Agriculture and The "Oil Syndrome": The Role of Public Policy in Developing PEtroleum Economies

Oil syndrome theory suggests that macroeconomic distortions resultmg from petroleum exports will ser10usly constram agricultural development. Tlus paper revtews the 1973-82 record of six important oil exportmg countnes-Algeria, Indonesia, Iran, Mexico, Nigeria, and Venezuela-among which agricultural performance differed markedly Average annual growth in production per capita was zero or negative in Algeria, Iran, and Nigeria, modestly positive in Mexico (which reversed an earlier trend of declinmg food production) and Venezuela, and unprecedentedly high in Indonesia. Macroeconomic management was less important m determining agncultural performance than the pattern of dtstnbution of public oil revenues through pricing and mvestment policies affectmg overall rural-urban terms of trade. Indonesia's macroeconomic management was quite good, Venezuela's indifferent, and Mexico's very poor. But Mexico and ( especiaIIy) Indonesia made smallholder-based agricultural development a national pnonty, with high levels of rural investment, trade protection, and broadly d1stnbuted mput subsidies. With few smallholders and no trade protection, agricultural growth in Venezuela depended on extraordinanly high subsidies to commerc1al agricultural producers. Algeria, Iran, and Nigena followed investment and pricing pollc1es sharply biased against mass agnculture, while attempting (without success) to meet rismg food demand with heavily subsidized, capital mtens1ve enclaves.

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