AJAD Volume 7 Issue No. 1 June 2010

In spite of a healthy demand for a renaissance in economic policy for agricultural development, the academic supply response is found wanting. The infusion of public economics into the economics of agricultural development, which thrived during the 1970s and 1980s, has stagnated due to the lack of foundations in transaction costs, dynamics, and the co-evolution of specialization and governance. Many of the policy ideas found in the World Bank's WDR 2008, for example, reflect a post-modern tendency to seek and destroy market failures with new mandates and subsidies for farmer cooperatives, microfinance, crop insurance, and land reform. The new development microeconomics favors form over substance and overemphasizes multiple equilibria, trap theories, new market failures, and the new case for social insurance. Empirical research has likewise suffered from the quest for clever instruments and methods instead of informative results that estimate parameters of established theories, distinguish between competing theories, or challenge theory to explain empirical patterns. These latest fads and fancies have distracted economists from the quest for fundamental explanations of development patterns, especially the nature and causes of specialization as an engine of growth. The stage is set for young dynamic scholars to develop new tools of analysis to explain empirical patterns in behavior and organization in developing agriculture and to build the foundations of a public microeconomics of development.

Using long-term panel data sets of rural households in the Philippines, Thailand, Bangladesh, and Tamil Nadu (India), a short-term panel data set in Mozambique, and cross-section data sets in Kenya, Uganda, and Ethiopia, the roles of labor markets in the long-term process of poverty reduction in Asia were examined in comparison with the current situation in Africa. There are three main findings. First, reliance on agricultural labor markets alone will not reduce poverty to a significant extent, in view of the declining share of agricultural wage income in Asia and its negligibly low level in Africa. Second, an increased non-farm income is a decisive factor in reducing rural poverty because it has become the major source of the rise in household income. Third, labor markets are clearly segmented in accordance with the schooling levels, where the younger and more educated children are engaged in lucrative non-farm labor employment in order to capture the high returns in schooling in this sector.

Asian and global agriculture will be under significant pressure to meet the demands of rising populations, using finite and often degraded soil and water resources that are predicted to be further stressed by the impacts of climate change. In addition, agriculture and land use change are prominent sources of global greenhouse gas (GHG) emissions. Fertilizer application, livestock rearing, and land management affect levels of GHG in the atmosphere and the amount of carbon storage and sequestration potential. Therefore, while some impending climatic changes will have negative effects on agricultural production in parts of Asia, and especially on resource-poor farmers, the sector also presents opportunities for emission reductions. Warming across the Asian continent will be unevenly distributed, but will certainly lead to crop yield losses in much of the region and subsequent impacts on prices, trade, and food security—disproportionately affecting poor people. Most projections indicate that agriculture in South, Central, and West Asia will be hardest hit.

It has been more than 25 years since Food Policy Analysis (Timmer et al. 1983) was published, and more than 30 years since the initial outline for the book was circulated among the authors. It is fair to say that the volume has been very influential in the way food policy issues have been looked at, and it remains in use as a textbook for a number of university courses2. Its academic success is a bit surprising because the target audience was not primarily university faculty (for whom the book seemed too simplistic in methodology and too anecdotal in presentation). Instead, it was mainly aimed at practitioners, an ill-defined group of analysts in need of an understanding of how a complicated and interconnected food system actually works. Training these practitioners was the main mission of the book.

The emergence of China as an economic power is one of the miracle growth stories of the last part of the 20th century and the early part of the 21st century. Its economy has been the fastest growing compared with the economies of the world since 1980 (World Bank 2002). Growth has occurred in all sectors, including agriculture. Poverty has fallen. In the past 30 years, based on China's official poverty line, the absolute level of poverty fell from 260 million in 1978 to 14.8 million in 2007 (NSBC 2008). Moreover, the general welfare of most of the population has increased markedly. Many indicators of nutritional status have improved. For example, the number of children with low body weight fell by more than half (Turgis 2008). In fact, by the end of 2007 China had achieved many of its Millennium Development Goals (MDGs).

Since its independence in 1947, India has aimed its agricultural development policies at reducing hunger, food insecurity, and poverty. The new strategy of agricultural development launched in the mid-1960s was successful in improving macro (national) food security in a reasonably short period of around two decades. From a precarious situation of heavy dependence on imports of staple food in the mid-1960s, India not only had reduced its imports but also emerged as a net exporter of cereals since the early 1990s. However, while India became a star performer in terms of economic growth in the last decade, its agricultural sector has not performed as well. This happened mainly due to complacency in the matter of production and availability of cereals in the country. Hence, the situation has turned into a serious case of macro food insecurity and farmers' loss of faith in farming around the middle of the current decade. To address the current situation, the government launched special programs in the past three years and took several steps to bring on track the agricultural sector's performance.