Assessments
Challenges Facing World Agriculture: A Political
Economy Perspective
J. Mohan Rao
OECD-FAO, World Agricultural Outlook 2008–2017. Paris: OECD Publishing,
2008. http://www.oecd.org/dataoecd/44/18/40713249.pdf
FAO, World Agriculture: Towards 2015/2030. Rome: Food and Agriculture
Organization, 2003. ftp://ftp.fao.org/docrep/fao/004/y3557e/y3557e.pdf
IMF, Food and Fuel Prices — Recent Developments, Macroeconomic Impact
and Policy Responses: An Update. Washington, DC: International Monetary
Fund, 2008. http://www.imf.org/external/np/pp/eng/2008/091908.pdf
FAO, Livestock’s Long Shadow. Rome: Food and Agriculture Organization,
2007. http://www.fao.org/docrep/010/a0701e/a0701e00.HTM
INTRODUCTION
The central challenge facing the world food system is the long-unfulfilled
promise of eliminating hunger and ensuring food security for all. It bears
witness to profound inequalities in economic access to food structured by
unequal production and market relations. This ‘long-term’ global problem
is not going away soon. Apart from these inequalities, that current policies
can only perpetuate, agricultural trends for the coming decades are far from
hopeful. Inequalities within the global South have risen in recent decades
leaving some fifty or so least developed countries with rapidly rising populations and labour forces, declining land bases on account of ecological stress
and climate change, stagnant land and labour productivities, and severely
compromised food security. The massive food price increases witnessed
over the last four years that produced deep distress among hundreds of millions of the poor and food-insecure across the world might also be seen as a
needed warning to the national and international powers of the costs of gross
disregard and fragile palliatives. That the price increases were themselves
chiefly due to the sucking up of agricultural resources by the subsidized
growth in demand for bio-fuels in the advanced countries, and also to the
galloping growth in demand for luxury foods, further underlines the role of
global income inequalities. Thus the recent price surge presages the shape
C Institute of Social Studies 2009. Published
Development and Change 40(6): 1279–1292 (2009). by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main St.,
Malden, MA 02148, USA
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of things to come with the ever-tightening linkage within the food–fuels
complex, which climate change and rising energy prices can only aggravate.
This Assessment aims to review the long-term prospects for global agriculture in assuring food security for all, to anticipate socio-economic gaps
that current structures, policies and practices portend, and to propose a political economy perspective going beyond business as usual that is required
to critically assess defensible valuations and effective solutions. The review
and anticipations draw on two comprehensive reports on world agricultural
prospects: the World Agricultural Outlook 2008/2017 (OECD-FAO, 2008;
hereafter the Outlook) and World Agriculture: Towards 2015/2030 (FAO,
2003; hereafter the Report). These are supplemented by an FAO assessment
of agriculture–environment links (Livestock’s Long Shadow, 2007) and an
IMF position paper on the food price crisis (Food and Fuel Prices — Recent
Developments, Macroeconomic Impact and Policy Responses: An Update,
2008). They are deployed to assess broad trends and challenges relating to
agricultural supply, basic food needs and luxury food demands, and also to
describe the inertial momentum of existing policies and their underlying assumptions and values enshrined in the dominant neoliberal paradigm. While
both studies commendably adumbrate and incorporate this inertial momentum in their projections, neither avails of a consistently critical appraisal
sufficient to the mounting challenges. In this sense, their projections and
policy proposals serve as the baseline defining business as usual from which
an alternative perspective might be ventured.
Over the past quarter century, a standardized well-honed policy package
has come to be prescribed throughout the global South. Neoliberal in inspiration and emanating from the World Bank, the IMF, the WTO and IFPRI,
it prescribes getting agricultural prices ‘right’, substituting the market for
public action, and defining ‘land reform’ as well-specified private property
rights. It has made agricultural trade liberalization de rigueur despite chronic
price instability in world markets and the collective immiserization that must
follow for primary goods exporters. Reposing bottomless faith in the market
(even where it does not exist or must fail), it has sought to fiscally starve and
mortally disable public sector institutions in a self-fulfilling cycle that would
diagnose defects and prognosticate failure without offering constructive reforms. Public expenditure and policy actions — for agricultural research
and development, improved water availability and control, integrated systems for training and extension services, access to rural credit, and the
provision of market and physical infrastructure — that played a historic role
in getting agriculture moving in countries as disparate as the United States
and India, came to be emaciated in the very countries that had remained
largely untouched by the ‘Green Revolution’ of the previous quarter
century.
Under structural adjustment conditionalities and bilateral programmes of
‘aid’, both spearheaded by the World Bank’s vision of agricultural development spelled out in its World Development Report 1982 (World Bank,
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1982), agricultural (and non-agricultural) output prices were required to be
aligned with border prices through wholesale trade liberalization. All forms
of input subsidy (on both private inputs and quasi-public inputs) were to be
set to nought. All government interventions in domestic markets (including
price stabilizations) were to be eliminated and government involvement in
procurement and marketing systems abolished. The fact that these formulaic prescriptions were conjoined with IMF-style stabilization programmes
meant severe fiscal retrenchment that drastically curtailed public inputs and
services for agriculture. As a consequence, the inevitable if reluctant rhetorical recognition of the value of agricultural research, extension and other
public services was not matched by the actual resource allocation decisions
that came in the wake of the conditionalities.
The package found fertile soil in countries that, hobbled by fiscal and
external debt burdens, were least able to resist it and yet could least afford
to adopt it. The evidence on the package is now in and, much as in the
case of neoliberal financial liberalization and deregulation, points to costly
failures. This much seems to be acknowledged even by the architect and lead
promoter of that package, in its second World Development Report devoted
to agriculture a quarter century after the first (World Bank, 2007). This mea
culpa notwithstanding, the internal evidence of that report gives no proof
that the Bank has undergone a radical change of heart or mind. The nuanced
and complex, not to say confused, reinterpretations of the record remain
largely confined to rhetoric while the main policy prongs advocated remain
as simple-mindedly and firmly wedded to the market-centred vision.
If further polarization between wealth and misery — most obviously
manifest in a billion hungry people, each of whom could be fed for a
full year with the grain that is now being converted into ethanol to fill a
25-gallon SUV gas tank — will be avoided, alternative policies must be
found. Some of these will require reversing the missteps during the lost
decades of development — going back to old-fashioned land reforms, mobilization of surplus labour and collective action for infrastructure building,
co-operatives for credit and input supply, and bringing a revamped state back
in to regulate markets. In addition, efforts must be made to organize research
and extension as public goods (including internationally organized biotechnology for the developing countries), provide irrigation and infrastructure,
and co-ordinate actions that will be needed to adapt to climate change —
all vital areas where invocation of the market mantra is either delusory or
self-serving.
The baseline also infers political-economic lessons from the recent worldwide food price crisis as well as from the growing linkages between agriculture and the energy-cum-environment complex. Scientific assessments of
the broad impacts of climate change have achieved a fair degree of consensus but detailed projections, especially as they relate to conditions affecting
agriculture, where local variations abound, will gain precision only as the
impacts themselves materialize in markets, on livelihoods and at the level of
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social-political adaptation, action and conflict. A political economy approach
is as relevant in this area as in the more traditional areas of concern such as
the management of land, water and produced means of production, as these
are appropriated and utilized through unequal structures of resource ownership and access, malfunctioning and manipulated markets, and systems
of political influence that work with, rather than against, these inequalities
and malfunctions. In both cases, making sense of demand–supply and resource use projections in terms of what they actually mean for food security,
poverty and the global distribution of income clearly must be the first order
of priority. That is the purpose that this Assessment intends to fulfil even if,
owing to limitations of space, only at a relatively high level of generality.
TRENDS AND CHALLENGES THROUGH 2030
The Report finds that the target of halving the number of undernourished
people by 2015 will not be attained and may remain out of reach even by
2030, mainly because many countries will experience continuing setbacks
and low rates of agricultural growth. Uneven growth implies that agricultural
productivity and farm income levels across the world — which are already
as unequal as overall national incomes per capita — will diverge even more
in the coming decades. All three main growth sources, namely, expanding
land area, raising cropping intensity with irrigation and boosting yields, have
witnessed a falling off during the 1990s. Wheat and rice yield growth rates
halved as compared to the earlier decades and growth in fertilizer input has
slowed as well.
Virtually all of the production slowdown is accounted for by the fall in
the average annual rate of demand growth, from 2.2 per cent during the
period 1970–2000 to an anticipated 1.5 per cent over 2000–2030. Behind
the demand deceleration is declining population growth in many regions and
a falling off in per capita demand growth elsewhere as saturation levels are
being approached. For just those reasons, the drop-off in demand growth will
also be far more pronounced in developing countries considered as a whole,
from 3.7 per cent to 2 per cent. The conclusion that food demand leads
food supply — when taken together with the stubborn persistence of global
hunger and undernutrition well into this century — underscores the crucial
point that food needs go unmet because they fail to materialize as effective
market demand. This, in turn, is almost entirely because of income inequality
and associated poverty, not due to any food supply constraint as such. In this
light, it is quite puzzling to find the Report summing up the overall prospect
in terms of market balance and imbalance: ‘world agricultural production
can grow in line with demand, provided that the necessary national and
international policies to promote agriculture are put in place’ (p. 1). Surely
the issue is not whether the world can balance demand and supply but
whether it can meet requirements with availability? Here as elsewhere, the
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Report lacks consistent focus on the central challenge referred to at the outset
of this paper.
The Report generally downplays the impact of global warming, averring
that food availability levels will not suffer any global decline on that account,
at least until 2030. While crop production potentials are likely to be adversely
affected in the tropics and subtropics, they will be compensated by increases
in temperate and northerly latitudes. The implications are that the dependence
of developing countries on food imports will deepen and food insecurity for
vulnerable rural groups will worsen. Grave problems can also be anticipated
in populous countries such as Egypt and Bangladesh with considerable
amounts of low-lying arable lands. The Report remains highly optimistic
that seed-fertilizer improvements can address most if not all the anticipated
problems.
The FAO-OECD Outlook, published six years after the Report, cannot
take so sanguine a view even though it works with a shorter time horizon
(2017 rather than 2030). Indeed it does not, in recognition of the heightened
knowledge and awareness about climate change during the intervening years
and, perhaps equally important, the food crisis induced by the dramatic rise
in food prices. Much like the Report, the Outlook finds that food and feed
remain the largest sources of agricultural demand growth. But the demand
for feedstock driven by the growing bio-energy sector has become the most
dynamic element in recent years. There has been a growing conversion of
agricultural outputs — traditionally foods and feeds such as cereals, sugar,
oilseed and vegetable oils — into inputs for the production of the fossil fuel
substitutes, ethanol and bio-diesel. The Outlook forecasts an approximate
doubling of ethanol and other bio-fuels in each of the major producing
regions of the EU, the US, Brazil and China. This fast-rising component of
demand is the primary cause of the food price crisis and is fundamentally
restructuring agricultural markets worldwide.
The most troubling implication for the food economy is the consequent
rise in the expected long-term trend of global food prices both directly
(from rising prices of the crops that serve as fuel inputs) and indirectly
(rising prices of other food crops that lose land and other resources to the
fuel crops, including important livestock products from higher animal feed
costs). Nominal and real food commodity prices over the horizon (2008–
17) will be substantially greater than the levels of the preceding ten years
(1998–2007). Just how much higher average real prices will be can be
gleaned from the following important cases: 18 per cent for the real price
of wheat, 32 per cent for coarse grains, 8 per cent for rice, 37 per cent for
oilseeds and 55 per cent for vegetable oils. As for the trend, the Outlook
estimates that from these higher average levels, food and agricultural prices
will resume their longer-term decline although at a slower rate than in the
past. This conclusion must be taken with great caution given the uncertainties underlying its assumptions, a matter to be taken up in the following
section.
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Rising prices are bound to have far-reaching effects on hunger, undernutrition and poverty worldwide, in many cases perhaps enough to wipe
out any gains from income growth. The Report warned that sharply rising
food prices would rapidly raise the share of undernourished in developing
countries above the current 40 per cent of total population. Since average
household expenditures on food in low-income countries exceed 50 per cent
of income, the adverse impact could represent a considerable step backward
from the lofty first Millennium Development Goal to ‘eradicate extreme
poverty and hunger’ (UN, 2009: 6). Among the ultra poor, who spend up to
80 per cent of their income on food and account for about a billion people,
this could spell disaster of the same order as was witnessed in the recent food
price crisis. With much smaller shares of food expenditure among the upper
deciles of the world income distribution, real income inequalities must perforce rise everywhere. The poor are also more vulnerable to price volatility
which the Outlook expects to increase owing to greater weather fluctuations induced by climate change and the growing weight of speculative
non-commercial funds flowing into agricultural futures markets.
With rising average incomes, diets are also expected to shift in developing
countries. The share of meat, dairy products and oil crops will continue to
rise while that of cereals, roots and tubers will fall. The growing share of
luxury foods implies another major source of rising prices as these resourceintensive commodities will further reduce resources available for the staples,
and represents yet another mechanism of real income transfers from the poor
to the rich. Since the luxury foods are also becoming more trade-intensive,
price volatility for the staples will add to the real income uncertainties that
the poor, lacking any means to insure themselves, must bear.
As already noted, both the Report and the Outlook predict rising food
import dependence in developing countries. The Report forecasts net cereal
deficits to rise from 9 per cent of consumption in 1997–99 to 14 per cent
by 2030. These aggregates conceal much sharper increases in import dependence among chronic food-deficit countries. No doubt this growing gap can
be bridged, as the Report concludes, by rising surpluses from traditional grain
exporters and new entrants into world markets. But growing dependence
implies a host of hardships due to world price volatility, foreign exchange
constraints, political vulnerability from export embargos and economic vulnerability from export restraints that may be invoked in times of crisis.
The price projections in the Outlook are based not on conservative but
fairly heroic assumptions including sustained worldwide economic growth,
contained inflation, constant real exchange rates and unchanged policies.
Unusual weather conditions including impacts of climate change and water
shortages, though acknowledged as posing potentially serious threats, are
also assumed away. As with global warming itself, however, prudence demands unfavourable scenarios be given due weight. The likelihood that real
prices actually trend sharply upward due to the energy–food linkages —
that are no longer transitory and due to climate change — cannot be left
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as an afterthought but must be woven into the basic projections. Since the
critical assumptions include ‘unchanged policies’, serious reconsideration
of the embedded policies also promises the required remedy.
There is another reason why the projections contained in the Outlook and
Report must not be taken at face value. The conclusion that the world food
system has been highly responsive to demands and that market ‘shortages’
are best remedied by removing market restrictions ignores the normative
requirements of food that alone constitute the basis of any reasonable definition of food security. But meeting these normative requirements will surely
require radically rethinking existing policies for raising food supply and for
augmenting the food purchasing power and other entitlements of the food
insecure.
For both these reasons, it is reasonable to re-examine the policy assumptions underlying the projections. The Report sensibly recommends giving
priority to local food production and reduced inequality of access to food in
order to improve outcomes for a large part of humanity that suffers significant degrees of food insecurity. This is especially important for low-income
countries with high dependence on agriculture for employment and income.
The Report also recognizes that the sine qua non of upgrading overall development performance in the lagging countries and making it pro-poor cannot
be met unless agriculture is accorded a crucial developmental role. But these
recommendations either run counter to or remain unfounded in the other
positions that the Report simultaneously advances.
The normative insistence on liberalized trade conflicts with the normative
priority recommended for ‘local food production’ which may also explain
why the latter proposal, in the final analysis, forms neither an integral nor
a robust component of the overall policy stance presented. This reflects
contestable beliefs about future promise and past performance. For one,
it is maintained that lowered trade barriers in all areas will confer large
benefits on developing countries’ farmers and that a more export-oriented
agriculture could fuel both growth and poverty reduction. The argument that
these benefits will come mainly from the removal of trade barriers to market
access in the advanced countries rather than from the removal of their export
and production subsidies (which is itself a mixed message on the virtue of
liberalized trade) does not fundamentally detract from the Report’s trade
optimism. For another, the Report argues that globalization has been basic
to reduced poverty and food insecurity in Asia (much as the World Bank has
argued that the East Asian growth miracles are attributable to a liberal policy
framework echoed in the Washington Consensus). The only qualification to
these neoliberal nostrums is the need to institute legal and administrative
frameworks to forestall the growing power of multinational food companies
that disempower developing country farmers.
There is a parallel insistence on markets within domestic frontiers as the
mainstay for overcoming production bottlenecks and raising food entitlements. Coming as this does in the aftermath of decades-long cutbacks in
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public investments and services for agriculture and given the compelling
need to restore and raise these public goods and services, the Report fails
to convey the urgency of revamping the public sector as a fundamental,
indeed primary, instrument for pushing agriculture forward and advancing
employment-intensive programmes to raise food security. The Report is not
quite as unabashed as is the IMF (Food and Fuel Prices) in its embrace of
the market vision. In relation to the recent food price crisis, for example,
the IMF states that ‘from an efficiency standpoint, it makes sense to pass
on the full price increases to consumers because this will encourage producers to increase supply and consumers to reduce demand’ (p. 3). This serves
as the central plank, a touching faith in the magic of prices to deliver all that
is needed to raise agricultural output, employment and productivity. But the
pangs of consumers who are ‘to reduce demand’ may be relieved, if possible, with palliatives: ‘At the same time, the poor must be protected . . . But
many low-income countries have neither the capacity nor the fiscal means
to [develop a well-targeted social safety net]. Understandably, most affected
countries have therefore had to adopt other policies that could be implemented quickly’ (ibid.). Since the rest of the IMF package is designed to
incapacitate states fiscally and organizationally, the actions needed ‘at the
same time’ and ‘quickly’ remain in limbo, the central problem of food security left hanging at the altar of getting prices right. Far from challenging
these assumptions and inconsistencies, the Report leaves the impression of
backing them despite its avowed commitment to agricultural development
and food security.
The upshot of an expansive commitment to the rule of the market coupled
with the effective undervaluation of the role of governments leaves smallscale producers to their own devices in coming to terms with the growth
of corporate, industrialized agriculture that is making deep inroads into
developing countries through large-scale acquisitions of land, high-profit
sales of genetically modified seeds and industrial inputs, rapid growth in
the domains of contract farming, and increasing penetration of farm-toretail food chains. The Report seems to acknowledge as much with the
claim that ‘the problem of undernourishment will tend to become more
tractable and easier to address through policy interventions, both national
and international . . . as the number of countries with high incidence declines’
(p. 2). This unobjectionable tautology says nothing, however, about what
needs to be done to address the urgent and immediate imperative of reducing
that ‘high incidence’ in the first place.
BEYOND BUSINESS AS USUAL
In a world still bedevilled by chronic hunger and food insecurity, it seems
paradoxical that only the effective demand for food constrains world supply.
Yet, within many developing countries, agricultural underdevelopment and
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the concomitant low supply of food products are the primary constraints on
the effective demand for food, since agriculture accounts for a large share
of mass employment, incomes and food expenditures. If agricultural supply is raised without generating much mass employment or incomes (e.g.,
through mechanization, growing land concentration and corporate commercialization), peasant and petty producers may be rendered poorer by the
consequent fall in output prices, and the non-agricultural sectors may also
suffer from a fall in their demand base. But if agricultural supply is raised in
an egalitarian, employment-intensive fashion, then rural producers will see
their incomes rise which will also spill over as added demand and higher
profitability for the non-agricultural sectors. The design of appropriate agricultural development policies (that determine the character of agricultural
development) is, therefore, crucial to bringing about a high rather than low
demand–supply equilibrium in the food market. It follows also that improving mass incomes and food security will complement rather than detract
from overall economic performance.
These structural features characterizing the home market of poor
economies are critical not only for their purely ‘comparative static’ potential
just noted, but also as fundamental determinants of economic development
arising from the dynamic mutual interdependence of the agricultural and
non-agricultural sectors, on both the demand and supply sides. Growing
exchanges of final and intermediate goods, labour movements and flows of
investable resources can anchor, on the supply side, a cumulative process of
rising specialization and productivities and, on the demand side, rising intersectoral effective demands, capacity utilization and inducements to invest. A
third arm of this mutualism is fiscal: higher utilization and investment levels
will raise public revenues, relieving the fiscal constraint on overall public investment and, in particular, on public investments for agriculture. Since such
investments and expenditures embody government interventions, cultivating
this three-sided interdependence (of agriculture, non-agriculture and fiscal
sectors) to raise economic growth and food security is very much a matter
of getting state interventions right — even if it means getting agricultural
prices ‘wrong’ according to neoclassical strictures (Rao, 1989).
The African experience illustrates well the benefits that would be available
with a policy course mindful of the complementarities delineated above, and
the avoidable costs that in fact have been extracted by market liberalism.
Consider the latter point first. In the neoliberal view, food trade does not
conflict with the goals of food security and equitable development. On
the contrary, the gains from specialization make it easier for countries to
pursue food security. This ignores the plain fact that exposure to narrow
and unstable international markets is a major source of food price instability
and associated food insecurity. Both vulnerable producers and consumers,
lacking other means for achieving food security, would be better off in
domestic markets that are, in some significant measure, sheltered from such
instability. The liberal viewpoint also takes free trade to be both optimal
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for growth (in view of the gains from trade) and pro-poor (since the more
abundant factor, labour, stands to gain). But this is premised on the static
case while disregarding the actual pattern of trade. Since significant parts
of North–South agricultural trade remain (Africa most especially), in point
of fact, complementary rather than competitive, any global imposition of
liberalized trade imposes the costs of the ‘fallacy of composition’ (Rao and
Storm, 2003). These costs are heightened when, as has indeed been the case
since the WTO agreements on agriculture came into force, the imposition
occurs in a context where hardly any progress has been made in dismantling
the protective-promotional policy regimes in the advanced countries. Even
for a single country, liberalized food exports will raise domestic prices
thereby not only reducing the purchasing power of urban and rural workers
and poorer peasants but also compressing effective demand, facing nonagriculture with attendant losses of output, government revenues and growth
momentum (Storm, 1997).
Meanwhile, the imposed regime shifts have induced, on the one hand,
excessive faith in the efficacy of agricultural prices to produce agricultural
supply response and, on the other, reduced fiscal and organizational capacities to provide public agricultural inputs and services (Rao, 1999). The fundamental contradiction in the present world trade regime is then between the
Herculean efforts devoted to enforcing international policy convergence and
the radically divergent initial structural positions that actually exist across
nations. Under the trading rules institutionalized in the WTO, the promised
gains, even by orthodox calculations, are static and minuscule, dwarfed by
any realistic assessment of the dynamic, fiscal and social-distributive costs.
Paradoxically, the rapid changes underway in the world food system are
posing the real threat of sharply rising food prices over the long haul, while
the threat from the dismantling of US and EU protectionism remains on paper. Developing countries would do well to convert this into an opportunity
by appropriately valuing food-agriculture without inviting the costs of free
trade by resisting imposed liberalizations.
In many African countries, the imposition of a single-minded focus on the
putative benefits of trade has detracted from the role of the home market.
This has led to alternating phases of agricultural optimism and pessimism,
reflecting more the cycles of trade and its fiscal repercussions than any
fundamental understanding of either productive potentials or comparative
advantage. Structural adjustment in the 1980s dismantled public institutions that supplied farmers with credit, insurance, access to land and other
services. Gone also are the days when commodity export regulations and
agreements ruled. The full brunt of these liberalizations fell on government
revenues which never really recovered from the retrenchments and African
agriculture, particularly the smallholder, has paid the price.
African agricultural productivity levels have long been held back, in the
main due to lack of new crop varieties and improved water availability
and control (Woodhouse, 2009). This cannot change unless African states,
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jointly and severally, invest in agricultural research and in improving water
control and access. There is pressing need for a renewal of public sector
biotechnology development for and in developing countries. If the poor
are to benefit from agricultural innovation, more attention may need to be
paid to investment in ‘public goods’ that reduce risks. Woodhouse notes the
potential for and actual cases of success of integrated pest management on
and off farms and, above all, of water control projects extending from largescale irrigation to small-scale stream diversions, all of which will require
co-ordination ‘at scales beyond the individual farm’ (ibid.: 273).
Political and administrative constraints are not immutable and, at any rate,
must be changed if Africa is to seize its own development potential. They will
also need to resist the influence of development agencies and donors who,
following the World Bank’s lead, continue to assume inconsistently that unregulated markets will evolve spontaneously to benefit the rural poor even
while acknowledging widespread market failure particularly in input supply,
credit, irrigation, research and extension. Similarly, while recognizing that
dynamic input markets in Asia and Latin America developed on account
of complementary public investments in irrigation, roads, marketing infrastructure and financial services, the Washington Consensus seems oblivious
of the systematic emaciation of complementary investment in Africa. Even
when this crucial gap is acknowledged, the inconsistency persists since it is
not backed by feasible policies for funding the investments.
To sum up, the formal obeisance to market principles in food-agriculture
either conceals or ignores the effective undermining of peasant and subsistence producers that the neoliberal approach embodies. The presumed
non-viability or inefficiency of small-scale production (by no means confined to agriculture since neoclassical analyses of small-scale manufacturing,
for example, typically find them to be ‘inefficient’) effectively implies that
large parts of developing economies have no good ‘reason’ to exist except on account of inappropriate state policies. But these judgements about
‘viability’ and ‘efficiency’ repose unfounded faith in the unregulated market’s ability to assure full employment for all and in the capacity of modern
industry and services to absorb a potential reserve army of labour that is
typically six to ten times as large as the numbers they presently absorb. To
leave peasants to the mercy of so-called liberalized trade, benefits neither
the peasants themselves nor even the country in question but only redounds
to the benefit of consuming countries (often among the rich North) and of
both traditional and corporate market intermediaries.
High concentration of land ownership and of control over other natural resources constitutes the greater part of initial inequality in low-income
countries. This has demonstrable consequences for productivity, growth and
subsequent inequality by limiting the share of agricultural output accruing
to agricultural workers and peasant-owners, reducing the productive capabilities of workers and so total income, and by reducing land yields and
the demand for labour on large farms. In dynamic terms, land inequality is
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associated with slow agricultural growth and labour-displacing technological change both of which tend to raise poverty by raising the price of food and
restricting employment growth. Although the proximate causes of these consequences often work through ‘distorted factor markets’, the distortions are
themselves traceable to the inequality of assets. It follows that real redistribution of land to the poor (not the fake ‘market-friendly reforms’ promoted
by the World Bank) can be a very important instrument for raising efficiency, speeding up growth and reducing poverty. This fundamental proposition is abundantly affirmed by the experience from early land reforms in
East Asia.
Agricultural sustainability looms large as a serious challenge for the world
food system both at local and global levels. The Report offers an assessment
of the extent and intensity of resource use over the horizon year 2030. It
concludes that the pressure on resources and consequent degradation will
continue to build up though at a slower pace than before. It maintains that
rural poverty will continue to constitute the main source of these pressures
and invokes the neo-Malthusian argument that many areas will suffer from
a vicious circle of poverty and resource degradation. But this conclusion
says nothing about the economic and political inequalities that lie behind
poverty and that must be seen as the basic causes of both poverty and
resource pressures. It also misses the essential connection between the consumption patterns of the rich (within the South and the North) that underlie
resource pressures and displace poor and marginal groups into ecologically
fragile areas. Together with concentrated resource control, this degradation
from above drives adverse environmental consequences both directly and, by
forcing degradation from below, indirectly (Rao, 1995). The neo-Malthusian
argument, therefore, blames the poor victims. Poverty and demographic pressure may be proximate causes of environmental degradation and subsistence
crises, but it is inequalities in the control over land and in access to capital
that underlie the virulence of both of these supposed ‘causes’ of resource
degradation.
At the global level, agriculture accounts for 22–30 per cent of global greenhouse gas emissions, the lion’s share of which comes from livestock (FAO,
Livestock’s Long Shadow). The shifting composition of food consumption
driven by growing ‘meatification’ of diets requires growing volumes of feed,
deforestation of the Amazon, increased fertilizer intensity, fossil-fuel based
transportation across international borders, animal methane, and so on. The
paradox of climate change is that although Southern growth is likely to contribute disproportionately to the increment of carbon emissions and Southern
populations suffer disproportionately from the impacts, neither of these projections would come to pass but for the monumental stock of emissions from
the North. Apart from this historical inequality as source, the correlation between climate change impacts and present socio-economic inequalities can
also be expected to be unfavourable to the need for concerted political action
for both mitigation and amelioration since the rich in the South — gainers
Assessment: Challenges Facing World Agriculture
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from growth — will be the least losers from climate change while the poor —
losers from growth — are also likely to lose the most from climate change.
In India’s case, for example, climate impacts are expected to be strongly correlated with currently prevalent economic, regional and social inequalities
with agriculture and the rural population being most at the receiving end.
The projected physical impacts under various scenarios cannot by themselves provide clear directions for corrective actions without an assessment
of weights to be placed on the real human consequences. That will depend
on the valuations we place on the impacts and, of course, these would vary
depending on who the ‘we’ are taken to be. Central to contested descriptions
and conflicting evaluations are the prevailing structural inequalities and the
uneven playing fields of political and ideological influence. Unfortunately,
widespread agreement among economists — that the Pareto criterion (an
‘improvement’ obtains if and only if at least someone gains and nobody
loses), in theory, and market-price-weighted GDP values, in practice, suffice to make all valuations of benefits and costs — will present an important
obstacle to enlightened policy, leave alone any concern about justice. Consider, for example, Nordhaus’s (1994) attempt to assess global damage costs
from climate change using per capita income (and population figures) for
countries around the world, a utility function allowing diminishing returns
to income, and conversion of these into an aggregate measure of global
welfare. The calculation altogether ignores intra-generational inequalities.
In another instance of immoderate claims based on the ‘market knows best’
dogma, Lord Stern (2007) valued human displacement, disease and death
across the world in the wake of climate change at the widely different per
capita incomes across nations and their underlying market prices. To say
the least, the commensurability of these effects with the financial value of
consumption is highly debatable.
This applies as well to the valuation of risks. Prudence in the face of risks,
some extreme, may not be easily forthcoming for the simple reason that if
the majority of the poor have the widely alleged high rate of discount on
the future, political systems and elites in the developing world, which seem
to be in a rush to catch up with their counterparts in the affluent West, may
have little desire to slow the engines of upper class income growth in the
cause of averting even the worst effects from climate change. Uninformed
economic calculation can only end up proving an unwitting bulwark of such
‘rationality’. The supposed objectivity of such economic valuations withers
in the face of the most important standing dispute over global warming: the
poor South, late-comers to the fossil fuels party, holding the rich Northern
pioneers responsible for the costs and restraints needed for the cleanup.
So ‘bygones’ that are supposed to be ‘bygones’ in the economic calculus
evidently are not and it will not do to argue that the South’s position is
merely rhetoric designed to mask their true (rational?) interests.
None of this is to say that calculations need not be made in arriving at
policy choices. But without some yardstick of justice, they must remain
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meaningless. If distributive justice issues here and now within generations
are not addressed, then, inter-generational justice which many take to be
the only relevant idea of sustainability (or justice for that matter) is liable
equally to remain stymied.
REFERENCES
Nordhaus, W.D. (1994) Managing the Global Commons: The Economics of Climate Change.
Cambridge, MA: MIT Press.
Rao, J.M. (1989) ‘Getting Agricultural Prices Right’, Food Policy 14: 28–42.
Rao, J.M. (1995) ‘Whither India’s Environment?’, Economic and Political Weekly XXX(13):
677–86.
Rao, J.M. (1999) ‘Globalization and the Fiscal Autonomy of the State’, in Globalization with a
Human Face: Background Papers. Vol I, pp. 327–60. New York: UNDP.
Rao, J.M. and S. Storm (2003) ‘Agricultural Globalization in Developing Countries: Rules,
Rationales, and Results’, in C.P. Chandrasekhar and J. Ghosh (eds) Work and Well-Being in
the Age of Finance, pp. 212–55. New Delhi: Tulika Publishers.
Stern, N. (2007) The Economics of Climate Change: The Stern Review. Cambridge: Cambridge
University Press.
Storm, S. (1997) ‘Agriculture under Trade Policy Reform: A Quantitative Assessment for India’,
World Development 25(3): 425–36.
United Nations (2009) ‘Millennium Development Goals Report 2009’. http://www.un.org/
millenniumgoals/ (accessed 11 September 2009).
Woodhouse, P. (2009) ‘Technology, Environment and the Productivity Problem in African
Agriculture: Comment on the World Development Report 2008’, Journal of Agrarian Change
9(2): 263–77.
World Bank (1982) World Development Report 1982. New York: Oxford University Press.
World Bank (2007) World Development Report 2008: Agriculture for Development. Washington,
DC: The World Bank.
J. Mohan Rao is Professor in the Department of Economics, University of
Massachusetts at Amherst, USA (email: [email protected]). His principal research fields include economic growth, income distribution and
institutional change in developing economies. In relation to agriculture,
his contributions have focused on agrarian institutions and on sectoral and
macroeconomic policies for agricultural development.