The Role of Agriculture and Trade In Economic Development

The interrelationships between the development of the agricultural sector, the process of structural transformation, and the overall growth of the economy have been debated extensively in international literature. Economists generally disagree less about the need for industrialization and the necessity, to accelerate structural change than about the strategy to promote the transformation of the economy, and particularly the role of the agricultural sector therein. The root of the controversy has been the nature of the growth-inducing process of transformation, whereby an economy turns itself from a predominantly agricultural and rural society into a largely industrial and urban society. The inevitable decline of agriculture during economic growth has confronted economists for decades with the question of its possible role in economic development. The purpose of this paper is to reassess the role of agriculture in that process, both from a theoretical point of view and from past experiences of developing countries. The treatment of the agricultural sector in development economics is briefly reviewed. The role of agriculture in the process of structural transformation and the conditions for its contribution to sustained economic growth are discussed. This discussion will show that, whereas industrialization is the ultimate engine of growth, sustained agricultural development remains a powerful strategy toward industrialization. The interrelationships between foreign trade and agricultural development are analyzed, indicating how both can contribute to industrialization and economic growth. Finally, some of the priorities for sustained agricultural development are discussed.