Failing small farmers: The World Bank and agriculture

4 December 2007

Stinging from a critique from its own evaluation unit on its work on agriculture in Sub-Saharan Africa, the World Bank released its flagship annual report on agriculture in October to heavy criticism from civil society.

The central finding of the Independent Evaluation Group (IEG) report on the Bank’s agricultural programmes in Sub-Saharan Africa between 1991 and 2006 was that the Bank, donors and governments have neglected agriculture. What limited Bank activity there has been has performed “below par”. In the period studied, the Bank channelled $2.8 billion in investment lending to agriculture, constituting just 8 per cent of its investment lending to the region.

The authors level a series of withering critiques at the Bank’s work, including:

In most reforming countries the private sector did not step in to fill the vacuum when the public sector withdrew
  • On seeds: Having encouraged governments to close their public seed companies, “Bank projects have not been very successful in promoting private sector participation in seed production”;
  • On soil fertility: “The Bank does not appear to have engaged its African clients in serious policy dialogue about the region’s declining soil fertility.”;
  • On access to water: while identifying the need for supporting irrigation, the Bank has done “very limited lending for that purpose”.;
  • On biodiversity: “little evidence that the Bank has adapted activities to diverse agro-ecological conditions”;
  • On transport: The Bank has made a “limited contribution to improving transport infrastructure for market access”;
  • On agricultural extension: “Private extension generally is skewed towards well-endowed regions and high-value crops”;
  • On credit: “Few investment operations have attempted to address the credit constraint of smallholders”;
  • On land reform: The Bank has shown “inadequate appreciation of the time that is required to build consensus around sensitive issues such as land reform”; and
  • On marketing reform: “In most reforming countries the private sector did not step in to fill the vacuum when the public sector withdrew.” Results fell short of expectations due to “inadequate background analytical work, weak political support, and insufficient appreciation of the system’s incentives”.

The evaluators conclude that “despite its presence for more than two decades in several countries, Bank support has so far not been able to help countries increase agricultural productivity sufficiently to arrest declining per capita food availability”.

Management slated the IEG report, charging that its recommendations were not “readily translatable into operational actions”. Noting that the evaluation serves as a pilot for a planned review of Bank assistance to agriculture worldwide, they called on the IEG to ensure that the next evaluation “should be based on the strongest possible analysis”. In the board discussion of the evaluation, a request was made for an update on the Bank’s rural development sector strategy, last revised in 2002.

Interest in the October release of the World Development Report (WDR) on agriculture was high. Donors, researchers and civil society groups anticipate that the document will play a central role in determining the direction of the Bank’s ‘return’ to agriculture. All parties agree that agriculture plays a key role in reducing poverty. The Bank estimates that “GDP growth originating in agriculture is at least twice as effective in reducing poverty as GDP growth originating outside agriculture”.

From this common starting point however, civil society briefings on the report reveal starkly different understandings of what role agriculture should play in development. The WDR authors take an instrumental approach, focusing on how agribusiness can best be developed to increase incomes. Their framework divides the world in three – agriculture-based, transforming and urbanised – emphasising the declining role of agriculture in GDP and employment as countries get richer. In contrast, NGOs have stressed food security and food policy. In a paper for German NGO Misereor, Murphy and Santarius use a framework of three rural worlds – industrialised, family-owned enterprises and subsistence – emphasising the way the worlds interact with one another.

A key divide is over the roles to be played by the state and the market. WDR authors concede that market failures are “pervasive” in agriculture-based countries. They encourage market regulation to ensure competition and allow for situations where state intervention in providing inputs or guaranteeing markets is warranted. In research for NGO Norwegian Church Aid, Mark Curtis captures the dilemma that many African countries find themselves in: “they have the worst of two worlds – government intervention is not good enough to really benefit the poor, but it is sufficient to crowd out badly needed growth in private sector development”.

ActionAid asserts that the Bank’s admission of market failures does not recognise the severe constraints placed on the state’s abilities to tackle market power due to the “globally dominant position of major agribusiness conglomerates”. Market concentration has distorted relationships between farmers and buyers. It has also resulted in a “pronounced gender bias against women”, assigning women to unskilled, labour-intensive tasks. This is indicative, says NGO Oxfam, of the WDR’s “lack of a comprehensive gender perspective”.

A second key divide is over the role of science and technology. WDR authors appeal for sharply increased investments in research and development and public-private partnerships. Answers to increased productivity lie in both ecological processes minimising the use of external inputs, and in “revolutionary advances in biotechnology”, including increased support for genetically-modified organisms (GMOs). A major push in the report is on the need for a ‘green revolution’ in agricultural technology for Africa. The authors argue that intellectual property rights (IPRs) in the seed industry have had “little impact to date” because there are “no indications that such rules have been enforced”.

Murphy and Santarius describe the Bank’s assessment of the potential of GMOs as “unjustifiably rosy”, emblematic of an over-reliance on capital-intensive technologies that are assumed to trickle down to the poor. This is mirrored by “too little discussion of low-cost, farmer-led technologies” and a re-orientation of research towards the needs of small-scale farmers. ActionAid questions why, despite recognising the limitations of IPRs, the Bank fails to push for publicly funded research. They caution that the enthusiasts of a new ‘green revolution’ should not overlook the environmental impacts of the Asian ‘green revolution’, and the role of yield-enhancing crops in resisting pressure for proper land reform.

The third key divide is over the role of international trade. The WDR operates on the assumption that full trade liberalisation is the objective, allowing for compensation of likely losers. In a liberalised world, the question becomes how to link small farmers to high-value supply chains. This requires assistance with infrastructure investments, compliance with international standards, and managing price risk.

All of the NGO counter-reports take issue with the Bank’s characterisation of an idealised market as set against the reality of gross power imbalances in the global supply chain. Murphy and Santarius describe the Bank’s discussion of the benefits of the current round of global trade negotiations as “superficial”. Oxfam cautions that “earnings from export opportunities often only accrue to better-resourced farmers and agri-businesses”.

WDR 2009: Spatial disparities

Next year’s WDR will be divided in three parts. The first part will document urbanisation, and the evolution of gaps between areas within countries, and between countries within regions. The second part will analyse the forces driving these changes, looking at how movements of people and capital help to “realise gains from scale and concentration”. The final section will propose policies to take advantage of these transformations, addressing distributional concerns. Lead author Indermit Gill is a labour economist who joined the Bank in 1993 and currently works for the human development unit in the Latin American and Caribbean region.