The Brookings Institution originally published this article.
Not a week goes by without news of digital disruption in traditional industries and sectors. We’ve already seen long-standing business models from taxis to hotels upended, and we’ve got to wonder where this will take the world’s oldest industry — agriculture. We urgently need to rethink public policy interventions to help countries navigate opportunities and challenges linked to digital advances in the food economy.
The promise of digital disruption in agriculture is enormous. Producing food and fiber is a data- and capital-intensive business. On the data side, a farmer’s feel for how to combine seeds, soil, water and weather can now be complemented by mobile-phone-based extension services, remote sensing data and artificial intelligence. On the capital side, the “sharing economy” creates amazing new opportunities for the optimal deployment of capital assets — tractors are agriculture’s Ubers and grain elevators are its Airbnbs. Advances in fintech are changing traditional land-based collateralization models and mobile banking is putting access right into farmers’ pockets.
Arguably, what is happening to product and factor markets is even more disruptive than what is happening on the farm. The race is on to streamline a hugely complex food system that relies on multiple upstream and downstream intermediaries and industries to match the world’s 570 million farmers with its soon-to-be 8 billion consumers. The complexity is being simplified as technologies such as blockchain improve traceability from the farm to fork and e-commerce platforms facilitate direct linkages between producers and consumers.
Digital disruption is occurring at a time when food systems are evolving under the pressure of rising incomes, changing consumption patterns, and the emergence of more business-oriented small- and medium-scale farmers. Add to the mix shifting climatic patterns, alternative proteins and genetic editing breakthroughs, and it’s easy to feel both excited and overwhelmed. Looking at digital impacts through a development economics lens may be a good place to start disentangling promise from peril and designing appropriate policy innovations.
Digital technologies disrupt the level and allocation of physical, human and natural capital. While the impacts on efficiency are expected to be mostly positive, the impacts on equity and environment are not as clear-cut. They require a more careful assessment. For example, will the digital transformation of the food system create new jobs or destroy them? Will data generated by food producers and consumers be used to improve the sharing of economic benefits or will information be captured by a few powerful players? On the environment, will precision technologies lead to a sound use of natural resources or will they instead accelerate their depletion?
Experience shows progress is not linear and change often brings unintended consequences: Agriculture is keeping pace with global population growth but it now generates an enormous amount of environmental degradation. The modern food system is also contributing to a public health crisis fueled by cheap calories and lack of diversity: Poor diets are now a leading cause of premature death.
The World Bank is embarking on a study on digital disruption of agriculture and food to ask hard questions about the role of public policy in maximizing potential gains in efficiency, equity and sustainability.
Juergen Voegele is senior director of food and agriculture global practices at The World Bank. The original and complete version of this article appears on the Brookings Institution website at this link: https://brook.gs/2qHkW2N