OECD versus Ha-Joon Chang on agricultural policy and poverty reduction: I'm with Chang

March 17, 2012

Avoid economists; SA's condom boom; will Holland chop aid this week?; scientists v policy makers v pastoralists on climate change; throwing rocks at Kony 2012 in Uganda: links I liked

March 17, 2012

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

March 17, 2012
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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.

3 comments

  1. Hi Duncan, oh dear, these postings put me in an uncomfortable position. Ha-Joon Chang was my supervisor at university. Jonathan Brooks is an old drinking buddy (hi Jonathan, nice photo!!!). Actually, I have blurred memories of discussing these same issues over drinks. Jonathan knows a lot more about agricultural than I do. But Ha-Joon (as usual) has some strong points to make about western hypocrisy in some of these issues. So let me come to the unsatisfactory observation that you’re all right! (including Stephen Wiggins on the importance of trying to manage gradual, not abrupt, transitions out of agriculture). Ha-Joon is clearly right about the diversity of institutional support to agriculture – and the fact that hardly any OECD countries follow the kind of model of agricultural development that the OECD itself puts forward suggests that there are some strong political economy reasons why this is not viable. But Jonathan is also right that developing countries have to be especially careful about poorly-targeted support to the agricultural sector, when the money could be better spent elsewhere – they simply can’t afford the luxury to misspend money in the way that many high income countries have done on farm support or, as the sell it now, on ‘rural development’. Jonathan is also right that the period of high prices that we are experiencing represents a window of opportunity to really putting agricultural development on a different footing – OK, high prices cause some major adjustment problems, but surely there is much more potential for agricultural development compared to the 1980s and 1990s when agriculture in the developing world languished because prices were so low that it pushed many farmers, as Keynes had once warned, below subsistence levels. Jonathan probably needs to be a little more tolerant of some of the heterodox experiments by governments to support agricultural development, and Ha-Joon perhaps a little more skeptical of the ability of developing countries to go down the same path that many industrialised countries have gone down with their agricultural policies. Are we all still friends? I hope so!!! Regards, Andy

  2. A couple of important points:
    First, I am smiling through gritted teeth in that photo.
    Second, Duncan describes me as the author of the report. In fact, I am the editor and one of the authors. For a full list of contributors, see the powerpoint attached to his post. My comments summarise our main policy findings but do not do justice to the scope and depth of their analysis.

  3. “But our main message … is that focusing on agriculture is not enough.”

    Straw man: no one is saying that all you need is agriculture.

    “Agricultural development is necessary – but it is not sufficient.” No! Agricultural development is essential and western style development is totally implausible for some/many countries now, with dwindling energy and mounting environmental problems.

    We must concentrate on fostering resilient, plural and diverse farming systems and that needs planning, the market can’t do it – it’s probably the best use of development funds since no one knows how to solve the economic problems the world is facing.

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