Institutional Obstacles to Expansion of World Food Production

Abstract

It was argued that over the near-to-medium term-roughly to the mid-1980's-there is enough potential for growth in existing Green Revolution technology and in technical capacity of farmers that institutions affecting these two sources of increased food production probably will not be seriously constraining. The principal bottlenecks likely will be found among those institutions affecting farmers' incentives to innovate. There is impressive evidence that when other conditions for innovation are favorable the supply of marketing services, for both inputs and outputs, is quite elastic. This seems to include the supply of funds from rural saving and informal credit sources, although the evidence is less clear in this respect. The situation concerning price relations and availability of inputs appears mixed. If national income growth targets are achieved, then the growth in total demand for food in the LDC's should be fast enough to support incentive prices for farmers. This advantage could be lost, however, if governments adopt policies to suppress food prices to keep down the cost of living. The price of fertilizers is expected to fall from the high levels of 1974, the amount of the fall depending in good measure on the success of the LDC's in increasing fertilizer production. Historically, their efforts to expand capacity have been relatively inefficient. Moreover, many countries still lack adequate capacity to produce the HYV's and pesticides. Even with good progress in expanding domestic production of inputs, imports will continue to be an important source of supply. Maintenance of present high prices of petroleum products could be a major obstacle to financing these imports on the necessary scale because of the drain it would place on available foreign exchange. I conclude, on balance, that prices and availability of fertilizers, pesticides, and seeds could have important negative effects on farmers' incentives to adopt Green Revolution technology. Rigidities in water management institutions may be even more limiting, for reasons noted in the previous section. The role of existing land tenure institutions is not clear. The tentative conclusion, however, is that over the near-to-medium term the maintenance will not be a major obstacle to further spread of the Green Revolution. Over the longer term, it could become more seriously limiting. The reason is that continued expansion of food production will eventually require the invention and adoption of new technologies and a higher level of technical and managerial skill than most farmers in the LDC's now possess. To do this will require substantial investments in domestic research and extension institutions and in rural education. In countries where a small class of large landowners wield substantial political power, these investments may not occur on the necessary scale because the large farmers have their own means of acquiring the technology and little perceived interest in supporting the upgrading of the skills of small farmers. This review of institutional obstacles to expansion of food production in the LDC's must end on a tentative note. The review does suggest some observations about the process of institutional change, however. There is impressive evidence of strong latent potential in the private sector of the LDC's for mobilizing the resources and effort needed for agricultural progress when the private economic rewards for doing so are high. Under these circumstances, needed changes in the institutions required to mobilize the resources and direct the effort seem relatively easy to achieve. Institutional resistance is stronger in situations where influential interests perceive change as a threat or where there is no direct personal economic reward to change, as in the typical public institution. The latter point is particularly important because the performance of public institutions is critical. Development of new technology, the fundamental condition for continued longterm growth, is basically a public responsibility because the gains from adoption usually cannot be sufficiently captured by private institutions to justify their assuming the cost. Although private firms often have incentives to impart technical knowledge to farmers as a way of widening the market for their products, the broadening and strengthening of the institutional structures concerned with both the general and technical education of farmers is a public responsibility. This is true also of the development of large irrigation systems, both because of the scale of the needed investments and the potential for social conflict in water management. The lack of a well-defined mechanism that would link responses of public institutions to the large social payoffs to increased public investment in irrigation, new technology, and technical abilities of farmers may prove in the long run to be the most important single obstacle to adequate growth of food production in the LDC's.