Agricultural Policies for Poverty Reduction. Jonathan Brooks OECD Trade and Agriculture Chatham House Friday 2 nd March 2012

Transcription

1 Agricultural Policies for Poverty Reduction Jonathan Brooks OECD Trade and Agriculture Chatham House Friday 2 nd March 2012

2 Contributors: Phil Abbott, Purdue University Jonathan Brooks, OECD Katia Covarrubias, FAO Mateusz Filipski, UC Davis Erik Jonasson, Lund University Ed Taylor, UC Davis Steve Wiggins, ODI

3 What role for agricultural policy in raising incomes and reducing poverty in developing countries? Does that role differ from what we would recommend for OECD countries? To what extent should policies focus on smallholder development? When might there be a need for market interventions? Renewed interest in smart input subsidies Market stabilisation as a response to high and volatile food prices OECD Trade & Agriculture 3

4 Best practice advice for OECD countries Protect incomes in the short term Targeted social policies Strengthen incomes in the long term Support the enabling environment Correct market failures, provide public goods Avoid market interventions Inefficient at transferring income Inequitable Adverse spill-overs (including onto developing countries) OECD Trade & Agriculture 4

5 Policies over what time frame? Short to medium term: economic structures are fixed Long-term: economic structures evolve How can we achieve impact given current structures and facilitate transition to structures that can generate higher incomes? What are the trade-offs and complementarities? How do priorities vary with context / stage of development? OECD Trade & Agriculture 5

6 The agricultural transformation With successful economic development: 1. Agriculture s share of GDP declines the economy diversifies 2. Agriculture s share of employment declines push of labour productivity improvement pull of labour demand from other sectors 3. Agricultural output increases OECD Trade & Agriculture 6

7 Agriculture s share of GDP: Asia % Nepal 50 Cambodia 40 Vietnam India Bangladesh Nepal Pakistan Cambodia Pakistan Vietnam Bangladesh India Sri Lanka Philippines Indonesia Georgia Mongolia Mongolia Philippines Indonesia Sri Lanka Jordan Georgia China Thailand Iran Malaysia China Thailand Iran Malaysia Saudi Arabia Korea Japan 0 Jordan Korea Saudi Arabia Japan USD Countries ordered by GDP per capita, current USD PPP, USD OECD Trade & Agriculture 7

8 Agriculture s share of GDP: Africa % Congo, Dem. Rep. Congo Dem. Rep. Liberia Guinea- Bissau Central African Republic Sierra Leone Guinea- Bissau Malawi Ethiopia Ethiopia Rwanda Mali Uganda Central African Mozambique Mali Rwanda Republic Madagascar Malawi Liberia Sierra Leone Burkina Faso Burkina Mozambique Uganda Faso Madagascar Chad Chad Ghana Kenya Ghana Cote d'ivoire Mauritania Kenya Lesotho Senegal Zambia Cote d'ivoire Zambia Sudan Sudan Senegal Mauritania Lesotho Cameroon Swaziland Cameroon Morocco Mauritius Morocco Namibia Botswana South Congo, Rep. Africa Namibia Swaziland Gabon Mauritius Gabon Congo, Rep. South Botswana Africa USD 314 Countries ordered by GDP per capita, current USD USD PPP, 2008 OECD Trade & Agriculture 8

9 Ag s share of GDP versus Ag s share Agriculture (% of GDP) 55 of Emp, ⁰ line Ethiopia Tanzania Argentina Russia Korea Chile Brazil Turkey Nicaragua China Indonesia Guatemala Mali Ghana Malawi Bangladesh Cameroon Vietnam Employment in agriculture as % of total employment OECD Europe non-oecd Middle East and North Africa Latin America Asia Sub-Saharan Africa India Uganda Kenya Burkina Faso

10 Stylised development path Agriculture s share of employment Agriculture s share of GDP Rising GDP per capita OECD Trade & Agriculture 10

11 The future for smallholders? OECD Trade & Agriculture 11

12 What about smallholders? Unnecessarily polarised debate Smallholders dominate farming in poor countries Paradox: rising opportunities go hand-inhand with adjustment stress Economies of scale, but larger farms does not mean latifundia Need to improve competitiveness within agriculture, but also to enhance opportunities outside the sector OECD Trade & Agriculture 12

13 Where do the poor live? Of the 1.3 billion on less than USD 1.25 a day: 72% in middle income countries, 28% in low income 1/3 in India, 1/3 in Sub-Saharan Africa 20% in China, compared with 40% in % in fragile / conflict affected states Priorities vary according to stage of development: Globally, smoothing the transition out of agriculture may be the biggest challenge OECD Trade & Agriculture 13

14 A strategy for strengthening rural incomes Situate agricultural policy within economy-wide context Education, primary healthcare, investment climate, macroeconomic policies, institutions and governance Create pathways within and outside agriculture Help Farmers become more competitive within agriculture Diversify Income sources Within agriculture Outside agriculture Leave the sector for off-farm work Social protection for those unable to adjust OECD Trade & Agriculture 14

15 Is there a need for market interventions? Input subsidies increasingly popular Perceived success e.g. in Malawi Hope that innovative design features can avoid known pitfalls ( smart subsidies) Price stabilisation a reality Major price shock in Fears of increased price volatility [Simulation model (DEVPEM) looking at efficiency & distributional effects of alternative interventions] OECD Trade & Agriculture 15

16 Market interventions Relatively easy levers to pull Offset rather than eliminate market failures Not the best way of transferring incomes Can impede the functioning of private markets Prone to political capture and can become a budgetary millstone But they may be the only tools policymakers have in the short term OECD Trade & Agriculture 16

17 Conclusion OECD best practice principles for agricultural policy are valid for poorer countries too Improve the functioning of markets (correct market failures and provide public goods) Establish effective systems of social protection There may be reasons to resort to second best instruments But it is important to move towards best practice More productive to talk about balance and sequencing than absolutes OECD Trade & Agriculture 28

18 OECD Trade and Agriculture Follow us on Contact OECD Trade & Agriculture 29