International Issues

Agricultural Productivity Grows in Developing Countries

Some economists say that "economic development" has come to be synonymous with "industrialization" as developing countries around the world race to catch up. This means that agriculture gets short shrift. Which raises the question that if countries get stuck in agriculture, are they doomed to poverty and slow growth?

  • Studies show that the relative importance of manufacturing in Latin America has been shrinking over the last decade.

  • Meanwhile, productivity growth in agriculture has been as fast as in manufacturing.

  • Since Chile opened up to trade in 1976, the relative size of its manufacturing sector has shrunk, but gross domestic product has expanded at an average rate of 7.2 percent annually since 1987 -- agricultural exports having been star performers.

  • Experts say that countries longing to develop economically can do so through productivity increases in their agricultural sector.

A country which previously grew and exported potatoes could increase its income, if conditions were favorable, by a move to producing fruits and then wines. While some economists consider agriculture as having little potential for growth -- since people can only consume just so much food -- others note that people's taste change and a smart marketing strategy can encourage consumers to demand high-ticket salmon instead of lowly catfish.

Free and open trade -- combined with low regulation and private entrepreneurship -- allow experimentation within the agricultural sector. Growth need not be limited to the industrial sector.

Source: "Stranded on the Farm," Economist, October 4, 1997.

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