Despite accelerating economic growth in India over the last thirty years, India’s structural transformation remains stunted, said economist Hans Binswanger-Mkhize at a May 10 FSE symposium on global food policy and food security. Unlike China, urban migration and labor absorption have been slower than expected, especially in the typically labor-intensive manufacturing sector. Formal sector jobs are few and declining as a share of employment, and agricultural employment (and growth) remains low.

The rural non-farm sector has been left to pick up the slack, and has emerged as the largest source of new jobs in the Indian economy. This will likely remain so over the next few decades given that two-thirds of India’s growing population is projected to live in rural areas. Add to the equation the need to increase crop yields by 50 percent under changing climate conditions and it becomes apparent that improving rural incomes and supporting agricultural growth is essential to decreasing poverty and unemployment in India now and in the future.

“The importance of India's rural non-farm sector shows us that structural transformation does not follow a recipe,” said commentator Marianne Banziger, a senior scientist at the International Maize and Wheat Improvement Center (CIMMYT) in Mexico.

While non-farm jobs offer significantly higher wages than farm labor, most jobs are informal and/or insecure (i.e., no health benefits, unemployment insurance or pensions). These jobs go mostly to men 18-26 years old who have some education, while the illiterate and women struggle to transition into this sector. Retail trade and transport, construction, and services (internet and phone booths, maintenance and repair of motor vehicles, and hotels and restaurants) are growing especially fast, partly due to urban-rural spillovers, but manufacturing is still only 20 percent of non-farm jobs.

“For rural households, non-farm employment is not distress employment, but a profitable diversification strategy,” said Binswanger-Mkhize. “At the same time, it has selectively absorbed young males into wage employment, decreased the number of farmers, and increasingly concentrated women in agriculture, contributing to a progressive feminization of agriculture.” 

As a result, farms on average have declined in both land and household size, and have moved toward the production of higher-valued goods and a modern model of part-time farming. This transformation concerned Banziger.

“Will the urban and land-less poor be held hostage by part-time farmers?” she asked.

Banziger projects in the next 20 years food and energy price inflation will likely exceed the income growth of the urban poor. Food price increases will push net consumers, who spend a third of their income on food staples, back into poverty.

“For food prices to remain constant, farmers yield gains will have to increase by 50 percent on essentially the same land area, with less water, nutrients, energy, labor and as climate changes,” said Banziger. "The more we delay investments, the steeper the challenge.”

Fortunately, small farmers are now better equipped to respond to these challenges, but are still limited by scale. Precision irrigation and fertilization technology coupled with remote sensing and cell phone technology enable better yield predictions that affect nutrient application. Better farm-level nutrient management increases farmer income and nutrient use efficiency.

For an optimistic Indian future to be realized government policy must support ways in which households increase their incomes, said Binswanger-Mkhize. A positive outcome for rural areas depends on continued urban spillovers, and on better agriculture and rural development policies, institutions, and programs.

Productivity growth needs to be sustained at very high levels. This requires more responsive, accountable, and better-financed research systems, more diversification of agriculture, and larger, better financed, and more accountable agricultural extension system. India currently employs one-seventh the number of extension workers as China.

"Rapid policy and institutional change will be required to overcome poor performance of many government programs," said Binswanger-Mkhize. "Current subsidies to fertilizer, electricity, water, and support to crop prices are already large, but are an inefficient means to transfer income to farmers."

Direct payments may be a more efficient way of supporting income growth. This is beginning to happen with fertilizers, but should be extended to electricity and food subsidies, said Binswanger-Mkhize.

“Maybe the people who have been disadvantaged in the past are the core for future change. With appropriate support, smallholder farmers can become the engines for agricultural productivity growth and transform India's growing economy,” concluded Banziger. 

At a ceremony at the Harvard Faculty Club on May 23, 2012, the Centennial Medal — the highest honor awarded by Harvard University’s Graduate School of Arts and Sciences — was given to Karl Eikenberry, the Payne Distinguished Lecturer at the Freeman Spogli Institute for International Studies at Stanford University.

The Centennial Medal is awarded each year to a select group of Harvard University’s most accomplished alumni. Centennial Medalists are Graduate School alumni who have made fundamental and lasting contributions to knowledge, to their disciplines, to their colleagues, and to the world at large. The medal was first awarded in June 1989, on the occasion of the 100th anniversary of the founding of the Graduate School of Arts and Sciences.

At the award ceremony, the Graduate School’s interim dean, Richard J. Tarrant, read a testimonial to Eikenberry’s accomplishments and leadership. Following is a slightly condensed version of that testimonial. 

The Soldier-Statesman: Karl Eikenberry, AM ’81, regional studies–East Asia

Karl Eikenberry, who served as US ambassador to Afghanistan from 2009 to 2011, is the “very model of a modern soldier-statesman,” says Graham Allison, the Douglas Dillon Professor of Government at the Harvard Kennedy School, with a nod to Gilbert and Sullivan.

Eikenberry, a graduate of the US Military Academy at West Point, is now the Payne Distinguished Lecturer at the Freeman Spogli Institute for International Studies at Stanford. He had a 35-year career in the Army, retiring as lieutenant general in 2009 when President Obama tapped him to lead the diplomatic mission in Afghanistan.

His involvement with that country has been long and deep. Prior to becoming ambassador, he was deputy chairman of the NATO Military Committee in Brussels, where he was heavily involved in the mission in Afghanistan, and regularly traveled there. From 2005 to 2007, he guided military efforts on the ground as commander of US-led coalition forces, and earlier, he served as US security coordinator and chief of the Office of Military Cooperation in Kabul, where he aided efforts to establish and strengthen the Afghan army and police force. “Karl was given extremely difficult assignments in Afghanistan,” says his Harvard mentor Ezra Vogel, the Henry Ford II Professor of the Social Sciences, Emeritus. “He has, under trying circumstances, provided assistance to the Afghan government and Afghan people and leadership to Americans in Afghanistan.”

Over the course of his career, Eikenberry served in key strategy, policy, and political-military positions, including as director of strategic planning and policy for the U.S. Pacific Command in Hawaii, as defense attaché at the United States Embassy in Beijing, and as the Defense Department’s senior country director for China, Taiwan, Hong Kong, and Mongolia.

In addition to his master’s degree from Harvard, Eikenberry was a National Security Fellow at the Kennedy School. He earned a second master’s in political science from Stanford, and he has an advanced degree in Chinese history from Nanjing University in China. His wide curiosity and astute grasp of the history and culture of the Far East, the Middle East, and international politics are revealed in his numerous articles on military training and tactics, history, and Asia-Pacific security issues. When he was appointed ambassador, Admiral Mike Mullen, the former chairman of the Joint Chiefs of Staff, said that it was “Karl’s experience as a soldier-scholar” that would prove crucial to fostering the kind of strong civil-military relationship required to enable good governance to take root and hold. Mullen added, “He knows the enemy, he knows our allies, and he knows himself.”

Since leaving Afghanistan, Eikenberry has written and spoken about the ethical dilemmas of war, political use and misuse of military deployment, and the need for military accountability. He has also become a leading voice in a conversation about the relationship between the economy and our national security.

“Integrity, service, honor, commitment, decency, intelligence. Karl Eikenberry embodies what it means to be an American patriot,” says Stephen Krasner, the Graham H. Stuart Professor of International Relations at Stanford. Indeed, Eikenberry’s service and achievements have earned him the highest military and diplomatic honors, including the Defense Distinguished Service Medal, the Defense Superior Service Medal, the Legion of Merit, and the Bronze Star.  
 

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Li is interested in the design of macroeconomic policies that mitigate financial frictions in firm investments. Her current research focuses on quantifying the cost of resolving insolvent firms and its impact on aggregate output in China and Japan.

Prior to coming to Stanford, Li was a Japanese Government Scholarship holder, and graduated with a BA and an MA in economics from the University of Tokyo.  

Xiaojun Li

Xiaojun Li, a Stanford predoctoral candidate in political science, is the inaugural recipient of a grant from the John and Jackie Lewis Fund to Support Research on Asia.

Xiaojun, whose Ph.D. dissertation chair is Jean Oi, a senior fellow at the Freeman Spogli Institute and director of the Stanford China Program, will use the $1,000 travel grant to present a paper on trade protection in China at a conference in Hong Kong, and a second paper on environmental controls and clean technology at private and state-run companies at a conference in Beijing.

The John and Jackie Lewis Fund was established to recognize the intellectual and moral support they have provided to students from Asia.  John Lewis is the William Haas Professor of Chinese Politics, emeritus, an FSI senior fellow by courtesy, as well as the co-founder of the Center for International Security and Cooperation. He is considered one of the world’s foremost experts on Chinese politics and U.S.-China relations. 

On May 18, 2012, the Pentagon released its annual report about the People’s Republic of China’s (PRC) recent military developments. The PRC Ministry of Defense has sharply criticized the report, saying it portrays China as rapidly building up its military for non-defense purposes.

Military strength is only one part of the national security strategies of both countries and stable U.S.-China relations are an important factor for the overall peace and prosperity of the Asia-Pacific region, said Karl Eikenberry during the annual Oksenberg lecture, held May 14 at Stanford.Eikenberry, FSI’s Payne Distinguished Lecturer and a Shorenstein APARC affiliate, discussed key factors shaping China’s national security strategy and corresponding developments in the People’s Liberation Army (PLA); constraints on China’s military capabilities; and implications of China’s economic and political growth for U.S. defense strategy.

In his opening remarks, Eikenberry, who served as U.S. ambassador to Afghanistan from 2009 to 2011 and whose distinguished military career included three decades of significant China experience, described Shorenstein APARC senior fellow Michel Oksenberg’s passionate commitment to teaching Stanford students about China. The annual lecture, established by Shorenstein APARC in 2002, honors the memory of Oksenberg’s academic career and the major role he played in normalizing and strengthening U.S.-China relations.

The key drivers behind the PRC’s current national security strategy, Eikenberry said, include preserving the legitimacy and power of the Chinese Communist Party (CCP), resolving territorial and sovereignty issues, and maintaining China’s rapid economic growth. The PLA, which has watched its budget grow at an annual rate of 10 percent nearly every single year since 1989, exists to support the goals of the CCP. Its own tasks are, in turn, driven by the most urgent needs of the CCP, including protecting China’s economic and territorial interests in the Asia-Pacific region, bringing it into potential conflict with the United States. A major goal of the PLA at present, Eikenberry said, is to develop its technological capabilities, in areas such as space and naval defense, to prevail in regional conflicts if peaceful resolution is not possible. He said China’s immediate motive, however, is less about driving the United States out of the Asia-Pacific as it is about reconfiguring the region’s—and the overall U.S.—power paradigm, which has remained unchanged since World War Two.

China’s defense budget is second in the world only to the United States—approximately 1.3 percent of the country’s GDP—but it faces several potential challenges to its continued rapid expansion and operational capabilities, Eikenberry said. Maintaining economic growth and social stability are likely to tax the CCP in the coming years, he said, and domestic security concerns could constrain the pace of Chinese defense modernization. In addition, issues within the PLA itself, such as corruption and the over-centralization of its command, could hold China’s military capabilities back. 

Eikenberry concluded his remarks with thoughts on how the United States should respond to China’s “rise” and increasing military strength. An important first step, he said, is to address U.S. domestic issues, including balancing the national budget while still allowing significant resources for military R&D and personnel training. Eikenberry also advocated supporting regional and global institutions, both economic and security oriented, in which China can participate as a responsible stakeholder. He further stressed the importance of improved engagement with U.S. regional allies. Finally, he emphasized the significance of developing processes of dialogue for avoiding and managing future conflicts between the United States and China.

Eikenberry’s remarks were followed by a lively question-and-answer session with the audience, which included numerous China experts from the Stanford community, students, and members of the general public.

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The latest summer 2012 issue of Stanford Social Innovation Review highlights how REAP leverages its research and global partnerships to influence government policy.

To read the full article, click here.