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20 CHAPTER 2 Productivity Decline and Falling R&D


Several press articles and policy briefs have cited declining productivity growth and declining stocks as the principal causes of the supply–demand imbalance (for a review, see Abbott, Hurt, and Tyner 2008). In many of these documents, slowing productivity growth is chiefly attributed to lower rates of investment in agricultural research. Declining yields are used as evidence for reduced growth, including a widely cited figure from the World Bank’s (2008c) World Development Report that shows declining growth rates in yields of rice, maize, and wheat (especially in the 1990s). Other studies also cite land degradation as a cause of the productivity slowdown (see Pender 2009). However, Fuglie (2008) argues that total factor productivity (TFP) measures are preferable and finds that TFP growth did not decline on aver- age, but actually increased. Nevertheless, Fuglie did find that agricultural investment had slowed down, which potentially accounts for why TFP accel- erated even as partial productivity growth measures decelerated. In our view, however, several arguments suggest that the productivity- based explanation of the food crisis should be seriously questioned. Most importantly, it is highly questionable whether yield growth or TFP growth is directly relevant in this context. Logically, a global supply–demand imbalance relates to total production per capita and its impacts (if any) on global trade; yields and other productivity measures are only determinants of production. For a broader perspective, Figure 2.8 shows trends in yields, production, irri- gation, and input use across regions and from the 1960s to today. The most pertinent measure is production per capita, and it is indeed true that global cereal production per capita was about 6 percent lower in the 2000s than it was in the 1980s. In other words, cereal production did not keep up with population growth.


The most important question is “What caused this decline?” The answer is complicated, but one simple means of addressing the question is to calcu- late global cereal production per capita after excluding individual regions, to supply at least superficial regional explanations of the decline in cereal production (Table 2.2). It turns out the oft-cited decline in Asian yield growth looks irrelevant (production growth would have been much lower if Asia were excluded from global production), confirming our earlier assessment of the China–India hypothesis. And although it is true that yield growth slowed in Asia, the slowdown came on the back of unsustainably high rates in the 1980s that resulted from the Green Revolution (a revolution cannot be sustained indefinitely). As shown below, poor performance in Australia is also not much of a long-term explanation, even though one could argue that climate change and unsustainable farming methods are affecting long-term growth.


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