World Bank climbs down on markets

from The Nation

By JOHN MBARIA

The World Bank has admitted that its push for a market-oriented approach to agricultural development in East Africa and elsewhere in the developing world has failed, and is now calling for renewed state intervention.

This admission marks a radical abandonment of the Bank’s 25-year campaign of foisting the deeply controversial and unpopular structural adjustment programmes (SAPs) on African countries that are blamed for entrenchment of massive poverty in most of these nations.

According to the World Development Report 2008: Agriculture for Development, the World Bank has acknowledged that governments are the custodians of the public good and have an important role to play in promoting agricultural growth, particularly in the smallholder sectors.

It further admits that its push for market-oriented growth has failed. “Market failures are pervasive, especially in the agricultural-based countries, and there is a need for public policy to secure desirable social outcomes.”

It further acknowledges that the state “has a role in market development, which includes providing core goods and improving the investment climate for the private sector.”

It hails Uganda for pioneering the contracting out of agricultural advisory services and for giving producer organisations a say in awarding the contracts.

The Bank’s new-found social activism is a far cry from its past development philosophy and practice. Indeed, the Bank seems to belatedly embrace humanitarian concern for the plight of millions upon millions of smallholder farmers by focusing on the plight of women farmers. “An African woman, bent under the sun, weeding sorghum in an arid field with a hoe, a child strapped on her back…(is) a vivid image of rural poverty.”

That report further talks of “bringing governments closer to the people”; calls for “more” and “better” international commitments to end hunger and poverty and asks the world to establish “fair rules” for international trade. It avers: “If the world is committed to reducing poverty and achieving sustainable growth, the powers of agriculture must be unleashed.”

However, the report is a contradiction of sorts. For instance, it will not escape even the casual reader that the about-turn made by the Bank is contradicted by the praise it heaps on its earlier market-oriented approach, saying, “Quality improvements and fair trade can open new opportunities for more remunerative markets for some smallholders.”

The question of whether the Bank is itself committed to what it asks other donors to do, has become the subject of heated debate since the report was released.

In African agriculture and the World Bank: Development or impoverishment, the Sweden-based Nordic Africa Institute delivers a scathing attack on the Bank, saying, “Consistently, World Bank agricultural policies have displayed contradictory tendencies and a glaring discrepancy between stated objectives and actual outcomes.”

The institute says that on the one hand, the Bank expresses concern for smallholder farmers, and indeed pressurised African governments to implement the structural adjustment policies in the name of making markets and the allocation of resources efficient so that smallholder farmers could benefit from competitive prices for their produce.

But, the Swedish Institute says, the World Bank continues to espouse “market fundamentalism” or the “unshakeable belief” in the power of the market as the “prime mover” of production and trade without regard to such other considerations as “political imbalances and social biases of markets as historical institutions.”

Paradoxically, in the World Development Report 2008, the Bank betrays, in more ways than one, its desire to have East African and other sub-Saharan African countries continue adhering to the dictates of the market. It asserts that liberalised markets will remain the fundamental force for raising productivity and alleviating poverty.

It goes on to concur with proponents of a Green Revolution in Africa that this is the path through which the continent will achieve farm productivity worth writing home about.

The push for Africa’s own version of the Green Revolution is been spearheaded by the Kofi Annan-led Alliance for the Green Revolution in Africa, a body that is funded jointly by the Melinda & Bill Gates Foundation and the Rockefeller Foundation.

Now the World Bank looks set to join in by championing the “revolution” and expressing support for the proliferation of genetically modified foods in Africa and elsewhere.

In this regard, the report notes that biotechnology is concentrated in the private sector; is driven by commercial interests, and has limited impacts on smallholder farming in developing countries.

It, however, says, “The potential benefits of these technologies will be missed unless the international development community sharply increases its support to interested countries.”

The import of the Bank’s admission that SAPs might not, after all is said and done, have been such a good idea, will not be lost on policy makers in East Africa and elsewhere in sub-Saharan Africa. This is where — in an advocacy bordering on intimidation — the World Bank has continued to play a leading role in pushing these countries to embrace its policies to the detriment of their own agricultural sectors.

It will not be lost on East African policy makers that they only agreed to implement the SAPs after the World Bank made it mandatory for them to do so before receiving development aid over the past 25 years.

To the weak East African economies, this was a “do-or-die” situation; the kind of situation where they either implemented the SAPs or lost development aid and budget support.

With a reluctance that proved amply justified in hindsight, Kenya, Uganda and Tanzania went about implementing these policies and suffered a horrendous two decades of sustained low agricultural growth rates and deepening rural poverty.

On its part, the Nordic Africa Institute delivers a scathing attack on the Bank for directly contributing to the mass impoverishment of hundreds of smallholder farmers in sub-Saharan Africa and elsewhere in the developing world. “Smallholder farming has been eroding over the past three decades, perpetuating rural poverty and marginalising remote rural areas.”

The institute further says that over the past quarter of a century, African smallholder farmers have been losing their share of the global markets for such traditional export crops like coffee, cocoa, tea, as well as cotton, tobacco and cashew nuts. This share has declined steadily to the point where it is now “negligible.”

In real terms, this has meant that producers of these crops in East Africa and elsewhere on the continent could no longer produce with advise from extension staff who (particularly in Kenya) were laid off en masse.

The implementation of SAPs also meant that farmers’ incomes dwindled and they could no longer afford to take their children to school while family diets became poorer by the day.

These difficulties were compounded by such other developments as widespread fragmentation of land, continued growth in rural population, the emergence of new diseases (HIV/Aids) and new strains of old diseases (e.g. tuberculosis), weakening of alternative social support structures, and lack of credit to raise farm productivity.

The net effect, as is typified in most rural areas of East Africa, has been deepening of poverty, rural misery and all their negative ramifications.

To escape this rural misery, millions of East Africans have been fleeing to urban areas. But many are not well prepared for the unforgiving urban life.

Indeed, the World Development Report says that with little education, millions of migrants have limited chances for getting integrated into formal job market.

Consequently, a significant proportion of the migrants have “exported” poverty to urban areas since they can only afford to live in such slums as Kibera in Nairobi.

The report states that migration to urban areas might not be the answer after all, and the rural poor stand a better chance on the farm. It says; “More than 80 per cent of the decline in rural poverty is attributable to better conditions in rural areas rather than out-migration of the poor.”

But if migration is not such a good option, what chances do East African farmers have of bettering their lot on the farm? The Bank now recognises the need for sound public policy to help the farmers.

It acknowledges that such policy must be sensitive to farmer differentiation; that there are yawning differences that characterise farmers.

It says that besides heterogeneity in terms of scale of production (large as opposed to small-scale farmers), farmers are differentiated by gender, ethnicity and social status, which “imply differing abilities to use the same assets and resources in responding to opportunities.”

The options offered in the report include enabling smallholder farmers to be more productive, improving the prices of foodstuffs, raising the quantity and quality of public investments and the promotion of innovations through science and technology.

And in a departure from the past, the Bank asks rich countries to remove their long-running protection for their own farmers.

By removing such protection, industrial countries would “induce annual welfare gains” in developing countries by an estimated five times the current annual flow of aid to agriculture. The report further calls for the establishment of fair rules for international trade.

During a recent visit to Kenya, Uganda’s President Yoweri Museveni, disparaged “mobile advisers” and attributed many of Africa’s problems to such advice.

The Nordic Africa Institute for its part casts doubt on the ability of the World Bank to deliver advice to developing countries. It quotes the World Bank’s own recent evaluation, which challenged the institution’s reputation as the world’s “knowledge bank” and criticised its habit of taking “new and untested results as hard evidence that informed its policies.”

No one, it seems, will ever hold the World Bank accountable for the monumental SAPs fiasco. As the Nordic Institute says, this is because sub-Saharan and other developing countries are too dependent on the Bank’s financial aid to complain even when they know that implementing its policies is likely to lead to massive repercussions for their people.