Agriculture Industry Linkage And Development Economics Essay

The macroeconomic linkage between the agricultural sector and industrial growing has been one of the most widely investigated in the development literature. In the early phases, research workers paid great attending in analyzing the relationship between the agricultural and industrial sectors, and how these sectors were inter-related. They argued that agribusiness merely plays a inactive function ; which is to be the most of import beginning of resources ( nutrient, fibre, and natural stuff ) for the development of industry and other nonagricultural sectors ( Rosenstein-Rodan, 1943 ; Lewis, 1954 ; Ranis and Fei, 1961 ) . Many of these analysts highlighted agribusiness for its resource copiousness, and its ability to reassign excesss to the more of import industrial sector ( Subramaniam 2010: 26 ) .

This paper reviews one chapter of a book, one article and one study. They are “ Agriculture during Industrialization ” in “ The economic Development of Japan ” by Ryoshin Minami ( 1986 ) , “ Trends in Agriculture-Industry Interlinkages in India: Pre and Post-Reform Scenario ” by Dilip Saikia ( 2011 ) and “ Joint ventures in agribusiness: Lessons from land reform undertakings in South Africa ” by Edward Lahiff, Nerhene Davis and Tshilili Manenzhe ( 2012 ) . This paper foremost shows the analysis of their theoretical models, and so how those articles define the linkages of agribusiness and other sectors.

Economic development in Japan

Minami ( 1986:82-84 ) starts his analyze of the relationship between agribusiness and industry in Japan by replying three inquiries. First, he looks at the agricultural growing rate before industrialisation ( Minami 1986: 82-83 ) . He emphasizes that the beginning of stable growing in agribusiness in Tokugawa Period ( 1603-1867 ) can be verified and continued to the Meiji period and that “ agribusiness before industrialisation could barely be described as stagnant ” ( Minami 1986:83 ) . Second, he mentions about the agricultural productiveness before industrialisation ( Minami 1986: 83-84 ) . Third, it refers to the agricultural growing from 1886 to 1920, the early period of industrialisation ( Minami 1986: 84 ) . He does non clearly answer the 2nd and 3rd inquiries, but what he wants to stress through replying those three inquiries is that “ [ a ] griculture had expanded well before industrialisation began and that growing continued into the early period of industrialisation ; this was the key to its success ” ( Minami 1986: 84 ) . Minami ( 1986:89-99 ) continues to reason how agricultural excess contributed to industrialisation in Japan. Minami besides mentions the function of authorities in footings of revenue enhancement and outgo on different sectors ( 1986: 97-98 ) . The excess of agribusiness contributed good to the industrialisation because the revenue enhancement extracted from agricultural sector was spent to industrialisation ( ibid. ) .

He refers to three points of how agribusiness contributed to industrialisation ( Minami 1986: 99 ) .

First, it provided an abundant supply of groceries. This prevented an addition in the comparative monetary value of agricultural merchandises and the happening of a form of lifting rewards bring oning decreased net incomes, and in bend taking to a falling growing rate. Second, its part to exports helped supply the necessary foreign currency. Third, the agricultural excess was an of import beginning of financess for the non-agricultural sector. These financess were transferred via two channels: husbandmans ‘ nest eggs and revenue enhancements on husbandmans. The former do non look to hold been every bit great as has been believed in the yesteryear. ( 99 )

Minami ( 1986 ) concludes this chapter by stressing that the agriculture-industry linkage was non one-sided at all ( 99 ) . It is because “ industry provided big sums of progressively inexpensive fertilisers and reduced the monetary values of agricultural machinery and implements ” ( Minami 1986: 9 ) . From labour market position, industry “ besides drew more and more labors off from agribusiness ” ( ibid. ) .

Agriculture-industry interlinkages in India

Saikia ( 2011 ) argues the growing of the economic system in India through three sectors ; agribusiness, industry and service sectors. He says that the surveies in India have done through merely agriculture-industry linkages, and the services sector had been kept off from analysis, but since the three sectors are interrelated to each other in the existent universe, he claims the importance of sing about services sector ( Saikia 2011:2-3 ) . Saikia starts his statement with reviewing the agriculture-industry linkages. He says that “ agribusiness and industry being built-in constituent of development procedure due to their common mutuality and symbiotic relationship, the part of agribusiness to the economic system in general and to industry in peculiar is good known in about all the developing states ” ( Saikia 2011: 4 ) . It was besides the same in Japan. Saikia besides points out that the degree of how much they depend on each other may alter over clip ( Saikia 2011: 4 ) . Then, he overviews the theoretical literatures of early authors, which chiefly emphasized the importance of addition in agricultural productiveness for modern economic growing from supply-side, or production linkages, and other literatures after mid-1970s, which argued that agribusiness ‘s possibilities of making sufficient demand to excite industrialisation ( Saikia 2011: 5-6 ) , and he pointed out that those bookmans have largely looked at merely one side of the agriculture-industry linkages, and that sing both sides was of import since the supply-side and demand-side linkages both work together ( Saikia 2011: 6 ) .

Through these two linkages, Saikia ( 2011 ) analyses the tendencies of inter-sectoral linkages in India. First, he argues for the production linkages, which “ fundamentally originate from the mutuality of agribusiness on industry and industry on agribusiness for run intoing the demands of their productive inputs ” ( Saikia 2011: 9 ) , like “ the end product of agribusiness provides inputs for many industries, such as sugar, cotton fabrics, jute fabrics, sugar cane, and baccy. Similarly, agribusiness besides absorbs the end products of other sectors as inputs required in the production processaˆ¦ [ which ] are fertilisers, pesticides, machine tools and electricity ” ( ibid. ) . He points out that we can see the addition of the agribusiness ‘s purchase from the non-agriculture sector, and he says that this addition shows the thought of the addition of the agribusiness ‘s dependance on industry for modern inputs ( Saikia 2011: 10 ) . On the other manus, he besides mentions that the diminution of the importance of the agro-based industries suggests a weak production linkage ( ibid. ) . He looks at the production linkages of service sector with agribusiness and industry ( Saikia 2011: 11 ) . He revealed that the service sector ‘s linkage with industry is strong, and industry and service sector ‘s linkages are mutualist ( ibid. ) . However, looking at the post-reform period ( station 1991 ) , the production linkages has become weaker ( Saikia 2011: 11-12 ) . Second, Saikia ( 2011 ) looks at the demand linkage ( 12 ) . “ The demand linkage between agribusiness and industry operates through agriculture income ” because the addition of agriculture income “ brings about an addition in the demand for industrial consumer goods and some manufacturer goods, such as pumps, tractors, fertilisers, pesticides, etc. ” ( ibid. ) . He focuses on the footings of trade ( TOT ) between agribusiness and industrial merchandises ( Saikia 2011: 13 ) He says it is of import since “ a favouralbe [ sic ] TOT for agribusiness leads to higher income of the agricultural sector, and therefore, creates more demand for industrial goods ” ( ibid. ) . Through this treatment, he indicates that “ while agribusiness ‘s dependance on industry for modern inputs has increased, industry ‘s dependance on agribusiness for inputs has declined during the same period ” ( Saikia 2011, 16 ) .

Joint ventures in agribusiness in South Africa

Lahiff et Al. ( 2012 ) is a study about the strategic partnership of agricultural sector and companies. Although it does non clearly reference about the linkage between agribusiness and industry, and is non clear what theoretical model is applied, this study besides mentions the importance of the agribusiness. This study contains instance surveies in two countries, Levubu and Moletele in South Africa. In both sites, “ big countries of high-value irrigated land have been restored to comparatively hapless communities. In order to keep the productiveness of commercial agriculture endeavors, and to maximize long-run benefits for their members, these communities have entered into contractual agreements with alleged ‘strategic spouses ‘ , most of which take the signifier of joint ventures ” ( Lahiff et al. 2012: 1 ) . This study analyzes these two instance surveies that these joint ventures are to day of the month non run intoing the outlooks. It refers to three grounds ( Lahiff et al. 2012: 50-52 ) . First, although it is needed to affect community members in the cardinal determinations, joint ventures are excessively complicated for inexperient members. Second, it is the failure of commercial spouses ; they make the endeavors unattractive. Third is the finance, which “ hampered agrarian operations from the really start, exacerbated the deficiency of creditworthiness of the operations and doubtless led to the failure of many of the ventures ” ( Lahiff et al. 2012: 51 ) . So, while it emphasizes the finance is non the lone job to be tackled, “ fiscal troubles aˆ¦ were surely the major concern ” ( ibid. ) . Then, after depicting the joint ventures ‘ failures, it besides mentions the deficiency of province support and refers to the failure of land reform ( Lahiff et al. 2012 ; 52 ) . Although it implies the importance of relationship between agribusiness and other sectors, this study is non clear what theoretical model was applied to analyse those instances.

“ Synergetic development scheme ” and three literatures

Kay ( Kay 2009 ) set an dismay that development economic experts tend to believe about merely one sector ‘s development, i.e. agricultural development or industrial development, and he argues that the “ synergistic ” development scheme is the most successful development scheme. Contrasting East Asia ( South Korea and Taiwan ) and Latin America, he argues the development schemes pursued in each part through four points ( Kay 2009: 117-124 ) . First, he looked at the province capacity and policy public presentation. He pointed out that, comparing to Latin America, “ what is singular about the South Korean and Chinese instance is that the State managed non merely to squash agribusiness but that it did so while at the same clip guaranting agribusiness ‘s sustained growing and therefore the production of a big economic excess ” ( Kay 2009: 118 ) . South Korea and Taiwan both had enlightened political leadings with a developmentalist vision for the whole society. It worked good for both agricultural sector and industrial sector “ via such mechanisms as revenue enhancement and use of the footings of trade in favor of industry ” ( Kay 2009: 117 ) . Plus, the State besides worked good to alter the category relationship by dispossessing landlord category ‘s lands and political power in an earlier agricultural reform ( Kay 2009: 118 ) . Industries expanded quickly by these State actions.

Second point is the agriculture-industry linkage ( Kay 2009: 119 ) . Kay reveals that South Korea and Taiwan knew the necessity of mutualist agriculture-industry linkage, and so “ ensured that the conditions were contributing to the acceptance of new engineerings and stimulated displacements in production forms to higher value harvests over the whole of the agriculture community ” ( Oshima 1987, cited in Kay 2009: 119 ) . He besides refers that both authoritiess paid attending to the industry which would better agribusiness, such as chemical fertiliser, farm machinery and equipment industries ( ibid. ) .

Third, Kay ( 2009 ) refers to the agricultural reform ( 120 ) . He cited White ( 1987 ) and emphasizes that the agricultural reforms in South Korea and Taiwan were major, while that in Latin America was comparatively limited ( Kay 2009: 120 ) . He besides mentions the timing of agricultural reform in Latin America was after industrialisation ( ibid. ) .

Finally, Kay ( 2009 ) argues the sequence of industrialisation ( 120-121 ) . Kay pointed out that the ground Latin America did non develop good was because “ it failed to switch in clip from an ISI [ import-substituting-industrialization ] to EOI [ export-oriented-industrialization ] development scheme ” ( ibid. ) . Industrialization in Latin America went through a dynamic stage of ISI ( 1960s ) . South Korea and Taiwan besides went through a similar procedure, but the difference was that “ both states were able to go on with, every bit good as deepen, this displacement to a more capital-intensive, labour-skill-intensive, foreign-exchange-intensive and large-scale industrialisation procedure, while Latin America was unable to make ” ( ibid. ) . He summarizes the difference between the public presentation of South Korea and Taiwan, and that of Latin America in three cardinal points ;

The first is South Korea ‘s and Taiwan ‘s superior State capacity and policy public presentation. The 2nd is Latin America ‘s failure to make an agricultural construction more contributing to growing with equity. The 3rd is South Korea ‘s and Taiwan ‘s greater ability to plan an appropriate industrial policy every bit good as developing the synergisms between agribusiness and industry. ( 121 )

This paper has overviewed three instances of development waies of Japan, India and South Africa. Minami ( 1986 ) argues about how the economic development in Japan was achieved. Minami mentioned the function of authorities, which was about reassigning agricultural excess to industry sector ( 1986: 97 ) . Minami besides mentioned the importance of interdependent and synergistic agriculture-industry linkages ( ibid. ) . Japan implemented the agricultural land reform, which led to the stimulation of proficient advancement since many husbandmans were liberated from the landlord-tenant relationship merely after the Second World War ( ibid. : 70 ) . As Kay ‘s theory indicated, Japan besides took those three waies, and the economic development achieved.

Saikia ‘s analysis of the India ‘s sectoral linkages ( 2011 ) gives the other position which Kay ( 2009 ) did non reference in his article. Actually, Kay admits that he did non include the services sector in his analysis ( 2009: 129 ) . Kay besides admits that the services sector has a critical function in sectoral linkages, and “ provides a span between agribusiness and industry thereby easing the development of synergisms between them ” ( ibid. ) . Saikia tried to affect the services sector in the relationship between agribusiness and industry sectors.

Lahiff et Al. ( 2012 ) analyzes the land reform undertakings in South Africa. It focuses on the strategic partnership with commercial operators with two instance surveies. It mentions some points which are related to Kay ‘s theory. First, in the two instance surveies, “ ( T ) he function of province bureaus such as the provincial Department of Agriculture and the Commission on Restitution of Land Rights has been critical throughout the damages procedure, in footings of reconstructing the land, advancing the strategic partnership theoretical account and, most problematically, in the proviso of grants ” ( Lahiff et al. 2012: 62 ) . State capacity is non high plenty, and “ the chances for farther land transportations or grant support is unpromising for the foreseeable hereafter ” ( ibid. ) . There are strategic partnership plans with commercial operators, but because of deficiency of province capacity, and of weak land reform, development can non be sustained.

These three articles and chapter are all concentrating on the importance of agribusiness. In Japan, the agriculture-industry linkage was non a one-way relationship ( Minami 1986: 99 ) : the synergistic agriculture-industry scheme worked good earlier, and during industrialisation procedure. In the survey of India ( Saikia 2011 ) , since the function of services sector has been immense these yearss, he included the third sector, and tried to explicate how the services sector can beef up the relationship of agriculture-industry linkage, and readdressed the importance of agriculture-industry linkage. Minami ( 1986 ) did non advert the importance of the services sector, and the relationship of the third sector to the other sectors should be considered in this country, but both have clearly showed the importance of agribusiness. In South Africa ( Lahiff et al. 2012 ) , on the other manus, the agriculture-industry linkage has been weak. Looking at South Africa through Kay ‘s theory, South Africa does non carry through the necessary conditions for development. Although since 1994 the province has implemented land reform, the land reform is non adequate “ in footings of economic development, poorness relief or damages for past unfairness ” ( Greenberg 2010, Centre for Development and Enterprise 2008 ; cited in Lahiff et Al. 2012 ; 7 ) . It says that the challenge of joint ventures, the community-company linkage, has some positive marks of development despite many jobs ( Lahiff et al. 2012: 63 ) , but looking at it through the synergistic development scheme, it is still non clear how three sectors interrelate with each other ; it does non clearly demo how the synergistic development scheme tantrum to the joint ventures.

The three sectors, agricultural, industry and services sectors, depend on each other, so “ ( P ) roposals for prioritising agribusiness over industry or vice-versa will non be able to accomplish the productiveness and growing heightening results that are desirable and possible through a more comprehensive apprehension of the dealingss between agribusiness and industry in the development procedure ” ( Kay 2009: 129 ) . Plus, it is now more and more needed to take the services sector when we think about synergistic scheme, since “ ( s ) ervices play an progressively critical portion of new engineerings and direction patterns every bit good as in the diffusion of cognition and information which will raise productiveness in agribusiness and industry ” ( ibid. ) . The function of companies itself should non be ignored, as the illustrations of joint ventures in South Africa show. However, without the support from the province, the ventures seem to be unable to work good for development. It should be discussed more what sort of dealingss of three sectors and the province are effectual and truly work for eliminating poorness today.

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