1. The structural dimensions of liberalization in agriculture and rural development
RuralStruc Program –
M’Bour Workshop
11-13 April 2006
World Bank (ESSD Africa)

2. A prerequisite: “Agriculture matters”
In 2000: 1.27 Billion people work in agriculture in developing countries - or: 96% of global EAP in agriculture - providing livelihood for 2.5 billion people (42% world population)
70% of the poor live in rural areas
Agricultural EAP rates are very variable:
Asia (including India and China) and Africa = 60%
Latin America = 20% (but 46% Guatemala vs. 15% Chile)
EU15 = 4%; USA = 2%

3. World’s Economically Active Population (EAP) in Agriculture

4. A necessity: to put the debate back into perspective
Liberalization > trade dimension
To replace trade liberalization in its context…
Like the iceberg…

5. To put the debate back into perspective (1)
To draw attention to the overall « configuration » :
The general globalization movement (transport and information revolutions => mobility of products, capital, ideas, people)
Role of the State => new role of firms
Adjustment / State withdrawal / privatization
Institutional change / democratization / decentralization
New nature and new contents of policies.

6. To put the debate back into perspective (2)
To draw attention to «density» :
What is the nature of the new economic and demographic polarizations?
Sectors/regions
What reconfigurations?
Demographic growth
Urban/rural relations
New consistence of the rural sector
Economic structure (activities)

7. To put the debate back into perspective (3)
… to better appreciate the «trajectories»
What are the trends?
What is the margin of maneuver?
What are the alternatives => what projects for the society/ political / national ?
What policy choices?

8. Reminder: the rationale about liberalization
The “standard” rationale:
Internal and external liberalization (« less State + more market ») = efficiency => growth => poverty reduction
The “reformed” rationale (beginning of 1990’s):
Existence of winners and losers
To better identify the impacts / to identify the losers
To define the security nets
To identify the roads for a «pro-poor growth»
« better State + more market »

9. The 5 limits of the debate on liberalization
1. Amplification of price effects (first order effects)
2. Underestimation of structure effects (second order)
3. Underestimation of confrontation effects
4. Concealment of transition questions
5. Lack of a historical perspective

10. The limits of the debate on liberalization (1)
Amplification of the “first order” transmission effects:
Focus on the prices of agricultural products
Reinforced by the methodological choices: the use of econometric models which define the gains of producers and consumers
Technical limits of the design: prices  elasticity
And a partial theoretical rationale that underestimates imperfect competition

11. However:
the downward trend of agricultural prices is not just the consequence of overproduction attributable to dumping and subsidies (the “classical” distortions)
there is a gap between the producer prices and the retail prices, which expresses new “market powers”
Thus:

12. The limits of the debate on liberalization (2)
Underestimation of the “second order” transmission effects, due to structures => beyond prices, new market configurations
concentration and oligopolization
vertical integration through agro-food commodity chains: first and second transformation
“horizontal” integration through distribution systems
which modify:
the rules of the game: new purchasing, selling and production methods… (norms, standards => contracts)…
the market access and the number of “players” (insiders / outsiders)
the conditions for negotiation

13. The limits of the debate on liberalization (3)
Underestimation of the “confrontation” effects:
Confrontation of productivities between agricultural systems / contexts (technological gaps)
Confrontation of competitiveness (costs, qualities, volume)
… which result in risks of market marginalization

15. The limits of the debate on liberalization (4)
A relative concealment of the “transition” question:
a risk of failure of the implicit evolutionary model underlying the analyses (increase of productivity => capital accumulation, labor force surplus => transfers towards other sectors)…
…which bumps on demo-economic characteristics (importance of population involved and lack of exit options in an increasing competitive context) => see works on “Trade and Poverty”

16. The limits of the debate on liberalization (5)
A lack of historical perspective and ignorance of the specific conditions of the first industrial revolutions:
Imperial / colonial world order: commercial openness + territorial control (captive markets)
adjustment through large international migrations:
the “colonial project” : colonization as an exit option to revolutions
the “new worlds”

17. In fine The need to differentiate national situations:
demographic size=> internal market
economic diversification: alternative sectors (absorption)
fiscal base of the State (for safety nets)
migrations options
The need to pay particular attention to the “small and medium” size countries with heavy rates of EAP in agriculture. Is there a risk of a “transition impasse”?
low income countries and least developed countries: Sub-Saharan Africa, but also Andean, central and insular America, and central Asia
The need to differentiate the regional situations within countries: territorial marginalization and polarization, specific regional challenges

18. RuralStruc Program

19. Justification and objectives
The need to better understand the current evolutions: “A better understanding for a better policy making”
1. to adopt a global approach of the processes of change by including structural dimensions
2. to “face” the question of the transition for certain categories of countries
3. to modify the method: to go from the “corrective” ex-post measures to an ex-ante political debate and to test new comparative approaches

20. Hypotheses Three main hypotheses :
The rapid segmentation of production and marketing structures
Structural locking/ transition impasses
The reshaping of rural economies

21. The segmentation
Concentration of market structures and integration processes => concentration / marginalization / exclusion among the production structures
Emergence of 2 or 3 track sectors:
1. integrated competitive agriculture (with development of wages)
2. marginal agriculture and insecure households (multiple and uncertain activities and incomes)
3. an intermediate group at risk (limited market integration and difficulties to adapt)

22. The segmentation (2)
Production structures: number and size / technical and economic results
Market structures:
commodity markets
factors markets (inputs, credit, land)

23. The impasses
What are the demo-economic trends: rural / agricultural / urban – rural depopulation?
And the existing alternatives:
economic diversification: new sectors of activity => capacity of absorption (jobs created)
migratory options?

24. The reshaping
Development of a new configuration of rural households (“archipelago type” of rural economies, mixing activities and incomes from local or distant origin) in response to global changes

25. The reshaping (2) New composition of rural incomes:
Agricultural / non agricultural (the “non-farm” = the solution to agricultural marginalization?)
Public / private transfers (subsidies / remittances)
New networking and town-country linkages