From the point of agricultural development, Mellor divides agriculture into three stages.
The stages are: 1. Traditional Agriculture 2. Technologically Dynamics Agriculture-Low Capital Technology 3. Technologically Dynamic Agriculture High Capital Technology.
Stage # 1. Traditional Agriculture:
“It is a technologically stagnant stage in which production is increased largely through slowly increased application of traditional forms of land, labour and capital.” The increase in output takes place through an essentially symmetrical expansion of all inputs or through increased input of the already abundant low productivity resources. Declining income and productivity per unit of an input is a common feature of this phase.
Policy in a Traditional Agriculture:
When we find agriculture in the traditional stage, the obvious objective is to push it into the 2nd stage. This is because it is mainly in the 2nd stage that agriculture starts helping the industrial development of the company.
No doubt, if we look at the history of economic development of west European countries, we find that industrial development started even when agriculture was in the traditional phase. Agricultural production increase in the traditional phase through increase in the area under cultivation.
The increase in population was not sufficient to consume away the extra production. The extra production helped the industrial sector which helped the agricultural sector in term through providing improved agriculture inputs.
The development of agriculture necessitates more investment. More investment means more saving in the agricultural sector. If the population continues to grow, the total savings in the agricultural sector may not increase even when there is some initial rise in production per acre. The extra output may be consumed by the growing population.
In-fact, even when there is an increase in per capita productivity in agriculture in an under developed economy, this may not mean any increase in per capita saving as the income elasticity of demand in the agricultural economies is very high and whole of the extra output may be domestically consumed.
A backward economy, in-fact, needs special measures for controlling population because in the initial stages of development, the economy generally finds itself in a vicious circle of population growth: poverty living to more population; more population leading to poverty and so own. It is only with great effort that the economy is able to get out of this rut.
Not only does the growing population hinder the growth of saving in the agricultural sector, it also leads to sub-division and fragmentation of holdings making the use of certain improved inputs, even if these can be somehow procured from outside, more difficult. This is especially the case with many of the present day underdeveloped economies where it has become difficult to extend the land frontiers.
Stage # 2. Technologically Dynamics Agriculture-Low Capital Technology:
In stage II, “a complex of technological changes substantially increases the efficiency of agricultural processes and raises the rate of increase of agricultural production………. The critical characteristics of stage II, as compared with stage I is the constant generation and application of technology which is facilitated by a complex institutional framework…”
In this stage:
(a) Agriculture still represents a large proportion of the total economy
(b) Demand for agricultural products is rising rapidly due to both demographic and income effects,
(c) Capital for industrial development is particularly scarce and returns are rising
(d) Limitations to the pace of economic transformation and pressure of population growth preclude enlargement of the average acreage per farm and
(e) Use of labour saving agricultural machinery is largely precluded by unfavourable labour-capital cost relationships. These conditions call for a type of agricultural development which at one time not possible, but which is now facilitated by modern science.
State and the Second Stage of Development:
Once the agriculture of an economy has entered the 2nd stage its development, the objective state policy should be:
(a) To see that the various inputs which are responsible for pushing agriculture in the second stage of development are progressively utilized by all farmers and also continue to be made available to the farmers at reasonable rates, (this will necessitate a large-scale import for these input from outside through the export of agricultural products and also industrial products after the industrial sector is developed or the setting up of industries producing these inputs in the country itself);
(b) To popularize these inputs through demonstration, propaganda, etc.;
(c) Supply of credit to those agriculturists, e.g., small farmers, who do not have sufficient finances to purchase these inputs.
Stage # 3. Technologically Dynamic Agriculture High Capital Technology:
This is the stage when agriculture has much of its relative importance in the generation of the National Income. Agriculture of various developed countries is included in this stage. Government’s role in different stages is quite important. In nature, of course, it is different. We would like to highlight the objectives and important policy measures relevant for each stage in the paragraphs that follow.
It may be noted that as the stage of agricultural development cannot be very finely demarcated, the objectives of agricultural policy at a particular time, too cannot be defined rigidly. What we fined at a particular point of time is a set of objective, their order of priority, of course, changing as the time changes. We shall be giving below only the relatively more important policy objectives vis-a vis agriculture in different stages of development.
Government and Agriculture:
If the process of development, as visualized when the agriculture as in stage II, continues, a time will come when both the agricultural sector as well as the industrial sector are highly developed through interdependence. This is agriculture in Phase III.
Such an agriculture has two major problems:
(1) The farm problem and
(2) The instability of agriculture.
Farm problem, to describe briefly refers to the phenomenon of poverty among plenty in the agriculture sector. Agricultural production, in physical terms, goes on increasing as its development proceeds.
However, the income as a result of this increased production does not increase proportionately due to a low income elasticity of demand for agricultural commodities in developed economies. Per capita income of the farmers thus falls in relation to that of the people in the non-agricultural sectors.
Instability of agriculture becomes more prominent in stage III because much of it occurs due to the developed nature of the industrial sector. A developed industrial, as we know suffers from the malady of booms and depressions.
As the industrial sector, at this stage of economic development, is very closely connected with the agricultural sector through purchase inputs from the agricultural sector and through sale of its products to the agricultural sector, these booms and depressions are transmitted to the agricultural sector also. The instability of agriculture thus, becomes more pronounced in this stage.
We can thus say that, in this stage, the basic problem is not to decide about measures needed for developing agricultural. It is rather how to tackle some difficulties created by economic development especially those emanating from the ‘farm problem’ or the ‘instability of agriculture’.
Some of the policy measures suggested to be adopted for reducing instability is buffer stock schemes, price supports, direct income transfer measures, control of fluctuations in the non-agricultural sector, etc.
Control over production, transfer of labour from the agricultural sector to non agriculture sector, encouragement of exports of agricultural products to other countries and control over imports of agricultural products into the country are some of the measures to solve the ‘farm problem’.
It may be noted that the preceding paragraphs only indicate the priorities that should be attached to various policy measures for agriculture in different stages of development. These are, however, not the only measures relevant for agriculture in a particular stage.
All measures of stage I, for example, are relevant for stage II also. Population control is desirable in stage III also. Similarly, some measures, particularly those pertaining to regional inequalities may be needed in stage III also if the development of agriculture has not been a balanced one.
The fact of the matter is that the Government has to ensure that besides taking certain steps on priority basis in a particular stage of agricultural development, the achievements of the policy measures followed in an earlier stage are not all, lost.