Escaping Poverty's Grasp

The Environmental Foundations of Poverty Reduction

David Reed

• Publisher: Routledge
• Year: 2012
• eBook ISBN: 9781136566301
• Edition: 1
• Topic: Economics
• Subtopic: Ecology
• Index: Economics

Despite decades of macroeconomic reforms, poverty reduction plans and rural growth strategies, poverty is persistent and environmental degradation is accelerating in the developing world. Though traditional economic indicators have improved in some countries, little has worked to open enduring economic and ecological opportunities to the rural poor. This unacceptable outcome grows, in large part, from the failure to place the needs of the poor at the centre of national development strategies and to link local level changes to urgently needed changes in national development policies.

This book is designed to change all of that by showing how change must begin at the local level and, from there, push upwards to change policies and institutions at higher levels to remove political, economic and institutional impediments that stifle opportunities for the rural poor and improved environmental management. This approach challenges the notion that poverty reduction and improved natural resource management can originate with design masters in international organizations or national capitals.Working with teams in China, Indonesia, El Salvador, South Africa and Zambia, WWF devised the revolutionary '3xM' - micro (local), meso (sub-national) and macro (national) - Approach to analysing and intervening to change the poverty dimensions in a country. This approach helps improve the local environment and community livelihoods, and promotes policy and institutional changes at state/provincial and national levels that are essential for the sustainable, equitable development. This book provides both the tools and successful case studies to show practitioners how to adopt the 3xM Approach in diverse developing country contexts.

Published with WWF

1

The Grinding Rituals of Poverty

For centuries, rural people have relied on the natural resources around them to support their families and, when conditions have permitted, to raise their living standards and escape the numbing conditions of poverty. Productive activities – tilling the soil, producing charcoal, mining precious metals and semi-precious stones and catching freshwater fish – have been possible because rural dwellers have had access to natural resources and environmental services that provide energy, materials for housing, medicinal treatments, marketable goods and food. Through careful management of those environmental goods, many rural people have earned enough income to invest in more assets to improve their natural resource base, increase their ability to transition into other rural-based endeavours or move to urban centres in search of improved living standards.

The emergence of increasingly modern, technologically sophisticated economies over the past centuries has given many the opportunity to transition into the evolving modern economy and move entirely out of rural poverty. This transition began in England and Northern Europe and later in the USA, where favourable economic, climatic and cultural conditions have allowed a nearly complete rural–urban transition with abject poverty an increasingly rare social condition. In the currently developing countries, economic opportunities and technological advances were not available until much later, if at all, affording rural dwellers in many countries only limited opportunities and resources to make the structural transition.

In many situations over the past century that positive dynamic between rising living standards and the environment for people living in rural areas has been supplanted by an ambiguous, often negative, one. The essence of that new dynamic is that the rural poor remain dependent on their meagre or restricted natural resource assets, are unable to participate or compete in the formal economy and must draw down their limited assets in unsustainable ways in order to survive. They have fallen into severe poverty, both absolutely and relative to others in their societies. The accompanying depletion of natural capital, be it by stressing the productive capacity of soils, overgrazing pastures, cutting down forests and mangroves or depleting fishing grounds, has resulted in a downward cycle of environmental degradation and deepening impoverishment.

Promoting the positive, mutually enhancing dynamic between the rural poor and sustainable use of natural resources has provided a main rationale for rural development projects financed by international development agencies, as well as for the local activities of civil society organizations in developing countries around the world. For decades, the investments and activities of these agencies and organizations have complemented government programmes designed to increase rural productivity, extend social services and improve the management of natural resources. Development partners pursued those goals through construction of infrastructure, provision of extension services, reforestation projects, health and educational programmes, rural financing mechanisms and a host of other activities. Indeed, the country experiences and policy perspectives offered in this publication are likewise grounded in this approach to promoting sustainable rural development.

But something fundamental has changed

For many years, debate took place within development agencies and government offices about the role that agriculture and rural development should play in the economic growth strategies of developing countries. One perspective held that productive activities in rural areas should be used to finance the industrialization and urban economic diversification of young economies through provision of cheap food and natural resources. A contending view argued that developing the agricultural sector and associated productive activities should be considered the economic foundation and subsequent springboard for national development strategies. Clearly, no uniform approach was settled on during the several decades of give-and-take. Most countries sought to find an uneasy middle ground somewhere between the two options, more often than not giving priority to using agriculture to support industrialization and diversification. That latter view tended to prevail because industrialization was considered a more important sign of progress, despite the unintended consequence of contributing to lower growth and increasing poverty in rural areas.

But something has changed of late, perhaps something quite fundamental. Today, it seems that the prevailing approach concerning agriculture and rural development has shifted in a fundamental way. The prevailing policy perspective now focuses on how best to integrate agricultural output of developing countries into international markets through global supply chains, rather than on assuring adequate domestic supplies of affordable agricultural products. This prevailing view holds that agriculture should be restructured and oriented into specialized, capital-intensive agricultural production regimes whose products are destined for niche markets principally in Northern countries. Clearly out of favour is the approach that emphasized increasing the competitiveness and security of the majority of small farmers in developing countries who continue to live in conditions of vulnerability and constant want.

This reorientation in development policy is part of a larger change in development strategy that shifts attention away from building dynamic domestic producer groups in agriculture and industry that are complemented by national and subnational distribution and marketing arrangements. As emphasized in past decades, encouraging the emergence of dynamic domestic sectors was intended to provide the social foundation for the emergence of a stable middle class to maintain domestic consumption and to strengthen the accountability of systems of governance. In its place, the new development approach focuses on integrating production into global supply chains tied to markets in developed countries. The development approach favoured today tends to ignore social policy that will facilitate redistribution of benefits to all segments of society and assumes that maximization of profits and ‘normal’ market dynamics will deliver optimal outcomes over time to all members of society.

This change in development strategy has important consequences for rural environments and for the poor. A specific example in Kenya – the cut-flower industry – illustrates how these different development strategies unfold on the ground and generate different sets of costs and benefits for various stakeholders. Expansion of the cut-flower market in Kenya has been one of the success stories of that country's export-led development strategy. The industry centred along Lake Naivasha produces a volume of flowers that eclipses many-fold the production in The Netherlands. It is not surprising that this sector has significantly increased its contribution to the Kenyan gross domestic product (GDP) and hard currency earnings during recent years. Moreover, as an isolated production system, the floriculture industry around Lake Naivasha has developed exceptionally sound environmental management practices, even winning the Ramsar watershed management award in 1999.

This apparent economic success is the result of what the United Nations Development Programme (UNDP) considered in 2005 to be one of the most liberal investment climates of sub-Saharan Africa (UNDP, 2005). The 2000 World Trade Organization review of Kenya's trade and investment climate found that ‘most of Kenya's business activities are open to foreigners and that in order to attract investment, Kenya offers tax incentives to local and foreign investors in the form of tax holidays, accelerated depreciation, investment allowances, lower duties on intermediate capital goods, and gradual reduction of corporate tax rates’ (www.wto.org/english/tratop_e/tpr_e/tp124_e.htm). Approximately 8000 jobs have been created for local workers in the course of the past decade.

When our perspective moves from the specific sector to the broader development process, a different view emerges. For example, over 100 people have been killed in recent years as a result of conflicts over access to and control of land, water and fishing grounds that have arisen largely because of the expansion of the floriculture industry. The conflicts over land and water have also moved upland to include the Maasai pastoralists who need both land and water for their herds. In addition, the tax concessions granted by the national government to flower producers prohibit local municipalities from raising revenues that would allow local governments to provide potable water and sanitation services to the burgeoning population of the region, including for the 8000 salaried workers employed by the industry. Without those sanitation facilities, contamination in the lake has increased dramatically over the past few years. Moreover, upstream farmers are obliged to protect watersheds, without compensation, so as to ensure delivery of water required downstream by flower growers, thereby reducing the economic opportunities for local Kenyans upstream.

To accentuate disparities between flower growers and other communities, the fact remains that 95 per cent of all flower growers are of Dutch nationality whereas other stakeholders are native Kenyans engaged in small-scale economic activities. Given that most growers are Dutch, income and profits, other than what is directly invested in expanding floriculture, are transferred abroad without contributing to further growth and diversification of the Kenyan economy. In addition to enjoying the financial, technical and marketing assistance from Dutch marketing chains, the Kenyan government is being urged by the international community to implement a programme encouraging local Kenyans to sell their land to foreign investors, so that they can expand the export-oriented sector, as part of a broader package of recent institutional reforms. As Kenyans sell their land, they lose a long-term income-producing asset for a short-term gain that they may not be able to invest to produce the same stream of income as the land provided. We should not lose from this picture the fact that smallhold agriculture accounts for approximately 60 per cent of the nation's marketed production (Nyoro, 2002).

At the present time, considerable external pressure is being exerted by international development agencies to reverse legislation that would allow the Kenyan government to begin to tighten controls over foreign investment and to promote a more sustainable development approach (UNDP, 2005). Moreover, with agencies supporting foreign investment over other concerns, such as promoting investment in expanding domestic market activities, exploiting the environment to its fullest potential is viewed as a necessary step in Kenya's development even ‘to the detriment of the environment if needed’.¹

Difficult trade-offs

This example provides a glimpse into the difficult trade-offs facing national policy makers as they shape development strategies for rural areas of their respective countries. On the one hand, governments must increase the ability of domestic agriculture to compete with lower-priced imports while also generating hard currency from high-value cash crops in external markets. On the other hand, governments must find ways of increasing the productivity and opportunities for millions of rural poor so that they can rise out of grinding poverty and ensure maintenance of their country's environmental patrimony. Given the limited financial resources available to many developing countries, difficult choices must be made between those options, leaving many pressing development priorities unattended.

In this context of trade-offs and difficult choices, this book focuses on addressing the needs of the rural poor and the rural environment, knowing that powerful, more dynamic economic interests will attend to the needs of the emerging export sector. With this focus, this publication provides an intervention approach to reforming economic policy and institutional arrangements so as to strengthen the economic opportunities of the rural poor and improve the management of natural resources on which they depend. The subsequent chapters offer a cost-effective intervention approach whose main purpose is to re-establish the link between micro-level economic activities and macro-level policies and institutional arrangements to improve the welfare of the rural poor and strengthen natural resource management. This approach, which we have termed the 3xM Approach in that it links the micro to the meso and macro levels of a society, was drawn out of direct experiences in rural areas in China, Indonesia, El Salvador, South Africa and Zambia, where it proved effective in overcoming complex and numerous constraints facing rural communities.

While the Kenyan example presented earlier in this chapter provides insight into the economic and ecological dynamics shaping the opportunities of the rural poor in one developing country, there is a broader global context that shapes the aspirations of the rural poor in the developing world and that shaped the opportunities of communities and partners in the five countries highlighted in subsequent chapters. To put the experiences presented in this book in a broader context we will briefly highlight a number of challenges facing governments and the rural poor as they try to respond to the new economic incentives and opportunities associated with the global economy. First, we highlight a number of economic and policy trends at the global level that create unfavourable conditions for addressing the needs of the rural poor in developing countries. Thereafter, we underscore the environmental changes taking place in rural areas of developing countries that constrain the responses of the rural poor to economic opportunities. The points we highlight are limited and selective but attempt to touch key challenges that shape development options in rural areas of the developing world.

Diminished economic opportunities for the rural poor?

The summary offered by the International Fund for Agricultural Development (IFAD) places the Kenya example in a more inclusive, if not global, context to explain how recent economic policy is affecting small farmers and the rural poor in developing countries:

Changes in international economic and political relations have unleashed national and local change processes that involve enormous challenges for the rural poor. The rural poor face new forms of competition for the resources upon which their existence depends. The underlying value of water, land and forests is rising in response to scarcity. In principle, this should be of benefit to rural communities – as the values of ‘their’ assets rise. In practice, this is a dangerous situation. On the one hand, small farmers are unable to leverage this increased value into greater access to investment capital. On the other hand, precisely this rise in value gives greater incentive to elite groups to try to capture them. (IFAD, 2005, p22)

In the context of the emerging global economy, the UN's Food and Agricultural Organization holds that many smallhold farmers have been unable to invest in their natural resource assets, improved technologies, chemical inputs and even seeds. For the smallhold farmer whose income has declined below the renewal level, drawing down of natural capital, underconsumption and undernutrition have become persistent realities that usually presage outward migration. The ‘economic unsustainability of the production system leads to the ecological unsustainability of the cultivated ecosystem, undernutrition and poor health’ (Mazoyer, 2001, p15).

The United Nations Food and Agriculture Organization (FAO) states that what is particularly significant about the trend signaled earlier is that, despite the steady outward migration from rural to urban areas in developing countries, the ‘world's stock of poor and undernourished is not simply a legacy from the past but rather the result of an ongoing process of extreme impoverishment of ever-renewed strata of under-equipped, poorly located, land-deprived and relatively unproductive rural inhabitants and small farmers’ (Mazoyer, 2001, p4). The FAO study asks that policy makers draw their attention to the renewing cycle of poverty, involving hundreds of millions of rural poor tied intimately to their limited environmental assets, which places a steady pressure on the productive capacity of soils, forests, watersheds and fishing grounds. Under these conditions of self-renewing poverty, the poor cannot compete in the marketplace. They cannot invest in their tools, they cannot invest in their land, they cannot raise the level of inputs used in production and, cumulatively, they disinvest in their own productive capacity by drawing down natural capital. It is the negative cycle of poverty and environmental degradation that has not yet been reversed and certainly not eliminated, despite the resources invested by national governments and development agencies over past decades.

The constraints experienced by the rural poor as they try to compete in the emerging global economy intersect with two longer-term trends that have likewise worked against the needs and interests of smallhold rural producers and aggravated the cyc...

Table of contents

• Front Cover
• Half Title
• Title Page
• Copyright
• Contents
• List of Figures, Tables and Boxes
• Acknowledgements
• Foreword
• List of Acronyms and Abbreviations
• Introduction
• 1 The Grinding Rituals of Poverty
• 2 The 3xM Approach
• 3 China
• 4 Indonesia
• 5 El Salvador
• 6 South Africa
• 7 Zambia
• 8 Lessons
• 9 Recommendations
• Index