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| Sunday, 19 September 2004 |
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| News Business Features Editorial
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Agricultural Development as a means of Poverty eradication
Poverty has become a serious socio-economic problem, so much so that reduction of poverty by half by the year 2015, was enumerated in the year 2000, in the UN Millennium Goals, as one of the eight goals to be achieved. Currently more than 1.2 billion, or one fifth of the world population, are poor, receiving less than one US dollar a day, ie less than one hundred rupees a day, bulk of which is in the developing world, mainly in Africa and South Asia, living amongst plenty. The causal factors of poverty cannot be analysed in a short article like this. However, one important phenomenon is that poverty is generally associated with rural agricultural societies. Nurkse showed a "vicious circle of poverty" by analysing the rural agricultural economy in a developing country. According to him low per capita income leaves very little as savings in these families. Low level of savings creates a situation of low investment. Low investment in return permits only the use of simple, primitive, low technology. This keeps the productivity of labour low resulting in low per capita income. Whether that vicious cycle is true or not there is another international vicious cycle operating against the rural farmers of the third world. Northern agricultural policies of the industrialised countries, mainly agricultural subsidy programes of triad America, European Union and Japan plus the other OECD countries, keep the farmers in the developing world eternally in poverty. As has been pointed out in numerous occasions, these country governments pay the agriculturalists subsidies to the tune of one billion US dollars a day or more than 350 billion US dollars a year for wheat, rice, cotton, sugar etc. growers, despite agriculture playing a minor role in their economies. These subsidies exceed the total income of the 900 million people of rural areas of developing countries living below the international poverty line. This value of subsidies is six times the amount allocated to aid to the developing countries. Most of this support is provided through mechanisms that increase output, subsidise exports, and restrict market access. It may be mentioned here that the distribution of agricultural support in the EU and the US is more unequal than income distribution in Brazil, one of the world's most unequal countries. Agricultural producers in developing countries lose on several counts because of this unjust subsidy regime. High tariffs in industrial country markets means that some of the poorest farmers of the world face highest trade barriers. Subsidised over production and export dumping cause further damage, undercutting small farmers in the global market. More than 10,000 cotton farmers of the West Africa alone lost some US $ 200m as a result of US subsidies in 2001. Subsidised exports from developed countries displace small farmers in their local markets undermining the dynamic linkages between the farm and non-farm sectors. This is particularly important to Sri Lanka in this present crisis. We import these entire subsidised foodstuff on a nominal tariff while taxing the farmers heavily through their inputs. Thereby we destroyed the possible dynamic link between the rural agricultural and urban non-agricultural sectors. This will not only create an unjust income distribution but also is responsible for the deficit in the trade account in the balance of payments pressuring the central bank to spend extra US dollars to stabilise the external value of our rupee. On the whole rich country farm policies provide a stark example of the hypocrisy and double standards that govern international trade. In this process they systematically skew the benefits of globalisation towards developed countries. Should we fall into this trap and get entangled in a debt trap? However, poverty is back in the official rhetoric on international trade. In all the gatherings of the World Trade Organisation's ministerial meetings (WTO) governments of the industrialised developed countries collectively pledge to 'development rounds' commitment as evidence of concerns to create a more equitable pattern of globalisation. Unfortunately, these pleasant words have not been translated into action. Need not state here that many developing countries depend critically on agriculture for employment, government revenue and foreign exchange earnings. Growth based on small farmer agriculture is one of the most powerful catalysts for poverty reduction because it enables the poor to produce their way out of poverty. In other words, fair agricultural trade can create an enabling environment for poverty reduction. The extent to which this happen is determined partly by rules governing competition between labour intensive smallholder agriculture in the developing countries on one side and large scale capital intensive agriculture in industrialised countries on the other. Unfortunately, these rules are currently rigged against the poor enhancing poverty status. Small farmers in developing countries are forced to compete in the world and local markets against EU and US surpluses exported at prices that bear no relation to the cost of production. Meanwhile their entry into to the northern market is curtailed by some of the highest import barriers in the world trading system. The result is lower prices for their output and loss of market share, enhancing household's economic poverty. Then it is clear that agricultural policies of the first world perpetuate mass poverty rather than reducing it. The lesson that we can learn from these facts is that international trade regime is not placed in favour of the rural poor of the developing countries. Eradication of rural poverty in these countries is the 'engine of economic growth'. If the existing trade pattern does not permit that effort heretical strategies have to be adopted to push these countries from the shackles of poverty. Neo-liberal strategies are important in this exercise. Our policy makers should take this ground situation into account when new policies are formulated. No doubt we need to increase our exports otherwise we perish. However, there is a great opportunity for the development of our rural agricultural sector, particularly the rural peasant farmers to produce substitutes for imported food and simple engineering products and thereby reduce the foreign exchange requirement. Need of the hour is to develop the domestic economy with a view to increase both exports and substitutes for imports to eliminate poverty. |
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