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Specialization and trade has created incredible wealth and other benefits.  However, the agricultural sector should be bracketed as at least a partial exception to the theory of comparative advantage.  All economic theories have their limits, and a dogmatic application of comparative advantage by development policy-makers to liberalize food trade in recent decades has been a social and economic failure.  This failure is due to a mis-appraisal of food security, social costs, and social and environmental value.

The theory of comparative advantage is the bedrock of neo-classical economics.  Put simply, it states that countries (as well as communities and individuals) should specialize in producing whatever they do most efficiently; and via free trade of these goods, we are all better off through increased consumption.

Even if you are good at everything, you are better off specializing.  In an example by economist Paul Samuelson: if you are both the best lawyer and the best secretary in town, you are nonetheless better off focusing on being a lawyer and hiring a secretary.  This will increase the economic well-being of both you and the secretary you hired.

Makes sense, right?  In food production, even if you can grow wine and wheat very cheaply in France, if you are better at wine production, you should theoretically focus on your vineyards and import wheat from the American Midwest.

This approach ruled the international development paradigm for the last 30 years and was part of what was called the “Washington Consensus” in the 1990’s.  America has pursued an agriculture-exports-first approach at the trade negotiations table since the end of WWII and the Marshall Plan.  Across the table, Third World policy-makers were transfixed by the paradigm.  Since we essentially define “under-development” as having a large percentage of a nation’s population engaged in farming, policy-makers sought to “develop” and thus urbanize/industrialize their countries.  They therefore accepted cheap American food imports in return for liberalized exports of textiles, electronics, and other manufactured products.  Furthermore, many argue that politicians in the Global South suffer from an “Urban Bias”.  The global elite study in glitzy Western schools, spend all their time in cities, and are heavily networked with and influenced by industrial business-leaders (as opposed to the majority of their population: farmers), who benefit greatly from this development model.

This development consensus assumed that all the farmers would move to the city and get jobs in factories.  They were nudged along by Structural Adjustment Programs and Conditionalities of debts owed to the IMF and World Bank, which enforced an erosion of economic and social support for the rural sectors.  Foundation funding for agricultural NGO’s, localized seed research, and agricultural extension services evaporated.

The Global Food Crisis last year, which essentially reversed the poverty-alleviation gains of the last twenty years and led to widespread rioting and protests, served as a huge wake-up call.  Furthermore, although under-publicized, liberalized corn trade under NAFTA collapsed the rural economy in Mexico and has led to massive increases in immigration, as well as marijuana production and trafficking (see Stuffed and Starved or this paper).

We now recognize that agriculture has been under-emphasized in international development.  To inform the creation of a new paradigm, here are the three broad reasons why the agricultural sector does not in fact represent a suitable application of comparative advantage:

1. Food Security: Creating a globalized, regionally specialized food supply makes local populations dependent upon global commodity exchanges for their very survival.  This means the Mexican poor go hungry if speculators buy up corn futures, oil prices spike, America subsidizes ethanol, or Chinese meat consumption increases.  All of these things took place last year, and there were riots in 60 countries.  Analysts are expecting another food commodity crisis in 2010, and accelerating crises in the future as climate change impacts agriculture and oil prices continue to rise.  If everything goes to hell, is America ready to accept a billion refugees?  People need regional food security.  Food is a different economic good than laptops.  If the laptop supply chain fails you, you can wait a few days.
2. Social Cost:  In the 1930’s, the Great Depression and the Dust Bowl caused massive social upheaval and untold misery as millions of farmers had to relocate (see Grapes of Wrath).  Today, there are twice as many Indian farmers as there are total Americans!  Things are happening on a far greater scale and require new models to ensure social survival.  The collapse of rural livelihoods for 800 million Chinese farmers has caused the greatest migration in human history.  Is it realistic that almost a billion people will find work in manufacturing in China in their lifetime?  In this paradigm, is the utility of a rural person really being counted one-to-one with the utility of an urban bureaucrat?  At the very least, significantly greater support needs to be funneled back from the new wealth created in the cities to the rural destitute facing the brunt of the market.
3. Social and Environmental Value:  Efficiency creates value, but so does diversity.  First, a locally diversified economy offers multiple options for those born with different proclivities (e.g. what if Aristotle had been born into a Greece that only specialized in spark plugs and women’s socks?).  Second, the co-location of different industries and thinkers breeds innovation, the ultimate driver of growth (e.g. the co-location of IT and craftspeople led to Etsy.com in Brooklyn, NY; the co-location of farming, mobile technology, and software engineers in India led to the creation of cell-based market price information technologies for farmers).  Third, farms are eco-systems, not factories; specializing in only one crop destroys the soil, the farmers’ livelihood, and often the surrounding environment.  Fourth, diversified landscapes and rural spaces are naturally fulfilling, relaxing, and inspiring for humankind.  We must ultimately ask ourselves: What is the goal? What do we want our societies to look like?  What options and cross-pollination opportunities do we want citizens to have?

Food and agriculture’s moment, both domestically and internationally, has arrived.  Yet as the international community re-focuses on the rural poor, sharp schisms have already arisen regarding how to proceed.  The path forward must glean from an unabashed appraisal of why we failed in the past.  We must abandon a dogmatic adoption of comparative advantage, neo-classical economics, industrial logic, and obsession with hyper-modernity, and instead apply a mix-and-match approach based on human well-being.  Indeed, studying the impact of comparative advantage theory on global agriculture may help us to comprehend the general limits and exceptions to standard economics so that we might apply this understanding elsewhere.