Occasional Essays
March 31, 2006

The Role of Agriculture in Economic Development

The role of agriculture in economic development is not a controversial subject. The issues have long been settled. The part agriculture plays in an economy depends primarily on two factors. The first is the stage of economic development the country has reached. The second is the amount of arable land the country possesses in relation to its total population. These in turn determine the type of agricultural policy that prevails.

Australia, Canada, New Zealand, U.S.A and the countries of the OECS were all colonies of Britain. The OECS countries however evolved in a very different manner from the other four. The four possessed vast expanses of good arable land.{{more}} With migrants from Europe and elsewhere, these countries were able to develop a very big and efficient agricultural sector. They could afford to and did become independent at a fairly early stage in their colonial history. They were able to diversify their economies into manufacturing and services. These soon became more important than agriculture. It was not that the agriculture ceased to grow. Rather, it was that the other sectors grew more rapidly so that today agriculture accounts for a very small percentage of their gross domestic product (GDP). In these four, now developed countries, the contribution of agriculture to GDP ranges between 2 and 7 percent while that of services is between 67 and 75 percent.

The OECS countries lacked vast expanses of arable land and a large domestic market. Because of this, as well as for other reasons, they did not develop in this way. They remained colonies for much longer and survived by exporting agricultural commodities to protected markets in Britain. In SVG’s case the first crop to receive protection was sugar, then cotton and latterly bananas.

The final curtain has now come down on this form of protectionism. The UK has turned its back on Empire and Commonwealth and integrated itself into Europe and we are left to make our own way.

We simply do not have the resource endowments to make it as a predominantly agricultural country particularly without protected markets.

Brazil is the developing country that is currently regarded as having great advantages for agricultural production. It has vast acreages where the entire SVG would probably not amount to a good medium – sized farm.

On the contrary, small states like Singapore and Hong Kong long ago decided that their best bet was not agriculture but manufacturing and services. They have been successful with their approach and now have the per capita incomes of developed countries.

Antigua was the first OECS country to come to terms with our heavy reliance on agriculture and bite the bullet. In the sixties, that island transited from an agricultural to a service-based economy. They went clean out of sugar and developed tourism, importing most of their food.

At this very moment St. Kitts is in the throes of doing precisely the same thing. In fact all the OECS countries are now involved in the process, with Antigua way out front and St. Vincent bringing up the rear.

Given that the Windwards possess better soils and get more rainfall than the Leewards it is possible that agriculture may not decline as much in the former as in the latter.

SVG may well still be able to export bananas to other Caribbean territories, produce food for its citizens as well as the tourists and find niche markets abroad for dasheen, pumpkin, peppers, farine, breadfruit among others. This will be no bad thing for it will afford the island food security and a more diversified economic structure.

There is no doubt however that agriculture will no longer be pre-eminent. In 2004 SVG’s economy grew by 5.4%. The main sectors which contributed to this overall rate of growth were construction 14.75% and tourism 5.5%. On the contrary, agriculture contracted by 5.2%.

To say, then, that agriculture is not now an engine of growth is therefore merely to state a statistical fact. Unsurprisingly, the figures for the OECS as a whole tell the same story.

The critical factor determining the part agriculture plays in SVG’s economy is likely to be labour, not land. When Antigua made its transition it went from labour surplus to labour shortage. Workers had to be imported from elsewhere, including a whole heap of policemen from SVG. At the time Dr. Carleen O’Loughlin was the Economic Adviser to the OECS. She immediately highlighted the crucial issue. These islands, she pointed out, have very small labour forces and one or two projects can quickly transform labour surplus into labour shortage with agriculture bearing the brunt of it.

In SVG the problem is likely to be aggravated by the declining birth rate and the high levels of emigration. Interestingly enough, between the Census of 1901 and that of 2001 population fell in the entire region from Bridgetown to Sandy Bay as well as in Marriaqua, all agricultural areas. It increased in the tourist area of the Southern Grenadines.

All over the world, as the importance of agriculture has declined farmers have sought to proclaim a fundamental role for the sector. The phenomenon is sometimes called agricultural fundamentalism. It is a reaction with which we can all empathize. The issues involved however need to be discussed dispassionately.