Resources Research

Making local sense of food, urban growth, population and energy

Are roads good for farmers or is research best? FAO’s annual measures both apples and oranges

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The FAO’s annual State of Food Agriculture in 2012 is called ‘investing in agriculture for a better future’. As the FAO’s premier ‘flagship’ report for the year, it is dense, is heavy with agri-oriented macro-economics, and is equally heavy with data and unabridged explanations of the roles of public investment and measures of agricultural productivity.

This is only a very fleeting sampling of the content of this year’s SOFA (as it is rather irreverently abbreviated into, both within FAO and outside it) and here I have picked out some thought-provoking material from the chapter on ‘channelling public investment towards higher returns’. [The State of Food and Agriculture main page is here. For those in a hurry there is an executive summary. The full report [pdf] can be found here.]

The magnitudes in the left panel are returns to one monetary unit of different types of public spending in terms of the value of agricultural production or productivity expressed in the same monetary unit. The agricultural performance variable is measured slightly differently in each country: agricultural GDP in China, agricultural total factor productivity in India, and agricultural labour productivity in Uganda. The magnitudes in the right panel are the reductions in the population size of the poor per monetary unit spent in each area of spending. The respective monetary units are: one million rupees in India; 10,000 yuan in China; and one million Ugandan shillings in Uganda. Chart: FAO SOFA 2012

The magnitudes in the left panel are returns to one monetary unit of different types of public spending in terms of the value of agricultural production or productivity expressed in the same monetary unit. The agricultural performance variable is measured slightly differently in each country: agricultural GDP in China, agricultural total factor productivity in India, and agricultural labour productivity in Uganda. The magnitudes in the right panel are the reductions in the population size of the poor per monetary unit spent in each area of spending. The respective monetary units are: one million rupees in India; 10,000 yuan in China; and one million Ugandan shillings in Uganda. Chart: FAO SOFA 2012

Country studies in several regions have found – said SOFA 2012 – positive relationships between government expenditure on agriculture and growth in agricultural and total GDP, while confirming that the type of expenditure matters. “In Rwanda,” said SOFA, “1 dollar of additional government expenditures on agricultural research increases agricultural GDP by 3 dollars, but the effects were larger for staples such as maize, cassava, pulses and poultry than for export crops. In India, expenditures aimed at improving productivity in livestock had greater returns and were more effective in mitigating poverty than general public investment in agriculture.”

The magnitudes are the reductions in the number of poor people per monetary unit spent in each area of expenditure. The respective monetary units are: one million baht in Thailand (i.e. reduction of number of poor people per one million baht spent in different sectors); one million rupees in India; 10 000 yuan in China; and one million Ugandan shillings in Uganda. Chart: FAO SOFA 2012

The magnitudes are the reductions in the number of poor people per monetary unit spent in each area of expenditure. The respective monetary units are: one million baht in Thailand (i.e. reduction of number of poor people per one million baht spent in different sectors); one million rupees in India; 10 000 yuan in China; and one million Ugandan shillings in Uganda. Chart: FAO SOFA 2012

The FAO report quotes from and refers to substantial literature on public investment in agricultural research and development, which SOFA 2012 shows has been one of the most effective forms of public investment over the past 40 years. The FAO’s prescription (or should it be direction?) is that because R&D drives technical change and productivity growth in agriculture, it raises farm incomes and reduces prices for consumers. I do think bits like this (which do tend to litter recent SOFAs) ought to be balanced by other views from FAO’s abundant research on ‘technical change’ and ‘productivity growth’, concepts that for the majority of small cultivators and for the majority of poor consumers of food mean more varieties of processed food from a shrinking variety of cereals being made available at higher prices.

Regrettably, the FAO burbles on about how “the benefits multiply throughout the economy as the extra income is used to purchase other goods and services, which in turn create incomes for their providers”, and about how “the welfare effects are large and diffuse, benefiting many people who are far removed from agriculture, so they are not always recognised as stemming directly from agricultural research”.

Surely, a tome as magisterial as the SOFA is meant to be needn’t grasp at such emblematic straws? For most smallholder cultivating households, the portion of agricultural income in total household income varies widely, and varies within a year between seasons. It is in my view therefore quite impossible to speak of benefits multiplying throughout the economy and of immeasurable but present welfare effects. How and for who, a SOFA should tell us, but this one does not.

The SOFA 2012 has added that “after agricultural R&D, the ranking of returns to other investment areas differs by country, suggesting that public investment priorities depend on local conditions, but rural infrastructure and road development are often ranked among the top sources of overall economic growth in rural areas”. Yes indeed they are, and I can say from experience in India that a better road (not a ‘good’ road, which is hard to find especially once a couple of monsoon months have had their way with roads) does local ‘mandis’ (farmers’ markets) much good.

The magnitudes are returns to one monetary unit of different types of public spending in terms of increased agricultural production or productivity measured in the same monetary unit. The agricultural performance variable is measured slightly differently in each country: agricultural GDP in China, agricultural total factor productivity in India, and agricultural labour productivity in Thailand and Uganda. Chart: FAO SOFA 2012

The magnitudes are returns to one monetary unit of different types of public spending in terms of increased agricultural production or productivity measured in the same monetary unit. The agricultural performance variable is measured slightly differently in each country: agricultural GDP in China, agricultural total factor productivity in India, and agricultural labour productivity in Thailand and Uganda. Chart: FAO SOFA 2012

“In Ethiopia, said the SOFA, access to all-weather roads reduced poverty by 6.9 percent and increased consumption growth by 16.3 percent. Returns to public investment in road infrastructure in Ethiopia were by far the highest of all categories. In Uganda, the marginal returns to public spending on feeder roads on agriculture output and poverty reduction was three to four times larger than the returns to public spending on larger roads.”

Well, yes and no is my view. Roads are used for non-agricultural purposes too, and tend more often than not to ‘open up’ (for better or worse) land use options along their length. If the incomes of agriculturally-dependent households became more varied because of family members being able to use new roads to find new wage opportunities (not necessarily agriculture-related) then how is one to apportion the additional benefit between being able to cart crop produce with less trouble than earlier, and between making use of a new informal labour transportation option that brings in extra wage earnings?

“Public goods in rural areas also tend to be complementary,” said SOFA 2012. In general yes, I agree. But then the SOFA cues the industrial-speak. “For example, in Bangladesh, villages with better infrastructure benefited more from agricultural research than villages with poorer infrastructure; they used more irrigation, improved seed and fertiliser, paid lower fertiliser prices, earned higher wages and had significantly higher production increases”.

This is an over-optimistic way of putting matters, and analogously, urban households that have access to a faster broadband service ‘benefit’ more from e-governance than households still using dial-up modems – but is there a demonstrable link to better or lower income? Moreover, ‘more’ and ‘better’ and ‘improved’ really is the language of industrial agriculture (and I can’t see lower fertiliser prices having been any more than a blip, certainly not a lasting condition).

The FAO’s SOFAs are always exceedingly valuable volumes, and provide much that sharpens our knowledge about food and agriculture, and they certainly widen our views about factors that can convincingly be linked with others which were hitherto ignored (or not attempted because of a lack of data). There is however to FAO first and to its many hundreds of thousands of ‘dependents’ (self included) next, the danger of following too enthusiastically (and uncritically) the ‘growth is good’ and hence more ‘growth is better’ train of advice. No doubt SOFA 2012 has passages that are likely more judicious, and we will examine these over the next few months.

2 Responses

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  1. Hi
    enjoyed reading your blog…is there an email id that I can reach you at?
    thanks

    srinivasan

    January 1, 2013 at 21:53

    • Thanks. makanaka [at] pobox [dot] com

      makanaka

      January 4, 2013 at 09:58


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