Interview: The World Bank on Agriculture
The World Bank’s Development Report in 2008 (WDR ’08) will be on the theme of agriculture and development. We caught up with Derek Byerlee (left) and Alain de Janvry, the report’s directors, to get a preview.
Why are investments in agriculture so important? Seventy percent of the world’s poor live in rural areas and most of them depend on agriculture. Growth in the agricultural sector is therefore one of the most effective ways of reducing poverty, since it can raise incomes of small-scale farmers, raise earnings of landless laborers, and improve access to food. Aside from these direct benefits, agriculture has important linkages with the rest of the economy and creates jobs in other sectors. Additionally, increased agricultural productivity lowers the prices of food. Lower food costs are important for reducing poverty since poor households—both rural and urban—spend a high share of their total expenditures on food. Your 2008 report is expected to comment on a rural to urban population transition that is larger and more rapid than at any other time in history. How does that affect agriculture? Despite higher rural birthrates, virtually all net population growth in the next 20 years will be concentrated in urban areas. This growth will be due to continued rural migration to urban centers. It is estimated that 725 million people will have migrated from rural to urban areas from 2005 to 2025. The outward migration of young men will leave behind a population of rural poor that is increasingly aged, female, indigenous, low skilled, and geographically clustered. On the other hand, an outflow of population can increase labor productivity in rural areas and also act as a source of finance for rural investment through remittance flows back to rural areas. Due to globalization, there are more tightly coordinated food supply chains. How do these help and/or hurt farmers? The increase in food processing and supermarket expansion is creating significant new market opportunities for the agricultural sector. However, supermarkets demand reliable flows of products of consistent quality, as well as compliance with increasingly stringent food safety standards. Although supermarkets create opportunities for producers who can meet these standards, they also increase the risk that small-scale farmers will be excluded. Scale economies, quality standards, and the timing of deliveries will require farmers to “cooperate to compete” if they are to have a place in an economy dominated by supermarkets. Is subsistence agriculture coming to an end? Pure subsistence, where households consume all of their production without engaging in buying or selling grains, has in fact already disappeared. Farmers today are becoming increasingly integrated into markets and, even in Africa, about 60 to 100 percent of farmers either buy or sell grain. Despite this increasing participation in markets, the share of subsistence income is still relatively high for rural populations in all regions of the world, ranging from 23 percent in Bangladesh to 48 percent in Bolivia or 80 percent in Madagascar. This shows that subsistence agriculture still plays an important role in rural households’ income, although it is slowly declining. Many say that part of the problem is that the World Bank hasn’t been paying enough attention to agriculture. Why did that happen and is that changing? World Bank lending for agricultural activities declined dramatically from about 31 percent of total lending in 1990-1991 ($3 billion) to less than 10 percent in 2000-2001 ($872 million). Factors that contributed to this decline included a continuing urban bias in expenditure priorities; increased competition for resources from newer sectors (health, education, governance); and smaller loan sizes for new-style agriculture projects (like land titling and community driven development.) However, lending amounts have rebounded since 2000 to about $2 billion in 2005. This recovery was mainly due to the Bank’s new rural strategy (2002), which emphasized that rural areas continue to be home to most of the world’s poor, and that agriculture continues to drive the economy in those areas. Many non-governmental organizations (NGOs) fault the World Bank for implementing policies that have been detrimental to small farmers. How do you respond to those critiques? Trade and market liberalization reform programs supported by the World Bank in the 1980s and 1990s were designed to reduce or eliminate distortions in the sector and introduce market forces in agriculture. Producers of export crops responded fastest and benefited most from such reforms. However, reforms were not always backed by the required public investments in institutions and public goods that would limit small farmers’ exposure to risks, reduce their transaction costs, and provide new skills and technologies. Hence, some farmers lost access to subsidies and price supports and were unable to diversify to respond to new market opportunities. Since the 1990s, the World Bank has refocused its approach on reducing poverty, becoming more responsive to the needs of developing countries, working more closely with civil society, and heightening the importance of community driven development. One of the key anticipated messages of your forthcoming report is to make agricultural and rural growth more pro-poor. What are the main themes you will address to achieve this?
There are many pros and cons to the use of genetically modified organisms, and there is much controversy around them. What is the World Bank’s position on them? The biotechnology revolution is only beginning and presents policy makers with a unique set of ethical, safety, health, and property rights challenges. Yet the promise of this technology to assist in coping with increasing food demand is large and these challenges must be addressed. As expressed in its rural strategy, the World Bank is committed to helping developing countries assess, explore, and safely use these new technologies. The central pillar of the World Bank’s approach to biotechnology will be to build capacity so that policy makers, scientists, consumers, and farmers in client countries can make informed decisions about options for—and the risks of—using these technologies. Many activists claim that conventional agriculture is unsustainable and harmful to the environment. What is your response? Conventional agricultural development is indeed often a large contributor to environmental problems such as deforestation, water pollution, soil degradation, and climate change. However, failure to intensify agriculture has also been unsustainable in many situations (for example, soil degradation in Africa). Thus, sustainable management of natural resources in the agricultural sector is a big challenge. Soil and water management approaches such as conservation tillage show much promise. One of the most encouraging developments in recent years has been a shift towards more participatory and community led approaches to natural resource management. Additionally, recent technological developments and the emergence of markets for environmental services offer exciting new opportunities for win-win gains. Where is some of the most innovative work being done to support agricultural development? A lot of innovative work in agriculture has been done by the World Bank over the past three years. Highlights include: community driven and managed agricultural development in Brazil’s northeast; small scale irrigation development in countries like Nigeria; natural resource management projects in places like the Loess Plateau in China; and implementing commodity price insurance programs in Peru. More examples can be found at the World Bank’s Agriculture Investment Sourcebook. What processes are you putting in place to consult with NGOs in preparing the WDR ’08? We are working very closely with the Latin American Center for Rural Development and with other NGOs in preparation of the WDR. Specifically, there will be a consultative workshop with NGOs in January 2007, we will be
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