2020 BRIEF 59 - MARCH 1999: AGRICULTURAL GROWTH, POVERTY ALLEVIATION, AND ENVIRONMENTAL SUSTAINABILITY: HAVING IT ALL

Peter Hazell

Peter Hazell is director of the Environment and Production Technology Division at the International Food Policy Research Institute.

Many developing countries have achieved impressive growth rates in agriculture in recent decades. Asia, for example, was threatened by hunger and mass starvation in the 1960s but is now self-sufficient in staple foods, even though its population has more than doubled. Despite this success, serious concerns remain for the future. Hunger and malnutrition persist in many countries, often because past patterns of agricultural growth were insufficient or failed to adequately benefit the poor. Expected increases in agricultural demand associated with population growth and rising per capita incomes will require continuing increases in agricultural productivity, although evidence indicates that yield growth is slowing and prospects for further expansion of cropped and irrigated areas are limited. And environmental problems associated with agriculture could, if not checked, threaten future levels of agricultural productivity and impose severe health and environmental costs at the national and international levels.

Continued agricultural growth is a necessity, not an option, for most developing countries. But this growth must not jeopardize the underlying natural resource base or impose costly externalities on others. It must also be equitable if it is to help alleviate poverty and food insecurity. These three goals - agricultural growth, poverty alleviation, and environmental sustainability - are not necessarily complementary, and achieving all three simultaneously cannot be taken for granted. Although much depends on the specific social, economic, and agroecological circumstances, a high degree of complementarity is more likely to be achieved when agricultural development is (1) broadly based and involves small- and medium-sized farms, (2) market driven, (3) participatory and decentralized, and (4) driven by technological change that enhances factor productivity but does not degrade the resource base. Such growth can reduce food prices while increasing farm incomes; is employment intensive; and increases the effective demand for nonfood goods and services, particularly in small towns and market centers. By reducing poverty and promoting economic diversification in rural areas, it also relieves livelihood demands on the natural resource base.

THE FIVE I'S FOR AGRICULTURAL GROWTH

The requirements for broad-based agricultural development are reasonably well understood and should not be forgotten in the contemporary quest for environmental sustainability. Since they are so important, they are briefly reviewed here.

Back in the 1950s and 1960s, policymakers and agricultural development experts were primarily interested in growth, and the lessons that emerged from that experience can be summarized as the five I's for agricultural growth.

Innovation. Strong national agricultural research and extension systems (both public and private) to generate and disseminate productivity-enhancing technologies.

Infrastructure, particularly good road and transport systems.

Inputs. Efficient delivery systems for agricultural services, especially for modern farm inputs, agroprocessing, irrigation water, and credit.

Institutions. Efficient, liberalized markets that provide farmers with ready access to domestic and international markets and effective public institutions to provide key services where these cannot be devolved to the private sector.

Incentives. Conducive macro, trade, and sector policies that do not penalize agriculture.

EQUITY MODIFIERS: HOW AGRICULTURAL DEVELOPMENT CAN REDUCE POVERTY

In the 1970s and 1980s, policymakers and development experts began to focus on ways of using agricultural development to reduce poverty and food security as well as contribute to growth. The lessons that emerged from that era can be summed up in six "equity modifiers" to agricultural growth:

1. Promote broad-based agricultural development. There are few economies of scale in agricultural production in developing countries (unlike processing and marketing). Hence, targeting family farms is attractive on both equity and efficiency grounds. But small- and medium-sized farms must receive priority in publicly funded agricultural research and extension and in marketing, credit, and input supplies.

2. Undertake land reforms, where necessary. Such reforms, particularly market-assisted redistribution programs, may be needed where productive land is too narrowly concentrated among large farms.

3. Invest in human capital, such as rural education, clean water, health, family planning, and nutrition programs, to improve the productivity of poor people and increase their opportunities for gainful employment.

4. Ensure that agricultural extension and education, as well as credit and small business assistance programs, reach rural women, since women play a key role in farming and ancillary activities.

5. Let all rural stakeholders (not just the rich and powerful) participate in setting priorities for public investments that they expect to benefit from or to help finance.

6. Actively encourage the rural nonfarm economy. It is not only an important source of income and employment in rural areas, especially for the poor, but it benefits from powerful income and employment multipliers when agriculture grows. In many countries, these potential multiplier effects are constrained by investment codes and related legislation that discriminate against small, rural nonfarm firms.

ENVIRONMENTAL MODIFIERS FOR SUSTAINABLE AGRICULTURAL DEVELOPMENT

The new priority of environmental sustainability that has emerged in the 1990s does not negate the need for agriculture to continue to contribute to growth, poverty alleviation, and increased food security; it is just that agriculture is now required to accomplish all of these in ways that do not degrade the environment. In addition to the five I's and the six equity modifiers (there are no short cuts here), eight environmental modifiers are now required for sustainable agricultural development. These modifiers have yet to be fully worked out and tested through development experience. In many ways the process is still at the research and design stage.

1. Give higher priority to backward regions in agricultural development, even though many of these may be resource poor. Considering the rapid population growth and limited nonfarm opportunities, agricultural growth is the only viable means of meeting the food and livelihood needs of growing populations in many backward areas for the next few decades. Failure to do so will lead to excessive outmigration, which will add to the problems of already overloaded urban slums. It will also lead to worsening poverty and further degradation of hillsides, forests, and soils. The development of backward regions will require additional resources for agricultural development, not diversion of resources from favorably endowed agricultural regions, where productivity increases are still important.

2. Pay more attention in agricultural research to sustainability features of recommended technologies, to broader aspects of natural resource management at the watershed and landscape levels, and to the problems of resource-poor areas.

3. Ensure that farmers have secure property rights over their resources. This does not necessarily imply that governments should invest in ambitious land registration programs. In many cases (in Sub-Saharan Africa, for example), the indigenous tenure systems still work surprisingly well. They are better able to meet equity needs and to recognize the rights of multiple users than are fully privatized property rights systems.

4. Privatize common property resources, or where this is not desirable (because of externality benefits or for equity reasons), strengthen community management systems.

5. Resolve externality problems through optimal taxes on polluters and degraders, regulation, empowerment of local organizations, or appropriate changes in property rights. But note that free market prices are not always the best; externalities may require optimal tax or subsidy interventions.

6. Improve the performance of relevant public institutions that manage and regulate natural resources (such as irrigation and forestry departments). Devolve management decisions to resource users, or groups of users, wherever possible. This also requires transfer of secure property or use rights.

7. Correct price distortions that encourage excessive use of modern inputs in intensive agriculture. That is, remove subsidies on fertilizers and pesticides and charge the full costs of irrigation water and electricity. It may still be necessary to subsidize fertilizer in backward regions where current use is low and soil fertility is being mined.

8. Establish resource monitoring systems to track changes in the condition of key resources, educate farmers about the environmental effects of their actions, and delineate and protect sites of particular environmental value.

CONCLUSIONS

Past patterns of agricultural growth have sometimes harmed the environment and exacerbated poverty and food insecurity among rural people, even as agriculture has met national food needs and contributed to export earnings. But poverty and environmental degradation are not an inevitable outcome of agricultural growth. Rather, these negative effects reflect inappropriate economic incentives for managing modern inputs in intensive farming systems, insufficient investment in many heavily populated backward areas, inadequate social and poverty concerns, and political systems that are often biased against rural people. With appropriate government policies and investments, institutional development, and agricultural research, there is no reason why agricultural development cannot simultaneously contribute to growth, poverty alleviation, and environmental sustainability.

For more information, see Peter Hazell and Ernst Lutz, "Integrating Environmental and Sustainability Concerns into Rural Development Policies," in Agriculture and the Environment: Perspectives on Sustainable Rural Development, ed. Ernst Lutz, with the assistance of Hans Binswanger, Peter Hazell, and Alexander McCalla (Washington, D.C.: World Bank, 1998).