Effects of Some General Economic Development Policies on Agricultural Development

Abstract

ECONOMIC policies directed to other sectors of the economy exert a very important influence on development. This is as true of fiscal and monetary policies, which attempt to influence the general level of economic activity, as it is of industry-specific programs which attempt to develop a particular sector such as the automobile industry. All too frequently, however, economists tend to ignore these policies in their research and analytical work.1 We tend to concentrate on those policies which are explicitly defined as agricultural policies and which bear directly on our sector of interest. The burden of this paper is that the set of economic policies which low-income countries have followed in attempting to speed up their rate of industrialization have had a very sizable and detrimental effect on development. These policies not only have resulted in direct discrimination against the sector but also have affected it indirectly by reducing the labor-absorptive capacity of the industrial sector and therefore damming up labor in the sector. My initial assignment was to discuss the effect of exchange rate policy on development. However, I have chosen to broaden the assignment and to discuss the broader set of policies which many developing countries have followed to accelerate their industrialization. I shall draw heavily on my experience in Brazil, but the set of policies I will consider is by no means unique to that country. The paper is in three parts. The first section presents some background comments that set the stage for the analysis which follows. The second part describes the specific set of policies which I have chosen to analyze.