An Urban's Rural View

China, China, China. Stop yapping about China, I sometimes think I hear Americans cursing under their breath. People tire of hearing how China could surpass the U.S. as the world's reigning superpower, how the Chinese are optimistic about the future while we're gloomy, how their infrastructure is shiny new even as ours crumbles.

And yet for farmers it's hard to ignore a country with a fifth of the world's population, a fast-growing economy and a propensity to import agricultural commodities. China is, along with ethanol, the difference between $2 corn and $7 corn, between $5 soybeans and $13 soybeans.

It's especially hard to ignore China when we're hearing warnings that economic growth there could slow dramatically soon, undermining that propensity to import what we grow.

One of the most interesting warnings has an agricultural motif. China, these doomsayers say, faces higher wages and slower productivity growth because most of the young farm boys and girls who could migrate to the city already have.

Peter Orszag, a Citigroup executive and former Obama administration budget director, has an interesting Bloomberg column (http://tiny.cc/…) summarizing the latest research on the issue. The most pessimistic researchers say China has reached its so-called Lewis turning point, a moment in time, named after a Nobel-winning economist, when moving workers from agriculture to manufacturing no longer stimulates economic growth.

As evidence that the Lewis point has arrived, Orszag notes that Chinese wages are rising, vacancies outnumber job candidates in many cities, migration rates from the countryside are falling and recent migrants are on average older than earlier ones.

"In 1978, agriculture accounted for 69 percent of total employment in China," Orszag writes. "And because average labor productivity outside agriculture was six times as much as inside it, shifting workers across the sectors generated huge productivity gains. By 2007, however, agriculture accounted for only 26 percent of total employment."

Of course, as Orszag admits, other economists think China is nowhere near exhausting its potential to bring farmers to the city. He cites as the middle-ground position the estimate of the International Monetary Fund that China's Lewis point will arrive between 2020 and 2025.

Still others think the Lewis moment isn't the key question. According to the Wall Street Journal (http://tiny.cc/…), Nick Lardy, a China expert who spoke at our DTN/The Progressive Farmer Ag Summit last year, thinks China can sustain economic growth at around 8% a year if it makes far-reaching financial reforms. Otherwise he sees growth dropping to close to 5% annually.

In the U.S., farm families make up a little more than 2% of the population. If China is anything like the U.S. it will send many more people to the cities and today's Lewis-point optimists will turn out to have been right.

Still, it's interesting to contemplate the possibility that American farmers could be the poorer because fewer Chinese farmers abandoned the farm.

Urban Lehner

urbanity@hotmail.com

(CZ)

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