Lecture 3: State and Rural Development PDF

LECTURE 3 LECTURE 3 THE STATE AND RURAL DEVELOPMENT Social Framework of Economic Development Instructors: Dr. Kojo Opoku Aidoo & Dr Collins Adu-Bempah Brobbey  OBJECTIVES To Examine:  The State and its role in development.  Relationship betwe...

LECTURE 3 LECTURE 3 THE STATE AND RURAL DEVELOPMENT Social Framework of Economic Development Instructors: Dr. Kojo Opoku Aidoo & Dr Collins Adu-Bempah Brobbey  OBJECTIVES To Examine:  The State and its role in development.  Relationship between urban and rural areas(Urban-Rural Dichotomy)  Agricultural policies and Implications for peasant farmers  The relationship between the farmers and the state  The extent to which agricultural policies are influenced by political considerations  Michael Lipton’s theory of “Urban Bias”  Robert Bates’ Theory of Agricultural Markets  Amanor’s argument about “Agribusiness.”  TUTORIAL QUESTIONS FOR REFLECTION Identify and explain three state and development agencies’ strategies for helping the smallholder farmers to increase food production in any one African country. Identify and explain how agriculture policies in any one African country have been influenced by government subsidy. Examine the importance of Bates’ Three (3) types of Agriculture market to peasant farmers in any one African country. Examine the characteristics of Bates’s three (3) types of Agricultural markets.  TUTORIAL QUESTIONS FOR REFLECTION Examine the significance of Bates’ Three (3) types of Agriculture market to peasant farmers in any one African country. Explain how government’s intervention in the agricultural markets are detrimental to the interest of peasant farmers in any one African country. Provide reasons to show how government’s intervention in the agricultural markets are harmful to the interest of peasant farmers in any one African state. With reference to one African country, examine two (2) strategies adopted by the state and development agencies to incorporate smallholder farmers into Agricultural Market.  TUTORIAL QUESTIONS FOR REFLECTION Examine the main argument of Lipton’sTheory of Urban Bias. In three (3) ways, discuss the causes and effects of Urban Bias in any one African state. Explain three (3) ways by which inappropriate agricultural policies have engendered backwardness of the peasants farmers in any one African country. Explain why inappropriate agricultural policies have been considered as “myths” and “conservative” in dealing with the backwardness of peasants farmwers in any one African country. Identify and explain any three industrialization strategies for ovecoming the Urban Bias phenomenon. Critically examine Corbridge’s criticism of Urban Bias. Explain what Agricultural development policy is all about. Explain the correation between state Policies and Prices..  TUTORIAL QUESTIONS FOR REFLECTION Critically examine Amanor’s (2005) Critiques of Bates’ Views on Agriculture Market Policies. Provide specific characteristics of Lipton’s theory of “Urban Bias” in any one African country. Write brief notes on the following: i.Agricultural commodities market ii. Factors for production market iii.Market for consumer goods. Identify and explain Bates’ three types of Agricultural market in Africa. Discuss three (3) ways by which the provision of government subsidy has contributed to shaping agriculture policies in any one African country. Identify and explain how agriculture policies in any one African country have been influenced by government subsidy.  Explaining the concept of State Weber’s View: State is organs of government which has:  Monopoly over the exercise of force and power;  Legitimate Institution as perceived by the governed;  Institutional structures established to handle governmental tasks: Exercise of force through e.g. bureaucracy, government ministries, law enforcement agencies, , police, military, tax and revenue, civil society/service, trade unions etc.   Administratively, performs Day-to-day running of state’s affairs.  Legal/ Policies: legislates, Formulates,adjudicates, Implements and evaluates. Explaining the Role of State in development process Hegel’s View:  Cohesion/Integration: Mediates different interest group. Marx’s View:  Exploitative mechanism: Uses coercive institutions to collect taxes, supports the interest of the most powerful groups in society that exert influence over it.  Military/Security/Defense: Exercises control over citizens and against external aggressions or ensure territorial integrity. Garner & Gatell’s Views  Diplomacy: dealing with international actors and/ institutions beyond its boundaries. Ideological: Consensus building/ Conduct elections, population census etc.. Powers that be: power over life and death of all citizens.  Establishing State Power and linking it to Urban power In development discourse, State is referred to as: 1. Legitimate Driven Force :  Application of coercive force /instrument to compel obedience.  This means that a citizen does not have a choice between obeying the laws or the rules of state. It is compulsory for every citizen to obey them not only because they are statutory institutions but also severe sanctions are attached to disobeying them. 2. Powerful Change Agent:  Recognition as all powerful, unlimited power  Supremacy over all that exist within state  Demands obedience to foster national integration (cohesion) for promoting development 3. Authority and Control All Human and Natural resources  LIPTON 1: State power equals Urban power  Lipton argues that in developing countries urban elites, dominate the state organs. Their power is not only based on economic wealth, but the power to organise, centralise and control the resources within the state.  Urban power in developing countries is out of proportion to the urban share of the population or production.  Urban elites consist of intellectuals, businessmen/women, politicians, bureaucrats, trade-union leaders, professionals, who control the distribution of resources.  In contrast rural people are dispersed, poor, inarticulate and not organised. They are often unable to make demands on government.  Lipton 2: Theory of Urban Bias  As a result of urban power there is a large disparity between rural and urban areas.  In developing countries 70 percent of the population work in rural areas, produce 40-45 percent of GNP, but only receive about 20 percent of national investment.  The wealth produced in the rural sector is extracted from the rural areas and invested in urban development.  Urban Bias there resulted from gap or inequalities existing between Urban Rich and Rural poor.  Lipton 3 : Gov’t Policies and Causes of Urban Bias  Government policies often undermine agricultural production by making farm produce very cheap and manufactured commodities relatively expensive.  This does not only promote inefficiency but also, serve as a disincentive to investment. While investment ensures urban growth unfortunately, it becomes expensive and does not promote much employment in the rural community.  Rural labour intensive options are therefore not developed. Lipton 3: Rural Inequalities and Causes of Urban Bias  Since the urban areas want to receive surpluses from people in the rural areas with minimal investment, they provide supports to only those people in the rural areas who can most provide surpluses (such as food, savings, export crops for foreign exchange).  Agricultural polices focus on the big farmers.  If they focused on improving the conditions of small farmers a lot of the improvement would go into the farmers' own household –i.e. improved household consumption of food.  Large farmers will transform inputs into more produce for the market.  Rural Inequalities and Causes of Urban Bias (Cont’)  This bias focus results in inefficiency because the small farmers who occupy more significant areas of land are deprived of the requisite incentives, cannot produce greater outputs per acre in a year than large farmers.  And hence the rural rich who is less efficient producers, however get more aid from the state and the small farmers with the potential to bring about greater change get less. Lipton 4: Gov’t policies Supporting Large Farmers & Neglecting Small farmers  Forced industrialisation has been based on an alliance between urban elites and large-scale farmers, neglecting the peasant or small farmers.  The aim of this alliance is to extract surplus from agriculture in the form of cheap food, savings and foreign exchange in return for favoured farmers having access to subsidies, inputs and services.  Often these inputs are only appropriate for the large farmers and are not suitable for small farmers. Frequently there are not enough subsidised inputs to go round all farmers and these are serious challenges to the small farmers as they have to buy their inputs on the market at inflated prices.  Implications of Gov’t policies- Inefficient Agriculture (Cont’)  This has harmed the rural poor who have been placed in an uncompetitive position as compared to big or large scale farmers with access to land and inputs and in relation to urban dwellers in social infrastructures/resources (i.e. roads, education, training, health facilities).  Over time, this policy of neglecting small scale or peasant farmers and subsidising large-scale agriculture has resulted in declining exports, rising food imports and increasing national debt. It has resulted in the underuse of scarce labour and overuse of scarce and costly capital.  Had these resources been invested in small scale agriculture they would have been used more efficiently. With rising population growth and high costs of creating urban jobs this strategy has proven unsustainable  Lipton 5: Tracing Urban bias in Africa  Urban bias is higher in Africa than elsewhere in the globe and this leads to more inefficient agriculture. Agricultural productivity is low.  In Europe the productivity of agricultural work is 75% of urban work,  In Asia and Latin America it is 35%  In Africa 20%.  In the 1980s the non-farm-farm income gap lay at around 6:1 in Africa as compared to 3:1 in Asia and Latin America and 1.5:1 in early European and Japanese development. Lipton 6: Inappropriate policies & Myths about Agriculture  In Africa inappropriate agricultural policies have led to myths about the backwardness and conservatism of peasants, when in fact there is much evidence that they are innovative and rational. This includes the following myths:  Large farmers are more efficient producers when in fact yields and returns to capital are higher than small farms with most crops and no technologies;  It is scientific to apply Western capital-intensive methods to land scarce, maintenance-skill-staff, labour-surplus and rural environments;  Technologies developed on experimental stations near urban cities cannot yield useful results without carrying on experimentation on farmers' fields.  Lipton 7 Why does urban bias exist?  The rural areas are poorly organized and unable to articulate their demands in a way which will force urban elites to take note.  The solution to urban bias is to organize rural peoples to see that the main source of exploitation is the rural-urban division and not rural differences.  Other developing countries have attempted to manipulate market forces in order to influence the prices of exports and imports, against the interests of farmers and rural workers.  The resources of the state have been used to build up urban rather than rural infrastructures (water, roads) and social services (health, education).  The small farmers, the vast majority of the population have been marginalized in terms of development How to overcome Urban Bias?  How to overcome Urban Bias Lipton 8: Industrialisation strategies  Rural people should unite and develop a rural alliance to demand allocation of resources from urban areas.  Economic development normally involves industrialization.  The route followed by Europe and Japan involved developing agriculture before the rural surplus was transferred from the rural sector to the rest of the economy.  Most developing countries have attempted to modernize their economy by giving priority to industrialization.  Some countries have followed the path of developing large state run farms which would then deliver surpluses to the cities. Corbridge’s criticism of Urban Bias  The theory equates rich with urban and poor with rural, while there are many poor people in rural areas. It makes big farmers to be part of urban structure as a creation of urban bias rather than as a part of inequalities within the rural area.  It presupposes that all rural people are poor while all urban people are rich. This is indeed, a fallacy of generalization, as it is possible to find rich people in rural areas and also poor people in the urban centres.  While small farmers may be interested in higher food prices rural labourers benefit from cheap food.  Large farmers are interested in protecting their favoured status.  There is therefore no clear association between urban and rural class interests and urban bias.  Bates 1 : Markets and the State  Bates has attempted to further develop the theory of Urban Bias by focusing on the relationship between state, political interests, and farmer interests rather than dichotomy between rural and urban interests.  In other words, while Lipton believes that the Urban Bias resulted from rural-urban dichotomy, Bates sees it as resulting from relationship between State and Political interests on the one hand, and farmer interest on the other hand. Rural areas exist to satisfy state and political interest.  He carried out his research in the late 1970s and early 1980s before structural adjustment. His work was influential in creating policy changes and the pressures in structural adjustment to remove state interventions in agricultural development policies.  Bates 2: What is Agricultural development policy about?  Agricultural development policy is about making suitable incentives available for farmers to guide and reward them to improving their farming.  From this, it follows that problems in agriculture are related to improper incentives which distort operations of the market.  One of these distortions is government policy.  Government policies are influenced by political factors. Therefore it becomes important to examine the political basis for agricultural policies and how policies are developed to appease powerful political interests and to enable political regimes to remain in power.  Bates 3: Three (3) Agricultural Markets  Powerful political interests have become entrenched in the state.  Consequently, government interventions in the agricultural markets have become very harmful to the interests of farmers.  In agricultural Sector, Bates identifies three (3) important Markets, namely: 1. The market dealing in Agricultural Commodities (food crops, cash crops for export). 2. The market dealing in Factors of Production, Inputs such as fertilizer. 3. The market dealing in Consumer Goods consumed by rural people e.g. staple food, yam, cassava, rice etc.  Governments intervene in these markets to gain surpluses which they use to build up their support base in the urban areas.  Bates 4: Agricultural Commodity Markets  In the agricultural commodities markets governments are interested in keeping the farmgate price of commodities low.  This enables them to realize profit through the control of trade (buying cheap and selling dear) to raise funds for state business and industrial ventures and to finance the large bureaucracy.  It also enables them to provide cheap food for urban workers to prevent urban unrest and cheap inputs for local industries. This creates an urban alliance.  This can be done through marketing boards which pay farmers minimal prices for export crops or through enforcing control prices.  Farmers respond to low prices by retreating from the market, by producing food crops for local markets rather than export crops, and by increasing self-provisioning rather than market production, Bates 5: Markets for Inputs (Factors of Prod.)  In the market for inputs governments subsidize inputs to: i) Increase the profitability of mechanized farming and, ii) Encourage large scale production at the expense of the peasant/ small farmers.  The benefits include to: i) Focus on a few elites farmers who gain large profits, ii) Encourage patronage of the state’s input delivery programmes and, iii) Win influential supporters and allies in rural areas.  Market for Inputs (Factors of Prod.)  Governments are interested in winning political support rather than economic efficiency.  By extracting surplus from rural areas governments can continue to maintain and extend the systems of patronage which they have established to maintain their power.  This includes extracting rural surplus to support the bureaucracy and to maintain a state industrial sector, and to appease urban workers who might riot if prices of food were increased.  Bates 6: Markets for Consumer Goods  Governments intervene in the Market for Consumer Goods to influence high prices paid for consumer goods manufactured by local industries by introducing high import tariffs.  This promotes the interests of industrialists who are often important allies of the government and makes consumers pay for costs of industrialization, while not assuring high quality commodities.  As a result local industries are not forced to be competitive on the world market. This results in inefficiencies which are paid for by the consumers including the farmers.  Bates 7: State Policies and Prices?  Why don't governments encourage efficient market price mechanisms?  Bates argues they get little political advantage from doing this, since if the market works efficiently it becomes invisible.  Political interests dictate that the economy should work as a system of patronage.  Bates 8: Unorganized Rural Producers  To strengthen food production governments could raise prices or increase investments in the agricultural sector.  However they do not do this because rural producers are not organized to demand higher prices and these actions would be unpopular among urban workers.  Rather than develop more efficient market policies to promote development, governments prefer development projects since they enable political patronage to be extended.  Through projects resources can be given to loyal supporters while dissenters can be removed from office and from access to resources.  However this often results in inefficiency as poorly trained supporters are rewarded with offices in which they have little capacity (Consequences of patronage politics).  Thus, governments attempts to win political support often distorts economic policies.  Bates 9:Markert policies vs. Dev’t. projects.  By returning a portion of what they extract from rural areas, given generously to a few allies, the government can divide rural political interests (divide and rule tactics), with individuals competing to receive patronage rather than asserting the interests of the masses or rural farmers. Note: this brings in mind the questions of ‘who defines development? And whose interest does development serve?  Bates 10: Economic Inefficiency  Similarly, governments develop economic inefficiency to cultivate patronage.  By creating a hostile policy environment rather than one which encourages producers to produce.  By enabling individuals to gain favours to promote their economic interests individuals are encouraged to engage in corrupt practices rather than seeking societal objective and collective benefit.  The possibility of being impeded in following their livelihood, or being victimized by unfair laws, prevents individuals from coming together to criticize unjust legislation or seeking to articulate or vocalize their group interests.  Implications of Government Interventions for small farmers  While the small farmers are seen by many people as the problem in agriculture,  it is rather government interventions which have been so harmful to the majority of farmers  Government interventions entrenches powerful political groups and interests which create serious obstacles to change and prevent small farmers from revolutionizing or developing their production.  Amanor (2005) Critiques Bates’ Views on Agriculture Market Policies  Deregulation does not only open up African markets to industrial commodities but also to food produce.  One of the fastest growing imports in West Africa has been US rice (Although Thai rice is now dominating imports).  This can frequently undercut local food production and displaced local foods on the urban markets.  Sometimes these crops receive forms of subsidies from their governments.  Amanor (2005) Critiques Bates’ Views on Agriculture Market Policies 2  US food traders have exerted a major influence on opening up new markets to their produce, arguing that African producers should specialize in crops in which they have a comparative advantage, rather than trying to promote local food security.  They say African producers should specialize in export crops.  Bates fails to examine how the state has also promoted agribusiness and how transnational agribusiness is expanding into development country markets.  Export crops are vulnerable to over-saturated markets, market monopolies, and price volatility in which during crises market prices can be below the cost of production.  Amanor Critiques Bates 2: (Cont’)  African countries have limited means of diversifying into new products given restricted market access to Europe and North America through food regulations and standards that are difficult to meet and require large expenditures on research.  Frequently multinational corporations control these markets.  Amanor Critiques Bates 3  Private marketing of food crops for the urban areas in Ghana is also subject to monopoly control of traders and market queens in both urban markets and the large rural wholesale markets.  Yam is controlled by market women associations.  In the rural wholesale markets the “market queens” buy from farmers and sell to large urban traders.  This is a buyers market and there are few market traders to farmers.  Amanor Critiques Bates 3  In the Kintampo district the market traders do not go out to the villages to buy yams but make the farmers bring their yams to market.  Since yams are a bulky crop this makes the farmers vulnerable and at the height of the yam season the traders can pay low prices to farmers knowing they cannot afford to transport the yam back to their villages.  Amanor Critiques Bates 4  While governments may distort markets through political interests, free markets are also subject to power interests and economically powerful traders and transnational traders are often able to exert disproportionate power and control over markets.  These interest groups are also able to influence state organizations to introduce policies in their interests rather than those of the farmers. (e.g export rice traders in Ghana).  Sources  Lipton, M. "Why poor people stay poor" in John Harriss, Rural Development, pp.66-88, Photocopy, IAS. Book also in ISSER Library.  Corbridge, S. "Urban bias, rural bias, and industrialization: an appraisal of the work of Michael Lipton and Terry Byres, in John Harriss, Rural Development, pp.94-118. Photocopy, IAS Library.  Bates, R. Markets and the state in tropical Africa extracts, Photocopy, IAS Library  Amanor, K.S. (2005) “Agricultural Markets in West Africa: Frontiers, agribusiness and social differentiation” IDS Bulletin Vol 36(2):58-62. Gugler J. 'Overurbanization reconsidered' Econ. Dev. Cult. Change 31:173-189. (1982)  ^ Bairoch, P. Cities and Economic Development From the Dawn of History to the Present.' (Chicago: Univ. Chicago Press, 1988)  Lipton M. 'Why poor people stay poor: urban bias in world development.'(Cambridge: Harvard UP, 1977)  ^ Markets and States in Tropical Africa (Los Angeles: California UP, 1981)  ^ - recent WTO discussions on agriculture