In this connection we study (1) Classical
Model, (2) Growth Stage Theories,
and (3) Kuznets Views.
(1) Agriculture in Classical Growth Model:
In the late 18th and early 19th
century, the classical economists like Smith, Mill, Malthus and Ricardo
developed a theory of growth which is based upon three factors, namely
population growth, natural resources and capital accumulation. The classicals
say that there are two types of people in an economy like workers whose asset is
their labor, and capitalists who own land and capital. The workers are given
just the subsistence wages. If due to some new inventions or the favorable
weather conditions etc., production increases it will create surplus which is
accumulated by the capitalists. However, such accumulation increases the demand
for labor. As the population is fixed in short run, the increase in demand for
labor will result in rise in wages. The excess of wages over subsistence level
will lead to grow the population demand for food. The rise in demand for food is
met by cultivating inferior lands as the superior land is fixed. The price of
food rises to cover the higher cost of production on lower quality land. The
effects of increased population and higher-priced food drive the real wages to
the subsistence level. Thus, in classical growth model, application of diminishing
returns and higher costs of production on lower quality land, represents a
constraint to growth so that the living standard remains at subsistence level.
If the technological progress occurs, the change occurs temporarily. All this
shows that agri. surplus has no greater role to play to promote economic growth.
(2) Agriculture in Growth Stages Theories:
According to growth stages
theories, economic development involves a structural transformation of a country.
In 19th century, Frederick List developed a set of stages based on shifts in
occupation distribution. His five stages were Savage, Pastoralism, Agricultur,
Agriculture and Manufacturing and Agriculture - Manufacturing - Commerce. The German
philosopher, List believed that progress in agriculture was dependent on strong
export demand or domestic industrial development. He felt that the industrial development has the
potential to develop agriculture and the total economic growth.
Another 19th century German Economist Karl Marx
visualized five stages of
development based on changes in technology, property rights and ideology. His
stages are as:
Primitive communism, Ancient slavery, Medieval feudalism,
Industrial capitalism, Socialism and Communism.
He is of the view that the class
struggles drive countries through these stages. One class possesses the land,
capital and authority over labor while the other possesses labor only. Class
struggles occur because economic institutions allow the exploitation of labor.
Prior to reaching the final stage, labor is never paid its full value. For
example if wages rise in the fourth stage (Industrial capitalism), labor is
replaced by machines. As a result, there will be unemployment which would
depress the wages. According to Marx, exploitation by the owners finally results
in revolution where all the means of production are collectively controlled.
Same is the case with agri. sector where cooperative farming was suggested. Marx
also viewed economies of scale in both agriculture and industry as a major
source of growth. He identified that in the process of growth the small peasant
farms would be eliminated and that they would be employed in industry.
Alan Fisher and Collin Clark also presented growth theory having three
stages. In Clark's formulation, agriculture is dominant in the first stage. In
the second stage manufacturing grows more relative to agriculture and in the
third stage the tertiary or the service industries grow the fastest. According
to Clark, economic growth is achieved by increases in output per worker in any
sector and by transfer of labor from sectors with low output per worker to those
with higher output per worker. While Fisher linked the transition from stage to
stage to advances in science and technology.
The major growth theory was developed by W. W. Rostow during 1950s. He
identified five stages through which all countries must pass. These stages are
Traditional society, The Pre-conditions for take-off, The Take-off, The
Drive to technological maturity and the Age of High Mass Consumption.
stressed upon capital accumulation and suggested that technology plays an
important role in the emergence of Leading Sectors. In his stage theory, Rostow
gave much more importance to the stages like Pre-conditions to Take-off and
Takeoff. He says that the Take-off is determined by the leading sectors where
agri. and its exports play an important role, He is of the view that in case of
so many developed countries which were once under-developed, agri. exports like
grain from Canada, Timber from Sweden and silk from Japan played very powerful
Kuznets' View of Agri. Surplus of Capital Formation and
Prof. Simon Kuznets is of the view that if agri. production increases it will
lead to create agri. surplus. Such surplus contributes to economic development
through three stages, as:
(i) After meeting its own requirements the agri. sector can transfer its
surplus wheat and cotton etc. to the other sectors of the economy.
(ii) When the agri. sector sells its surplus to other sectors of
the economy the incomes of the farmers will increase which they
will spend on the other sectors of the economy. As, if the
farmers earn by selling their surplus agri. goods they will spend
them on non-agri. goods like, T.V. radios, fridges and motor-cycles
etc. When the demand for such goods increases the process of industrialization will increase. This will promote
(iii) The agri. sector could export the surplus agri. goods. In this way, the
foreign exchange could be earned. Such foreign exchange could be used to finance
a country's imports By importing machinery from foreign countries the process of
industrialization can be initiated. In other words, the export-led growth can be
started with agri. growth which may finally take a country to adopt import-led
growth strategy Thus the economic growth may be attained by following
export-promotion and import-substitution strategies. Again, if in a country,
agri. production increases a country may attain self-sufficiency. The dependency
on agri. imports will decrease leading to save the foreign exchange which could
be employed for industrialization.
Prof. John Mellor and Prof. Johnston has presented following
limitations whereby the agri. surplus cannot play an encouraging role in
(i) When the process of development in a country starts the structural changes
in the economy will take place loading to reduce the share of agri. sector and
increase the share of industry in GNP. To such situation, if the agri. sector
does not grow the industrial development will be affected. As we saw in the
Lewis model that the growth of modern sector depends upon the growth of
(ii) In case of UDCs population increases rapidly which leads to greater rise
in demand for food. As a result, there are reduced possibilities of having agri.
surplus in developing countries rather they have to import food.
(iii) The income elasticity of demand for food is very high in case of
developing countries. As a result, the people spend a major share of their
incomes on agri. goods. Hence, the chances of agri. exports are not very bright.
(iv) In case of UDCs, mostly those industries are set-up which require the
domestic inputs. This will also decrease the chances of agri. surplus for
exports. The reduced foreign exchange earning will not be able to finance
(v) In case of Japan and UK the savings of landlords shifted from agri. sector
to non-agri. sector But in the countries like Pakistan and India such did not
happen. Here when the incomes of the farmers increased they purchased lands,
paid old debts or used them to celebrate ceremonies.