Hans Meliczek
Mr. H. Meliczek is professor at the Institute of Rural Development, University of Göttingen, Germany.
Recent political and economic changes
Impact
Outlook, opportunities and challenges
Conclusion
World agriculture has undergone drastic changes during the last few decades. Agricultural production has increased and world food supplies are 18 percent higher than 30 years ago. Between 1961 and 1990, per caput food supplies in developing countries increased 27 percent, from 1 945 to 2 474 calories per day, while their populations grew from 2.1 billion to nearly 4.0 billion (FAO, 1995b: 427).
Yet, while the sector on average has kept up with population growth and demand for agricultural produce, many countries and population groups have been bypassed. Progress in some countries has been negligible and in sub-Saharan Africa nutritional levels have actually fallen. Worldwide, about 800 million people are still chronically undernourished.
Furthermore, the rate of growth in agricultural production has not contributed to the alleviation of poverty. On the contrary, in the 1980s average income declined in 46 of the 82 developing countries reviewed by FAO. On a regional basis, both Africa and Latin America were especially affected. Here the percentage of poor people increased during the 1980s from 41 to 47 percent (FAO, 1994: 5).
There are many reasons for this situation, ranging from agro-climatic conditions to changes in international commodity prices to government policies.
Misguided government policies and priorities have not recognized the importance of the agricultural sector in the overall development process. In many developing countries this sector has been neglected or outright taxed. Proceeds from agricultural taxation were used to finance the development of other sectors, mainly industry and manufacturing, while only a small share was returned to agriculture.
Yet, experiences in South and Southeast Asia reveal the importance of agriculture-based development strategies in which the transfer of resources to the non-agricultural sector has been the result of surplus generation in agriculture as opposed to surplus extraction.
From Japan to Indonesia, governments followed a strategy which gave early priority to agriculture, especially to raising the productivity of rice farmers to ensure food security. Investments were made to improve the efficiency of the domestic marketing systems in rural areas.
In contrast, many African countries have undervalued the agricultural sector and rural infrastructure and have attempted to displace markets rather than invest in improving their efficiency. Since 1960, the rice-based economies of Southeast Asia have outpaced the coarse grain and root crop-based economies of sub-Saharan Africa. A large part of Africa's failure and Southeast Asia's success can be attributed to the differential treatment of the agricultural sector (Timmer, 1994: 13).
In the early 1980s, terms of trade collapsed as oil prices soared and prices of other commodities fell, increasing the difficult debt burden of many developing countries. Between 1982 and 1991, the total foreign debt of sub-Saharan African countries grew from US$ 57 billion to US$ 144 billion. The total foreign debt of Latin American countries grew from US$ 354 billion to US$ 470 billion.
In order to overcome these financial difficulties and to enable countries to repay their international debts, the World Bank introduced structural adjustment and stabilization programmes in the 1980s that required changes in economic policy and management as well as institutional reforms. They implied the reduction of the role of the state, support to the private sector, dismantling of parastatal agencies such as marketing boards, abolition of subsidies, and devaluation of overvalued exchange rates.
Because of the need for immediate economic gains, many countries favoured the establishment of large-scale farming enterprises which produce monocrop export crops and neglected the sector of small farmers whose situation deteriorated, leading to increased poverty, indebtedness and growing landlessness.
The landless and near landless rural population constitute the largest single group of those afflicted by poverty. Some 30 million rural people in developing countries are landless, 138 million are near landless, and numbers in this category are growing throughout the developing world, especially in South Asia. Resources to accommodate the poor and the landless are shrinking, with the expansion of arable land growing more slowly than that of the rural population.
In search for employment and income, as many as 70 million people, mostly from developing countries, are working, legally or illegally, in other countries. Each year, more than one million people migrate permanently. In addition, because of adverse political and ethnic conditions, the number of refugees has increased continuously. It rose from 2.8 million in 1976 to 17.3 million in 1990 (FAO, 1994: 5).
For most developing countries, particularly in Africa and Latin America, the 1980s were a 'lost decade'. Policies and strategies which attempted to alleviate poverty through a few isolated projects, even if they were successful, did not bring about the expected results, since they were carried out within a political and economic framework that was not conducive to rural development.
On the other hand, many indicators of social performance, such as literacy rates, disease eradication or at least suppression, longevity, secondary school attendance, infant and childhood mortality, and population growth rates continued to improve for the developing countries as a whole. For some, however, especially in sub-Saharan Africa, they deteriorated.
In Central and Eastern Europe and the Soviet Union of the 1980s, the twin objectives of military strength and socio-economic progress proved increasingly difficult to achieve simultaneously. The resulting strains on centrally-planned economic systems precipitated the major transformations that began in the late 1980s. A major reason for the poor performance of the agricultural sector was a heavily centrally-planned economy chat operated through large production units and did not provide incentives for private initiative. Yet, while the productivity of the socialist farming enterprises was low, they guaranteed employment, income and a modest, but rather balanced, living standard for the majority of the rural population.
THE BREAKDOWN OF THE CONTROL economies of Central and Eastern Europe and the former USSR marked the beginning of a difficult and painful process of transition toward more open market-oriented economies. The early stages of this process interrupted traditional trading patterns, drastically reduced real per caput incomes, reduced demand, and disrupted production, processing and distribution. As part of the transition process, even the most basic legal and economic institutions had to be adjusted to allow and encourage the private sector to operate as part of a functioning market economy.
Political and economic changes were not restricted to the former socialist countries of Europe. They also occurred in many developing countries. In order to overcome their debt burden, many developing countries continued their policy reforms and structural adjustment programmes, reduced government spending and intervention in agricultural input and output markets, phased out subsidies and privatized the former parastatals.
These reforms were intended to reduce state interference in productive activities through a gradual transfer to the private or cooperative sector of such areas as distribution of input supplies, agricultural credit, marketing of products and utilization of agricultural infrastructure. As a consequence, the state is becoming less involved in the management of rural development projects. Its activities will increasingly be restricted to the provision of favourable policy and structural conditions for rural development to take place under the aegis of other institutions.
In the late 1980s, when the negative impact of structural adjustment programmes on the social situation became evident, renewed emphasis was placed on the human dimension of development. This orientation had a number of important implications. First, it was recognized that adjustment had to be carried out "with a human face", i.e. in such a way that it would attenuate its excessive effects and alleviate acute disparities and social hardship. Second, the importance of people's knowledge, skills and aptitudes, together with the appropriate institutions that would enable them to participate in the development process was recognized. Third, the need to enhance food security and nutrition policies became apparent with the recognition that food access often depends more on income than on supply. And forth, attention was focused on the need to promote the sustainability of agriculture and rural development.
Many governments also started to reduce their support of state-run cooperatives and encouraged farmers to create new cooperatives, based on voluntary membership and administered and financed by their members. Several countries, such as Fiji, Kenya, Myanmar, Namibia, Nepal, Swaziland, Tanzania and Uganda, have enacted new cooperative laws that foresee the transformation of the former state-controlled cooperatives into voluntary organizations. In Ethiopia, India, Laos, Vietnam and Zambia such laws are under preparation.
The rise of democracy and the widespread decentralization of government allowed the rural poor to make new claims on their political representatives. Several rural development schemes, particularly in Latin America, are being managed by NGOs using resources transferred by central or local governments. The role of NGOs and the private sector in rural development will be further enhanced in the face of shrinking government budgets and services.
Growing environmental concerns arising from massive deforestation in the humid tropics, deforestation and soil erosion in the watersheds and depletion of underground water tables, has increased interest in rural development strategies which internalize some of the externalities created by poverty. The debt crisis has further increased the cost of these externalities, e.g. the need to import food and oil because water reservoirs are rapidly silted by soil erosion in the watersheds. The possibility of using rural development to promote environmental protection, transferring resources by taxing those who would benefit from reducing the externalities of poverty, has opened new approaches. (de Janvry and Sadoulet, 1993: 143)
In the field of land tenure, there is a growing recognition among researchers and policy-makers, particularly in Africa, of the importance of customary rights and the participation of local communities in the management of natural resource use. While in the past, customary land tenure systems and institutions were perceived as inhibiting agricultural development, several countries are now giving due consideration to traditional forms of access to land. The Rural Code Ordinance of Niger of 1993, for example, aims at elevating customary land rights to written rights and thus contributes to developing from an informal market to a more formal market that will allow secure land transactions.
These new approaches to rural development are only beginning to emerge, but some of their main traits can be discerned. They will rely to a large extent on a new partnership between government and grassroots organizations. They will be based less on the transfer of resources, e.g. subsidized credit, than on the promotion of new institutions able to mobilize local resources, e.g. the Grameen Bank. They will have a strong non-agricultural component to capture the linkage effects of agricultural development. These activities will be located as far as possible in the rural areas to provide complimentary sources of income for peasant households and reduce the external costs of rapid urban migration. And they will have strong environmental purpose, involving the transfer of resources as payment for the reduction of increasingly-costly national and international externalities of poverty (Ibid: 144).
In addition, in many countries the state's capacity, authority and autonomy are being eroded by rapid advances of the activities of transnational corporations (TNCs) in the fields of finance, trade, transport, communications, production and consumption, i.e. by 'globalization' (UNRISD, 1995). Many national institutions have gone into decline and governments have been unable to protect their people from disturbing trends in the international economic environment. Among the most powerful of these external forces are TNCs, many of which are financially more powerful than national economies. Their main objective is the maximization of profits and this objective is frequently achieved without concern for the economic, social and environmental conditions of the developing countries in which they operate.
AS A RESULT OF MARKET-ORIENTED economic reforms, some developing countries have been successful in stabilizing their economies, shown by widespread reductions of inflation rates and political and social stability in some countries and areas formerly affected by civil strife and armed confrontation.
China, which started its economic reform as early as 1978 with the introduction of the Household Responsibility System, has achieved an unprecedented increase of its economy and its agricultural sector. In 1993, China's economy grew by 13.4 percent and in 1994 by 11.8 percent. Despite unfavourable weather conditions, agricultural growth has been 3.5 percent in recent years (FAO, 1995a: 105).
In Central and Eastern Europe, however, the agricultural sector has faced dramatic shocks. With the breakdown of the command economy, production structures and regional trade, all countries of the region have experienced sharp drops in agricultural production and declines in per caput food consumption levels. Large population groups have faced malnutrition because of declining incomes. In some cases, changes have been so great and abrupt that they seriously disrupted national food balances and endangered the functioning of national, regional and local food supply and trade systems. Although there are some encouraging signs in some selected countries that agricultural production has increased slightly in the last two years, output has not yet reached pre-reform levels.
In Africa, some countries benefited significantly from the new opportunities provided by recent developments in agricultural commodity markets. The gains from improved terms of trade are estimated to benefit 13 sub-Saharan countries by an average of four percent of GDP (FAO, 1995a: 95).
While the devaluation of the CFA in early 1994 has had a positive impact on the export sectors and overall economies of the 14 CFA zone member countries, it also has resulted in sharp increases in the prices of imported goods, including food staples, which caused a wave of strikes and demonstrations in several countries. Negative social effects continue to be felt. The living standard in urban areas has fallen and access to health care and resources for schools have been seriously affected (FAO, 1995a: 78).
In India, the substantial nominal devaluation of the rupee in June 1991 made exports of many of its agricultural commodities more competitive. Exports of rice, wheat, cotton, fruit and vegetables, fish and fish products, and meat received a tremendous boost. Yet, here again, the resulting increases in local food-grain prices have had a negative impact on food security for the poor. Poverty has increased during the last three years.
In Mexico, the peso devaluation significantly altered the price relationships between domestic and imported products. Higher prices for imported grain resulted in competitive gains for domestic producers, more direct purchases from local producers by the milling and livestock industries, and fewer purchases of imported grain. In Venezuela, too, the strong devaluation of the bolivar resulted in lower food imports. At the same time, farmers suffered from drastic cuts on subsidized credit and price support measure (FAO, 1995a: 132).
The Near East is also negatively affected by the effects of trade liberalization. The region is heavily dependent on food imports, so the reduction of subsidies on European agricultural goods (which accounts for more than 75 percent of the cost of production) is expected to cause greater budgetary outlays on imported food.
The effects of policy reforms on the poor vary considerably among different population groups. The extent of benefit or loss will depend on their income, resources, education and their access to productive resources, such as land. Reductions in expenditures for social safety nets, including cuts in the public payroll and in welfare programmes for the poor, as well as the increase of prices for imported items, including basic goods such as food, medicines and fuel, due to devaluation have had detrimental effects on the weakest segments of the population.
While it is expected that higher prices for agricultural products will have a positive effect on the agricultural sector in general, the distribution of gains and losses among rural people depends on whether they are net food sellers or buyers, whether they are producers of export or subsistence crops, and whether they have access to land, labour, credit, input and product markets.
Structural adjustment programmes have had the positive effect of facilitating the decentralization of authority and responsibility to local and regional governments and to locally-based "popular organizations."
The 1980s saw a massive rise of grass-roots organizations in part as a response to the suppression of traditional social organizations by socialist and military governments. These new organizations have taken the form of community groups, neighbourhood associations, producers' associations, etc. They provide new channels for the transfer of resources and for the management of rural development schemes. A new trend toward more democracy has emerged gradually, providing more opportunities for the rural population to participate through organizations of their own choice in the process of decision-making.
The reduction of the influence of the state has also had its impact on the flow of information, since censorship has been alleviated in many countries. Together with the rapid advances in communications and information technology, the international circulation of news and of development models has had important consequences for the cultures of developing countries.
On the one hand, it has opened windows on the outside world in closed societies, regarding for example, the exercise of democratic freedom, and enriched life through contact with other cultures and societies. On the other hand, the demonstration of violence in the relations between people, the confusing of human with economic values, and the widespread glorification of Western lifestyles inaccessible to the masses in the developing countries work powerfully against the establishment of development policies based on solidarity, self-confidence and long-term effort (UNESCO, 1995: 32).
In the field of land tenure changes, very few countries have followed the examples of East Asia. Japan, the Republic of Korea and Taiwan implemented sweeping land reforms in the 1940s and 1950s which helped to stimulate production and equity. In some countries of Asia and the Near East, land reform measures introduced in the late 1950s and early 1960s have generated worthwhile results. Efforts in Latin America suffered from the lack of supporting services which put the reform beneficiaries into difficult situations and created the impression that other, less drastic measures could be a substitute for reform.
Currently only a few countries, such as the Philippines, are implementing a land redistribution programme. The main reasons for the lack of progress in land reform in its traditional form are political considerations and vested interests.
Yet, there are still many countries where land reform has a role to play. A country which is in urgent need of an agrarian reform is South Africa, where the average size of a farm in 'white areas' is 1 300 ha, whereas it is only 1 ha in 'black areas'. A land reform law which aims at overcoming this discrepancy is currently under preparation.
In Algeria, the transformation of state-owned farms to private farms is changing the historical structure of production in the agricultural sector and improving the efficiency and competitiveness of farm activities.
In Central and Eastern Europe and the former Soviet Union, such transformations take place with varying speed and intensity. While some countries have made considerable progress in the privatization of landed property, other are reluctant to abolish the previous production structures and aim at changing the pattern of management. In this process, however, a strong polarization between the former administrators of the cooperative and ordinary cooperative members is noticeable, whereby the former frequently acquire cooperative assets under false pretenses and at the expense of the latter.
AS THE 1990S UNFOLDED, A NEW PATTERN of international relations began to emerge. The end of the cold war reduced political tensions among the superpowers and resulted in some cutting of military expenditures by the developed and the former centrally-planned economies. Yet, the "peace dividend" resources have not yet been utilized to assist developing countries.
The transition from centrally-planned to market-driven economic systems has been accompanied by problems (assumed to be short run) of economic depression and unemployment. As a consequence, some economic assistance has been diverted from developing countries to countries in Central and Eastern Europe and Central Asia which are in the process of transition.
In the field of agriculture and rural development, the new economic environment poses a number of advantages for some. It is expected that the ongoing changes towards liberalization will raise the prices for agricultural produce. It has to be recognized, however, that this development will benefit only those commercial producers and peasants who have clear access to land and that the rural poor and others who are net buyers of farm produce will lose in this process.
As it is most unlikely that the traditional type of government-initiated land reform is going to take place in the course of liberalization, it is necessary to explore new approaches to land reform.
In South Africa, for instance, the government wants to follow market-oriented reforms, rather than a state-controlled reform which in Zimbabwe and other parts of the world has proven to be costly and difficult to implement. The government intends to reduce its support to the large commercial farms in the hope that this may aid the land reform process and result in land sales by those large-scale farms which would be unable to survive in an unprotected environment. Furthermore, funding would be provided to employees in large commercial farms so that they can acquire equity and associated ownership and decision-making powers in such enterprises.
Experiences in agrarian reform in Latin America and elsewhere seem to indicate that allowing the market to determine the future course of agriculture on the basis of a viable land market and market prices is a right step into this direction. Such an approach allows for maximum individual incentives, is more efficient and avoids bureaucratization (Thiesenhusen, 1993: 17).
As the imposition of large-scale farming in the former centrally-planned economies did not bring about the results expected from the alleged economies of scale, many new governments have adopted a new land policy which favours the movement away from group or collective farming and toward "land to the tiller" (Thiesenhusen, 1993: 13). Yet, this policy was not accepted by many of the former members of the cooperatives. As they had become specialized agricultural workers on these farms, they do not possess the skill, experience nor the physical prerequisites to manage a farm on their own. Therefore, many cooperative members in Central and Eastern Europe preferred to stay on the farm unit even after it changed its form of organization and operation. What is needed, however, to make these enterprises suitable to the new economic conditions is a flexible type of management which is able to respond to the needs of the market and allows participation in decision making.
The ultimate objective of agrarian reform and rural development is the alleviation of rural poverty. As governments are gradually reducing their leading role and also their staff, new actors, such as cooperatives and NGOs have to fill this gap.
Because of their knowledge of local conditions NGOs are frequently in a better position to address rural development problems than government officials living in urban centres. Yet, a word of caution is needed. While many NGOs have been successful in promoting rural development, they have had less success in translating project success achieved at the micro level into development that is significant at the macro level. "The literature tends to assume or hope that micro-level experiences are generalizable, but rarely it explores the mechanisms through which project-oriented NGOs can transcend the spatial and temporal limitations of the project approach" (Vivian, 1994: 168).
THE RECENT ECONOMIC AND POLITICAL changes which have taken place in many developing countries and in countries in transition provide new possibilities and challenges for rural development and rural poverty alleviation.
But much remains to be done to define and implement a new approach to rural development adapted to the situation of market liberalization, state contraction, newly-recovered democratic rights and a burgeoning of grass-roots organizations, new social actors and new social movements (de Janvry and Sadoulet, 1993: 144).
While parts of structural adjustment programmes, such as the withdrawal of input subsidies and the establishment of remunerative prices for output, will improve the efficiency of agriculture, the acceleration of agricultural growth alone will not alleviate poverty. Agricultural growth takes too long to trickle down to the rural poor.
The right delineation between public and private participation in development is difficult to define, yet there is more and more general agreement that development depends to a large extent on organization, good governance, institutions, people's participation in decision-making and political consensus.
The need for community participation in development has been increasingly recognized. National governments are recommended to consider decentralized approaches to their social and development programmes. Such decentralization would increase the efficiency of government spending and be more cost effective, since projects would be more selectively suited to local needs. Local employment would increase and, since the local community will in a sense be spending its own money and residents will feel more included in the process, there would be an added incentive to lower cost and increase performance.
Development failures in the past were largely due to attempts by governments and donor agencies to do too much for too many groups, circumventing market activities. Recent experience indicates that, in order to improve this situation, governments should play a role in correcting the conditions that cause markets to fail, such as information deficiencies, lack of clear property rights and lack of a stable legal framework. Within a market framework, governments also have other important regulation responsibilities such as to establish and enforce property rights, provide public goods, carry out specific interventions to alleviate poverty and improve food security and nutrition.
While the state gradually withdraws from productive and commercial activities and focuses its role on orienting and regulating rural development activities, there is an urgent need to protect producers and consumers, safeguard national resources, and give preferential assistance to the needy segments of the population. Governments have to play an important role in this process in order to prevent market forces from leading to the exploitation of the weaker sections of society by the stronger ones.
In the past, policy orientation was in favour of large farms, although it was known that smallholder agriculture is often more efficient in terms of the ratio of energy inputs to product yields, helps to preserve biodiversity and provides a stable base of employment. Smallholder agriculture also provides a supportive base for rural communities because it has a strong multiplier effect. This in turn contributes to the development of stronger institutions for sustainable development.
A new concept of rural development should include a shift away from preoccupation with large-scale farmers as symbols of growth and toward recognition of small producers as both investment worthy and capable of producing added value (Mafeje, 1993: 22).
Yet, small producers have serious problems. The lack of irrigation and the inability to purchase chemical fertilizers and other inputs means that small farmers are unable to benefit fully from new high yielding varieties. Small farmers are unable to influence agricultural prices, which are often kept low by the government's deliberate attempt to keep food prices inexpensive for urban consumers. In order to overcome the difficulties of the small enterprise, agricultural producers have no choice other than to organize themselves, engage in self-help activities, pool their resources and cooperate with each other.
Land reform could significantly relieve pressure on marginal and ecologically-fragile lands, because in many developing countries land distribution is highly skewed with most agricultural land being concentrated in a small percentage of holdings. Land reform is, however, most difficult to implement because land ownership and land distribution reflect the power structure within a country.
One possibility to improve the land tenure situation without a drastic .reform is the introduction of a progressive land tax. This would induce intensive use of land and discourage the holding of land for speculative purposes. Attractiveness of land to the rich may also be reduced by the withdrawal of input subsidies.
As little progress can be expected in the field of land redistribution programmes in a market economy, land tenure questions have to be tackled in an indirect manner, i.e. through the reduction of subsidies, increase of land tax, provision of credit, and support to the smooth functioning of a land market.
The recognition of traditional land rights and the enforcement of those rights can provide the assurances needed by the poor to lengthen their time horizons and thus broaden their options for resource management. This recognition needs to include traditional land tenure arrangements, such as common property regimes, which are important for the sustainable use of natural resources.
Common property regimes, as opposed to open access, also can provide an institutional framework for internalizing externalities by recognizing poor people as stakeholders in the management of natural resources. A common property framework can facilitate the collective action that is needed for integrated approaches to sustainable development through the pooling of knowledge and resources.
Past experiences have shown that centralized political systems and a policy which does not give due attention to the agricultural sector are not conducive to the alleviation of rural poverty. The success of rural development requires the creation of an enabling policy environment, since isolated projects and efforts will not be able to operate under adverse political and economic conditions. Governments should allocate their limited resources to activities which are necessary for the efficient functioning of the economy and society. Even under a market economy, governments have the responsibility to assist the poor to increase their productivity and thereby try to close the gap between the rich and the poor.
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Where the theory does not fit,
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New players, new rules. For decades, land reform issues fit classical patterns; now, everything is changing,
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