Food processing in agricultural regions: a route to prosperity ?

Peter Pierpoint

A recent economic study indicates that the food processing sector is the key to increasing prosperity in agricultural regions.

The analysis of European Union regional data strongly suggests that agricultural regions should consider expanding the food processing sector to complement the agricultural sector, as there is a synergistic effect between food processing employment and agricultural employment - i.e. output per head is greater in those agricultural regions which enjoy a buoyant food processing sector.

A paper (Pierpoint, 1997) presented to the Annual Conference of the Agricultural Economics Society (Edinburgh, March 1997) describes a comparison between the county of Cornwall, UK and the Departement of Finistère, France. The two regions share many common socio-economic characteristics. They both enjoy a variety of links which operate in the cultural, social and economic domains. Both are located at the "land's end", as peripheral areas.

The economies of the two regions have a significant agricultural base, though the agricultural intensity of Finistère exceeds that of Cornwall. The agri-food industry- l'industrie agro-alimentaire- is more developed in Finistère than in Cornwall. Superimposed on the agricultural base is an ownership structure that includes a strong representation of a variety of forms of co-operation. The prevalence of farmer-controlled business is typical of French agriculture. Agricultural co-operation within Cornwall is, in comparison, rather limited.

Given the divergent nature of these two agricultural sub-regions and given the substantially greater prosperity enjoyed by the Bretons compared to the Cornish, the question that arises quite naturally is- what is driving this differential prosperity? What drives the divergent prosperity experienced by agricultural areas?

The approach adopted by the study was to apply the idea of the "internal colony" (Hechter, 1969). The more of an internal colony that the sub-region is, the poorer, and more exploited, that sub-region will be.

Of course agricultural regions are generally poorer, in economic terms, than more industrialised regions. Employment in the agricultural sector is often used as an indicator of economic underdevelopment because the agricultural sector appears to be relatively unproductive in the generation of value-added. The economically strong areas tend to have a well-established manufacturing sector. In spite of specific EU regional aid, an agricultural area may remain poor because the support does not penetrate the value-adding processing sector. Regions with higher levels of agricultural employment tend to have a lower level of GDP per head than the more industrial-service oriented regions. If, however, the agricultural region can break out of the colonial relationship and develop its food processing activity, then it can enjoy the benefits of the value-adding activity and thence experience a higher GDP per head.

Food processing is shown unambiguously to be a good thing for the agricultural region. The implication for institutions charged with fostering regional economic development in agricultural regions is that they might seriously consider using the development of the food processing sector as a lever on regional. Agricultural regions will do well to encourage, facilitate, even subsidise, food processing activity within their domain.

This is not to say that other initiatives would be unrewarding but rather that the food processing sector, being rooted in indigenous output, might more readily be stimulated.

References

Peter Pierpoint

Plymouth Business School, UK
University of Plymouth
Plymouth PL1 8AA
UK

Email: p.pierpoint@pbs.ac.uk


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