Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN) Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN)
 


Promoting agriculture for social protection or social protection for agriculture: Strategic policy and research issues
Discussion Paper
August 2006
Andrew Dorward, Rachel Sabates Wheeler, Ian MacAuslan, Chris Penrose Buckley, Jonathan Kydd, Ephraim Chirwa


Executive Summary

It is increasingly recognised that agriculture must play a role in pro-poor economic growth in countries with large, poor rural sectors. There is also a major focus on social protection interventions to address risks and insecurity affecting poor people. However current policy debate and formulation makes only limited attempts to integrate agricultural and social protection policies. This paper outlines significant paradigm shifts in policies affecting both these fields and highlights pertinent issues arising from interactions between agricultural and social protection policies.

The paper begins by setting out the sources and effects of stress in rural people’s livelihoods, and their responses to stress. Poor rural people’s livelihoods are complex, diverse and risk prone with inherent seasonal instability. Vulnerability not only affects people’s welfare, it also reduces growth, directly by destroying assets, and indirectly as the threat of shocks and stresses diverts assets from more productive activities to those that reduce vulnerability. These responses involve removal of, resistance to, recovery from and relief from stresses. These responses are nested within three broader livelihoods strategies which people adopt (often together) to survive and to advance their welfare:

  • ‘Hanging-in’, where activities are undertaken to maintain livelihood levels at a ‘survival’ level;
  • ‘Stepping-up’, where investments are made in existing activities to increase their returns; and
  • ‘Stepping-out’, where existing activities are engaged in to accumulate assets as a basis for investment in alternative, higher-return livelihood activities.
Development normally involves shifts in emphasis in people’s livelihoods, from hanging in (through low risk /low return subsistence activities) to stepping up (in higher risk / higher return commercial agricultural activities) to stepping out (from agriculture to higher return non-farm and often urban activities). Social protection and agricultural development policies should support this progression, but means of support should change with structural changes in livelihoods and in rural economies.

Social Protection

Social protection policies emerged initially to protect groups of people harmed by structural adjustment policies in the 1980s and early 1990s but now extend beyond simple welfare concerns, with increasing emphasis on risk management to reduce insecurity and its harmful effects on investment and pro-poor growth. Social protection now encompasses public and private initiatives to support communities, households and individuals in their efforts to manage risk. It is pursued through three types of instrument, characterised by their primary function in impacting on peoples livelihoods:

  • welfare instruments provide relief and sometimes recovery from deprivation
  • risk-insurance instruments seek to avert deprivation by putting in place robust and accessible recovery mechanisms
  • resilience-building instruments aim to enhance incomes and capabilities, through a range of livelihood-enhancing programmes that build assets and promote resistance to stresses and shocks.
Impacts of the different types of instruments are not, however, restricted to these primary functions and interact in a number of ways with the four basic livelihood responses to stress as described above (removal, resistance, recovery and relief).

Agricultural Growth

Agricultural policy in developing countries over the last 50 years can be broadly divided into two phases. First, state-led development involved massive government investments in various types of agricultural intervention, including input and finance subsidies, produce price stabilisation and support. Though very successful in some (mainly Asian) countries, in other (mainly African) countries these policies imposed major fiscal burdens but had little success in stimulating growth and poverty reduction. These failures, with changing development theory and economic ideology, led to the second phase - market liberalisation. This has also had mixed results, but importantly has largely failed to get staple food production moving in poorer rural economies.

The successes and failures of state and market led agricultural policies may be explained by changing market conditions and policy requirements in the process of agricultural transformation. Early in this process, government (or other) interventions are needed to ‘kick-start markets’, but these fail if they are poorly managed and are implemented without successful prior investments in infrastructure and technology development. Liberalisation policies are more successful in stimulating (non-staple) agricultural growth when implemented after agricultural supply chains have become established, but fail to benefit staple crops if implemented prematurely.

Links between social protection, growth and agricultural development

Links between social protection and agricultural growth go beyond positive feedbacks where reduced vulnerability promotes growth and growth reduces vulnerability, important though these are. Social transfers have greater growth effects if they take people or economies across critical poverty trap thresholds and impacts also depend on other interventions: for example risk insurance mechanisms may only induce people to invest in riskier higher return activities if input, financial, or output marketing services needed for these activities are present. Similarly agricultural policies promoting higher risk/higher return activities may be ineffective with inadequate social protection mechanisms.

Complementary roles for social protection and agricultural development policies revolve around their contributions to poor people’s ‘hanging in’, ‘stepping up’ and ‘stepping out’ strategies. Early social protection welfare instruments focused on supporting ‘hanging-in’ strategies. These are still important but newer insurance and resilience based instruments aim to help people escape from poverty traps so that they can ‘step-up’ or ‘step-out’, taking risks to engage in more productive activities. Agricultural policies provide services supporting the same process.

There are further complementarities in the both policy spheres’ need for policy aims and instruments which change with structural transitions in livelihoods and in market and non-market activities and relations. Thus, for example, over reliance on market based mechanisms in poor rural areas which have not yet experienced growth may be ineffective because of a lack of effective markets. As development proceeds, however, and markets ‘thicken’ then market based interventions may become more effective and efficient in both social protection and agriculture.

Strategic approaches to agricultural growth and social protection policies

Four broad strategic approaches to social protection and agricultural growth can be identified in the way that complementarities between agricultural growth and social protection policies in poor rural areas have been exploited (or ignored) in past and current policies.

  • Social protection (inter alia) from agriculture and agricultural growth
  • Social protection independent of agricultural growth
  • Social protection for (inter alia) agricultural growth
  • Social protection through (inter alia) agriculture
The first three approaches have been associated respectively with post-independence state led development policies, earlier liberalisation policies, and the new social protection growth agenda.

Policies promoting social protection from agricultural growth have been remarkably successful in some countries but failed disastrously in others, as discussed earlier. Successful strategies provided both complementary services promoting crop production and some systemic social protection in terms of welfare and risk management for both producers and poor consumers. On the other hand independent approaches to agricultural development and social protection have a poor record in stimulating staple crop based agricultural growth in poor rural economies which have not yet achieved an agricultural transformation. Strategies promoting social protection for agricultural growth face very significant challenges in overcoming problems of high transaction costs, adverse selection and moral hazard in crop insurance and micro-finance programmes in poor rural areas, though may be very effective in rural areas that have already experienced some growth.

There is an important research agenda here in comparing the costs and effectiveness of more generic growth and social protection approaches used in earlier state led agricultural development policies (for example food price stabilisation interventions) with more recent micro- level social protection approaches. Similarly lessons need to be learnt from the successes and failures of state, market and civil society engagement in these different approaches. Lessons should identify different combinations of instruments and stakeholder roles and relations that can best promote both agricultural and non-agricultural growth and social protection in different contexts and might, for example, allow the ‘social protection through agriculture’ approach to become more effective in promoting both sustainable agricultural growth and social protection.

Policy principles

Clear policy principles are needed to guide the development of contextually appropriate, complementary and flexible policy goals and instruments in both agricultural development and social protection. Contextualised principles should take account of (inter alia):
  • conditions, constraints and opportunities in agricultural and non-agricultural sectors
  • the structures of people’s livelihoods, and opportunities, constraints and risks people face,
  • current conditions and dynamics of change in market and supply chain development,
  • existing formal and informal social protection mechanisms
  • capacity and resources for implementation of agricultural and social protection interventions
  • specific characteristics, strengths and weaknesses of different agricultural and social protection interventions in achieving particular outcomes in different contexts
Food access and prices and HIV/AIDS impacts are two specific issues where there are particularly strong and complex linkages between agriculture and social protection.

Design and implementation issues

Agricultural and social protection instruments should be designed and implemented to exploit synergies and avoid conflicts between them. A number of issues need to be addressed:
  • Choice of type of transfer (e.g. cash, food, inputs, or vouchers) should take into account: multiplier effects of different transfer types; specific programme objectives; programme and recipient costs; and market development and effects
  • Timing is critical in seasonal agriculture, and interventions should support, not undermine, people’s strategies for coping with seasonal vulnerabilities and exploiting seasonal opportunities.
  • Scale: Both the size and number of transfers have important threshold and multiplier effects affecting social protection and agricultural outcomes in livelihoods and economies.
  • Conditionality often results in unintended effects which have to be considered in terms of cost and outcome trade-offs across multiple objectives.
  • Stability and reliability of programmes have critical effects on their ability to deliver risk insurance benefits, as these depend on people’s trust in being able to access services when needed.
  • Targeting: Effective targeting is critical to the success of non-universal social protection, but is difficult to achieve and requires substantial resources.
  • Costs increase sharply with targeting strictness and the remoteness of the target population.
  • The political economy of local, national and international relations: The funding, design and delivery of social protection and agricultural policies are highly political. Support for different initiatives depends upon their objectives and the interests of financiers, implementers and intended and unintended beneficiaries.

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