Importance Of Agriculture In Economic And Social Perspective

Agriculture as the Primary Sector of the Economy

Question:

Discuss about the Agriculture Land Policies Of Taiwan.

Agriculture is considered as the primary sector of the economy. A nation is highly depended on the agriculture sector to feed the growing population. The contribution of agriculture is not limited in supplying food; the sector plays a vital role for providing raw material to agro based industries.  Agriculture comprises of both food crops and cash crops and thus has a strategic role in country’s prosperity if nurtures properly. However, in the process of development the contribution of primary sector is often neglected and more reliance is given on industrialization. However, there are instances of countries where economic growth is achieved through development of agricultural sector. The success story of east Asian countries is an example of agro based economic growth. Rapid growth of these nations is not subject to industrial and manufacturing development.  The three key aspects of growth there are emphasis on land reform, rural industrialization and protectionism policy for agriculture.

The paper analyzes the importance of agriculture from economic and social perspective. ‘Green Revolution’ is an important event in the history of agriculture. The revolution introduced new and advanced technology in agriculture. The particular case of Taiwan here is taken into consideration to view the importance of the particular sector.

The agricultural economies in defined as an applied social science discussing aspects related to production, distribution and consumption of primary or agricultural products and services. Economics is study of allocation of scarce resources. The agricultural economics deals with resource allocation in context of farming. It involves theoretical concepts of micro and macroeconomics and focuses on practical application of it. Apart from crop production today agricultural economics deals with management of livestock. The main factor input in agriculture is land. Because of inelastic supply of land, the aspect of growing human population and productive capacity of land has become a matter of concern (Atkins and  Bowler 2016). The contribution of agriculture in economic growth has come from three main channels – contribution of agriculture in supplying factor input, contribution in final consumption and contribution is market economy.

Factor contribution: Agriculture supplies raw materials in industries that primarily depends on this sector. There are several food producing industries that are growing around the world and depends on agricultural input.

Product contribution: The food crops are used for final consumption. Rice, wheat, maize and many other are considered as staple food for population living in different regions (Norton, Alwang, and Masters 2014).

Market Contribution: Farmers do not consume all the agriculture produce. Cash crops like jute, tea, sugarcane and cotton and excess of food crops after consumption are marketed using proper network. Depending on agricultural supply, several markets develop in areas located closer to agricultural land.

Green Revolution that was initiated in 1960s attempted to make a rapid transformation in method of farming and productivity. The revolution in agriculture has brought with application of advanced technology and scientific knowledge. Green revolution introduced use of high yielding varieties of seed, advanced technique of irrigation and soil conservation and use of fertilizer and pesticides (Franke 2015). The Green Revolution thus up lifted agriculture from its primitive stage to a contributor of industrial economics.

The Role of Agriculture in Country's Prosperity

The major aspect of success brought by green revolution is the application scientific technology in irrigation method, efficient fertilizer and pesticides and proficient crop seed. This section gives a brief description of technologies used in green revolution.

A sustainable agriculture is subject to availability of water resources. In the era of green revolution, countries were highly suffered from drought and inefficiencies of water due to pollution. The inefficient irrigation technique was one factor causing drought aggravate problems of water inefficiencies. Use of surface water for irrigation lead to scarcity of water. In order to overcome the shortcomings of existing irrigation techniques the new method focused on lowering the impact of drought and gave a higher protection to crops. Under new system drip irrigation was used resulting in optimization of water use and water reached to plants’ root (wordpress.com 2018). The new technique benefitted agriculture by reducing growth of weed on agricultural land and reducing soil erosion.

The advanced irrigation technique was supplemented with application of better fertilizers. The green revolution focused on increasing food production through increased harvesting of wheat, cereals and grains. The advancement of pesticides and fertilizers helped to achieve this goal. Under the era of green revolution chemical based and inorganic fertilizers were introduced (Goron and Raizada 2015). The new agricultural method adapted during this time mostly used synthetic nitrogen based fertilizers. The use of nitrogen based fertilizer increased the mineral contain in soils resulting in high crop yield.

In order to sustain crop growth, it is necessary to cure diseases or damages caused by pests on farming land. For this, various types of pesticides were introduced during green revolution. Most commonly used pesticides were insecticides and fungicides (Eddens 2017). These pesticides stimulated crop production with improvement of crop yield and quality of crop produced at the same time.

Introduction of High Yielding varieties seed is a key aspect if technological innovation in agriculture. These HYV seeds have five distinct characteristics from the regular seeds. These are, they have high yield rate than regular seed, more responsive to chemical fertilizers, drought resistance, stronger heads of the grain that remain steady even when grains are completely matured and most importantly a significantly shorted period required for crop growth (Song et al. 2017). Because of successful H.V.P program, the production of food grain almost doubled between 1950-51 and 1969-70.

In the past few decades, world population has increased rapidly. The population growth along with growth of income has boosted the demand for food. Countries that are unable to feed the growing population rely on imported food. However, at present the agricultural production has been threatened from changes in environment. As the supply of land is limited, same land is cultivated year after years (Tittonell 2014). Continuous cultivation of same land reduces the mineral contains in the soil. This reduces crop yield. In addition, continuous cultivation loosens soli and remove the upper layer causing soil erosion. Intensive irrigation techniques lead to distortion in regular flow of water causing flood and draught that further damage crop yield. The application of chemical fertilizer and pesticides poisoned the arable land causing death of helpful warms in the soil. Finally, the greatest threat to agriculture at present day is the climate change caused by global warming. The climate change has a possible impact of reducing crop yields mostly in developing regions (Shapiro 2016). The water supply is interrupted with unusual changes in climates.

The Contribution of Agriculture in Economic Growth

In the list of four East Asian Tigers, Taiwan holds an important position. The country has undergone a rapid growth in the between 1960 and 1990. The success of Taiwan has followed by a series of policies including industrialization oriented towards export, development of import substituting industries and adaptation of liberalized economic policy during this time. The strong base of the economy protects it from Asian economic crisis broke out at 1997 (Islam 2016). The section discusses series of agricultural policies undertaken in Taiwan to stimulate agriculture.

The Land reform policy aims at transforming the agrarian system to bring improvement in rural income and encourage rural development. The reform initiates to secure property rights for individual farmers. It also ensures improvement in the status of tenants by transferring ownership rights from land owners to tenants. It is generally observed that the share of agriculture in GDP declines with growth. This is explained by the theory of Engel curve relation. The law states that the proportionate share of income on food is greater for low income household as compared to higher or middle income groups.

Figure 1: Engel curve

(Source: Yu 2018)

The land reform policy in Taiwan is analyzed in three different phase- first phase from 1946 to 1982, second phase from 1983 to 2000 and third phase is from 2009 onwards.

In 1950s, agricultural land in Taiwan was under monopoly control of riches. As a result, riches controlled major goof supply. Farmers worked as a laborer under them and this contributed to significant wage discrimination. Viewing this, policies were initiated to for balancing ownership rights during this time. The reform set a maximum rent of 37.5% of income from main crop. In order to break monopoly in land ownership famers are allowed to rent land owned by government (ap.fftc.agnet.org, 2018). Government purchased land from rich landowners and offered land to farmers as ‘Rental with buying option’.

The second phase of land reform includes the following policies

Availability of long-term loan at a relatively low interest rate for purchase of land agricultural equipment.

Cooperative operation through agricultural association.

Improvement of agricultural process and promotion to mechanical farming

Third phase (Since 2009)

The current land policy of Taiwan aims to make the nation self-sufficient globally. The main four objective of current policy include promotion of competitive structure to secure domestic food supply, rejuvenation of land for idled farming, maintenance of agriculture production Zone and establishing proper system of management and feedback to identify problems of existing system and unusable agricultural land (Tsai 2015).

As a country grows richer, the share of agricultural produce in GDP declines. For this, country generally switches from the policy of agricultural taxation to subsiding the sector. Taiwan also follows this general trend. Agriculture protection rate in Taiwan during 1950s was nominal terms were negative. Low protection allows imported agricultural product in Taiwan market lowering the value of it. From 1965-69 the average protection rate increased from 2 percent to nearly 55 percent in 1980-82 (Balassa 2014). The consequence of an increased protection is declining import by increasing price in the domestic market.

The Three Key Aspects of Growth in East Asian Countries

Figure 2: Effect of import tariff

(Source: Balassa 2014).

Following imposition of tariff, the prices of food in Taiwan has increased more than 300 percent between 1960 and 1980. This slowed down food consumption. The open economies like Singapore and Hong Kong, in the absence of any tariff restriction, average food consumption has increased rapidly.

In the process of development, agriculture is mostly considered as playing a subsidiary role. The sector is regarded as important for supplementing industrial sector by supplying raw materials. However, besides supplying raw material the sector itself plays a vital role in feeding population and generation of employment. This section and discusses role of agriculture in Taiwan and its importance in the economy.

The agriculture sector include farming, forestry and fishery. In addition to supplying raw materials, the sector has contributed to GDP of Taiwan. The figure below shows the share of agriculture in Taiwan’s GDP.

Figure 3: share of agriculture in Taiwan’s GDP

(Source: statista.com 2016)

In Taiwan, the contribution of GDP from agriculture has increased from 45261 TWD to 62946 TWD in between third and fourth quarter of 2017. The average GDP from agriculture between 1981 and 2017 is 56641.43 TWD (Panagariya 2016). The percentage share of agriculture in GDP has increased from 1.70 % in 2015 to 1.82% in 2016.

The agricultural sector in Taiwan has significant contribution in employment generation. In 2010, the employment in agriculture was 550,000. The employment in agriculture has recorded an increase by 1.29% as compared to previous year.

Figure 4: Agricultural employment in Taiwan (‘000)

(Source: euromoneycountryrisk.com 2018)

Figure 5: Export and import value of Taiwan agriculture

(Source: fftc.agnet.org 2018)

In the era of trade liberalization, there has been a considerable increase in agricultural import. However, the trade openness also creates opportunity for agricultural export. Several assistances have provided to expand agricultural export in Taiwan. Successful implementation of trade promotion policies result in an increase in export value from $3.24 billion to $3.55 billion in between 2003 and 2004 (Kim and Heo 2017).

The analysis above shows, the role of agriculture is not merely limited to a subsidiary role but it also plays an important role in supplying food, employment generation and export earnings. Ignoring the development of agricultural sector can result in negative implications for the economy as a whole as can be seen from the case of Taiwan.

Conclusion

The paper analyzes role of agricultural sector in an economy. Agriculture has factor contribution in terms of supplying input to agro-based industries, product contribution as it is used as final consumption and market contribution.  The green revolution initiated in 1960s introduced new and advanced technological methods of irrigation, fertilizers, pesticides and high productive seeds. The agriculture today has faced challenges coming from a changing environment condition. The essay has drawn its conclusion in reference to a particular Asian economy namely Taiwan. The nation has taken a series of land reform policies and protectionism policy to develop its agricultural sector. The share of agriculture in Taiwan’s GDP, its contribution in employment generation and its trade orientation are analyzed. It has been observed that the share of agriculture in GDP has remain more or less same or increasing, the proportion of employment has increased slightly and there are significant openings for export contributing to GDP of Taiwan.

Reference List

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