The unfortunate statistic on agriculture and development

The federal government has placed a lot of bets on Agriculture. The president said shortly after his inauguration in 2015, that agriculture would be his priority – a message backed by the minister of agriculture, and with policy focus. No other sector has received as many policies and interventions since 2015.

Just to be clear, it is difficult to fault the focus on agriculture given that the agricultural sector currently employs the most number of people. Agriculture accounted for between 30 and 50 percent of total employment depending on who you ask. It therefore follows that increasing the productivity of those employed in agriculture should increase the wellbeing of a large chunk of people. If a farmer is able to increase their yield from three tonnes per hectare to four tonnes per hectare then that farmer is a lot better off, all things being equal of course. Given that most of the rural poor are employed in agriculture then it does make some sense that agriculture is a focus.

There is, however, a rather unfortunate statistic on agriculture and development. According to this data, in every country that has “developed” since the start of the industrial revolution, the development is always associated with less and less people working in agriculture. In England, where most would agree the industrial revolution kicked off, roughly 75 percent of the population was dependent on agriculture in 1700. By the census in 1841 only 22 percent of people worked in agriculture. In the United States in 1830, over 90 percent of people resided on farms, presumably employed in agriculture. By 1870 it was down to 50 percent, and by 2008, less than 2 percent. More recently, in 1970 in China, just over 80 percent of the population worked in agriculture. By 1990 it was down to 60 percent, and as at last count in 2015 it was down to about 28 percent. You get the gist? You can pore through the data from country to country but the trend is the same in every case: development is always associated with less people in agriculture. The only countries that still have large fractions of the population employed in agriculture are the poor and least developed ones.

This does not mean that agricultural production fell in England in the 1700s or in the United States in the 1830s, or in China in the 1970s. In most cases, agricultural production actually increased. This increase was however driven by fewer people. The story typically goes like this: Some people decide to give up on agriculture and move to urban areas to try and do more valuable things. The people left behind in rural areas have more land and resources to work with, given that some people have left agriculture. The increased access to land, and rural labour that is relatively more scarce implies that mechanization is a lot more likely. Increased mechanization then leads to increased productivity with less people producing more agricultural products.

As with most things in economics, there is some debate on the sequence. What is not up for debate is the cold statistic. No country, since the industrial revolution, has ever developed with more people employed in agriculture. If you look beyond the jargon, the reason is simple: agricultural products are actually of very low relative value, and the only way for agriculture to make sense is if each person does a lot of it. Unfortunately, to do a lot of it, you need a lot of land, and not everyone can have a lot of land. There is just not enough land for everyone to have a lot of it. Is agriculture really the future? Although understandable, are we wise to place our bets on agriculture? I leave that for you to decide.

A short note on FX
There has been a lot of movement on FX policy in the last month. Now that the dust appears to have settled, it is useful to get a grasp of where we are. If you look beyond the smoke and mirrors, it appears we are back to a sort of managed float. Although one that is significantly worse than what was in place in 2014 before the oil price adjustment. Some windows are fixed, some windows are floating, some windows are somewhere in between, and some windows are closed.

We know, from our experience over the last three years, that the managed float regime was hopelessly unable to deal with shocks. This windowed regime is even less capable of doing so. I guess we are back to praying that shocks don’t happen and that the oil price stays up, else we are back to square one again. Unfortunately, shocks always seem to happen when they are least expected.

• Nonso Obikili is an economist currently roaming somewhere between Nigeria and South Africa. The opinions expressed in this article are the author’s and do not reflect the views of his employers.