The Plundering of Agriculture in Developing Countries

The findings and policy implications presented in this paper are based on The World Bank Comparative Study of Agricultural Pricing Policies in Developing Countries, which examined agricultural pricing interventions in eighteen developing countries during 1960-- 85, as well as on the evolution since 1985. The results of the study have been published in a five-volume series, The Political Economy of Agricultural Pricing Policy (Baltimore, Md.: Johns Hopkins University Press), edited by Anne O. Krueger, Maurice Schiff, and Alberto Valdés. This paper draws on the findings of volume 4, A Synthesis of the Economics in Developing Countries, by Maurice Schiff and Alberto Valdés. Research on development strategies and trade regimes in developing countries since the early 1970s has consistently found that countries that have adopted outward-oriented strategies have been more successful than countries that sought to build their industrial sector through inward-oriented strategies of import substitution (Little, Scitovsky, and Scott 1970; Balassa 1971; Bhagwati 1978; and Krueger 1978, 1983). But none of these comparative studies explicitly examined agriculture or looked systematically at the impact of trade or other types of indirect intervention on agricultural incentives. The World Bank research reported here fills these gaps by assessing the effects on agriculture of both direct and indirect price interventions during twenty-five years (1960-1985) in eighteen representative developing countries, using a common conceptual framework and methodology. The research developed measures of the impact of direct and indirect price policy interventions on relative prices within agriculture and between agriculture and the rest of the economy. These measures were then used to estimate the effects of price interventions on agricultural production, consumption, foreign exchange earnings, the budget, income transfers between agriculture and the rest of the economy, and income distribution.