Stimulating Agricultural and Rural Transformation StART

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Stimulating Agricultural and Rural Transformation
(StART) in the Low-Income Tropics
Chris Barrett February 20, 2009
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Extreme poverty has fallen rapidly in east Asia
and worldwide, but only proportional gains in
South Asia and none in Sub-Saharan Africa, where
gt50 still live on less than 1.25/day.
The promise
Source Chen and Ravallion (2008)
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The challenge
Ultra-poverty is especially persistent and
prevalent in sub-Saharan Africa
Ultra-poor (income per capitalt 2005US0.54/day)
Source IFPRI (2007)
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A key driver
Persistent poverty is closely tied to
agricultural stagnation
Cereal yields and extreme poverty move
inversely. South Asian progress Sub-Saharan
African stasis
Source World Bank (2007)
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The consequence
Agricultural stagnation is a key driver of
poverty and undernutrition
The WHO identifies undernutrition as the biggest
risk factor for disease and death worldwide and
30/47 SSA countries have macronutrient
availability shortfalls .
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Poverty traps

• Reinforcing feedback
• Low productivity causes poverty.
• Poverty causes hunger and natural resource
  degradation.
• But hunger and degraded natural resources also
  cause poverty and low productivity.
• Hence the vicious cycle of poverty traps, hunger
  and natural resources degradation.

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The challenge Poverty traps
Why such persistence?

• Two key features of poverty traps
• Initial conditions matter
• It takes money to make money investment is
  the engine of growth and exit from poverty.
• In SSA, ultra-poor are heavily rural and depend
  on meager (and degrading) natural resource base
  and have little access to key infrastructure.
• Risk matters
• Direct loss of productive assets to disease,
  conflict, climate variability, etc.
• Responses ex post coping (e.g., school
  drop-outs, distress asset sale) and ex ante risk
  management (e.g., low-risk, low-return
  livelihoods).

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Need to StART

• Need agricultural and rural transformation to
  break out of ultra-poverty/hunger trap
• Reason 1 location, livelihood and asset holdings
• Most ultra-poor live in rural areas (rural-urban
  poverty gap increases in poverty depth)
• Most ultra-poor work in agriculture, at least
  part-time.
• Increasing the productivity of the assets
  controlled by the poor (and the stock of assets
  they control) is fundamental to any strategy to
  break out of the poverty/hunger trap. So must
  increase the productivity of the rural poors
  labor, land, livestock and other assets.

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Need to StART

• Reason 2 Budget dependence
• Food is 65-80 of ultra-poors budgets.
• Most SSA farmers are not net sellers of basic
  commodities most are net buyers.
• So food price effects of agricultural
  productivity growth reinforce gains to the rural
  poor by reducing cost of living.
• Hence the seriousness of the recent global food
  price crisis for the poor, including most small
  farmers!

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Need to StART

• An example from Madagascar
• A doubling of rice yields
• reduces the share of food insecure
• households by 38
• shortens the average hungry period
• by 1.7 months (1/3)
• increases real unskilled wages in
• lean season by 89 (due to both
• price and labor demand effects)
• All the poor benefit unskilled
• workers, consumers, and net seller producers
• the poorest gain most.
• (Minten and Barrett, World Development, 2008).

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Need to StART

• Result
• World Bank estimates that real GDP growth from
  agriculture is 2.7 times more effective in
  reducing extreme poverty headcount in poorest
  countries, vs. non-ag sectors.
• Historically, advances in food system
  productivity have been the foundation of poverty
  reduction and modern economic growth throughout
  history.
• Agricultural growth has strong multiplier effects
  on the rural non-farm economy generating both
  local demand and investible resources, as well as
  ensuring the food security of those who leave the
  farm.

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Key StART principles

• No one size fits all approach is viable. Need
  to contextualize. But there exist several key
  principles for targeting StART interventions
• Principle 1 Build and protect productive
  assets.
• Multiple assets matter Human capital, land
  (incl. soil fertility), water, livestock,
  investible funds (savings, credit)
• Interventions include direct provision (e.g.,
  free education) or subsidies for asset
  accumulation or insurance of existing assets
• For privately held assets (land, livestock,
  equipment, education, businesses, etc.), mainly
  need to improve investment incentives.
• Also need to conserve common pool assets
  (rangelands, water, forest, etc.) through better
  governance and incentives.

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Key StART principles

• Principle 1 Build and protect productive
  assets.
• How to improve incentives?
• More secure property rights (tenure, police)
• Resolve financial market failures
• Crowding-in investment in complementary inputs
  (e.g., physical and institutional infrastructure)
• Provision of safety nets
• Clear conservation rules, authority w/o burdening
  the poor.
• A key concern Soil quality
• SSA losing 4bn/yr in soil nutrients
• plus feeds a Striga problem that costs
• another 7 bn/yr in yield losses and
• mycotoxin contamination of gt25 of
• food supply.

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Key StART principles

• Principle 2 Improve the productivity of the
  poors current asset holdings.
• Improved production/processing technologies
• More efficient/remunerative marketing channels
• Uptake/participation turns on assets, so dont
  forget 1!
• Key concern 1 Agricultural research in SSA
• Avg RoR 35, and 80 of ultra-poor in
  agriculture
• But only 4 of public expenditures are on ag and
  a small fraction of that goes into research.
• Key concern 2 Changing agrifood supply chains
• Who is participating, on what terms, w/ what
  effects?

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Key StART principles

• Principle 3 Improve risk management options for
  the ultra-poor.
• Regressivity, multidimensionality and
• context-specificity of uninsured risk
• exposure make this a serious challenge.
• Risk reduction
• Improved crops and livestock, better
• water control, diversification, peace,
• disease control
• Risk transfer
• Improved markets, index-based risk
• finance, global humanitarian response

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Global local (Glocal) Solutions
Key StART principles

• Principle 4 Facilitate favorable transitions out
  of agriculture.
• Must equip the next generation
• to transition into remunerative
• non-farm employment.
• Keys are (i) supporting physical
• and institutional infrastructure
• (ii) early childhood health, nutrition and
  education, especially
• for disadvantaged children. Closely tied to
  improvements to parents productivity, risk
  management and asset holdings.

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Global local (Glocal) Solutions
Conclusions

• There is real reason for hope
• Real ag output growth is accelerating in South
  Asia and SSA at long last back to positive per
  capita rates of food output growth
• Renewed and innovative initiatives (e.g., AGRA)
  and attention (e.g., WDR 2008), and turn-around
  in both public aid and private investment in
  low-income countries.
• Exciting new innovations in technologies (e.g.,
  micronutrient-rich staple crops,
  drought-resistant cultivars), advances in finance
  (e.g., index insurance to pre-finance emergency
  response and provide a productive safety net),
  and improvements in policies (e.g., rule of law,
  tenurial security, global food aid).

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Global local (Glocal) Solutions
Conclusions

• But recognizing the need to intervene is the easy
  part.
• We need to emphasize and focus on four key StART
  principles
• Build and protect productive assets.
• Improve the productivity of the poors current
  asset holdings.
• Improve risk management options for the
  ultra-poor.
• Facilitate favorable transitions out of
  agriculture.
• And remember that appropriate policy design and
  implementation are highly context specific. So
  need to continuously and rigorously research the
  settings in which we work and the policies we
  design and introduce
• beware repeating the errors of the
  1980s-90s!

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Thank you
Thank you for your time, interest and comments!