All Commentary
Monday, July 1, 1985

Agricultural Technology, Economic Incentives and World Food Problems



The importance of policy is amply demonstrated in the neighboring countries of Kenya and Tanzania. The two nations have similar agricultural resources and histories—but in the 20 years since independence, they have followed diametrically opposite farm policies. Kenya divided big landholdings among small-holders, then backed the smallholders with price incentives, research and extension programs. Overall farm productivity increased 37 percent from 1971 to 1982. Tanzania forced its scattered family farmers to consolidate into large villages . . . Tanzania’s farm output rose only 12 percent in the 11 years from 1971 to 1982—even by the Tanzanian government’s highly optimistic numbers. Only massive food aid forestalled widespread hunger in Tanzania even before the recent drought.[7]

Avery contends that even in Africa, technology is now available to double yields and drought- proof its food supplies.[8] He cites as evidence a new, more drought-resistant sorghum hybrid developed in the Sudan that appears to have the potential to triple yields in much of East Africa. Also available is a new sorghum for the dryer region of the Sahel that apparently can double yields there. In West Africa, there is the potential to become self-sufficient in rice by shifting from upland to swamp rice production. Nigeria has a new corn variety that yielded nine tons per hectare in the midst of last year’s drought (the current average yield is one ton). New peanut varieties with yields several times those of current varieties are being tested in Senegal, Mozambique, Zambia, and Zimbabwe. Improved pest control and new varieties helped bring about a seven-fold increase in yields of cowpeas in West Africa. The fact that available technology has not been more widely applied in Africa is not only a highly visible human tragedy but also an indictment of the government policies of African nations.

Farm Programs in Developed Countries

Agricultural success in the less developed countries is also adversely affected by farm programs in the United States and other highly developed countries that subsidize domestic agricultural output. When domestic prices of farm products are raised above the world price, im ports must be restricted to prevent domestic users from buying lower priced imports. As a result of the U.S. sugar price support program, for example, domestic sugar price was four times the world price in late 1984. This import quota system, imposed by the world’s biggest sugar market, is highly detrimental to Caribbean sugar producers.

In addition, subsidies, easy credit terms, and reduced interest rates are often used in the United States, the European Economic Community, and other developed countries to increase agricultural exports. Regardless of the type subsidy, producers in the exporting country receive an artificial advantage at the expense of producers in the countries where the products are “dumped.” This dumping of agricultural products in developing countries permits governments to keep the price of food cheap to the detriment of local farmers. Dependence on cheap imports discourages agricultural development and food production. The conclusion is that in assisting developing countries, the United States, the E.E.C., and other highly developed countries should stop subsidizing their own farmers. While government farm programs in the United States are often sold to the public on the basis of helping “feed the world,” these programs actually impede economic development and food production in less-developed countries.

Economic Aid

The conventional wisdom for the past generation has been that poor countries cannot develop without financial aid from the highly developed countries. Foreign aid, however, is not indispensable to economic progress. Indeed, P.T. Bauer shows that aid is more likely to obstruct development than to promote it.[9] Foreign aid reduces incomes in the donor countries and enables the recipient country to follow counterproductive interventionist policies. Aid, for example, enabled Tanzania to pursue economic and social policies that are antithetical to both economic progress and individual freedom. The effects on farm output of the Tanzanian experiment (which involved forcibly herding millions of people into collectivized villages) were described above.

The Population Problem

Neo-Malthusians frequently cite the population “explosion” as an insurmountable barrier in alleviating world hunger. The prophets of doom typically reach their conclusions on the basis of projecting past trends. However, there is no reason to expect population to continue to increase at the same rate in developing countries as economic development occurs. When income levels rise in developing countries, the birth rate can be expected to decrease.[10] Thus, the relationship between population and food must be considered in the context of economic development. There is no evidence that Draconian population controls (such as compulsory sterilization or abortion) are required for economic development.

Implications and Conclusions

The world is currently undergoing a major increase in agricultural productivity. World agricultural production is at a record high and is increasing rapidly. Agricultural output is increasing rapidly in the developing countries—rising from 2.7 percent per year in the early 1970s to 3.3 percent annually from 1977 to 1982.[11] This growth rate would have been even higher if not for the dismal record of agricultural production in Africa.

The famine in Africa emphasizes the urgency of modernizing African agriculture. Fortunately, much of the required technology is presently available. The coupling of technology with economic incentives can increase agricultural output in Africa just as it has in many countries throughout the world.

There is no easy or quick solution to world hunger or economic development. Production of food and other products is limited by available resources, and the only realistic goal in any country is to make the most efficient use of these resources. The only effective way of increasing incomes is to increase capital formation and productivity. Foreign aid is no substitute for voluntary savings by the millions of people living in low-income countries.

Programs and policies affecting physical inputs will have little effect on output in the absence of the proper social and economic climate. Political controls of agriculture and other sectors of the economy inevitably stifle individual initiative, capital accumulation, and productivity. It is no accident that every country that has launched experiments in collectivized agriculture has wit nessed a decrease in agricultural productivity. Hong Kong, Singapore, South Korea and Taiwan are examples of countries that have prospered by shunning collectivist economic policies. The effect of recent limited privatization measures on agricultural output in China provides another dramatic example of the effect of economic incentives.

Increases in agricultural technology present a challenge to highly developed as well as to less developed countries. The temptation by government officials in both cases is to “manage agriculture.” In the developed countries, domestic farm product prices are increased above competitive levels by expensive farm programs. Surpluses acquired in the operation of price support programs are often “dumped” in less developed countries. These policies are inimical to food production in less developed countries and to economic progress.

Rising farm productivity throughout the world now holds the promise of undermining these protectionist farm policies. There seems little doubt that farm producers in all countries will face more competition in domestic and foreign markets as currently available technology is adopted more widely. There is no way to determine now what the ultimate effects of these developments on world agriculture will be. We can be confident, however, that a more productive agriculture holds the potential to improve the lot of the world’s hungry people. The challenge to governments in developed and less developed countries then is to abstain from policies that restrict competition and trade. Such restrictions prevent farmers and other workers in all countries from engaging in those activities in which they are most productive. Only through widespread use of decentralized competitive markets can agricultural resources throughout the world be used most productively, yielding maximum benefits to people in all countries.


1.   The productivity figures cited in this section are from two papers by Dennis T. Avery, Senior Agricultural Analyst, Bureau of Intelligence and Research, U.S. Department of State. “The Dilemma of Rising Farm Productivity” was presented before The Agribusiness Round-table, September 10, 1984. “The Bad News for Farmers Is That the Global Bad News Is Wrong” was presented before the N.C. Society of Farm Managers and Rural Appraisers, February 28, 1985.

2.   “Business Brief: In Praise of Peasants,” The Economist, February 2, 1985, pp. 86-87.

3.   Ibid., p. 87.

4.   Ibid.

5.   “Peasants Rising,” The Economist, February 2, 1985, pp. 11-12.

6.   Dennis Avery, 1985, op. cit., p. 3.

7.   Dennis Avery, 1984, op. cit., pp. 6-7.

8.   Dennis Avery, 1985, op cit., p. 4.

9.   P.T. Bauer, Dissent on Development, Revised ed. (Cambridge, Mass.: Harvard Univ. Press, 1976), pp. 95-132.

10.   Ludwig von Mises, Human Action (Chicago: Henry Regnery and Co., 1966), p. 669.

11.   Dennis Avery, 1985, op. cit., p.3.


The importance of policy is amply demonstrated in the neighboring countries of Kenya and Tanzania. The two nations have similar agricultural resources and histories—but in the 20 years since independence, they have followed diametrically opposite farm policies. Kenya divided big landholdings among small-holders, then backed the smallholders with price incentives, research and extension programs. Overall farm productivity increased 37 percent from 1971 to 1982. Tanzania forced its scattered family farmers to consolidate into large villages . . . Tanzania’s farm output rose only 12 percent in the 11 years from 1971 to 1982—even by the Tanzanian government’s highly optimistic numbers. Only massive food aid forestalled widespread hunger in Tanzania even before the recent drought.[7]

Avery contends that even in Africa, technology is now available to double yields and drought- proof its food supplies.[8] He cites as evidence a new, more drought-resistant sorghum hybrid developed in the Sudan that appears to have the potential to triple yields in much of East Africa. Also available is a new sorghum for the dryer region of the Sahel that apparently can double yields there. In West Africa, there is the potential to become self-sufficient in rice by shifting from upland to swamp rice production. Nigeria has a new corn variety that yielded nine tons per hectare in the midst of last year’s drought (the current average yield is one ton). New peanut varieties with yields several times those of current varieties are being tested in Senegal, Mozambique, Zambia, and Zimbabwe. Improved pest control and new varieties helped bring about a seven-fold increase in yields of cowpeas in West Africa. The fact that available technology has not been more widely applied in Africa is not only a highly visible human tragedy but also an indictment of the government policies of African nations.

Farm Programs in Developed Countries

Agricultural success in the less developed countries is also adversely affected by farm programs in the United States and other highly developed countries that subsidize domestic agricultural output. When domestic prices of farm products are raised above the world price, im ports must be restricted to prevent domestic users from buying lower priced imports. As a result of the U.S. sugar price support program, for example, domestic sugar price was four times the world price in late 1984. This import quota system, imposed by the world’s biggest sugar market, is highly detrimental to Caribbean sugar producers.

In addition, subsidies, easy credit terms, and reduced interest rates are often used in the United States, the European Economic Community, and other developed countries to increase agricultural exports. Regardless of the type subsidy, producers in the exporting country receive an artificial advantage at the expense of producers in the countries where the products are “dumped.” This dumping of agricultural products in developing countries permits governments to keep the price of food cheap to the detriment of local farmers. Dependence on cheap imports discourages agricultural development and food production. The conclusion is that in assisting developing countries, the United States, the E.E.C., and other highly developed countries should stop subsidizing their own farmers. While government farm programs in the United States are often sold to the public on the basis of helping “feed the world,” these programs actually impede economic development and food production in less-developed countries.

Economic Aid

The conventional wisdom for the past generation has been that poor countries cannot develop without financial aid from the highly developed countries. Foreign aid, however, is not indispensable to economic progress. Indeed, P.T. Bauer shows that aid is more likely to obstruct development than to promote it.[9] Foreign aid reduces incomes in the donor countries and enables the recipient country to follow counterproductive interventionist policies. Aid, for example, enabled Tanzania to pursue economic and social policies that are antithetical to both economic progress and individual freedom. The effects on farm output of the Tanzanian experiment (which involved forcibly herding millions of people into collectivized villages) were described above.

The Population Problem

Neo-Malthusians frequently cite the population “explosion” as an insurmountable barrier in alleviating world hunger. The prophets of doom typically reach their conclusions on the basis of projecting past trends. However, there is no reason to expect population to continue to increase at the same rate in developing countries as economic development occurs. When income levels rise in developing countries, the birth rate can be expected to decrease.[10] Thus, the relationship between population and food must be considered in the context of economic development. There is no evidence that Draconian population controls (such as compulsory sterilization or abortion) are required for economic development.

Implications and Conclusions

The world is currently undergoing a major increase in agricultural productivity. World agricultural production is at a record high and is increasing rapidly. Agricultural output is increasing rapidly in the developing countries—rising from 2.7 percent per year in the early 1970s to 3.3 percent annually from 1977 to 1982.[11] This growth rate would have been even higher if not for the dismal record of agricultural production in Africa.

The famine in Africa emphasizes the urgency of modernizing African agriculture. Fortunately, much of the required technology is presently available. The coupling of technology with economic incentives can increase agricultural output in Africa just as it has in many countries throughout the world.

There is no easy or quick solution to world hunger or economic development. Production of food and other products is limited by available resources, and the only realistic goal in any country is to make the most efficient use of these resources. The only effective way of increasing incomes is to increase capital formation and productivity. Foreign aid is no substitute for voluntary savings by the millions of people living in low-income countries.

Programs and policies affecting physical inputs will have little effect on output in the absence of the proper social and economic climate. Political controls of agriculture and other sectors of the economy inevitably stifle individual initiative, capital accumulation, and productivity. It is no accident that every country that has launched experiments in collectivized agriculture has wit nessed a decrease in agricultural productivity. Hong Kong, Singapore, South Korea and Taiwan are examples of countries that have prospered by shunning collectivist economic policies. The effect of recent limited privatization measures on agricultural output in China provides another dramatic example of the effect of economic incentives.

Increases in agricultural technology present a challenge to highly developed as well as to less developed countries. The temptation by government officials in both cases is to “manage agriculture.” In the developed countries, domestic farm product prices are increased above competitive levels by expensive farm programs. Surpluses acquired in the operation of price support programs are often “dumped” in less developed countries. These policies are inimical to food production in less developed countries and to economic progress.

Rising farm productivity throughout the world now holds the promise of undermining these protectionist farm policies. There seems little doubt that farm producers in all countries will face more competition in domestic and foreign markets as currently available technology is adopted more widely. There is no way to determine now what the ultimate effects of these developments on world agriculture will be. We can be confident, however, that a more productive agriculture holds the potential to improve the lot of the world’s hungry people. The challenge to governments in developed and less developed countries then is to abstain from policies that restrict competition and trade. Such restrictions prevent farmers and other workers in all countries from engaging in those activities in which they are most productive. Only through widespread use of decentralized competitive markets can agricultural resources throughout the world be used most productively, yielding maximum benefits to people in all countries.


1.   The productivity figures cited in this section are from two papers by Dennis T. Avery, Senior Agricultural Analyst, Bureau of Intelligence and Research, U.S. Department of State. “The Dilemma of Rising Farm Productivity” was presented before The Agribusiness Round-table, September 10, 1984. “The Bad News for Farmers Is That the Global Bad News Is Wrong” was presented before the N.C. Society of Farm Managers and Rural Appraisers, February 28, 1985.

2.   “Business Brief: In Praise of Peasants,” The Economist, February 2, 1985, pp. 86-87.

3.   Ibid., p. 87.

4.   Ibid.

5.   “Peasants Rising,” The Economist, February 2, 1985, pp. 11-12.

6.   Dennis Avery, 1985, op. cit., p. 3.

7.   Dennis Avery, 1984, op. cit., pp. 6-7.

8.   Dennis Avery, 1985, op cit., p. 4.

9.   P.T. Bauer, Dissent on Development, Revised ed. (Cambridge, Mass.: Harvard Univ. Press, 1976), pp. 95-132.

10.   Ludwig von Mises, Human Action (Chicago: Henry Regnery and Co., 1966), p. 669.

11.   Dennis Avery, 1985, op. cit., p.3.

Dr. Pasour is Professor of Economics st North Carolina State University at Raleigh.

British Parson Sir Thomas Malthus predicted in 1798 that population increases over time would outstrip increases in food production causing chronic food shortages. In recent years, a neo-Malthusian doctrine has again gained popularity as widespread hunger problems, especially in Ethiopia and other African countries, command front-page headlines. It is ironic that visions of a starving Africa are obscuring a major surge in agricultural productivity throughout much of the world today. Moreover, there is a great deal of evidence that the most serious constraints on food production are not weather or natural resources but rather government policies that stifle entrepreneurial incentives. This paper presents evidence on rising farm productivity, the importance of economic incentives in agriculture, and implications for world food production and economic development.

Rising Farm Productivity[1]

Increases in agricultural technology are resulting in dramatic increases in farm productivity throughout much of the world. In the United States, farmers planted the world’s first hybrid wheat in 1984, which increased yields from 25 to 30 percent. Rice growers in the Gulf states planted a new rice variety, which also had yields 25 to 30 percent higher than earlier varieties. At the same time, Taiwanese farmers are feeding surplus rice to livestock. Agricultural output is also increasing rapidly in the European Economic Community (E.E.C.). Wheat yields rose 23 percent in the E.E.C. in 1984 and French harvest of field peas has jumped 50 percent in two years.

Contrary to popular impression, world agricultural production is also increasing rapidly in the developing countries. Thailand, Malaysia, Indonesia, and the Philippines have all increased their farm productivity by more than 35 percent in the last decade. The International Rice Research Institute has introduced its Third World rice variety, which requires much less nitrogen and pesticide protection to achieve yields comparable to those of its previous “miracle” rice varieties. Researchers in Peru are making break-throughs in production in the huge Amazon Basin replacing trace minerals that leach rapidly because of the high rainfall. Argentine wheat has be come so cheap that grain companies recently considered importing it into the United States.

Agricultural productivity in Asia has been most influenced by the Green Revolution and by a recent dramatic shift in Chinese farm policy. Green Revolution rice varieties have been the biggest single factor in lifting Asian agricultural output by more than 25 percent during the past decade. Yet, potential gains from increases in available technology can be choked by policies that stifle entrepreneurial incentives.

Technology Is Not Enough

China provides a classic example both of the effect of collectivist agricultural policies and of what can happen when these policies are changed. In 1958, Chairman Mao decreed “The Year of the Great Leap Forward.” Under the “Great Leap Program,” large numbers of farm workers were to be diverted to industrial employment and the remaining farm population forced into agricultural communes. The loss in agricultural output caused by these policies was catastrophic. Food supplies fell to famine levels and had not recovered by 1965. Thus, contrary to conventional wisdom, per capita food consumption actually decreased during the Mao years.

China’s agricultural output has increased dramatically since the late 1970s when a decision was made to increase farm product prices, scrap the big communal farms, and lease the land back to families and small groups. The privatization moves and the retreat from communism have been accompanied by an increase in food grain output of 12 percent a year for the past seven years despite bad weather in 1980, so that China has overtaken Russia as the world’s largest wheat producer.[2]

A recent article in The Economist reveals a general relationship between market incentives and agricultural production.[3] In a cross-country comparison of food production, Africa dominates the list of individual countries whose agriculture has increased the least since 1970. However, the difference between the most and least productive African states is dramatic. Significantly, the study concludes that: “Those which have done best—e.g., Ivory Coast and Malawi—have encouraged private ownership of land, or given peasant farmers security of tenure. The least productive have been those which have encouraged state and collective farms.”[4]

The evidence suggests that property rights and economic incentives are fully as important in less developed as in highly developed economies. This conclusion, however, should not be taken to mean that providing economic incentives will quickly transform a poor country. There is no short-cut to economic development, with or without outside financial aid. (As shown below, financial aid often is counterproductive.)

The solution to economic development in low-income countries lies primarily within the countries themselves. The only long-run solution to food and income problems in any country is to increase through capital formation the productivity of the people involved. When government policies severely distort economic incentives and discourage capital formation, it is not surprising that productivity, including agricultural output, is low.

What Can Be Done?

There is evidence that more can be done to increase food production in poor countries. Large increases in output by peasants in India, China, and other countries show that increases in agricultural output do not require big farms, big dams, big irrigation systems or an “agricultural plan.” Instead, the most important step is to provide entrepreneurial incentives. This means that poor countries need to scrap those policies that are biased against farmers such as high taxes, price controls on farm products, overvalued exchange rates that depress agricultural exports, and protectionist trade policies that increase the cost of fertilizer and farm machinery.[5]

Developing countries, for example, often have regulations banning the importation of tractors, harvesters, and other mechanically powered farm machinery. Such restrictions are based on the old but persistent myth that machines destroy jobs. This argument carried to its logical conclusion would prevent all substitution of capital for labor and permanently keep workers at a subsistence level.

Another important step, as suggested by the productivity figures presented above, is to increase the application of science in agricultural production. Per capita food production rose 16 percent in South America and 10 percent in Asia between 1972 and 1982.[6] This improved performance is due both to improved farming technology and to stronger economic incentives to use it. Many small farmers in developing countries, given an incentive, can now benefit from higher yielding varieties and better pest control.

Africa—No Exception

But what about Africa? In recent months, the world’s attention has been riveted on Africa’s hunger problems. The food problem in Africa is not due to the lack of natural resources. The problem is that most of Africa has continued to practice its traditional method of cultivation as rising population pressures allow fallow land less and less time to recover its natural fertility. Overgrazing is also encouraged by communal landholding. Public policies rooted in a development model stressing the necessity of central planning and rapid industrialization stifle agricultural production (and economic development in general). Dennis Avery, senior agricultural analyst, U.S. Department of State, presents a vivid example:


The importance of policy is amply demonstrated in the neighboring countries of Kenya and Tanzania. The two nations have similar agricultural resources and histories—but in the 20 years since independence, they have followed diametrically opposite farm policies. Kenya divided big landholdings among small-holders, then backed the smallholders with price incentives, research and extension programs. Overall farm productivity increased 37 percent from 1971 to 1982. Tanzania forced its scattered family farmers to consolidate into large villages . . . Tanzania’s farm output rose only 12 percent in the 11 years from 1971 to 1982—even by the Tanzanian government’s highly optimistic numbers. Only massive food aid forestalled widespread hunger in Tanzania even before the recent drought.[7]

Avery contends that even in Africa, technology is now available to double yields and drought- proof its food supplies.[8] He cites as evidence a new, more drought-resistant sorghum hybrid developed in the Sudan that appears to have the potential to triple yields in much of East Africa. Also available is a new sorghum for the dryer region of the Sahel that apparently can double yields there. In West Africa, there is the potential to become self-sufficient in rice by shifting from upland to swamp rice production. Nigeria has a new corn variety that yielded nine tons per hectare in the midst of last year’s drought (the current average yield is one ton). New peanut varieties with yields several times those of current varieties are being tested in Senegal, Mozambique, Zambia, and Zimbabwe. Improved pest control and new varieties helped bring about a seven-fold increase in yields of cowpeas in West Africa. The fact that available technology has not been more widely applied in Africa is not only a highly visible human tragedy but also an indictment of the government policies of African nations.

Farm Programs in Developed Countries

Agricultural success in the less developed countries is also adversely affected by farm programs in the United States and other highly developed countries that subsidize domestic agricultural output. When domestic prices of farm products are raised above the world price, im ports must be restricted to prevent domestic users from buying lower priced imports. As a result of the U.S. sugar price support program, for example, domestic sugar price was four times the world price in late 1984. This import quota system, imposed by the world’s biggest sugar market, is highly detrimental to Caribbean sugar producers.

In addition, subsidies, easy credit terms, and reduced interest rates are often used in the United States, the European Economic Community, and other developed countries to increase agricultural exports. Regardless of the type subsidy, producers in the exporting country receive an artificial advantage at the expense of producers in the countries where the products are “dumped.” This dumping of agricultural products in developing countries permits governments to keep the price of food cheap to the detriment of local farmers. Dependence on cheap imports discourages agricultural development and food production. The conclusion is that in assisting developing countries, the United States, the E.E.C., and other highly developed countries should stop subsidizing their own farmers. While government farm programs in the United States are often sold to the public on the basis of helping “feed the world,” these programs actually impede economic development and food production in less-developed countries.

Economic Aid

The conventional wisdom for the past generation has been that poor countries cannot develop without financial aid from the highly developed countries. Foreign aid, however, is not indispensable to economic progress. Indeed, P.T. Bauer shows that aid is more likely to obstruct development than to promote it.[9] Foreign aid reduces incomes in the donor countries and enables the recipient country to follow counterproductive interventionist policies. Aid, for example, enabled Tanzania to pursue economic and social policies that are antithetical to both economic progress and individual freedom. The effects on farm output of the Tanzanian experiment (which involved forcibly herding millions of people into collectivized villages) were described above.

The Population Problem

Neo-Malthusians frequently cite the population “explosion” as an insurmountable barrier in alleviating world hunger. The prophets of doom typically reach their conclusions on the basis of projecting past trends. However, there is no reason to expect population to continue to increase at the same rate in developing countries as economic development occurs. When income levels rise in developing countries, the birth rate can be expected to decrease.[10] Thus, the relationship between population and food must be considered in the context of economic development. There is no evidence that Draconian population controls (such as compulsory sterilization or abortion) are required for economic development.

Implications and Conclusions

The world is currently undergoing a major increase in agricultural productivity. World agricultural production is at a record high and is increasing rapidly. Agricultural output is increasing rapidly in the developing countries—rising from 2.7 percent per year in the early 1970s to 3.3 percent annually from 1977 to 1982.[11] This growth rate would have been even higher if not for the dismal record of agricultural production in Africa.

The famine in Africa emphasizes the urgency of modernizing African agriculture. Fortunately, much of the required technology is presently available. The coupling of technology with economic incentives can increase agricultural output in Africa just as it has in many countries throughout the world.

There is no easy or quick solution to world hunger or economic development. Production of food and other products is limited by available resources, and the only realistic goal in any country is to make the most efficient use of these resources. The only effective way of increasing incomes is to increase capital formation and productivity. Foreign aid is no substitute for voluntary savings by the millions of people living in low-income countries.

Programs and policies affecting physical inputs will have little effect on output in the absence of the proper social and economic climate. Political controls of agriculture and other sectors of the economy inevitably stifle individual initiative, capital accumulation, and productivity. It is no accident that every country that has launched experiments in collectivized agriculture has wit nessed a decrease in agricultural productivity. Hong Kong, Singapore, South Korea and Taiwan are examples of countries that have prospered by shunning collectivist economic policies. The effect of recent limited privatization measures on agricultural output in China provides another dramatic example of the effect of economic incentives.

Increases in agricultural technology present a challenge to highly developed as well as to less developed countries. The temptation by government officials in both cases is to “manage agriculture.” In the developed countries, domestic farm product prices are increased above competitive levels by expensive farm programs. Surpluses acquired in the operation of price support programs are often “dumped” in less developed countries. These policies are inimical to food production in less developed countries and to economic progress.

Rising farm productivity throughout the world now holds the promise of undermining these protectionist farm policies. There seems little doubt that farm producers in all countries will face more competition in domestic and foreign markets as currently available technology is adopted more widely. There is no way to determine now what the ultimate effects of these developments on world agriculture will be. We can be confident, however, that a more productive agriculture holds the potential to improve the lot of the world’s hungry people. The challenge to governments in developed and less developed countries then is to abstain from policies that restrict competition and trade. Such restrictions prevent farmers and other workers in all countries from engaging in those activities in which they are most productive. Only through widespread use of decentralized competitive markets can agricultural resources throughout the world be used most productively, yielding maximum benefits to people in all countries.


1.   The productivity figures cited in this section are from two papers by Dennis T. Avery, Senior Agricultural Analyst, Bureau of Intelligence and Research, U.S. Department of State. “The Dilemma of Rising Farm Productivity” was presented before The Agribusiness Round-table, September 10, 1984. “The Bad News for Farmers Is That the Global Bad News Is Wrong” was presented before the N.C. Society of Farm Managers and Rural Appraisers, February 28, 1985.

2.   “Business Brief: In Praise of Peasants,” The Economist, February 2, 1985, pp. 86-87.

3.   Ibid., p. 87.

4.   Ibid.

5.   “Peasants Rising,” The Economist, February 2, 1985, pp. 11-12.

6.   Dennis Avery, 1985, op. cit., p. 3.

7.   Dennis Avery, 1984, op. cit., pp. 6-7.

8.   Dennis Avery, 1985, op cit., p. 4.

9.   P.T. Bauer, Dissent on Development, Revised ed. (Cambridge, Mass.: Harvard Univ. Press, 1976), pp. 95-132.

10.   Ludwig von Mises, Human Action (Chicago: Henry Regnery and Co., 1966), p. 669.

11.   Dennis Avery, 1985, op. cit., p.3.

Dr. Pasour is Professor of Economics st North Carolina State University at Raleigh.

British Parson Sir Thomas Malthus predicted in 1798 that population increases over time would outstrip increases in food production causing chronic food shortages. In recent years, a neo-Malthusian doctrine has again gained popularity as widespread hunger problems, especially in Ethiopia and other African countries, command front-page headlines. It is ironic that visions of a starving Africa are obscuring a major surge in agricultural productivity throughout much of the world today. Moreover, there is a great deal of evidence that the most serious constraints on food production are not weather or natural resources but rather government policies that stifle entrepreneurial incentives. This paper presents evidence on rising farm productivity, the importance of economic incentives in agriculture, and implications for world food production and economic development.

Rising Farm Productivity[1]

Increases in agricultural technology are resulting in dramatic increases in farm productivity throughout much of the world. In the United States, farmers planted the world’s first hybrid wheat in 1984, which increased yields from 25 to 30 percent. Rice growers in the Gulf states planted a new rice variety, which also had yields 25 to 30 percent higher than earlier varieties. At the same time, Taiwanese farmers are feeding surplus rice to livestock. Agricultural output is also increasing rapidly in the European Economic Community (E.E.C.). Wheat yields rose 23 percent in the E.E.C. in 1984 and French harvest of field peas has jumped 50 percent in two years.

Contrary to popular impression, world agricultural production is also increasing rapidly in the developing countries. Thailand, Malaysia, Indonesia, and the Philippines have all increased their farm productivity by more than 35 percent in the last decade. The International Rice Research Institute has introduced its Third World rice variety, which requires much less nitrogen and pesticide protection to achieve yields comparable to those of its previous “miracle” rice varieties. Researchers in Peru are making break-throughs in production in the huge Amazon Basin replacing trace minerals that leach rapidly because of the high rainfall. Argentine wheat has be come so cheap that grain companies recently considered importing it into the United States.

Agricultural productivity in Asia has been most influenced by the Green Revolution and by a recent dramatic shift in Chinese farm policy. Green Revolution rice varieties have been the biggest single factor in lifting Asian agricultural output by more than 25 percent during the past decade. Yet, potential gains from increases in available technology can be choked by policies that stifle entrepreneurial incentives.

Technology Is Not Enough

China provides a classic example both of the effect of collectivist agricultural policies and of what can happen when these policies are changed. In 1958, Chairman Mao decreed “The Year of the Great Leap Forward.” Under the “Great Leap Program,” large numbers of farm workers were to be diverted to industrial employment and the remaining farm population forced into agricultural communes. The loss in agricultural output caused by these policies was catastrophic. Food supplies fell to famine levels and had not recovered by 1965. Thus, contrary to conventional wisdom, per capita food consumption actually decreased during the Mao years.

China’s agricultural output has increased dramatically since the late 1970s when a decision was made to increase farm product prices, scrap the big communal farms, and lease the land back to families and small groups. The privatization moves and the retreat from communism have been accompanied by an increase in food grain output of 12 percent a year for the past seven years despite bad weather in 1980, so that China has overtaken Russia as the world’s largest wheat producer.[2]

A recent article in The Economist reveals a general relationship between market incentives and agricultural production.[3] In a cross-country comparison of food production, Africa dominates the list of individual countries whose agriculture has increased the least since 1970. However, the difference between the most and least productive African states is dramatic. Significantly, the study concludes that: “Those which have done best—e.g., Ivory Coast and Malawi—have encouraged private ownership of land, or given peasant farmers security of tenure. The least productive have been those which have encouraged state and collective farms.”[4]

The evidence suggests that property rights and economic incentives are fully as important in less developed as in highly developed economies. This conclusion, however, should not be taken to mean that providing economic incentives will quickly transform a poor country. There is no short-cut to economic development, with or without outside financial aid. (As shown below, financial aid often is counterproductive.)

The solution to economic development in low-income countries lies primarily within the countries themselves. The only long-run solution to food and income problems in any country is to increase through capital formation the productivity of the people involved. When government policies severely distort economic incentives and discourage capital formation, it is not surprising that productivity, including agricultural output, is low.

What Can Be Done?

There is evidence that more can be done to increase food production in poor countries. Large increases in output by peasants in India, China, and other countries show that increases in agricultural output do not require big farms, big dams, big irrigation systems or an “agricultural plan.” Instead, the most important step is to provide entrepreneurial incentives. This means that poor countries need to scrap those policies that are biased against farmers such as high taxes, price controls on farm products, overvalued exchange rates that depress agricultural exports, and protectionist trade policies that increase the cost of fertilizer and farm machinery.[5]

Developing countries, for example, often have regulations banning the importation of tractors, harvesters, and other mechanically powered farm machinery. Such restrictions are based on the old but persistent myth that machines destroy jobs. This argument carried to its logical conclusion would prevent all substitution of capital for labor and permanently keep workers at a subsistence level.

Another important step, as suggested by the productivity figures presented above, is to increase the application of science in agricultural production. Per capita food production rose 16 percent in South America and 10 percent in Asia between 1972 and 1982.[6] This improved performance is due both to improved farming technology and to stronger economic incentives to use it. Many small farmers in developing countries, given an incentive, can now benefit from higher yielding varieties and better pest control.

Africa—No Exception

But what about Africa? In recent months, the world’s attention has been riveted on Africa’s hunger problems. The food problem in Africa is not due to the lack of natural resources. The problem is that most of Africa has continued to practice its traditional method of cultivation as rising population pressures allow fallow land less and less time to recover its natural fertility. Overgrazing is also encouraged by communal landholding. Public policies rooted in a development model stressing the necessity of central planning and rapid industrialization stifle agricultural production (and economic development in general). Dennis Avery, senior agricultural analyst, U.S. Department of State, presents a vivid example:


The importance of policy is amply demonstrated in the neighboring countries of Kenya and Tanzania. The two nations have similar agricultural resources and histories—but in the 20 years since independence, they have followed diametrically opposite farm policies. Kenya divided big landholdings among small-holders, then backed the smallholders with price incentives, research and extension programs. Overall farm productivity increased 37 percent from 1971 to 1982. Tanzania forced its scattered family farmers to consolidate into large villages . . . Tanzania’s farm output rose only 12 percent in the 11 years from 1971 to 1982—even by the Tanzanian government’s highly optimistic numbers. Only massive food aid forestalled widespread hunger in Tanzania even before the recent drought.[7]

Avery contends that even in Africa, technology is now available to double yields and drought- proof its food supplies.[8] He cites as evidence a new, more drought-resistant sorghum hybrid developed in the Sudan that appears to have the potential to triple yields in much of East Africa. Also available is a new sorghum for the dryer region of the Sahel that apparently can double yields there. In West Africa, there is the potential to become self-sufficient in rice by shifting from upland to swamp rice production. Nigeria has a new corn variety that yielded nine tons per hectare in the midst of last year’s drought (the current average yield is one ton). New peanut varieties with yields several times those of current varieties are being tested in Senegal, Mozambique, Zambia, and Zimbabwe. Improved pest control and new varieties helped bring about a seven-fold increase in yields of cowpeas in West Africa. The fact that available technology has not been more widely applied in Africa is not only a highly visible human tragedy but also an indictment of the government policies of African nations.

Farm Programs in Developed Countries

Agricultural success in the less developed countries is also adversely affected by farm programs in the United States and other highly developed countries that subsidize domestic agricultural output. When domestic prices of farm products are raised above the world price, im ports must be restricted to prevent domestic users from buying lower priced imports. As a result of the U.S. sugar price support program, for example, domestic sugar price was four times the world price in late 1984. This import quota system, imposed by the world’s biggest sugar market, is highly detrimental to Caribbean sugar producers.

In addition, subsidies, easy credit terms, and reduced interest rates are often used in the United States, the European Economic Community, and other developed countries to increase agricultural exports. Regardless of the type subsidy, producers in the exporting country receive an artificial advantage at the expense of producers in the countries where the products are “dumped.” This dumping of agricultural products in developing countries permits governments to keep the price of food cheap to the detriment of local farmers. Dependence on cheap imports discourages agricultural development and food production. The conclusion is that in assisting developing countries, the United States, the E.E.C., and other highly developed countries should stop subsidizing their own farmers. While government farm programs in the United States are often sold to the public on the basis of helping “feed the world,” these programs actually impede economic development and food production in less-developed countries.

Economic Aid

The conventional wisdom for the past generation has been that poor countries cannot develop without financial aid from the highly developed countries. Foreign aid, however, is not indispensable to economic progress. Indeed, P.T. Bauer shows that aid is more likely to obstruct development than to promote it.[9] Foreign aid reduces incomes in the donor countries and enables the recipient country to follow counterproductive interventionist policies. Aid, for example, enabled Tanzania to pursue economic and social policies that are antithetical to both economic progress and individual freedom. The effects on farm output of the Tanzanian experiment (which involved forcibly herding millions of people into collectivized villages) were described above.

The Population Problem

Neo-Malthusians frequently cite the population “explosion” as an insurmountable barrier in alleviating world hunger. The prophets of doom typically reach their conclusions on the basis of projecting past trends. However, there is no reason to expect population to continue to increase at the same rate in developing countries as economic development occurs. When income levels rise in developing countries, the birth rate can be expected to decrease.[10] Thus, the relationship between population and food must be considered in the context of economic development. There is no evidence that Draconian population controls (such as compulsory sterilization or abortion) are required for economic development.

Implications and Conclusions

The world is currently undergoing a major increase in agricultural productivity. World agricultural production is at a record high and is increasing rapidly. Agricultural output is increasing rapidly in the developing countries—rising from 2.7 percent per year in the early 1970s to 3.3 percent annually from 1977 to 1982.[11] This growth rate would have been even higher if not for the dismal record of agricultural production in Africa.

The famine in Africa emphasizes the urgency of modernizing African agriculture. Fortunately, much of the required technology is presently available. The coupling of technology with economic incentives can increase agricultural output in Africa just as it has in many countries throughout the world.

There is no easy or quick solution to world hunger or economic development. Production of food and other products is limited by available resources, and the only realistic goal in any country is to make the most efficient use of these resources. The only effective way of increasing incomes is to increase capital formation and productivity. Foreign aid is no substitute for voluntary savings by the millions of people living in low-income countries.

Programs and policies affecting physical inputs will have little effect on output in the absence of the proper social and economic climate. Political controls of agriculture and other sectors of the economy inevitably stifle individual initiative, capital accumulation, and productivity. It is no accident that every country that has launched experiments in collectivized agriculture has wit nessed a decrease in agricultural productivity. Hong Kong, Singapore, South Korea and Taiwan are examples of countries that have prospered by shunning collectivist economic policies. The effect of recent limited privatization measures on agricultural output in China provides another dramatic example of the effect of economic incentives.

Increases in agricultural technology present a challenge to highly developed as well as to less developed countries. The temptation by government officials in both cases is to “manage agriculture.” In the developed countries, domestic farm product prices are increased above competitive levels by expensive farm programs. Surpluses acquired in the operation of price support programs are often “dumped” in less developed countries. These policies are inimical to food production in less developed countries and to economic progress.

Rising farm productivity throughout the world now holds the promise of undermining these protectionist farm policies. There seems little doubt that farm producers in all countries will face more competition in domestic and foreign markets as currently available technology is adopted more widely. There is no way to determine now what the ultimate effects of these developments on world agriculture will be. We can be confident, however, that a more productive agriculture holds the potential to improve the lot of the world’s hungry people. The challenge to governments in developed and less developed countries then is to abstain from policies that restrict competition and trade. Such restrictions prevent farmers and other workers in all countries from engaging in those activities in which they are most productive. Only through widespread use of decentralized competitive markets can agricultural resources throughout the world be used most productively, yielding maximum benefits to people in all countries.


1.   The productivity figures cited in this section are from two papers by Dennis T. Avery, Senior Agricultural Analyst, Bureau of Intelligence and Research, U.S. Department of State. “The Dilemma of Rising Farm Productivity” was presented before The Agribusiness Round-table, September 10, 1984. “The Bad News for Farmers Is That the Global Bad News Is Wrong” was presented before the N.C. Society of Farm Managers and Rural Appraisers, February 28, 1985.

2.   “Business Brief: In Praise of Peasants,” The Economist, February 2, 1985, pp. 86-87.

3.   Ibid., p. 87.

4.   Ibid.

5.   “Peasants Rising,” The Economist, February 2, 1985, pp. 11-12.

6.   Dennis Avery, 1985, op. cit., p. 3.

7.   Dennis Avery, 1984, op. cit., pp. 6-7.

8.   Dennis Avery, 1985, op cit., p. 4.

9.   P.T. Bauer, Dissent on Development, Revised ed. (Cambridge, Mass.: Harvard Univ. Press, 1976), pp. 95-132.

10.   Ludwig von Mises, Human Action (Chicago: Henry Regnery and Co., 1966), p. 669.

11.   Dennis Avery, 1985, op. cit., p.3.


  • E. C. Pasour, Jr. is professor emeritus of agricultural and resource economics at North Carolina State University. He is coauthor with Randal R. Rucker of Plowshares and Pork Barrels: The Political Economy of Agriculture (Independent Institute, 2005).