What agricultural policies worked in today's successful economies? Important new book from Ha-Joon Chang

March 14, 2012

     By Duncan Green     

Ha-Joon Ha-Joon Chang. Routledge recently published a book edited by Ha-Joon that I think is very important indeed. Unfortunately, it’s only come out in very expensive hardback (a snip at £85), and the FAO, which funded it, is not known for its publicity machine, so here’s some background and excerpts. ‘Public Policy and Agricultural Development’ aims to do on agricultural policy what Ha-Joon’s 2002 book ‘Kicking Away the Ladder’ did on industrial policy, namely reclaim the lessons of history to refute the ideas of the Washington Consensus and instead suggest a much more activist role for the state (although its conclusions on ag are less statist than Ha-Joon’s work on industrial policy in books like Kicking Away the Ladder). The book builds on detailed case studies of 11 developed countries in their earlier stages of development and the experiences of 10 developing and transition economies in the last half century. It presents six detailed case studies of agricultural policy in the last half century in two Latin American countries (Chile and Mexico), two African countries (Ethiopia and Ghana), and two Asian countries (India and Vietnam). It covers a huge range of ag policy issues, including land policy (land tenure reform and land quality improve¬ment), knowledge policy (research, extension, education, and information), credit policy (specialized banks and agricultural credit co-operatives), physical inputs policy (irrigation, transport, electricity, and divisible inputs such as fertilizer, seeds, and farm machinery), policies intended to increase farm income stability (price stabilization measures, insurances, and trade protection), and policies intended to improve agricultural marketing and processing. The core message is that ‘despite distinctive country-specific issues, agricultural policy challenges that confront countries at earlier stages of economic development, today and in the past, are remarkably similar across countries….. today’s rich countries all grappled with landlessness, fragmentation of holdings, lack of irrigation and other rural infrastructure, backward technologies, limited availability of credit to small farmers, excessive price fluctuations, limited availability and poor quality of farm inputs (especially fertilizers), poor warehousing and marketing facilities (which often force farmers to sell at the wrong time and wrong prices), food insecurity, and trade shocks.” smallholder farmingThis means that there is a lot that countries can learn from other experiences, both historical and contemporary’. It frees our “policy imagination” by showing that the range of policies and institutions that have produced positive outcomes for agricultural development has been much wider than any particular ideological position – be it the pre-1980s statist one or the pro-market ‘New Conventional Wisdom’ of the Washington Consensus (NCW) – would admit. It also shows that the willingness to experiment with new policies and institutions, and the willingness to learn from other countries’ successes and improve upon their solutions, were important in all agricultural success stories. ‘Rethinking Public Policy in Agriculture’ has the potential to be highly influential in changing the way we think and talk about agriculture and development, reclaiming the lessons of history, and providing a rich set of experiences and ideas for policy and institutional reform. At the core of these experiences is the role of smallholder agriculture, and what governments need to do to help them become a driver of development. At first glance, that fits in very well with some of the core messages of the GROW campaign, but Oxfam’s women and ag specialist, Sally Baden, will address that tomorrow. And if you’re still hungry for more, here’s a bit more detail from Ha-Joon’s overview chapter. “Land reform is today supported in only very muted and market-based forms (e.g. no ownership ceilings), but Japan and other East Asian countries had a very successful comprehensive land reform system that included strict landownership ceilings. State-backed specialized rural banks and credit subsidies are only reluctantly accepted by the NCW, but all of today’s rich countries used these devices. Profit- driven micro-finance is favoured over credit co-ops in the current orthodoxy, but many of today’s rich countries used the latter successfully. Ghana’s rural banks, half owned by the government and half by the local community, are an innovative variation on the theme. While marketing boards are routinely denounced by the orthodoxy, especially in sub-Saharan Africa, Denmark and some other European countries had benefited from effective export marketing boards. Co-ops are these days not exactly discouraged, but the central role that they played in the development of agro-maisprocessing and marketing in Denmark, Germany, Sweden and Japan are not sufficiently emphasized by the proponents of the NCW. Price stabilization measures are frowned upon by the NCW, but many of today’s rich countries used them and some had great success with them, such as the USA and Japan. More recently, Chile has used a very effective price stabilization scheme. Facilities like state-subsidized agricultural insurances, public provision or subsidization of warehousing facilities, and input (e.g. fertilizer) quality control were some of the very effective policies used by today’s rich countries (and some of today’s developing countries, like Chile in the case of state-subsidized insurances). These policies are not actively objected to by today’s orthodoxy, but they are not given sufficient attention. All these issues suggest that the contents of the agricultural policy tool-box for today’s developing countries will be significantly enriched if history is taken more seriously. Third, our study reveals that the exact institutional forms of successfully delivering critical needs of the agricultural sector vary enormously across time and space. There were successes with all forms of delivery in all sorts of countries – public provision (e.g. agricultural research in the USA, extension in the Netherlands, irrigation in Vietnam, seeds in Mexico, rural credit in Germany), private provision (e.g. marketing services through contract farming in Zambia, machinery services in Egypt), private delivery subsidized by the state (e.g. agricultural insurances in Chile, certain types of research in The Netherlands), public– private partnerships (e.g. irrigation in Sweden), cooperatives (e.g. butter and bacon processing and marketing in Denmark, credit co-ops in Germany), state–cooperative partnerships (e.g. rural banks in Ghana, export marketing in Denmark, fertilizer supply in Korea) – which suggests that the standard dichotomy between the public sector and the private sector is crippling our policy imagination. Likewise, our study reveals cases of failures with many of these delivery modes. Public provision failed miserably in agro-processing in Ghana before the 1980s. Private provision failed spectacularly in fertilizer supply in post-socialist Hungary, agricultural education in post-socialist Ukraine, and extension and fertilizer supply in post-reform Ghana. Sometimes both the public sector and the private sector failed in the same area, suggesting that the causes of the problem lie deeper than ownership form – rural credit in Zambia and seed supply in Ghana. Cooperatives in many developing countries were not very successful, giving them a bad name. All these examples suggest the importance of a pragmatic approach not hidebound by pro-state or pro-private sector ideologies. Indeed, one important common characteristic of success stories is their willingness to pick solutions that do not neatly fit into ideological boxes.” Or you can read his summary in the Journal of Peasant Studies.]]>