AGRICULTURE AND ECONOMIC DEVELOPMENT LEROY D BANDA HEAD

AGRICULTURE AND ECONOMIC DEVELOPMENT LEROY D. BANDA HEAD, COOPERATIVES DEVELOPMENT AND PROJECTS MUSCCO

MOTIVATION • Significant number of the developing Countries have reasonably large agriculture sector • Though there is a general consensus on the fact that value creation in agriculture is relatively less than in other sectors it is still debatable what type of role agriculture can play in the overall evolution of economic growth of such economies • Settling such a debate will require serious Policy Implication for such countries

EXISTING LITERATURES • Some take improvement in agricultural productivity as a necessary step toward a sustainable economic growth: R. Nurkse (1953) and that of W. W. Rostow (1960) - Most today’s developed economies • Some other argue otherwise by mentioning the fact that even among the present day developed economies those that had emphasized on agriculture lagged behind those others : Mokyr(1976), Field (1978) and Wright (1979) - Belgium and the Netherlands • Still some others say it depends, and this position can be taken as an attempt to reconcile the above two positions: K. Matsuyama(1996) - All developed economies and emerging economies

THEORETICAL EXPLANATION OF THE THIRD POSITION • Ag Pr Increases Income, but it depends on the nature of the economy where/how this additional income is spent - If we assume that the economy is closed, it is inevitable that there will be not only an increase in income but also surplus of labor; and hence Industrialization - If we assume an open economy, an increase in income could normally be spent on manufacturing products from the rest of the world, and there may not be much surplus labor since demand for agricultural products is not limited domestically; and hence countries could stay long without structural transformation • The traditional view assumes basically a closed economy

THEREFORE • Matsuyama’s prediction is only partially consistent with the evidences from the contemporary developing countries • openness of economies negatively affects the gains in the economic growth from improvement in the agricultural productivity, however, this effect is not strong enough to cause -either a long-run negative relationship between economic growth and agricultural productivity in the contemporary developing countries - or to bring large differences in the gains from agricultural productivity between the open and closed economies But the fact is: Africa lives in the rural, where agriculture is the mainstay of the economy

AGRICULTURE FOR DEVELOPMENT

I. HISTORICAL PERSPECTIVE ON AGRICULTURE IN DEVELOPMENT Well defined classical paradigm of the role of agriculture in development in the 1960 s • Grounded in history: Western experience, Asian miracles • Grounded in theory: Agriculture on the road to industrialization • Grounded in empirical regularities: Agricultural transformation • Grounded in behavior: Agriculture responsive to incentives

Successes, but many implementation failures in the 1970 s • Urban bias in Import Substitution Industrialization • Integrated rural development to meet broadened development objectives flawed: • Overestimated state capacity to coordinate • Underestimated emerging private sector roles • Undermined cooperative producer organizations • Many failures in agriculture-based projects • Too complex, insufficient support

Leading to 20 years of neglect of agriculture under the Washington Consensus (1985 -2005) • Adjust the macro-fundamentals but no sectoral policy • Industrialize through open economy not through agriculture • Descale the role of the state in agriculture despite pervasive market failures • Reduce rural poverty through transfers instead of rising autonomous incomes • Investment in agriculture discouraged by low international commodity prices and adverse environmental effects

Neglect of agriculture: Decline of the shares of agriculture in public expenditures and in overseas development assistance

II. CURRENT CRISES AND RESURGENCE OF DEMANDS ON AGRICULTURE FOR DEVELOPMENT Following 20 years of neglect, five crises put agriculture back on the development agenda: 1) The global food and financial crises: Rising food insecurity and hunger 2) Stagnation of productivity growth in Sub-Saharan Africa agriculture 3) World poverty still overwhelmingly rural 4) Increasing rural-urban income disparities 5) Rising resource scarcity and unmet demands for environmental services

CRISIS 1: GLOBAL FOOD AND FINANCIAL CRISES The world food situation has changed drastically in the recent times. This implies three major policy shifts: • Need to give greater attention to the supply side of agriculture to achieve sustainable productivity gains and greater resilience to shocks. • Need to raise again the issue of food security as a policy concern: Combine trade, national food reserves, level of food self-sufficiency, social safety nets, and role of subsistence farming. • Need to focus not only on chronic poverty but also on vulnerability to price and income shocks for net buyers of food: “new poor” and risks of irreversibilities in assets, health, and education due to shocks.

II. CURRENT CRISES AND RESURGENCE OF DEMANDS ON AGRICULTURE FOR DEVELOPMENT Crisis 2: Stagnant productivity growth in SS-Africa agriculture AREA EXPANSION HAS HISTORICALLY BEEN THE MAIN SOURCE OF OUTPUT GROWTH IN CEREAL PRODUCTION IN SS-AFRICA, BUT LARGELY EXHAUSTED

II. CURRENT CRISES AND RESURGENCE OF DEMANDS ON AGRICULTURE FOR DEVELOPMENT Stagnant yields are associated with low fertilizer use and limited irrigated area. Understanding the determinants of yield growth (technology adoption) is a major research challenge

II. CURRENT CRISES AND RESURGENCE OF DEMANDS ON AGRICULTURE FOR DEVELOPMENT CRISIS 3: WORLD POVERTY STILL OVERWHELMINGLY RURAL 75% of world poor are still rural, and rural poverty is rising in SS-Africa and South Asia

II. CURRENT CRISES AND RESURGENCE OF DEMANDS ON AGRICULTURE FOR DEVELOPMENT Crisis 5: Rising resource scarcities and unmet demands for environmental services The rate of deforestation is accelerating in SS-Africa. Conservation agriculture, rapidly expanding worldwide, is barely adopted in Africa due to lower yields and high labor costs

III. EMERGENCE OF A NEW PARADIGM OF AGRICULTURE FOR DEVELOPMENT These crises put new demands on using agriculture for development, but with no possible return to the classical paradigm for two reasons: “Development” is no longer just industrialization (1950 -60) but multidimensional (1970 -) • Growth, poverty/hunger, vulnerability, equity, sustainability The structural context for agricultural growth has changed drastically • Globalization, integrated value chains, technological and institutional innovations, environmental constraints

HENCE EMERGENCE OF A NEW PARADIGM OF AGRICULTURE FOR DEVELOPMENT TO REPLACE THE CLASSICAL PARADIGM Two features of the emerging paradigm 1) Because development is multidimensional: • Win-wins exist, but trade-offs are expected • Need priority setting at the national level 2) Need to use both the process and the outcome of agricultural growth to achieve these multiple dimensions • Role of smallholder farming But two barriers to overcome: • Continued under-use of agriculture for development • Unclear how to succeed in using agriculture for development

IV. WHY THE CONTINUED UNDER-USE OF AGRICULTURE FOR DEVELOPMENT? Successful structural transformations in Asia

IV. WHY THE CONTINUED UNDER-USE OF AGRICULTURE FOR DEVELOPMENT? But agriculture is still under- and misused in Africa and Latin America: Labor is pushed out of agriculture without associated growth in GDP per capita

Resources are being committed to a Green Revolution for Africa, but will it succeed? What we know: It must be different from the Asian GR because of §Heterogeneity of conditions Need decentralization and participation §Multiple effective constraints Need a multispectral approach §Small countries Need regional cooperation

It must be different from the Asian Green Revolution In addition: • It must go beyond cereals to include high value activities • It must deal with sustainability and environmental friendliness Beyond the seed-fertilizer-water package toward agroecology, agro-forestry, and conservation agriculture. • It must address brand new challenges Energy prices, climate change, integrated value chains, globalization • It must succeed urgently given the rapid changes in the world food situation and distress of rural populations. Answer: Continued under-use because we do not know enough about how to do it, and are not adequately equipped to do it successfully

V. CONDITIONS FOR SUCCESS IN USING AGRICULTURE FOR DEVELOPMENT Proposition: Two conditions for success in using agriculture for development Condition 1: Need to re-conceptualize the role of agriculture for development in the new paradigm 1) Recognize the complementarities and trade-offs in the multiple functions of agriculture for development q Define country priorities and strategy 2) Design the process of agricultural growth to achieve development beyond market forces q With eventual growth opportunity costs (e. g. , debate on farm size) 3) Redefine the role of the state in support of agriculture q State to set social priorities among conflicting functions, overcome market failures, regulate, and engage in private-public partnerships.

Condition 2: Need to re-design approaches for effective implementation in the new paradigm 1) Experiment with new approaches and internalize lessons for scaling up successes in policy and practice q Derive lessons from past mistakes and identify impacts in new options 2) Fix the governance structure for the state to fulfill its new functions for agriculture q Redesign ministries of agriculture to use growth for development with a territorial perspective and a role for producer organizations 3) Develop expertise in using agriculture for development q At the local (decentralization), national, and international levels q Key role of FAO as source of world expertise in using agriculture for development

VI. CONCLUSION: THE WAY FORWARD Positive developments in support of using agriculture for development: Grounds for optimism q. Greater public awareness of importance of agriculture for development, including poverty, gender, environment q. More resources committed by governments, foreign aid, new players, private sector q. More attention from politicians to food crises, hunger q. But can we deliver? q. Do we know how to do it? q. Do we have the capacity to do it? q. What could be the role cooperatives

Guidelines for a successful use of agriculture for development: Grounds for concern q. The biggest mistake we can make is believe that it is easy to do and that we already know enough to do it. q. Effort must be massive, concerted, and sustained to succeed: commitments must be met and continued q. Short term political concerns with food must be translated into long term concerns with agriculture q. New approaches must be devised and evaluated q. Capacity to effectively use the resources committed is the main limiting factor to be addressed.

Making the emerging paradigm Development succeed is essential but still uncertain of Agriculture for It is a major challenge and opportunity that the international community must address

SMALLHOLDER FARMERS • 70% of the people living in poverty around the world live in rural areas and depend largely on smallholder agriculture for their livelihood. • According to FAO, there an estimated 500 million family farms across the developed and developing world. • These farms produce the food that feeds billions of people, and represent up to 80% of all farm holdings. • Smallholders and family farms play an important role in agriculture ü Providing food and nutrition security for the growing world population, ü Creating and preserving jobs in rural areas, ü Stemming the rural-urban migration ü Preserving Bio-diversity.

CRITICAL CHALLENGES IN THE AGRICULTURAL SECTOR • Global Challenges § Climate Change § Insufficient Capital § Rising Cost of Production (COP) § Access to Markets. • Challenges of Smallholder Farmers § Access to Land § Low Productivity § Ineffective farming techniques – Traditional Subsistence Practices § Inadequate Access to Agricultural Extension § Low Adoption of New Technologies § Wasteful Post-harvest Practices – Affects Quality and Safety of Food § Poor Market Participation.

• Moreover, in addition to contributing to global food and nutrition security, ü Family Farms are a factor of preservation and conservation of traditional local food and ü Balance of agricultural biodiversity through the sustainable use of natural resources. • If well supported by policies driven by social protection, and if the farmers’ skills are enhanced, family farming can help to boost local and regional economies.

• There should be recognition that ending hunger and poverty requires recognition that family farming should be central. • However, it should not just stop at the level of that recognition, but rather it should go further to provide guidelines on how the family farming can efficiently and effectively produce food for the global populace. • States and Governments must create the enabling environment and provide all necessary support for the farmers to invest in their farming businesses. • The Family Farming holds the key towards poverty alleviation and socio-economic development.

• Reports by World Bank have shown that Agriculture growth has high economic pay-off and high poverty reduction pay-off (World Bank World Development Report, 2007). • According to IFPRI, agriculture growth, as opposed to growth in general, is typically found to be the primary source of poverty reduction (IFPRI, 2007). • However, there can never be agriculture growth in the first place without production, and the family farmers are behind production of food, fibre, fodder and fuel crops, as well as livestock (including fisheries). • The Family Farmers will be vital in the new Global Development Agenda 2015 for poverty eradication because their business, agriculture, is proven to be at least twice as effective as other production sectors in the

• In most developing countries, and even in developed countries, the Family Farmers are now joining forces and are working in organised groups such as Associations, Cooperatives or Farmers Clubs for collective action and to defend their rights to land, seeds, water and food. • This is proving to be an important strategy, not only towards achieving economies of scale, but also ensuring that farmers are able to access Rural Advisory Services, Extension and Capacity Building Services in value addition. • Consequently, most of the organised farming groups are now investing in produce aggregation, warehouse receipting systems and agro-processing in their rural set up, thus creating more jobs and providing markets to farmers to sell their commodities within easy reach as they move up the agriculture value chain. • In this regard, the new Global Development Agenda 2015 should not have far to look in efforts to ending unemployment; the Family Farming can play that role.

• With increasing changes in climate, the next Global Development Agenda will put emphasis on Sustainable Development, and in this connection, the Family Farming will play a significant role. • Family Farming, besides being a source of genetic agro-diversity, can ensure their preservation through seed varieties and native livestock breeds well adapted to various environments. • Finally, the Family Farming will have a critical role to play in reducing the impact of climate change through adoption of Climate Smart Agricultural (CSA) practices. • By its very nature, Family Farming has to preserve and conserve soil and water for it to be sustainable. • However, as the world is embarking on the fight against climate change, it is surprising to note that the global debates on climate change are ignoring the role agriculture can play in reducing the effects of climate change. • Much as greenhouse gasses (GHG) from agriculture contribute substantially to global emissions, there is huge potential for CSA to play a significant role in climate change adaptation and mitigation to contribute to reducing GHG emissions.

• The world is facing critical development challenges ranging from food shortages, malnutrition, food safety, food losses and food waste to high levels of poverty, high unemployment rates, and climate change. • The global community is geared towards ensuring that the upcoming Global Development Agenda builds on the successes, and lessons from the Millennium Development Goals. • The role of Family Farming in the next Development Agenda ought to be well positioned because of the direct and practical implications it has on food security, climate change, sustainable development and also in ending hunger, malnutrition and creating jobs for the rural populace. • Therefore, the new Global Development Agenda has to strategically position the role of Family Farming in its theoretical and strategic framework which UN Member States will adopt after 2015.

CAN COOPERATIVES BE PART OF THE ANSWER?