Posted April 1997
Bertinoro I
High-level Technical Seminar:
Private and Public Sector Cooperation
in National Land Tenure Development in Eastern and Central Europe
University Residential Centre
Bertinoro, Italy
1-5 April 1997
THE WORLD'S AGRICULTURAL SYSTEMS are changing. The growing international debate on how economic and political liberalisation can be the most effective mechanisms for ensuring economic efficiency, social well-being and political efficacy at the national level, has produced clear impacts on the world's agricultural systems. Changes in agriculture are reflected in both theory and practice. Firstly, the abandonment of old models has led to substantive changes in the agricultural system and its relations with other sectors of national systems. Secondly, changes have resulted in a new theoretical advocacy regarding the institutional structure of the agricultural system and in the recognition of a new role and functionality for the state.
Stated simply, it is now accepted that effective policy-making can only emerge from a plural decision-making process grounded in the participation of the greatest possible number of interest groups, coalitions and civil society representatives. The state must ensure the creation of the appropriate institutional framework in order to facilitate the realisation of the new participatory imperative. In addition, new advocacies have merged regarding the role and nature of civil society and its necessary inclusion in the policy-making process. Likewise, there is a growing respect for the politics of subsidiarity and corresponding economic, administrative and political decentralization. It is clear then, that these changes have led to a reconsideration of rural development and the contribution of government and policy to this process.
This post-war consensus has reached an end. The bases of justice are no longer operating in the area of economical morale, they are now developing in the context of political philosophy. The stability/distribution/growth triangle is replaced by a new order of principles guided by governance/equity/modernization. The theoretical discussion on the basis of this new order respond to the crisis and subsequent break-off of the consensus. A clear expression of which is the fading of the principle of full employment, or the presenting economic stability and democracy as a dilemma. There is a need to identify the economical and social objectives in relation to the specificity of processes, actors, instruments involved, thereby taking into account the relevance of justifications, beliefs and accepted values. It is essential to understand this complexity without losing the conceptual vision guiding policy at the economical and social levels, without trying to resolve the problem by dissociation between scientific rationality and moral judgement.
To summarize, the consensus emerging from the time of the post-war period, no longer applies. The economical principles based on growth, distribution, and stability have shifted from the context of crisis, to principles of a political philosophy based on modernity, equity and governance. Such a systematic framework faces the difficulty of having to integrate two contradictory elements: one aiming at individual rights, the second related to social rights. They actually interlink in the same contradictory and heterogeneous universe. The aim is not to build an ideal structure away from the realities of the world, but rather to construct a proposal which finds itself within the world by not cancelling its inherent contradictions. Pure models belong to worlds of utopia, and their application is worrying in that they are exclusive, even when recognized as an ideal element of critique.
The focus of this thesis brings back the principles of freedom and equity in a different context: the freedom of decision-making based on reciprocity, instead of the economical and political elimination of the principal actors. In this way the discourse redirects the state-society relation, based on the clear belief that the profile of the state is in all fields built upon society itself, from market support to recognition of the levels of autonomy of civil society, to solidarity in communities. The hallmark of modern ideological discussion revolves around the state-civil society relation. It is closely linked to the relation with markets, social organization and communities.
At the end of this century, a more radical formulation would paint a picture of the world that is either set up as a mirror of the market, or else of the state as the sole responsible for designing the world in which citizens live. The way in which the respective fields of influence will be predetermined constitutes the key to consensus-building. Confrontation will arise if the state-market relation is unbalanced. That is why in the field of the economical processes a new perception of the market-state relation has been found. In the last years economic freedom has increased substantially. New ways of profit are being sought and other forms of property by civil society have emerged with the reduction of state property. The concept of private property is also being enlarged and now covers also communal and family property as forms of social private property, a well as cooperatives and corporate enterprise, over and above strictly individual property.
Recognizing the role of society in the production of wealth allows the state to orient its action toward a pluralism of property forms through differentiated policies, regulation means, encouragement through enabling environments, or by proposing direct and focused support programmes. State and market are mutually related, but in order to benefit society, their norms of interaction have to be made public and subject to revision. This is the best way to correct the negative impact of economical processes on social aspects.
New forces have emerged and within these movements social expressions have been diversified. In the seventies, new social structures tried to confront the dual crisis of representation and discourse. Neo-corporatism or social corporatism became part of the political agenda of the seventies as a consequence of the renewed interest for professional associations related to development and the regulation of social conflicts. New forms of social representation have emerged from social mobilization. A common aim seems to unite the various groups: gaining their autonomy as social forces and, as a consequence, creating a link with the state which does not necessarily imply allegiance with the political regime in place.
Social networks value their autonomy and do not constitute monolithic blocks. They recognize shared responsibility as a principle for action. They do not operate by constructing one-stop alliances, but rather work on the understanding of strategic convergence. Without dilution of differences they can identify themselves with and centre around specific problems, which is why the networks are decisive elements for governance. In networks and in other modern forms of social mobilization, there is a common trait which tends to reformulate the concept of popular sovereignty, in which justice articulates democracy in a concrete way through the real autonomy of social forces. It is in this sense that autonomy is demanded by new social organizations, in order to build strategic convergence with the state with the aim of bringing justice with participation.
The point is to develop a shared interest through a solidarity process in which positive benefits are agreed upon in a social contract, taking into account that each party take decisions in its own interest and is also conscious of the need for a rational type of solidarity mechanism. The social contract has therefore more benefits for both parties than would be the case without a contract. It is also necessary that from this moment onwards the points agreed upon serve as criteria to value the common practices and to institutionalise them.
Rural development should be driven by the same forces that shape political and economic liberalisation. A properly constructed market, rid of distortions and privileges, is the most effective means of distributing rights and wealth within a society. Political freedom and pluralism represent the only way of incorporating the needs of individuals and groups within the decision-making process. A "properly constructed market" implies economic liberalisation, including policy affecting the macro-economic balance, deregulation, privatisation, decentralisation, fiscal reform, free markets, and trade liberalisation. Likewise, it implies processes of political liberalisation that embrace policy affecting universal human rights, participatory pluralism, decentralisation, subsidiarity, accountability and transparency. It also implies clearly defined governmental interventions to basically help markets and democracy, and to assist areas where markets do not function, or where there are political shortcomings.
One possibility of representing a model for liberalisation is to approximately locate a given country in a diagram with the graph determining the shape of liberalisation, where the x-axis covers economic liberalisation and the y-axis political liberalisation. For example, in three reform sequences stylized in a graph the political consequences of the reform processes may likely be contingent on the sequencing of political and economic liberalization. There are clearly is tensions between political and economic liberalization and the general impossibility of governments to make clear choices due to different circumstances, and institutional constraints and the like that might push them on a certain path.
Nevertheless, each sequence has predictable consequences, due to the nature of the political transition, for the political alignments and conflicts and for the ultimate sustainability of the overall economic transformation. Of course the sequence is never unilateral in the sense that once it starts from a certain point (economic reform first, simultaneous economic and political liberalization, political reform first), the same forces that are set in motion might change the sequence or the pace of change.
It is important to keep this perspective in mind not so much for the general discussion on economic stability and democracy as a dilemma, but much more for the specific dilemmas that policymakers and social actors confront in building coalitions capable of conducting reform in an orderly manner. It has been argued, for example, that conflict between economic and political liberalization is a characteristic of certain stages of growth. During the first stage of the structural adjustment policies it was argued that, in order to stage a massive, rapid and direct restructuring, an authoritarian rule may have been better endowed to avoid bickering and endless negotiations that might have derailed the whole economic reform.
Though some examples from East Asia or Latin America seem to support this argument, especially when one analyzes the processes of political liberalization that were developed in these same countries after a first stage of economic reform, it can be argued as well that the political disruptions and social deficits the economic reforms left were in the first place the main engine for political reform. Furthermore, u-turns in the economic reform policies implemented during the stage of political openness might have been a consequence of bad timing rather than of political reform per se.
An assessment of the shape of liberalisation will have to take into account capital stocks (the total capital stock consists of social, human, natural, and man-made capital), decisionmaking processes and policy design. Man-made capital refers to what is usually considered in financial and economic accounts. Natural capital is discussed in many works of environmental economics. Human capital refers to investments in education, health and nutrition of individuals. Social capital is the institutional and cultural basis for a society to function.
The agricultural sector is generally taxed in developing countries, directly and indirectly (i.e. economy-wide, e.g. through pro-industry bias). Sectoral policies thereby tend to have a different impact there than in the industrialized countries. Such policy-induced distortions have led to world prices that for most tropical products are likely to have been higher than the free-trade level. The demand for protection in developing countries has emerged because real farm prices have recently begun to decline, and are expected to continue to do so. This decline has been caused not only by falling world prices, but also by an appreciation of the real exchange rate (particularly in Latin America). This appreciation has followed from net capital inflow surges and is typically influenced by the ongoing process of policy reforms in a given country.
State tutelage and subsidy. In countries at lower levels of rural development the private sector has typically been: sheltered from foreign competition; supplied with underpriced inputs produced by public sector firms; and sustained up- and downstream by governmental and public sector sub-contracting and purchasing of supplies and services. Such benefits have furthermore necessitated high levels of regulation and licensing, price controls, discriminatory tax rates, and crowding out from domestic credit and foreign exchange markets (Bienen and Waterbury, 1989). The private sector has often been using the banking system of the public sector to absorb financial risks.
Dysfunctional land markets. Land tenure reforms, through the clarification of property rights and the transactions that accompany them, should also create a sufficient legal space in which the different options pursued by peasants in order to adapt to changing conditions, can occur. Land tenure relations (in the pre-reform agricultural system) have been much influenced by bimodality (the dualistic structure of the agriculture sector in many countries), and the absence of linkages, for example between land and employment, landowners and workers, raw materials and transformation, production and profit, and regional / local demand and policy.
Integrated agriculture. Opposition to land reform had made integrated rural development projects aimed at smallholders a popular alternative. However, while the land reform process must become integral part of such development programmes, policy must be coordinated between the macro, sectoral and local levels in an effort to successfully integrate agriculture. Agricultural production today is affected by the same macro economic and political policies, the same national and international markets, that affect urban centres. The most promising development of the past decade is the change taking place in how policy is being formed and how decisions are being made, and a slow move away from what has thus become known as the "urban bias". There has been an emphasis on building intermediate organisations and decentralisation of government actions and responsibilities. Governments are learning that they can carry out their policy goals only if they share power, and accomplish most when playing a subsidiary role. Participation has not become so desirable just because it is inherently more democratic, but because it can make development cost-effective and sustainable.
Expanded agriculture. Rural households in developing countries diversify their incomes by supplementing cropping income with off-farm income. The expanded portfolio of agricultural households includes: local self-employment in small enterprises that may be linked (in the production linkage sense) upstream or downstream from the local farm sector, or not linked; agricultural wage employment outside the local area, in migration. Farm households participate in migration and in the off-farm sector of the rural economy to smooth incomes in the face of shocks such as rainfall instability and drought (risk management, ex ante diversification, and risk coping, ex post diversification), and to earn cash to buy food and farm inputs. Off-farm income has become important to rural households in most developing areas, for short-term food security, for long-term farm investment, and as a means to long-term income growth. Agricultural households have thus expanded their activity and rural development analysis needs likewise to enlarge its parameters to include the participation of rural households in all parts of the rural and urban economy if differentiated policies are to be developed.
Associative agriculture. Cooperatives were often controlled by governments -- seeking to achieve industry-type economies of scale -- as the sole buyers of agricultural produce in a given area, and used as means for taxation. However if protection, special subsidies, legal constraints etc. are removed, there appear to be few, if any, economies of scale in agriculture above the size of a family-operated unit. The fact that the concerns of rural food producers are not much heard in policymaking arenas is in large part due to weak economic and socio-political organisation. One of the "pre-requisites" for successful rural development is the formation of social capital through self-help groups/cooperatives up- and downstream from agriculture, and professional associations. Fieldwork has shown that "bottom-up" building processes create far more sustainable and self-reliant organisations than those that are state-imposed. Autonomy does not imply autarchy, but, rather, requires that every association or cooperative has the ability to decide internally its choices and policy. Autonomy also implies that the generally weak capital base of rural cooperatives in many countries be strengthened. To this end FAO and the Committee for the Promotion and Advancement of Cooperatives (COPAC) have launched a special research programme on sustainable capital formation in cooperatives.
Contract agriculture. In outgrower schemes, farmers contract to grow a particular crop over a specified period (usually one year) for a central processing and/or exporting unit. Generally, credit is provided for the necessary agricultural inputs, whereas the grower supplies land, tools and labour. Such arrangements may involve parastatals and public enterprises, or be private schemes. Ideally, smallholders may obtain access to modern technology, quality control, marketing, and other services by joining contract schemes. However, they have been found to be associated with gender and generational conflict, for example in Gambian irrigated rice schemes, where women have been resisting the burden of labour claims made by male household heads for the double cropping of rice. Contract agriculture reflects some of the major changes associated with the liberalisation of agricultural production in the world economy, as the contract is relied on as the warrantor of an increasing number of transactions. Contractual relationships are characterized by the need for orderly and predictable transactions, calling for a new emphasis on land tenure regularisation. Leasing and sharecropping are major types of contracts, albeit often informal, that make land markets dynamic.
Flexible agriculture. Intersectoral analysis should start from the base of the rural household -- a household that is not merely participating in the one (agriculture) sector, but in both the farm and non-farm sectors, comprising activity in local rural areas and towns, as well as in migration. A focus on linked markets (land-credit, land-labour, labour-credit) is indispensable for adequate policies in the rural sector. Hence, the reality of the farm household in developing countries is really that of a 'multisectoral firm', and traditional monosectoral policy approaches are inadequate. A. Bagnasco, in analyzing the industrial model of small enterprises in northern Italy stresses the important articulation between regional cities and the countryside (1988). He finds a significant statistical correlation between the development of the small enterprise system and the type of labour relations in agriculture mainly based on small family farms and sharecropping. In the latter the basic unit of reference is the farmer's family that obtains income from off-farm activities as well, ensuring the flexibility of its workforce in its functioning.
Household property, self consumption, and family management of diversified sources of income guarantee an important reduction of the costs of reproduction. More important, argues Bagnasco, is the fact that the enlarged farm family engaged in a diversified range of productive activities in addition and complementary to agricultural activities, which helps members of the family obtain a wide range of expertise and abilities. This specific and polyvalent know-how is another expression of workforce flexibility, but the success of this type of development depends very much on the social networks of friends and relatives that, based on trust, is able to transmit knowledge and information, fill loopholes, engage in cooperative efforts and create a critical mass of economic resources, knowledge and linkages that guarantee the success of the enterprises.
Urban agriculture. It has been estimated in 1994 (Mougeot) that about 12 percent of the world's total population -- 700 million people -- are supplied with food by 200 million urban farmers, in large part through informal purchases on the streets. In Asia estimates commonly place the number of households involved in city farming at over 50 percent of total urban households. Vegetable consumption and perishable produce in particular are to a large extent provided by urban agriculture. Urban agriculture therefore appears to make a substantial contribution to income flexibility, and to food security at large, providing an estimated 10 - 40 percent of overall nutritional needs in developing countries. Dietary variety is supplied by fruits and vegetables, some livestock (poultry, birds, smaller animals, occasionally cows), staples (cassava, maize, and beans), and berries, nuts, herbs and spices. Urban food production does not usually require extensive landholdings, or guaranteed long-term use. It is characterized by the critical involvement of women, especially in the big cities of the developing world.
Feminised agriculture. Agricultural tasks are becoming increasingly concentrated in the hands of women, in part because of the breakdown of traditional family structures and higher rates of male out-migration from rural areas. Such migration is mostly the result of the search for non-agricultural wage employment elsewhere, or forced by civil unrest or environmental displacement. In some parts of (mostly southern) Sub-Saharan Africa, female-headed households may make up to 60 percent of total households in rural areas. In Asia, they perform over 50 percent of the work required in rice cultivation. Some of the most complex agricultural systems in Latin America are the home gardens commonly run by women. By tending to home or neighbourhood gardens women can reduce the demands placed on their husbands' wages (in Latin America, a family may save about 10 - 30 percent of the total food bill), or else supplement these with cash income derived from the sales of their produce. Women typically also work more hours than men -- up to 60 hours per week -- and for less or no income.
Human capital agriculture. From the social point of view there would clearly be a problem if public resources were used to finance a level or type of education that has a social rate of return below the opportunity cost of capital, or if the extra social resources invested in someone's "surplus schooling" (a frequent accusation for farmers) do not have a productivity counterpart. But this has not been the case, and international comparison shows that the premium associated with university education has in fact been increasing over time, including studies in agriculture. It has been found that four years of schooling have a positive impact on agricultural productivity, for example in Guatemala (Phillips and Marble, 1986). A study in Thailand found that one additional year of schooling adds about 2.5% to farm output (Chou and Lau, 1987). Sizeable returns to education can be found across the spectrum of the labour market, particularly among rural workers and the self-employed. Education and health also interact, good student health generally leading to better performance.
A theoretical framework for contemporary rural development must take into account the direct and indirect effects of recent trends of globalisation (the following discussion draws heavily on Zamagni, 1995). Firstly, economic deregulation since the 1980s and the creation and consolidation of the European Economic Community (EEC) have much contributed to the formation of a global financial market. This has been brought about by an extreme increase in financial transactions per unit output of gross national product, triggered, inter alia, by the growing burden of public debt: the volume of financial currency transactions has tripled from 1986 to 1992; daily sales of public debt shares have expanded more than ten-fold over the last decade. In modern societies entrepreneurial capacity is no longer identified with specific, marketable products, but, rather, we are witnessing a "dematerialisation" of the economy in that such societies now produce mostly financial goods and services.
Secondly, economic development today is carried to a large extent by a new knowledge structure, including technical knowledge and technical capacity, as illustrated by the globalisation of information technology. This structure has important implications for technology transfer and development, given that such knowledge and capacity is more difficult to transfer, including, most importantly in the context of the present discussion, the case of institutions. Scientific knowledge and "laissez-faire" policies (free flowing exchange of goods and services) alone are no longer sufficient, as perhaps they were in predominantly industrial societies, to guarantee the gradual alleviation of inequalities among countries: on the contrary, not only between the more and less developed, but within the OECD countries differences in technological status are widening.
Thirdly, there has been an extreme intensification of competition, on an unprecedented transnational scale, to the extent that this phenomenon has been refered to as "hyper-competition". This has far-reaching implications for the cost-effectiveness of enterprises in developing countries, which are compelled to seek their comparative advantage in access to cheap labour. The possibilities of transnational relocation of activities (entrepreneurial flexibility) that come with current state-of-the-art technology (technological flexibility) have become more significant in determining levels of competitiveness than successful specialisation in the production of particular goods. Resources have thus become extremely mobile, leading to a maximum mobility in the demand for labour -- but not its supply -- and national governments are finding it harder to collect tax revenue.
In countries where labour is cheap and its supply relatively flexible, for example in much of Asia, the globalisation of competition brings about labour-intensive production by multinational companies. At the same time there has been an increase in what can be seen as the legislative function of the contract, no longer seen simply as the application of laws convened at the national level. The consolidation of a global culture of contracts as the basic instrument to regulate mechanisms of economic interaction is called for largely by the global market. The latter necessitates a renewed emphasis on the role of civil society as a means by which civil "micro-institutions" codify common ethics and make dynamic the system of human relations, one of the foundations upon which to forge a new rural covenant.
The greatest contemporary challenge facing the architects of rural development today is to ensure the correct direction of change and to create the necessary institutional support. Forging a new rural covenant means insuring change with continuity, building new constructive coalitions, and establishing consensual goals that provide well-being, governance, productive efficiency, and sustainability.
Bienen, H., and J. Waterbury, "The political economy of privatization in developing countries," "World Development," Vol. 17, no. 5 (1989), pp. 617-632.
Chou, E.C., and L.J. Lau, "Farmer ability and farm productivity: a study of farm households in the Chiangmai Valley, Thailand, 1972-1978," Discussion Paper 62, Education and Training Department, World Bank (1987).
Mougeot, L., "Cities feeding people," International Centre for Development Research, Ottowa (1994).
Phillips, J.M., and R.P. Marble, "Farmer education and efficiency: a frontier production function approach," "Economics of Education Review, " Vol. 5, No. 3 (1986), pp. 257-264.
Zamagni, S., "La globalización como especifidad de la economía postindustrial: implicaciones económicas y opciones éticas," Facoltá delle Scienze Economiche, Bologna, unpubl. typescript (1995).
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