Market and Coordination Failures in Poor Rural Economies: Policy Implications for Agricultural and Rural Development

This paper argues that the disappointing outcomes of adjustment policies in poor rural economies, principally in sub-Saharan Africa, can be partly attributed to weaknesses in the neo-classical theory which underlies these polices and from associated failures to recognise structural changes (or transitions) in growing agricultural economies. After a brief description of agricultural policy changes in sub Saharan Africa, the mixed achievements of market liberalisation policies are explained using new institutional economic arguments regarding inherent difficulties in economic coordination in poor economies, difficulties which markets themselves cannot overcome. A novel framework is put forward for understanding coordination failure and integrating it with other causes of under-development notably low levels of technical and institutional development and poor governance. The paper concludes by considering the implications of these arguments for development policies in different sub-Saharan economies.development, coordination, markets, institutions, Marketing, O12, O17, Q12,

INSTITUTIONAL DIMENSIONS OF TRADE LIBERALISATION AND POVERTY

Trade policy liberalisation requires institutional change, in the sense of a change in the rules of the game. The question is whether these changes produce "superior institutions" judged in terms of a reduction of transactions costs; improved coordination; stronger strategic commitment to investing in needed specific assets; and allocative efficiency. In conventional approaches to the analysis of liberalisation, changed institutional arrangements are studied, but they tend to be considered in the category of "practical details": important but not especially intellectually interesting. In contrast, this paper argues for a parallel approach to the study of the effects of liberalisation on the rural poor, in which institutional matters are central. A broad range of institutional issues is considered, informed by a theoretical framework provided by the various strands within institutional economics. The framework set out and discussed leads to the contention that smallholder agriculture in poor countries needs coordinated market economy (CME) type institutions if it is to develop, at least at the earlier stages. Ideally, these would be based on deliberative institutions, working horizontally inside a sector, and also vertically along the supply chain. It is argued that the way forward is likely to involve a rethinking of the role of the state (at sub-national, national and international - aid donor - levels) and of the roles of producer organisations and other stakeholder (including trader) associations. The aim must be to find a way in which the state and other powerful actors can initiate deliberative processes and take a lead in encouraging appropriate asset specific investments, while at the same time planning to fade into the background as initial success is achieved. These conclusions challenge conventional analysis of trade policy liberalisation in poor countries and also challenge institutional specialists to provide insights, ideally quantifiable, into the consequences of those liberalisation policies which drive changes in such features as "non-standard institutional arrangements"; non-market coordination; and the roles of government.Food Security and Poverty, International Relations/Trade,

Coordination risk and cost impacts on economic development in poor rural areas

This paper addresses issues relevant to a critical problem in economic development: how to get rapid pro-poor economic growth in poor rural areas in Africa and South Asia where most of the world’s dollar a day poor live. It examines constraints to the development of coordinated exchange systems in poor rural areas, focusing on the core problem of thin markets and low density of economic activity in these areas. Transaction cost and risk analysis is integrated into a conventional neoclassical production economics framework to describe the existence of low level equilibrium traps in transactions and supply chains and to generate important insights for development policy.Development, agriculture, market liberalization, coordination problem

The future of small farms for poverty reduction and growth:

"The people operating small farms in developing countries have to cope with the risks of these small businesses and have long faced heavy challenges. Today, these challenges are particularly severe, and the aspirations of young people on small farms have changed. Globalization and the integration of international markets are stimulating intense competition, offering some opportunities but also new risks. In light of these pressures and others, many of the world's millions of small farmers are simply not making it. Indeed, half of the world's undernourished people, three-quarters of Africa's malnourished children, and the majority of people living in absolute poverty live on small farms. The transformation of the small-farm economy is one of the biggest economic challenges of our time. For some, it entails growth into specialized, market-oriented farms; for others, part-time farming combined with off-farm rural jobs; and for others, a move out of agriculture. The pathways of transformation differ by region and location and will take decades. Policy must take a long-run view to support and guide this process efficiently, effectively, and in social fairness. The role of women farmers and their livelihoods requires particular attention. In this paper, Peter Hazell, Colin Poulton, Steve Wiggins, and Andrew Dorward address several crucial questions. Do small farms in fact have a future? In what situations can small farms succeed? What strategies are most appropriate for helping to raise small-farm productivity? The authors review both sides of the debate over the future of small farms before coming to their conclusions. Coming down firmly on the side of policy support for small farms, they point to small farms' significant potential for reducing poverty and inequity. They also clarify the differing roles of and needs for small farms in different country contexts and spell out a policy agenda for promoting small-farm development. This discussion paper is based on a literature review and the deliberations of an international workshop, “The Future of Small Farms,” organized by the International Food Policy Research Institute (IFPRI) 2020 Vision Initiative, the Overseas Development Institute (ODI), and Imperial College London in Wye, England, from June 26 to 29, 2005. (A proceedings volume for this workshop is available from IFPRI, www.ifpri.org/events/seminars/2005/smallfarms/sfproc.asp.) We hope that this discussion paper will help stimulate renewed attention among many stakeholders— including policymakers, researchers, the private sector, and nongovernmental organizations—to small-scale agricultural development. Healthy and productive small farms could serve as a crucial mechanism for achieving the poverty and hunger Millennium Development Goals. " From Foreword by Joachim von BraunPro-poor growth, Agriculture, Economic development, small farms, Poverty reduction, Sustainable livelihoods, Non-farm development, Rural-urban linkages, small farms,

Priorities and Preconditions for Successful Investment in Smallholder Agriculture in Sub-Saharan Africa

In the past couple of years, there has been resurgence in interest in smallholder agriculture as a potential driver for growth and poverty reduction in Sub-Saharan Africa. However, there remains considerable skepticism as to whether public investment in smallholder agriculture will lead to the desired growth and poverty reduction, given a general pessimism about "absorptive capacity" for (public) investment in Africa, the perception of failure of past agricultural investment and the observation that current conditions are unconducive to agricultural growth in Africa. This paper combines experiences of two UK-based NGOs dedicated to promoting smallholder agriculture and strengthening rural livelihoods in Africa with insights from academic literature on African agriculture and rural markets to set out an agenda for investment in smallholder agriculture in Africa. It identifies priorities for public investment, but also key issues related to "absorptive capacity" that need to be addressed if such investment is to succeed in generating agricultural growth and poverty reduction. Particular emphasis is placed on: a) investment in human and organisational capacity of smallholder farmers; b) investment in coordinated service provision to equip producers to respond to evolving market opportunities; c) the process of developing and implementing credible agricultural development strategies at both national and local level, and; d) reform of Ministries of Agriculture to support this process.International Development,

Impact of Load Carriage on Metabolic Efficiency

Load carriage is a crucial detail of long-distance running, especially when it comes to ultra-marathon distances (\u3e26.2 miles). Longer distances require larger loads to carry fluids and nutrition to maintain performance during these events. Running packs fitted close to the torso are the most popular methods for carrying 1-3 L of fluid, additional food, and gear; however, little is known to what extent load mass may impact running performance. PURPOSE: To identify at which point relative load mass (% of body mass) begins to negatively impact submaximal metabolic efficiency. METHODS: To date, 7 active runners (≥3 days/week, ≥16.09 km/week for the last six months) have participated in this study. Participants (27.9±6.5 yrs; 179.2±4.4cm; 74.68±15.5kg) include males (n=5) and females (n=2) that have undergone four, four-minute intervals on the treadmill at a self-selected pace with relative loads of 0%, 3%, 6%, and 9% of their total body mass using a weighted Salomon running pack. VO2 (ml/kg/min) was measured (Parvo Medics TrueOne Metabolic Measurement System, Sandy, UT) during the last minute of each interval and then averaged for analysis. A repeated measures ANOVA was performed comparing the relative load of 0% to running pack loads equating to 3%, 6%, and 9% of total body mass. RESULTS: There was a strong, positive correlation (R2 = 0.83) between pack load and VO2, although significant differences in VO2 were only observed between the relative loads of 0% and 9% (p = 0.013). CONCLUSION: These data suggest that although a linear increase in VO2 in relation to pack load was observed, pack loads at 9% resulted in a significant increase in VO2, indicating a decrease in running economy. Identifying the relationship between relative load mass and metabolic efficiency may allow runners to better prepare and manage their loads to reduce fatigue during ultra-marathon type competitions

Institutions and economic policies for pro-poor agricultural growth

"This paper draws together findings from different elements of a research project examining critical components of pro-poor agricultural growth and of policies that can promote such growth in poor rural economies in South Asia and Sub-Saharan Africa. Agricultural growth, a critical driver in poverty reducing growth in many poor agrarian economies in the past, faces many difficulties in today's poor rural areas in South Asia and Sub-Saharan Africa. Some of these difficulties are endogenous to these areas while others result from broader processes of global change. Active state interventions in 'kick starting' markets in 20th century green revolutions suggest that another major difficulty may be current policies which emphasize the benefits of liberalization and state withdrawal but fail to address critical institutional constraints to market and economic development in poor rural areas. This broad hypothesis was tested in an analysis of the returns (in agricultural growth and poverty reduction) to different government spending in India over the last forty years. The results reject the alternate hypothesis underlying much current policy, that fertilizer and credit subsidies, for example, depressed agricultural growth and poverty reduction in the early stages of agricultural transformation. The results show initially high but then declining impacts from fertilizer subsidies; high benefits from investment in roads, education and agricultural R&D during all periods and varying benefits from credit subsidies over four decades; low impacts from power subsidies; and intermediate impacts from irrigation investments. These findings demand a fundamental reassessment of policies espousing state withdrawal from markets in poor agrarian economies. Given widespread state failure in many poor agrarian economies today, particularly in Africa, new thinking is urgently needed to find alternative ways of 'kick starting' markets ways which reduce rent seeking opportunities, promote rather than crowd-out private sector investment, and allow the state to withdraw as economic growth proceeds. Authors' AbstractAgricultural growth ,Poverty, Rural ,South Asia Rural poor ,Africa, Sub-Saharan ,Agrarian economies ,Globalization ,Green Revolution ,Poverty alleviation ,Government spending policy India ,

Coordination risk and cost impacts on economic development in poor rural areas

This paper addresses issues relevant to a critical problem in economic development: how to get rapid pro-poor economic growth in poor rural areas in Africa and South Asia where most of the world’s dollar a day poor live. It examines constraints to the development of coordinated exchange systems in poor rural areas, focusing on the core problem of thin markets and low density of economic activity in these areas. Transaction cost and risk analysis is integrated into a conventional neoclassical production economics framework to describe the existence of low level equilibrium traps in transactions and supply chains and to generate important insights for development policy

Coordination risk and cost impacts on economic development in poor rural areas

This paper addresses issues relevant to a critical problem in economic development: how to get rapid pro-poor economic growth in poor rural areas in Africa and South Asia where most of the world’s dollar a day poor live. It examines constraints to the development of coordinated exchange systems in poor rural areas, focusing on the core problem of thin markets and low density of economic activity in these areas. Transaction cost and risk analysis is integrated into a conventional neoclassical production economics framework to describe the existence of low level equilibrium traps in transactions and supply chains and to generate important insights for development policy