Agricultural policy, poverty and the role of the state: the OECD responds

March 17, 2012

     By Duncan Green     

Today Jonathan Brooks author of the OECD’s new book on agricultural policy and poverty reduction, responds to my rather jonathan brookscritical review. (For footie fans, the photo behind him is taken in a Brazilian bar, and celebrates the lobbing of the English goalkeeper David Seaman by Ronaldinho in the 2002 World Cup) Duncan, Thanks for this review, and the opportunity to reply. I wouldn’t make quite so much of the counterpoint with Ha-Joon Chang’s book, as we at OECD would concur on the general need for countries to be able to adopt agricultural strategies that are tailored to their structural circumstances and stage of economic development, and would agree that there is no one-size-fits-all development template. In policy terms, our main point is that direct interventions in markets – be that through subsidies for seed and fertiliser or price guarantees – are not ideal in the long term, for precisely the reasons you quote. In that sense, you’re right that we see a narrow role for government in directing markets. However, we see a potentially much broader role in getting those markets to function properly. It is perhaps worth adding, for readers not familiar with OECD, that while we are direct in our policy advice, we have no formal powers to limit a country’s “wiggle room”. In terms of broader strategy, I think there were more areas of agreement at the meeting than of controversy: Because smallholder farmers dominate the rural economies of poorer countries, and because many of them are poor, raising their productivity is critical to poverty reduction strategies. I fully accept Michael Lipton’s point that smallholder farmers are operating efficiently given the constraints that they currently face. The key challenge is to ease those constraints. You can’t do many things better than build a road that enables the farmer to get her product – and the majority of them are women – to market. Equally, I would endorse the view that there is a need to reverse decades of underinvestment in agriculture. The good news is that the potential for that investment to pay dividends is better than it has been for many years. High food prices have imposed real hardship on poor consumers, and on the large numbers of farm households who are net buyers of food. Yet our current Agricultural Outlook, which we produce jointly with FAO, projects that prices will remain strong for the foreseeable future. In the long-term, that has to be an opportunity for developing country farmers. For decades we have complained about the effects of low food prices on developing country farmers, and it is worth remembering that there were 850 million undernourished people in the world in 2006 – when world food prices were at an all-time low. But our main message – and I think the discussion could have picked up on this better – is that focusing on agriculture is not enough. All countries that have developed and raised incomes from a few hundred dollars per capita per year to a few thousand dollars per year have developed their agricultural sectors, but they have also diversified their economies and created better paid jobs outside farming. Green Revo in AFricaMuch is made of the need for a Green Revolution in Africa, to follow the Green Revolution in Asia. This is absolutely necessary. If agriculture is the heartbeat of the economy and the heart is not working properly then you need to fix it. Yet forty years after its Green Revolution, much of India’s rural population remains mired in poverty and more than 40% of children are underweight. Although India’s economy is growing rapidly, and generating unprecedented wealth, agriculture has been effectively excluded. Indeed, the sector accounts for nearly two-thirds of all employment, yet commands just 16% of national income. And India is not unique: two-thirds of the world’s poor live in middle income countries where rural incomes languish. What we were suggesting – and this is something that agriculture specialists often accept grudgingly – is that in addition to raising agricultural productivity we need to hook rural populations into wider engines of growth. If we seek to generalise from the circumstances of the poorest agriculture-dependent economies, such as Ethiopia and Malawi where there are few sources of potential employment outside agriculture, then we risk missing a vital route to resolving the global poverty problem. Steve Wiggins’ point is an interesting one. The difficult question – and we don‘t pretend to have all the answers here – is when do the investments that he describes smooth the transformation of the sector and when do they impede it? The package of investments he outlines – with roles for government, the private sector, donors and NGOs – can help broaden agricultural growth. But it is important that new development projects can survive the expiration of funding and that they do not deter farmers from seizing opportunities elsewhere. To sum up, we need a broader strategy that widens opportunities both within and outside farming, and creates diversified rural economies, so that rural incomes catch up and we do not witness distress migration to squalid shanty towns. I’ve never been to a Trotskyist meeting or belonged to a religious sect, but I agree that some of the discussion became a bit esoteric. I think that reflects the propensity of agricultural economists (and I confess to being a member of that particular sect) to become embroiled in technical questions such as the optimal farm size, and in some cases to view any wider discussion of multi-sectoral dynamics as somehow “anti-agriculture”. Agricultural development is necessary – but it is not sufficient.]]>