Agriculture as the basis of industrialization and economic development. Lessons from the historical experiences of developing countries in the second half of the 19th and the first half of the 20th centuries

Abstract

A specific feature the most of the underdeveloped countries, referred to as Third World Countries after World War II, was their historically high dependence on agriculture and a high percentage of the population employed in agricultural and livestock production. In developed countries (Western European countries and Anglo-Saxon countries), the share of agriculture in GNP was small, and the percentage of the population employed in agriculture was at a relatively low level and showed a decreasing tendency. The wrong conclusion was drawn from this that the development effort should be towards industrialization, sometimes with neglect of agriculture. The increase in effective demand for industrial products from agriculture was its significant contribution to the industrialization process. In the early stages of economic development, with the predominance of the agricultural population, there was no mass market apart from agriculture. This meant that the emerging industrial sector had to be based on the demand that originated and created in agriculture. Thus, the faster the productivity and income in this sector of the economy grew, and the faster agriculture switched to forms of monetary exchange, the more favorable conditions were for the development of craftsmanship and, later, industrialization. Moreover, the high birth rate and technological advances in agriculture made a certain proportion of the rural workforce technologically redundant. The successful development of agriculture combined with an increase in farmers’ income was possible only when the labor force was diverted from it and found productive employment in other sectors of the economy. At the turn of the 1950s and 1960s, the growth of income from exports of agricultural products was also slow, which meant that developing countries faced the problem of the tightness of export markets and a drop in export prices. A disturbing feature of these changes was the fact that the stagnation in demand and the fall in prices of many agricultural products coincided with the increase in real incomes in developed countries, which entailed fundamental changes in the structure of demand.