Industry Builds on Agriculture

Industry Builds on Agriculture


One of the best things about advances
in agricultural productivity is that they tend to spur
industrial revolutions. Consider Indonesia, the country’s economy
has had its ups and downs but overall, over the last few decades it has emerged as an industrializing
exploiting nation. The industrializing processes
of the 1980s were in fact preceded
by about 15 years of strong gains
in agricultural productivity. During the 1970s, about
50 million Indonesians left poverty without the aid
of export-oriented industry. This was because of agriculture. For instance, between 1968 and 1985,
yields for rice, which is the staple food in Indonesia,
rose by about 80%, and total rice production grew almost
three times faster than population growth. In 1974, Indonesia was the largest
rice importer in the world. By 1984, the country
was self-sufficient in rice. Indonesia’s green revolution was based
in small farmers, it was mediated through markets,
and the state played an important role in making available to farmers, high yielding fertilizer responsive
rice varieties. Japan, Taiwan, and South Korea all have
broadly similar histories in this regard. That is, their processes
of industrialization were preceded by significant productivity gains
in agriculture. These market developments were supported
by their governments through building the right kinds
of infrastructure, rural education, and in general
supporting and encouraging research and development in agriculture, in addition to the more general role
of those governments in creating a stable
economic environment. Agricultural growth helps boost
industrialization in a few ways. For one thing, the more productive
is agriculture, the easier it is for some workers
to shift from farms to factories in larger cities. Furthermore, agriculture
produces a surplus and this mobilizes domestic savings,
which can be used to finance investment as indeed was the case in the East Asian
economic miracles. Finally, there may be
an intangible effect, a country which has
some success in agriculture starts to believe it can have
economic success more generally. Interestingly, Japan, Taiwan,
and South Korea all engaged in significant programs
of land reform in the periods leading up
to their industrialization. Basically, land was taken
away from landlords and given to smaller farmers and tenants. Cause and effect are hard
to disentangle here, but it seems that this may have boosted
agricultural productivity and it also may have contributed
to a general sense of fairness and helped the later democratization
of these countries. There was now a greater chance
that these countries would have a stable middle class. Overall, information on these topics
is fairly diffused and spread out. You could try David Henley, “The Agrarian
Roots of Industrial Growth,” or just Google, “East Asian
miracle agriculture” to get to some good sources.

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