Nafziger Economic Development (4th ed)

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growth, increasing average costs from and diminishing returns to growing biochemical energy and fertilizer use, less sustainable farming practices, and decelerating expanded agricultural hectarage reaching the limits of the earth’s carrying capacity. Dyson notes a decline in average grain production after peak production in the mid1980s, even when calculated using five-year moving averages, in all regions except Asia. Still, the declining trend lines in sub-Saharan Africa, Latin America, and North America since the 1980s, suggest reason for concern. Moreover, the decline in fish catches per capita outside China since 1990 (Chapter 7), and the leveling off in soybean production per person since the late 1980s, reinforce the pessimistic scenario based on grain output data (Renner et al. 2003; Brown 1994a:177–197, 248–251; Dyson 1994:397–411; Brown, Platt, Kane, and Postel 1994:26–41). However, for Dyson, low world grain prices, and reduced grain price supports, the withdrawal of cultivated land, and the reduced subsidized overseas sales by the largest grain producer, the United States, were responsible for the lion’s share of the declining trend since the 1980s. Indeed, if you exclude sub-Saharan Africa (see Figure 7-1), food output per person has not fallen.

Dennis Avery (1995:A12) thinks that the fall in foodgrain output per capita in the early 1990s merely reflects a shift from the consumption of grains to that of “luxury” food like meat, milk, and eggs. Indeed meat output per person has steadily increased from 1950 to 2000 (Renner et al. 2003:31), suggesting that with economic growth, the world’s population substitutes expensive for cheaper foods.

Thus, we need to ask whether average food production will rise or fall through the first two decades of the 21st century when world population growth is expected to increase 1.3 percent yearly? Major studies of world food supply disagree about whether, with present trends in resource availability and environmental limitation, together with expected technological improvements, food increases should stay ahead of population growth.

Simon’s view. Some economists’ optimism about technological change makes them not only believe that output will continue to grow more rapidly than population but also that population growth stimulates per capita output growth. Julian Simon (1979:26–30) argues that the level of technology is enhanced by population. More people increase the stock of knowledge through additional learning gains compounded by the quickening effect of greater competition and total demand spurring “necessity as the mother for invention.” Division of labor and economies of largescale production increase as markets expand. In short, as population size rises, both the supply of, and demand for, inventions increase, thereby increasing productivity and economic growth. Because population growth spurs economic growth, Simon’s model requires no government interference and is consistent with a laissez-faire population policy.

Although Simon criticizes the Club of Rome’s Limits to Growth (Chapter 13) for underestimating technical change, he goes to the other extreme by assuming that population growth causes technological progress. Indeed, Simon’s assumption that technological progress arises without cost contradicts the second law of thermodynamics,

which states that the world is a closed system with ever-increasing entropy or unavailable energy (see Chapter 13). Moreover, Simon’s model, like that of the Club of Rome, yields the intended results because they are built into the assumptions. Simon’s premise (1986:3) is that “the level of technology that is combined with labour and capital in the production function must be influenced by population directly or indirectly” (see reviews by Arndt 1987:156–158; Ermisch 1987:175–177).

Food research and technology. There are reasons to be concerned about the Malthusian balance in LDCs. About 80 percent of the world’s expenditures on agricultural research, technology, and capital are made in developed countries. Vernon Ruttan’s study (1972) indicates that these expenditures bear directly on the greater agricultural labor productivity in DCs. This greater productivity has little to do with superior resource endowment. To be sure, some agricultural innovations used in DCs can be adapted to LDCs. However, these innovations must be adapted carefully in the developing countries. Usually, LDCs need their own agricultural research, as many of their ecological zones are quite different from those of North America and Europe.

The discovery of improved seed varieties and the improvement of agricultural methods in third-world countries are mainly the work of an international network of agricultural research centers, which includes the Consultative Group on International Agricultural Research (CGIAR) in partnership with numerous National Agricultural Research Systems and nongovernmental organizations (NGOs). The principal food commodities and climate zones of the developing world have been brought into this network. Such donors as the World Bank, the U.N. Development Program, the Ford Foundation, the Rockefeller Foundation, the U.S. Agency for International Development, and agencies of other governments have financed the network. Its goals are to continue and extend the work generally known as the Green Revolution – the development of high-yielding varieties (HYVs) of wheat and rice. These HYVs of grains are an example of global public goods that benefit all nations; other examples include polio and smallpox vaccinations, the campaign against river blindness, the Montreal Protocol to reduce ozone depletion, and the Kyoto Protocol on reducing greenhouse gases. Prototypes of international agricultural research centers are International Center for the Improvement of Maize and Wheat (CIMMYT), the Mexican institute, founded in 1943, where a team led by Nobel Peace Prize–winner Norman Borlaug developed dwarf wheat; and International Rice Research Institute (IRRI) in the Philippines, founded in 1960, which stresses research on rice and the use of multiple cropping systems. Other centers concentrate on genomics, plant genetics, agroforesty, semiarid tropics, the tropics, dry areas, irrigation management, aquatic resources, livestock, food policy, and rice in West Africa (CGIAR 2004).

Economists in India, Pakistan, the Philippines, and Mexico argue that foodgrain growth would not have kept up with population growth in the last four decades or so of the 20th century without the improved packages of high-yielding seed varieties, fertilizers, pesticides, irrigation, improved transport, and extension. Indeed, yield increases and increased cropping intensity but not arable land expansion form the lion’s share of sources of growth in LDC crop production from 1960 to 2005, and

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are expected to dominate growth from 2005 to 2030 (FAO 2003:126).2 Chapter 7 indicates that farm yield increases reduce poverty in Afro-Asia but not in highly unequal Latin America.

Michael Morris and Derek Byerlee (1998:471) contend that “with the potential of the Green Revolution technologies now largely exhausted, new technologies will be needed to ensure continuing productivity growth in Asia’s intensely cultivated cropping systems.” Continuing technological improvements will require changing the organization of agricultural research and extension, and the design and implementation of technical change (ibid.). Moreover, the international agricultural network needs to emphasize genomics and other new biotechnological applications discussed in Chapter 7.

The CGIAR, together with national research centers, were sometimes slow in learning constraints and priorities of local farmers, adapting research to local conditions and culture, and engaging in a three-way communication with field agents and farmers. Furthermore, many crop scientists in developing countries leave local research centers because of low salaries, politics on the job, government roadblocks to research, small budgets, and other grievances (Wade 1975:91–95; World Bank 1982i:57–77).

Network critics charge that research projects emphasize high-yielding grain varieties that benefit the large commercial farmers. To elaborate, scientists tended to develop these varieties as part of a package, which included capital inputs, such as irrigation, fertilizers, tractors, mechanical pumps, threshers, reapers, combines, pesticides, and so on. For example, in India and Pakistan, new wheat varieties were adapted to cropland under controlled irrigation – land owned primarily by relatively affluent Punjabi farmers. Some of the negative effects of the package were increased land concentration, displacement of farm labor, and rising rural unemployment and emigration.

Moreover, the Cornell University scientists David Pimentel and Marcia Pimentel (1993:497–500) contend that the adverse environmental side effects of pesticides, a foundation of the Green Revolution, call into question its long-run sustainability and continuing yield growth. A part of the strategy of the Green Revolution is large monocultures and year-round plantings of a single crop, which increase pest

2This is despite estimates that only 1.5 billion hectares (11 percent) of the globe’s land surface is used for crop production. FAO estimates that 2.7 billion hectares remain with crop production potential for rainfed agriculture, meaning that only 36 percent of the land suitable is being used for crops. For LDCs, 960.000 million hectares (34 percent) of a potential 2.8 billion hectares already in cultivation have the potential for growing rainfed crops at an acceptable minimum level. Why is such a small percentage of potential land used? The following are examples. Some 90 percent of the unused land is in seven countries: Brazil, Democratic Republic of the Congo (DRC), Sudan, Angola, Argentina, Colombia, and Bolivia. In North Africa, large tracts of land are suitable for cultivating only olive trees, but there is little demand for them in practice. More than 50 percent of the land area in the DRC is suitable for growing cassava but less than 3 percent for growing wheat. Much land suffers from ecological fragility, low fertility, high disease incidence, or lack of infrastructure, requiring high input use and management skills for sustainable use. Other land is used for forest cover, protected cover, human settlements, or economic infrastructure (FAO 2003:127–132). Alas, most nations with an excess supply of land resist emigration from countries with an excess demand for land.

outbreaks and exacerbate the pressure for pesticides. Many LDCs, like DCs before them, have subsidized the use of pesticides, which disproportionately benefit wealthy farmers and large companies. In addition, those pests that survive have a genetic makeup allowing them to detoxify the poison and dominate in succeeding generations, shielding them from pesticides. Furthermore, pesticides upset nature’s method of control by wiping out pest predators and swelling other populations that were initially small to pest status. For example, in northeastern Mexico, cotton production required increased insecticide applications but increased the outbreak of tobacco budworms, a secondary pest, which replaced the eradicated boll weevil. In Egypt, DDT use to control the bollworm spurred the white fly to explode into a major pest.

Much of the substantial percentage of pesticides that do not reach their host become environmental contaminants. Pesticides not only damage their targets but also have a toxic effect on wildlife, plants, groundwater, and soil and water organisms. Pesticides can interfere with the endocrine and immune systems of animals, whereas atrazine at low levels harm whole ecosystems, inhibiting algae and plankton growth and the reproduction of fish and other organisms. The goal of the alternative to pesticide application, integrated pest management (IPT), is to reduce yield losses by pests while minimizing the negative effects of pest control. IPT, which uses crop rotation, multicultural planting, field sanitation, and biological control through natural predators, requires substantial investment in research and technology (FAO 2003:304; World Resources Institute, U.N. Environment Program, and U.N. Development Program 1994:111–118).

Prabhu L. Pingali (1998:474–493), sometime CIMMYT, IRRI, and FAO economist, observed that rice productivity growth in tropical Asia had decelerated since the 1980s. Part of this slowing down can be attributed to falling rice terms of trade in world markets. Pingali asked whether the Green Revolution contributed to a decline in rice physical productivity. This revolution included intensification of irrigated land use, involving a permanent move from one rice crop annually followed by dry season fallow to two to three consecutive rice crops yearly on the same land.

Evidence from both IRRI experiments and other on-farm tests in eight South and Southeast Asian countries showed that, holding inputs constant, yields fell from the 1960s to the late 1980s and 1990s. With HYVs, insect and disease infestations rose with intensification. Continuous rice flooding and monoculture, accompanied at time by poorer quality irrigation water and impeded drainage, leads to micronutrient deficiencies and iron toxicity, and sometimes compacted subsoil and salinity buildups. To maintain yields, flooded rice needs rotation with dry-season rice or other crops, such as legumes, barley, or soybeans that do not require standing water. Another way to maintain yields is to increase fertilizer3 and other inputs. Sustaining productivity

3International Food Policy Research Institute (IFPRI) researchers Per Pinstrup-Andersen, Rajul PandyaLorch, and Mark W. Rosegrant (1997:30) warn against misapplying environmental concerns about chemicals and fertilizers in rich countries to developing countries. They contend that LDCs, especially sub-Saharan Africa, with low application rates, need expansion in their use of fertilizers.

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necessitates a holistic approach to long-term management and more efficient use of land, labor, and other inputs (Pingali 1998:474–493), perhaps enabling the net impact of new HYVs to be positive. But LDCs need to closely scrutinize the health and environmental impact of the Green Revolution’s package of seeds, fertilizers, pesticides, water use, and infrastructure costs.

Food distribution. There is more than enough food produced each year to feed everyone on earth adequately, yet millions are hungry. Food distribution is the difficulty. The Japanese, who are well nourished, do not consume many more calories per person daily than the world average (IIASA 2004a; U.N. Development Program 2003:87). The American Association for the Advancement of Science (Gavan and Dixon 1975:49–57) and World Food Program (Thurow and Solomon 2004:A1, A8) estimate that calorie and protein availability in India would have exceeded minimal requirements if distribution had not been so unequal. Furthermore, although Brazil, a country with high income inequalities, has more than twice the GNI per capita of China (inside front cover table), it has about the same proportion of the population undernourished (World Bank 2003h:104–106). In general, undernutrition and malnutrition are strongly correlated with poverty, which in turn is correlated with inequality in income distribution. Except for sub-Saharan Africa, food shortages are not a result of inadequate production but of deficiencies in food distribution.

Remember Sen’s discussion of nutrition being dependent on entitlement rather than income level (Chapter 7). The U.N. Development Program (2003:87) contends that

If all the food produced worldwide were distributed equally, every person would be able to consume 2,760 calories a day (hunger is defined as consuming fewer than 1,960 calories a day). Addressing hunger means ensuring that people have command over the resources (especially income) needed to acquire food. Hunger is more than just a lack of available food. It is a problem of deficiencies in food entitlement and deprivations in related essential services (health care, education, safe drinking water, adequate sanitation). Food entitlement differs from food availability in that it indicates what a person can command with income and thus consume, rather than what is available in the market.

Unequal food distribution means that some countries and localities are likely to face food deficits. Despite increased agricultural productivity in developing countries, their cereals deficits are expected to increase to more than 10 percent of consumption; this percentage is especially high in sub-Saharan Africa and the Middle East (Table 7-2). Domestic food deficits by themselves need not mean undernourishment if a country can afford to import food. However, with higher prices for farm inputs and increased capital goods imports for industrialization, many developing countries may not have the foreign currency to import enough food to relieve the deficit.

Energy limitations. Higher energy prices could seriously weaken our assumptions about the global food balance. The substantial gains made in food productivity in the four decades after World War II were partly dependent on cheap, abundant energy

supplies. World average food output may be ceasing to grow as energy and other resource limitations become more binding. Obviously, the energy-intensive U.S. food system cannot be exported intact to developing countries. Two scientists estimate that to feed the entire world with a food system such as that of the United States would require 80 percent of today’s entire world energy expenditures (Steinhart and Steinhart 1975:33–42).4

A recapitulation. In the four decades after World War II, the world avoided the Malthusian specter but did not show evidence to support Simon’s view that population growth spurred output growth. Indeed, there is reason to be wary about the population–food balance for future years in LDCs. The uncertainty concerning future growth in agricultural productivity, especially in sub-Saharan Africa, probably means that we should continue our efforts at population control.5

URBANIZATION AND CONGESTION

LDCs are congested and overpopulated in certain areas and especially so in major cities. Although 33 percent of the population of Africa is urban, it remains the least urbanized of the six continents. Yet, some scholars argue that urban growth in Africa hampers economic development, employment growth, and the alleviation of poverty. In the early 1980s, highways to the central business district in Lagos, Nigeria, were so choked with traffic that it took four to five hours for a taxi to drive 24 kilometers (15 miles) from the international airport in rush-hour traffic. Although the premium on space in the inner city made it almost impossible for the working poor to afford housing there, the cost of transport made it difficult to live even on the outskirts of Lagos. Ironically, the demand for transport (and congestion) in Lagos fell in the late 1980s and early 1990s as a result of an economic depression triggered by reduced real oil export prices!

Remember the description of large Indian cities, with the mixture of fast moving vehicles and bicycles, rickshaws, oxcarts, cattle, dogs, and pedestrians carrying head loads. The capital cities of India (New Delhi), Bangladesh (Dakha), and China (Beijing), with fewer than 10 passenger cars per 1,000 people are at least as congested as Toronto, Vancouver, New York City, Seattle, Stockholm, Tokyo, and Melbourne, all located in countries with more than 450 passenger cars per 1,000 people (World Bank 2003h:167).

Urban areas in LDCs are not only experiencing a rapid natural increase in population but also are serving as a magnet for underemployed and poorly paid workers

4Lower tillage agriculture in the United States in the 1980s, 1990s, and early 21st century might reduce this figure a few percentage points.

5Hatton and Williamson (2003:465–486) see “rapid growth in the cohort of young potential migrants, population pressure on the resource base and poor economic performance [as] the main forces driving African migration” to Europe and North America, an emigration even more prominent than that from Europe to North America in the 19th century. Yet, unlike the earlier migration, Hatton and Williamson are not optimistic that Africa’s economic growth will turn around and slow down the demographic pressures on emigration out of Africa.

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from the rural areas. Combating increased congestion may actually increase gross product; usually the costs of congestion are not subtracted from national income. A study by the U.N. Population Division (2002) projects the LDC urban population doubling from 2000 to 2038. Virtually all world population growth during this period will be concentrated in cities. After 2007, the urban population of the world is expected to be more than its rural population, a deceleration from increases previously (see Chapter 9). Potential overurbanization puts pressure on LDCs to limit population growth not just in cities but in an entire nation.

RAPID LABOR FORCE GROWTH AND INCREASING UNEMPLOYMENT

The LDC labor force growth rate is the same as the rate of population growth, 1.6 percent yearly. The vast pool cannot be readily absorbed by industry, resulting in increased unemployment and underemployment. Chapter 9 indicates some of the political and social problems, as well as economic waste, ensuing from such underemployment. These problems underscore the urgent need to reduce population growth.

THE DEPENDENCY RATIO

Although the LDC labor force is growing rapidly, the number of children dependent on each worker is high. High fertility rates create this high dependency ratio or load, which in turn slows the growth of gross product per capita (Bloom and Canning 2004). The dependency ratio is the ratio of the nonworking population (under 15 years old and over 64 years old) to the working-age population (ages 15 to 64).

You can view age structure in a population age pyramid showing the percentage distribution of a population by age and sex (Figure 8-10). Austria, with a near stationary population, has a low fertility rate and only 16 percent of its population under 15 years old (represented by the bottom three bars in its pyramid). The bottom of Austria’s pyramid is narrow, and its ratio of non-working to working age population is only 47 percent. The United States, with a slow growth of population, has 21 percent of its population under 15 years, and a dependency ratio of 52 percent.

LDCs have higher dependency ratios so that their lower three bars are wider. Bolivia, with 40 percent under 15 years, has a ratio of 67 percent, whereas Nigeria, with 44 percent under 15, has a ratio of 87 percent. In 2001, more than 20 percent of adults in Botswana were HIV-positive in 2001. Thus, the numbers of births, child deaths, women of child-bearing age, and their partners have been adversely affected by HIV/AIDS. Indeed, without AIDS, Botswana’s dependency ratio, 79 percent, and population pyramid would approximate those of Bolivia (Lampley, Wigley, Carr, and Collymore 2002:17–19).

Figure 8-11 shows that as fertility rates have fallen, the dependency burden, based on the ratio of the non-working age to working-age population, has declined in East and South Asia, the Middle East, and Eastern Europe and Central Asia since the 1970s and in sub-Saharan Africa, behind in the demographic transition, since the 1990s.

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FIGURE 8-11. Dependency Ratios Are Declining in Developing Countries for a While.

Source: World Bank 2003i:6.

Some LDCs narrowed the base of the pyramid in the last 40 years. For example, in 1960, when the birth rate in Costa Rica was 47 per 1,000, it had a population structure with a wider base and a narrower peak than Nigeria’s pyramid to the left of Figure 8-10. However, after the country launched a vigorous family-planning program in 1968, the birth rate dropped to 29 per 1,000 from 1978 to 1987 (26 in 1994 and 18 in 2003) so that the bottom bars narrowed substantially.

Of course, the ratio of the labor force to population is not only a function of dependency ratios. Because of cross-national differences in the participation of women, old people, youths, and children in the labor force, countries with similar dependency ratios may have different ratios of labor force to population.6

6 Beaudry and Collard (2003:441) find that since 1975 DCs “with lower rates of adult population growth adopted new capital intensive technologies more quickly than their high population growth counterparts, therefore allowing them to reduce their work time without deterioration of growth in output-per-adult.”

FIGURE 8-12. Population Age Profile and Service Requirements: Bangladesh, 1975. Bangladesh’s high birth rate necessitates high spending levels on food, health care, and education for children. (Total population, 74 million). Source: McHale and McHale 1979:14.

Dependency ratios vary within developing countries according to income. The living standards of the poor are hurt by high fertility and large families. Each adult’s earnings support more dependents than is the case in richer families. Thus, in peninsular Malaysia in 1980, 71 percent of the richest 10 percent (by household) were 15 to 64 years old compared to only 45 percent for the poorest 10 percent (World Bank 1980i:42).

The widespread decline in dependency ratios enables societies to divert fewer resources for schools, food, health care, and social services for nonworking young people. Figure 8-12, which plots the relationship between age and service requirements, shows the higher school and health care costs of caring for those 15 years or under. Households in Bangladesh have a larger number of consumers per earning member than in Europe, which means a high ratio of consumption to income. Less income is left over for savings and capital formation.

The Oxford economist Robert Cassen (1994:12) argues that

[South] Korea provides a contrasting example. If Korea had maintained its 1960 fertility level until 1980, the number of primary school children would have been one-third larger, and expenditure on primary education (at the same cost per pupil) would have been higher by 1 percent of GDP. In fact, however, Korea effectively promoted fertility decline through publicly funded family planning programs at the same time that socioeconomic change made smaller families attractive. It was thus able to improve both the extent and the quality of education, helping to lay the foundations for its manufacturing success.

In 2003, 5 percent (256 million) of the LDCs’ population was 65 years and over, compared to 15 percent (180 million) of the DCs’ population (Population Reference Bureau 2003:3). In 2025, demographers expect those 65 and over in LDCs to be 13 percent (884 million), and those in DCs to be 32 percent (320 million) (U.S. Department of Commerce 1999).

As Figure 8-11 shows, high-income OECD countries have already experienced an increase and by 2010 will experience a substantial increase for several decades