Agriculture and Development: Revisiting the Policy Narratives

Author: Stefan Dercon; University of Oxford, Department of International Development, Mansfield Road, Oxford OX1 3TB, United Kingdom Contact Details: stefan.dercon@economics.ox.ac.uk fax: 44-1865-281801 Abstract: This essay questions the way the findings from research on agriculture in poor countries tend
to be summarized in policy narratives, and more specifically the role agricultural economics tends to play in this process. I conclude that there is a tendency to overstate the role agriculture plays in development and, as a result, some of the wrong battles are being fought in the policy advocacy arena, and inappropriate advice is being offered to policy makers. A more open and self-critical approach to the place of agriculture in development would be more helpful for policy design.

JEL Codes: Q18, O13, O41

Agriculture and Development: Revisiting the Policy Narratives Stefan Dercon Department for International Development (DFID), UK and Oxford University1
Abstract This essay questions the way the findings from research on agriculture in poor countries tend to be summarized in policy narratives, and more specifically the role agricultural economics tends to play in this process. I conclude that there is a tendency to overstate the role agriculture plays in development and, as a result, some of the wrong battles are being fought in the policy advocacy arena, and inappropriate advice is being offered to policy makers. A more open and self-critical approach to the place of agriculture in development would be more helpful for policy design. Policy narratives are important in policy making. They are the stories, the set of premises and conclusions, used to frame the space for decision making.2 They can be thought of as simple representations of the logical chains that capture the essence of the processes that shape outcomes. They are also the basis for communication with politicians and with the general public, often translated into a compelling case, advocating for particular actions. One key task of research is to ensure that the narratives that shape decisions are consistent with the best evidence available. So asking the question whether the overarching narratives on agriculture in development are still appropriate is important. Agriculture matters: agriculture still provides the main livelihood for most of the poor, and global pressures on food security are likely to exacerbate with looming climate change. These questions are even more relevant in a rapidly changing context. One change is remarkable progress on the Millennium Development Goals across the world, even if we did not achieve many of them in many countries. World poverty according to MDG1 has gone down in line with the target, albeit with a lot of help from China and not quite by the aid community that helped to draw up these MDGs. But also progress is being made in South Asia and, in recent years, in Africa, where growth has picked up considerably and measured poverty has for the first time started to go down in the official poverty below $1.25 data (in 2008 compared to 2005). But problems such as undernutrition (stunting, or low height for age) remain a very important reality with devastating consequences in later life. There is also agricultural growth, even in Africa, even if it is hard to claim that agricultural growth led the way in growth there or even anywhere in recent years, with international commodity prices and new discoveries of natural resources telling a big part of the story. We have also had the 2007/08 food price crisis, with subsequent peaks in 2011 and in 2012. Indeed, within this context, we also have seen a
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I am grateful for very helpful comments from Jo Swinnen and Douglas Gollin. All views expressed as well as all errors are my own, and cannot be attributed to DFID. Correspondence to: stefan.dercon@economics.ox.ac.uk 2 In public policy analysis, policy narratives are defined as stories with a beginning, middle, and end (or premises and conclusions, if cast as an argument) [that] revolve[s] around a sequence of events or positions in which something is said to happen or from which something is said to follow (Roe 1994: 36).

renewal of attention to agriculture, including in the poorest countries and in the international community, most recently culminating in even the G8 putting forward ambitious targets for a New Alliance on food and agriculture. The questions arising from all this is where does agriculture fit now in the development policy agenda? What is its role in growth and development? And are our narratives towards the policy community the right ones and properly evidence-based? My focus throughout is on sub-Saharan Africa (SSA), as the prime area where debate is rife and the narrative needs a refresh. Agriculture in the development policy narrative There is no doubt that agriculture will remain important for development in the future, not least as the world will need to be fed, and because a large even if declining number of the poor remain dependent on agriculture for their incomes. But this is not enough to justify massive investments in agriculture in each country in the world; it does not follow directly. Three recent examples capture quite well some of the (related) narratives that are typically used, and some of their flaws. As development aid is spending tax-payers money, it is right that elected politicians in donor governments are central in decision making on actual spending by aid agencies and government departments, based on advice by civil servants, advisory bodies and the research community. A recent discussion on a proposal to boost spending on agriculture in Africa with senior donor policy makers reminded me of the care we should take with the policy narratives that are presented. They were told the story that spending on smallholder agriculture was key to kick-start growth and ensure poverty reduction, based on historical and Asian evidence, quoting the World Development Report 2008 as its source (World Bank, 2007). One senior politician present commented immediately I dont want to see hundreds of millions wasted again on some agricultural projects in Africa. The basis of this comment is not altogether clear to me, although it is possibly consistent with a general perception in the agricultural community that agriculture is neglected and misunderstood. Still, there is a clear perception that much has been spent with little transformational result. It did not help that the narrative said that all evidence suggests that growth in agriculture is essential for growth and poverty reduction in developing countries, just when Africa has many of the fastest growing economies in the world, and poverty is declining. Furthermore, as reflected in the most recent World Development Report (World Bank, 2012), there is a general perception that the next task in development is to create jobs in urban areas, and that agriculture was not the leading sector in the current growth. In short, the smallholder agriculture narrative was so simple and stated with so much conviction and little nuance that it was probably too simple to be true, and sounded like a tired narrative at the same time. Below I will argue that it is indeed too simple to be true, and neither agriculture nor the agricultural economics research community is well-served by its simplicity. Nevertheless, such narratives are common and used with much conviction. For example, an alternative and somewhat different version popped up in the 2012 New Year letter by Bill Gates on behalf of the B&M Gates Foundation The problem is that *the] farms [of the poor], which tend to be just a couple acres in size, dont produce enough food for a family to live on. *+ The world faces a clear choice. If we 3

invest relatively modest amounts, many more poor farmers will be able to feed their families. If we dont, one in seven people will continue living needlessly on the edge of starvation. My annual letter this year is an argument for making the choice to keep on helping extremely poor people build self-sufficiency (Bill and Melinda Gates Foundation, 2012, p.1). Indeed, the letter is building an extremely simple (and surprisingly dated) narrative, of spending on smallholder agriculture to get people self-sufficient in food as an effective broad poverty and hunger reduction strategy. A third example goes even further. Neo-Malthusian narratives are re-emerging again, such as in Brown (2011), who uses a narrative of fear of disaster such as food wars and global hunger linked to climate change and environmental scarcities to justify vast investments to boost yields in agriculture in environmentally sensitive ways. This is a narrative more popular with scientists than economists, and tends to lack any logically consistent analysis of the role of markets, price signals, comparative advantage, and, in general, economic processes, nor does it consider implications for specific countries. Versions and combinations of these narratives often appear in policy discussions, and rarely are they publicly contested. It tends to lead to a generic simplistic narrative, as a truth universally acknowledged, that always and everywhere spending on agricultural research and on smallholder agriculture is effective and is the only route to growth, poverty reduction, and the eradication of hunger and undernutrition. Questioning the narrative Elsewhere I have argued in more detail that this narrative is far too simplistic (Dercon, 2009). The two last examples have limited empirical basis and are rarely put forward by agricultural economists. But also the first one, that highlights the role of agriculture in development and growth, is problematic. This view of the role of agriculture is based on the exceptional Asian experience with the massive success of the green revolution and the role and opportunities of smallholders in the farming systems there. At least as important, it is also based on an underestimation of the other economic processes that took place at the same time both in the historical evidence as well as in the experiences in Asia. Looking at agriculture in isolation is a recipe for misunderstanding the economic transformation in growing economies and the role of agriculture therein. In Collier and Dercon (2009) we also questioned a nave look at the role of smallholders in growth in agriculture, both conceptually, as well as in terms of the evidence base. This does not have to mean that the role of agriculture in Africa should not be central to stimulating growth. Of course, the evidence of fast economic growth in Africa, with a strong link to natural resources, suggests that other drivers of growth may be possible. At the same time, this does not mean that this growth is sustainable in some countries without a serious boost to agriculture. In Dercon (2009), we argued that, for a more effective view on the scope for agriculture, at a minimum, we should recognise that Africa is hugely heterogeneous in terms of economic contexts. While most conceptual arguments related to agriculture first rely on closed economy settings, the key mechanisms for growth become quite different in open economy settings, with agriculture and food production much less the binding constraint. In fact, conceptually, it is hard to make an argument for the essential role of agriculture in growth in countries other than those landlocked or unable to engage with the world 4

economy. Quite a few countries have natural resources providing an obvious source of rents to boost economic activity, albeit with strong negative incentives linked to Dutch Disease problems and governance, but also meaning that agriculture is not likely to be a binding constraint on growth. Similarly, areas with locational or other investment advantages, such as with good seaport access, could attract export-oriented manufacturing, again not suggesting that agriculture is where growth needs to start. In all these settings, agriculture could have complementary roles in growth and this role would need to be articulated carefully but heterogeneity is the name of the game here, not a one size fits all for growth and agriculture (Dercon, 2009). Indeed, this would mean that it will depend on comparative advantage, when, where and to what extent one ought to invest in agriculture, not very different from other growth opportunities. It also is unlikely to be the case that everywhere and anywhere investing in smallholders is the best way to get more agricultural growth going, a message amplified in more discussion in Collier and Dercon (2009). There is nevertheless a stronger case to be made on investing in agriculture for its poverty effects. As most of the poor live off agriculture and agriculture is highly labour intensive, when we achieve growth in agriculture it is bound to have relatively large poverty effects. The most commonly quoted evidence for this is from Ravallion and Chen (2007) for China, suggesting that growth in the primary sector (mainly agriculture) had four times as large a poverty effect as growth from any other sector. But China may well be different from African countries. Still, using similar methods, Christiaensen et al. (2011) reach conclusions that growth in agriculture has higher poverty effects across SSA and non-SSA countries, although there is heterogeneity linked to the level of income of countries, inequality, whether they are resource-rich or not, and whether absolute poverty below $1.25 per day per person or $2 poverty levels are considered, and the average effects are (considerably) smaller than the Ravallion and Chen (2007) results for China. But this is not answering whether this means we should actively invest in agriculture or non-agriculture, even from the point of view of poverty reduction. To answer this, the cost of investing in agriculture ought to be taken into account: if the costs are several times higher to get a one percent GDP growth in agriculture than in non-agriculture, it may still mean that investing in the latter may be superior for poverty reduction. Gollin (2012) highlights that productivity per worker outside agriculture remains at about four times productivity per worker in smallholder agriculture, even after strenuous efforts to correct any possible causes of mismeasurement. This gap is partly the reverse of the high labour intensity of agriculture, but also suggests that the process of labour movement from activities with lower productivity to higher productivity is insufficiently functional. The usual process in economics of closing this gap would be putting resources in the high return activities as a means of bringing down this gap. In any case, this is troubling for the task and relative cost-benefit of boosting overall growth through smallholder agriculture relative to non-agriculture, even if average and marginal returns are not the same of course. Again, arguments can and have been made on this (see Christiaensen et al. 2012 for a recent defence), but it would seem plausible to suggest that whether investing in agriculture is really the best place to start to bring down this gap in all contexts will depend on various factors and the set of

alternative opportunities.3 And, as argued in more detail in Collier and Dercon (2009), these opportunities will be different across various parts of the agricultural supply chain, and should not be too narrowly focused only on production. Rebuilding a plausible policy narrative It would appear that some of the policy narratives are just asking too much from agriculture in each and every setting: surely in some cases, not everywhere and not in every setting, the returns to boosting agriculture are superior to other opportunities. And being more precise about these opportunities, relative to others, would serve to inform better agricultural policies and investments. We are definitely asking too much from smallholders: from the proposed narratives, it appears that not only will investing in them help to reduce poverty, they will also start and sustain growth in poor economies; they will even provide global food security and sort out undernutrition. A better narrative would be one that recognises the strength of agriculture in reducing poverty, but also is more careful to encourage the identification of real opportunities, rather than promising blanket success in true silver bullet style. I would propose three elements: first, a more precise identification of the relative role of agriculture in overall growth strategy; second, a much clearer identification of where the opportunities are in agriculture, carefully specifying particular contexts and the specific parts of the value chain where gains are highest; and finally, highlight the specific possible pay-offs in terms of poverty reduction from succeeding in identifying the relevant growth pockets in agriculture. The narrative could be something like: Agriculture is a sector whose neglect is harmful for sustaining growth a crucial source of feeding growth in other sectors, of diversification, and most likely of central importance in closed, landlocked and otherwise inaccessible regions and countries. Within agriculture, there are unexploited returns across the value chain; particular bottlenecks in this value chain that deserve the public promotion of investment just as there are other activities and investments that are probably relatively wasteful. Growth in agriculture, and in particular by smallholders, reduces poverty strongly as there is more poverty in their ranks, and agriculture tends to be relatively more labour intensive than other growth. So, identifying the specific opportunities for growth where poverty pay-offs are particularly high is especially important. The result would be a narrative that treats agriculture as just another sector when it comes to growth, and being more precise on where the opportunities are is then essential, rather than just suggesting any public investment in agricultural research or infrastructure will have big effects. It then recognises that there is clearly a place for relatively more attention to agriculture and smallholders, given their role in poverty reduction. However for growth in agriculture, opportunities should be explored across the value chain, without limiting it a priori to the production side of agriculture, and specifically via
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I have not commented on the link between agricultural growth and nutrition, although this is even more tenuous. A recent systematic review of agricultural interventions aimed at improving nutrition for children found very little evidence of impact (Masset et al. 2011).

smallholders. It should not raise excessive expectations on impacts on nutrition, nor in fact that always and everywhere investing in this sector will have the biggest poverty impacts. It is unlikely to be true that investing only or even largely in agriculture and smallholders is going to be sufficient for sustained poverty reduction anywhere in the world. Historians offer a useful means of expressing progress in agriculture in pre-industrial societies: the share of the labour force or population required to produce sufficient food for the population.4 Most African countries would produce enough food to feed their populations provided it was equally divided. But the shares of the labour force involved in food production are still more than 50% in most African countries - going beyond 75% in countries like Ethiopia or Burkina Faso (World Bank, World Development Indicators). Progress in terms of growth and poverty reduction will have to mean that many of the current smallholders and their children wont be smallholders anymore. Investment in agriculture and other sectors must in due course have the effect to reduce the numbers of people involved in producing food. In short, whenever we invest in agriculture and in smallholders, it makes sense to ask ourselves what it will do for this transformation. It cannot be forgotten that there are too many peasants: so will it help quite a lot of these peasants or their children to leave agriculture? Implications for research This has implications for the way agriculture is researched. Some of these simple narratives have been used to promote the strong case for investing in research in agricultural technologies. While much of this may be worthwhile, if the returns to agriculture are heterogeneous across different areas and economic contexts, then it surely will matter what is being researched, and choices have to be made. For example, is it best to develop drought-resistant crops suitable for particular marginal areas, or are these areas for which agriculture is not the most sensible investment (say, it would be better to promote job creation and opportunities to leave agriculture)? One should not unquestionably accept that agriculture as a sector should be privileged. Indeed, given the development challenges but also the vast changes taking place in the developing world, it is more important than ever to ask why investing in agriculture is important and what should be invested in in various contexts. Policy makers who want to act in a more evidence-based way ought to get a clearer sense where and when the returns to investing in agriculture are genuinely highest in various contexts; what to prioritise, and, very helpfully, what not to pursue first. Agricultural economics could clearly do more to answer these questions. Engaging more with non-agricultural sectors and opportunities is not obvious for a sub-discipline such as agricultural economics that appears to define itself by a sector. There are of course other areas in economics defined by sectors, such as health economics, transport economics, etc. However all these sub-disciplines must ensure not to succumb to overstating their self-importance, and remain critical about their own place in development. One way of doing so would be to avoid being too inward-looking, and remain open to developments in other areas of economics with relevance to poor countries, and
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For an excellent recent example, see Allen (2009).

respond to challenges posed by other research. Working closer with economists working on macro, growth, industrial organisation, labour or public economics, and those innovating with new methods, such as using experimental methods, would help to build up more nuanced narratives of the relative importance of agriculture in development. It would have the additional benefit of ensuring that questions, methods and answers remain at the frontier of research, not just defined by agricultural economists. An additional benefit would be that work by agricultural economists on developing countries is more likely to be considered at the core of economics research on development. References Allen, R.C. (2009), The British Industrial Revolution in Global Perspective, Cambridge: Cambridge University Press. Bill and Melinda Gates Foundation, (2012) 2012 Annual Letter by Bill Gates, Seattle. Brown, L. (2011), The new geo-politics of food, Foreign Policy, May-June. Christiaensen, L., L.Demery and J.Kuhl, (2011), The (evolving) role of agriculture in poverty reduction an empirical perspective, Journal of Development Economics, 96(2): 239-54. Collier, P. and S. Dercon (2009), African Agriculture in 50 years: Smallholders in a rapidly changing world, Expert meeting on how to feed the world in 2050, Food and Agriculture Organization, June 24. Dercon, S. (2009), Rural Poverty: Old Challenges in New Contexts, World Bank Research Observer, 24: 128. Gollin, D., D. Lagakos and M.E.Waugh (2012), The Agricultural Productivity Gap in Developing Countries, Working Papers 11-14, New York University, Leonard N. Stern School of Business, Department of Economics. Masset, E., L. Haddad, A. Cornelius and J. Isaza-Castro, (2011), A systematic review of agricultural interventions that aim to improve nutritional status of children, London: EPPI-Centre, Social Science Research Unit, Institute of Education, University of London. Ravallion, M. and S. Chen (2007), Chinas (uneven) progress against poverty, Journal of Development Economics, 82(1): 1-42. Roe, E. (1994). Narrative Policy Analysis: Theory and Practice. Durham, CT: Duke University Press. World Bank (2007), World Development Report 2008: Agriculture for Development, Washington D.C.: World Bank. World Bank (2012), World Development Report 2013: Jobs, Washington D.C.: World Bank.