Are global value chains really the right answer for small farmers? Great new study from IIED and HIVOS

December 18, 2012

     By Duncan Green     

IIED and HIVOS.IIED Vorley et al coverSmall producer agency in the globalised market, by Bill Vorley, Ethel del Pozo-Bergnes and Anna Barnett, does for our thinking on livelihoods what the Africa Power and Politics Programme does for governance, or Portfolios of the Poor for financial systems – challenges most of the conventional wisdom and makes a whole lot of sense, crystallizing those ‘back of the head’ discomforts with orthodox thinking and getting you (or at least me) nodding in recognition at the sensible alternatives provided. Enough rave reviewing, what does it say? The starting point is ‘looking at where small producers are — and not where we think they should be’. As with Portfolios of the Poor, by looking intently at small producers’ current strategies, you rapidly realize that the received wisdom on how development agencies can help them is probably misconceived. In particular, an awful lot of our thinking is on helping get small farmers into global value chains (GVCs).  The problems the paper identifies with that strategy include: –          Informal markets are growing, not shrinking (see table 3.1) – modern value chains are the exception, not the rule. In many regions, informal local and regional markets are growing as fast or faster than global ones. –          The GVC approach largely targets the ‘top of the pyramid’ of better-off small farmers best able to meet the stringent quality and quantity requirements of GVCs. –          Farmers often prefer informal markets because they are flexible and allow them to minimise risk by running a diverse ‘portfolio’ of strategies – some family members head for the cities, others work off-farm, others produce lots of different crops on the farm. If prices or other factors vary, they change their strategies – the right thing to do in terms of resilience, but often leading them to be branded as unreliable by formal chain buyers. IIED informal econ 1990-2000–          ‘Beyond the practical considerations of profits, barriers and penalties are matters of perception and culture. Small-scale producers are typically very comfortable with informal trade, but may not see formal and modern markets as ‘for them’, given the requirements for technology, education and organisation. For some, modern markets are associated with unfamiliar language, concepts, goals, and codes of conduct. And they oblige farmers to carry higher risks.’ The focus on the agency of smallholders produces other novel insights, for example on migration: ‘The exodus of young farmers should not be considered a new crisis to be headed off.  Development initiatives commonly approach this situation by trying to fix problems and make village life more attractive. From the agency perspective, an alternative — more aligned with the preferences and strategies of rural youth themselves — is to think about supporting migration in such a way that young people can leave successfully and also are encouraged to return, bringing new skills and knowledge back to the countryside.’ Happily, the authors avoid the trap of romanticising informal market structures: ‘Though informal markets offer the crucial advantages of access and flexibility, and are sites of creativity and trust among small farmers and other market actors, they also have a dark side, including poor traceability and food safety, poor records on environmental impacts and worker welfare, and sometimes corruption, criminality, monopolies and cartels.’ What seems to work resembles the APPP’s findings on ‘hybrid institutions’ in governance: development interventions need to work ‘with the grain’ of traditional structures. The result is a syncretic amalgamation of informal and modern market structures (eg groups of Ugandan farmers using elaborate mobile phone networks to get better prices when selling to informal market traders – the paper is littered with great case studies to illustrate all these findings). And there are some interesting critiques of the GVC approach: ‘Global markets tend to demand that small-scale producers upgrade in the areas where small farmers have a comparative disadvantage — to produce standardised products at high volumes, for example. But there are some promising markets, especially locally and nationally, that instead value the ‘intangible assets’ that small farmers have in plenty. These valued qualities are rooted in traditional production methods and cultural identity.’ And if producer organization is such a no brainer ‘why aren’t more farmers organized?’ and what kinds of organization actually take root and make a difference (for example, IIED’s research suggests that many of the most successful producer organizations actually started life as credit co-ops and then evolved)? IIED summary As for the so whats, I think a few suggestions emerge either explicitly or implicitly: –          Spending more effort trying to ‘see like a farmer’ (see table 6.1). Study what exists much harder before wheeling out your cherished model of producer cooperatives, bargaining with global value chains etc etc. Maybe a case for some ‘Portfolios of the Poor’ style diaries charting small producers’ market interactions over a year or so (anyone already done this?) –          Rather than adopting a standard ‘best practice’ approach, innovate by trying several things out as experiments, spotting which ones are failing and replacing them with some other approach –          Think about the enabling environment that would benefit both formal and informal producers (access to information, infrastructure), rather than focusing on particular value chains –          Focus on those areas where informal markets don’t work for small producers – eg in influencing government policy-making]]>