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However, it is not just the economywide
pace of growth that matters for
poverty reduction but also its sectoral
composition, with agricultural growth
known to be especially “pro-poor.”
Although the only sustainable cure for
poverty might be economic growth,
some kinds of increased productive
capacity reduce poverty more than
others. Many studies underscore that a
given rate of growth can deliver diverse
outcomes for the poor, suggesting the
pattern—sectoral and/or geographical—matters
independently of overall
growth. If the poor live mostly in
remote rural areas and depend mainly
on agriculture for a living, rapid expansion
of urban manufacturing will likely
have less of an impact on poverty than
agricultural progress.
Poverty and Agricultural Productivity
The academic literature strongly supports
the view that growth in the
agricultural sector is more povertyreducing
than non-agricultural sources
of growth, at least at the lowest levels
of income. For instance, econometric
work by Luc Christiaensen, Lionel
Demery and Jesper Kuhl confirms that
agricultural growth is the most effective
source of reducing poverty among
the poorest of the poor (classified by
them as earning $1 per day or less). In a
policy research paper published by the
World Bank, José Montalvo and Martin
Ravallion find that, contrary to popular
belief, the primary (natural resources)
sector—rather than the manufacturing
or services sectors—was the real driving
force in China’s spectacular success
against poverty, in which approximately
400 million people were able to rise
above the absolute poverty theshold.
Increasing agricultural productivity
constitutes an important part of the
poverty-reduction story. Arthur Lewis,
who won the Nobel Prize in economics
in 1979, observed that successful economies
were able to develop by drawing
unproductive labor off the farm and
into manufacturing in the cities, where
worker productivity was much higher.
This had the effect of not only supporting
industry but also raising productivity
on the farm by reducing excess
labor. As suggested by the associated
52 SAISPHERE
literature (for example, an Organisation
for Economic Co-operation and
Development report published in 2011,
Agricultural Progress and Poverty Reduction:
Synthesis Report, by Joe Dewbre,
Dalila Cervantes-Godoy and Silvia
Sorescu), a clear negative relationship
exists between the poverty rate and
agricultural productivity. Moreover,
the relationship is concave; increasing
agricultural productivity is especially
effective at high levels of poverty.
A paper produced by the U.K.
Department for International Development
emphasizes the historically close
correlation between different rates of
poverty reduction over the past 40
years and differences in agricultural
performance, particularly the rate of
growth of agricultural productivity.
Agriculture and poverty reduction are
related via four “transmission mechanisms”:
(1) direct impact of improved
agricultural performance on rural
incomes, (2) impact of cheaper food
for the poor, (3) agriculture’s contribution
to growth and the generation of
economic opportunity in the nonfarm
sector, and (4) agriculture’s fundamental
role in stimulating and sustaining
economic transition, as countries—
and poor people’s livelihoods—shift
away from being primarily agricultural
toward a broader base of manufacturing
and services.
There are many contributory factors
to success in agricultural growth,
including access to output and input
markets accommodated by a good
transportation, marketing and processing
infrastructure; nondiscriminatory
tax and trade policy; high rates of
investment in agricultural research and
extension services; a system of ownership
rights that encourages initiative;
employment that creates nonagricultural
growth; well-functioning institutions;
and good governance.
Of course, although the poor in
rural areas count on agriculture to
make a living, they are also consumers
of food; in fact, they spend far more
of their income on food compared
with the nonpoor. There is no more
telling indicator of global agricultural
progress over the long term than the
steadily declining real price of food, a
trend reflecting technology-induced
growth in agricultural productivity
outstripping population and incomedriven
increases in demand for food,
as Julian Alston and Will Martin wrote
in the American Journal of Agricultural
Economics.
Variations in prices of food commodities
may also have special significance
for poverty outcomes, as
reported widely in the press during
times of commodity price spikes, such
as 2007–08 and 2010.
Yet, the fact that variations in food
commodity prices also affect farm
income is sometimes ignored. For
many of the poor, price changes have
an impact on both the income they
earn and what they pay for foodstuffs,
with opposite implications for poverty.
In some countries, higher food costs
undoubtedly increase poverty, while
in others they lessen it. As Lawrence
Chandy and Geoffrey Gertz pointed
out in a recent Brookings Institution
policy brief, the widely held view that
higher food prices are an unmitigated
negative for the world’s poor is incor-
Although the poor in rural areas count on agriculture to make a
living, they are also consumers of food; in fact, they spend far
more of their income on food compared with the nonpoor.
rect. Be that as it may, rapid changes
in prices certainly can have significant
distributional effects across regions,
countries and sectors; a quick hike in
the global price of rice may benefit the
poor in Vietnam (a big rice producer)
but could negatively affect the poor in
Nigeria (a big rice importer).
It is impossible to draw general conclusions
a priori about whether in any
given instance lower food commodity
prices are good or bad for poverty.
Lower food prices will inevitably lift
some poor people above the poverty
line and push some below it.