Current Approaches To Rural Poverty Reduction Are Inefficient And Ineffective
There is implicit recognition that increased agricultural production reduces rural poverty. However, current approaches to rural poverty reduction emphasize programs directly targeted to the poor and programs to increase agricultural production of the poor subsistence and below subsistence farmers. It is noted that the “average” farmer is at or below the subsistence level. The first is a helpful palliative, not a long run solution, the second is ineffective.
What is not recognized and therefor not acted upon is that:
- The bulk of agricultural production (typically 85 percent) takes place not on subsistence farms but on small commercial farms that are neither subsistence nor poor.
- Poverty reduction occurs because the small commercial farmer spends half of incremental income on the labor intensive, non-tradable goods and services produced by the rural non-farm sector which harbors the bulk of the poor.
The dominance of agricultural production to poverty reduction is well documented by Ravalion and colleagues at the World Bank, Timmer at Harvard, and Thirtle at DIFFD. They do not explain how this works.
Mellor and Malik (see list of current publications) document the role of the small commercial, farmer. The average of all farms is indeed at about the subsistence level, but that is the very misleading averaging of two very different sets – roughly equal numbers of small commercial farms and subsistence and below subsistence farms.
The small commercial farmer has rural oriented consumption patterns of home improvement, local furniture, and a wide range of local goods and services. The market for these is well documented as local and thus dependent on the small commercial farmer. If they prosper the poor rural- non-farm households (subsistence plus landless) prosper and poverty declines and of course conversely.
Thus, poverty reduction programs must recognize and concentrate on achieving the fully feasible (see the Africana Unions CAADP) six percent or so growth rate through the small commercial farmer. That requires first class research, large public sector extension, and finance institutions explicitly oriented to the small commercial farmer. While those programs are taking effect (to reduce rural poverty by half in a decade or so) targeted food aid and such palliatives effectively increase short term welfare.