The following thoughts from Dr. Adel Beshai were collected through an interview earlier this year
My interest in agriculture rose just over 40 years ago when in 1974 I was assistant to the secretary general of the UN World Food conference which was held in Rome.
This event was triggered by a world food crisis which began in 1973, when output of America and Russia fell drastically and prices of major grains doubled. In our attempt to address the crisis we discovered that part of the reason behind the food crises was also the developing countries…
Developing countries as a group before World War II were net food exporters. After World War II, when scores of developing countries were embarking on independence and getting rid of colonialism and imperialism, they effectively dismissed the agriculture sector in favor of industrialization. Their underlying rationale was that colonialists wanted the developing world to remain only focused on the agriculture sector in order to provide the necessary raw materials needed for their own industrialization
Indeed developing countries went along the path of industrialization, and whilst industrialization is beneficial, especially if you are industrializing efficiently and effectively, it doesn’t necessarily entail ignoring the agriculture sector. However, the outcome was that developing countries had indeed ignored agriculture in their very attempt to industrialize from as far back as 2 decades prior to the crisis of the 1970’s. If we look at some selective growth rates, growth in agriculture was very low in the developing world after World War II given the perception that it is a “primitive” sector. The resolution of the UN World Food conference at the time was that there was a need to for change and direct the attention of the developing world to bring back the agriculture sector as an engine of growth as well alongside the industrial sector, achieving a more balanced source of growth The origin of balanced growth goes back to Malthus in 1824 in his published book “Principles of Political Economy”, where he explained that you cannot develop by only depending on one industry. Therefore to validate how balanced growth can come about it has become necessary to look at agriculture as a sector with backward and forward linkages in an economy. Not only as a source of raw material, but also a source of demand; where if the generated income becomes high from the sector, it increases the capacity and the purchasing power to buy from the industrial sector.
Nonetheless, even if agriculture regained some attention for a while in the developing world and agricultural output increased, soon again the interest in agriculture got lost and many started to focus on easier, often more lucrative jobs and the rationale “I don’t want to be a farmer, I want to be a merchant” quickly came in to place.
So what are the lessons learned?
• Agriculture is important
• In most of the developing countries agriculture was a big percentage of GDP and industry a small percentage, thus even if you support the right industry, since it is a small weight in GDP, the overall average would still be not as much affected had they invested more in agriculture.
• Agriculture policies have been unfavorable to the sector in the developing world: Governments historically have been taxing the sector at a time when developed countries were subsidizing it.
What is the reason behind the decrease of contribution of the agriculture sector to GDP in Egypt?
• The sector is not getting its due share of attention, as a result of wrong policies.
• There was no inclusive rural development in Egypt, even during the era of Muhammad Ali when agricultural growth was remarkable, the farmer was usually oppressed.
• The producer is exploited, as he doesn’t receive his due share of profit since the era of Nasser until this date. A very major problem in agriculture in Egypt that hasn’t been resolved up to this date is the marketing of agricultural products. Agriculture products are sold in wholesale markets that are controlled by a quasi-monopsony–even if there are thousands of producers, the few number of buyers have the power to determine the price, thus keeping it low.
• Agriculture banks and cooperatives are not doing a good job supporting small farmers.
• Only a small proportion of fertilizers are sold at subsidized prices; black market and traders enter the picture and the farmer at the end is left to buy the fertilizers at the market price, causing his profit to increase only marginally.
Way forward and a look in to the future…
• Agriculture affects the lives and the incomes of many, thus policy makers ought to solve the above issues.
• “The farmer is the best economist”. Before planting a crop, give the farmer his due and provide him with the right incentives to make it profitable to produce. If it is no longer profitable to produce, the farmer would rather sell his land: as has been the case in Egypt, many farmers have been building on the agriculture land.
• Support small farmers. Any agricultural development project needs to look first at the anatomy of the agriculture sector, meaning: it has to first determine what the share of the small producer would be and what would rural development and a rise in small farmer income entail. The result would be a win-win outcome, achieving social justice and growth.
• There is a need to spread a new philosophy, namely that agriculture can be a profitable activity. Many people in developing countries believe that growth will only occur by having factories, forgetting a very important fact that most of the richest countries in the world (e.g. New Zealand and Denmark) are heavily involved in agriculture.
In conclusion, if I need to summarize my overall policy prescription it would go like this: when it comes to agriculture you need a mixed economy, no country should leave agriculture entirely to the market. Following the dialogue of export led growth, I would say: “Agriculture for export”.
