In the latter part of the 20th century, Ethiopia was afflicted by political upheaval, civil conflict, and severe drought, cumulating in a devastating famine that claimed at least 400,000 lives in 1984–1985 (de Waal, 1997), but since the mid-1990s, Ethiopia has achieved one of the fastest economic growth rates in the world.

Ethiopia has characterized its new economic policy as “agricultural development-led industrialization,” which puts an emphasis on raising the productivity of smallholder farmers in order to improve food security and generate broadly shared income gains. The result: between 1993 and 2018, agricultural output more than tripled, with growth averaging more than 5 percent per year over these 25 years (Figure 5). About two-thirds of this growth came from expanding land in farms and the use of other inputs and about one-third from productivity gains: agricultural TFP grew at an annual rate of 1.6 percent over these years, according to the United States Department of Agriculture Economic Research Service (USDA-ERS) estimates. This acceleration in agricultural and economic growth greatly improved the livelihoods of millions. By 2015, the share of the Ethiopian population subsisting on less than US$1.90/day had been cut in half, falling to 31 percent from 71 percent in 1995; the fraction of children under age five suffering from stunting fell from 67 percent in 1992 in to 37 percent in 2019.

Asian and African countries that achieved high rates of agricultural productivity growth (e.g., Ghana, Ethiopia, Bangladesh, and Thailand) all show the importance of effective local agricultural research, development, and extension (R&D&E)

Ethiopia’s “agricultural development-led industrialization” involved a strong role for the state in guiding agricultural and rural investment together with gradual liberalization of the market economy. Dorosh & Rashid (2012) identified several policies that have been especially important to Ethiopia’s success in agriculture: (1) liberalizing agricultural markets; (2) investing in agricultural research and extension; (3) building rural transportation infrastructure; (4) establishing an effective social safety net; and (5) providing macroeconomic stability. These policies encouraged farmers to adopt new crops and improved crop varieties, increase use of fertilizers and other modern inputs, invest in land improvement, and access markets with emerging farm surpluses.

The costs of Ethiopia’s agriculture-led development strategy have not been insubstantial. Total spending on agriculture by the Ethiopian government between 2001 and 2017 was US$7.19 billion, or 9.4 percent of total government expenditures (FAO, 2020).

Ethiopia is one of the few African countries to substantially increase its spending on public agricultural research, which has more than tripled in real terms, from less than US$50 million per year in the 1990s to US$162 million in 2016 (constant 2011 prices: Agricultural Science and Technology Indicators Database [ASTI], 2020). During 2001–2017, foreign donors also committed US$5.63 billion to Ethiopia in development flows for agriculture, agro-industry, and rural development, and another US$9.78 billion in food and nutrition assistance (FAO, 2020), but these commitments paid off. Between 2001–2019, annual agricultural value-added increased from US$7.76 billion to US$21.7 billion. The cumulative value of the growth over 2001 levels in agricultural value-added over these years was US$113 billion. The increase in agricultural value-added, which raised farm incomes, in turn generated demand for non-farm goods and services. Diao et al. (2007) estimated that each US$1 of agricultural value-added in the Ethiopian economy generates an additional US$0.29 in non-farm GDP.

Although spending on agricultural research has increased, it is still small relative to the size of Ethiopia’s agriculture sector (R&D spending is less than 0.3 percent of agricultural value-added), and scientific capacity is underdeveloped, with fewer than 8 percent of research staff having PhD degrees, compared with about 30 percent on average for agricultural research systems in SSA countries (ASTI, 2020). Importantly, productivity improvement will need to move beyond crops and include Ethiopia’s large livestock sector.

The experience of Ethiopia proves that with strong political resolve, even the poorest and most shock-prone countries of the world can make huge strides to make their people more resilient and self-reliant. Along this growth trajectory, there will be inevitable shocks that require humanitarian assistance. However, the impact of these shocks should be progressively mitigated as countries become more resilient and self-reliant. An agricultural productivity-led growth strategy can help countries progress along this path.

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