‘Urban Bias’, Intersectoral Resource Flows and the Macroeconomic Implications of Agrarian Relations: The Historical Experience of Japan and Taiwan

It is argued that agrarian relations play a critical role in the pattern of intersectoral resource flows and the way in which the agricultural sector shapes the macroeconomy in developing countries. The notion of ‘urban bias’ used by GKI is defective in its abstracting from the pre‐existing agrarian system and from the prevailing institutions and in focussing on one simple set of influences outside the agricultural sector itself, i.e. government policy bias. This is illustrated with reference to the historical experience of two countries regarded as exemplary by GKI: Japan and Taiwan. Their experience shows that high rates of taxation and surplus extraction from agriculture are not incompatible with maintaining profitability and production incentives in agriculture, as long as agrarian relations and other enabling conditions can ensure a fast enough rate of technological progress and productivity growth in the sector. The macroeconomic implications of different agrarian relations are much more complex than the urban bias story told by GKI would suggest.