Foreword

Summary

This volume deals with poverty and food security, two themes related to my own work over the past several decades, the impact of food price volatility on the poor, and the role of structural transformation as a pathway out of rural poverty. This foreword is designed to illustrate the links between these two topics and to highlight several of the important findings in the chapters that follow. To do this it is useful to put poverty and food security into a historical perspective using the structural transformation as a framework. Historically, structural transformation has been the only sustainable pathway out of rural poverty. It is a general equilibrium process, intimately linked to what is going on in the rest of the economy (Timmer 2009). As Chairman Mao once put it, “the only way out for agriculture is industry”.

There are four basic patterns to a successful structural transformation and these have been remarkably uniform:

1. (1) A declining share of agriculture in value added in the economy (share of GDP) and employment (share of the labour force). Because labour productivity starts out lower in agriculture than outside, there is a gap between the share of agriculture in GDP and in employment, a gap which is gradually eliminated as agriculture is integrated into the rest of the economy. However, recent experience shows this gap often widens before it starts to narrow.

2. (2) A commensurate rise in the share of urban/industrial/modern service activities. (3) Migration of rural workers to urban settings to allow this transformation to take place.

3. (3) A demographic transition with rapidly falling mortality rates, slowly falling fertility rates, and a subsequent period of rapid population growth, which offers a “demographic bonus” when dependency rates drop to low levels for several decades.

The basic cause and effect of the structural transformation is rising productivity of agricultural labour. There are three basic ways to raise labour productivity in agriculture:

1. (1) Through higher prices for agricultural output (make it worth more in real economic terms, which may well be happening in the current economic era).

2. (2) Use of new technology to produce more output for a given amount of labour.

3. (3) The migration of agricultural workers to other occupations with higher productivity, without lowering farm output (the classic Lewis model of development).