ABSTRACT
Experience in the past four decades clearly indicates that rapid poverty reduction in pre- and early-industrial economies can be achieved only through a combination of agricultural and rural development. It could not yet be accomplished through urban and industrial development if only because of shortages of foreign exchange and constraints in the financing of the necessary investments, not to mention the problem of delays in adapting social institutions and attitudes. In an early phase urban and industrial development depend on the agricultural sector’s social transformation function and on its market and factor contributions and are thus closely linked to agricultural growth. An increase in total agricultural productivity (through technical progress and investment) is the key to poverty reduction. It leads to rising wages and ground rents in real terms and – depending on the price policy and/or transformation costs – to declining food prices. Poverty is also reduced by multiplier effects in the rural economic circuit. Empirical evidence shows that training, agricultural research and road-building are the most important levers available to government and development cooperation for reducing poverty. However, they operate satisfactorily only where the agricultural policy environment meets three requirements: first, distribution of land ownership that shares the ground rent structurally and provides security for small-scale farming; second, an agricultural price and trade policy that offers sufficient incentives to be innovative and to invest; third, an innovation policy that introduces the findings of applied agricultural research effectively into general rural practice. Failure to meet these requirements largely obstructs the means of reducing poverty through agricultural and rural development.
