Pathways out of poverty in the new agriculture John Staatz & Niama Nango Dembélé Michigan State University Cornell International Workshops on Agricultural Education and Information Systems Workshop II: Pathways Out of Poverty Livingstone, Zambia November 11-16, 2006

The Small Farmer in the New Agriculture Agriculture for Development in the 21 st Century Agriculture for Development in the 21 st Century The WDR’s 3 worlds of agriculture:The WDR’s 3 worlds of agriculture: Agriculture-based countries (mainly SSA) Agriculture-based countries (mainly SSA) Transforming countries (mainly Asian) Transforming countries (mainly Asian) Urbanizing countries (mainly Latin American) Urbanizing countries (mainly Latin American) Agriculture’s role in promoting economic growthAgriculture’s role in promoting economic growth A source of growth A source of growth A distributor of growth A distributor of growth An important factor in making growth sustainable An important factor in making growth sustainable

Agricultural growth has unique powers for poverty reduction GDP growth from agriculture benefits the poor at least twice as much as GDP growth originating in non-agriculture Source: WDR 2008

Agricultural growth can have unique powers for poverty reduction Most of poverty remains rural Most of poverty remains rural GDP growth from agriculture benefits the poor at least twice as much as GDP growth originating in non- agriculture GDP growth from agriculture benefits the poor at least twice as much as GDP growth originating in non- agriculture Example of China Example of China POVERTY Agriculture as main livelihood

What’s needed: agricultural transformation Broad-based productivity increases in farming and related value chains Broad-based productivity increases in farming and related value chains Productivity increases result from integration of small farmers into: Productivity increases result from integration of small farmers into: Broader economic systemsBroader economic systems Broader knowledge and information systems (including systems for delivering better technologies)Broader knowledge and information systems (including systems for delivering better technologies)

Agriculture & Structural Transformation Decrease in relative role of farming in the economy (% of GDP, employment) Decrease in relative role of farming in the economy (% of GDP, employment) Movement from household- level production to a more integrated economy. Movement from household- level production to a more integrated economy. As a consequence, the linking farmer and others in the food system to the knowledge system of the wider world As a consequence, the linking farmer and others in the food system to the knowledge system of the wider world Structural Transformation as:

How does agricultural productivity growth lead to pathways out of poverty? 1.Direct participation in more productive farming As family farmersAs family farmers As farm laborersAs farm laborers 2.Indirect (linkage) effects Increased employment and income in producing farm inputs and processing & marketing outputs (production linkages-- backward & forward)Increased employment and income in producing farm inputs and processing & marketing outputs (production linkages-- backward & forward) Flows of labor and capital from farming to other sectors of the economy (factor market and fiscal linkages)Flows of labor and capital from farming to other sectors of the economy (factor market and fiscal linkages)

How does agricultural productivity growth lead to pathways out of poverty? 2.Indirect (linkage) effects Increased employment in producing consumer goods (consumption linkages)Increased employment in producing consumer goods (consumption linkages) Increased economic productivity due to better nutrition of workers and more efficient (less liquid) investment (productivity linkages)Increased economic productivity due to better nutrition of workers and more efficient (less liquid) investment (productivity linkages) 3.Lower prices for staples, which: Raise real incomes of the poorRaise real incomes of the poor Help expand employment by holding down wage rates (wage good effect)Help expand employment by holding down wage rates (wage good effect)

Pathways between agricultural growth and poverty alleviation Both direct and indirect effects depend both on technology and institutions, especially markets, which in turn depend on access to information & supporting services Both direct and indirect effects depend both on technology and institutions, especially markets, which in turn depend on access to information & supporting services Experience of Green Revolution in Asia: indirect effects (especially the consumption linkages & wage-good effects) had bigger, albeit second-round, anti-poverty effects than the direct effects. Experience of Green Revolution in Asia: indirect effects (especially the consumption linkages & wage-good effects) had bigger, albeit second-round, anti-poverty effects than the direct effects.

Key challenges in creating & broadening the pathways 1.Building a strategy that addresses the diversity of smallholders (wrt size, gender): diversity Commercial smallholdersCommercial smallholders Potential commercial smallholdersPotential commercial smallholders Subsistence smallholders who need, over time, to move to more remunerative livelihoodsSubsistence smallholders who need, over time, to move to more remunerative livelihoods 2.The challenge is to how to Help the second group become viable commercial smallholdersHelp the second group become viable commercial smallholders Capture part of the benefits of productivity growth among the first 2 groups to help facilitate the movement of the 3 rd group out of farming.Capture part of the benefits of productivity growth among the first 2 groups to help facilitate the movement of the 3 rd group out of farming.

Size diversity of smallholders: Small farm sector hectares KenEthRwaMozZam bottom 25% 2nd 3rd top 25% Source: Jayne et al *

Key challenges in creating & broadening the pathways 3.Helping the poor participate in the “new agriculture” Demand drivenDemand driven Increasingly attribute-specific as opposed to commodity orientedIncreasingly attribute-specific as opposed to commodity oriented System-orientedSystem-oriented GlobalGlobal New actors, new technologies & new risksNew actors, new technologies & new risks Broad array of consumers, with varying ability to pay for upscale services in poor countries. Broad array of consumers, with varying ability to pay for upscale services in poor countries. Scope for increased regional tradeScope for increased regional trade Supermarkets still account for a minority of sales, esp. in SSASupermarkets still account for a minority of sales, esp. in SSA Implication: Need to be able to identify & target diverse markets & respond to their varying needs. Implication: Need to be able to identify & target diverse markets & respond to their varying needs.

Key Challenges for broadening the pathways in SSA 4. Balancing site specificity with the need to achieve economies of scale Diversity of farming systemsDiversity of farming systems 48 separate countries, many small48 separate countries, many small Importance of regional trade & transaction costs Importance of regional trade & transaction costs National governance problems become regional National governance problems become regional Scale & spillovers in research, education, policy Scale & spillovers in research, education, policy Low population & infrastructure densityLow population & infrastructure density

What do the different rural entrepreneurs, including farmers, need to increase their productivity and incomes? 1.Information about market opportunities 2.Productive technologies and practices 3.Support services 4.An enabling policy environment Note: Farmers need all 4 of these (market information not enough), but there is an information component to each. Farmers need all 4 of these (market information not enough), but there is an information component to each. Need to view these as part of an integrated system. Need to view these as part of an integrated system. Needs are frequently different by gender Needs are frequently different by gender

What’s needed for those who cannot farm their ways out of poverty? Risk reducing agricultural technologies Risk reducing agricultural technologies Information about non-farm opportunities Information about non-farm opportunities Education to be able to move out of agriculture Education to be able to move out of agriculture Information and supporting services for transition out of agriculture Information and supporting services for transition out of agriculture Sustainable safety nets Sustainable safety nets As with the more commercial farmers, these factors have important gender dimensions

Pre-conditions: Socio political context Governance Macro fundamentals Pre-conditions: Socio political context Governance Macro fundamentals Improve livelihoods in subsistence agriculture and low skill rural occupations Increase employment in agriculture and the RNFE; enhance skills Access to markets Establish efficient value chain Enhance smallholder competitiveness Facilitate market entry Pathways out of poverty: farming, labor, migration Transition to market Transition to market Demand for Ag products Balancing objectives Source: WDR 2008

Thank you very much!