Agricultural Reform in Developing Countries
Jan 6, 2011

Agricultural Reform in Developing Countries

Following the 2008 food shocks, 2009 saw a jump in land sale deals from an average of 10 million acres annually to over 110 million, with 70% of these deals in just a handful of African countries. The shear scale of land reforms that are occurring demands that we consider the problems, the commonly advocated solutions, and some new ways forward.

The dominant motivation for agricultural land reforms is simply that land can be made to more efficiently produce food using modern techniques, practices and development. In a world with crushingly high food prices (they have just passed their previous 2008 spike) and starvation for so many of the world's poor, greater agricultural efficiency is a moral imperative. However, there are many difficulties and barriers to simply installing modern farming practices in developing countries. Moreover, many of the reforms that are occurring - whether advocated for in the best interests of the people of developing countries or alternatively imposed for profit or other motives - have significant negative consequences and benefits that are very unequally given. There is an equality-efficiency trade off. What I advocate aims to not just optimize this balance between equality and efficiency but to increase both sides simultaneously.

In many developing countries, land ownership paradigms are very poor. Families have lived and worked land for generations, yet have no official deed or claim to their land. This paves the way for governments to sell enormous tracts of land to foreign investors with little regard to current populations who are kicked off. Even when there are attempts to distribute benefits equably, original land owners almost universally get a very poor deal. Part of the efficiency of modern agricultural practices lowers the number of laborers needed to work on a unit of land so while some argue that displaced farmers can become farm laborers the pattern has typically been the creation of large numbers of landless poor who flood to more urban areas with little or no compensation.

The benefits of the increased efficiency from modern farming of large tracts of newly acquired land may not even substantially benefit the countries, let alone the displaced land users. The majority of the profits end up in the foreign investors and not either the original landowners or even the governments doing the selling.  Rules of law are sufficiently poor and corruption sufficiently rampant that managing to receive even the agreed upon money or future taxes is difficult. Large portions of the physical food and profits end up leaving the country for sale internationally (often to the country whose companies are making the investment). The result is that while a gross increases in efficiency may happen, the benefits are spread inequitably and a given country may actually suffer a net loss due to privatizing large land tracts to foreign multinationals.

We are now faced with the dichotomy between desiring to modernize and increase agricultural efficiency in a way that is equitable and distributes its benefits to the people of developing countries, in particular the displaced land users. The use of foreign investors is needed because local agrarian users do not presently have the expertise, capital and levels of development to physically implement these changes. However, we need to figure out how to use foreign investors in an equitable fashion that benefits both sides.

In countries where governments are sufficiently established, these kind of agricultural reforms can be aided by government investment in irrigation, transport and energy infrastructure, seed programs, equipment subsidies, microfinance, land titles which promote individual investment and many other things. However, the countries that most need the government to provide these things as individuals don't have the capital or ability to attract investment themselves are the same countries where the government is least capable or willing to do it. Chronically underfunded, money spent on agricultural assistance is money not spent on health or education. Due to corruption or lack of capacity, governments may simply not be able to provide this kind of assistance. This seemingly underscores the need for foreign investment.

The world financial aid systems reflect this asymmetry.  The two groups which can get large scale financing are governments and foreign companies. The people who have the most difficult getting investment are the local farmers themselves. These people simply have no access or the ability to scale their needs into the international finance system consisting of the World Bank, IMF, foreign governments and banks. Our first reaction is that it ought to be their government who facilitate this access and scale but as we see their governments lack this capacity. Hence we arrive at the situation in the first sentence of this post where massive privatization to foreign companies occurs and the problems associated with this fall inevitably behind.

The solution, such as it is, is a multifaceted approach that focuses on empowering individuals and communities. The goal is to raise agrarian communities to the level where they can acquire the capital and investment to implement modern farming practices. Through organization, communities can pool their resources, land and work, join with other similar communities, and be scaled to the size where they can attract government assistance, foreign aid and investment.  Since the original land users are involved and retain a vested interest in improving the community one doesn't have to face the equality-efficiency trade off as efficiency is increased without losing equality. To accomplish this requires changes in world financial organizations like the World Bank, assistance from the governments of developing countries but there is also significant room for NGO's to aid in building communities to the levels that they can attract investment.

Land ownership is key. As discussed, without giving land ownership to families who have toiled on land it is nearly impossible to distribute the benefits equitably. This doesn't prevent large foreign investment that consolidates land ownership, but it does ensure people get a fair price for their land opposed to the government selling it, the new owners kicking them off, and compensation being small or nothing. Additionally, it is well established the correlation between property rights and development for the simple reason that if you know you will own your land into the future you will invest in its development. Property rights, as important as they are, are nonetheless difficult to pressure developing governments to implement. The easiest part to fix is for the financial institutions like IMF, World Bank and other governments to pressure developing governments to institute property rights as conditions for aid and loans as they do for many other, often less effective, issues. The barrier is that foreign corporations who want access to purchase this land and additionally developing governments hoping to raise money from selling land both act to prevent pressures on them for land reforms. The result is these issues are disturbingly absent and having strong institutions capable of acting outside of these interests is imperative.

The next step after ensuring equitable land ownership is to have the international aid organizations diversify their investments from governments and foreign corporations to include local communities. As long as the global investment culture is that governments and corporations are the exclusive ones with access to investment dollars, the development of communities that pool their resources and attracted outside investment to create regions of modern agricultural practices will always be inhibited. This is actually easier at the level of groups of communities who can band together to attract aggregate funding - the groups increase the economies of scale and relevance in the market. The Clinton foundation did a similar thing with regards to AIDS medicine where they helped band together numerous entities from companies, NGO's and governments to guarantee AIDS medicine purchases which helped transition it from being a high cost, low volume profit model to the vastly more beneficial low cost, high volume profit model. This story reflects how it is possible to coalesce movements in this way to mutual benefit.

There is significant room for NGO assistance in this area, particularly in the nature of working with local communities to assist them in developing to the point that they can attract investment or join with similar groups. Too often aid comes in the form of direct produce aid, things like medicine, food, education and the like. This is important. But it is also important to try and assist in the development of local groups with local governance that can pool the resources of farmers and increase their access to farming development.

An additional benefit of this community based approach - and it is a significant one - is that it allows communities to decide for themselves the kinds of risks and externalities they wish to accept going along with modern farming practices. Pesticides, herbicides, salinification, ground water and aquifer depletion, nutrient depletion, genetically modified food and the like all have risks to negatively harm the people and the environment of communities. These risks should not be imposed by foreign corporations or governments. With empowered communities, the communities can decide which parts of modern farming practices they wish to adopt and if they believe the risks outweigh the benefits to a community they have a power to reject that.

These problems are difficult and without a single solution. Continued work needs to be done at the level of the international institutions, at the level of governments and helping them develop in developing countries, with direct assistance from NGOs and the continued help of foreign corporations and capital markets. However, by acknowledging the need for community based agricultural reform, each of these different levels can help support the idea of building communities which will allow for the necessary reforms to be done in a way that is equitable while increasing efficiencies. Simply by realizing that communities are a relevant player in this development - and that the burden does not entirely lie with foreign corporations and governments - can make a world of difference.

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