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What Is the Role of Agriculture in Economic Development?

By Sandi Johnson
Updated May 16, 2024
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The role of agriculture in economic development is multifaceted. Food production and similar agricultural businesses have the potential to feed a nation, supply jobs, and contribute to the tax base of local and national governments. Developing nations can dramatically reduce poverty through efforts to stimulate agricultural business growth. Studies indicate that regardless of whether a developing country is poor or wealthy, focused efforts to grow the agricultural sector have the same effects: reduced poverty, improved food supplies, and increased exports.

Historically, as populations increase both domestically and internationally, the demand for more plentiful and unique food sources also rises. When it comes to agriculture in economic development, countries with unique natural resources benefit from offering the resulting agricultural products to other countries and regions. For example, in the 20th century, produce specific to the nation of Chile was desired by citizens of the United States and surrounding countries. Chile capitalized on the demand for its agricultural products, and the resulting export-generated revenues improved economic conditions there. Demand for Chile's produce helped grow farms, increase jobs, and add to the gross domestic product of the country.

As seen in the early history of the United States, many countries begin building economic strength and international trade through agriculture. Once a country becomes stronger in terms of the economy, many turn to more advanced businesses and trade options, such as natural resources, technology, or industrial products. Fewer citizens produce agricultural products for a living. Economic growth naturally produces higher average earnings, more advanced and stable infrastructure, and better educational opportunities. Citizens can expand away from merely acquiring necessities and look to fulfilling wants and interests, including exotic foods, imported fibers, and other agricultural products from around the world.

Changes in the average income and spending abilities among citizens of more developed countries offer opportunities for developing nations. Like their predecessors, these developing countries can utilize natural resources to increase trade with other nations. In addition to exotic or unique products, developing countries can also supply additional stores of staples such as grains and natural fibers. Not only does the role of agriculture in economic development serve to increase trade for these specific goods, but also serves to establish trade relationships and develop markets for future goods and services, outside of agricultural products.

Although international trade is important, local communities typically feel the effects of agriculture in economic development long before the effects become evident on a national scale. A single farm can offer a few or several dozen jobs for local citizens, as well as providing healthy, plentiful food for area residents. Taxes paid on properties, products sold, and subsequent farm income help boost tax revenues for the community, providing funding for community programs and critical infrastructure. Several farms within the same area naturally have a greater impact on the local community. Expanding agricultural growth to include an entire county, state, or other region then begins to impact economic conditions at the national level.

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Discussion Comments
By fify — On Nov 29, 2014

Everyone talks about cheap produce, jobs and development. But not many people talk about the quality of the food we produce. Health is another prerequisite for economic development. We can't be a productive country if the people aren't healthy. But with mass production methods, pesticides and genetic modification, we are producing more and more unhealthy food in America.

This is slowly deteriorating our health and I'm sure that it's going to impact our development negatively in the coming decades as the results become more and more apparent. I believe EU countries banned genetically modified foods. Why can't we do the same?

By bear78 — On Nov 29, 2014

@bluedolphin-- Of course, agriculture is very important. But as you said, more developed economies may prefer other types of production, such as cars or technological goods. I agree that agriculture should be alive and well in every country. Of course, this doesn't mean that every country has to produce every good and make enough food to feed themselves completely. I also oppose excessive subsidies to farms that cannot keep themselves afloat otherwise.

The main idea behind trade is the idea of comparative advantage. Countries with the greatest comparative advantage in a good produce that good and sell it to other countries. This way, everyone makes what they're efficient in, and everyone gets a wide range of goods for the lowest price. This is one of the major reasons why some developing nations make a considerable amount of their GDP from trade and agriculture. They have the right conditions and the lowest costs to produce those goods that other countries want. This is why we get lots of bananas from South America.

By bluedolphin — On Nov 28, 2014

Although agriculture has such a great benefit for economic development, I see some developing countries reduce agricultural production instead of increasing it. I don't understand why they are doing this. I realize that as the economy grows, production may slowly shift towards other types of goods. But even the most developed countries have strong agricultural activity and support farmers through subsidies if required.

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