Poorer Countries Should Try to Reduce Reliance on Agriculture

Agriculture is imperfect safety net against food price volatility

Shift to other sectors can increase labor productivity, expert says

Create insurance mechanisms to protect main crops

In an interview with IMF Survey online, development expert Banerjee of the Massachusetts Institute of Technology explained the impact of increasing global demand for food and why poor countries should consider moving their populations out of agriculture into more productive employment. He said countries should move toward higher investment and productivity in agriculture.

IMF Survey online: What is the impact of increasing global demand for food on low-income countries?

Banerjee: There are some countries that are dealing with the fact that China's growth—which is a wonderful thing—and to a lesser extent India's growth are increasing demand for a set of commodities. If you happen to be a net buyer of those commodities, you are in trouble.

If you take the countries which are food scarce, they are having a hard time right now. The combination of drought and the general rise in world food prices means there are a bunch of countries in Eastern Africa that are having a particularly difficult time. If we really think that commodity price instability is the way of future, do we really want poor people to be involved in the commodity industries, in particular agriculture?

Right now, the rural sector is an imperfect insurance mechanism. Most developing countries do not really have a safety net. You either go into retail or agriculture. Those are the two places where you end up.

My point is that the safety net has just got a lot less safe. It was never a great safety net, but now there is an additional layer of risk. If that safety net goes away, what is left?

IMF Survey online: So you are encouraging labor to move away from agriculture and from food because of the instability. Yet, you think that maybe the bigger players should put their energy in that very sector?

Banerjee: Absolutely. How do you get people out of agriculture? This is going to be the big challenge for the next 20 years. I think countries need to move some people out of agriculture and move a different kind of people, who can make bigger investments and who can raise productivity, into agriculture.

It is something that is going to happen, but it is, politically, extremely fraught because what do you do with those people and what do you do with the people who are going to suddenly end up...