Agriculture – For sustained growth and combating poverty

The projection of economic growth as something evil that benefits only the rich is fallacious. Yet, equally wrong is taking the GDP number for a sacrosanct symbol of surefire prosperity for all. All praise is due to the government’s economic team for various improvements in the macro-economy: 5% growth in the first quarter, dramatic appreciation in the rupee against the dollar, an on-track IMF programme and the encouraging performance of the stock market – all reflect recovery. Yet how these gains are shared with the neediest of the needy remains to be seen – and this alone should be taken as an encompassing yardstick of success.

Historically, Pakistan’s economic policy has never been pro-poor. In the words of Stephan Klasen, ‘Pro-poor growth will require growth that is focused on sectors where poor people are active (or could become active) and regions where poor people live…’ Leaving Zulfiqar Ali Bhutto’s 70s aside (who launched into a rather overcharged, self-defeating assault on poverty), poverty reduction was no government’s priority. Admittedly, PPP-governments were relatively more focused in this respect, but their lacklustre economic performance and unimpressive governance hit the poor from another window, namely – overall stagnation of incomes.

Yet, our amoral approach to economics has hardly changed. The present government is living up to the impression it is known for – being the industrialists’ government. According to the State Bank’s 1st quarterly report, industry and services grew by 0.7 and 1.2 percentage points more than their respective targets in Q1 FY2014. But the agriculture sector missed its target by 1.3 percentage points and its growth was 0.2 percentage points less than even the corresponding quarter last year.

Was this apparent industrial bias simply an irregularity? Apparently not. This season – after the first quarter – farmers got the squeeze from sugar mills, where the official price for sugarcane in Punjab was perceived as being unfairly low – the same as last year. In addition, the sugar mills also made deductions of around 1000 kg per trolley on the pretext of poor quality cane – which farmers found to be a novel way of being paid less for their cane. Hardly was any farmer an exception to this general rule of katoti or deduction, since the cane was abundant and the buyer monophonic. The sugar industry – as always – was allowed to act collusively as the single buyer.

The wheat support price, which was the farmers’ last hope for compensation this year, was also not revised. While the previous government had been revising the prices upwards every year, this government came with a sharp change of mind. Instead of pricing the wheat on the higher side to relieve the poor farmers, the price was kept low, despite the damages to wheat the farmers incurred from irregular downpours.

This echoes a recurring shortcoming in the South Asian approach to economic development, where agriculture and industrialisation were treated as if mutually exclusive – as if one cannot flourish in the presence of another. Growth in India, to state another example, did not ameliorate the state of farmers the way Chinese growth did, where growth and poverty reduction were both rapid. Agricultural growth preceded the Chinese miracle. The limbs of the Dragon (farm income) were strengthened to make it good to go for meat (read industry), not axed, as we would like to do in the Southern Asia.

Other East Asian countries like Japan, South Korea and Taiwan engaged in aggressive export-oriented industrialisation, but with an equally high-spirited redistribution of resources. Agricultural policy complemented the industrial policy. Agrarian reforms included fair and stable prices, subsidised credit and technical assistance from the government, and redistributive and tenurial land reforms. These measures ensured better deals for the farmers (especially the poor ones) and steady growth of agriculture.

For the industry, in turn, the agrarian reforms secured a smooth supply of economical raw materials, but also a bigger domestic market for industrial products. As new buyers, who had graduated out of poverty, kept becoming part of the markets for comforts and luxuries, domestic demand for the manufactures increased. The resulting win-win situation had other spillover effects as in better health and education at large.

There is no reason why this pattern of inter-sectoral complementarities may not be emulated in Pakistan. On the contrary, this is virtually the best model available to us, given the demographics. Agriculture employs 45 per cent of the total labour force here. Poverty is especially concentrated in the rural areas.

The SDPI’s recent multidimensional poverty report by Naveed and Ali (2012) reveals that about athird of Pakistan’s population remains poor, 21 per cent being under severe stress. But, ‘severe poverty in rural population is 4 times higher than in urban population’. In addition, while only 18 per cent of urban households are poor, 46 per cent rural ones live in poverty.

The policymakers need to strike a balance between the interests of the top 20 per cent and the rest. To think that supporting the rich industrialist class could bring growth on its own is an illusion that has failed us miserably in the past 66 years. Growth cannot be sustained with crime and violence. Crime and violence will be there as long as there is poverty. Agriculture is the golden goose that can eat away the pest of poverty and keep laying the golden eggs of industrial growth. Nurture the golden goose, don’t kill her, my dear industrialists!