Home' Partners : Partners: Raising incomes – pathways out of poverty Contents PARTNERS SUMMER 2013
seen falling food prices, aligned with a falling
share of agriculture in economic output and
employment. This is achieved through a
migration of rural workers to urban areas and a
rising share of urban economic activity (industry
and services) contributing to economic growth.
During this transition a population spurt is
experienced, before a new equilibrium is reached.
The policy challenge in this context has
been to deliver mechanisms that point the
poor to the pathway towards growth, or
to prevent the poor from falling from that
pathway. This is underpinned by policy that
supports the necessary rising productivity in
agricultural and non-agricultural sectors that
drives economic growth.
During this transition, food policy
interventions are important to keeping staple
foods accessible to the poor, connecting rural
labour to urban employment and delivering
health and education services, particularly in
rural areas experiencing a rapid transformation.
The key to this transformation is supportive
policy settings that encourage investment in
appropriate areas, such as boosting agricultural
productivity, and encourage broader growth
throughout the national economy, especially
growth that will absorb surplus labour from
rural areas at higher productivity than it can
achieve in agriculture.
A NEW SCENARIO
This historical pathway to transformation is not
a certainty in the changing global context. The
potential is for climate change and associated
responses, notably the growth in biofuels,
to reverse the long-term trend in declining
commodity prices. This would also reverse the
higher incomes resulting from the historical
pathway of transformation, outlined above.
As climate change has gradually increased
impact, higher temperatures and greater
variability of rainfall are anticipated. These will
inevitably impact on agricultural sectors in a
number of ways, including:
nconstant changes in climate-based
nincreased variability of seasonal products;
nshifting areas of land use and new areas of
nhigher and more volatile commodity prices
driven by variable supply and yield pressures
from changing climates; and
ngreater impacts on the poorest producers,
leading to increased pressures on the poorest
households in terms of income generation
and food security.
A second factor in this scenario, already
beginning to take effect, is the growing demand
for biofuels, driven by efforts to mitigate the
causes of climate change. The likelihood of
increasing demand, driven by rising middle
classes increasingly using private transport, is
increased investment in the biofuels sector.
Higher grain prices will require subsidies to deliver
a profitable biofuels sector. The result is likely to
be a willingness on the part of governments,
especially governments in rich countries, to
subsidise this sector, keeping prices high, a
scenario agreed by most observers of the sector.
If these scenarios play out, what are the
consequences for economic growth and
poverty reductions in developing countries?
Not surprisingly, the answer depends on the
role of agriculture in individual countries.
If only large farmers are able to reap the
benefits of higher grain prices, and their profits
do not stimulate a dynamic rural economy, a
downward spiral can start for the poor. High
food prices cut their food intake, children
are sent to work instead of school and an
intergenerational poverty trap develops.
If the poor are numerous enough, the entire
economy is threatened, and the structural
transformation comes to a halt. The share of
agriculture in both employment and GDP
starts to rise, and this reversal condemns future
generations to lower living standards. There
will be much more 'structural' poverty, and
countries determined to cope with it will find
themselves supporting expensive and long-
term safety nets for the poor.
A reversal of the structural transformation
as the regular path to economic development
and reduced poverty will be a historical
event, countering the patterns generated by
market forces over the past several centuries.
Such an event is likely to have stark political
consequences, as populations do not face the
sustained prospect of lower living standards
with equanimity. It is possible, of course, that
new technologies will come on-stream to lower
energy costs across the board and thus allow the
biofuel dilemma to disappear quietly. But the
current prognosis is that it will not be this easy.
The consequences of such a reversal will
require new ways of thinking. Longer term,
rising commodity prices may create an incentive
for agricultural production, assuming that the
impacts of climate change are managed and do
not reduce yields by too much on average.
To bring this about will require a
reinvestment in agriculture, both in research
and in rural infrastructure across the sector in
developing countries. Coping with climate
change also poses questions for smallholder
farmers and what policies will be needed to
ensure that they have a future in this scenario.
Going forward, the challenge of food
security for all is directly tied to the
management of climate change. Lobell and
Burke make the following observation:
"...one thing appears almost certainly true in
the twenty-first century; if agriculture and food
security are to thrive, they will have to do so in a
constantly warming world. The level of climate
stability that has been experienced since the
dawn of agriculture is a thing of the past; the
future will be one of constant change. This need
not spell disaster for food security, but we would
be wise not to underestimate the enormity of
the challenge at hand."
[Lobell D. and Burke M. (eds) 2010.
Climate Change and Food Security: Adapting
Agriculture to a Warmer World. Advances in
Global Change Research, Vol. 37, p1960]
Food policy analysis that understands this
challenge and offers insights into how best
to cope with it will be a key driver of how
successfully society adapts to climate change. n
About the author
Peter Timmer is adjunct professor at the Crawford School of Public Policy at ANU. Now retired
from teaching, he is the Thomas D. Cabot Professor of Development Studies, emeritus, at Harvard
University. Prior to joining CGD, Professor Timmer was dean of the Graduate School of International
Relations and Pacific Studies at the University of California San Diego. In addition to his faculty
positions in three schools at Harvard, Professor Timmer has also held professorships at Cornell
and Stanford. In 1992, he received the Bintang Jasa Utama (Highest Merit Star) from the Republic
of Indonesia for his contributions to food security. He served as the chief outside adviser to USAID
for developing their strategy on growth and agriculture for the Natsios Report (Foreign Assistance
in the National Interest), and he was one of the key advisers for the World Development Report
2008: Agriculture for Development. He currently serves as an adviser to the Bill and Melinda Gates
Foundation on agricultural development and food security issues.
Professor Timmer's work focuses on four broad topics: the nature of 'pro-poor growth' and its
application in Indonesia and other countries in Asia; the supermarket revolution in developing
countries and its impact on the poor (both producers and consumers); the structural transformation in
historical perspective as a framework for understanding the political economy of agricultural policy;
and the functioning of the world rice market.
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