Seven Theses in Support of Successful Rural Development
A. de Janvry and E. Sadoulet
University of California at Berkeley
During the last decade,
the economic, political and institutional context for rural development
has changed markedly in most developing countries, with the general
achievements of economic recovery following implementation of
adjustment policies, transition to more representative forms of
governance and consolidation of a thick web of civil society organizations.
This context creates new perspectives to address the urgent problem
of extensive rural poverty and to put into place successful programmes
of rural development. While every country and every particular
social group needs its own specific programmes, there are a number
of broad principles that can be derived from these experiences.
Cautioning against facile generalizations and stressing at the
outset that adaptation to every particular situation is essential,
this article explores seven broad theses for successful rural
development following this approach in the economic, political
and institutional context that currently characterizes most developing
countries.
Sept thèses à l'appui d'un développement rural réussi
Durant les dix dernières
années, le contexte économique, politique et institutionnel
pour le développement rural a changé de façon
marquée dans les pays en développement en raison
des réalisations de la reprise économique qui a
suivi la mise en exécution des politiques d'ajustement,
une transition vers des formes d'administration plus représentatives
et la consolidation d'un épais réseau d'organisations
de la société civile. Ce contexte est propice à
de nouvelles perspectives pour faire face au problème crucial
de la pauvreté rurale extensive et pour mettre en place
des programmes à succès de développement
rural. Alors que chaque pays, et chaque groupe social particulier
a besoin de programmes spécifiques, il y a de nombreux
principes généraux qui peuvent être tirés
de ces expériences. Mettant en garde contre les généralisations
faciles et soulignant que l'adaptation à chaque situation
particulière est essentielle, cet article explore sept
vastes thèses pour un développement rural réussi
en suivant cette approche dans le contexte économique,
politique et institutionnel qui caractérise actuellement
la plupart des pays en développement.
Siete tesis en apoyo a un desarrollo rural exitoso
Durante la ultima década,
el contexto económico, político e institucional
del desarrollo rural ha cambiado considerablemente en la mayoría
de los países en desarrollo, debido a una recuperación
económica consecuencia de la implementación de políticas
de ajustes, la transición hacia formas de gobierno más
representativas y la consolidación de una importante red
de organizaciones de la sociedad civil. Este contexto crea nuevas
perspectivas para enfrentar el problema urgente de la extendida
pobreza rural, y para implementar exitosamente programas de desarrollo
rural. Mientras que cada país, cada grupo social, necesita
programas específicos, existe un número de principios
generales que pueden ser deducidos a partir de estas experiencias.
Manteniendo una cierta precaución hacia fáciles
generalizaciones y considerando la importancia de la adaptación
a cada situación particular, el artículo presenta
siete tesis para un desarrollo rural exitoso siguiendo este acercamiento
en el contexto económico, político e institucional
que actualmente caracteriza la mayoría de los países
en desarrollo.
Contents
Introduction
Thesis 1
A sound macroeconomic context, achieved by implementation of successful stabilization and adjustment programmes, is necessary but not sufficient for successful rural development
Thesis 2
The institutional gaps created by government contraction are currently the most serious hurdle to smallholder response to incentives to invest
Thesis 3
Rural poverty is fundamentally created by the poor's insufficient control over income-generating assets
Thesis 4
The rural poor are highly heterogeneous and solutions to rural poverty must be correspondingly differentiated
Thesis 5
Rural development programmes must be demand-driven since only the poor themselves, with appropriate organizational and technical assistance, have the information necessary to identify solutions that will suit them and belong to them
Thesis 6
This approach to rural development implies a strong, redefined role for the state, to allow it to support and complement the role assumed by civil society in rural development programmes
Thesis 7
The problems of rural poverty and retention of rural populations can almost never be solved by agriculture alone, no matter how successful agricultural development may be
Conclusion
Introduction
During the last decade, the
economic, political and institutional context for rural development
has changed markedly in most developing countries, with the general
achievements of economic recovery following implementation of
adjustment policies, transition to more representative forms of
governance and consolidation of a thick web of civil society organizations.
This context creates new perspectives to address the urgent problem
of extensive rural poverty and to put into place successful programmes
of rural development. There has also been considerable experimentation
with a new participatory and decentralized approach to rural development,
grounded on the role of organizations in civil society and decentralized
governance, that departs radically from the previous state-led
integrated approach to rural development.
These experiences were pursued
in a dispersed and all too often loosely rationalized fashion
by a number of non-governmental organizations (NGOs) and international
organizations, most particularly the United Nations International
Fund for Agricultural Development (IFAD). While every country
and every particular social group needs its own specific programmes,
there are a number of broad principles that can be derived from
these experiences. Facile generalizations should not be made,
however, and it is essential that each particular situation is
adapted to.
[ Contents ]
Thesis 1
A sound macroeconomic context,
achieved by implementation of successful stabilization and adjustment
programmes, is necessary but not sufficient for successful rural
development
A sound macroeconomic context
is clearly necessary as it enables the removal of historical anti-agriculture
biases created by exchange rate overvaluation, import substitution
industrialization policies and direct taxation of agriculture
and the elimination of inflation, which discourages investment
and imposes a cruel tax on the poor. Exchange rate and trade liberalization
allow a more realistic and credible price system to be put into
place, and this, in principle, should create price incentives
for agriculture. In the short term, however, these benefits may
be cancelled by the elimination of subsidies to agriculture and
the recurrence of exchange rate appreciation owing to capital
inflows. This implies the need for the state to manage the incentive
system explicitly during transition periods in order to help agriculture
modernize and diversify as it adjusts to its newly found comparative
advantages.
Even when these incentives
become effective, however, benefits are only derived if there
is a high elasticity of supply response in agriculture. The key
to successful rural development thus depends on jointly achieving
successful macroeconomic adjustment and putting into place the
determinants of a high elasticity of supply response among smallholders.
It is one of the fundamental purposes of rural development interventions
to engineer this high elasticity of supply response.
While creating incentives
for sellers of an agricultural surplus, the process of adjustment
typically raises the price of food and increases unemployment,
again at least in a transition period. Since many of the rural
poor are landless and net buying smallholders, this transition
will worsen poverty among them, at least until adjustment creates
enough growth, employment and response in the production of non-tradeable
foods. To protect these groups, special programmes of income generation
(public works programmes) and targeted food subsidies (social
funds) are required. These programmes address transitory poverty
and help insure the political feasibility of reforms, but they
do not solve the much more difficult and extensive problem of
structural poverty which is the object of rural development.
Macroeconomic contexts will
continue to change beyond the phase of structural adjustment as
domestic economies respond to international shocks and opportunities,
go through the successive phases of business cycles and are affected
by cumulative processes such as population growth, learning-by-doing
and depletion of resources. For this reason, the correspondence
between macroeconomic policy and rural development interventions
is a process that needs to be adjusted continuously. This requires
the ability to coordinate the making of macroeconomic policy with
the making of rural development policy. In general, however, the
branches of government where rural development is designed have
little interface with the branches of government where macropolicy
is made. This raises three important issues for successful rural
development:
- the need
for the branches of government responsible for rural development
and the interests of civil society concerned with rural development
to be part of a continuous dialogue with the branches of government
charged with the making of macropolicy. If rural development is
an important concern for government, opportunities for this dialogue
to occur need to be explicitly provided;
- the need
to find a location for rural development within the governmental
structure which allows for both effective representation in this
dialogue and effective service for implementation - a difficult
challenge. Observation of the administrative location of rural
development services across country governments reveals a wide
range of solutions including ministries of agriculture, ministries
of social welfare, ministries for the environment, central planning
and budgeting agencies, specialized services directly attached
to the executive and agricultural research institutes. Clearly,
no unique solution that reconciles all the exigencies for successful
rural development seems to prevail at the level of central government;
- in choosing
this location, the need to separate rural development from welfare
activities, so that the perceived likelihood of public transfers
by rural households does not divert their energies towards rent-seeking,
does not postpone private initiatives in new projects as they
wait for public rents and does not tempt governments to use rural
development programmes for short-term political gain.
[ Contents ]
Thesis 2
The institutional gaps
created by government contraction are currently the most serious
hurdle to smallholder response to incentives to invest.
The implementation of stabilization
and adjustment policies has resulted in fiscal austerity and downscaling
of the direct role of the state in the economy. For rural development,
this has implied the contraction or foreclosure of many public
institutions such as development banks and parastatals which had
serviced agriculture, the downscaling of subsidies which had often
been introduced to compensate agriculture for appreciated real
exchange rates and industrial protectionism and the privatization
of many services to agriculture. This wholesale institutional
change has induced differentiated responses across sectors of
agriculture. The more commercial sectors have, in general, successfully
gained access to new sources of institutional support through
commercial banks, private merchants, contracts with agroindustry
and professional organizations or private consulting firms delivering
technical advice.
The extremely poor have sometimes
benefited from access to safety nets temporarily put into place
by social funds. By contrast, the middle sector of smallholders,
the principal clientele of rural development programmes, has all
too often been left dispossessed of access to institutions delivering
credit, efficient financial services, marketing and information
about technology and market opportunities, creating a serious
institutional vacuum that threatens the very existence of this
social sector because it compromises its competitiveness vis-à-vis
the commercial sector of agriculture. As land markets become liberalized
within a context of pervasive institutional gaps for smallholders,
land could easily become concentrated in the hands of a minority
of commercial farmers and the mass migration of displaced smallholders
ensue.
Successful rural development
therefore needs to focus on the reconstruction of civil institutions
in support of an efficient smallholder economy. This includes
a wide array of institutions which have been suppressed, or failed
to emerge, by the preponderance of the state: credit unions, savings
and loans associations and financial NGOs; marketing cooperatives
and community storage organizations; organizations for the co-production
with government of public goods and services, for instance for
infrastructure and its maintenance or for research and development;
water users' associations that can assume the direct management
of devolved water districts; and community organizations that
can enforce cooperation in the management and improvement of common
property resources such as grazing lands, forests and fishing
grounds.
These institutions are crucial
in permitting smallholders to reduce transaction costs in accessing
markets, relax constraints on investment and factor use and ensure
effective management of productive resources, for example, by
increasing the elasticity of supply response of smallholders.
In all cases, the key principle
for the construction of civil institutions that can effectively
substitute for former government service agencies is to capitalize
on the unique informational and enforcement advantages that local
(often traditional) institutions have. The superior ability of
local institutions in capturing local information allows them
to control opportunistic behaviour that takes the form of adverse
selection and moral hazards in contractual relations. To compensate
for the disadvantages of locality, such as diseconomies of scale
and high covariation in local events, integration between local
institutions and broader formal institutions should be sought.
The enforcement of cooperative behaviour by local institutions
can be achieved through interlinked transactions, the exercise
of social pressure, the advocacy of social norms and repeated
games with no exit option for participants.
[ Contents ]
Thesis 3
Rural poverty is fundamentally
created by the poor's insufficient control over income-generating
assets.
It is control over assets
that gives households, and the members of a household differentiated
by gender and age, the opportunity to generate income. There exists
a wide array of assets that serve this purpose. These include:
land and water, the primary assets for rural smallholders; other
productive capital such as tools, animals and machinery; human
capital, including the health, education, skills and experience
of working-age adults; organizational capital such as membership
of cooperatives and credit unions; social capital such as membership
of communities where social collateral can be used in accessing
loans, face-to-face relations in exchange help reduce transaction
costs and mutual insurance is practised; and migration capital
under the form of membership of networks of migrants which help
to increase the chances of successful migration.
Anti-poverty programmes need
to focus on mechanisms that increase the asset entitlement of
the rural poor. For rural development, access to land and water
and the nature of property rights over these assets are key issues
that are far from resolved for a large share of the rural poor
in most developing countries, and most particularly for the poorest.
Solving this problem is a precondition for successful rural development
programmes. This reopens the tremendously complex problem of land
reform, a problem that needs to be placed high on the political
agenda, and of the associated institutional reforms in support
of competitiveness of the land reform beneficiaries. Where landlessness,
non-viable farm sizes and uncertain property rights prevail, no
agriculture-based rural development effort can succeed in reducing
rural poverty without first addressing this question.
Yet, the record of land reform
has in general been at best mixed, often leading to the expropriation
of tenants and the worsening of rural poverty or to the modernization
of large estates in response to threats of expropriation without
redistributive gains for the poor. The four most difficult issues
for successful land reform are:
- to restore
the inverse relation between total factor productivity and farm
size, based on the superior advantage of small farms in making
use of self-motivated and partially captive family labour. This
relation has often been perverted by the capitalization of agriculture
occurring within a context of policy and institutional biases
favouring large farms, such as tax breaks for wealthy landowners,
privileged access to credit and to government services for commercial
farmers and, in general, successful rent-seeking by larger farmers.
Eliminating these biases through policy and institutional reforms
is thus a precondition for the inverse relation to hold, itself
a condition for the achievement of both equity and efficiency
gains through land redistribution;
- to organize
powerful political coalitions in support of land redistribution
in order to countervail the power of traditional landlords and
local elites to derail the reform, even against the will of a
progressive central government. These coalitions need to go beyond
the direct land reform beneficiaries to include urban industrial
and services interests, both producers and labourers, who see
in increased domestic market size, reduced urban migration and
greater political stability advantages to the reform;
- to promote
organizations among beneficiaries and to construct service institutions
through which they can have efficient access to the financial
services, input supply, marketing and extension, that will help
them achieve competitiveness after the reform. To be successful,
land reforms must consequently go well beyond land redistribution
and address extensive organizational and institutional reforms;
- to mobilize
government support for the beneficiaries beyond land redistribution
so they gain access to a redesigned infrastructure and to the
necessary public goods and services complementary to private initiatives.
[ Contents ]
Thesis 4
The rural poor are highly
heterogeneous and solutions to rural poverty must be correspondingly
differentiated.
Heterogeneity across households
comes from highly varied asset endowments and highly varied constraints
on performance such as differential access to markets, credit,
infrastructure, information and insurance. The result is a bewildering
variety of (constrained) opportunities for households to design
survival strategies, even while remaining poor within this exercise
of choice. This applies both to households as a whole and to gender
categories within households. Sources of income typically include
crops and livestock, forestry and fisheries, participation in
the labour market, self-employment in microenterprises and migration
and remittances. To design rural development interventions, this
heterogeneity needs to be characterized and understood, usually
by conducting household case studies and surveys and constructing
typologies of household categories.
Heterogeneity is both a difficulty
for the design of solutions and a valuable opportunity; it shows
that there is no unique solution to poverty, but also that there
are many potential roads out of poverty. For instance, households
with little land but good human capital can use the labour market
as an important source of income, while households with migration
capital can rely on remittances to complement meagre farm incomes.
With a heterogeneous population, a policy or programme such as
structural adjustment will have highly uneven implications across
household types; at the same time, heterogeneity allows the design
of differentiated interventions and the targeting of these interventions
on particular segments of the rural poor. In facing up to heterogeneity,
rural development programmes must consequently be able to offer
poor households a broad portfolio of options as opposed to looking
for one solution to all situations.
[ Contents ]
Thesis 5
Because of heterogeneity
and the existence of a multiplicity of continuously changing solutions,
rural development programmes must be demand-driven since only
the poor themselves, with appropriate organizational and technical
assistance, have the information necessary to identify solutions
that will suit them and belong to them.
Demand-driven rural development
is by now a well-recognized approach with which IFAD and a number
of other development agencies and governments have started to
experiment widely, although there is not yet any synthesis of
the lessons learned because most programmes following this approach
are still at the early stages of implementation. Under the veil
of limited information, the challenge is to design a demand-driven
approach to rural development that is likely to succeed. There
are a few broad preliminary principles that can be derived from
the experiments in progress. They suggest that demand-driven rural
development should be crafted along the following principles:
- Start with
a strong effort to organize poor households and communities. NGOs
can be particularly useful in this effort, especially in including
the poorest and traditionally least-organized households. Project
resources need to be devoted to this effort.
- Organize
regional executive agencies, following the model of Community
Development Funds (IFAD) or Social Action Funds (World Bank).
These local agencies typically include representatives from central
and local government, NGOs, community-based and grassroots organizations
and local traditional structures of leadership. They are charged
with the responsibility of setting broad priorities for the disbursement
of funds and inviting organized households and communities to
submit projects for funding, as both grants and loans (clearly
separated), on a competitive basis. Superior access to local information
for these regional agencies helps them to channel resources to
the poor while mitigating adverse selection and moral hazards
problems.
- NGOs and
technical assistance consultants (on a voucher basis funded by
each project) can be called upon by the organized households and
communities to help in the formulation and submission of projects
to the regional executive agency. Demands for loans are mediated
by the regional agency, often through a financial NGO or a local
financial institution on a percentage points basis, but channelled
to commercial or development banks. Grants and loans are allocated
on a competitive basis by the regional agency, inducing organized
groups to make their demands more competitive by contributing
local resources (for instance for the co-production of public
goods and the maintenance of infrastructure) and offering guarantees
of loan repayments and credible delivery of results.
- The regional
executive agencies can be regrouped in peak organizations allowing
efficient dialogue among such organizations, as well as with government
and donors. This national forum permits the definition of priorities
consistent with the government's long-term plans and with donor
priorities. It allows beneficiaries to lobby for continuity of
programme support and for access to additional assets by the organized
poor. It also allows for resources to be allocated in a transparent
fashion and for accountability to be achieved by making fully
public information on the allocation of such funds (ex-ante)
and on the results achieved by use of these funds (ex-post).
- Sustained
government and donor commitment to rural development requires
the organization of broad pro-poor coalitions that can lobby in
support of this approach. Because governments respond to political
pressures, poverty-related public expenditures need to compete
with demands from other organized groups, which are backed by
resources allocated to rent-seeking and, hence, more powerful
than pro-poor coalitions.
Constitutive elements of
a pro-poor coalition could include: political representatives
of the direct beneficiaries, particularly through local government,
with close relations to poor constituencies; those interests that
are indirectly benefited by rural development through linkage
effects such as merchants and entrepreneurs catering to the effective
demand of the poor and employees of anti-poverty programmes; individuals
and institutions concerned with the negative social and political
consequences of poverty and urban migration such as urban labour
and the urban middle class; individuals and institutions concerned
with the negative environmental consequences of rural poverty
such as downstream interests and users of water emanating from
watersheds where the poor practise slash-and-burn and deforestation;
institutions of a moral character motivated by altruism or proselitism;
and international and national agencies concerned with poverty.
Following these broad principles,
which are to be adapted in each case to both the specific degree
of organization of civil society and the current degree of decentralization
and democratization in local governance, rural development programmes
should be:
- decentralized
towards organized groups of households and communities;
- participatory,
to capture local information and resources and to achieve accountability
of local government;
- demand-driven
and differentiated to allow for asymmetrical information and the
heterogeneity of households and communities;
- strongly
market-oriented to achieve smallholder competitiveness within
the new economic and institutional framework;
- complemented
by the effective construction of supportive civil society institutions
in replacement of the downscaling of state services;
- clearly separated
from welfare provision to minimize false expectations of households
and communities and populist gestures by government;
- based on
a partnership between state and civil society to maximize complementarity
between the initiatives of these two sets of institutions;
- backed by
a broad pro-rural poor coalition that can effectively lobby for
programme sustainability;
- organized
as a learning process, where learning is achieved in a participatory
fashion.
[ Contents ]
Thesis 6
This approach to rural
development implies a strong, redefined role for the state, to
allow it to support and complement the role assumed by civil society
in rural development programmes.
The central government and
the local branches of government involved in this partnership
need to perform the demanding task of catalysts in inducing the
emergence of regional executive agencies and in performing specific
roles as part of this alliance which only they can perform. Success
in performing these tasks requires the devotion of resources to
the strengthening of the public institutions involved, particularly
at the local levels of governance where the types of expertise
needed for participatory rural development are new and often lacking.
Good governance, not substitution of the state by agents of civil
society, is thus a key to the success of this approach to rural
development.
In particular, the state
needs to continue fulfilling functions that are its unique realm:
macro- and sectoral policy in support of rural development; the
delivery of public goods and services; regulation of environmental
effects; regulation of the competitiveness of markets and the
enforcement of contracts; provision of information when it creates
positive externalities such as new technology; assistance in access
to assets for the poor; and welfare and safety nets for the poorest.
Many countries have taken
initiatives to decentralize governance towards provincial or municipal
governments, effectively devolving a number of tasks from central
to these levels of governance. This can be quite effective in
enticing civil society participation, more effectively responding
to local demands from the organized poor and achieving greater
accountability in governance. However, to be effective, the decentralization
of governance requires a number of preconditions to which the
central government needs to contribute. These include: democratic
forms of governance at the local level and, in particular, due
representation of the interests of the organized poor; fiscal
decentralization to endow these local administrative bodies with
control over resources; and the training of local bureaucrats
to perform technical functions in support of participatory rural
development.
A functioning system of rural
development, based on regional executive agencies, thus needs
good governance, even if the direct role of the state in these
agencies may be subsequently downscaled as civil society gradually
learns to assume more directly a number of functions that, initially,
only the state can fulfil. A high elasticity of supply response
in the context of market liberalization and a greater role for
civil society thus require a redefined, pro-active and efficient
public sector as part of the new coalition with civil society
on which rural development is constructed.
[ Contents ]
Thesis 7
Successful rural development
requires a thriving agricultural sector, but the problems of rural
poverty and retention of rural populations can almost never be
solved by agriculture alone, no matter how successful agricultural
development may be.
Most rural incomes derive,
directly or indirectly, from agriculture, including forestry and
fisheries. Successful agricultural development is thus a precondition
for successful rural development. However, given the rapid growth
of rural populations, land scarcity and mounting environmental
pressures, off-farm and non-farming incomes need to be promoted
in the rural areas as an integral component of rural development.
This implies:
- the promotion
of investments in microenterprises which can: add value to agricultural
and forestry products; produce the regionally non-tradeable goods
and services demanded by agriculture as inputs (backward linkages)
or in response to the expenditure of agricultural incomes (final
demand linkages); and produce regionally tradeable goods through
the decentralization of industry. This last activity suggests
emulating the Italian, Danish and Brazilian (shoes and textiles
in the state of Sao Paulo) experiences with flexible specialization,
where formal industries subcontract production to rural households
and cottage industries. These microenterprises will more often
than not be part of a labour-intensive informal sector, complementary
to the modem sector;
- the promotion
of skills and the quality of human capital for successful
participation in the labour market and seasonal migration - on
the demand side of the labour market, the promotion of labour-intensive
industrialization in both the formal and informal sectors;
- the development
of financial institutions to channel remittances back to the emitting
communities and make them available for investment by local entrepreneurs
in productive, employment- creating activities.
In general, promotion of
rural microenterprises is not the systematic purvey of any of
the main ministries and tends to fall between the cracks of public
administration. For rural development, the promotion of off-farm
and non-farming sources of income also requires a broader view
of the opportunities made available to organized households and
communities, for instance the options offered by regional executive
agencies. International agencies often have difficulties in handling
this diversity as they tend to be specialized in activities that
focus on agriculture (FAO, IFAD), industry (the International
Labour Organisation - ILO, the United Nations Industrial Development
Organization - UNIDO) or human capital development (the United
Nations Educational, Scientific and Cultural Organization - UNESCO,
the United Nations Children's Fund - UNICEF), calling on the need
for coordination among these agencies and on broader coalitions
of donors.
[ Contents ]
Conclusions
Reflecting on these seven
theses for participatory rural development is an exercise in high
expectations, but also in modesty; while it charts a new and exciting
potential for rural development initiatives, it also serves to
underscore how little is yet known about conducting effective
rural development in the economic, institutional and political
context that prevails in the developing countries as they emerge
from structural adjustment. It also leads to a better understanding
of the fact that there is no unique solution and that much local
innovation and experimentation will be needed.
To succeed in this effort,
this approach must be designed as a learning process, where each
attempt is monitored in terms of achievements and failures and
where the broad spectrum of agents involved in the programme are
called to participate in assessment and in the drawing of lessons
for the design and implementation of subsequent initiatives. It
is these lessons that urgently need to be drawn and shared so
that a new rural development science can emerge from the multiplicity
of initiatives currently under way.
