Agricultural development for poverty reduction – some options in support of public policy interventions

A renewed focus on agriculture is emerging among donor organizations. In 2005, The World Bank published its report Agricultural Growth for the Poor. An Agenda for Development and Dfid published a policy paper entitled Growth and poverty reduction: the role of agriculture, and soon the World Development Report 2008 entitled Agriculture for Development will be published. As witnessed by the titles of the reports, the key concern driving this renewed focus is the wish to increase the contribution of agriculture and agricultural growth to poverty reduction.

The need to get agriculture back on the development agenda is the first argument of these policy documents. Agricultural growth, it is argued, is far more important to the poor than non-agricultural growth. Because 70 percent of the world's poor are estimated to live in rural areas and because agriculture accounts for a large part of the economy in the least developed countries, agricultural growth cannot be easily substituted by growth in other sectors.

Policy debates about the role of agriculture in poverty reduction have long been polarized as a choice between on the one hand, seeking to maximize the indirect poverty reducing effects by increasing rural farm employment opportunities and lowering food prices through investing in medium to large scale farming in high potential areas, and, on the other hand, seeking to improve farming practices in marginal areas which are generally characterized by high poverty rates.

As often happens in such polarized debates, there has been a tendency to overlook facts - in this case that a significant part of the rural poor belong to the category of land-owning farming households in potential and high potential areas. In many countries, the proportion of the population living in poverty is much higher in the more marginal and remote parts, and this appears to have masked the fact that, due to higher population densities, the absolute number of poor people living in potential areas exceeds the number of poor people living in the marginal areas. Berdegué and his colleagues (2006) estimate that at a minimum, there are more than 7 million poor farmers in six Latin American countries that have access to land and are located in non-marginal environments, representing between 14 and 52 percent of all farmers in those places.

The image of the disappearing peasantry, being nurtured by the overall urbanization taking place and the increasing attention to the importance of non-farm rural employment, has added to this neglect of the smallholder sector. However, in many Third World countries, the smallholder sector plays an important economic and social role through the participation of smallholders in domestic and the traditional export markets and by providing an important and often irreplaceable source of livelihood to a large share of the rural poor for whom few alternatives exist aside from illegal international migration or joining the informally-employed urban poor. Aldana (2007) has analyzed data for the poorest and most isolated districts in the already very poor Southern Andes region, and finds that agricultural income represents between 66 and 78 percent of the total income of rural households. Moreover, she found that even under in the most extreme conditions (areas with poverty incidence of 90 percent), less than 30 percent of total agricultural production is consumed at home, contradicting the quite common image of small-scale farmers, being totally isolated from markets.

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