Food Price and Trade Policy Biases - The Oxford Topic of Food, Politics, and Society - page 361

Pervasive though these policy biases seem to have been, they are not unchanging. On
the contrary, new data reveal that they have evolved in fairly systematic ways as national
economies have developed over the past half century. The challenge is to harness that
capacity for change and direct it toward growth-inducing policy reforms and institu-
tional innovations that also reduce inequality and poverty and thereby enhance global
food security.
The chapter begins by briefly summarizing the history of thought on the role of agri-
culture in economic development. It then presents evidence from a new study of the
evolution of price-distorting policies in both high-income and developing countries.
That new empirical study covers seventy-five countries that account for more than 90
percent of world's population and agricultural output. It reveals that, among the high-
income countries, some have been able to rid themselves of farm subsidies, and some
have at least changed their key policy measures to less inefficient and less inequitable
forms of support. Among developing countries, much of the earlier anti-agricultural
bias has been phased out over the past quarter century. A worrying sign, however, is
that agricultural protection has begun to emerge as the more advanced of those emerg-
ing economies industrialize. The third section reports on the contribution of agriculture
to the current global welfare cost of distortions to farm and nonfarm goods markets,
and on the impact of those distortionary policies on income inequality and poverty. The
chapter concludes with an assessment of what might evolve in the coming decades, of
the alternative measures available for dealing with the perceived problems associated
with agriculture's changing role in economic development, and of their potential for
reducing inequality and poverty and enhancing global food security.
Agriculture's Perceived Role in
Development
Post-World War II development economists had a dim view of the contribution that farm-
ers made to modern economic growth. In contrast to the perceived advantages of manu-
facturing, agriculture was seen as a low-productivity, constant-returns-to-scale activity
whose producers were not very responsive to incentives. In addition, the real interna-
tional prices of farm products were known to be volatile and thought to be in permanent
long-term decline (Singer 1950; Prebisch 1950). This led Prebisch and others to argue that
developing countries should strive to diversify their economies and reduce their depen-
dence on a small number of primary commodity exports. To do this, they encouraged
developing countries to develop their manufacturing sectors through import-substituting
industrialization aided by manufacturing protection policies (Prebisch 1959). A corollary
to this was the taxation of agricultural exports that, like import tariffs on manufactures,
had the perceived additional benefit of raising government revenue in settings where
there were still very high costs associated with collecting income or consumption taxes.