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if agricultural output fails to grow rapidly enough, rising prices might actually
garner farmers ahigher share of consumers' expenditures. But this reflects lower
real incomes, not the result of economic growth.
If the terms of trade are not to rise in favor of agriculture, farmproductivity
must rise-an agricultural revolution is needed. The second factor that explains
the joint agricultural growth and relative decline is seen in the rapid growth in
agriculturalproductivity, measured by output per laborer or output per hectare,
in all the successfully developed countries. Technical change in agriculture in all
of the OECD countries proceeded at such apace that the long-run terms of trade
declined for farm products. Lower prices thus exacerbated the sluggish demand
growth due to low income elasticities; the combination put pressure onagricultural
resources to move out of farming and into the more rapidly growing sectors
of the economy. Such intersectoral movements of resources have been painful in
all societies that haveundergone successful structural transformation, and all
societies have found mechanisms to cushion the adjustment process.
The paradox over the agricultural transformation occurs at thispoint. Just as
countries learn how to institutionalize the process of rapid technical change in
agriculture, its product no longer has high social value. The resulting low incomes
for farmerscreate powerful political pressures to slow the process of structural
change, and the seemingly inevitable result is massive distortion of the price
structure [Johnson (1973), Anderson andHayami (1986), World Bank (1986)].
Nearly all rich countries protect their agricultural sectors from international
competition, and countries no farther along in the development process than