Certain technologies can enable us to grow faster than developed nations ever did
It might surprise to discover that we journalists find out what is going on by reading the newspapers, just like everyone else.
But there’s far too much out there for us all to research from primary sources. It’s when we spot a story which intersects with our own expertise that it all becomes interesting. Such as one from Sarah Sayeed Gazi in this newspaper -- which is really a tale of how Bangladesh is going to skip an entire part of economic development.
More than that, it’s going to skip what is generally thought of as an essential, nay vital, part of the development of an economy from a peasant to an industrialized one.
This is something that is going to make Bangladesh richer, faster -- a thoroughly good thing to happen.
The basic background is that peasant farming -- that done by purely human and animal muscle power -- has a natural limit to it. Farms and landholdings end up being small because there’s only so much land that can be usefully used by someone expending their own labour on it.
Sure, it’s possible to hire labour, but over generations, that’s not quite what happens. Farms end up being the efficient economic size, given that limitation of how much one man, or family, can usefully farm.
If technology is static, this isn’t a problem -- we’re at efficient size, we’re doing the best we can. But technology isn’t static, or at least hasn’t been these past couple of centuries. Agricultural technology most certainly hasn’t been. But those improvements then run slap bang into the limitations of extant land holding sizes.
A tractor might be more efficient than a water buffalo, but not if you’ve only got five hectares. You can never make back that capital investment on such a small holding.
So, despite technology in general advancing, it doesn’t get applied. We need to change the system and size of farms themselves to be able to use those more productive technologies. That is a social revolution even if it doesn’t need a political one for it to take place.
Many of those small farmers need to be driven -- or tempted -- off the land so that farms become larger, at efficient scale for the new technologies. This takes a long time, generations at least, and is often accompanied by either violence -- the way the Soviets did it -- or gross poverty among those not moving off the land yet. It might all even be necessary, but it’s never a pleasant process.
In much more recent times in Europe and North America, we’ve seen a different solution to the same problem. Instead of landholdings increasing in size so as to be able to support the mechanization of farming, we’ve had the mechanized part being done by contractors.
A full-on combine harvester plus trucking combination can be $500,000 and more, very few people will have enough land to be able to justify that for a couple of weeks a year at harvest time. So, independent companies own the combines, moving them across regions so as to use them for months of the harvest as it happens over time in the different localities. The same becomes then true of planting, tilling, harrowing, and so on.
The economic effect here is that in order to gain those advantages of increases in productivity from mechanization, we don’t need to be consolidating land holdings. To buy a week of harvesting on a smaller farm is just as affordable as two weeks on a larger one relative to the crop lifted in the process.
It is that which can be seen in Ms Gazi’s article in this paper. For what she’s describing is how that rural hinterland is changing today in Bangladesh. It’s not happening with $500,000 combines, sure, but we are seeing the emergence of contract farmers.
Or contract providers of farming services. One example is of a power tiller-operated seeder. Rather than having an expensive piece of equipment to justify using on only a few hectares, it is rented out (along with operator) to work on many small farms.
We’ve thus mechanized, using expensive equipment, many small farms without having to agglomerate the farms into one large one. And also, without having to drive -- or tempt -- those farmers off the land.
We have, in essence, thus entirely skipped centuries or more of agricultural economic development. The peasant farms of Europe started to disappear in the 18th century as seed drills and so on were designed.
The process of farms getting ever-larger only stopped a couple of decades back. Moving directly from human and animal power to contract machinery means that Bangladesh doesn’t have to go through the agglomeration of farms into larger economic units. We’re still gaining the efficiency without going through social upheaval.
Of course, it might well still do so, as people begin to prefer the towns to the fields, but that’s a different matter.
This isn’t entirely unusual in development terms. Those places which, by chance, developed first, have gone through a certain set of technologies and thus situations. It’s not true that in order to develop a place must go through that same set. For example, my native UK went from no telephones through a fixed landline system which covered the country to the current mobile network.
It is the existence of that landline voice network which gives us the basics of a broadband internet system. Bangladesh has never had an all encompassing telephone network based upon physical lines, and now never will. As we’re all entirely aware, no one’s going to build one now given mobiles.
But given that there isn’t already that physical network to hang a broadband system off, it’s also probably true that Bangladesh will never have a broadband network for the internet. It’ll be one using the still rapidly-developing mobile solutions.
Sure, maybe we’ll get fibreoptic in the city centres, but no one’s going to wire the whole country.
It’s precisely that skipping of the various stages of economic growth which enables it to be so fast these days. As an illustration, Bangladesh has been growing GDP at 6% to 8% a year for the past couple of decades. Britain has never seen its economy grow at 6%, not ever, not once, not even for one year. You’re able to skip many of the steps we took.
Tim Worstall is a Senior Fellow at the Adam Smith Institute in London.