The Agricultural Sector: Dominated by the QWERTY Economy
Nicaraguan agriculture provides a perfect example of the QWERTY economy, dominated not by rationality or liberty, but by routine, inertia and traditions that perpetuate inefficiency and prevent us from getting head.
José Luis Rocha
Nicaragua’s agricultural sector is having to fight in very adverse conditions today, not just because of everything going on in the country, but also because of all the changes in the world. Agricultural trade currently represents less than 10% of total global merchandise exports, compared to 25% at the beginning of the sixties. This downward trend, despite the greater volume of agricultural goods produced by the world, has resulted from both the introduction of new non-agricultural products into world commerce and the fall in agricultural prices relative to prices for industrial products. Furthermore, agriculture-based economies have seen their market quota shrink and their agricultural trade balance deteriorate due to steadily growing dependence on agricultural imports right in their own countries.
The world markets have increasingly relegated these agriculture economies, which are in the South. Thus while the developed world accounted for 60-65% of world exports in the 1930s and 1940s this proportion had reached 73% by the nineties. And while trade between those developed countries accounted for 40% of world trade in mid-century, that figure now stands at 60%, of which all but 10% consists of exchanges of manufactured goods. Trade between industrialized and agricultural countries, which represented over a quarter of the total in mid-century, has dropped to 15%.
National rice production: R.I.P.Nicaraguan agriculture is experiencing the drop in prices just like other countries of the South. The average international price of beef—one of the country’s "star" exports—fell by 16% just in the last decade. Large-scale mechanization, the use of chemicals and the specialization of developed countries’ agricultural production systems have increased their surplus, and they are seeking new markets.
Market liberalization has also allowed other countries to introduce their agricultural products into the Nicaraguan market, where they have a competitive advantage over national products. For example, cheaper imported yellow corn has replaced sorghum, a basic input for chickenfeed. Domestic sorghum production has dropped to under half of what it was at the end of the war in the eighties.
One of the most dramatic illustrations of Nicaragua’s current crisis is provided by rice production. In 1972 Nicaragua exported US$1 million dollars worth of rice and did not import a single grain. In 1998 we had to import $17 million worth of rice and exported none. The previous year, thanks to the droughts caused by the El Niño phenomenon, the situation was even more catastrophic; we exported $2 million worth of rice against $34 million of imports. Yet it is not a climatic problem, because the year before that we imported $32 million but exported only $1 million. Nor is it a problem of inefficiency. It costs $10 to produce a quintal of rice in Nicaragua, while it costs $20 to produce the same amount of similar quality in the United States, yet our neighbor in the North has become our main supplier. How can it compete? US rice producers enjoy a government subsidy of $7.64 per quintal, while the Nicaraguan government provides import facilities and preaches the virtues of free trade to local producers, announcing that those who do not prove profitable—according to the neoliberal catechism—will be "naturally" displaced towards areas in which they are more competitive. There is not an iota of "naturalness" in such displacement.
Both governments, theirs and ours, are paving the way for our food dependency. Opening markets in the South with no equivalent in the North is turning us into permanent losers, even in areas where we supposedly had "comparative advantages."
Forced to import The degree to which a country can supply its own basic food needs depends on the world markets for wheat, rice and corn, which are the dominant triad in the basic food trade. According to the UN Food and Agriculture Organization (FAO), agricultural subsidies in Eastern Europe helped reduce its proportional contribution to the global volume of wheat, rice and corn imports from close to 63% in 1948-1950 to 16% in 1995-1997, while increasing its contribution to exports from 5% to nearly 18%. Due to an enormous rise in net supplies throughout Europe since then, the rest of the world has been virtually forced to give up supplying its own basic grains. There has also been a notable growth of agricultural exports in Asia due to improved yields. Everything indicates that cheaper agricultural products will push out national products in Nicaragua as well. Any attempts to open other markets for our agricultural products will always run up against consumption patterns, better-placed competitors and protectionist barriers for agriculture—such barriers will predictably be maintained in Europe for political reasons. The market will not wait for us to catch up, and while we are dozing, others are forging ahead.
wheat, rice and corn
Another problem is that increased basic grain production, which is the basis of food security, has up to now been achieved by expanding the area cultivated. This is slowly being curtailed in Nicaragua to establish protected areas of tropical forest conservation, which means that future increases in corn and bean production will increasingly have to be generated by greater productivity.
QWERTY: Keys that stickSo why do things continue to be produced and proposed the same way despite the drastically changing scenario and the fact that we are still going backwards? The answer could lie in what some have dubbed the "QWERTY economy." Devotees of the free market economy base their arguments on the supposition that the economy is always driven by the most rational decisions, but economic history experts Paul David and Brian Arthur reject the idea that markets lead us down rational paths toward a single better solution. In the light of historical evidence, they argue that results depend on what they call "path dependence." In other words, the destination point depends on what happens along the way. This is what they call the "QWERTY economy."
From the first typewriters to the most sophisticated modern-day computers, keyboards have always had the same layout, with the top line reading QWERTYUIOP. This distribution of letters is not the most comfortable or efficient solution in terms of finger movement. But in the 19th century, when people began to use typewriters, a mechanism that obliged typists to write slowly and carefully had certain advantages, given the tendency of keys to get stuck.
By the time sticking keys was a thing of the past, it was no longer possible to change to a more efficient keyboard design as typists had learned to type on the QWERTY keyboard because that was the one that had been industrialized. In turn, manufacturers produced machines with that keyboard because it was the one typists knew how to use.
Paul David has found that economics is full of such stories, in which certain factors reinforce and perpetuate inefficiency. So the term "QWERTY economy" implies that certain accidents lead to stagnation or bad solutions and the free market does not guarantee the best results. US economist Paul Krugman, in turn, observed that the collective result of many free decisions often ends up bogging us down in a bad result, for example when we get trapped in inferior technology. In Nicaragua’s case, the QWERTY economy has operated on various levels, trapping us in the same crops, the same sectors and above all the same technology.
Tied to tradition with As a result of the policies being applied that only benefit large-scale producers, small and medium producers have ended up playing their part in certain QWERTY effects by doing things the same way for decades now. The QWERTY economy generates farmers with no technical agricultural expertise, no administrative sense and not enough ability to flexibly adapt to new requirements that the market and the environment demand. It reproduces them as corn or bean growers and hoe or ox operators. And it lets them think that continuing to do everything in the same way is the most natural thing in the world.
no technological upgrading
H. W. Singer, an expert in development issues, noted decades ago that "improving manual looms or ‘simple’ agricultural instruments should be seen as a refinement potentially equal to developing the lunar module or the supersonic Jumbo Jet." He also pointed out why technological change had focused more on jets, or in Nicaragua’s case on big agricultural companies, than on looms and hoes:
"Given that virtually no research and experimental development spending is dedicated to problems of particular interest to underdeveloped countries, we can see that technology tends to be much more modern in sectors where the poor countries’ activities are more like those of the rich countries. On the other hand, there has been little or no technological progress in areas with problems that do not exist in the rich countries: those related to tropical agriculture, small-scale production, use of the underdeveloped countries’ own raw materials and agriculture and subsistence crops."
Another economic "rationality"Small producers cannot take the necessary technological steps forward if they do not have access to appropriate technology. Before daring to take those steps, they first have to modify very deep-rooted soil use patterns. Small-scale producers cling to the "economic rationality" of investing any surplus they have in establishing new plantations rather than increasing the yields of existing ones, a system that allows them to exploit the natural soil fertility and save on agrochemicals. Recent studies estimate that 70% of Nicaraguan small-scale producers do not apply any fertilizers to their coffee plants or apply insufficient amounts.
At first, this tactic produces yields of just under 6 quintals of coffee beans per hectare at a low cost. But after the first two to four harvests, the yields gradually drop until they stabilize at around 3 to 3.5 quintals per hectare. With the story similar for other crops, this traditional "rationality" has caused us to lag way behind in terms of agricultural yields.
In 1950, before the "green revolution," global corn and rice yields stood at 1,054 kilograms (23.2 quintals) and 1,124 kilograms (25 quintals) per hectare respectively, but by the year 2000 those yields had doubled or tripled. In Nicaragua, the yields in 2000 varied a lot depending on the technology employed, with irrigated rice farming yielding 56 quintals per hectare and non-irrigated rice farming only 35. We produced 42 quintals of corn per hectare if tractors were used, 28 if oxen were used and 14 if manual techniques were used. Corn yields for most of the production systems used in Nicaragua are still below those of 1950. The current drop in chemical fertilizer use—from 72,000 metric tons in 1988 to 49,000 metric tons in 1997—reflects the reduced availability of agricultural credit rather than the massive adoption of organic fertilizers.
The yields of manual agricultureThe difference in yield per worker puts us at an even greater disadvantage. On the world scale, the productivity of manual agriculture, which is still the most widespread system, stands at 20.5 quintals of cereals per worker, while more mechanized forms of agriculture produce over 10,250 quintals per worker. Given that a worker using a 120-hp tractor covers over 200 hectares, it can be assumed that the differences in income and yield per worker are even more pronounced in developed countries.
Comparing the situation in Nicaragua with that of developed countries requires complicated calculations. On the one hand, Nicaragua’s prevailing production systems make frequent use of family labor—including members of the family circle who are not recorded as part of the economically active population—and, on the other, they are not specialized in the sense of being exclusively dedicated to one crop. Nonetheless, estimates from very detailed studies indicate that a corn farmer can sow 28 hectares with a tractor, 3.5 with oxen and 0.7 manually using a hoe. Most production units in Nicaragua use rudimentary manual techniques, which is why they produce such low yields.
Our milk cows and shrimp farmsNicaragua is even further behind in terms of milk production. In 1950, the average annual milk yield per cow in France was 2,000 liters, and is currently 5,600 liters. In Nicaragua, the average annual yield today is 1,140 liters, just 57% of France’s average 1950 yield and 20% of its average yield for 2000. It is illusory to aspire to the production levels in France, which is suffering many problems linked to genetic manipulation and large-scale production and is beginning to de-mechanize somewhat. It would, however, be realistic and reasonable to propose increasing our productivity levels.
An elementary improvement such as providing prepared feed during the dry season would immediately put the breaks on the current 1.5 liter a day reduction in each cow’s productivity when the pastureland dries up. This improved diet would increase each cow’s annual production by 320 liters and would also mean that cows could give birth at the age of 25 months, rather than the current 36 months, and reduce the interval between births from 22 to 16 months. It would also help reduce the 12% cow mortality rate, which is excessive.
Improved selection of the milk herd could also increase yields from 4 to 16 liters. While none of this is pie in the sky, such technological improvements tend to be within the reach of the big haciendas, but currently prove almost inaccessible for small- and medium-scale cattle-raisers.
It is a similar story in other productive sectors. Shrimp cultivation has increased by 400% since the end of the contra war and currently represents a third of national fishing production. But Nicaragua has the lowest shrimp yield per hectare in all of the Americas, producing just 1,272 pounds per hectare a year against a continental average of 1,828 pounds. The limited productivity of Nicaraguan farms is mainly due to the deplorable levels of shrimp survival, which in certain farms stands at just 42%. If the model appears to work, producing fat profits for some businesspeople, it is due to the low value of the lands involved—in the form of 20-year state concessions at $30 a hectare—and the availability of very cheap labor.
Research in Nicaragua’s central regionIn Nicaragua’s case, this situation is aggravated by the influence that small- and medium-scale producers have on the economy. According to the most exhaustive survey done by the Ministry of Agriculture and Forestry in 1998, 381,000 farms are in production, of which 67% have under 7 hectares, 31% between 7 and 140 hectares and just 2% over 140 hectares.
In an attempt to create grounds for optimism, various Nicaraguan social sciences have focused on what some of them term "emerging sectors," only to discover that they could more accurately be described as divergent sectors, as they are not included in any development policies.
A study done by the Nitlapán-UCA Research and Development Institute focuses on the country’s central region (Madriz, Nueva Segovia, Estelí, Matagalpa, Boaco, Chontales, part of Jinotega, Río San Juan and the South Atlantic Autonomous Region). That area covers most of the country’s dry zone, almost all of the large coffee plantations and cattle ranches, the entire former agricultural frontier and a small part of the new one. It measures 40,000 square kilometers—almost a third of the national territory—and includes a population of 160,000 families, the equivalent of 50% of the country’s rural population.
In this region alone, peasant farmers with medium-sized farms account for 58% of producing families, own 49% of the land, generate 38% of added value and employ 65% of the zone’s agricultural laborers. In contrast, agrarian businesses, which are most favored by the current paradigm, represent only 3% of producing families, own 24% of the land and employ just 11% of the agricultural labor force. It is clear that any policy that benefits peasant farmers would have a much greater scope, with major effects on employment and income distribution. But the QWERTY effect of concentrating on agroexport haciendas keeps us stagnated.
The productive potential of this region’s agricultural properties measured by surface cultivated ($919 million) is double their current productivity ($452 million). This calculation is particularly significant as it was based only on superimposing the yield from the area’s best-cultivated lands to all land in the central region, without even considering the effects of introducing new technology or increasing the area cultivated. Realizing this potential implies bringing the average yield of these lands up to the current average for lands in Costa Rica.
The challenge is to In Nicaragua, all of the paradigms for agricultural development have ignored the majority sector represented by small- and medium-scale producers, which has never had access to improved technologies. The paradigms have responded neither to the market nor to the country’s conditions, but rather to "path dependence"—or the QWERTY economy.
raise productivity on less land
Assuming that all conditions are fixed, the models are based on supposed "comparative advantages" that have never provided an advantage for anyone but a small elite. It is worth asking what more favorable policies and better income distribution would imply for the majority sector, although the longed-for tangible improvement in their productivity would probably only come with certain technological advances.
Working with these sectors—or any other, for that matter—implies concentrating on a technological conversion that produces tangible productivity changes. Disguising their inefficiency, Nicaragua’s different development models have relied on increasing exploitation of the country’s most abundant resource: its land. This was considered an inexhaustible resource until recently, but the fertility of Nicaraguan soils has decreased and the country does not have more arable land.
We no longer benefit from natural fertility, as the land’s naturally good yields drop off after five to twenty years. Of the nation’s total pastureland, 65% is now impoverished, while we have simultaneously become more vulnerable to climatic risks because of the soil’s reduced capacity for water retention. As increasing the surface area cultivated can no longer ensure increased production, there is a need for increased productivity.
Technological advances in Nicaraguan agriculture do not necessarily imply forcing greater mechanization that displaces labor. What they do assume is transcending the QWERTY economy at all levels and employing a model that does not exalt big haciendas while overlooking small- and medium-scale producers, despite their weight in the market, or confining them to basic grains production with the same old methods. Given how far behind we are lagging, technical advances would include simply bringing a good part of the country’s idle land into production, forestry management, productive diversification, ox-drawn plows, more rational administration, summer feed for cattle, pig and chicken rearing, and crop and animal production that enables farmers to receive staggered incomes.
Locked into QWERTY and the 19th centuryThe main obstacle is continuing to do things the same way. Our problem is not that we are an agricultural country, but that we are almost exclusively agricultural and, worse yet, that we are producing almost exactly the same crops, technology and productivity as we did a century ago. Changing this paralysis requires policies that create the right atmosphere for the directional changes required. The changes cannot just be in the agricultural sector and they cannot be only short term. Changes in productivity and diversification can only be made over the longer haul and their effects will only be palpable in the long term and in the best of conditions.
Many productivity changes depend on modifying cultural patterns that are set in the collective consciousness and consecrated by tradition and thus can only be redefined through long, slow processes. For all that, we are in such a bad state—so "qwertyfied," that we also need actions that can create a fairly quick impact not just on the agricultural sector but also on the whole economy