Development - of what? for what?

A proud farmer with plantains, Samoa

A few years ago, I spent a few weeks in Samoa, a paradise Pacific island country. I was part of a World Bank team assisting the government in the development of a program for increasing the competitiveness of the agriculture sector. My role was to look into opportunities for commercial organic production.

Some things strike you in Samoa. One are the traditional villages with their special building style, the open fales , houses without walls. The village and the extended family (still) have strong positions in Samoa, land is mostly still communal (some 90 percent) and leaders of the extended families, the mathai, assign land to the members of the family. Soils are mostly rich. In these soils Samoans have been growing coconuts, breadfruit, taro and bananas as well as a number of fruits. Traditionally, pigs played a big role. Later cattle, cocoa and coffee were introduced. Many products are not sold in the market but are distributed within then families and villages, the meat in particular is mostly consumed at big parties. So farming is still not so integrated in the market economy.

There are a number of “obstacles” for a commercialization of farming. In essence this means bringing more farmers into a mainly cash-based and market based economy, both on the input and output side. It means that farmers shall sell products in a market situation, but it also means that farmers use more inputs, both hard and soft inputs, ranging from credits, fertilizers. irrigation to advisory service, business planning. In this way they can increase productivity and their incomes. But the price is increased risk. But not only that. When traditional farming systems are brought into the market economy, the change is not only technical or economic and the effects are not only for the household, but the whole village social context is disrupted, reducing the role of the village, and the extended family, as economic institutions. This was certainly the case for when farming was brought into the market economy in Europe and the same pattern is seen everywhere.

When visiting some dozen farms in Samoa, I realized that many of the farm families seem to be happy with their life. Even on direct question of what they would like for their business, they come up with nothing related to increased production, higher income etc. Combine this with the effect of the foreign remittances: lot of money coming in with little efforts from the locals and a certain shortage of labor. Add the effect of the village structure and land ownership: low incentives to invest in higher production as it will be shared by so many and low incentive to invest in the soil as it is not private. Yes, then there are simply not very big reasons for farmers to increase productivity. In particular there is little reason for why they would like to specialize and increase risk in their production, something that is often a basis for modernization of farming.

A cocoa tree growing in the lava rock, Samoa

Some claim that small holders never voluntarily change into the market economy but must be coerced into it through many different pathways. Sometimes by brutal means such as the British enclosures; trading monopolies or outright colonization. But more often through more subtle means: credit programs that makes them dependent; compulsory schooling that means they need to pay school fees, uniforms, books as well as they loose labor force and the children get other values; land titling, i.e. the transformation of land from communities to individuals etc.

Other ways to force people into commercial farming was the introduction of taxes that had to be paid in cash, a system that turned subsistence farmers into commercial farmers – or laborers. As the Kenyan environmentalist and winner of the Nobel Peace Prize Wangari Maathai (coincidentally the same name as the Samoan chiefs!) describes in her book Unbowed:

When the British decided to collect revenue and finance local development, they did not want to be paid in goats. They wanted cash. They also wanted to create a labor force, but they did not want to force people to work. So they introduced an income tax for men in most parts of the country that could be paid only in the form of money. This created a cash-based rather than a livestock-based economy. 

 It is called "development". 

Growing out of poverty or grow poverty?

The poorest farmers in the world are unlikely to farm themselves out of poverty. They simply lack resources to invest in agriculture, and paradoxically they often even lack the labor needed as they are busy earning money with other trades than farming. To try to ease their predicament by introduction of GMOs or chemical fertilizers is a counterproductive strategy. 

A recent doctoral thesis, From Betterment to Bt Maize: Agricultural Development and the Introduction of Genetically Modified Maize to South African Smallholders by Klara Jacobson, Uppsala reinforce this understanding through a study of the Massive Food Production Programme (MFPP), an agricultural development program aiming to reduce poverty by raising agricultural production in Eastern Cape Province, South Africa. Introduction of Bt maize (a GM crop) was a main component in this program. The Bt maize variety introduced was not adapted to smallholders' farming environments. It was input-demanding and sensitive to environmental dynamics, and it was promoted for planting in monoculture.

The results also reveal that the program was not properly designed to support the improvement of smallholders' livelihoods through agriculture. The program disregarded the long-term marginalisation of smallholders, and the associated need for substantial advisory, infrastructure and credit support to increase agricultural productivity.

The program also, like so many similar programs, failed to recognize the heterogeneity of poverty, resulting in a bias towards the better-off smallholders. Many may believe that poor farmers would have ample access to labor, from themselves and their families, but the study show that the poorer were more labor constrained than those better off. For example they had to do manual hand-hoeing of their fields instead of using oxen and they had to offer their labor to others for money or food. The wealthier, in contrast could use the labor of the poorer to increase their productivity. 

I have written a number of posts on this, and associated topics earlier, e.g.
The road to food security: What works and what doesn’t?
The hunger, the people and the land
If you don't have cash you don't get to eat
Rich people are not starving – can markets help?
Millennium Villages: the Great Experiment

Ultimately, this analysis can be drawn much further. There are similar issues to consider if we want to understand why commercialization of small holder farming may not work out as well as many believe.
Most farmers will simply not survive in this process. If they did, there would be enormous over-production of agriculture commodities. After the introduction of cross-Atlantic steamships, European farms had difficulties to cope with competition from North America. The response was to introduce protectionist measures. Still the pressure of competition was a lot lower for them than it is for poor farmers in developing countries today. To believe that they could compete with their manual labor, their muscles, with tractors driven by fossil fuel is simply not at all realistic, and the result of this is seen everywhere.

In addition, because of the productivity gains in developed countries, agricultural prices dropped with some 60 percent in the period 1960 to 2000 (Dorward et al 2002). As the productivity, and energy use, of the poorest farmers remained much the same, it is obvious that they lose out. At current prices, it would require one life of labor for a manual farmer to acquire a pair of oxen and small animal drawn equipment, and ten generations of labor to buy a small tractor (Mazoyer and Roudart 2006). The productivity gap has widened over the last decades, both relatively and in absolute numbers (see table below). 

Agricultural labour productivity, dollar per man-year

	1990-1992	2001-2003	Agriculture as share of GDP
Low income countries	315	363	20%
Middle income countries	530	708	9%
High income countries	14,997	24,438	2%
France	22,234	39,220	2%
United Kingdom	22,506	25,876	1%
USA	20,797	36,216	1%
Brazil	1,507	2,790	5%
India	332	381	4%
China	254	368	12%
Malawi	72	130	36%

Source: World Bank 2007

You can read more on this here: Agriculture: How cheap energy (and capitalism) increased the gaps between rich and poor

The road to food security: What works and what doesn’t?

Considering that donors spend some US$ 150 billion per year in development aid, and that much of this is oriented to poverty alleviation and food security it is perhaps surprising to know how few thorough international reviews that have been made to assess  what works and what doesn’t work. The Dutch Ministry of Foreign Affairs has now reviewed existing evaluations in the field and make a summary in the study A systematic review of the impact of interventions in agricultural production, value chains, market regulation.  One conclusion is that most evaluations and impact assessments are not solid enough to allow for any far-reaching conclusions. Of 365 evaluations screened only 38 fulfilled the quality criteria the reviewers had developed.

The review assessed four pathways to food security: increasing production; development of value chains; market reform and land security. Interventions based on access to credit; development of non-farm sector; social safety nets; stabilized prices, hygiene and sanitation were thus not part of the review.

Overall conclusions

Interventions improving land tenure security scored mostly positive, especially when combined with other interventions.

Interventions increasing agricultural production scored generally positive, except for sustainability.

Value chain development scored well on increasing trade, but the most vulnerable people did not benefit.

Market regulation reform interventions score lowest, due to the combination with reduced support to the agricultural sector in several African countries.

Success was most likely where different interventions were combined in a favourable national climate.

As I have been working a lot with value chain development I took a particular interest in that: Intervention in value chain comes out as one of the better strategies for improving food security. The report highlights that there is a big potential in the development of domestic value chains. For example, in Kenya approximately 500,000 smallholders produce vegetables and fruits for the domestic markets while only 11,500 smallholders were engaged in the export market. The export market involves many more large plantations with employees. They employ in total also around half a million people, who are food secure through their income. The evaluation also studied value chains built around GlobalGAP, Organic and Fairtrade.

Number of farmers producing certified products for export markets          

Standard	Worldwide	Developing countries	Africa
GlobalGAP (2007)	97,000		2,871
Organic (2009)	1,808,000	1,526,000	511,000
Fairtrade		977,000	589,000

source: IOB study 363, 2012

Clearly donors are disappointed with the very limited impact of all the efforts spent to train smallholders in GlobalGAP systems. There have been many donor financed projects for linking smallholder farmers in developing countries to organic markets in developing countries. For example the Export Promotion of Organic Products from Africa. In that programme, more than 120 thousand smallholders in Uganda and Tanzania were linked to organic markets in Europe, USA and Japan. The estimated earnings reached some US$ 30 million per year.  The review assess the impact of organic value chains as successful, but can’t conclude if the efforts have reached the most vulnerable or not. Successfactors have been linking of farmers to commercial exporters (as opposed tp supporting farmer to export themselves), group certification and efforts to improve quality. Also for Fairtrade it was unclear if the most food insecure people were reached and perhaps surprising the report states that, Fairtrade seems to have reinforced men’s role in household an cooperative decision making around cash crops; in one case women’s income had even declined. For the total household income, in four of six cases in Latin America, there had been no increase of household income with Fair trade: ”The low income for Fairtrade farmers is due to the competition between the Fairtrade crop and other farm and non-farm activities, the additional costs for inputs and (hired) labour, and the limited Fairtrade market - only part of the produce is sold as Fairtrade.”

On the opposing side to organic stands a strong drive to increase use of chemical fertilizers, and sometimes GMOs and pesticides. The reports says that the subsidised fertilizer schemes in Zambia and Malawi have been successful. However, another recent special review of such schemes, Agricultural input subsidies in Sub-Saharan Africa from DANIDA comes to a much less positive conclusion after studying such schemes in Malawi, Zambia, Ghana and Tanzania:

• Significant increases in agricultural productivity and food production is possible, and the potential for improving agricultural productivity by subsidising agricultural inputs exists. However the estimates are somewhat uncertain. Costs are very high, and given uncertainties it is unclear whether the programmes provide value for money.

• There is very little convincing evidence to suggest that outcomes are likely to persist after termination of the programmes. However, the subsidy programmes are designed to address the distortions created by market imperfections rather than the market imperfections themselves. When (if) the programmes are phased out, input use is likely to decline again.

It also concludes that none of the programmes managed to reach the poorest households

On the, rather controversial, effects of market deregulation, the Dutch review shows how market de-regulation in China and Vietnam, in combination with land reform, has contributed tremendously to growth and reduction of poverty. ”The impact of domestic trade reform alone was not evaluated, but together with the other pathways in Vietnam’s agricultural development, it contributed to the production increase, from a deficit of 27% in 1980 to a surplus of 40% in 1999. And for China:

In China, during the so-called household responsibility system reform between 1978 and 1984, national grain production increased from 305 to 407 million tonnes. Increases in efficiency increased labour productivity and reduced production costs and food prices. [... ] As a result, per capita grain consumption increased from 195 to 250 kg per year, and household income increased by 15% per year between 1978 and 1984. The efficiency gains in agriculture made labour available for the rural industry sector that absorbed about one third of the rural labour force by 1996. Poverty declined from 53% in 1981 to 8% in 2001.

On the other hand the report also points to that during the period of big de-regulation

In most African countries, the increase in food import was larger than the increase in agricultural export. The ratio of food import to agricultural export has worsened for all African countries plus Guatemala and Peru, remained the same for Guyana, and had improved for China, India and Chile (1970-2002). In the period 1995-2002, the situation was worst for Senegal which imported food worth more than three times their total  agricultural export. Farmer income from export crops increased in all countries. In contrast, farmer income from liberalised food crops decreased in all countries, except in Chile. Farmer income from food crops that were still protected increased in Cameroon, Nigeria, Morocco, China, India, Chile, Guyana and Peru.

That land reform the report highlights that land titling and solutions based on individual, private ownership may not be the best. As a matter of fact they are likely to benefit more those that are already better off, and exclude women and disadvantaged groups.

As the report points out, there is no silver bullet that by itself can guarantee food security. It stands clear to me that food security – poverty and equality are intrinsically linked, and that the reason for food insecurity is found in an unjust society and unequal access to resources, and therefore,  that the path to food security is to correct those injustices.

The monuments of the city are built on the backs of poor rural people

When going from Lusaka towards the farm of Susan Mkandawire we meet a constant stream of guys on bicycles on their way to Lusaka with heavy loads of charcoal. One of them is Christoffer Finsoni on this picture. He is a farmer but earns most of his cash from charcoal making and marketing. He carries 4 bags of 30 kg charcoal on his bicycle some 30 km to the market in Lusaka.

We often here the story about ignorant rural population that destroys their environment by cutting down the trees for cooking. But the reality is a lot more complex. Christoffer and his likes are mainly living in the "organic economy" based on biological and renewable resources. Wood (charcoal) and human power (as in bicycle) are the main energy sources. When I meet him in my car I represent the fossil fuel economy and the global industrial system. What strikes me is the direction of the stream of resources.

Many believe that the stream is from the rich global fossil-fuel economy to the poor, but is it?

Andrews family doesn't use char coal for their cooking, they use fire wood. Char coaling for the market in the city is a bigger threat to their forest land. And who is buying the char coal? Well it is certainly not the poor, they use twigs, corn cobs, stalks and other waste for their cooking. It is rather rich people in the city that drives deforestation. A similar case is the cutting of forests for conversion to grazing land. Most of that meat is destined for rich people. A similar thing is the idea to make bio char from bio mass. Again, poor peoples resources are used to enable the rich to continue a life style that is not sustainable. 

In the same way, the notion that urban living is more environmentally friendly as claimed by many, is just a delusion. The city has always been a parasite on the rural areas and most of the destruction in rural areas are caused by "city life and industrialism". This is based on inequality, privilege and violence.

The pot of gold at the base of the pyramid

A "supamarket" in Bujumbura July 2011

It is no longer at the end of the rainbow we will find the pot of gold - it is at the Base Of the Pyramid. To produce for the poor has become a much noticed market niche. The four billion people at the Base Of the (economic) Pyramid (Called BOP)—all those with incomes below US$3,000 in local purchasing power—live in relative poverty. Yet together they have substantial purchasing power: the BOP constitutes a $5 trillion global consumer market (WRI 2007). Most people, even the companies themselves, were utterly surprised by how rapidly cell phones spread in developing countries. Between 2000 and 2006, the number of mobile subscribers in developing countries grew more than fivefold—to nearly 1.4 billion. Growth was rapid in all regions, but fastest in sub-Saharan Africa—Nigeria’s subscriber base grew from 370,000 to 16.8 million in just four years (WRI 2007). One reason for this spectacular growth was of course that most African countries had failed to bring landlines to their population. Inspired by this success, many companies tailor-make products for the poor and innovations occur. One can transfer money quicker and easier in Kenya than in Sweden via the cell phones, an enormous leap in a country where normal bank transfer seemed to go with camel caravan, often got lost and fees of transfer were very high. As low income countries are not as stuck in infrastructure investments, we might actually see quicker uptake of some innovative technology, such as distributed power solutions, than in developed countries. Many of these products, such as cell phones, undoubtedly improve quality of life. And mobile banking certainly makes running a business both cheaper and easier. They are also to some extent "democratic" in nature, they reach many people and are not linked to a certain position, corruption or privilege. So this is all good.

Many of the "things" do take money away from local consumption though, as most of these products are imported, so it is not clear to me how they, if at all, can contribute to local economic development. Earlier, many of the poor countries could at least export agriculture products to pay for the imports, but now more and more poor countries are net importers of agriculture products. What is clear is that making people buy things is one of the most efficient strategies to integrate them into global markets. The increased need for money force people into money based employment or market oriented production.  

More people working for the Man, so to say.

India: The poor will pay the bill for climate change

There are a number of reasons to believe that the costs of climate change will not be borne equally across income groups. First, regional variation is expected in future warming as well as in the climate sensitivity of agricultural production. Irrigated areas, for instance, may be wealthier and, at the same time, less vulnerable to rising temperatures. Secondly, households differ in their ownership of agricultural assets, notably land, as well as in their human capital and allocation of labor. The returns on land and labor (of different types) will probably respond differently to climate change. Thirdly, households will be exposed in varying degrees to changes in food prices that are likely to occur with global warming. Urban households tend to be net buyers of food to a much greater extent than rural households (as are non-farm households within rural areas), leaving them relatively worse o when prices rise.

A recent research paper from the World Bank analyzes how changes in the prices of land, labor, and food induced by modest temperature increases over the next three decades will affect household-level welfare in India. The authors predict a substantial fall in agricultural productivity, even allowing for farmer adaptation. Overall, the welfare costs of climate change fall disproportionately on the poor. This is true in urban as well as in rural areas, but, in the latter sector only after accounting for the effects of rising world cereal prices. The results suggest that poverty in India will be roughly 3–4 percentage points higher after thirty years of rising temperatures than it would have been had this warming not occurred.

The report also says that:

The substantial fall in agricultural productivity (17 percent overall) that we predict as a result of warming will translate into a much more modest consumption decline for the majority of households. This is because these households derive the bulk of their income from wage employment and (rural) wages are estimated to fall by only a third as much as agricultural productivity. 

But here I loose the reasoning: If agriculture productivity is supposed to fall, realistically prices would go up. And if wages are also supposed to fall those poor that derive most of their income from wage labour must suffer hard from falling wages and increased food prices. Perhaps I am missing some part of the argument? 

Disasters: rich blindness and poor people drown.

It is no surprise to me, but a surprise coming from the World Bank:

Assuming that capital productivity is higher in areas at risk from natural hazards (such as coastal zones or flood plains), this paper shows that rapid development in these areas—and the resulting increase in disaster losses—may be the consequence of a rational and well-informed trade-off between lower disaster losses and higher productivity.....These results also suggest that the overall risk — i.e. mean annual losses — can increase with time, and even faster than wealth, in spite of continuously improving protection. A consequence of these findings is that future increase in disaster losses might be difficult to avoid.....

The more interesting stuff comes later:

All risks are not linked to rational choices, however. We showed that imperfect information and
myopic expectations can amplify risk-taking behaviors. This effect can be reinforced by other
sub-optimalities. In particular, some economic agents have little flexibility in their localization
choices, like the poorest households who locate in informal settlements in developing-country
cities.

What this means in more plain speak is "myopic expectations" is the most revered short term interest of profit, the so called invisible hand that is supposed to make everybody happy in the end. And that the effect of this, like always, hurt poor people most.

So in essence what their research show is the profit motives are not giving an optimal result or an optimal resource allocation and that the cost of failure will have to be born by the poor. Well, we knew that already, but it is good to have World Bank papers to prove the point...It also shows the inherent danger of too complex economic systems and the danger of trying to "compete" with nature. When you build a dyke it protects you from the flood, but once that dyke burts, you are worse off than without the dyke. 

Download the paper
 

The Magic washing machine

Hans' presentation shows the link between poverty and energy and the challenges involved in a very easy to grasp way.



What I often miss in Hans' presentations is the link to economic and political forces, which both helps to explain WHY things are like they are and also have the solutions. Nevertheless, he does a great job, and you can find much more on Gapminder

Food is not a commodity like any other

Sin maíz, no hay país they say in Mexico, without maize there is no country. One of many expressions that underline the importance of food, not only for survival, but for our culture and for political stability. We know that lack of food can trigger political upheaval and perhaps revolution.

Sometimes, I am more surprised by the opposite, however. How come that the hungry sit and beg instead of just crashing into the shops and plunder, or trying to mug me? I guess it is a combination of the repressive society, culture and also that people that are poor and hungry, also are very tired and disillusioned. To rob or loot requires some strength and initiative, but most people starving are so tired. Honestly, can you say that it would be immoral for the person that is starving to steal a banana to eat? Would you also say that it is immoral for her to steal to giver her child to eat? I certainly could never condemn that.

If you want to read more about hunger, its causes and how to reduce it, I can recommend
Food enough, Land enough?
About hunger, agriculture, trade and global solidarity
by Peter Einarsson, published by Forum Syd, the Swedish Church and Swedish Cooperative center. The report ends with six rules of the thumb about food security.
1. The food supply will not take care of itself.
2. Food is not a commodity like any other..
3. Hunger is not a developing country problem..
4. The environmental food crisis is for real.
5. Technology is not the problem.
6. Globalize solidarity..

Mad as hell

10 million people own a third of all assets

Are you a HNWI? If so you are one of 10 million guys controlling one third of all assets. And while the world economy went into recession your wealth increased some 19 percent.

The most commonly quoted figure for "membership" in the high net worth "club" is $1 million in liquid financial assets.

The world’s population of high net worth individuals (HNWIs) grew 17.1% to 10.0 million in 2009.The world’s population of high net worth individuals (HNWIs) returned to 10 million in 2009, increasing by 17.1% over 2008. HNWI financial wealth increased 18.9% from 2008 levels to $39 trillion. After losing 24.0% in 2008, Ultra-HNWIs saw wealth rebound 21.5% in 2009. Ultra-HNWIs increased their wealth by 21.5% in 2009. In terms of the total Global HNWI population remains highly concentrated with the U.S, Japan and Germany accounting for 53.5% of the world’s HNWI population, down slightly from 2008. Source: World Wealth Report 2010. The World Wealth Report covers 71 countries in the market-sizing model, accounting for more than 98% of
global gross national income and 99% of world stock market capitalization.

World GDP, also known as world gross domestic product or GWP - gross world product, calculated on a nominal basis, was estimated at $65.61 trillion in 2007 by the CIA World Factbook

Global household wealth amounted to $125 trillion in the year 2000. The richest 2% of adults in the world own more than half of global household wealth according to a path-breaking study released today by the Helsinki-based World Institute for Development Economics Research of the United Nations University (UNU-WIDER).

well there are many different ways one can present the data of world inequality - they all have one thing in common. It is appalling.