THE ROLE OF AGRICULTURE AND ITS PREREQUISITES IN ECONOMIC-DEVELOPMENT- A VISION FOR FOREIGN DEVELOPMENT ASSISTANCE

The aim of this paper is to establish a vision for foreign development assistance based upon the evolution of thought and empirical evidence found in the development literature. The paper spotlights the agricul tural-led approach. The empirical record shows that agricultural growt h had a more pronounced impact on increases in developing-country inco me than did growth in the nonagricultural sector. The reason for the d ifferential impact is that developing countries focusing on agricultur al development experienced more broad-based income growth and increase s in the demand for domestically-produced goods; whereas the developin g countries promoting rapid industrialization experienced narrow-based income growth, with a demand pattern oriented toward nonfood and capi tal-intensive products. A precondition for agriculture to play its pro per role is the existence of a conducive environment in which private enterprise can flourish. Developing-country governments need to assume responsibility for the creation and maintenance of essential institut ions. Government investments are required in education, infrastructure , and other areas where the commercial market is not capable of delive ring critical services. Finally, governments must responsibly manage t he macroeconomy, pursuing sustainable pricing policies and fiscal and monetary policies that are consistent with real equilibrium exchange r ates.