World Bank demands agricultural shake-up

For decades, governments in developing countries and international agencies alike have promoted rapid industrialisation as the path from poverty. Yesterday, however, the World Bank identified agriculture as a potentially more effective method of improving the lot of the world's very poorest.

Launching the Bank's latest World Development Report, Agriculture for Development, the Bank's president, Robert Zoellick, said: "A dynamic agriculture for development agenda can benefit the estimated 900 million rural people in the developing world who live on less than $1 a day, most of whom are engaged in agriculture. We need to give agriculture more prominence. At the global level, countries must deliver on vital reforms such as cutting subsidies and opening markets".

The report argued that richer countries would have to engage in this reform agenda, pointing out, for example, the damage done to African smallholders by the American government's subsidies to its cotton growers. Biofuels also come in for criticism. The World Bank said: "the problem is both tariffs and heavy subsidies in rich countries, which drive up food prices and limit export opportunities for efficient developing country providers."

However, the biggest revelation remains the potential of agriculture. The World Bank said: "For the poorest people, GDP growth originating in agriculture is about four times more effective in raising incomes of extremely poor people than GDP growth originating outside the sector."

Such a discovery also has important political implications for nations such as China. There, a burgeoning and wealthy middle class has grown up all along the eastern half of the country, centred on Shanghai and Beijing. In the rural west, life pretty much goes on as it ever has, with income levels scarcely higher than they were a decade ago.

For most rural Chinese, the route to prosperity is getting a job in the city. Such a gap is worrying the Chinese authorities, who fear the political implications of a growing gulf between urbanites and the countryside.

While generally welcoming the report, several NGOs also raised some points of caution. Oxfam said: "Rich countries have yet to reform their own agricultural policies and are still dumping on the world market – rapid liberalisation can undermine growth and compound inequality. Forcing developing countries to liberalise in the face of this would be a disaster."

ActionAid International added: "World Bank lending policies over the past 25 years have forced the public sector to withdraw from agriculture by removing government subsidies on farm inputs such a fertiliser and dismantling public agricultural marketing boards. It has been a massive failure."