giids lecture 9 -agricultural policy

8/13/2019 GIIDS Lecture 9 -Agricultural Policy

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Agricultural policy

Carlos Oya

SOAS, University of LondonThe Graduate Institute, Geneva

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SOME BACKGROUND ON AGRICULTURE:

ROLE OF AGRICULTURE AND DIVERSITY

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Why is agriculture important?

Very important in poorer (SSA) countries 20-50% value added

60-80% employment

40%+ exports in some countries

Significant linkages with other sectors (trade,agro-processing, transport, etc.)

Often an important component ofindustrialization strategies (source of surplus forindustry)


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Agriculture: an engine of development?

Labour surplusmigration Labour productivity

Food supplystable and growing

Raw materials for industryforward linkage

Market for manufactured goodsbackward linkage

Source of foreign exchange

Source of financial transferable surplusfiscal linkage

Socio-political stability in rural areas


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NorthSouth?

Massive diversity among developing countries

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Agriculture value added per worker (constant 2000 US$)1965 1985 2003 2003/1965

Argentina 4648 6489 9627 2.1

Chile 1942 2868 3253 1.7

Cote d'Ivoire 593 496 763 1.3

Ghana 400 319 346 0.9

South Africa 703 1606 2470 3.5

Bangladesh 227 232 312 1.4

India 228 297 398 1.7

China 154 224 378 2.5a o

Argentina/

China 30.24836 29.03176 25.50128


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UNDERSTANDING AGRICULTURAL

POLICY/STRATEGIES: THE BIG PICTURE

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Agricultural

growth and

surplus creation

Social relations andagrarian structures: power

and struggles

State capacity and

visionpolitics andideology

Transfer ofresources

Direct: investment

and state transfers

Indirect:

price policies

subsidies

exchange rate

Industrialisation

+

Political economy of dynamic linkages agriculture-industry and

agricultural policies


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Sources of/ constraints on agricultural growth

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Extensive Intensive

Land frontier

Labouravailability

(peak times)

population

density

Farmgate prices:

levels andvolatility

AnimaltractionMechanisation

/ tractors

Credit

Market outlets

New crops

Inputs:

biotechnology

Irrigation

Roads /

infrastructure

Land tenure

Agro-industriallinkages

Research

and

innovation

IncentivesMeans of

production

TechnologySocial

relations

STATE

Energy


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Centrality of land?

So land is just one of many possible factors

and constraints and land productivity not

always main issue

But it appears to be economically and

politically central to agrarian debates

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LAND POLICY AND THE SMALL VS

LARGE FARM DEBATE

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The small vs large scale debate:

what scale? Problems with definitions and measurement: what is

small scale?

Farm size (2 ha) but compare an intensive capitalistirrigated cut flower farm with cold chain etc on 2 ha witha extensively cultivated millet farm reliant on familylabour in drylandswhat matters for productivity is farmcapitalization, business scale and form of organization

What is smallin South Africa? What is smallin Ethiopia?What is smallin Brazil? In India?

Inverse relationship: what is being compared? Smallwithin smallholders? Small with absentee landlords?Small with middle-scale (upper capitalist peasant strata)?Small with large-scale capital intensive agribusiness?


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The small vs large scale debate:

some critical points

Assumptions on workers incentives,supervision costs and family vs hired labour

Understanding/interpreting small farmingresilience from a historical and political

economy perspective

How agribusiness globalization changesconditions of reproduction and puts a premium

on scale and capitalization Why a focus on land productivity (yields) when

labour productivity is more relevant for povertyreduction? What is the binding constraint?


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Overcoming disadvantages

Can small farmers overcome their scale

disadvantages? How?

Can large farmers overcome their scale

disadvantages? How?


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A non-linear relationship between farm size

and productivity

Output

per

hectare

Farm size: hectares

0.2 2 10 25 50 100 1000

Distress self-

exploitation

Income target /

reproduction

constraintsMid-scaledynamism

Less efficient

landlords

Highly

specialised LS

capitalist farms

Industrial

agriculture

Technological

upgrade


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WB 2007


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Source: Minot and Ngigi, 2004

Kenya vegetable export agriculture:

dominance of large commercial farms


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AGRICULTURAL REFORMS AND THE

LIBERALIZATION AGENDA

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State intervention and incentives to agricultural growth:

direct support and surplus extraction vs liberalization

During 1960s and 70s many states followed olddevelopment economics recipes of extracting surplus fromagriculture via taxation and price policies with successesand failures (see Kay, Chang)

With macroeconomic crisis in late 1970s some of theseinterventions no longer affordable without external support

WB/IMF provided a negative diagnostics of the situation

that led to substantial reform towards liberalization andstate withdrawal from agriculturerationales:o Removing urban bias

o Reducing fiscal deficits

o Improving incentives for farmers (price-market deregulation-liberalization)

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A broad summary of the impact of

agricultural adjustment:

Pervasive evidence of market failures:

Price volatility: geographical, seasonal and inter-annualincentives?

Reduced market access for some farmers (poorer / remote areas etc.)

In many cases, producer prices actually declined, partly as a result of

world trends Not enough private operatorssqueeze on fertilizer and input

distribution and cost increases for agricultural producers

Structural vulnerabilities to the demands of globalization areexacerbated in the context of declining public investment

uneven playing field is reinforced and less competitiveagricultural exporters lose out

Lessons from the history of agricultural policies in successfulcountries and the pervasive and wide-ranging role of stateinterventions ignored by neoliberals (Chang 2009)

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A P W hi i


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A Post-Washington consensus view

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Lessons from history

State intervention central to agricultural development

Key component of industrialisation strategiesagriculture-industry linkswithout neglecting agriculture

Importance of balance: promoting agricultural exports while addressing

food security

Wide range of interventions in public goods and support to farmers:

Input distribution and subsidies (seed, fertilizers, pesticides, machinery)

Subsidized (seasonal) credit

Irrigation, electricity

Crop insurance

Agricultural research, innovations and training for productivity increases

Marketing and prize stabilization mechanisms Trade protection

But pragmatic approach matters: each of these interventions led to both

success and failure depending on context

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KEY CHALLENGES AND PRIORITIES FOR

AGRICULTURAL POLICY IN THE XXI

CENTURY

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Addressing the untapped potential?

WB support to irrigation


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The importance of crop choice for labour demand

WDR 2008, p. 209 34


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Northeast

Brazil

C l di k


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Concluding remarks

Agriculture is important but cannot be analysed in isolation in a

problem-solving fashion Lessons from history (agrarian transitions, effective policies,

diversity of trajectories, etc.) are essential for understanding

todays problems and future perspectives

Understanding agrarian structures and dynamics of agrarianchange (class formation, labour, reproduction, accumulation,

domestic and external forces) essential to transcend superficial

dichotomical debates (land reform)

Agricultural development and inter-sector linkages intimatelyrelated to various forms of state intervention, many of which

have been sidelined by a populist-neoliberal alliancethe

challenges for poorer countries are huge but the scope for

improvements and more effective policies is also enormous

giids lecture 9 -agricultural policy

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