“What do you mean ‘too rural’?”

by Alin Voicu

The Wall Street Journal blog has 2 recent articles (Matthew Dalton, Greece Has Too Many Farmers and Greece And Portugal Are Too Rural) dealing with the old problem of concern to Nicholas Georgescu-Roegen, Mihail Manoilescu and this blog: development, including development under overpopulation, a.k.a., the peasant problem. Said Alin:

You have hit upon a problem that supports the old saw that “plus ça change…” in more than one way.  The same problem is real and quite rigorous analyses were conducted in late XIX and early XXth centuries in the same geographical areas with the same conclusions: “overpopulation” in the countries in Eastern and Southern Europe, with a great deal of the people working in agriculture. See most of the work of Doreen Warriner (*Economics of Peasant Farming*, 1939) and W.E. Moore (*Economic Demography of Eastern and Southern Europe*, 1945), for example.

The most salient description of the issue, some history and hints on solutions you can read in a paper by one who knew things first-hand, economist extraordinaire Nicholas Georgescu-Roegen, a Romanian immigrant to the US and a professor at Harvard and Vanderbilt–“Economic Theory and Agrarian Economics”, Oxford Economic Papers, 1960.

You do put the cart before the horse, however, although you do recognize that as a potential issue when you talk of “which way does causality go.” Of course, mere living in cities is a derived aspect, a “bourgeois” one, to be very etymologically correct. But, Georgescu-Roegen shows that at the bottom of this are (a) a lack of capital to drive the development and growth of city (“burg”/”bourg”) type industry; and (b) a wrong economics, truly of the “townspeople” among whom Marx himself decried “the idiocy of rural life” (*Communist Manifesto*) much to the shame of his theory which utterly failed to explain it (per Veblen), namely, classical wages = marginal productivity of labor, adopted by “contamination” or imitation from developed countries and used on an economy to which it does not apply.

In these countries it used to be, and you see the legacy of it, that the way national income was produced and sheer survival meant all had to work in some fashion and that drove productivity (MPL) to effectively zero. By classical lights, that should have meant that wages had to be zero as well, i.e., starvation. What Marx called “the calvary of capitalism” had not yet been ascended then (and is dubious even to today) in these countries, highlighting the inappropriateness of that economic model. Surely, an alternative has to take hold *temporarily* and development fostered–but the wrong mindset leads to the crises and disasters you bring up.

Unfortunately, the problem is very delicate and a catch-22: to have a developed economy you have to have capital to produce factories, production goods and consumer goods–lather, rinse, repeat, if you want, for the “circular” (i.e., reproducible) flow; capital you don’t have so you have to borrow; you have no assets to pledge so you pledge the “full faith and credit” of the gov; proceeds are spend *not* on capital; da capo ad infinitum or “ad crisisum”…

Surely, as another Romanian economist, Mihail Manoilescu, observed and Georgescu-Roegen found, “labor is far more productive of value in industry than in agriculture.” Certainly, Greek and Portugese goods are outstanding in this area as even David Ricardo knew when he developed his theory of international trade/comparative advantage. But, and your article makes this point implicitly, comparative advantage does not work–the solution to the problem described is much more likely to lie in well-thought-out strategic industrial development. You also sense that may be due to the “industries not growing fast enough to spark more agricultural workers to flock to urban centers.” But the catch-22 rears its head again–how will they do that under draconian austerity measures????

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