas tend to be
intensively cultivated.
As a result, they are subject to rapidly diminishing returns to
increased labor inputs.
In such conditions, shifting cultivation is the most economic
method of using limited supplies of labor on extensive tracts of land.
3) Labor is scarce during the busiest part of the growing season,
planting and weeding times.
At other times, much of the labor is underemployed.
Because the time of planting is determined by the onset of the rains
and much of Africa experiences only one extended rainy season, the
demand for workers during the early weeks of this rainy season
usually exceeds all available rural labor supplies.
The net result of these three forces had been slow growth in
agricultural labor productivity throughout much of Africa.
As long as population size remained relatively stable, this historical
pattern of low productivity and shifting cultivation enabled most
African tribes to meet their subsistence food requirements.
• But the feasibility of shifting cultivation has now broken down as
population densities increase.
• It has largely been replaced by sedentary cultivation on small owner-
occupied plots.

• As a result, the need for other nonhuman productive inputs and new
technologies grows, especially in the more densely populated
agricultural regions of Kenya, Nigeria, Ghana and Uganda.

• With the growth of towns, the penetration of the monetary

economy, soil erosion and deforestation of marginal lands, and the
introduction of land taxes, pure subsistence-agricultural practices are
no longer viable. And as land becomes increasingly scarce, land
degradation is increasing in scope.
 Despite some recent progress, just 22% of the cereal-growing
farmland in sub-Saharan Africa is sown with improved varieties,
which are used on a large majority of the land in all other
developing regions.

 Dependence on unimproved seeds, sown on unfertilized, rain-fed

fields is a worsening problem for the region given both the depletion
of soils and the unreliability of rainfall.
 Of all the major regions of the world, Africa has suffered the most
from its inability to expand food production at a sufficient pace to
keep up with its rapid population growth.
 As a result of declining production, African per capita food
consumption fell dramatically during the 1980s and 1990s while
dependence on imports particularly wheat and rice increased.
4.3. Gender Issues in Agricultural Development: the Important
Role of Women
 In Africa, where subsistence farming is predominant and shifting
cultivation remains important, nearly all tasks associated with
subsistence food production are performed by women.

 The most important role of women is providing food security for

the household through:-
 The supplementation of household earnings,

Diversification of household income sources and

Raising livestock to augment household assets.

 A traditional economics assumption following Nobel laureate Gary
Becker has been that households cooperate to maximize effectively
shared objectives: the “unitary household” model.
Contd…..
 However, development economics research has found that
households engage in extensive bargaining,
 sometimes to the point where higher incomes would be possible if
husbands and wives could cooperate more extensively.

 Although efforts to increase the income of women by providing

direct access to credit and inputs have experienced considerable
success, programs that work indirectly with women have
frequently fallen short of their stated goals.
 Because the active participation of women is critical to agricultural
prosperity, policy design should ensure that women benefit equally
from development efforts.
4.4. The Economics of Agricultural Development: Transition from
Peasant Subsistence to Specialized Commercial Farming.

 We can identify three broad stages in the evolution of agricultural

production:
1. The first and most primitive is the pure, low-productivity, mostly
subsistence-level, peasant farm.
2.The second stage is what might be called diversified or mixed\family
agriculture, where part of the produce is grown for consumption and
part for sale to the commercial sector.

• The third stage represents the modern farm, exclusively engaged in

high-productivity specialized agriculture geared to the commercial
market.
 Contd…..
 Agricultural modernization in mixed-market developing economies
may be described in terms of the gradual but sustained transition
from subsistence to diversified and specialized production.
 But such a transition involves much more than reorganizing the
structure of the farm economy or applying new agricultural
technologies.
 Any government attempting to transform its traditional agriculture
must recognize that in addition to adapting the farm structure to
meet the demand for increased production,
 Profound changes affecting the entire social, political and
institutional structure of rural societies will often be necessary.
 4.4.1. Subsistence Farming: Risk Aversion, Uncertainty and
Survival
 On the classic peasant subsistence farm:
most output is produced for family consumption (although some
may be sold or traded in local markets), and a few staple food crops
are the chief sources of food intake.

Output and productivity are low and only the simplest traditional
methods and tools are used.

Capital investment is minimal; land and labor are the principal

factors of production.
The law of diminishing returns is in operation as more labor is
applied to shrinking (or shifting) parcels of land.
Contd…..
 The failure of the rains, the appropriation of his land and the
appearance of the moneylender to collect outstanding debts are the
banes of the peasant's existence and cause him to fear for his
survival.

 Labor is underemployed for most of the year, although workers

may be fully occupied at seasonal peak periods such as planting and
harvest.

 The peasant usually cultivates only as much land as his family can
manage without the need for hired labor, although many peasant
farmers intermittently employ one or two landless laborers.
 Contd…..
 Technological limitations, rigid social institutions and fragmented
markets and communication networks between rural areas and
urban centers tend to discourage higher levels of production.
 Any cash income that is generated comes mostly from non-farm
wage labor. In addition :-
the static nature of the peasants' environment,

the uncertainties that surround them, the need to meet minimum

survival levels of output, and
the rigid social institutions into which they are locked, most
peasants behave in an economically rational manner when
confronted with alternative opportunities.
 The traditional two-factor neoclassical theory of production where
land (and perhaps capital) is fixed and labor is the only variable
input provides some insight into the economics of subsistence
agriculture.
 Unfortunately, this theory does not satisfactorily explain why
peasant agriculturalists are often resistant to technological
innovation in farming techniques or to the introduction of new seeds
or different cash crops.
 According to the standard theory, a rational income or profit-
maximizing farm or firm will always choose a method of production
that will increase output for a given cost (in this case, the available
labor time) or lower costs for a given output level.
 But the theory is based on the crucial assumption that farmers
possess "perfect knowledge" of all technological input-output
relationships as well as current information about prevailing factor
and product prices.

 The theory loses a good deal of its validity when applied to the
environment of subsistence agriculture in much of Asia, Africa, and
Latin America.

 Furthermore, when access to information is highly imperfect, the

transaction costs of obtaining this information are usually high.

 As a result, peasant farmers often face price bands (a wide range)

rather than a single input price.
 Along with limited access to credit and insurance, such an
environment is not conducive to the type of behavior posited by
neoclassical the­ory and goes a long way to explain the actual day- to-
day behavior of peasant farmers.
 Subsistence agriculture is thus a highly risky and uncertain venture.
It is made even more so by the fact that human lives are at stake.
 In regions where farms are extremely small and cultivation is
dependent on the uncertainties of variable rainfall, average output will
be low and in poor years the peasant and his family will be exposed to
the very real danger of starvation.
 In such circumstances, the main motivating force in the peasant's life
may be the maximization not of income but rather of his family's
chances of survival.
 Accordingly, when risk and uncertainty are high, a small farmer
may be very reluctant to shift from a traditional technology and crop
pattern that over the years he/she has come to know and understand
to a new one that promises higher yields but may entail greater risks
of crop failure.

 In many parts of Asia and Latin America, why peasant farmers

have apparently not responded to an "obvious" economic
opportunity will often reveal that:
1.The landlord secured all the gain,
2.The moneylender captured all the profits,
3.The government's "guaranteed" price was never paid, or

4.Complementary inputs were never made available.

4.4.2 The Transition to Mixed and Diversified Farming
 Subsistence living is merely substituted for subsistence production.

 For small farmers, exclusive reliance on cash crops can be even

more precarious( risky) than pure subsistence agriculture because
the risks of price fluctuations are added to the uncertainty of nature.

 Diversified or mixed farming therefore represents a logical

intermediate step in the transition from subsistence to specialized
production.

 In this stage, the staple crop no longer dominates farm output and
new cash crops such as fruits, vegetables, coffee and tea are
established, together with simple animal husbandry.
Contd…….
 These new activities can take up the normal slack in farm workloads
during times of the year when disguised unemployment is prevalent.

 This is desirable in many developing nations where rural labor is

abundantly avail­able for better and more efficient use. For example:
If the staple crop occupies the land during only parts of the year, new
crops can be introduced in the slack season to take advantage of both idle
land and family labor.

Where labor is in short supply during peak planting seasons, as in many

parts of Africa, simple laborsaving devices (such as small trac­tors,
mechanical seeders, or animal-operated steel plows) can be introduced to
free labor for other farm activities.
Contd….
Finally, the use of better seeds, fertilizer and simple...irrigation to
increase the yields of staple crops like wheat, maize, and rice can
free part of the land for cash crop cultivation while ensuring an
adequate sup­ply of the staple food.

 The farm operator can thus have a marketable surplus, which he

can sell to raise his family's consumption standards or invest in
farm improvements.

 Diversified farming can also minimize the impact of staple crop

failure and provide a security of income previously unavailable.
 The success or failure of such efforts to transform traditional
agriculture will depend not only on the farmer's ability and skill in
raising his productivity,

 But, also on the social, commercial, and institutional conditions

under which he must function.

 Small farmers of diversified countries like Colombia, Mexico,

Nigeria, Ghana, Kenya, India, Pakistan, Thailand, and the Philippines
are responsive to price incentives and economic opportunities and will
make radical changes in what they produce and how they produce it.

 Lack of innovation in agriculture, is usually due not to poor

motivation or fear of change per se but to inadequate or
unprofitable opportunities.
4.4.3 From Divergence to Specialization: Modern
Commercial Farming
 The specialized farm represents the final and most advanced stage of
individual holding in a mixed market economy.

 It is the most prevalent type of farming in advanced industrial

nations.

 It has evolved in response to and parallel with devel­opment in other

areas of the national economy.

 General rises in living standards, biological and technical progress,

and the expansion of national and international markets have
provided the main impetus for its emergence and growth.
 In specialized farming, the provision of food for the family with
some marketable surplus is no longer the basic goal.
 Instead, pure commercial profit becomes the criterion of success,
and maximum per-hectare yields derived from synthetic
(irrigation, fertilizer, pesticides, hybrid seeds, etc.) and natural
resources become the object of farm activity.
 Production, in short, is entirely for the market.

 Economic concepts such as fixed and variable costs, saving,

investment and rates of return, optimal factor combinations,
maximum production possibilities, market prices, and price supports
take on quantitative and qualitative significance.
 The emphasis in resource utilization is no longer on land, water,
and labor as in subsistence and often mixed farming.

 Instead, capital formation, technological progress, and scientific

research and development play major roles in stimulating higher
levels of output and productivity.

 Specialized farms vary in both size and function.

 They range from intensively cultivated fruit and vegetable farms to

the vast wheat and corn fields of North America.
 In most cases, sophisticated laborsaving mechanical equipment,
ranging from huge tractors and combine harvesters to airborne
spraying techniques, permits a single family to cultivate many
thousands of hectares of land.
 The common features of all specialized farms are:-
 Their emphasis on the cultivation of one particular crop;

 Their use of capital-intensive and, laborsaving techniques of

production; and
 Their reliance on economies of scale to reduce unit costs and
maximize profits.
For all practical purposes, specialized farming is no different in
concept or operation from large industrial enterprises.
 In fact, some of the largest specialized farming operations in both
the developed and especially the less developed nations are owned
and managed by large agribusiness multinational corporate
enterprises.
 4.5 Toward a Strategy of Agricultural and Rural Development:
Some Main Requirements.

1. Improving Small-Scale Agriculture

A)Technology and Innovation
 In most developing countries, new agricultural technologies and
innovations in farm practices are preconditions for sustained
improvements in levels of output and productivity.
 Two major sources of technological innovation can increase farm
yields.

1) the introduction of mechanized agriculture to replace human labor.

 It has a dramatic effect on the volume of output per worker,

especially where land is extensively cultivated and labor is scarce.
Contd…..
 For example, one man operating a huge combine harvester can
accomplish in a single hour what would require hundreds of
workers using traditional methods.
 But in the rural areas of most developing nations where land
parcels are small, capital is scarce, and labor is abundant,
 the introduction of heavily mechanized techniques is not only
often ill suited to the physical environment but, it has the effect of
creating more rural unemployment without necessarily lowering
per-unit costs of food production.

 Importation of such machinery can therefore be antidevelopment.

Contd…..
2) The second sources are biological (hybrid seeds), water control
(irrigation), and chemical (fertilizer, pesticides, insecticides, etc.)
innovations.

They are land-augmenting; that is, they improve the quality of

existing land by raising yields per hectare.

 Only indirectly do they increase output per worker.

Improved seeds, advanced techniques of irrigation and crop rotation;

the increasing use of fertilizers, pesticides, and herbicides; and new
developments in veterinary medicine and animal nutrition represent
major scientific advances in modern agriculture.
Contd…….
 These measures are technologically scale-neutral;

 they can be applied equally effectively on large and small farms.

 Again, the major challenge is to extend this success to sub- Saharan

Africa, which will in some cases need new innovations.

 There are also important environmental challenges in many parts of

the developing world,

 including risks posed by a falling water table, for which well-

designed government policy and in some cases restored collective
action mechanisms are usually necessary.
 B) Institutional and Pricing Policies: Providing the Necessary
Economic Incentives.
The social institutions and government economic policies that
accompany their introduction into the rural economy often are not
scale-neutral.

 On the contrary, they often merely serve the needs and vested
interests of the wealthy land owners.

Large landowners, with their disproportionate access to these

complementary inputs and support services,

are able to gain a competitive advantage over smallholders and

eventually drive them out of the market.
Large-scale farmers obtain access to low-interest government
credit, while smallholders are forced to turn to moneylenders.
The inevitable result is the further widening of the gap between rich
and poor and the increased consolidation of agricultural land in the
hands of a very few so-called progressive farmers.

Pricing of agricultural commodities, especially food grains and other

staples produced for local markets are also important criteria for
major improvements in government policies .

In Many LDC governments, Farmers have been paid prices below
either world competitive or free-market internal prices.

 The relative internal price ratio between food and manufactured

goods (the domestic terms of trade) thus turned against farmers and
in favor of urban manufacturers.
 With farm prices so low in some cases below the costs of
production-there was no incentive for farmers to expand output or
invest in new productivity-raising technology.
 As a result, local food supplies continually fell short of demand, and
many developing nations, especially in sub-Saharan Africa, that
were once self-sufficient in food production had to import the
balance of their food needs.
 This caused further strains on their international Bop’s situation and
contributed to the worsening foreign-exchange and international
debt crisis of the 1980s.

 Economists argue that LDC governments , they must not only make
the appropriate institutional and credit market adjustments but must
also provide incentives for small and medium-sized farmers by
implementing pricing policies that truly reflect internal market
C) Adapting to New Opportunities and New Constraints.

 The best opportunities for sales to growing urban areas are

generally found in higher value-added activities, particularly
horticulture (fruits, vegetables, and cut flowers) and aquaculture.

 But small farmers will need special organization and assistance to

take advantage of new opportunities.

 Smallholders can bargain better as a group than as individuals. So

a high priority is to facilitate collective action through producer
organizations to reach scale in marketing and bargain for better
prices.” Otherwise, the risk is large that these developments will
benefit mainly the larger farmers.
 2) Conditions for Rural Development
 We can draw three propositions that in essence constitute the
necessary conditions for the realization of a people-oriented
agricultural and rural development strategy.
A) Land Reform
Proposition 1: Farm structures and land tenure patterns must be
adapted to the dual objectives of increasing food production and
promoting a wider distribution of the benefits of agrarian progress.
 Agricultural and rural development that benefits the masses of
people can succeed only through a joint effort by the government
and all farmers, not just the large farmers.
 Done through the provision of secured tenure rights to the
individual farmer.
 A small farmer's attachment to his land is profound.
 It is closely bound up with his innermost sense of self-esteem and
freedom from coercion
 In most countries, the highly unequal structure of land ownership is
probably the single most important determinant of the existing
highly inequitable distribution of rural income and wealth.
 It is also the basis for the character of agricultural development.

 Land reform usually entails a redistribution of the rights of

ownership or use of land away from large landowners in favor of
cultivators with very limited or no landholdings.
 Different economists and FAO also reported land reform as a
prerequisite for development, in many developing countries.
 The report argued that such reform is more urgent today than ever
before, primarily because:
 income inequalities and unemployment in rural areas have worsened,
 rapid population growth threatens to worsen existing inequalities,
 recent and potential technological breakthroughs in agriculture (the
green revolution) can be exploited primarily by large and powerful
rural landholders and hence can result in an increase in their power,
wealth, and capacity to resist future reform.
 land redistribution not only increases rural employment and raises rural
incomes but also leads to greater agricultural production and more
efficient resource utilization.
 If programs of land reform can be legislated and effectively
implemented by the government, the basis for improved output levels
and higher standards of living for rural peasants will be established.
B) Supportive Policies
Proposition 2: The full benefits of small-scale agricultural
development cannot be realized unless government support systems
are created that provide the necessary incentives, economic
opportunities, and access to needed credit and inputs to enable small
cultivators to expand their output and raise their productivity.
Though land reform is essential in many parts of Asia and Latin
America, it is likely to be ineffective and perhaps even
counterproductive unless there are corresponding changes in:-
Rural institutions that control production (e.g. Banks,
moneylenders, seed and fertilizer distributors),
supporting government aid services (e.g., technical and educational
extension services, public credit agencies, storage and marketing
facilities, rural transport and feeder roads), and
 government pricing policies with regard to both inputs (e.g.,
removing factor price distortions) and outputs (paying market-value
prices to farmers).
 Even where land reform is not necessary but where productivity and
incomes are low,
 This broad network of external support services, along with
appropriate governmental pricing policies related to both farm inputs
and outputs, is an essential condition for sustained agricultural
progress.
 C) Integrated Development Objectives

Proposition 3: Rural development, though dependent primarily on

small farmer agricultural progress, implies much more. It
encompasses:

i)Efforts to raise both farm and non-farm rural real incomes through
job creation, rural industrialization, and the increased provision of
education, health and nutrition, housing, and a variety of related
social and welfare services;

ii) A decreasing inequality in the distribution of rural incomes and a

lessening of urban- rural imbalances in incomes and economic
opportunities; and
iii) Successful attention to the need for environmental sustainability
limiting the extension of farmland into remaining forests and other
fragile areas, promoting conservation, and preventing the harmful
misuse of agrochemicals and other inputs;
iv) the capacity of the rural sector to sustain and accelerate the pace of
these improvements over time.
•This proposition is self-explanatory. the achievement of its four
objectives is vital to national development.

•This is not only because the majority of 3rd World populations are
located in rural areas, but also because the rapidly increasing problems
of urban unemployment and population congestion must find their
ultimate solution in the improvement of the rural environment.
 By restoring a proper balance between urban and rural
economic opportunities and
 by creating the conditions for broad popular participation
in national development efforts and rewards,
 developing nations will have taken a giant step toward the
realization of the true meaning of development.
The End of the Chapter