As the emphasis of agricultural development evolved and diversified over recent decades, the role of the agricultural sector in the wider economy has similarly changed. Economic policy reforms in recent decades have contributed significantly to changing the traditional urban biases that historically discriminated against farmers and, ultimately, against the poor. In some cases, trade and fiscal policy reforms have changed how both trade and aid are leveraged for development, transforming dependencies on food aid into more effective, long-term opportunities for development financing. In other cases, monetary policy reforms have reduced the distortionary effects of exchange rates and lending policies on the agricultural sector, allowing for more rapid growth and development.
The most dramatic case in point comes from China. Between 1978 and 1984, China undertook a series of policy reforms that transformed the country’s food and agricultural sector and reduced hunger on a scale unrivaled in history. The reforms effectively reintroduced household farming after more than 30 years of collective agriculture. This new approach to agriculture—the Household Responsibility System—gave farmers the incentive to sell their surplus farm production to the market. By returning more than 95 percent of China’s farmland to some 160 million farm households, the reforms directly contributed to an increase in rural incomes by 137 percent, a reduction in rural poverty by 22 percent, and an increase in grain production by 34 percent. Gains in on-farm efficiency also led to a substantial increase in the rural labor force available for non-agricultural employment, a shift that fueled a rapid process of industrial growth in rural China, and more broadly, China’s remarkable march to industrialization during the past three decades.
In Vietnam, a series of similar reforms between 1987 and 1993 fundamentally shifted the country’s economy to a greater market orientation, immediately transforming the agricultural sector. During the period 1989–92, the agricultural sector emerged from its stagnation and grew at a rate of 3.8 percent per year, while the country shifted from being a net food-importing country to the world’s third largest exporter of rice in 1989. Within a decade, more than 10 million households—representing about 87 percent of peasant households—had received land-use certificates for about 78 percent of Vietnam’s agricultural land. These reforms, together with other market liberalization policies, encouraged farmers to produce food staples, livestock, and high-value crops far more productively, and for substantially greater market gain, than in previous eras. The reforms contributed substantially to Vietnam’s dramatic reductions in poverty and contributed to both economic growth and industrialization.