SCALING UP IN AGRICULTURE, RURAL DEVELOPMENT, AND NUTRITION
Investing in Agriculture to Reduce Poverty and Hunger KEVIN CLEAVER
Focus 19 • brIeF 2 • June 2012
poor people in the world. In addition, about 870 million people are undernourished, and about 2 billion people suffer from micronutrient deficiency. About 70 percent of the world’s poor people live in rural areas, and many have some dependency on agriculture. Over time, however, there has been progress in reducing the total number of undernourished people and in reducing the number of poor people in Asia and in Latin America. Did agricultural performance help bring down the poverty and hunger rates? There is evidence that agricultural growth has a high
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poverty reduction payoff. Higher agricultural productivity growth underpinned early development in Japan, the United States, and Western Europe, and later in China, the Republic of Korea, and Taiwan. Analysis by the International Fund for Agricultural Development (IFAD), the World Bank, and IFPRI shows that there is a clear correlation between the developing countries with the largest reduction in poverty rates and incidence of undernourishment and those with the most rapid agricultural growth. For example, a 1 percent per annum increase in agricultural growth, on average, leads to a 2.7 percent increase in the income of people in the lowest three income deciles in developing countries. Investment in agriculture is 2.5 to 3.0 times more effective in increasing the income of the poor than is nonagricultural investment. And agricultural growth, as opposed to growth in general, is typically the primary source of poverty reduction. The contrary is also true: a decline in agricultural growth throws many poor people into poverty. This explains some of the increase in poverty and hunger in developing countries during 2008 and 2010, when food prices increased worldwide.
How to stimulate agricultural production
Do we know how to stimulate agricultural growth and rural development in low income countries, and what is the relationship of such stimulation to “scaling up?” There is now a large body of literature indicating that domestic and international investment in agriculture and rural development, combined with supportive policies, stimulates agricultural growth. What is needed first are measures to improve farmer and agro-industrial access to markets through better government and partner country policy, investment in infrastructure, and government services. These involve the creation of an enabling environment for private investment in marketing, farm input supply, agroprocessing, and, of course, farming itself. The investments need to be both private and public, with the latter focused on rural infrastructure, rural education, information supply, regulation, and policy. Second, international donor and individual government
attention on smallholder farming is needed, because smallholders have special informational, infrastructure, and support needs. Such attention would focus on smallholder productivity, food production, reversal of environmental degradation, and management of
espite significant strides in reducing poverty during recent decades, there are still about 1.2 billion extremely
natural resources. This focus involves research and development, instruments to reduce farmer risk, rural financial services, development of farmers’ organizations, improvement of labor mobility, and a higher quality of public sector governance.
Where agricultural production has been stimulated and why
If agricultural growth is so effective in reducing poverty and we know how to get such growth, why is agricultural production growth and rural development in most developing countries so problematic? Why is the global rural poverty and nutrition problem not being resolved in most countries? Why are known solutions not more widely applied? The reality is that investment in agriculture, both by developing
country governments and aid donors, has declined since the 1980s. Specifically, the share of agriculture in total bilateral and multilateral aid fell from a peak of 22.5 percent in 1979–1981 to a low of 5.4 percent in 2003–2005, before increasing to 6 percent, according to 2009 data from the Development Assistance Committee of the Organisation for Economic Co-operation and Development. The combination of declining aid to agriculture and low public investment in agriculture by developing countries in recent decades has resulted in a huge public investment gap between what is needed and what is supplied. In Africa, most governments still spend less than 10 percent of public budgets on agriculture, despite their commitment in the Maputo Declaration of 2003 to reach or surpass that target. It is instructive to look at those African countries meeting
the 10 percent target since 2000: Ethiopia, Madagascar, Malawi, Mali, Niger, and Senegal. Several of them had large public sector investment programs, operating on a large, nationwide scale, generally assisted by donors. This stimulated agriculture in Ethiopia, Mali, and Niger, but not in Madagascar, Malawi, and Senegal. In the latter cases, overriding factors affected agricultural growth, including poor agricultural price and marketing policy in Senegal and Malawi and civil strife in Madagascar. The implication is that bigger public expenditure programs for agriculture, supported by bigger aid allocations for the sector and combined with good policy and adequate governance in Africa, can lead to agricultural growth exceeding that of the benchmark Chinese rate of 4 percent per annum, as was the case for Ethiopia, Mali, and Niger. Looking back on the longer period of the 1990s and early 2000s, the available data suggest that good policies and high investment in large-scale agricultural programs by the governments of Brazil, China, Laos, Morocco, Mozambique, Peru, Tanzania, and Vietnam achieved excellent agricultural growth (over 4 percent per annum) and good poverty reduction. Good performers also receive much donor aid for agriculture,
helped by the fact that the governments have large-scale programs that donors can support. Scale, therefore, matters; large-scale programs financed by governments and donors boost agricultural growth, in turn reducing poverty, if policy is broadly enabling.
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