Growth and Poverty Mailing List Archive

[Buddhika Samarasinghe <<address removed>>]

Dear Professor Duncan,
 
We have been following the recent debate developed in the two thought
provoking pieces written by Simon Maxwell and Michael Lipton with great
interest. The debate thus far seems to be on lines of the relevance or
otherwise of agriculture directly for poverty reduction based on the fact
that the majority of the poor throughout the developing world live in rural
areas. 
 
Focusing on only one sector, albeit one as important as agriculture, runs
the risk of ignoring the great wealth of knowledge developed about growth
and what makes it more or less pro-poor. 
 
The role agriculture plays in poverty reduction depends very much on the
pattern of growth. There has been some hint of this in the current debate,
but we believe that the issue needs greater attention so that aid for
agriculture fits in with wider initiatives to promote pro-poor growth. To
assess the importance of policies for pro-poor growth and growth patterns,
at the risk of huge generalisation, let us consider three patterns of
growth:
 
 
1. Industry Led Growth (Asian) 
 
In this instance, the growth momentum of the economy derives from industry.
The growth of agriculture, in particular agricultural productivity, helps to
make growth pro-poor. This is particularly the case if agricultural growth
precedes industrial growth, as Michael Lipton points out. When agricultural
productivity does not improve, then growth is less pro-poor as evidenced by
Datt and Ravillion in India. When agricultural productivity rises, the
result reinforces the effect of growing demand for labour from industry. In
effect, wages increase in both industry and agriculture making growth
pro-poor.
 
 
2. Agriculture Led Growth: Mainly Smallholder Agriculture (Africa)
 
Many countries in Africa today (such as Zambia, Malawi, Nigeria) and various
episodes in the past in Asia have witnessed this form of growth. The result
of agricultural led growth, associated with productivity increases due to
technological change and / or migration, does result in pro-poor growth
(even if in the Zambian case incomes of the poor fell by less than average
incomes). However, unless it is accompanied by growth of other sectors, it
is unlikely to result in the very high sustained rates of growth for rapid
poverty reduction - for example in India the Green Revolution on its own did
not lead to rapid growth. In the absence of growth in other sectors, there
is a danger that agricultural led growth will stall. Without a shift in
demand for agricultural products, prices fall and this reduces the incentive
to continue to increase agricultural productivity. If agriculture is export
orientated the fall in agricultural prices may occur as a result of
declining terms of trade or periodic downturns in commodity markets. The
growth of other sectors of the economy has to be of sufficient quantity and
quality to shift demand significantly. A move into low productivity informal
sector livelihoods may not be sufficient as Africa is proving.   
 
 
3. Agriculture Led Growth: Commercial Agriculture (Latin American / Southern
African)   
 
This type of growth has been prevalent in Latin America, although not
exclusively limited to countries in the region. Once again, although growth
rates can be high, they are unable to reach the very high rates (above 6
percent per annum) required to have a significant impact on poverty
reduction. In addition, this type of growth is likely to result in increased
disparities in incomes which may derail growth through social conflict. The
participation of the poor in agriculture is mainly in the form of waged
employment. For wages to rise, the labour market across the economy as a
whole has to tighten and this unlikely if agriculture is the only sector
experiencing growth. In fact labour use in agriculture may rise by little,
despite growth, due to growing labour productivity. 
Clearly, the role of agriculture in poverty reduction varies with the growth
pattern. In the Asian paradigm, it plays the role of making growth pro-poor.
In the African agricultural led growth with smallholders, agriculture is the
lead sector and ensures that growth is pro-poor. It needs substantial rise
in non-farm incomes though to sustain growth and poverty reduction. In the
Latin American example agriculture may lead growth but such growth is
unlikely to be pro-poor unless other sectors are growing alongside
agriculture. 
 
The reasons why agriculture by itself can not address poverty reduction lies
in points Simon Maxwell makes in his paper, namely the low income elasticity
and high price elasticity of the vast majority of commodities produced by
agriculture. This, combined with the very large increases in productivity
that are possible to shift the supply side, means that successful growth in
agricultural commodities can lead to a fall in unit value of agricultural
output, thus dampening growth rates in the sector. 
 
This is why the policies associated with high rates of sustained pro-poor
growth are necessary. They should result in broad based growth as they
create enabling conditions for all sectors including agriculture. Without
such policies in place it is highly unlikely that growth will be sustained
and that any amount of assistance to agriculture will deliver sustained
poverty reduction. With such policies in place agriculture's role in poverty
reduction will depend upon the pattern of growth. 
 
Whether one subscribes to the Sachs and Warner "Resource Curse" theory for
agricultural dependent economies or not, we know that sustained periods of
rapid growth require that growth be broad based. Tempting as it may seem to
focus on the sector that provides the livelihoods of the majority of the
poor, it is highly unlikely that that sector alone will be able to deliver
the poverty reduction required despite Michael's assertion that productivity
growth can compensate for declining prices. We don't think (hope) that
Michael is arguing that the Green Revolution by itself transformed the
countries of Asia. A more equitable international trading system may help
reduce the bias in terms of trade against agriculture but it is difficult to
see how a situation where it is removed completely will develop unless
consumption patterns the world over change dramatically. 
 
The type of assistance to agriculture will clearly depend on the type of
agriculture practised and the pattern of growth it forms part of. The type
of agriculture practised in Latin America may well benefit from land
redistribution to help make growth pro-poor. In Africa, the best way to
support agriculture may be through supporting the growth of agricultural
based manufacturing for domestic and export markets and to ensure that value
chains do not exclude the small farmer. We hope this contribution helps to
progress this important debate. One of the main contributions of the
livelihoods approach was to move the discussion on poverty reduction beyond
agriculture. We hope that our contribution moves the debate from agriculture
and poverty reduction to the role of agriculture in pro-poor growth.
 
 
 
Buddhika Samarasinghe and Sunil Sinha
Emerging Market Economics Ltd
3 Millharbour 
London E14 9XP