Tunetra Economics Necessary Policies for Economic Incentives

Necessary Policies for Economic Incentives

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The Green Revolution varieties of wheat, corn, and rice, together with needed irrigation and chemicals, are scale-neutral and thus offer the potential for continued small-farm progress, the sccial institutions and government economic policies that accompany their introduction into the rural economy are often not scale-neutral.-? On the contrary, they often merely serve the needs and vested interests of the wealthy landowners. Because the new hybrid seeds require access to complementary inputs such as irrigation, fertiliser, insecticides, credit, and agricultural extension services, if these are provided only to asmall minority of large landowners, one impact of the Green Revolution can | be (as in parts of South Asia and Mexico) the further impoverishment of many peasants. Large landowners, with their disproportionate access to these complementary inputs and support services, are able to gain a competitive advantage _ over smallholders and eventually drive them out of the market. Large-scale farmers obtain access to low-interest government credit, while smallholders are forced to turn to moneylenders. The result has all too often been the further widening of the gap between rich and poor and the increased consolidation of agricultural land in the hands of a very few so-called progressive farmers. A developmental innovation with great potential for alleviating rural poverty and saising agricultural output can thus turn out to be antidevelopmental if public olicies and social institutions militate against the active participation of the small farmer in the evolving agrarian structure. Another critical area of many past and some’continued failures in government olicies relates to the pricing of agricultural commodities, especially food grains and other staples produced for local markets. Many governments in developing nations, in their headlong pursuit of rapid industrial and urban development, – maintained low agricultural prices in an attempt to provide cheap food for the urban modern sector. Farmers were paid prices below either world competitive or free-market internal prices. The relative internal price ratio between food and manufactured goods (the domestic terms of trade) thus turned against farmers and in favour of urban manufacturers. With farm prices so low—in some cases below the costs of production—there was no incentive for farmers to expand output or invest in new productivity-raising technology. As a result, local food supplies continually fell short of demand, and many developing nations, especially in sub-Saharan Africa, that were once self-sufficient in food production had to import food. Many development economists therefore argue that if governments are to promote further increases in agricultural production that make a larger impact on poverty reduction through Green Revolution technologies, they must. make not only the appropriate institutional and credit market adjustments ‘ but also continued progress to provide incentives for small and medium-size farmers by implementing pricing policies that truly reflect internal market. conditions.

Adapting to New Opportunities and New Constraints As a route out of poverty and toward genuine rural development, enhanced cereal productivity (the classic Green Revolution characteristic) represents only a small part – Of the agricultural opportunities. The best opportunities for sales to growing urban areas are generally found in higher-value-added activities, particularly horticulture (fruits, vegetables, and cut flowers) and aquaculture. These products, along with organic and perhaps Fair Trade versions of some otherwise traditional developing-country exports such as coffee and spices, also provide good opportunities for higher-value exports. But small farmers will need spe| cial organisation and assistance to take advantage of new opportunities. As the 2008 World Development Report concludes, “Smallholders can bargain better as group than as individuals. So a high priority is to facilitate collective action through producer organisations to reach scale in marketing and bargain for better prices. Otherwise, the risk is large that these developments will benefit mainly the larger farmers.

An opportunity—which also poses a potential threat—is the growing activity of foreign investment in developing-country farmland, also known land grabbing. An IFPRI report estimated that from 2006-to 2009, 15 to 20 million hectares of developing-country farmland had been transferred. An example is the 2008 deal of South Korea to acquire 690,000 hectares in Sudan. Foreign ownership and long-term leasing of farmland can lead to some better-paying job creation, training, access to better techniques, and new export markets. But there is a real threat that many farmers will lose access to their traditional right to use land, that there may be net job losses, and that water shortages and Environmental
degradation of adjacent lands may accelerate, at least without adequate oversight. These and other potential risks are greater when there are governance shortcomings, including corruption, and when women and other poor and vulnerable claimants are not empowered. This is a topic that will be followed closely. One of the biggest constraints looking ahead is the looming environmental problems driven by global warming and climate change, which are expected to most negatively affect sub-Saharan Africa and South Asia. Smaller and poorer farmers are likely to be affected severely, because of their lower access to irrigation and other inputs and generally lesser capacity to adapt—although, ironically, with their smaller use of irrigation and different crop mix, their absolute income declines may be less than those of richer farmers. Although the majority of global warming problems are caused by developed countries, to the extent that cultivated areas in developing countries continue to increase by means of eliminating remaining forested areas, climate change problems will only worsen. This “agricultural extensor ovation,” not only in forests but also in drier and other sensitive lands, further brings the risk of local soil degradations and lost environmental services such as maintaining water and air quality. The losses of wetlands and of biodiversity also lead ‘to substantial national (as well as international) costs. Moreover, intensification of agriculture has often brought with it the misuse of agrochemicals, which can entail large human and ecosystem costs.

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