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NEW TRENDS IN DEVELOPMENT THINKING
AND IMPLICATIONS FOR AGRICULTURE

Simon Maxwell
Robin Heber Percy


Simon Maxwell is Director of and Robin Heber Percy a Research Assistant at the Overseas Development Institue, London.





1. INTRODUCTION

The food, agriculture and rural development sectors (FARD) have a symbiotic relationship with development more generally, providing livelihoods for poor people in rural areas, but also contributing foreign exchange, food for the cities, raw materials, a market for industry, and an investible surplus for the country as a whole. By the same token, thinking about FARD has had a symbiotic relationship with wider thinking about development, contributing many ideas about growth, distribution, and poverty reduction, and also receiving many ideas in return. These relationships justify attention to context in a volume dealing with future priorities for research in food, agriculture and rural development.

In tackling context, the paper deals mainly with thinking about development, rather than with changes in the objective reality confronting the FARD sectors. However, a small deck-clearing operation examines whether the changes experienced and to come constitute slow trends or substantial discontinuities. Beyond that, the paper identifies a current conventional wisdom on FARD and then tests it against themes in current thinking about development. From a long list of candidates, the paper focuses particularly on thinking about

  1. poverty, social exclusion and sustainable livelihoods,
  2. globalization,
  3. the `post-Washington Consensus', and
  4. aid.

The paper ends with a summary of the implications for economic and policy research in the FARD sectors.


2. DECK-CLEARING: TRENDS OR DISCONTINUITIES?

In 1963, Dudley Seers wrote "The Limitations of the Special Case", a paper which effectively launched the profession of development studies. He argued that most economic policy-making was derived from the experience of a small number of rich countries, which, in global terms, constituted an unrepresentative special case. He identified twenty features of this special case, relating to factors of production, sectors of the economy, public finance, foreign trade, households, savings and investment, and dynamic influences. The factors are listed in Table 1. The implication is that in the rest of the world, in other words in developing countries, these conditions do not apply.


TABLE 1
Characteristic features of the special case

I.

Factors of Production

a.

Labour

Literate and mobile, mostly in employment: highly organized; racial, religious and linguistic differences not sufficienty important to break up the labour supply; substantial quantities of skilled and professional workers.

   

b.

Land

Most available land cultivated, and by private owners (or farmers with secure leaseholds) in plots of economic size.

   

c.

Capital

All sectors heavily capitalized, with spare capacity; integrated and comprehensive systems of transport and power.

   

d.

Enterprise

A wide field from which entrepreneurs can be drawn, and a favourable climate for enterprise; firm legal basis for corporations.

II.

Sectors of the Economy

a.

Agriculture

Wholly commercial, and flexible in response to price changes or technical advances; foreign ownership rare; extensive marketing network for foods.

   

b.

Mining

Of limited size and in the hands of local firms.

   

c.

Manufacturing

Diversified, with a large metal-using industry producing (inter alia) machinery and vehicles; some areas of competition.

   

d.

Overall

Manufacturing much larger than either agriculture or mining; natural resources adequately surveyed.

III.

Public Finance

a.

Revenue

Strong reliance on direct taxes relative to import or export duties; tax laws enforceable.

   

b.

Expenditure

Includes big layouts on social security and agricultural subsidies; realtively little on public works.

IV.

Foreign Trade

a.

Exports

Consist of several products for which there is a a large internal market; and for which price and income elasticities are fairly high; export prices determined by local costs and stable; exports sold to many countries.

   

b.

Imports

Consist largely of primary products (some of which are also produced domestically) which come from many countries, and for which the income elasticity of demand is not high.

   

c.

Capital

Long-term capital flows and profit remittances of secondary importance.

V.

Households

a.

Income

Distribution moderately equal (post-tax); very few living at subsistence level.

   

b.

Expenditure

Food not overwhelmingly important; standardisation and mass production possible, because of equal distribution of income, national promotion and homogeneity of tastes; prestige of local manufacturers high.

VI.

Savings and Investment

a.

Savings

Mobilized by a capital market, comprising a stock exchange, a bond market and an extensive nationally owned banking system, with a central bank and a managed currency; personal savings significant.

   

b.

Investment

High (probably over 20 percent of GDP); but import level low.

VII.

Dynamic Influences

a.

Trade

No chronic tendency to deficit because of income elasticities (see above)

   

b.

Population

Growth of population slow (less than 2 percent a year), and urbanisation relatively moderate.

   

c.

Aspirations

Envy of foreign living standards not high or spreading as a cause of discontent.

Source: Seers, 1993

It takes only a casual look at Table 1 to realize that, whatever the merits of this list might have been in 1963, it does not provide a good basis for differentiating countries forty years on. For example, land is increasingly scarce in developing country agriculture, farming is increasingly commercialized, and major changes have taken place in the size, composition and skill level of the labour force. Further, the share of agriculture in the economy has shrunk in most cases.

Table 2 illustrates changes in

  1. agriculture as a share of GDP,
  2. the share of the labour force in agriculture,
  3. the importance of the urban population,
  4. the illiteracy rate, and
  5. other primary commodities as a share of merchandise exports, for the main developing country regions and for the world as a whole, for the period from the 1960s through the 1990s.

The figures show considerable variation among developing country regions. However, the contribution of agriculture has fallen sharply everywhere, by close to half in South Asia and by more than half in East Asia. The share of the labour force employed in agriculture has fallen. The urban population has increased. The literacy level has increased. And the share of exports accounted for by agricultural commodities has fallen, by as much as three quarters in East Asia, and by over half in South Asia. Sub-Saharan Africa is always presented as an exception in this kind of analysis. Even here, however, the share of agriculture in GDP and exports has fallen by over a quarter, and the share of the population living in urban areas has more than doubled.


TABLE 2
Main changes for FARD Sectors

(a) Agriculture, value added (% GDP)

1965

1970

1980

1990

1997

Sub Saharan Africa

24

21

18

18

18

South Asia

43

43

37

30

25

East Asia and the Pacific

39

35

28

24

18

Latin America and the Caribbean

17

12

10

9

8

Europe and Central Asia

-

-

-

17

12

World

11

91

66

56

-

(b) Labour force in agriculture (% of total)

1960

1970

1980

1990

Sub Saharan Africa

82

78

72

68

South Asia

75

71

69

63

East Asia & Pacific

82

76

72

69

Latin America and the Caribbean

48

41

34

25

Europe and Central Asia

46

33

27

23

World

61

55

52

49

(c) Urban Population (% of total)

1960

1970

1980

1990

1997

Sub Saharan Africa

14

19

23

28

32

South Asia

17

19

22

25

27

East Asia and the Pacific

17

19

21

28

33

Latin American and the Caribbean

49

57

65

71

74

Europe and Central Asia

45

52

59

63

66

World

34

37

39

43

46

(d) Illiteracy Rate, adult total (% of people 15 and above)

1970

1980

1990

1997

Sub Saharan Africa

71

61

50

42

South Asia

68

61

54

49

East Asia and the Pacific

45

31

20

16

Latin America and the Caribbean

26

20

15

13

Europe and Central Asia

11

7

6

4

World

46

37

30

26

(e) Other primary commodities (% share of merchandise exports )

1965

1970

1988

1992

Sub Saharan Africa

58

46

38

32

South Asia

57

44

24

21

East Asia and the Pacific

58

45

16

15

Latin America and the Caribbean

50

45

29

30

World

27

20

14

13

Source: World Bank: World Development Indicators

Other changes are less easily measured by internationally comparable statistics: successive waves of technical change, the alleged decline of the peasantry (Bryceson 2000), the growth in the relative importance of non-farm incomes in rural areas (Ellis 1998), the development of agribusiness, the spread of conflict. Work by FAO (Alexandratos 1995) and others (e.g. Pinstrup-Andersen et al., 1999) project substantial further changes by 2020. The picture will vary from region to region, and substantially within regions. However, it may not be fanciful to suggest that future FARD research priorities should take account of the probability that:

These features may be the result of long-term trends rather than sharp discontinuities, but on the aggregate they generate a development `problematique' in rural areas sharply different to that laid down in 1963.


3. IS THERE A CURRENT CONSENSUS ON FARD?

Has thinking about FARD kept up? The basic scaffolding of thinking about these sectors in developing countries was laid down at about the same time as Dudley Seers' work on the limitations of the special case. Johnston and Mellor (1961) re-invented a role for agriculture and built the scaffolding which is still in use today. They argued that agriculture could provide labour, capital, foreign exchange and food to the industrial sector, and could also supply a market for industry (both consumption goods and production inputs).


TABLE 3
The evolution of thinking about agriculture, 1950s - 1990s

Period

Dominant Development Paradigm

Agricultural Strategy

1950s

Growth through Industrialization

Community Development

1960s

Growth through industry and agriculture

Green Revolution

1970s

Redistribution with growth and basic needs

Integrated Rural Development

1980s

Structural Adjustment

NGOs/Emergency Relief

1990s

Poverty Reduction

Small scale credit/linking relief and development/sustainable livelihoods/participation

Source: Maxwell 1998

TABLE 4
FAO World Food Summit: themes and commitments

Commitment

Theme(s)

Ensure an enabling political, social and economic environment designed to create the best conditions for the eradication of poverty eradication and for durable peace based on full and equal participation of men and women which is most conducive to achieving sustainable food security for all.

Poverty Eradication
Gender Awareness
Sustainability
Political and Social Factors

Policies to eradicate poverty and inequality and improve physical and economic access, by all, at all times, to sufficient, nutritionally adequate and safe food and its effective utilisation.

Poverty Eradication
Food Security

Pursue participatory and sustainable food, agriculture, fisheries, forestry and rural development policies and practices in high and low potential areas, which are essential to adequate and reliable food supplies at the HH, national, regional and global level, and combat pests, drought, and desertification, considering the multifunctional character of agriculture.

Participation
Sustainable Resource Use.
Physical Heterogeneity
Risk Management

Ensure food, agricultural trade and overall trade policies are conducive to fostering food security for all through a fair and market-orientated world trade system.

Role of Market
Trade Liberalization

Prevent and be prepared for natural disasters and man made emergencies and to meet transitory and emergency food requirements in ways that encourage recovery, rehabilitation, development and a capacity to satisfy future needs.

Risk Management
Relief and Development

Promote optimal allocation and use of private and public investments to foster human resources, sustainable food, agriculture, fisheries, and forestry systems, and rural development, in high and low potential areas.

Role of Private Sector
Sustainability
Physical Heterogeneity

Source: Compiled from FAO World Food Summit 1996

The balance between these different objectives has changed over time, however. As Table 3 illustrates, thinking about appropriate agricultural strategies has evolved in harness with the evolution of the dominant development paradigm. Development thinking in the 1950s concentrated on growth through industrialization, with a parallel emphasis in the rural sector on community development. In the 1960s, stimulated by new thinking, but also by the technical breakthrough of the green revolution, production increases became the most important objective. In the 1970s, corresponding to a dominant development paradigm concerned with redistribution with growth and basic needs, thinking on agriculture shifted to livelihood objectives; integrated rural development became the key intervention. In the 1980s, stimulated by the need to tackle fiscal and external imbalances partly associated with the 1979 oil shock, structural adjustment models predominated; in the rural sector, integrated rural development gave way to disengagement, with a focus on NGO activity and emergency relief.

Finally, in the 1990s, especially following the publication of the World Bank's World Development Report for 1990 and UNDP's Human Development Report in the same year, poverty reduction was re-established as the overarching priority. This was associated with development of sustainable livelihood approaches, and with a variety of interventions targeted towards small-scale producers, for example micro-credit. Participation also rose up the agenda.

Obviously, there is again considerable variation within regions. In particular, South Asia was spared the effects of the debt crisis in the 1980s. India, for example did not initiate the kind of liberalization programme associated with structural adjustment until the early 1990s, and retained a strong set of rural development programmes throughout.

Where, then, do we stand at the beginning of the new century, in terms of thinking about the FARD sectors? From an FAO perspective, the best statement of current conventional wisdom remains the Declaration and Plan of Action adopted at the World Food Summit in 1996. This provides both a statement of vision and a programming framework. The main elements are summarized in Table 4. The Summit was notable for its identification of `food security' as the principal objective, defined as existing when `all people at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life'. (FAO, 1996: para 1). This is consistent with a poverty focus. The Summit went on to define six key commitments, covering : enabling environment for agricultural development; poverty reduction policies; policies for sustainable food, agricultural and rural development; a fair and market-orientated world trade system; preparedness for natural disasters; and a commitment to work with the private sector. A seventh commitment was to monitor and follow up the recommendations of the Summit, which has resulted inter alia in the development of a food insecurity and vulnerability information and mapping systems (FIVIMS) (FAO 1999, 2000).

Other agencies have also developed a conventional wisdom on FARD. Maxwell (1998) has described a `Washington Consensus', linking the independent work of the World Bank and the International Food Policy Research Institute. For example, the World Bank's strategy paper on rural development (currently under review) tackles the question region by region, and makes the following statement about Africa:

Goal

Real agricultural growth of at least 4% annually, through improved technology and increased productivity, focusing on impact crops.

Strategic interventions

Improving the welfare of the rural population will involve:

  1. supporting investments in agriculture, rural infrastructure, human health, and education;
  2. ensuring that agriculture evolves into a business activity in an enabling environment;
  3. providing economic opportunities that promote entrepreneurship and encourage investments; and
  4. improving quality of life by making households self-sufficient in basic needs (World Bank 1997b: 116-117).'

The emphasis here on a competitive, market-oriented agricultural sector is echoed in a recent paper by IFPRI, which sets out seven elements of a paradigm for agriculture and rural development, as follows (Bathrick 1998):

Putting these various statements of the conventional wisdom together, it is clear that an accommodation has been found between the pre-eminence of a poverty reduction objective and the legacy of a neo-liberal, market-oriented economic model. Growth is regarded as essential, the private sector will be the main engine of development, government will provide strategic policy and investment support for infrastructure, service delivery and marketing, participation will be encouraged (perhaps more in some models than others), and safety nets will be provided.

The question then is whether this roughly-hewn consensus is robust, or whether further changes are required. In particular, can thinking about the future of the FARD sectors draw on current debates in other sectors? A related question, not addressed here, but of some practical importance, is whether the conventional wisdom is carried through into policy. For example, the decline in funding for agriculture and rural development is notable.


4. CURRENT THEMES IN DEVELOPMENT THINKING


Poverty, social exclusion and sustainable livelihoods

A good place to start is with thinking on poverty and related matters, which currently dominates the development agenda. The model of food security embodied in the plan of action of the World Food Summit approximates a model of poverty (or absence of poverty), particularly with its emphasis on access, managing risk, participation, and gender equity; it represents a substantial advance on earlier definitions which concentrated on food production (Maxwell 1996). Much of the new thinking stems from work on rural development, for example on livelihoods. However, are there insights from the current debate on poverty that can help take the model forward?

Many themes in the recent poverty debate are familiar: the human development emphasis, derived from work by Amartya Sen on capability and functioning (Sen 1985, UNDP 1990, 1997), the focus on vulnerability (Chambers 1983, 1989), and a new emphasis on social participation, institutions and social capital (World Bank 2000). Comparing current thinking with that of even the recent past, there is:

A new twist was given to the poverty debate by the publication of the World Bank World Development Report for 2000/1, "Attacking Poverty" (World Bank 2000). The last major World Bank report on poverty, in 1990, defined poverty largely in income and consumption terms, and promoted a strategy for the reduction of poverty involving labour intensive growth, human capital development, and (with less emphasis) social safety nets. The new report takes a much broader view of poverty, closer in its essentials to a human development perspective; and advocates a three-legged strategy based on

  1. opportunity,
  2. empowerment, and
  3. security

Comparing this strategy with that proposed in 1990, security is now given greater prominence, and empowerment features for the first time. This is a substantial change. The recommendations remain controversial, however. Recent work by Dollar and Kraay (2000) is said to show that growth remains the best route to poverty reduction. Others, more concerned with distribution questions (Hanmer and Naschold 2000), disagree (White and Anderson 2000): high Gini coefficients have a substantial impact on the poverty elasticity (the reduction in poverty associated with a given amount of growth); and, given what is known about likely future growth rates, redistribution will be essential to reach poverty reduction targets.


FIGURE 1
DFID's sustainable livelihoods framework

Source: Ashley and Carney (1999)

Four other recent developments are worth noting. First, conceptual work on sustainable livelihoods codifies and develops earlier work on livelihoods and on asset vulnerability (e.g. Chambers 1989, 1997, Scoones 1998, Moser 1998, Carney 1998), leading to the kind of diagrammatic representation in Figure 1.

In the livelihoods framework, outcomes are specified in terms of income, but also in terms of `wellbeing and reduced vulnerability'. Importantly, livelihoods are seen as being derived from a set of assets, particularly five kinds of capital: human, natural, financial, social and physical.

Secondly, there has been important work on social exclusion, which helps particularly to conceptualize the causes of poverty. Most of the thinking here has been in the North, but the concept of social exclusion has also been applied in developing countries, particularly through the work of ILO (Gore and Figeuiredo,1997). A useful current definition is:
"the process through which individuals or groups are wholly or partially excluded from full participation in the society in which they live" (European Foundation 1995:4).


TABLE 5
Arenas and elements of social exclusion

Key arenas

Elements

Rights

Human
Legal/civic
Democratic

Resources

Human and social capital
Labour markets
Product markets
State provision
Common property resources

Relationships

Family networks
Wider support networks
Voluntary organizations

De Haan has suggested that the key arenas for social exclusion can be classified under the headings of rights, resources and relationships (Table 5), drawing attention to the democratic rights of citizens, the operation of labour and product markets, and relationships within families and communities (see De Haan and Maxwell, 1998).

Thirdly, there has been a new wave of interest in social protection, a familiar topic in the food security arena, where vulnerability has long been a core concept (Dreze and Sen 1989, von Braun and Kennedy 1994), but one receiving new prominence in more general poverty work (Chu and Gupta 1998; Deacon et al. 1997; Getubig and Schmidt 1992; Gruat 1997; World Bank 1999, 2000; van Ginneken 1999). The current debate is much concerned with the boundary between private and public scope and responsibility for risk management. Private risk management strategies draw on both formal and informal mechanisms (Table 6) and include diversification, insurance and credit schemes.

Inevitably these strategies have limitations: their localized nature; for informal insurance schemes their inability to spread risk and cope with systematic or covariate risks; and expense (Morduch 1999). Most importantly, when considering poverty alleviation, private risk management schemes tend to overlook the very poor (Sinha and Lipton, 1999). This leaves the state with an important role in risk management and the public provision of safety nets for the very poor, either through formal insurance or other assistance (Norton et al. 2000a).


TABLE 6
Privately-provided risk management strategies

Risk

Privately-provided Management Strategy

Conflict
Disastet

  • Informal social welfare (neighbourhood help, children in foster homes, remittances)
  • Informal precautionary savings and investment in human capital (high fertility) and social capital (marriage and other networks that provide help).

Harvest

  • Income diversification
  • Use of risk-reducing inputs
  • Delay sowing
  • Plot diversification
  • Choosing low-return enterprises with lower risks

Health

  • Reducing exposure to health risk, if causes known
  • Holding precautionary savings
  • Investing in social capital that provide labour, food and care

Labour

  • Informal social welfare (neighbourhood help, children in foster homes, remittances)
  • Informal precautionary savings and investment in human capital (high fertility) and social capital (marriage and other networks that provide help).

Price

  • Income diversification
  • Establishing contact/informal relationships with outstation buyers
  • Increased production for home consumption

Source: Zeller, 1999

Finally, there is new work on rights-based approaches. The UNDP Human Development Report for 2000 deals with this topic. Rights cover civil and political, as well as economic, social and cultural matters. A recent review (Maxwell, 1999) concludes that:

An illustration of the potential is provided by the follow-up work on the right to food since the World Food Summit (Box 1):


Box 1: The right to food

In May 1999, the UN Committee on Economic, Social and Cultural Rights agreed a General Comment on the Right to Adequate Food. This was the culmination of a long process of analysis and advocacy by those concerned with the plight of more than 800 million people in the world without access to sufficient food.

The General Comment recognizes the legal basis of the right to adequate food, most clearly expressed in the 1966 Covenant on ESC Rights. It acknowledges that the right will have to be realized progressively, but charges states with `a core obligation to take the necessary action to mitigate and alleviate hunger'. States are required to respect, protect, and fulfil the right to food, making every effort to meet minimum obligations `to the maximum of available resources'. Non-state actors have responsibilities, too, and states should regulate accordingly and provide a conducive environment. Internationally, states and international organizations are required to cooperate in `joint and separate action' to achieve the full realization of the right to food.

The General Comment advocates specific measures: a national strategy, framework legislation, verifiable benchmarks, monitoring, a judicial process, and adequate reparation for victims of violation. National ombudsmen and human rights commissions should address violations to the right to food.

Source: Maxwell , 1999


What are the implications of all this for research in the FARD sectors? A number of points can be suggested:

  1. Poverty needs to be understood in both economic and non-economic dimensions, with a strong emphasis on subjective feelings, dignity, self-esteem, and empowerment. In this respect, the FAO definition of food security could be further enriched.
  2. The complexity and diversity of poor people's livelihoods may need greater recognition, particularly the management of a portfolio of activities in different sectors and locations. The issue of non-agricultural income in rural areas is rising rapidly up the agenda.
  3. The importance of managing risk, and the consequent emphasis on security.
  4. The role of assets in sustaining livelihoods, and within the asset set, the importance of recently-recognized assets, like social capital.
  5. The importance of developing a model of the causes of poverty, drawing particularly on the insights of social exclusion analysis.
  6. Turning to rights, it is interesting to ask whether FAO could use a rights-based approach as a planning framework, as UNICEF has done with the Convention on the Rights of the Child. The right to food would not be sufficient on its own, but a food security charter might be possible, following the humanitarian precedent.
  7. In this context there are obvious extensions of the trajectory followed by discussion of food rights to other aspects, both traditional (land rights, water rights) and non-traditional (perhaps infrastructure or input delivery).
  8. It would be useful to explore the use of a rights approach to resolve issues around individual versus collective rights, for example in natural resource conflicts (location of dams, management of common property resources).

Globalization

Globalization is certainly a significant topic in development: not only are there many books, papers and lectures on the subject (see for instance Held et al. 1999, Giddens 1999), but globalization received the ultimate accolade of being the subject in 1999 of both the World Bank's World Development Report and UNDP's Human Development Report. The topic is a complex one, however. In order to explore the relationship between globalization and well-being, it is necessary to clarify

What is globalization?

Globalization is a term used in many different ways: Box 2 contains a selection of different perspectives. There are some common themes, especially the idea that the world is facing a qualitatively new level of integration in a variety of economic and non-economic spheres, and that this is driven by communications and transport innovations. For most theorists of globalization, economic issues (especially trade and capital flows) are part of the equation, but only part. As Held et al. observe (ibid:436) `what is especially notable about contemporary globalization is the confluence of globalizing tendencies within all the key domains of social interaction'.


Box 2: Perspectives on globalization

Shrinking space, shrinking time and disappearing borders are linking people's lives more deeply, more intensely, more immediately than ever before. Contemporary globalization is characterized by new markets, new tools, new actors and new rules (UNDP 1999:1).

The continued integration of the countries of the world, characterized by the acceleration of the movement of goods, services, ideas and capital across national borders; and the evolution of the international economic order into a highly integrated and electronically networked system (World Bank, World Development Report 1999:31).

The extensity, intensity and velocity of political, economic and cultural flows and connections . . . (associated with) the expansionary tendencies of political, military, economic, migratory, cultural and ecological systems . . . each mediated by the late twentieth-century communications and transport revolution' (Held et al.: 431 and 436).

We live in a world of transformations, affecting almost every aspect of what we do. For better or worse, we are being propelled into a global order that no one fully understands, but which is making its effects felt upon all of us. Globalization is political, technological and cultural, as well as economic. It has been influenced above all by developments in systems of communication, dating back only to the late 1960s (Giddens 1999).



Box 3: Propositions on globalization and poverty

A. Propositions about the livelihoods of poor people

  1. Globalization boosts growth, creates new livelihood opportunities, and leads to increased income.
  2. Restricted access to the new opportunities created by globalization mean that some people benefit more than others).
  3. Globalization also benefits some (e.g. the skilled) more than others, and in some cases drives wages down.
  4. As a result of (2) and (3), globalization increases inequality, internationally and nationally.
  5. Globalization increases the exposure of the poor to market-related risks (both factors and products).
  6. Globalization increases the `time squeeze' on the caring capacity of households.
  7. Globalization may lead to a worsening of the environment for poor people.
  8. Globalization may lead to pressure on health and safety conditions at work, and to an erosion of labour rights.
  9. Globalization may undermine cultural diversity.
  10. Globalization may weaken social capital.
  11. Globalization may undermine the inter-generational contract.

B. Propositions about the provision of state services

  1. As a result of globalization, markets impose fiscal and monetary discipline on states.
  2. Globalization is reducing the options for states to raise revenue.
  3. As a result of (1) and (2), there is a fiscal squeeze on public goods and merit goods, including social expenditure.
  4. Globalization has diminished the accountability of states, with power moving up and down (to the international level, and to regions or cities).
  5. Paradoxically, the successful management of globalization requires states to take on new activities (e.g. infrastructure, safety nets).
  6. States have to find ways to work in partnership with the private sector and civil society.

C. Propositions about international governance

  1. As a result of globalization, more emphasis is now placed on international agreements.

Source : Norton et al., 2000b


The impact of globalization on poor countries and poor people has been one of the themes of the debate, and it is possible to summarize the propositions which have been made on this account. Nineteen of these are listed in Box 3 under three headings:

  1. propositions about the livelihoods of poor people,
  2. propositions about the provision of state services, and
  3. propositions about international governance. These are propositions found in the literature, not conclusions reached as a result of new analysis.

The most frequently discussed implication of globalization has to do with free trade and its impact on poverty. Specifically agricultural questions are left aside for the moment, in favour of exploring a more general conceptual framework. Bussolo and Lecomte, 1999 show that trade policy principally affects poverty through its impact on (a) growth, and (b) income distribution. They conclude as follows:

There are, of course, qualifications to this potentially beneficial picture. The poor will fail to benefit from globalization if they are denied access to markets, for physical or institutional reasons (see the above discussion on social exclusion). There may be significant adjustment costs in moving to an open trade regime, which may penalize the poor. Social expenditures may be undermined if governments rely on trade taxes for a significant share of revenue.

This is not the place for a detailed review of the implications of globalization for the FARD sectors, but Kydd et al. (2000) have argued that the challenges will be especially severe for small-holders faced with the uneven spread and impact of new technology, and by market opportunities (both international and domestic) which favour large-scale producers. Special measures will be needed to develop agriculturally-based but `linkage-rich' livelihoods in rural areas, and to facilitate what the authors call `good exits' from agriculture.

Beyond that, the question is what assumptions policy-makers should make about:

The post-Washington consensus

A reduced role for the state has been on the development agenda since the publication of the Berg report in 1981 (World Bank 1981, see also Colclough and Manor 1991). In recent years, thinking on this subject has been dominated by the idea of a `Washington Consensus', and, latterly, a `Post-Washington Consensus'.

The term `Washington Consensus' was coined in 1990 by John Williamson (Williamson, 1994), at the Institute for International Economics in Washington. It consists of a ten-point summary of the policy package which Williamson identified as lying at the heart of World Bank and IMF thinking, especially with regard to structural adjustment in Latin America. The summary is reproduced in Box 4. It contains most of the elements of classic structural adjustment, both stabilization (fiscal discipline, tax reform, devaluation) and liberalization (trade, finance, investment etc...). It also notes the importance of property rights.

A reading of Box 4 shows that there is a great deal of good sense in the Consensus. Who, for example, would object to secure property rights? Or lower expenditure on white elephants? Or even competitive exchange rates? On the other hand, some elements, as we shall see, are more controversial: the very specific strictures on fiscal discipline are an example. Furthermore, there have always been questions (a) about sequencing (e.g. the advisability of `Big Bang' liberalization), and (b) about what is left out (safety nets? democratic accountability?).


Box 4: The Washington Consensus

  1. Fiscal Discipline
    Budget deficits, properly measured to include those of provincial governments, state enterprises, and the central bank, should be small enough to be financed without recourse to the inflation tax. This typically implies a primary surplus (i.e. before adding debt service to expenditure) of several percent of GDP, and an operational deficit (i.e., disregarding that part of the interest bill that simply compensates for inflation) of no more than about 2 percent of GDP.
  2. Public Expenditure Priorities
    Policy reform consists in redirecting expenditure from politically sensitive areas, which typically receive more resource than their economic return can justify, such as administration, defence, indiscriminate subsidies, and white elephants, toward neglected fields with high economic returns and the potential to improve income distribution, such as primary health and education, and infrastructure.
  3. Tax Reform
    Tax reform involves broadening the tax base and cutting marginal tax rates. The aim is to sharpen incentives and improve horizontal equity without lowering realized progressivity. Improved tax administration (including subjecting interest income on assets held abroad - flight capital - to taxation) is an important aspect of broadening the base in the Latin context.
  4. Financial Liberalization
    The ultimate objective of financial liberalization is market-determined interest rates, but experience has shown that, under conditions of a chronic lack of confidence, market-determined rates can be so high as to threaten the financial solvency of productive enterprises and government. Under that circumstance a sensible interim objective is the abolition of preferential interest rates for privileged borrowers and achievement of a moderately positive real interest rate.
  5. Exchange Rates
    Countries need a unified (at least for trade transactions) exchange rate set at a level sufficiently competitive to induce a rapid growth in non-traditional exports, and managed so as to assure exporters that this competitiveness will be maintained in the future.
  6. Trade Liberalization
    Quantitative trade restrictions should be rapidly replace by tariffs, and these should be progressively reduced until a uniform low tariff in the range of 10 percent (or at most around 20 percent) is achieved. There is, however, some disagreement about the speed with which tariffs should be reduced (with recommendations falling in a band between 3 and 10 years), and about whether it is advisable to slow down the process of liberalization when macroeconomic conditions are adverse (recession and payments deficit).
  7. Foreign Direct Investment
    Barriers impeding the entry of foreign firms should be abolished; foreign and domestic firms should be allowed to compete on equal terms.
  8. Privatization
    State enterprises should be privatized.
  9. Deregulation
    Governments should abolish regulations that impede the entry of new firms or restrict competition, and ensure that all regulations are justified by such criteria as safety, environmental protection, or prudential supervision of financial institutions.
  10. Property Rights
    The legal system should provide secure property rights without excessive costs, and make these available to the informal sector.

Source: Williamson, 1994

A more systematic review of the Washington Consensus was undertaken by the Bank's then chief economist, Joe Stiglitz (Stiglitz 1998a, 1998b). The review contained some elements which questioned tenets of the Consensus, and some which added to it. Among the former, we can cite his questioning of very restrictive inflation targets; among the latter, a new emphasis on financial regulation, competition policy, and policy to facilitate the transfer of technology.

In questioning the relevance of the Washington Consensus, Stiglitz argued that:

Stiglitz then went on to develop more general arguments about what was missing in the Washington Consensus, particularly as regards the role of government. He argued that the `task of making the state more effective is considerably more complex than just shrinking its size'. For example:

The debate about the Post-Washington Consensus is not yet over, but it is clear that there are many resonances for the FARD sector. Agricultural policy in the 1980s and 1990s was informed by the structural adjustment paradigm that underlay the Washington Consensus. A return to market-determined pricing, the removal of quantitative restrictions, and the promotion of private sector operations were key themes in the food sector, and for other commodities. Indeed, this consensus is reflected in the positions of other organizations.

The question is what limits are put on this process. The 2000/1 World Development Report, for example, argues strongly, (possibly following Stiglitz) that market liberalization requires strong and prior institutional underpinning. In the FARD sector, this caution seems appropriate. For example, in the case of seed provision, the public sector cannot be dispensed with altogether. It needs to help nurture a nascent private sector. And it needs to play a part in plant variety protection, especially farmers' rights to varieties developed on farms. Tripp and Louwaars (1997) conclude that `there will be a range of pathways towards strengthening national seed systems, and many will involve complex interactions between the public, commercial and voluntary sectors . . . a search for more comprehensive terminology to guide this process might substitute `diversification' for `privatization' and `regulatory reform' for `deregulation".

More generally, it might be suggested that future research on the FARD sectors should pay more attention to:


AID

A final area of current debate is about the role of aid. Four current issues are worth noting.

First, from a theoretical point of view, an important debate has been about the importance of good policy as a pre-condition for the successful use of aid - an idea formulated by Burnside and Dollar (1997) and greatly popularized by the World Bank publication, `Assessing Aid' (World Bank, 1998). This concluded that `financial assistance leads to faster growth, poverty reduction and gains in social indicators in developing countries with sound economic management' (World Bank 1998:2), but `has much less impact' elsewhere. Again, however, this finding has not remained uncontested: in a recent review, Hansen and Tarp (2000) conclude that the impact of aid is not conditional on good policy, but that it does increase the growth rate across the board, mainly via an effect on capital accumulation. A puzzle remains, however, that project-level evaluations of the impact of aid often show much better returns than economy-wide studies. Why is it that good projects fail to deliver a wider impact?

Secondly, there has been thinking on donor-recipient relationships, particularly around the notion of partnership, for example in the Development Assistance Committee of the OECD (DAC 1996, 1998) and in the World Bank's Comprehensive Development Framework (Wolfensohn 1999). Key words here are ownership, coordination, transparency and accountability, but the literature shows that there are many models on offer, from a one-way, and potentially coercive partnership at one extreme, to a genuine partnership with mutual accountability at the other (Maxwell and Riddell 1998). A review of the issue concluded that `mutual accountability appears to lie at the heart of successful partnership relations, and that accountability is often backed up by formal procedures and even a legal framework. This is a big jump for donors to make . . .' (Maxwell and Conway 2000).

Third, there has been interest in focusing aid more tightly on poverty reduction, particularly in pursuit of the international development target of reducing absolute poverty by half by 2015. The main vehicle for this is the new-style Poverty Reduction Strategy Papers, but concerns have been expressed about whether or not productive sectors will receive sufficient recognition and funding in PRSPs (Belshaw 2000).

Source

Finally, and at a more practical level, there has been innovation in the use of sector-wide approaches to help improve donor coordination, and strengthen links to macro-planning tools, such as the Medium Term Expenditure Framework. Sector-Wide Programmes are, however, both more common and more straightforward in sectors like health and education, than in complex sectors like agriculture. Brown et al. (2000) conclude that agricultural SWAPs pose special challenges: the most important government roles in supporting agriculture may not be about public expenditure; the most important public expenditures for supporting agriculture (e.g. roads) may not be in the agricultural sector, narrowly defined; much of what is done by the Ministry of Agriculture may be done better by the private sector; there is no single `technology' which can be standardized across the sector; and government is a relatively minor player in the sector. They conclude that there may be a role for SWAPs, but that an overall agricultural strategy is an essential prior step.

What are the implications for research on the FARD sectors? Researchers might consider:


5. SUMMARY AND CONCLUSIONS

The task in this paper was to say something about how context might affect future priorities for economic and policy research in food, agriculture and rural development (FARD). The issue was approached from two directions: first, by means of a brief review of how the sectors had evolved in the past and might change in the future; and, secondly, by reviewing recent debates on some aspects of development, in order to test the robustness of the current conventional wisdom on FARD.

The first point is that the FARD sectors are changing fast. Contrary to the semi-subsistence peasant model which sub-consciously informs much thinking about FARD, and indeed about developing economies as a whole, it is hypothesized that in the near future agriculture will be largely commercial, most rural people will be disconnected from the land, and agriculture will be a relatively small sector in the national economy. Of course, this vision will apply more directly in some places than others. Nevertheless, it challenges FARD researchers: to project systematically, monitor effectively, and help planners deal with the inevitable transition pains.

The paper then turns to thinking about FARD, and begins with a statement of the current conventional wisdom, derived from the World Food Summit, but also from the work of other international agencies working in the area. A rough-hewn consensus is identified, which manages an accommodation between poverty reduction, on the one hand, and market realities, on the other: growth is necessary (though not sufficient), the private sector is the main source of growth, the government's job is to stimulate growth and provide safety nets, participation is to be encouraged. Again, there are regional specificities to take into account, particularly when these general priorities are translated into detail.

The core question is then asked i.e. whether current thinking on a range of development issues challenges the existing consensus, or stretches it in new directions. The answer is `yes' - not in revolutionary, but certainly in evolutionary ways. A good deal of provocative material is found; perhaps more important, opportunities are identified to take current FARD thinking in new directions.

On poverty, social exclusion, and sustainable livelihoods, the evolution of thinking is tracked, and the parallels with thinking about food security are identified. Of particular importance is the need to incorporate non-material dimensions of poverty and capability into current definitions, the value of asset-vulnerability frameworks for planning livelihood strategies (including social capital as an asset), and the value of social exclusion models, originally developed in rich countries, in providing essential explanatory models of what causes poverty.

On social protection, the centrality of risk and risk management to many current debates about rural and agricultural policy is recognized. New thinking has made useful contributions especially on informal social protection systems.

On rights-based approaches, FARD specialists have again been prominent, for example on the right to food. The wider debate is useful, nevertheless, in illustrating opportunities. For example, UNICEF has used the Convention on the Rights of the Child as a programming tool. Could FAO draw up a charter for food security, and borrow the experience of other sectors to pursue a broader-based and more coherent approach to rights?

Globalization is not only a popular topic, but a key factor in the transformation of FARD sectors. The different dimensions of globalization and are identified and a summary is presented of several propositions about globalization and poverty. In this area, FAO is likely to find more of its work in future concerned with global issues, including global public goods. However, even at country level, there is an important research agenda: building a functional classification of rural dwellers which takes account of the likely impact of globalization, tracking the impact, and systematically devising measures which maximize the benefits of change. Small-scale farming may be at particular risk.

Questions about the pace and sequencing of liberalization remain central to development policy, and to the FARD sectors. The paper summarizes the debate about the post-Washington Consensus, and should make the point that many of the arguments used to question Big Bang liberalization in the financial sector could equally be applied to FARD: a drought or flood can cause as much short-term damage to an economy as a capital outflow. New thinking on liberalization and privatization is cautious, concerned to put institutional reform before market reform, insistent that the state needs to retain a large role in the provision of public goods and merit goods (education, technology), and anxious to emphasize participation at all stages and in all processes. In the FARD sectors, thinking about food marketing, public-private partnerships and regulation of input provision has struggled with the same issues. There needs to be greater iteration between general and sector-specific debates.

Finally, donor countries and agencies are rapidly changing the language of cooperation with poor countries, and also, more slowly, the practice. Key debates are identified concerning the constraints to aid effectiveness, partnership, aid for poverty reduction and sector-wide approaches. New `technologies' being developed to implement partnership, particularly Sector Wide Approaches (SWAPs) have much to offer, but problems still to resolve in their application to the FARD system.

There are many topics not discussed here: governance, decentralization, global institutional reform, conflict and post-conflict reconstruction. These are all important. More work would reinforce the argument that research planning on FARD sectors requires constant iteration with the evolving development agenda. A number of substantive issues have been identified. A concluding question might be one of process. What mechanisms exist for facilitating the iteration between general development and FARD thinking? Obviously, researchers on both sides are `in touch' through professional associations and policy fora. Is there, however, scope for better liaison through UN mechanisms: ECOSOC? The ACC? The Committee on Development Planning? An initiative by FAO? There are several possibilities worth exploring.


ACKNOWLEDGEMENT

Thanks are due to colleagues at FAO for help and support, especially Jacques Vercueil, Franco Viciani and Kostas Stamoulis.




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