At an FAO meeting during the mid-1980s--the heyday of farm protectionism in Europe--the head of delegation of a large European country complained off the record: "Progress in technology brings increases in agricultural production of 1.5 percent a year, no matter what you do. If demand does not increase, your surpluses will grow, automatically. "
Seen through the eyes of this deputy minister, technology generation--or research--is an evil that relentlessly creates new political, economic and humanitarian problems of food surplus disposal.
His country has a vast structure of public agricultural research facilities at university and state levels which are working to improve farming, marketing and the quality of farm products. But what the deputy minister hinted at was, first of all, private sector research. A multitude of national and transnational companies are conducting research in order to be able to sell a stream of innovative products and processes to farmers. They are the real actors behind the 'automatic' 1.5 percent increase in output. Their concept, of course, would not work without the farmer acting as "homo oeconomicus" who is willing to learn (and forget), to innovate and experiment.
Had the same deputy minister been heading a developing country delegation, his perspective would have been totally different. The idea of a 1.5 percent 'automatic' growth rate would have been a pleasant discovery for him which he would have, in all likelihood, attributed to public sector research. Why?
In most developing countries there is not much private sector research activity going on in and for agriculture. National agro-industries are usually in their infancy; transnational companies are mainly selling products which have been developed elsewhere. Both are concentrating their research in developing countries-if any-on legally appropriable aspects of innovation that promise short- to medium term profits.
These profits are most likely to be found in the cash and export commodity production sectors. Basic foodstuff production for domestic consumption will not normally attract private sector research investments. Unless public sector research in basic foods is undertaken, technological progress in food production in a developing country will be very slow, often close to nil.
Does that mean that output would not grow? As long as the farm population keeps on growing there will be more labor input and hence more output, but with a decreasing marginal product. To stabilize or to increase the marginal product of labor in basic food production requires progress in technology.
Technological progress from private sector research and development comes at a price. Farmers in developed countries are able to pay that price because, by definition, rich country farmers are rich or, at least, well off-compared to developing country farmers. In a poor country's basic food sector there isn't much money to be made for private companies; at least not in the short to medium term that an entrepreneur has to envisage. Also, the sector structure with millions of small farmers implies organizational problems which make it difficult for farmers to fund research directly (for instance through farmers' associations) and prevents the private sector from getting good returns on research because of physical and legal market imperfections.
Farmers in poor countries need essentially free access to advanced technology. Only the public sector can offer free access because its research products are funded by taxpayers (either directly or through international organizations), or by benefactors (for instance through private foundations). These research products are public-or free-goods and are the results of research processes based on the principle of free exchange of knowledge.
This principle runs counter to the interests of private sector R&D which must aim at protecting knowledge through legal appropriation and usually keeps secret what cannot be appropriated. In simple terms: while the private sector will gladly use the free research products emanating from the public sector it is not likely to share its knowledge with other institutions, except on a barter deal basis. Occasionally, public research institutions will have to take steps to prevent private sector companies from legally appropriating public sector research results.
This lopsided relationship is not necessarily a bad thing. One of the objectives of public sector research should be to phase itself out over time. Agricultural research in most of today's developed countries started early in this century as public sector research. In many countries, a plethora of public research institutions still exist today not primarily as a reminder how it all began but as proof that despite the rapidly growing importance of private sector research, agriculture in developed countries needs a strong complement of public research.
A similar trend can be observed in the more advanced developing countries. In Latin America, for instance, private companies are becoming increasingly active in the basic food sector because rising mass incomes made basic food production more profitable and because decades of successful public sector research have created a technology basis from which it is easier for private companies to carve out niches for appropriable innovations. In the early phases of development it is therefore inevitably one of the functions of public sector research to pave the way for private enterprise, and to subsidize it by granting free access to research products and processes.
On the other hand, public research often needs private enterprise to ensure the optimal use of public sector innovations by farmers. In the seed sector, typically, private companies often have the best and most reliable access to farmers. Improved seed developed by public research would remain an ivory tower ornament unless private companies perceive a commercial value and profit, and take it to the end user.
"Most maize seed produced and distributed in the developing world is," for instance, "seed of varieties and hybrids orginally developed by the public sector." However, "the growing use of hybrid maize in many developing countries suggests that the private sector will further strengthen its position in the maize seed industry, not only in seed production and distribution but also in R & D." (CIMMYT Summary no.2, 1996)
What is important is that both private and public sector institutions recognize their interdependence and the long-term potential of collaboration. The CGIAR, in establishing a Private Sector Committee, has taken an important step in that direction.
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