Entries tagged with “deglobalization”.

In the world of food security and agricultural development there is a tendency to see market integration as a panacea for problems of hunger (see Theme 2, point 4). There is ample evidence that market integration creates opportunities for farmers by connecting them to the vast sums of money at play in the global food markets. But there is equally ample evidence pointing to the fact that markets are never just a solution – negotiating global markets from the position of a small producer presents significant challenges such as the management of commodity price instability (without meaningful market leverage).  The academic side, and much of the implementation side, of the food security world already recognizes this issue, driven by (repeated) studies/experiences of food insecurity and famine showing that markets are nearly always the most important driver of this stress on the global poor. Planning for the benefits of market integration without serious thought about how to manage the potential downsides of markets is a recipe for disaster.

For example, simplifying one’s farm to focus on only a few key crops for which there is “comparative advantage”, and then using the proceeds to buy food, clothing, shelter and other necessities, works great when the market for those crops is strong. But what happens when the food you need to buy becomes more dear than the crops you are growing, for example through food price spikes or a shift in markets that leave one’s farm worth only a fraction of what is needed to feed and clothe one’s family? In the world’s poorest countries, where most food security and agricultural development work takes place, there is little capacity to provide safety nets to vulnerable citizens that might address such outcomes.

This is not a call for the provision of these safety nets (microinsurance is very interesting, but a long way from implementation).  While useful and, in some contexts, critical, they are, in the end, band-aids for a larger conceptual problem – the framing of market engagement as a panacea for the problems of agricultural development and food security.  Often, such programs also presume a lack of existing safety nets at the community or household level – a sort of “we can’t make things worse” mentality that marks much development thought. However, farmers in these countries have long operated without a state-level safety net. They hedge against all kinds of uncertainties, from the weather to markets.  For example, one form of hedging I have seen in my own work is an emphasis on growing a mix of crops that can be sold or eaten, depending on market and weather conditions.  If, in coastal Ghana, you are growing maize and cassava as your principal crops, you can sell both in years where the market is good, and you can eat both in years where the market turns on you. I have referred to opting out of markets as temporary deglobalization, where people opt in and out of markets as they gauge their risks and opportunities.

Forcing farmers away from this model, toward one that focuses on enhancing the economic efficiency of agricultural production by reducing the focus of a country and its farmers to a few crops that are their “comparative advantage”, and which they should sell to purchase the rest of their dietary needs, removes the option of turning away from markets and eating the crops in conditions of years where the markets are not favorable.  This is even more true when some of that newly reduced crop mix only takes value from sale on global markets (i.e. cocoa) and/or which cannot be eaten (i.e. cotton). In short, such restructuring in the name of economic efficiency makes people dependent on the political structures of the state that govern the markets in which they participate.  Most of our work takes place in the Global South, where the state rarely has the capacity to step in and help in times of crisis.  It is pretty easy to do the math here: done wrong, food security programs principally framed around ideas of economic efficiency can enhance state capacity to extract value from farmers without a comparable improvement in the delivery of services or safety nets.  This is an acceptable outcome if you are trying to compel people to submit to the state and the markets the state regulates, which is one way to boost measurable GDP and state revenue. However, it is really bad if you are actually trying to improve people’s food security.

The key points and principals here:

1)   Are you addressing food insecurity or strengthening the state’s capacity to raise revenue and measure economic activity? These are not the same thing – generally, they are at odds with one another, as making agricultural practice easier to see and measure only serves to improve the capacity to extract revenues from farmers, without any guarantee of improved services proceeding from those revenues.

2)   Economic efficiency is a desirable characteristic of agricultural livelihoods, but in the absence of safety nets cannot be the organizing principal of food security interventions. All else being equal, it is better when farmers use their scarce resources as efficiently as possible. However, the measurement of efficiency must take place within an assessment of the various risks currently managed through “inefficiencies” – as many such inefficiencies are in fact parts of robust, community- and household-level safety nets.

3)   Food security programming should be able to identify the difference between an inefficiency and a critical part of a community- or household-level safety net.  Regardless of the consequences for economic efficiency, programs and projects should not destabilize these until such time as new, reliable safety nets exist to take their place.

4)   Opting out is OK. Farmers should be allowed to structure their farms such that they can opt out of markets if things turn bad, even if this limits their total incomes in “good”/optimal years. This should not be assessed in terms of the average outcome, when best and worst cases are averaged.  Your best case is some more money. Your worst case is severe deprivation and death. These are not equal. Averting the latter is more important than achieving the former.

Adrian Fenton, writing on the website of IIED (whose work I generally like), seems to be pushing the idea that community-based adaptation (that is, adaptation that builds upon/strengthens strategies employed at the local scale) and microfinance go hand-in-hand. I am not so sure this is a good idea – I feel like IIED has missed a fundamental point here – for most of the developing world, livelihoods are about avoiding and managing risks and challenges – and then capitalizing on any surplus that might come about after managing those risks.  As many have noted, this largely risk-averse approach to making a living hugely constrains opportunity because you cannot employ all of your resources in an effort to engage in markets/work off the farm/what have you – you have to effectively waste a bunch of them guarding against events that often don’t happen. One way in which this happens, which I lay out in my book and have discussed on this blog, is when people set up their livelihoods in a manner that allows them to temporarily deglobalize when markets turn against them.  This effectively requires holding back resources from market sale in case you have to rely on them directly.  For example, farmers who keep the deglobalization option open in their livelihoods hold back a portion of their labor from market engagement as they dedicate time to planting and raising food crops that might be used for subsistence purposes if the markets turn.

Given this fundamental characteristic of so many livelihoods that we see in the Global South, it seems to me that coupling adaptation (current community- and household-level livelihoods are, in effect, adaptation efforts that go on continuously) with microfinance applies the wrong medicine to the problem – people don’t need more capital, they need a way to free up the various resources they already have from the necessary conservativism of their current livelihoods strategies.  Adding loans, even small loans, to the current livelihoods mix simply increases risk without necessarily providing benefits that offset that risk.

Instead, it seems to me we ought to be shifting our focus toward microinsurance and away from microfinance – microinsurance provides the safety net that enables risk-taking at the household and community level, and therefore empowers people to use their existing resources in the manner they best see fit.  In short, it allows us to meet some of the financial requirements for adaptation without having to create new financial vehicles, and new forms of risk in already-stressed livelihoods.  This is a much more direct means of addressing the challenges to local livelihoods posed by climate change impacts and raising the capital needed to address future risks, rather than offering seed capital, hoping the business/effort works out with enough profit to pay back the loan and provide a large surplus that might then be employed to address climate change.

This strikes me as the adaptation and development version of Occam’s razor – when evaluating plans for future adaptation efforts, select the one that requires the fewest new institutions and steps to raise the capital/resources necessary to meet future challenges.