The Primary Sector in Economic Development (Routledge Revivals)

Proceedings of the Seventh Arne Ryde Symposium, Frostavallen, August 29-30 1983

Mats Lundahl

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317593607
• Edition: 1
• Topic: Economia
• Subtopic: Economia dello sviluppo

It is a major problem for less developed countries to make their primary sectors sufficiently profitable in order to be able to build up their manufacturing and service sectors. This edited collection, first published in 1985, examines the nature of the primary sector and its role in economic development. Chapters consider problems of stagnation and income distribution in such countries as Chile and Brazil; trade in national primary products and exports in Africa and the Middle East; and reform and policies of development in countries such as Peru. An interesting volume with an international scope, this title will be of value to economics students with a particular interest in the role of the primary sector in developing economies.

PART ONE

THE ROLE OF THE PRIMARY SECTOR

1 THE PRIMARY SECTOR: COMPOSITION AND FUNCTIONS^*

Markos J. Mamalakis

If the rod be bent too much one way, says the proverb, in order to make it straight you must bend it as much the other.

Adam Smith, The Wealth of Nations, p. 628.

Introduction

This paper hopes to restore, through the analysis of all components of the primary sector, a long lost balance in development economics and correct an analytical incompleteness which has existed ever since Adam Smith, David Ricardo and John Stuart Mill. The incomplete developmental framework and analytical thinking to which I refer is the dualistic agriculture-industry model. The missing part is that of ‘services’. This model, which even today pervades the literature even though it ignores services, is based on two pillars. The first is the partially valid ‘industrialisation mystique’ which glorifies the catalytic role of manufacturing in opening and paving the path to self-sustained growth. The second has its roots in the physiocratic tenet and emphasis on the ‘produit net’ of agriculture as the sole source of income and wealth. The modern neophysiocratic ‘agricultural economics approach’ which suggests transforming neglected ‘traditional’ agriculture¹ is also partial and incomplete because it perceives the ‘primary sector’ problem as a mono-sectoral, agricultural one, when in reality it is a multisectoral regional one.

The analytical misconceptions of the agriculture-industry model that are embedded in the classical school have been reinforced by modern Nobel-prize-winning development economists such as Theodore Schultz (emphasising agriculture) and W. Arthur Lewis (emphasising industry) and development of elaborate but incomplete models such as those of Ranis and Fei² and Dale Jorgenson.³ The more recent popular rural-urban model of Harris and Todaro,⁴ a reaction to the incomplete agriculture-industry framework, also fails to treat explicitly either rural or urban services.

A basic theme of the present paper is that the primary sector consists as much of agricultural, forestry and fishing activities as it does of services (Colin Clark’s tertiary) and industrial (secondary) ones.⁵ Economic development, therefore, never was a process of transition from agriculture to industry and then to services. It has always been a process of transition from embryonic primary activities (rural agricultural, service and industrial ones) to advanced, modern and highly productive primary (rural) and postprimary (urban service and industrial) ones. During this process industrial and service activities have generally increased in relative importance as compared to agriculture.

Lack of, or only implicit, treatment of services by the classical school and modern development specialists has led to flawed analyses and diagnoses of the poverty and underdevelopment problem and fundamentally defective remedial strategies.

The paper is divided into three parts. The first examines the relationship between production of goods and services and the primary sector. Presented in it are four concepts of the primary sector and of labour surplus. Part 2 discusses some major dimensions of the relationship between the primary sector and income distribution. Part 3 deals with selected aspects of capital formation as they relate to the primary sector.

1. The Primary Sector and Production

The Four Concepts of the Primary Sector

What the primary sector is, what its functions and composition are, is far from clear. There can be at least four concepts or definitions of the primary sector. According to the first, ‘narrow’ definition, primary is synonymous with agriculture. The function of the primary sector is to produce agricultural consumer goods. In terms of the second ‘intermediate’ definition, the primary sector includes all activities needed to produce and deliver agricultural goods to the final consumer. The primary sector consists both of goods and services production. Storage, transportation, trade and even those personal services transforming the quantity, time and location dimension of agricultural goods⁶ are an integral part of it. The second is basically the definition used by Colin Clark.⁷

The third notion of the ‘extended primary sector’ includes all rural activities producing agricultural, service and industrial consumer goods needed for the survival of a family. The function of the extended primary sector is to produce all consumer goods needed by rural households. As long as they are consumer-oriented and rural, all agricultural, service and industrial activities are part of it.

And then there is the fourth and ‘broadest’ notion which includes within the primary sector all consumer and capital goods produced by and needed for the survival of rural families. Primary now is synonymous with rural. The primary is a multifunctional, multi-activity, multi-product and multi-service sector.

The Four Types of Primary Sector Labour Surplus

This fourfold classification of the primary sector is the first step in the process of decomposing its structure, identifying its idiosyncratic features and developing novel development strategies. The usefulness of this classification can be seen by examining the four ‘labour surplus’ concepts that correspond to the four aforementioned notions of the primary sector. There exists, first, the well-known and celebrated notion of the ‘agricultural labour surplus’.⁸ Surplus agricultural labour (narrow primary-sector labour surplus) is that part of the rural labour force that cannot find productive employment in agriculture. Estimates exist suggesting that as much as 80 per cent of the rural population in developing countries cannot find, under prevailing production conditions, full employment within rural agriculture. By focusing on this ‘narrow (agricultural) labour surplus’ concept, development economists (Ranis and Fei, W. Arthur Lewis) using the dualistic agriculture-industry framework have perceived of industrialisation as the only path to prosperity. The industrialisation plus stagnation pattern of many developing countries has created, however, the need for better analysis and development strategies.

In the second concept, the ‘intermediate primary sector labour surplus’ is defined as that segment of the rural labour force that cannot be employed productively either in agricultural production or in the ancillary services that augment the value of agricultural products as they move towards final consumption. It can be estimated conservatively that as much as 30 per cent of the rural labour force is, or can be, employed productively in the service segment of the intermediate primary sector. Labour employed in services complementary to agricultural production and consumption⁹ is neither free nor idle nor surplus. Furthermore, development cannot be achieved unless the quality and quantity of these complementary primary sector services are greatly strengthened. Economic development is characterised as much by a transition from non-existent or low quality to ample and high quality complementary to agriculture primary sector services as it is characterised by a transfer to labour from low productivity agricultural to high productivity agricultural and industrial jobs.

According to the third concept, which corresponds to the extended primary sector, labour surplus is defined as that segment of the rural labour force that cannot be employed productively in any type of agricultural, service and industrial rural consumer goods production. As much as 80 per cent of the rural labour force is, or can be, employed in the ‘extended primary sector’. Of this 80 per cent, 20 per cent would be employed in agriculture (narrow primary sector), 30 per cent in complementary-to-agriculture services (the second component of the intermediate primary sector) and another 30 per cent in autonomous services, such as health, education and administration¹⁰ and industrial consumer goods production (the third segment of the extended primary sector). Economic development involves as much an employment transition from low to high productivity rural non-agricultural consumer goods production as it involves a transition from low productivity non-agricultural rural to high productivity urban consumer goods production.

Labour surplus of the ‘broadest primary sector’ (all rural activities), which is the fourth concept, is defined as that segment of the rural labour force that cannot find productive employment in any rural consumer and capital goods production. As much as 90 per cent of the rural labour force may be employed in the broadest primary sector, with 10 per cent engaged in the production of such capital goods as roads, dwellings, fences, irrigation works, bridges, storage places and so forth. If the above ‘estimates’ are accepted as reasonable, a vast difference between the labour surplus of the ‘narrow’ and ‘broadest’ primary sector does emerge. While the ‘narrow primary sector labour surplus’ can be as high as 80 per cent of the rural labour force, the labour surplus of the ‘broadest primary sector’ (the rural labour surplus) may be only, or even less than, 10 per cent of the rural labour force. The implications in the formulation of strategies cannot be ignored.

Agricultural, Service, Primary and Rural Revolutions

A goal and consequence of economic development is the rise in the productivity of labour in all segments of the broadest primary sector, that is in agriculture, complementary to agriculture services, other rural consumer goods production and rural capital goods production. The hypothesis advanced here is that rural services, complementary and autonomous, provide the magic link between an agricultural revolution, which generates the food surpluses needed for growth, and a rural revolution, which makes rural life as, or even more, attractive than that in urban areas.

There exists the need of transforming the location, quantity and time dimension of agricultural products through trade, transport and financial services revolutions. There exists also the need of transforming the quantity and quality of all rural agricultural and non-agricultural inputs and outputs through revolutions in quality maintaining and improving health, educational, social security and governmental services.

A primary sector revolution will have materialised if and when the underlying agricultural, medical, transport, governmental, trade, financial and educational transformations have taken place. In order for all these changes to be carried out it will be necessary (a) to find a means of employing previously unutilised or underutilised labour; (b) to reduce the size of unilateral resource flows from primary-rural to urban regions; (c) to establish free terms of trade between agriculture, services and industry, whether these are urban or rural; and (d) to restore a balance between rural and urban services by reducing the concentration of services in cities.

Many of the aforementioned changes are likely to occur simultaneously. However, I believe, there is one change that must come first. That is decentralisation of governmental services and political power. Such a decentralisation is needed to enable the primary sector to utilise its own resources for its own and the general social benefit. Such a decentralisation would also enable the primary sector...

Table of contents

• Cover Page
• Half Title
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Table of Contents
• Preface
• Introduction Mats Lundahl
• Part One: The Role of the Primary Sector
• Part Two: Problems of Stagnation and Income Distribution
• Part Three: Trade in Primary Products
• Part Four: Generating Change
• Part Five: The Socialist Experience
• List of Contributors
• Index