Leaving the villages
View(s):In other words, this means that the agriculture share of GDP continues to fall with economic development. And at the same time, the employment share of agriculture too continues to fall. This is, indeed, shocking news to those who believe that “agriculture is the backbone of the economy”.
Agriculture in rich countries
By looking at the importance of the agriculture sector in the national economy, we could even recognise whether the country is rich or poor! In rich countries, the agriculture share of GDP is small, while relatively a fewer number of people are occupied in the agriculture sector. In poor countries, the agriculture share of GDP is higher, while relatively a larger number of people work in that sector.
We can examine some statistics to confirm this. In the US, the agriculture share of GDP is only 1 per cent of its 25-trillion-dollar economy; of the 168-million labour force only 1.6 per cent is employed in the agriculture sector. Similarly, out of an over 3-trillion-dollar economy in the UK, the agriculture share of GDP is less than 1 per cent; of the 35-million labour force there, only 1 per cent work in agriculture.
Farming is a loss-making sector.
As a developing economy, in
Sri Lanka’s 84-billion-dollar economy, the agriculture share accounts for over 8 per cent of GDP, whereas out of its 8.5 million labour force
26 per cent work in agriculture. In the countries that are poorer than
Sri Lanka, the agriculture sector is normally more important in the economy.
In India, where per capita income is lower than in
Sri Lanka, out of the 3.3-trillion GDP, the agriculture share accounts for 17 per cent; its labour force exceeds 550 million, while 43 per cent of it is occupied in the agriculture sector.
The irony is that, however, in rich countries which depend less on agriculture, people eat “good food at affordable prices”. In poor countries which depend more on agriculture, food quality is lower, and food prices less-affordable to the people. The adverse impact of the world food crises too felt more on poor countries which depend more on agriculture than on those rich countries which depend less on agriculture.
Development impetus
When examined closely, the diminishing importance of the agriculture sector is accompanied by a series of interesting structural changes: One of them is the increase in populations in the urban sector along with a decline in populations in the rural sector. This experience is also associated closely with land consolidation – amalgamation of smaller plots of agricultural land to form large farms.
In the development process, rural populations migrate to urban cities and take up jobs in industry and service sectors. The urban sector must accommodate a large influx of rural populations to supply labour for industrial and service sector development.
It helps industry and service sector development, which is growing with a heavy concentration in the urban sector. Naturally, industry and service sectors grow much faster than the modernising agriculture sector.
The rural sector is green and spacious reflecting its specialisation in agriculture. When people move from the rural sector towards the urban sector, rural populations decline and the people to work in agriculture also declines. Amazingly, the decline in rural population is good for agriculture development as well.
Traditionally the rural sector has excess labour which is often under-utilised in the economy. For this reason, even if some people leave the rural agriculture sector, it is not a reason for the decline in agriculture output. In fact, it is the opposite; the agriculture sector gains the benefit of declining population, because, on the one hand, it improves the utilisation of remaining labour more productively and efficiently minimising under-utilisation.
On the other hand, the decline in rural population increases land consolidation promoting large-scale production at lower average cost and with higher average productivity. It also allows agriculture development through technological advancement, modernisation and commercialisation, because such developments can be accommodated more effectively by large-scale farms.
Land consolidation
The migration of people from the rural sector to urban sector allowing for land consolidation has taken place in the world in various ways – by force, by laws, and by incentives.
Perhaps, the first experience of land consolidation in the world is known as the “land enclosure” movement in England and Wales. The movement which lasted for centuries gained its momentum during the 15th to 19th centuries. It involved the consolidation of common lands and smallholdings into larger farms in the hands of private owners, which were enclosed with fences.
Despite the resulting human tragedy, millions of rural populations who lost land rights for cultivation and dwelling flooded the industrialising cities. But at that time, these cities did not have developed urban facilities for decent living.
Accordingly, the people for generations lived in the urban sector in harsh conditions supplying labour to emerging industries, coal and steel mining and infrastructure development. The rural areas, which were now transformed into large-scale farms with wage-labour and machinery, constantly kept increasing agriculture production and productivity.
Laws and incentives
European countries, including England, later passed laws to support and encourage land consolidation. It legitimised and legalised land consolidation in rural areas and population concentration in urban areas. Accordingly, it was quite natural to notice economic development, population concentration and land consolidation, all going hand in hand.
The governments have also provided incentives for rural people to migrate to the urban sector. Employment opportunities, urban housing, and other urban facilities are some of the incentives that the governments offer to rural people to migrate to the urban sector. We must not forget that in some countries, there are regulatory barriers and traditional obstacles to rural migration and land consolidation too.
The governments prepare urban development plans to design and guide expansion and development of urban areas. Unlike the spacious rural areas, urban living is a compact living environment. The urban development plans, therefore, design various aspects related to urban life such as land use, infrastructure, transportation, housing, waste disposal, utility supply and environmental sustainability.
Education and skill development are powerful incentives for rural people to migrate to urban sector. People with education and skills find much more productive use of their knowledge and skills in the urban sector than in the rural sector.
In fact, people gather in the urban sector for two reasons: They find more opportunities to utilise their labour productively, which is a contribution to development. They also find more opportunities in the urban sector to benefit from development.
Urban-rural populations
As urban-rural migration and land consolidation happens in the agriculture sector, 85 per cent of people live in the urban area, while in the entire Euro area covering 19 Western European countries, 78 per cent of people live in the urban sector. In the US too, 83 per cent of the total population live in the urban sector.
The smaller shares of rural populations in the UK, Euro area, US, and other developed countries are engaged in large-scale modern agriculture with higher production and productivity.
Even in China, about 60 per cent of its large population now lives in the urban sector. In contrast in India about two-third of the population still live in the rural sector.
For the entire world too, the urban population share has been growing along with a decline in the rural population share. Accordingly, the two sectors reached half-to-half in 2007. Today, out of about 8 billion world population, 57 per cent live in the urban sector.
With better planning and management, urban-rural migration and agriculture land consolidation make economic development faster. It is also easier and less costly for the governments to provide better living environments in the urban sector than in the rural sector.
Sri Lanka
Apart from economic opportunities and development benefits, there are environmental reasons for urbanisation and land consolidation. With compact living by people, urbanisation economises the use of space, environment, and resources on the one hand. It expands forest cover and wildlife, helping the societies to minimise pollution, climate change and biodiversity losses due to human intervention.
By the way, Sri Lanka has been moving against the currents. It is quite strange to note that in
Sri Lanka about 80 per cent of people still live in the rural sector, leaving only 20 per cent to the urban sector. Let’s delve into these peculiar numbers on our own in the coming week.
(The writer is Emeritus Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).
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