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Some comments on this Bloomberg article about India's farmer protests, and its use of historical analogies as well as concepts from development economics. https://www.bloomberg.com/opinion/articles/2021-02-10/india-s-farm-protests-have-parallels-in-18th-century-england-for-better-or-worse
( the rationale behind India’s proposed farm reforms is that agricultural price supports & subsidies, as well as the rural job guarantee, keep India’s agricultural sector too large, i.e., it employs too many people. And this keeps India, as a whole, poorer than it could be. )
The article uses the ‘Lewis Turning Point’ as the frame thru which to analyse the situation. The authors argue India is nearing the LTP & agri reforms can accelerate the process. Previously I had seen business/financial press debating whether/when China has (had) reached its LTP
The LTP, as originally defined by Arthur Lewis, is when an economy runs out of ‘surplus labour’ in agriculture & wages begin rising. But what does ‘surplus labour’ mean?
Lewis meant ‘traditional agriculture’ employs more people than necessary to produce a given level of output. Due to community sharing norms, there were many zero- or low-marginal product (*) workers on farms who could be induced to leave for factories without sacrificing output.
(*) Lewis himself did NOT say zero marginal product. But many critics of Lewis, including another Nobel laureate, Schultz, interpreted ‘surplus labour’ as zero-MP workers. Actually you’ve had three Nobel laureates in economics wrangling over ‘surpus labour’: Lewis, Schultz & Sen
Now, it is possible to talk about ‘surplus labour’ being created by productivity growth in agriculture. If agriculture begins producing same/more output with fewer workers, then there is ‘surplus labour’ who could migrate to the cities.
But in that case, the ‘Lewis Turning Point’ (if that actually exists) could be extended for a verrrrrry long time. Especially if rural migrants end up mostly finding themselves in the urban informal sector.
The authors of the article declare England had reached its ‘Lewis Turning Point’ earlier than anyone else and cite England’s precocious structural transformation — <40% of England’s labour force were employed in agriculture ca 1750, about the same as India today.
But the authors neglect that English wages didn’t start rising until the mid-19th century! In fact economic historian Bob Allen has argued that England’s agricultural transformation was too rapid, before there was enough employment to absorb the excess laboour....
Japan between 1870 and 1930s is another illustration that the ‘Lewis Turning Point’ (if it exists) can be delayed by productivity growth in agriculture. But at least there was ‘balanced growth’ in other sectors (manufacturing, service) to absorb the labour.
Yes, India has too large an agricultural sector, and yes, no country is rich which has not drastically shrunk its agric share of employment. But the 20th c also suggests you can shrink your agricultural sector without getting richer! You just feed urban informal employment
