Causes of Low Productivity and Policies to Raise Output in Essay

Causes of Low Productivity and Policies to Raise Output in Underdeveloped Countries - Essay Example According to Schultz (1998, p.329), economists find it difficult to understand the preferences and scarcity constraints that determine the choices that poor people make because they fail to understand is that poor people are no less than concerned about improving their lot and that of their children than rich people are. As poor people reside predominantly in low-income countries, they earn a pittance for their labor, half and more of their meager income is spent on food, and that most of them earn their livelihood in agriculture. Schultz also points out that economic history has also been neglected. Classical economics was developed during the time when most people in Western Europe were barely scratching out subsistence from the poor soils they tilled and were condemned to a short life span. As a result, early economists dealt with conditions similar to those prevailing in low-income countries today. Knowledge of the experience and achievements of the poor people over the ages can contribute much to an understanding of the problems and possibilities of underdeveloped countries today (1998, p.332). Accordin According to Emmerij (1987, p.9), the disappointing performance of agriculture in many low-income countries cannot be ascribed wholly to technical factors or agricultural conditions in that unsuitable economic policies can have the effect of reducing incentives to increase output and impending production. In connection to this, Schultz (1998, p.333) argues that differences in the soil productivity1 do not explain why people are poor in long-settled parts of the world, conversely, the state of agriculture in underdeveloped countries. Schultz narrates: "People in India have been poor for ages, both on the Deccan Plateau, where the productivity of the rainfed soils is low, and on the highly productive soils of South India. In Africa, people on the unproductive soils of the Southern fringes of the Sahara, on the somewhat more productive soils on the steep slopes of the Rift landform, and on the highly productive alluvial lands along and at the mouth of the Nile all have one thing in common: they are very poor" (Schultz 1998, p.331). Rather, Schultz cites that though land per se is not a critical factor in being poor, the human agent is. The expectations of human agents in agriculture - farm laborers who both work and allocate resources - are shaped by new opportunities by the incentives [in agriculture] to which they respond. These incentives, explicit in the prices farmers receive for their products and in the prices they pay for producer and consumer goods and services, are greatly distorted in many low income countries (1998, p.332). Governments tend to introduce distortions that discriminate against agriculture because internal politics generally favor urban at the expense of rural people, despite the much greater size of the rural population (Schultz, 1998). The effect of these government-induced distortions is to reduce the economic contribution that agriculture is capable of making (1998, p.332), despite the fact that