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Assumption I:  Agricultural Development Drives Economic Development

If you look at the most recent reports of CAADP or even international development organizations, you will find riddled throughout those well researched papers the belief that historically it was our increased capacity to produce food that allowed our more prolific market places, like cities, to emerge.  That in order for society to develop, economically, the rural base would have had to produce enough food to support the ever growing population at the urban center.  This assumption, that agriculture development leads to greater economic development, is what drives not only our current policy bias in CAADP but for the private sector to participate in delivering these services of ‘economic development via agriculture development’ in rural areas – and we already know the most ‘efficient’ way that publicly funded private players can deliver on those goals is by being extremely large.

Conventional Views

These conventional ideas are premised on many beliefs, however we will only touch on three:  i) supply side economics (productivism), ii) larger size and more expansive scalability are better for society, and iii) rural areas are where more poverty exists, so we should place emphasis on rural activities.  Supply-side economics is a form of economics that presupposes if a business produces more of a given product or service and pushes this out to customers, then the economy would grow as a result of the expanded opportunities for consumption, a supply push approach.  And related economically, much of this view also presupposes that markets (which simply put represent what real people are willing to pay and the resulting effects that this trade has on the lives of those involved) must not be interfered with by governing bodies (i.e. laissez-faire economics) or oversight.  Integrated in this view are statistics and data from research institutions (who can widely disseminate this info) which without an alternative framework for thinking within can lead you to believe their figures are fact – since they are based on ‘real’ data.  That the ability to generate more food and raw materials will drive down prices for consumers (fundamental pricing mechanics of supply and demand).

The reason many view large size and scale as so important in development stems from the view of a single entity extending resources to the many – like a government distributing services to the masses.  So that in this view, to more effectively deliver services to the numerous and distant customers, fixed costs must be redistributed among a greater number of customers, ultimately reducing the per customer cost.  And the only way to deliver this service is by being extremely large.  Taking this further, by being large, the company then has the capacity to absorb capital, knowledge, subsidies, and all other external support since they are more likely to curry favor with politicians.  The other aspect of this is that in order to make delivering products or services attractive is to do so at a profit, and to reach profits in such endeavors is to play the volume game:  more product necessary to redistribute the fixed costs – leading to an ever growing need to expand.  There is also a cultural aspect that is often overlooked:  that by being large and ‘scalable’, these companies are more capable of delivering value to society, another way of viewing how the shareholder theory ultimately gives back to society by persistently pursuing growth and returns at almost any cost.

The third conventional view we’ll argue assumes that since rural development is where more poverty exists, we should place more emphasis on rural activities.  This is also the premise under which CAADP was developed – it assumes that increased agricultural activity in rural areas will generate broad based growth for the economy and that growth will ultimately lead to urban development.  The rationale behind this thinking is that the extra food production will save the state from buying food on the global (or external) market, thereby freeing up foreign exchange for the importation of strategic industrial and capital goods.  At the same time, with more food produced, somehow rural incomes will rise, providing a growing domestic market for national industries to be created.  This would then reduce poverty by increasing labor productivity and employment in rural areas, by generating more opportunities for rural to urban migration.  At least, that is the way it is supposed to work in economic theory, and possibly even when looking back at history – however, that view cannot be traced forward.

Unsound Assumptions

Supply side economics tends to work best in economies or industries that do not already produce in plenty the goods and services it demands.  In other words, in the context of Sub-Saharan Africa, most of its citizens do not need more cassava or sweet potatoes, they already have that in hand; thereby it cannot be that by generating more (or a greater supply), this will help propel society into positive growth via expanded consumption of these very products.  If however, there was an internal or especially external demand for cassava or sweet potatoes on the global (or regional) markets, then that would change the situation – and trend us away from our first assumption:  that agriculture development will drive economic development in Sub-Saharan Africa.  Peter Hazell and Xinshen Diao at IFPRI make sure they differentiate between which food staples should be promoted for local production noting that livestock, in particular, has a much stronger effect on supply – and that’s primarily because livestock is the food staple in high demand with limited supply locally.  Although Michael Lipton outlines a counter argument, our goals are the same:  if we need to generate economic development then incorporate our small farmers into the process, don’t alienate them with adverse policy.  Lipton’s argument is that additional staple production will suppress prices for urban consumers, lead to greater income for rural farmers including labor demand for farm work, and limit migration to the city thereby lessening the pressures on unemployment and urban wages.  Our argument is to generate the demand from the urban center first, to pull in additional food production from the rural base; meaning, when the focus is on developing an urban population (through new business promotion, proper governance and oversight, and allocating budgetary resources to promoting local food sources), this helps generate additional employment and drives up wages which have an effect on local food markets:  it demands greater innovation from small farmers and the food industry to supply better products and services to this now developed (and possibly better educated) urban population.  The challenge, as Lipton rightly identifies, is if small farmers can continue to innovate and apply technology at a faster rate than falling prices and their costs; even though prices for food that are produced locally are higher and would compete with cheaper imports from abroad.  In addition to technology adoption and creation, is if small farmers have the capacity to understand the needs of the urban base and respond to this need utilizing their existing shambas (i.e. small farms, peasant resources).

The idea that small corresponds to inefficiency, or limited capacity, is incorrect.  Of late, groups like Food Tank have rightly highlighted reports and information that tell the story of the small farmer.  Their campaign on family farming, including small holders, is premised on many misunderstood realities that many developed country populations are unaware as they believe large corporate farms are in fact necessary to feed such urbanized societies (and corporations make sure that they tell the masses via media that this is the case!).  However, effective small farms are associated with significant economic and social advantages, for instance:

  • they are more efficient producers in economies with lots of cheap labor (because family workers are less costly and more motivated than hired workers and small farms are more likely to use labor rather than capital-intensive technologies),
  • they help contain poverty by providing an affordable platform from which poor households can experiment with ways to improve their livelihoods (i.e. the shamba),
  • they help prevent premature urban migration and the explosive growth of large cities (this one is suspect and Malthusian in nature), and
  • they also ensure a degree of food security in rural areas where high transport and marketing costs can drive up food prices, while at the national level their higher land productivity has the potential to help poor countries attain greater self-sufficiency in staples such as cereals, tubers, and even livestock. (see IFPRI – The Future of Small Farms, p. 37)

The environmental advantages are apparent too.  Although small farms are more likely not to utilize outside inputs like chemical and synthetic toxic fertilizers – the very reason they are unable to use these tools also prevents them from better deploying proper soil management practices such as cover cropping, rotation, mulching, inter-cropping, utilizing trees, and making local organic fertilizers; for want of shared knowledge.  However this challenge can be overcome if the playing field is balanced – that means policies that favor small holders just as much as they do large corporates.  Policies should include i) improving water, public transportation, and information infrastructures; ii) providing vocational agriculture and business education; iii) providing access to affordable technologies and key organic inputs; and iv) promoting producer marketing organizations that can link small farmers to existing and new markets.  And not just policies but measurement tools too.  Imagine if we could begin measuring our agricultural productivity using ‘internal inputs‘ (such as power from animals, on farm feeds, mulching/grasses, composting, integrated farming, agroforestry, etc.) INSTEAD of solely ‘external inputs‘ (such as land, labor, tractors, fertilizers, etc., all things that can be purchased); this would completely shift how we look at more organic/non-synthetic forms of farming! (see Phil Pardey’s presentation here)  With these supports, issues of scale need not be an issue as scale in fact takes away from the very nature of what contributes to small farm advantages.  To scale is to fall into the conventional trap of utilizing the types of technology that replace much needed labor; there are many forms of technology that do not do this – See Ursula Franklin’s “The Real World of Technology”.

To reverse the assumption that agriculture development drives economic development, the last conventional view we will argue discusses how rural development might not be the best place for CAADP resources.  Clear evidence exists that rural areas have greater levels of poverty.  These areas are typically defined as highly varied in their geographic size, capacity of their populations, patterns of economic activity, and degree of integration with national and international economies.  Agriculture is usually but one source of income for rural families, unfortunately by necessity.  Unless you are a niche business capable of marketing that value to far removed consumers, it is difficult for the rest of the rural base to participate in these types of markets (examples of these niche businesses include chocolate makers like Madecasse, rice aggregators like Lotus Foods, and small coffee farms in Bolivia with café’s in the US).  This means that making investments into the rural base will be expensive, possibly prohibitive for any politician to take on, and all together an inefficient use of resources.  So to place our focus on addressing directly the rural challenges, still leaves the overarching questions of where the original demand originates from, of where the capital flows from, and where the innovation is created.  If we use the multi-dimensional poverty index developed by Alkire-Foster-Hammock for countries like Ethiopia, Uganda, and Kenya in East Africa, we find that the incidence and intensity of poverty in the urban centers is anywhere from 3 to 5 times less than that of rural areas – meaning, the places where resources are located, where competition exists because of density, and greater flow of information exist are urban centers.   Allocating resources to further propel urban business startup, education, and identification of overall market needs in-country could be a valuable tool of CAADP.  However, to address development of rural areas by allocating resources there only exacerbates the fundamental demand, capital, and innovation problems and ultimately limits a longer term sustainable solution to economic development.

Emergent Views Supporting Small Enterprise

If supply side economics were switched to a demand side economics where economies of scale were kept low (and they can be if corporates aren’t favored in political wheeling and dealing); if instead policies geared to support small companies were the focal point of policy makers; and if a shift in resources and policy towards the urban center were promoted to further enhance the rural relationship, then an altogether new view of CAADP could emerge.  The good news is that CAADP does address research and development – something emanating from the city center where research institutions exist along with its more educated population base.  However, the remainder of the policies – in particular pillar (i) and pillar (iii), if taken from the conventional view, might bring forward activities that either misplaced resources into a sparsely populated region or pushed for greater production without the proper demand, respectively, further creating an imbalance and affecting prices.  The alternative is greater business promotion support delivered efficiently and at least cost via dense urban centers where information is more likely exchanged among the many cross-connections that naturally exist in cities, connecting the public and private capital resources to those enterprises focused on food, and with appropriate research and development for regional specific needs for food.

*New technology is not to be forgotten either.  This new technology is typically developed in urban centers (cities) that have more capacity to be innovative and creative, testing new ideas and deploying them to a population that would eventually demand those new goods and services.  But simply importing technologies that have been effective in increasing output for farmers in developed countries is of little use if farmers in developing countries are not aware of the existence of such technologies once they are imported.  The available technologies in Kenya, for example, are not sufficient to meet the needs for small stakeholders.  According to Njehu of Nairobi Consulting Group  “Only 20% of cropland in Africa is sown with improved cereal varieties.  Kenya’s agricultural research institutions and extension services have very little capacity to engage in new scientific research or get existing technologies out into farmer’s fields.”  Access to better technologies could significantly increase output for small scale farmers in Kenya.

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