|CERES No. 058 (FAO Ceres, 1977, 50 p.)|
the new strategy against poverty must be based on an awareness that powerful vested interests will oppose it, and on measures to deal with the surplus cut to urban areas
by Thomas Balogh
After three decades of often devoted and certainly unrelenting work by international and national agencies, transferring technical skill and resources to the less advanced countries, there is little doubt that inequality, both at the international and at the domestic levels, has increased and is still increasing. Mr. MacNamara's strategies for greater equality have not yet had any visible results. It is equally undeniable that the poorest (especially in the poorest countries) have suffered an absolute decline in their living standards.
At the same time expectations have been aroused, the attainment of which would depend on a very substantial "leap-forward" in the poorer areas. There is at the moment little hope of this. Consequently, there has been growing dissatisfaction and unrest on the one hand and disillusion on the other. After the great and hardly justified hopes of having conquered poverty in the highly industrialized countries and at least built the foundation for steady progress in the rest of the world, there is now dismay and bitterness.
To share "the best"
The change in outlook could not have come at a worse moment. Mass unemployment, which haunted the interwar period, has returned and shows no sign of lifting. The obstacles in the way of effective intervention and provision of significant aid have been made graver by the political and social developments in the poorer areas of the world-and not only in those whose liberation from colonial rule has been effected since the Second World War.
In retrospect the liberation of the dependencies, however welcome, could hardly have taken place under less auspicious circumstances for a balanced development and the attainment of greater equality and a better society. The Second World War had brought about a total turnabout in the attitudes of the metropolitan countries to the colonies. On the one hand, the will of the colonial powers to keep the dependencies by force vanished. On the other hand, there was an increasing conviction that the metropolitan countries would have to contribute to development, while political dominance no longer seemed essential or even profitable from an economic viewpoint.
The change was abrupt. Before the Second World War, the metropolitan countries took no interest in the purposive planned development of their colonies. They held the ring for private enterprise with a definite and effective bias in favour of their own nations. Apart from India, and for very different reasons in some of the southern Mediterranean countries, education, essential for progress, was not developed. There were no institutions of higher education. With a few exceptions, secondary education was mostly unsatisfactory. What there was inaccessible to the vast majority in rural areas, which lived in poverty and illness and was in most parts of the world exposed to exploitation by landlords or chiefs, merchants and moneylenders.
The war not only shattered the confidence of the empires but also evoked a desire on the part of influential do-gooders (at least to a modest degree) to share "the best" that a metropolitan power could offer its dependencies At the same time, the immense cost of funding these projects contributed to the violent wind of change, to the acceptance of the end of the empire.
The final emancipation of the colonies (apart, again, from the Indian subcontinent), however, came too late to prevent these ideas from being carried out. Universities and hospitals sprang up from Sri Lanka to the Caribbean, from Kampala to Khartoum. Lavish expenditure was initiated. At the same time, efforts were made to recruit civil servants, officers and other professionals from among the inhabitants of the dependencies. This could not decently be done in the new atmosphere except on the basis of equality.
Two grave consequences followed. First, a middle class was suddenly created, and the grave inequality between the expatriate elite and the rest of the country perpetuated because salaries and fringe benefits corresponding to these of metropolitan expatriates had to be paid to locals.
A social evil
In the colonial period, moreover, the absence of modern welfare institutions and the strict nonintervention of the state enabled a very sparse bureaucracy to conduct affairs. This changed abruptly with independence and the burden of the government cadres lay heavily on the rural areas. So did the rapidly increasing, and often newly created, middle class. Secondly, the inequality of income distribution unfortunately did not lead to high savings being devoted to productive investment.
The FAO inquiries (1957-61) on Mediterranean and African development laid special emphasis on the need to reform traditional agriculture as the first priority, if balance and social equality were to be promoted. These studies also stressed the fact that, in the absence of a thriving agricultural sector, the first impetus of industrial development would not be self-sustaining. But, they had little or no influence on policy as it ran up against the strong resistance of the new and also of the old, traditional vested interests.
Lately, this resistance against rural development has abruptly changed, and both governments-among them the U. K. - and the World Bank have laid increasing stress on rural development and education as a first priority.
Unfortunately, this change in attitude has not yet produced the preconditions of its success. For a short period, the "miracle seeds" encouraged hopes that the problem of hunger, indeed of poverty, could be solved mechanically by the new inputs. Indeed, there is little doubt that in large areas of the world these seeds have enabled a drastic increase in total production. Some authors, among whom the late Wolf Ladejinski was prominent, warned that careful strategy planning was needed if the green revolution was not to turn into a social evil. Total production and even farm surpluses might increase. But this might well go hand in hand with increased unemployment (because of the introduction of labour-saving machinery), increased misery (because of the pressures of an increasing population on the already overcrowded land), thus increasing inequality as land revenues and prices boom and landowners displace tenants.
The crisis caused by the abrupt increase of the crude oil prices only aggravated an already difficult situation for the poorer areas. Until 1971 or 1972, the terms of trade of the primary producers were highly unfavourable. Thus, there have been demands for a common fund to finance the stabilization of 18 basic commodities and other products. I have already argued that the stabilization of most primary prices would not contribute cost efficiently to solving the problem of poverty.
Insofar as primary producers are concerned, these proposals seem to be based on a superficial view of the complex sociological problems involved in the unequal relationship between them and manufacturers in their ability to "capture" by price increases (or at least the maintenance of prices) a fair share of the fruits of an improvement in productive methods. This is not due merely to the fact that manufacturing is monopolistic or oligopolistic while primary production is not.
The most attractive
In the first place, cash crops primarily for export are the main generators of money income in a number of poor countries, notably in Asia and Africa. This means not only that, in the main, these commodities must find an outlet abroad, but also that no analogy can be drawn between them and the oligopolistic price determination of manufactured goods. For the latter, the home market is the determinant one. In their case, therefore, increases in prices due to cost-push pressures also increase income and ipso facto provide markets. This is not the case for most primary products.
The export cash crops are usually by far the most attractive. It is unrealistic to expect any reversal in the unfavourable trend for primary producers without a change in the social framework of the countries concerned. Furthermore, this change is much more likely to be stimulated under the impact of well-planned aid programmes offering alternative employment to rural labour than by commodity schemes or even by the liberalization of trade in manufactures. Trade, and especially an induced improvement in the terms of trade, is no alternative to a well-conceived programme of aid combined with internal reform.
This conclusion is very much strengthened by the reflection that improvements in trade will not bring help to the most hard-pressed countries in proportion to their needs. Within the cash-crop countries, it is the landowner and the larger peasant who are likely to benefit.
Given the great cultural, technical and environmental differences among developing countries, I do not believe that a model of ubiquitous validity can be constructed, nor is it plausible to assume that "there is also evidence that the entire package - resource redistribution, massive education and labour-intensive growth policies - must be adopted in that sequence to achieve rapid success."
Tends to be higher
However, Adelman's conception that a package is needed is to my mind entirely right. The difficulty arises when large parts of the package-especially land reform- represent a revolutionary attack on entrenched vested interests. Intensive research has confirmed the hypothesis that the output per unit of land on small farms in the long run tends to be higher than that on larger ones. The technical advantages enjoyed by the latter are offset or more than offset by the fact that the former use more labour-intensive crops and modes of cultivation, and work larger portions of their land (i.e., leaving less of it fallow).
But even if the political obstacles against redistribution could be removed, very acute problems arise in the present socioeconomic framework of most of these countries: a sharp fall in the surplus available to cities would ensue, as the redistribution of land would entail a sharp rise in rural subsistence consumption. Nor is it certain that after the land reform the present methods could continue to yield higher income per hectare on the land transferred. Only a very intensive specialized education could offset the transfer of land from skilled hands capable of making use of modern methods of production to the lower income landless labourer or smallholder.
The new strategy against poverty thus needs to be based on the acceptance of the fact that not only powerful private vested interests will oppose programmes that would entail greater equality, but that measures must be taken to relieve the cut in the surplus available for the urban areas.
A sharp break
The first requirement, therefore, is the resuscitation of food aid. I have always regarded the idea - buttressed by political arguments-of the poorest countries striving for self-sufficiency as totally absurd.
Food aid should be used in the first place (apart from maintaining supplies to urban areas) to increase the food intake of the unemployed or grossly underemployed population without ruining the peasants' domestic markets.
It could also be used through "linked" public works to support the traditional sector's transformation. This would entail a sharp break with the giant programmes so dear to both contributing and recipient governments. Small hydrological works, the damming of wadis, of dry ravines, the construction of secondary irrigation ditches and of access roads to villages-all sorts of works that need collective support and action could be undertaken without forced collectivization.
The second vital need is to organize mass education. Here, a combination of conventional and nonconventional methods is needed. Conventional education has colossally expanded since the last war-but, as we have seen, unequally and to a large extent irrelevantly to needs. It should be turned toward technical vocational tasks. However, what are most urgently needed are widespread indoctrination courses on new technical knowledge on cultivation strictly in tune with the land-tenure reform. To achieve meaningful coverage, a sufficient cadre of what the French call moniteurs (that is, elementary-school level agricultural teachers or orderlies) has to be created. Their first course must necessarily be short, using the dead season if any. It is the number of participants that counts primarily. The most intelligent, and those who show leadership capacity on returning to their villages, must then be recalled for follow-up courses of increasing intensity until after three or four courses they should be accepted as agricultural graduates. In parallel, elementary schools should be organized on the basis of farms to teach the young not only literary but agricultural knowledge.
Once such cadres have been created, agricultural extension services would have to be organized to bring credit to the reformed agricultural units and supply them with improved seeds, fertilizer and chemical crop preservatives (pesticides, etc.). This initiative might be used to push the organization of cooperatives. At the outset, these should not be too ambitious. There has been enough experience of cooperatives conniving with the powerful to increase rather than diminish the exploitation of the poorest.
Finally, agricultural development funds should be created. These should be somewhat independent of government. They would channel aid funds toward the poorest strata while at the same time seeing that the supporting programme is faithfully set up.
A small fraction
After more than thirty years of experience with technical and resource aid, the programme outlined here seems lacking in realism and perhaps rather naive. Yet, nothing less will do if the original aim of the United Nations and the World Bank is to be achieved.
It is more than unfortunate that such international economic cooperation will now have to be carried out in a world ambience that is extremely unfavourable. Since 1974, the world has been confronted with an international trade surplus in favour of the oil-producing countries of some $40 thousand million per year. It is most unlikely that the position will be seriously altered.
The cumulative total of the surplus, contrary to earlier optimistic calculation, will certainly mount and might reach $400 to $500 thousand million. One of the most dangerous aspects of this situation is the volatility of these vast short-term balances. It is, therefore, essential that an international fund should be established to stifle any cumulative waves of short-term capital
The "safety net" established for the United Kingdom by the rich central banks is a small fraction of what is needed to staunch the possibility of a run. Even the increase of SDRs to $15 thousand million, proposed by the Director of IMF, is insufficient. The creation of an International Fund for Agricultural Development can be understood only as a means of obtaining some contribution from OPEC
The forecast is that the developing countries' deficit will increase to $29 thousand million this year. This would be manageable - what is menacing is the accumulating total volume of debt, which lately reached the horrific figure of $190 thousand million, of which $80 to $85 thousand million are due to banks. Without strong action, action that has never been and is at the moment not seriously contemplated, a crisis resembling that of 1931-33 might overwhelm the non-Soviet orbit.