Box 6-2. Contrasting views on agricultural development and markets

From a sustainability point of view, a society must provide for the replacement and growth of its capital, including both human re­productive capital and replenishment of natural resource capital. Capacities can be constrained severely by scarcity of soils, water, and energy, among other factors, when there is growing demand for food and energy. Scarcity of renewable natural resources is contingent with their use. Markets are necessary, but do not guarantee sustainability of public goods such as food security, conservation of natu­ral resources, or protection and enhancement of the environ­ment. There are incentives to produce goods with negative externalities because producers may not pay for damage caused to public goods (Stiglitz, 2006). Agricultural production happens within complex agrar­ian systems whose capacities can be constrained by a lack of resources or lack of autonomy. Sustainable development should be based on the pillars of endogeneity (as opposed to mimetic growth), self-reliance and self-confidence (as op­posed to dependence), be need-oriented (as opposed to market-led), in harmony with nature and open to institutional change (Sachs, 2002). Resilience, the capacity to absorb shocks, is necessary to prevent dependency. A compromise is necessary between the two extremes: autarky and completely free trade. It is necessary to imagine an optimum position that ensures viability and resilience, such as is the principle of biologi­cal systems (Tabary, 1993).
This perspective contrasts with the view that puts much more emphasis on the role of less regulated markets and does not see agriculture as an activity that is different in character from other economic activities. In this view, the private sector must be the engine of economic growth; inflation must be low to maintain price stability; state bureaucracies must be small; government budgets must be close to balanced; tariffs on imported goods must be lowered or eliminated; restrictions on foreign invest­ment must be removed; industries, and stock and bond markets must be open to foreign ownership and investment; quotas and domestic monopolies must be removed; exports must increase;

state-owned industries and utilities must be privatized; capital markets must be deregulated and currencies made convertible; the economy must be deregulated to promote domestic compe­tition; government corruption, subsidies and kickbacks must be eliminated; banking and telecommunications systems must be opened to private ownership and competition; and citizens must be allowed to choose from among competing foreign and domes­tic pension options and mutual funds (Friedman, 1999).
For a variety of reasons, the previous position has been a point of major conflict in international trade and financial negotiations over the last two decades. A long-standing perspective within the field of agricultural economics contests this position with one that emphasizes the particular nature of agriculture in its social and biological context. This position argues out that in the agricultural sector the general equilibrium model of the economic theory with a unique and social optimal equilibrium price cannot, indeed, a fortiori at a world level, be simply applied, for the following rea­sons (Loyat, 2006): •   Certain assumptions for a competitive equilibrium are not met (market failures, asymmetry of information, great dif­ferences in productivity levels between agricultures), mak­ing any optimal equilibrium illusory; •   Public goods, such as food security or protection of bio­diversity, are not recognized by the market. Consequently, the market price will not be able to guarantee these public goods; •   General Equilibrium model cannot represent the diver­sity of agricultural economics. The equilibrium price on the world market is disconnected from the real costs of production because of imperfect competition, dumping practices and the heterogeneity of resource endowments and labor productivity. This situation can be detrimental for most of local farm systems; and •   Agriculture relies on complex short and long-term interac­tions. Non-consideration of food security, biodiversity and environmental impact impede price signals from being so­cially efficient.