Land tenure Institutions

Land Reform Bulletin: 1996
Réforme agraire: 1996
Reforma Agraria: 1996

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.

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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:

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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.

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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:

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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.

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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: 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:

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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.

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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: 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.

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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.



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