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Industrialization: Effects on agriculture

The sustained growth of non-agricultural employment and the transfer of part of the rural labour force to the towns have made it possible to stabilize the number of agricultural workers and halt the growth of population pressure on the land, thus creating the conditions for improved labour productivity and peasant incomes, industrialization has been accompanied by a rapid rise in the demand for food and in agricultural prices, creating profitable outlets for agriculture and thus increasing purchases of industrially produced goods.

Reducing pressure on the land

In spite of a particularly high population growth rate. 3.4% p.a., employment targets were practically attained in the 1970s and first half of the 1980s.

Between 1967 and 1984, the working population increased at an annual rate of 4.3% or 1.602.000 persons. Between 1966 and 1980, according to the Ministry of Planning, some 1.5 million new jobs were created, which meant that everyone coming on to the labour market could be offered a job.

Table 4.2
Growth in the Working and Employed Populations ('000)¹²

Sources: Algeria. Ministère de la Planification and Office National des Statistiques.

Thus, the sustained economic growth was able to meet the social demand for employment and begin to reduce the pre-existing volume of unemployment. The number of new jobs rose by about 6% p.a., absorbing all the annual growth in the labour force.

In 1966, the population census gave 610.000 unemployed: 433.100 in the rural areas (65% of the total) and 177,000 in the urban areas, plus 262.900 people seeking their first job, making a total of 873,000 unemployed, or an unemployment rate of almost 30%. By January 1983, the number of job-seekers was 563.948, as against a total employed figure of 3,632,594. Thus, between 1966 and 1983, the number of unemployed had fallen in absolute terms. Despite the increase in the working-age population over the same period the unemployment rate had fallen from 30% to 13.4%.

Interestingly, the employment situation had been reversed in favour of the rural sector, the percentage of unemployed falling from 65% in 1966 to 18% in 1983 due (as indicated below) to the high demand of the building and public works sector, the bulk of whose labour force originates from the rural areas. Industry's share in total job creation was small: an average of 20.000 jobs p.a. between 1966 and 1984, or approximately one job in six. Services (that is, all activities other than material ones) provided the highest percentage, rising from 31% in 1966 to 38% in 1984. The greatest number of jobs in services were created between 1980 and 1984, which explains the relative fall in industrial employment from 17.2% in 1977 to 13.8% in 1984 and the fall in the number of people in the material production sectors.¹⁴

Table 4.3
Employment by Sector, 1966-1984

Sources: RGPH 1966-77; Algeria, Office National des Statistiques, Enquête emploi 1984.

Despite a relatively high annual growth of 11% p.a., industrial employment is well below that of partly industrialized countries where it accounts for between 20% and 30% of the total working population. Industrial production, apart from hydro-carbons, rose at a similar rate, some 10% p.a.

These data indicate the limited character of industrialization during the 1970s and should go some way towards dispelling the oft-repeated suggestions that industry received too much attention at the expense of agriculture- when agricultural stagnation is not blamed on the growth of industry. Neither can the capital intensity of industrial investment explain the low volume of industrial employment. The average cost per job in industry was 380,000 AD (US$70 to 80,000), varying from 600,000 AD in the ISMME to 110,000 AD for the textile industries (Confère Etude de l'Agence Nationale pour l'Aménagement du Territoire, 1985).

Table 4.4
Employment by Manufacturing Sector (1985)

Source: Algeria, Ministère de la Planification, Agence Nationale pour l'Aménagement du Territoire, 1985.

In reality, the rate of investment in industry was much less than it seems. Hydro-carbons were in first position, totalling some 30% of the financial resources invested over the 1970s as a whole. This was due partly to the function of financing development assigned to hydro-carbons which constitute the sole source of external receipts. Hydro-carbon and natural gas resources have been used to sustain the programmes for importing capital goods needed for industrialization and other sectors of the economy.

In fact, the principal phase of industrialization - the construction of a capital goods sector- has not yet even begun and has so far received less than 10% of industrial investment. The first core of industries, set up during the 1970s, still requires a significant volume of imports of intermediate and capital goods in order to function. According to Algeria's Ministère du Commerce, of total imports for 1979, 1980,1983 and 1984, capital goods' share was 43%,38%. 37% and 33% respectively. For the same years, raw materials and semi-finished products' share was 35%, 36%, 38% and 39% respectively. Combined totals for both types of goods were: 1979,78%; 1980,74%; 1983, 75% and 1984,72%. This situation considerably limits the local productive system's autonomy from the outside world.

The experience of countries that have embarked on accelerated industrialization shows that three or four decades is needed to crystallize all the investments into an integrated industrial system. Poland, an underdeveloped European country before the Second World War, in three decades reached tenth place among the industrialized countries of the world. In Yugoslavia, between 1950 and 1980 industry grew at an annual average rate of 8.6%; and in China. 10% for three decades.

The number of non-agricultural jobs was enough to absorb virtually all the natural population growth, both urban and rural, but it did not lead to an absolute decline in the number employed in agriculture. (In Europe, this began to decline at the end of the 19th century (c. 1880), thus making possible an increase in area per worker and helping to fuel rises in labour productivity.) Despite a sharp relative decline in the agricultural population, from 49.6%, in 1966 to 22% in 1983, the number employed in agriculture changed little over the period 1966-85 (852.000 in 1966: 692.000 in 1977: 854.000 in 1983: and 1.010.000 in 1985).

But non-agricultural activities' soaking-up of the demand for jobs did make it possible to stabilize agricultural population numbers and prevented increased pressure on the arable area.

This apparent stability in terms of population and land, however, does not account for the same socio-economic reality. Rather than many farmers abandoning agricultural activity and the land being concentrated in the hands of middle peasants, as has been observed in a number of countries, there has been a gradual shift of the agricultural population towards holding two jobs or part-time employment. A degree of industrial and administrative decentralization helped the creation of non-agricultural jobs in the rural areas to such an extent that by 1977, only some 51% of the population was engaged in agriculture, and by 1984 only 37.7% - barely one employed worker in three- as the percentages according to the Office National des Statisques show: 1977. 51%; 1982. 46.2%, 1984, 37.7%. In the same document, percentages of rural population engaged in building and public works were: 1977. 16.06%; 1982. 19.1%: 1984, 21.54%; and in the same years, the rural population employed in industry was: 10.6%, 8.4% and 9.1% respectively.

In fact, more generally, rather than farmers doing two jobs it would be more accurate to speak of a variety of sources of joins and income among members of farming households. Given the limited available arable areas and population density, 70% of holdings are less than 10 hectares, and the majority of peasants cannot produce enough for their own subsistence. In other words, production is lower than the cost of maintaining the worker and his family. The potential number of those who would migrate from the rural areas and agricultural employment if non-agricultural employment were to grow rapidly is thus extremely high. It is well-known that it is the top of the economic cycle, with the growth of employment opportunities outside agriculture, that promotes this movement of the working-age population.

The spread into the rural areas of industrial activities associated with the development of social and economic infrastructure, and administrative, communication and socio-cultural facilities, has made it possible so far to keep the bulk of the non-agricultural population outside the trig urban centres.

The rural population grew on average by about 2% p.a. over the period 1966-84 which, given the land situation, shows that there was a moderate amount of rural out-migration, probably less than half the natural population increase, which is estimated at 3.2%, slightly less than 1966 when it was 3.4%.

There was more social and geographical mobility among casual agricultural workers, landless peasants, the total number of whom fell from 622.500 in 1966 to 114.000 in 1977, while the number of permanent workers in the public agricultural sector rose from 187,800 in 1966 to 192.604 in 1977. The fall in the number of rural workers in the 1970s also affected family workers, the number of whom fell from 214,000 in 1966 to 52.768 in 1977. In percentage terms, the urban/rural distribution of the population for the years 1966, 1977, and 1984 was, urban: 32%, 41.2% and 43% respectively: and for the same years, rural: 68%. 58.8% and 57% respectively.

The spatial distribution of industries, and of public investment more generally, has proved an effective means of fighting against the rural exodus. While the import-substitution industries of the first phase of industrialization (textiles, leather) were labour-intensive and created to mop-up pockets of unemployment that had built up in the large and medium-sized towns, the programme of small and medium industries scattered all over the country affected virtually all the largest provincial towns. This policy had the effect of keeping the bulk of the surplus agricultural population in place by offering it employment outside agriculture. The agricultural exodus¹⁵ was achieved without migration or involved only short-distance migration.

Relations between industrialized towns and the rural areas have restructured the regional space to favour agriculture by keeping the population on farms and increasing the incomes of peasant-worker groups. Conversely, as Prenant notes, urban growth around tertiary activities has tended to be parasitical on the rural areas.

As the Second Four-year Plan (1974-77) got underway, most urban centres were in a position to fill the increased number of job vacancies from their own natural increase. As early as 1974. Prenant observed a more rapid growth of towns in the hinterland and the fact that numerous small centres were taking on urban functions. He could thus observe that:

The urban growth currently underway in Algeria seems to be marked less by the mushrooming of the big towns than by many small centres taking on urban functions. Sometimes the functions lead to the demographic growth of localities that previously had small populations, perhaps even villages created to receive these functions, sometimes on the contrary they urbanize already existing large settlements of the rural population and give them, or restore to them, an urban character.

Food demands and price increases

The rapid expansion of wage work among the economically active population - 70% of the total employed population - put strong pressure on the demand for food. It is estimated that this rose by 4-5% p.a. throughout the 1970s.

In common with all the oil-producing countries, revenues from hydrocarbons made it possible to improve the level of the population's food consumption. The daily calorie intake, scarcely more than 2.000 (2.100) in the 1960s, had risen to 2.500 per day by the late 1970s, with a very marked reduction in the differences between rural and urban areas. The improvement in per capita daily calorie intake was both quantitative and qualitative since meat and dairy products, eggs, fruit and vegetables account for a high proportion of food consumed. Thus, per capita meat consumption rose from 8.2 kg to 15 kg over the period, and milk consumption from 34 to 61.3 kg: such a rapid rise in demand necessitated increasing quantities of imports.

The proportion of local production in total consumption has diminished continuously since the 1970s. For the principal basic staples, agriculture supplies only a small proportion of needs: as statistics for 1982 show, the basic daily intake was largely covered by imports: 75% for wheat; 70% for pulses; 80% for vegetable oils; 50% for milk products and eggs; 100% for sugar.

The quantity of imports rose on average by 8% per annum, reaching a total value of 9.200 billion Algerian dinars in 1983, equal to slightly less than US$ 2 billion, as against receipts from hydro-carbons of some 13 billion dollars in the same year.

Contrary to what has happened in many countries, however, these imports have not been an obstacle to the growth of total production. Measures were taken to protect domestic agriculture from the effects of world markets and to increase peasant incomes.

Imports were limited to basic products (wheat, vegetable oils, dairy products and sugar) which account for most of the calorie and protein intake of the bulk of the population and for 80% by value of imports. Leaving aside this group of products, and some additional imports of beef, mutton and lamb, local production has not had to face competition from imported products, total supply exceeding demand.

Protection of local agriculture from world markets is also assured by delinking consumer prices from producer prices. For some products producer prices are higher than both the prices of imported commodities and consumer prices. This is the case for wheats and pulses, vegetable oils (olive oil), milk, eggs and potatoes. The state subsidizes both production and consumption, production subsidies tending increasingly to replace consumer subsidies following the increases introduced in 1983-84.

The fact there are two sources of supply- imports and local production - and two price systems- fixed prices and market prices- has led to the establishment of a dual organization of markets and circuits for distributing food products.

There is a relatively integrated state network that includes firms importing, processing and packaging products, and a chain of distribution outlets; and a network of private businesses, made up of several tens of thousands of wholesalers and retailers. State trading, conducted essentially in the cities and main provincial towns, distributes basic commodities that fall into the category of products whose prices are fixed administratively: cereal products, pulses, vegetable oils and sugar purchased by the state on the local market or imported. Private trade distributes the bulk of the products of domestic agriculture, particularly red meat, fruit and vegetables, at market prices.

More than the producer price policy, however, it is the global weakness of supply compared to demand that gives local production its most secure advantage. Imports are not quantitatively sufficient to affect the prices of domestic products. This limited availability, or relative shortage, which often takes the form of interruptions of supply, makes it possible to market all local products at market prices, which are distinctly higher than the prices fixed by the state. It also has the consequence of limiting the consumption of certain basic imported products such as cereals, eggs, pulses and potatoes.

Given the structure of relative prices and wages, households ought to have consumed more milk, eggs, cereal products and pulses than they do today.

Thus in the event of a price rise, when one product is replaced by another, the replacement cannot always be the cheapest but a product that is available even at higher prices. As a result, there is no competition between imported products and local commodities and the price level is fixed independently on the two markets - state and private. Depending on its origin and the distribution network involved, the same product can be available simultaneously at different prices: imported red meat is sold at 35 dinars/kg, local meat at 100 dinars: imported potatoes at 2.5 to 3.0 dinars, local potatoes at 5.00 dinars: reconstituted milk at 1.30 dinars, local fresh milk at 5.00 dinars.

This structure of supply has so far made it possible to sell local products at very high prices, and facilitated a major transfer of the social surplus, mainly to the benefit of private agriculture which holds control of some 15.000.000 hectares or pasture and grazing devoted to rearing sheep and cattle, almost 65% of the irrigated areas are devoted to the production of vegetables and fruits.

While these measures as a whole acted as an effective protection for local production, they nevertheless led to an even closer integration of the system of production and consumption into world markets.

High demand, at high price levels, for fruits, vegetables and red meat, led peasants to turn away from such basic staples as wheat, pulses, and oilseeds, because relative prices, as a result of strong demand emanating from high income groups, made it more profitable to produce fruits, animal, and market-garden crops. The rapid rise of agricultural prices has also slowed down improvement in the population's real consumption, increasing the relative share of the household budget devoted to foodstuffs at the expense of other consumer items.

In 1980, households had to devote a larger share of their expenditure (57%) to foodstuffs than in 1968 (41.6%) for a still inadequate nutritional level. Consumption has not yet reached the level (3.000 calories) beyond which there is a relative decline in the share of food expenditure in the household budget.¹⁶

The continuous rise in the relative share of food expenditure reflects the effect of the inflation of food prices rather than any rise in real consumption. For an equal food level, about 2.500 calories. Tunisian households spend only 41% of their expenditure on food. The consumer price index in Algeria rose on average by 15% p.a. between ]968 and 1980 (6% in Tunisia over the same period) whereas household incomes rose by about 12% p.a. (at current prices). Compared to the evolution of per capita expenditure which makes it possible to eliminate the effect of household size, the elasticity coefficient of food demand rose from 0.944 in 1967 to 0.999 in 1980, which reflects a high and rising average propensity to consume.

With 2.500 calories, the quantitative limit has not yet been reached, since it can be observed that all groups' consumption of foodstuffs is rising, whatever the income band considered. The demand for food remains largely unsatisfied and consumption continues to rise faster than production.

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