To understand why agriculture has been neglected so far in most development policies in Africa, we must look at three explanatory factors that are often debated. The first relates to the political economy of agricultural taxation, long documented after the seminal contributions of Krueger (1974) and Bates (1981, 1983). The second refers to the budget bias against agriculture, which was at the forefront of debate among agricultural ministers during the 2003 Maputo Conference. The decrease in agricultural public expenditure over the past decade tends to strip agricultural policies of their sector-specific components in favour of infrastructure, health and education spending. The third factor involves a review of market failures specific to agriculture, and an explanation of why, after a state withdrawal, the market itself may be reluctant to invest in agriculture.
4.1 The political bias against agriculture
It has long been recognized that low-income agrarian economies tend to discriminate against food producers. However, as economies develop and agriculture shrinks relative to the rest of the economy, policies progressively tend to favour farmers. This was particularly true for the period between independence and the first wave of structural adjustment programmes in the 1980s, when most African countries implemented policies that underpriced food through an overvalued exchange rate.
In examining the origins of cheap food policies and food subsidy programmes, de Janvry and Subramanian (1993) found that most were started in response to economic and political pressure on the state:
1. Food price controls were introduced in Bangladesh, India and Pakistan to stem inflationary pressures associated with war scarcities and droughts.
2. Cheap-food policies also originated as a side-effect of the import-substitution industrialization strategy pursued through strategic protectionism and overvaluation of the domestic currency, which occurred in much of Latin America during the 1950s and 1960s and in parts of Africa until the beginning of the structural-adjustment programme period. This policy was often reinforced by access to food aid or concessional imports. Because food prices are a major determinant of the real wages of urban workers, cheap food policies have contributed to keeping industrial wages low. While selected commercial farmers succeeded in tapping institutional subsidies, mostly on export markets, smallholders were at a disadvantage because they lacked access to cheap credit, subsidized irrigation, improved seeds and other inputs. Smallholders’ income tended to stagnate or decline.
3. Food subsidy programmes aimed at the entire population were instituted at a high cost to government budgets under socialist or populist regimes, in which the state engaged in redistributive measures (for example, in Egypt and Sri Lanka).
By reinforcing the economic and ideological arguments for cheap food policies and food subsidies, electoral and pressure-group politics provided some convincing arguments in favour of their perpetuation in spite of poor economic achievements of the 1970s. Clientele- seeking in middle- and upper-income classes was a major motivation of cheap food policies through overvalued exchange rate in Latin America (Lattimore and Schuh, 1976). In Africa, public procurement at below-market prices benefited certain groups. Bates demonstrated that in many African countries, parastatal agencies may not have succeeded in handling
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