CHAPTER 7: AGRICULTURAL TRANSFORMATION AND RURAL DEVELOPMENT

7.1 THE IMPERATIVES OF AGRICULTURE PROGRESS AND RURAL DEVELOPMENT

OVERVIEW
 Agricultural and rural development is essential for national
development.
 Migration to cities in Africa, Asia, and Latin America is increasing rapidly.
 Nearly 2 billion people in developing countries struggle with inadequate agricultural livelihoods.
 The United Nations Food and Agriculture Organization estimated that in 2018, over 820 million people lacked
sufficient food.
 Current consensus among economists is that agriculture and rural economies are crucial for economic progress in
low-income countries.
 Traditionally, agriculture was seen as a passive contributor to economic development, primarily supporting
industrial growth.
 Integrated Rural Development: the broad spectrum of rural development activities, including small-farmer
agricultural progress, the provision of physical and social infrastructure, the development of rural non-farm
industries, and the capacity of the rural sector to sustain and accelerate the pace of these improvements over
time.

RURAL POPULATION AND POVERTY

 Over two-thirds of the world's poorest people live in rural areas and rely on subsistence
agriculture.
 In 2018, over 3 billion people lived in rural areas of developing countries and about 25% of these individuals lived
in extreme poverty.
 Despite urbanization, over 60% of the population in low- and lower-middle-income countries reside in rural areas.
Countries with over 80% rural populations include Ethiopia, Nepal, Nigeria, Papua New Guinea, Rwanda, South
Sudan, Sri Lanka and Uganda.
 India remains more than two-thirds rural.

THE ROLE OF AGRICULTURE IN DEVELOPMENT

1. Lewis’ Two-Sector Model: Emphasizes rapid industrial growth, with agriculture providing cheap food and surplus
labor.
2. Simom Kuznet’s Contributions:
a) The product contribution of inputs for industry such as textiles and food processing.
b) The foreign-exchange contribution of using agricultural export revenues to import capital equipment.
c) The market contribution of rising rural incomes that create more demand for consumer products.
d) The factor market contribution: labor contribution and capital contribution.

ELEMENTS OF ECONOMIC DEVELOPMENT STRATEGY

 An agriculture- and employment-based strategy requires:
1) Accelerated output growth through technological and institutional
changes.
2) Rising domestic demand for agricultural output from urban development.
3) Diversified, non-agricultural, labor-intensive rural development activities.

EIGHT MAIN QUESTIONS THAT NEEDS TO BE ASKED ABOUT AGRICULTURAL AND RURAL DEVELOPMENT AS IT
RELATES TO OVERALL NATIONAL DEVELOPMENT
1. How can total agricultural output and productivity per capita be substantially increased in a manner that will directly
benefit the average small farmer and the landless rural dweller while providing a sufficient food surplus to promote
food security and support a growing urban, industrial sector?
2. What is the process by which traditional low-productivity (peasant) farms are transformed into high-productivity
commercial enterprises?
3. When traditional family farmers and traditional (peasant) cultivators resist change, is their behaviour stubborn and
irrational, or are they acting rationally within the context of their particular economic environment?
4. What are the effects of the high risks faced by farmers in low-income countries, how do farm families cope with
these risks, and what policies are appropriate to lessen risk?
5. Are economic and price incentives sufficient to elicit output increases among traditional (peasant) agriculturalists, or
are institutional and structural changes in rural farming systems also required?
6. Is raising agricultural productivity sufficient to improve rural life, or must there be concomitant off-farm employment
creation along with improvements in educational, medical, and other social services? In other words, what do we
mean by rural development, and how can it be achieved?
7. How can countries most effectively address problems of national food security?
8. What is the proper role for government in the agricultural sector? (What actions can lead to improvements through
addressing market failure and what are likely to make things worse through government failure?)

7.2 AGRICULTURAL GROWTH: PAST AND PROGRESS AND CURRENT CHALLENGES

7.2.a Trends in Agricultural Productivity
OVERVIEW
 Agricultural production has kept pace with world population growth, contrary to some predictions of global food
shortages.
 The developing world has led the way in agricultural output gains.
 Green Revolution refers to the increase in grain production due to new hybrid seed varieties of wheat, rice, and
corn, leading to high farm yields in developing countries.
GROWTH IN AGRICULTURAL OUTPUT
 World Bank Estimates (1980-2004):
-Developing world: 2.6% growth per year
-Developed world: 0.9% growth per year
 Developing countries' share of global agricultural GDP increased from 56% to 65% and their share of world non-
agricultural GDP remains at 21%.
 Agricultural output in developing countries grew significantly from 1970 to 2010.
 In Africa, agricultural output growth has not kept pace with population growth.
 Impact of Agricultural Sector Problems: Issues in agriculture can lower incomes, leading to increased migration to
urban informal sectors. Unlike advanced countries, developing countries have higher agricultural employment but
lower output. This reflects lower labor productivity in agriculture compared to manufacturing and commerce.

SUCCESSFUL PROGRAMS
 Various programs have reduced hunger and increased agricultural
productivity:
-Green Revolution in Asia -Land tenure reform in China and Vietnam
-Containment of wheat rusts -Improved tilapia in the Philippines
-Improved maize and pest-resistant cassavas in -Cotton reforms in Burkina Faso
sub-Saharan Africa -Market improvements in Kenya
-Shallow tube-wells for rice in Bangladesh -Smallholder dairy marketing in India
-Hybrid rice and mung bean improvements in East Asia

GLOBAL AGRICULTURAL PRODUCTION TRENDS

 Agricultural production is rising globally, generally keeping pace with population growth. However, progress is
uneven:
Asia: Cereal yields in 2005 were nearly triple those of 1960.
Latin America: Strong production gains.
China: Hunger levels decreased.
South Asia: Good performance, but hunger increased in India.
Sub-Saharan Africa: Yields increased by about one-third.

PRICE TRENDS FOR AGRICULTURAL COMMODITIES

 Prices for key agricultural commodities have returned to levels not seen since the late 1970s.
 From 2011 to 2016, prices trended downward, nearing pre-crisis levels.
 From 2016 to 2019, prices increased but did not reach crisis highs.

FUTURE CHALLENGES
 By the late 2040s, the world will need to feed over 9 billion people.
 Despite successes, significant challenges remain.
 A proposed international treaty to manage food price spikes could help prevent negative outcomes, but sustaining
interest has been difficult.

7.2.b. Market Failures And The Need For Government Policy

THE NEGLECT OF AGRICULTURE IN LOW-INCOME REGIONS
 Neglect of agriculture in development priorities due to misplaced emphasis on rapid industrialization.
 Government's role in agriculture is crucial in overcoming this neglect.

CHALLENGES IN AGRICULTURE IN DEVELOPMENT

 Early government interventions in agriculture often resulted in harm rather than good.
 Market failures in agriculture include environmental externalities, public good character of agricultural services,
economies of scale in marketing, information asymmetries in product quality, missing markets, monopoly power
in
input supply, and monopsony power in purchasing farmer output.
 Addressing monopsonistic power where large farmers have wage-setting power over landless laborers in local
labor
markets.
 Government may need to create markets where they are missing, such as weather insurance and credit.

ROLE OF GOVERNMENT IN POVERTY ALLEVIATION

 Poverty prevents farmers from taking advantage of opportunities that could help pull them out of poverty.
 Lack of collateral, health and nutrition, information, and missing markets limit the ability of poor farmers to take
advantage of opportunities of globalization.
 Government should ensure that growth in agriculture is shared by the poor.
 In some countries, impressive agricultural growth has occurred without the poor receiving proportional benefits.
 By including the poor, the human and natural resources of a developing nation are more fully employed, leading
to
increased growth and poverty reduction.

7.2.c Agricultural Extension

AGRICULTURAL EXTENSION SERVICES
 Agricultural Extension is the demonstration and training services for improving agricultural practices and raising
farm productivity.
 Agricultural extension services are government-supported, often working with universities.
 These programs have improved agricultural practices and raised farm productivity.
 They also educate rural people in natural resources, health, nutrition, and sanitation practices.
EXTENSION SERVICES IN DEVELOPING COUNTRIES
 Extension services have shown potential positive effects on productivity, particularly through the introduction of
high-
yielding crop varieties.
 A common approach in developing countries is participatory adult education through Farmer Field Schools (FFSs).
 The Junior FFS focuses on knowledge, skills, productivity, and food security for farm children and their families.

LACK OF ADOPTION OF TECHNOLOGIES AND IMPROVED FARMING PRACTICES

 Adoption of proven technologies and improved farming practices by smallholder farmers has been slow,
contributing
to slow agricultural productivity growth.
 Causes of low adoption include lack of knowledge, access to markets, inability to distinguish genuine products,
credit
constraints, uninsured risks, and coordination problems.
 Limited adoption of basic improved cultivation methods, such as crop rotation and use of green manure, is
particularly important for marginalized smallholder women farmers.
 Women farmers are under-served by agricultural extension, leading to gross unfairness and potential harm.

7.3 THE STRUCTURE OF AGRARIAN SYSTEMS IN THE DEVELOPING WORLD

7.3.a Three Systems of Agriculture
OVERVIEW
 Understanding agricultural systems is crucial for rural development.
 The transition from subsistence to commercial agriculture is key.
 Agricultural productivity varies significantly across countries.
 Developed countries have more physical and human capital, leading to higher productivity.

1. AGRICULTURE-BASED COUNTRIES
 Agriculture is a major economic growth source.
 Accounts for approximately 32% of GDP growth.
 417 million people live in these countries.
 Over two-thirds of the poor in these countries reside in rural areas.
 82% of the rural population in sub-Saharan Africa lives in these countries.
 Includes countries like Laos and some African nations like Senegal.

2. TRANSFORMING COUNTRIES
 Home to about 2.2 billion rural people.
 Agriculture contributes only 7% to GDP growth.
 Almost 80% of the poor are rural.
 Most of South and East Asia, North Africa, and the Middle East are included.

3. URBANIZED COUNTRIES
 Nearly half of the poor live in cities.
 Agriculture contributes even less to output growth.
 Found mainly in Latin America, the Caribbean, and parts of Eastern Europe and Central Asia.
 Contains about 255 million rural dwellers.

7.3.b Traditional and Peasant Agriculture in Latin America, Asia and Africa
 Agrarian systems involve land distribution, ownership and management.
 In many developing countries, land is concentrated in the hands of a few powerful landowners. Latin America and
parts of Asia show this concentration, while Africa has more unused land.
 Asia struggles with fragmented and congested land parcels.
 Average farm sizes in Latin America are larger than in Asia.
 Variance in farm size is higher in Latin America, with some large farms and many small ones
 In Asia, farm sizes are generally becoming smaller over time. This trend is also increasingly observed in Africa.

7.3.c Agrarian Patterns in Latin America: Progress and Remaining Poverty Challenges
AGRARIAN PATTERNS IN LATIN AMERICA
 Latin America faces issues with the most prevalent pattern of the American Agrarian System known as the
latifundio-
minifundio system:
Latifundio are very large landholdings owned by a few landlords. These are farms large enough to employ
more
than 12 people, some employing thousands.
Minifundio are smaller landholdings. These are farms too small to provide employment for a single family (less
than two workers).

OTHER FARM TYPES AND ITS EFFICIENCY

Family Farm: Owned and operated by a single household.
Medium-Size Farm: Employs up to 12 workers.
 Family and medium-size farm provide work for 2-4 people (family farms) and 4-12 workers (medium-size farms).
It
use a more efficient balance of labor and land and show higher total factor productivity compared to latifundios
and
minifundios.

ECONOMIC INEFFICIENCY OF LATIFUNDIOS

 Transaction Costs are costs related to business operations, such as gathering information, monitoring, establishing
 reliable suppliers, formulating contracts and obtaining credit.
 Wealthy landowners often value latifundios for power and prestige rather than agricultural output, leading to idle
land
or less intensive farming and higher supervision costs compared to family labor on smaller farms.
IMPROVING AGRICULTURAL PRODUCTION
 Raising agricultural production requires:
1. Direct economic policies (better seeds, fertilizers, etc.).
2. Reorganization of rural social and institutional structures.
 Focus on providing opportunities for peasants, especially indigenous people.

CURRENT AGRICULTURAL LANDSCAPE

 Despite poverty among minifundio owners, a dynamic sector with efficient family and medium-size farms exists.
 Chile leads in nontraditional exports (fresh fruits, aquaculture, etc.) and has a strong agricultural extension
system.
 Brazil has seen growth in sugarcane-based biofuels and soybeans.

CHALLENGES AND INEQUALITIES

 The latifundio-minifundio pattern remains dominant in some countries (e.g., Guatemala, Honduras).
 Social discrimination and limited access to agricultural land persist, particularly in countries like Colombia.
 Areas with poor agricultural conditions often have high poverty levels, exacerbated by reduced access to credit
and
inputs, and political participation barriers for the poor..
 Addressing these issues requires sustained action from both government and civil society to improve conditions
for
rural populations in Latin America.

7.3.d Transforming Economies: Problems of Fragmentation and Subdivision of Peasant Land in Asia
KEY TERMS
Landlord: Owner of land with rights to lease to tenants.
Sharecropper: Tenant farmer who shares crop yield with the landlord.
Tenant Farmer: Farmer who pays for land use, often by sharing output.
Moneylender: Lends money at high interest rates, often to peasant farmers.

RURAL CONDITIONS IN ASIA

 Traditional Agrarian Structure
-Before European colonization, the agrarian structure was village-centered.
-Local chiefs and peasant families exchanged goods and services:
(a) Peasants provided produce and labor.
(b) Chiefs offered protection, land rights, and public services.
-Land decisions were made by the community or chief, with rights to cultivate land protected.

IMPACT OF EUROPEAN COLONIZATION

 European colonization changed the agrarian structure significantly.
 Gunnar Myrdal noted that colonial rule catalyzed changes in:
1. Property rights
2. Monetization of the economy
3. Population growth
 European land tenure systems promoted private property ownership:
(a) Landlords gained unrestricted rights to land.
(b) The role of landlords shifted from community members to absolute owners.
 Social consequences: Breakdown of village cohesion and informal rights structures and landlords were relieved of
community obligations, focusing solely on land taxes.

SHARECROPPING STATISTICS
 India: 48% of tenanted land is sharecropped.
 Indonesia: 60% sharecropped.
 Philippines: 79% sharecropped.
 Sharecropping is prevalent in Asia (84.5% of tenanted land) compared to Latin America (16.1%).
 Sharecropping is rare in Africa, where tribal or communal tenures dominate.

RISE OF MONEYLENDERS
 Individual land titles allowed moneylenders to gain power.
 Land became negotiable for loans, leading to potential loss of land for peasants.
 Transition from subsistence to commercial agriculture increased cash needs:
 Money was needed for seeds, fertilizers, and food.
 Moneylenders often prioritized acquiring land over high-interest loans.

ECONOMIC DETERIORATION
 Moneylenders' influence led to the deterioration of traditional peasant cultivators' economic status.
 Rapid population growth contributed to land fragmentation and impoverishment.
 Understanding the deterioration of rural conditions in Asia requires examining the interplay of colonial rule,
economic
changes, and the rise of moneylenders.

LAND FRAGMENTATION
 Severe fragmentation of landholdings has occurred.
 Average peasant holdings are often less than 1 hectare.
 Many families face chronic poverty as holdings shrink below subsistence levels.

INDEBTEDNESS AND POVERTY

 Peasants borrow from moneylenders at high interest rates (50-200%).
 Inability to repay leads to selling land and becoming tenants.
 High rents and unfavorable sharecropping terms exacerbate poverty.
  Abundant labor results in extremely low wages.
 Transition from small proprietors to tenant farmers, then to landless laborers, and finally to jobless
vagrants. In India, high rates of farmer suicides reached 400,000 from 2000-2018.
 Indebtedness leads to harassment, shame, and fear of losing land.
 Climate conditions worsen farming results and contribute to mental health issues.

7.3.e Subsistence Agriculture and Extensive Cultivation in Africa

OVERVIEW OF SUBSISTENCE FARMING
Definition: Farming primarily for personal consumption.
Dominance: Most African farm families focus on subsistence farming.
Exceptions: Some plantations and export crops exist (e.g., sugar, cocoa, coffee).

SHIFTING CULTIVATION
Definition: A method of farming where land is tilled until it loses fertility, then a new area is cleared for
planting.
Fertilizers:
Manure and chemical fertilizers are generally
unnecessary.
Some villages apply animal waste to intensively cultivated plots to maintain fertility.

CHARACTERISTICS OF AFRICAN AGRICULTURE

Importance of Subsistence: Central to village
communities.
Shifting Cultivation: Some land is available beyond immediate needs, allowing for shifting cultivation.
Access Rights: Families have rights to land and water, excluding non-community members.

CHALLENGES IN TRADITIONAL AFRICAN AGRICULTURE

Limited Tools: Traditional tools restrict the area that can be
cultivated.
Diminishing Returns: Intensive cultivation leads to diminishing returns on labor.
Shifting Cultivation: Remains the most economic method under traditional
practices.

CURRENT CHALLENGES
 Increasing population densities have made shifting cultivation less
viable. Shift towards sedentary cultivation on small plots.

ECONOMIC AND ENVIRONMENTAL FACTORS

Urban Growth Growth Irrigation
Land Issues Seed Quality

7.4 The Important Role of Women

OVERVIEW
 Women play a crucial role in agricultural production, especially in developing regions like Africa and
Asia.
 In subsistence farming, women perform nearly all tasks related to food production.
 Ester Boserup's studies show that women do most agricultural work, with estimates of 60-80% in Africa and
Asia. Women's labor is often "invisible," meaning they receive no payment for their work.
 Women are responsible for removing and burning felled trees, sowing or planting, weeding, harvesting and
preparing crops for storage or consumption. Men typically handle initial tasks like cutting trees but often seek
cash income elsewhere.
 Household tasks of women include processing grains, tending livestock, cooking, caring for children and collecting
firewood and water can add hours to their workday.
 Women often engage in household production for sale, such as homemade beer, processed foods, handicrafts
and textiles. These activities help supplement household income and provide food security.
 Non-farm activities are becoming increasingly important for women's economic and social advancemen
Government programs that favor men exacerbate disparities in resource access. t.

TIME POVERTY
 Women face "time poverty" due to multiple responsibilities:
Labor for cash crops
Cultivating food for household consumption
Raising and marketing livestock
Household chores (processing and cooking food)
 Women often work longer hours than men due to these diverse
responsibilities.

CHALLENGES FACED BY WOMEN

 Women's diverse duties complicate the assessment of their agricultural
production.
 As population density increases, women spend more time traveling to fields, often in harsh
conditions. Women cultivate small vegetable gardens, which are vital for family food security.

FINANCIAL CONSTRAINTS
 Financial investments are risky, especially for poorer
households.
 Limited access to credit forces women to use less efficient production methods, leading to lower
incomes. Women often retain traditional economic activities due to restricted choices.

CHANGING ECONOMIC STATUS

 As agriculture becomes more commercialized, women's roles and economic status may
change. Women often remain unpaid for their contributions to cash crops.
 Resources are frequently diverted from women's crops to promote cash cropping.
CONCLUSION
 Women's contributions to agriculture are vital for food security and household income.
 Addressing gender disparities in agricultural policies is essential for improving women's productivity and economic
status.

ECONOMIC IMPACT OF GENDER INEQUALITY IN AGRICULTURE

Subtopic 1: Cash Contributions and Household Welfare
 Significant increases in a male spouse’s cash contribution are necessary to offset a woman’s losses when
vegetable
prices rise.
 If the husband's contribution does not meet the increased cash needs, the welfare of women and children
declines.
 Women typically spend a higher proportion of their income on nutrition and basic necessities compared to men.

Subtopic 2: Household Income and Health

 An increase in household income does not guarantee improvements in health and nutrition if it comes at the
expense
of women's resources.
 Changes in land use that boost household income but diminish women's economic status can harm the welfare of
both women and children.

Subtopic 3: Unitary Household Model vs. Bargaining

 Traditional economics assumes households cooperate to maximize shared objectives (the “unitary household”
model).
 Development economics shows that households often engage in bargaining, which can lead to higher incomes if
cooperation improves.
 Households spend differently based on who controls the income, affecting bargaining power.

Subtopic 4: Gender and Resource Allocation

 Men controlling income from cash crops can increase their bargaining power, affecting how funds are used.
 A larger fraction of income controlled by women is typically spent on children's health and education.
 Evidence suggests reallocating agricultural inputs from husbands’ to wives’ plots can increase efficiency.

Subtopic 5: Case Study: Burkina Faso

 Research by Christopher Udry indicates that women-controlled plots yield less than men-controlled plots due to
higher labor and fertilizer inputs on men's plots.
 Misallocation of resources leads to an estimated six percent loss in output.

Subtopic 6: Empowering Women in Agriculture

 Supporting programs that empower rural women is essential for economic efficiency and social justice.
 Many government programs exclude women due to lack of collateral, property rights, and financial
independence.
 Agricultural training often focuses on low-productivity tasks for women, reinforcing traditional roles.

Subtopic 7: Challenges in Development Programs

 Women’s involvement in development projects is often limited to welfare programs that do not enhance
economic
well-being.
 Projects relying on unpaid labor from women yield minimal support and success.
 Direct control of resources by women leads to better engagement and outcomes.

Subtopic 8: Policy Recommendations

 Adoption of new crops and technologies should align with the interests of female household members.
 Active participation of women is crucial for agricultural prosperity.
 Policy design must ensure equal benefits for women in development efforts.

7.5 The Microeconomics of Farmer Behaviour and Agricultural Development

7.5.a The Transition from Traditional Subsistence to Specialized Commercial Farming
 The transition from traditional subsistence to specialized commercial farming represents a significant shift in
agricultural practices and economic systems.

TRADITIONAL SUBSISTENCE FARMING

 Self-sufficiency: Families or communities produce food primarily for their own consumption.
 Diversified farming: Multiple crops and livestock are raised to ensure food security and minimize risk.
 Low technology: Traditional farming methods, such as manual labor and simple tools, are used.
 Local markets: Surplus produce is sold in local markets or exchanged with neighbors.

SPECIALIZED COMMERCIAL FARMING

 Market-oriented: Farms produce specific crops or livestock for sale in national or international markets.
 Monoculture: Large areas are dedicated to a single crop or livestock species to increase efficiency and reduce
costs.
 High technology: Modern farming methods, such as mechanization, irrigation, and precision agriculture, are
employed.
 Global supply chains: Produce is sold to wholesalers, processors, or exporters, and may be transported long
distances.

DRIVERS OF THE TRANSITION

 Population growth: Increasing demand for food and agricultural products.
 Urbanization: Growing cities create new markets for agricultural products.
 Technological advancements: Improved farming methods, transportation, and communication enable larger-scale,
specialized farming.
 Government policies: Support for commercial agriculture, such as subsidies, credit programs, and trade
agreements.

7.5.b Subsistence Farming: Risk Aversion, Uncertainty and Survival

 Subsistence farming is a type of agriculture where families or communities produce food primarily for their own
consumption, often relying on traditional practices and limited resources. Here's a deeper dive into the risks,
uncertainties, and survival strategies associated with subsistence farming:

RISK AVERSION
 Crop failure: Subsistence farmers are vulnerable to crop failures due to weather events, pests, or diseases.
 Livestock diseases: Livestock diseases can lead to significant losses and impact food security.
 Market fluctuations: Subsistence farmers may not have access to stable markets or fair prices for their produce.

UNCERTAINTY
 Weather variability: Subsistence farmers are often at the mercy of unpredictable weather patterns, such as
droughts
or floods.
 Soil degradation: Soil quality can decline over time, reducing fertility and affecting crop yields.
 Pests and diseases: New pests and diseases can emerge, threatening crops and livestock.

SURVIVAL STRATEGIES
 Diversification: Subsistence farmers often diversify their crops and livestock to reduce dependence on a single
crop
or animal.
 Traditional practices: Farmers may rely on traditional practices, such as crop rotation and organic farming, to
maintain soil fertility and reduce pests and diseases.
 Community support: Subsistence farmers often rely on community support, such as shared labor and knowledge,
to
overcome challenges.
 Food storage: Farmers may store food for future consumption to mitigate against crop failures or other disruptions.
 Off-farm income: Some subsistence farmers may supplement their income with off-farm work to reduce
dependence
on farming alone.

7.5 c The Economics of Sharecropping and Interlocking Factor Markets

 Sharecropping is a farming arrangement where a landowner allows a tenant to cultivate the land in exchange for a
share of the crops produced.
 Interlocking factor markets refer to the interconnectedness of markets for different factors of production, such as
land, labor, and capital.

THE ECONOMICS OF SHARECROPPING

 Risk Sharing: it allows for risk sharing between the landowner and the tenant. The tenant bears the risk of crop
failure,
while the landowner bears the risk of rent non-payment.
 Incentive Problem: create an incentive problem, as the tenant may not have a strong incentive to work hard or
invest
in the land, since they only receive a share of the output.
 Efficiency: an efficient arrangement, as it allows the tenant to farm the land without having to purchase it outright.
 Exploitation: criticized for potentially exploitative, as landowners may take advantage of tenants by charging high
rents or providing inadequate support.

INTERLOCKING FACTOR MARKETS

 Land Market: The land market is interconnected with other factor markets, such as the labor market and the
capital
market.
 Labor Market: The labor market is affected by the land market, as the availability of land can impact the demand
for
labor.
 Capital Market: The capital market is also interconnected with the land market, as the availability of capital can
impact the ability of farmers to purchase or rent land.
 Market Power: Interlocking factor markets can create market power imbalances, where one party has more
control
over the market than others.

IMPLICATIONS OF SHARECROPPING AND INTERLOCKING FACTOR MARKETS

 Poverty and Inequality: Sharecropping and interlocking factor markets can perpetuate poverty and inequality, as
those with more power and resources may be able to exploit those with less.
 Market Distortions: Interlocking factor markets can create market distortions, such as price distortions and
inefficiencies.
 Policy Interventions: Policy interventions, such as land reform and labor protections, may be necessary to address
the negative implications of sharecropping and interlocking factor markets.
 Alternative Arrangements: Alternative arrangements, such as cooperative farming and community land trusts,
may
provide more equitable and sustainable solutions for farmers and rural communities.

7.5.d Intermediate Steps to Mixed or Diversified Farming

TRANSITION FROM TRADITIONAL TO SPECIALIZED FARMING
 Instant transformation from traditional agrarian systems to specialized commercial farming is unrealistic.
 Introducing cash crops indiscriminately can lead to loss of land for peasants.
 Subsistence living can replace subsistence production without improvement.

DIVERSIFIED (MIXED) FARMING

 Definition: Production of both staple crops and cash crops along with simple animal husbandry.
 Represents a logical intermediate step from subsistence to specialized farming.
 Characteristics:
Staple crops no longer dominate farm output.
Introduction of cash crops like fruits, vegetables, coffee, tea, and pyrethrum.
New activities can utilize idle land and family labor during slack seasons.

BENEFITS OF DIVERSIFIED FARMING

 Utilization of Idle Land: New crops can be introduced during off-seasons.
 Labor Efficiency: Labor-saving devices (e.g., small tractors, mechanical seeders) can be used during peak
seasons.
 Increased Yields: Better seeds, fertilizers, and irrigation can enhance staple crop yields.
 Marketable Surplus: Farmers can sell surplus to improve living standards or invest in farm improvements.
 Income Security: Minimizes the impact of staple crop failures.

FACTORS FOR SUCCESS

 Access to credit, fertilizers, water, crop information, and marketing facilities.
 Fair market prices for outputs.
 Assurance that improvements benefit the farmer and family.

EVIDENCE OF RESPONSIVENESS
 Countries like Colombia, Mexico, Nigeria, Ghana, Kenya, India, Pakistan, Thailand, and the Philippines show that
small farmers can adapt to economic incentives and opportunities.

7.5.e From Divergence to Specialization: Modern Commercial Farming

CHARACTERISTICS OF SPECIALIZED FARMING
 Represents the final and most advanced stage of agricultural production.
 Focuses entirely on market production rather than family sustenance.
 Emphasizes commercial profit and maximum yields using synthetic and natural resources.

VARIABILITY IN SPECIALIZED FARMS

 Range from small fruit and vegetable farms to large wheat and corn fields.
 Use of sophisticated labor-saving equipment allows families to manage extensive land.

COMMON FEATURES
 Emphasis on one particular crop.
 Capital-intensive and labor-saving production techniques.
 Reliance on economies of scale to maximize profits.

COMPARISON TO INDUSTRIAL ENTERPRISES

 Specialized farming operates similarly to large industrial enterprises.
 Some large operations are managed by multinational agribusinesses.

CHALLENGES FOR SMALLHOLDER FARMERS

 Strategies for risk management and overcoming coordination failures are essential for successful specialization.
 Coexistence of subsistence, mixed, and specialized commercial farms is common in developing countries,
especially
in low-income regions like Africa.

FAMILY FARMS
 Transition to Commercial Enterprises
The shift from family farms to commercial enterprises may be challenging.
This transition relies on solving various short- and intermediate-term issues.
 Improvement of Small- and Medium-Scale Mixed Farming
There is a consensus on enhancing small- and medium-scale mixed farming practices. Benefits include:
Increased farm incomes
Higher average yields
Effective absorption of underutilized rural labor if practices are labor-intensive
This approach is seen as a key immediate strategy for achieving genuine, people-oriented rural development.

7.6 Core Requirements of a Strategy of Agricultural and Rural Development

 The main objective of agricultural and rural development in developing nations is to improve rural living standards
by
increasing small-farm incomes, output, and productivity while ensuring food security.

7.6.a Improving Small-Scale Agriculture

 Enhancing small-scale agriculture is a crucial strategy for sustainable rural development. Two major sources of
technological innovation contribute to increased farm yields:
a) Mechanization and Labor-Saving Technology
-The introduction of machinery (e.g., combine harvesters) can significantly boost output per worker.
-While effective in areas with extensive land and scarce labor, mechanization can be problematic in rural areas
with small farms, abundant labor, and limited capital.
-Heavy mechanization may lead to rural unemployment, increased poverty, land consolidation, and gender
disparities in productivity.
b) Biological, Water Control, and Chemical Innovations
-Includes hybrid seeds, irrigation, fertilizers, pesticides, and improved veterinary practices.
-SCALE-NEUTRAL TECHNOLOGIES refer to innovations that can be effectively used on both large and small
farms without requiring significant capital investment or mechanized equipment. Examples include improved
seeds, better irrigation methods, and fertilizers.
 -These innovations have successfully increased agricultural output, particularly in Asia, but sub-Saharan Africa
still faces challenges in adopting them.
-Environmental concerns such as water depletion, soil degradation, and salination require effective
government policies and collective action.
 Thus, small-scale agricultural improvements require a balanced approach, incorporating appropriate technology
and innovation while addressing socio-economic and environmental challenges. Scale-neutral technologies play a
vital role in ensuring that small farmers can benefit from agricultural advancements without needing large-scale
investments.

7.6.b Institutional and Pricing Policies: Providing Economic Incentives

 Challenges of Green Revolution Benefits
 While Green Revolution technologies (wheat, rice, corn) are scale-neutral, government policies and social
institutions are not.
 Wealthy landowners benefit disproportionately due to better access to irrigation, fertilizers, credit, and other
inputs.
 Small farmers struggle with limited access to these resources, leading to further economic inequality and land
consolidation.
 Agricultural Pricing Policies and Their Consequences
 Governments in developing nations often keep agricultural prices low to support urban industrial growth,
disadvantaging farmers.
 This policy reduces incentives for farmers to increase production, leading to food shortages and increased food
imports, especially in sub-Saharan Africa.
 To improve agricultural output and reduce poverty, pricing policies should reflect real market conditions and
support small and medium-sized farmers.
Adapting to New Opportunities and Constraints
 Beyond cereals, higher-value agriculture (horticulture, aquaculture, organic products, Fair Trade exports) presents
best income opportunities.
 Small farmers need collective action through producer organizations to compete effectively in these markets.
 Foreign Investment in Farmland (Land Grabbing)
 Large-scale foreign investment in farmland (e.g.,In 2008 is the deal of South Korea to acquire 690,000
hectares in Sudan) can bring better jobs, training, and market access
 However, risks include land dispossession (farmers lose access to their traditional rights to use land), job
losses, environmental degradation, and governance issues(corruption), especially affecting vulnerable groups.
 Environmental Challenges and Climate Change
 Global warming disproportionately harms small and poor farmers, especially in sub-Saharan Africa and South
Asia, due to limited resources for adaptation.
 Agricultural expansion into forests and sensitive lands worsens climate change and leads to soil degradation,
biodiversity loss, and environmental damage.
 Misuse of agrochemicals further harms human health and ecosystem
✓Thus, to maximize the benefits of agricultural development while reducing poverty and environmental harm,
governments must:
- Implement fair pricing and institutional policies that support small farmers.
- Facilitate collective farmer organizations for market competitiveness.
- Ensure responsible foreign investment in farmland.
- Address climate change and environmental sustainability in agricultural planning.

7.6. Conditions for Rural Development

 Land Reform
Conclusion 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, allowing further progress
against poverty.
Key Points:
 Land reform ensures increased food production and equitable economic
benefits.
 Secure land tenure is crucial for small farmers' economic stability, self-worth, and freedom from debt.
 Various land reform models exist, including ownership transfers (Japan, South Korea, Taiwan), redistribution
(Mexico), and new settlements (Kenya).
 Unequal land distribution hinders rural economic advancement and deepens poverty.
 Economic Commission for Latin America (ECLA): Land reform is a prerequisite for poverty reduction.
 Food and Agriculture Organization (FAO): Land reform is more urgent than ever due to worsening inequalities,
population growth, and the monopolization of agricultural benefits by large landowners.
 Empirical Evidence: Land redistribution improves employment, income levels, and agricultural
productivity. Political resistance from large landowners often prevents successful land reform
implementation.

 Supportive Policies
Conclusion 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.
Key Points:
 Land reform alone is ineffective without complementary policies that support small
farmers.
Key support systems include:
• Access to credit and financial support for small
farmers.
• Affordable farm inputs (seeds, fertilizers, etc.).
• Agricultural training and technical assistance.
• Infrastructure development (roads, storage, and market facilities).
 Integrated Development Objectives
Conclusion 3: Rural development, though dependent primarily on small-farmer agricultural progress, implies
much more. It encompasses: (a) efforts to raise both farm and non-farm rural real incomes through job
creation, rural industrialization, and other non-farm opportunities and the increased provision of education,
health and nutrition, housing, and a variety of related social and welfare services; (b) a decreasing inequality in
the distribution of rural incomes and a lessening of urban-rural imbalances in incomes and economic
opportunities; (c) 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; and (d) the capacity of the rural sector to sustain and accelerate the
pace of these improvements over time.
Key Points:
 Rural development extends beyond farming and includes:
• Economic Growth: Job creation, rural industrialization, and alternative income
sources.
• Social Equity: Reducing income gaps between rural and urban areas.
• Environmental Sustainability: Protecting forests, promoting conservation, and regulating agrochemical use.
• Long-Term Progress: Ensuring continuous improvement in rural living standards.
✓Over half of the developing world’s population lives in rural areas, making rural development a crucial part of national
economic growth. Thus, balancing urban and rural economic opportunities fosters inclusive national development.