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A possibility to better target the pro-poor capacity of agriculture
development is to refer to the converging theories and concepts currently
used in poverty reduction strategy thinking, targeting agriculture
John Mellor shows the impact of agricultural growth on poverty reduction and
non-farm growth, particularly due to the multiplier effect of agriculture on
the rest of the economy (MELLOR, 2000); There has been for some decades a
literature on the strong linkages between growth in agriculture and
multipliers in the non-farm sector arising from the expenditure of
incremental farm income. The labor intensity of those multipliers has been
emphasized. Empirical evidence is now accumulating that for every job made
directly in agriculture from agricultural growth two to three jobs are made
in the non-farm sector (see Mellor on Egypt). All these multiplying effects
have to be linked to the concept of externalities of endogenous growth
models and to the paradigm of demand-led growth (PALLEY, 2002). Palley
research on domestic-demand-led growth, shows that widely shared
household-income growth contributes to strengthen local demand growth which
drives to increase productive investments : widely shared income generates
higher consumption of local products. Marginal propensity to consume is
higher in low income population groups; furthermore in developing countries,
marginal propensity to consume local products is higher among poor
households. This confirms the relevance of growth strategy based on
agriculture production sub-sectors where low-income households are highly
involved and where value added is widely shared
Converging theories and concepts in poverty reduction strategy thinking
<<...OLE_Obj...>>
Endogenous growth theory emphasizes on factors which provide externalities
on economic growth; they are (i) private investment and capital, (ii) human
capital (education), (iii) technological innovation and (iv) public
investment. These externalities drive to consider among support actions
credit and investment support, training and extension, research and
firm-driven innovation support, public investment support in infrastructure
and facility building
To sharpen the debate towards "How can DFID be more effective in getting
poverty-reducing agriculture going?" as proposed by Gareth Williams, I
propose to focuse on the Concept of agriculture as Motor of growth and
poverty reduction and to define criteria allowing to select specific
agricultural sub-sectors/ branches with high pro-poor growth potential
The growth-engine role of a sector goes through the number of employments
that it generates. Generated employments induce monetary demand which
expands monetary flow. The economic and social importance of an activity
sector/ sub-sector depends on the number of firms, small enterprises
involved, the employments generated and on the degree of coverage of the
national space which will affect their degree of interaction with the local
economy. This local link of activities contributes to the propagation of
multiplying effects and to the strengthening of the local economic
structure. Therefore, to generate engine effects on economy which
characterize an growth-engine sub-sector, an economic activity has to group
five main characteristics:
* First, it should target local needs (domestic demand),
therefore it is provided with easy market channels and it improves living
conditions.
* Secondly, it has to ensure a chain of trade/ service linked
activities both upstream and downstream which favor and promote
strengthening of links developed with other local economic actors.
* Third, it should provide engine effects through the
employments provided an the income distribution generated, the investments
realized.
* it should avoid to develop leakages through over dependence
on imports of foreign goods and services (JOB, 1990).
* Finally, sustainability should be considered in identifying
a growth engine
Adapted and applied to agricultural commodities sub-sectors, these criteria
may be translated as follows:
* High part of production affected to local or national demand
* Commodity Chain with a wide range of local upstream or
downstream actors (equipment, input supply, service providers, processing
operators, wholesale, transport operators, retailers)
* Commodity chains which provide significant part of valued
added to small farmers and wage worker, generating rural employment/ labour
in the regions where they operate
* Commodity chains whose dependence on imported inputs
(operational costs) stays reasonably low
* Commodity chains whose value added is mostly realized
domestically and through local processing
Selecting two or three main agriculture growth engine sub-sectors would
allow to "build a broad - based rural economic growth" strategy (European
Union, 2002). It links also with World Bank proposed framework for a renewed
rural development Strategy (Word Bank, 2002) which ...is moving to holistic
pro-poor rural development, "fostering broad-based growth while reaffirming
its commitment to agriculture as the main engine of rural economic growth".
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Louis BOCKEL
Agricultural Policy Officer
Agricultural Policy Support Service
TCAS FAO ROME
tel (00 39) 06 5705 4104 priv. 06 50 53 133
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Please visit dfid-agriculture-consultation.nri.org.