Posts Tagged ‘agriculture’

Fair Trade: from oppressed to oppressors?

Fairtrade accused of failing to deliver benefits to African farmworkers screams the Guardian headline. Alright, the headline doesn’t exactly scream, but if they can use journalistic clichés then so can I. Either way it’s certainly not good news for Fair Trade.*

So where’s that precious premium going, then, you might ask? Why into the hands of that holy grail of much development aid: the “rural capitalist” smallholder. That terminology comes from the conclusions of the the DFID-commissioned SOAS report behind the headline. That conclusion, however, switches the quotation marks, putting quotes around “smallholder” (presumably on the basis that are not all farmers so classified have operations that are especially small) and not around “rural capitalist”. It is an interesting indicator of possible cognitive bias.

But a premium for smallholder farmers is exactly what I always thought was the main point to Fair Trade, so what’s the problem? I see a whole raft of issues bundled up here, not all of which necessarily reflect badly on Fair Trade, but which nonetheless do lead to some uncomfortable questions about where now.

  1. Have FLO and their brethren just become too successful for their own good? The bigger you are, the harder it is to maintain the highest standards everywhere. Especially when you are relying on economies of scale to make the business proposition feasible.
  2. The myth of the noble peasant. I suspect most people in FLO know it’s nonsense, but their marketing plays right up to it.
  3. Even if they knew the myth is codswallop, how much did FLO, its senior people and backers, know about the high prevalence of wage labour in some of their agricultural producer sectors? Not much presumably because the report claims to demolish another myth: that “very little wage employment has been created by smallholders in Africa.” One might suggest that, given their business, FLO ought to have understood better, but it seems the failing might be rather more widespread than just the FLO.
  4. Who better to hold down the wages of casual labourers than people living in the same village, who know exactly how much work you can extract from someone for a few shillings, and know exactly how desperate their fellow villagers are for work?
  5. Lots of aid projects try to stimulate rural capitalists. Why? Because every project needs to identify local leaders and other agents of change: local entrepreneurs are highly prized. (Who do you think all those micro-financiers are lending to?) Plus, other things being equal, a greater proportion of profits earned by such people is likely to stay in and circulate within their communities. Newly minted capitalists may spot other business opportunities in their communities, and invest, which would be missed entirely by outsiders. Conversely, it is hard to design economic development projects that specifically benefit the poorest of the poor that aren’t either incredibly expensive or just hand-outs in disguise.
  6. What’s the counterfactual? According to the report many of these labourers are amongst the very poorest in local society, and often disadvantaged for other reasons. Maybe they struggle to get employment on other farms with better wages and employment conditions? They might be no better off as a result of Fair Trade, but it seems hard to argue they are any worse off.
  7. All of which might suggest a storm in a teacup were it not for the fact that the Fair Trade Foundation say fair trade is “about better prices, decent working conditions, local sustainability and fair terms of trade for farmers and workers in the developing world” (my emphasis added). Whoops! Did they over-reach?

So what now? The report contains a whole raft of recommendations for fair trade organisations, donors and governments, and yet many of these recommendations, especially to the latter groups, the authors themselves acknowledge are highly difficult if not downright infeasible to implement in the setting of smallholder agriculture. For FLO they include a bunch of technical corrections which may help to a degree, but which will probably also make the whole Fair Trade standard that much more complicated, and therefore more intimidating to smallholders.

The authors also suggest fair trade organisations should invest more in research (now there’s a surprise coming from a bunch of professional researchers!), and better monitoring. However, where will the money come from? The report implies where it thinks there is some fat that could be trimmed:

“These recommendations are unlikely to be welcomed by Fairtrade organisations, or by the supermarkets that profit from the important public relations and product differentiation opportunities that certified products provide.”

And so we’re back to one of the main criticisms of fair trade over the years: a great proportion of the consumer product price premium stays with supermarkets, and only a very small proportion makes its way back to the farmers. As indeed is true for the non-premium bit of the price. The trouble with much fair trade labelling, alas, is that it implies that this normal law of economics is somehow reversed in the case of the price premium on fair trade labelled products.

Would fair trade work without those excess profits for supermarkets? I know too little to tell, but one has to guess that market penetration would surely be lower if it were less profitable for the supermarkets, and so, at the very least, there is a trade-off that fair trade organisations need to weigh up.

Ultimately, the bigger problem seems to be the question: can fair trade live up to all its claims reliably on a tiny slice of the product price? If fair trade organisations take a bigger slice how ethical will that be judged? Do we view this as money taken from the consumers (who are paying more) or from the producers (who could receive more if the fair trade organisations’ slice was smaller)? Fair traders have a real problem any time the debate shifts towards the latter consideration.

Many economists think the basic premise behind ‘fair trade’, namely paying a higher price than you have to, is just plain poppycock. But the many achievements of the fair trade movement to date suggest that its rationale is no more poppycock than assumptions of rational economic decision makers, and indeed that it fits very well that gap between theory and reality. The problem is that those assumptions of economic theory work well enough in so many other cases to suggest the gap (and thus its market value) is quite thin.

That does not bode so well for fair trade, but I would not write off the power of human willing self-delusion so quickly. Yes we might all be better off buying the cheaper coffee and then sponsoring a child, but consumers like to think they are doing good when they buy ethically labelled products. It’s part of the modern feel-good sales pitch. If someone is going to trade off that, better they have the moral intentions of the FLO and its peers. The next time I have the option, I’ll probably choose to buy fair trade. There are far worse ways to indulge oneself in this world.

* The Fair Trade Foundation have their own response alleging some methodological flaws in the study. Through the grape vine I gather the researchers are pushing back strongly. I am not in a position to judge how serious is the flaw nor how significantly it might affect the final conclusions.

How not to measure progress

In the run up to the UNFCCC latest Conference of Parties (on now, don’t hold your breath!), the Farming First coalition released this infographic (excerpt below) showing progress towards integrating climate change into agriculture policy around the world. It’s a good cause, but I think the authors haven’t been reading my and others’ warnings about differentiating outputs and outcomes. Either that or they were desperate to find stuff to put in amidst all the stalling in official negotiations at the CoPs. How else to explain their choice to feature not just the first but all four ‘Agriculture and Rural Development Days’* as important milestones?

farming-first-climate-infographic-excerpt

World Whatever Days can be useful in advocacy, but we have so many of them these days I really struggle to keep up and/or care. More critically, when you feature them in an infographic like this, I really have to question who are you aiming this at? To me this kind of communication reeks of an NGO’s need to impress donors, saying in effect “Look at all the good stuff we’ve spent your money on!” rather than engaging with other stakeholders on the real issues.

All of which is a real pity because you would be hard pressed to find two policy areas, especially in international negotiations, which are more screwed up right now than agriculture and climate change.

* Renamed as ‘Agriculture, Landscapes and Livelihoods’ in its latest incarnation.

Leapfrogging is hard with only one leg

“Environmental systems are easier to set up when development is still in its early stages” claims the FT. This arguably is a misquote from the article (blame the sub-editor?) by Sarah Murray who cites the old chestnut of the leap over fixed line telephony straight to mobile phones in Africa. With the possible exception of mobile money, building, of course, on the earlier leap, and still mostly confined to Kenya, I struggle to think of any other big technological leaps made that have significantly fast-forwarded development on the national or international scale.

That is not to say that small leaps are not being made by various businesses across the developing world, but Ms Murray was talking about the big systemic leaps, especially to greener technologies in such things as agriculture and power generation. Here I feel the picture is less rosy.

Mobile phones first brought benefits to the elite, benefits they had not previously been able to access in other ways, so I imagine that less regulatory hurdles were put in their way. In contrast there are lots of powerful vested interests in agriculture and power generation, and elites have little problem putting food on the table or fuel in their private generators. Moreover significant reform to the farm sector inevitably involves wrestling with that most sensitive of subjects, and one in which elites are particularly attached to their privileges (and thus potential for abuse): land.

Most eco-friendly farming techniques either require a certain amount of upfront investment (organic certificates don’t come cheap) and/or have a long term payoff, e.g. better soil nutrient retention. Without security of tenure such innovations will always be restricted to small pilot projects.

Alas most farmers in Africa (Ms Murray was specifically talking about Africa) are smallholders with negligible if any land tenure security. Large commercial farms will at least have the relevant pieces of paper, but may have had to trample upon a few rights just to get them in the first place, and thus can be a lot more vulnerable to changing political winds then they might like, i.e. their tenure security ain’t so great either.

So although I would like to be more optimistic, I would caution anyone expecting a great leap forward in agricultural technologies in Africa or other developing countries. It’s hard to go leapfrogging when one leg is nailed to the floor.

Hat tip: my Dad.

Seeing the land for the jatropha

Amongst all the kerfuffle about biofuels a couple of years back I frequently found myself sub-vocalising good ol’ Pete Townshend:

Meet the new boss
Same as the old boss

And now Anna Locke over at ODI has written an excellent, balanced piece dissecting the real problem: land management and large-scale agricultural investment, of any stripe. She writes:

Among the incentives is the fact that land simply does not cost very much in many ‘land-rich’ African countries such as Tanzania and Mozambique, due to exceedingly low land rentals and taxes, which do not adequately reflect the true value of the land to the users. This means that companies can hold onto large areas of land without having to think too closely about the cost of doing so. Land is allocated on a first-come, first-served basis in many countries, prompting a rush by investors to get to the head of the queue and get as much land as possible. This also means that companies often try to secure larger areas of land than they can manage initially in order to guarantee taking the project to scale or for future expansion, or to get hold of an asset that they can sell on in the future.

Despite the above, cheap land and labour are often the cornerstones of governments’ investment policies. This has been encouraged by some of the international donor agencies and is seen by governments as a way to compensate for often difficult business environments with high costs in other areas. But how can this be squared with the rights of communities and local citizens to adequate compensation for their land and decent work conditions?

I have it on good authority that considerable effort by government and some CSOs was subsequently put into developing a Biofuels Strategy for Tanzania, when the country reportedly has some excellent land laws that are just not enforced very consistently. Maybe this was clever strategy by the CSOs – taking on land law enforcement generally might be too big a challenge – but it appears to be another case of mistaking a power/politics issue for a technical problem, for which, by implication, a technical solution can be found. Given that the biofuels revolution appears already to have faded, can lessons be easily transferred to other agricultural sectors? If the issue was framed as a technical problem in the first place that might be difficult.

I have some other observations cum recommendations:

  • Land is definitely cheaper in much of Africa than it is in developed countries. Any economic manager / adviser would be mad not to try to leverage that for the good of the country.
  • But navigating local community politics is hard. Investors are right to be wary!
  • Developing country governments can help most by establishing clear, transparent processes for handling this, and then following them properly.
  • Unfortunately, under misguided pressure by investors, they often appear to short-circuit their own rules which are usually put in place in the first place to protect local people from ‘evil investors’.
  • So to developing country governments I say: Yes investors may need help navigating your byzantine bureaucracy, and you should ensure no officials unreasonably hold up business. (Actually it would be great if you could do that for everyone else, but I understand you cannot do everything at once.) But please do not attempt to spike due process.
  • To investors I say: Face up to reality. This won’t be easy and you need to be prepared for the long haul. The best way to win over local people is to be good employers who respect the local environment etc. Don’t make promises of new schools etc that you cannot keep (unless/until you make millions). You’re a business not a charity, so just focus on being a good business!

That all said, any rich countries looking to trim some budget fat and maybe to make a nice deal at Durban next week should give the strongest possible consideration to ditching their “incredible and immoral [biofuels] subsidy” schemes. (Quote from Mark Lynas)

Quotes to ponder

If this seems pie in the sky, [Kanayo] Nwanze [the president of the International Fund for Agricultural Development (Ifad)] cites a number of countries that are seeing success by focusing on agriculture – Tanzania, Rwanda and Ghana – whose governments, helped by the private sector, have made a big commitment to farming. "The potential is huge," said Nwanze. "With a little investment, Africa can feed itself and it has the potential to feed the world."

(Guardian 27 July 2011 – Africa can feed the world)

So far, Kilimo Kwanza [Tanzania’s big new agricultural initiative] has not brought much new under the sun. It focuses on promoting mechanisation and large-scale investments in agriculture.

NGOs have pointed out that unless Kilimo Kwanza starts addressing the need of small-scale farmers, who make up the vast majority of farmers in Tanzania, the initiative is unlikely to bring much development.

(Land Affairs 03 Aug 2011 – Secrecy in Law Making)

Is this another case of publicity out-running the reality on the ground?

Blame it on the speculators, why don’t you?

Catching up on what’s been on the Guardian’s Development Matters blog, I’m surprised that no-one else has yet chimed in on the dodgy economics on show by Christian Aid’s Alex Cobham when he points the finger at pension funds for helping drive up world food prices. Now I’m not an expert economist, so I will gratefully defer to anyone who can point out that the error in the following.

One of the basic principles of economics is that prices rise when demand exceeds supply, but then these price rises should stimulate further production thus taking the edge off price rises. So before we get to the pension funds, we have to ask ourselves, are there external factors driving up the price of food globally, to which we answer yes: rising populations, increasing prosperity (richer people eat more and eat more protein which takes a significantly larger land area to produce per unit than arable crops) and climate change are all at work, meanwhile yield improvements are tailing off a bit. This is why rich Arabs and others are buying up large tracts of Africa, and equally why the pension funds are investing in agricultural commodities.

The more important question, in my mind, is why has production not responded to these clear price signals? Farmers are better able to respond to incentive price increases than suppliers of other commodities: new mines and oil rigs take a while to come on stream, whereas farmers can easily up production the following year. Global food prices have been high for a few years now – albeit with plenty of volatility – long enough for farmers to respond. That they haven’t done so sufficiently suggests to me that there is something wrong with the operation of global food markets, which there is; they must be the most highly subsidised in the world and are also subject to various price controls and periodic export bans by twitchy governments.

That is not to say farming is not a risky business: it is, and global price volatility is ample evidence of this. However, commodity derivative markets can actually help a poor farmer who is weighing up whether or not to invest in additional seed or fertiliser this year: they allow the farmer to enter into a contract now to deliver at a fixed price later. (Since bad weather can easily wreck the best such laid plans, the farmer would be well-advised to buy some insurance too.) This is one thing often forgotten about financial derivatives: most (I hesitate to say all) were first devised to ameliorate risk for producers and consumers, not for the benefit of speculators.

However, in the developing country where I live and work, the state controlled marketing boards and cooperatives are extremely poorly run. I suspect very few people working in them even have any idea as to what a commodity derivative is, let alone how they could use them to support their farmers. It is a fine idea to provide floor price support to farmers, but these cooperatives do so so inefficiently that one really has to question their raison d’être. Simply closing them down over night without any replacement, as happened in some countries under IMF-led structural adjustment strictures during the 1990s, would probably leave farmers bereft of any support, but allowing them to be replaced gradually by private sector players, who at least have clear commercial incentives to boost production, would seem a sensible option to me, with governments reduced to a buyer of last resort to provide a guaranteed floor price protection that should insulate farmers from the worst kind of exploitation by the ‘evil’ middle men of agricultural commerce.

Although there may be fortunes to be made and lost along the way, speculative bubbles that do not have any foundation in market fundamentals will play themselves out in time. Moreover pension funds are not your average speculator; they tend to invest for the long run. If they thought there was a problem of over-supply in world farming they simply would not invest. Global agricultural markets must be massive; that speculators – whoever they may be – can have an impact speaks to me more of a tightness in supply coupled with artificial narrowing of the market by price controls and export restrictions.

I doubt that full market liberalisation is the optimal solution to agricultural commodity price volatility, and in any case it is clear that politically this is currently out of the question. But a lot could be done to make markets operate more efficiently, and to allow developing country farmers to benefit more from rising demand. Blaming pension funds and other speculators, however, is akin to shooting the messenger. Christian Aid should be capable of better than this kind of base populism.

Free parking for rich farmers?

Whenever I hear of a new protected area being created I always worry about which local communities maybe losing their land. Fines-and-fences conservationists with strong connections to donors may regrettably outweigh remote indigenous communities in the considerations of central government elites.

Whether or not that was the case when Gambella National Park was created in Ethiopia in 1974 I have no idea – it is the site of the second largest mammal migration in Africa! – but it now appears that global agricultural investors trump the conservationists. If a national park’s boundaries are to be compromised for sensible concessions with local residents then I will happily applaud (the rigidity of interpretation around protected area regulations is one reason I am ambiguous about their benefits), but selling a park out to international agribusiness doesn’t even come close.

Unlike the countries further south, my guess is that wildlife-based tourism is pretty low in Ethiopia, so the government doesn’t think its losing much. All of which just goes to show that getting biodiversity to pay for itself can yield better protection than some piece of paper.

How much global condemnation will the Ethiopian government face for this decision only time will tell, but it looks like facts are being created on the ground quicker than a conservation campaign can mobilise. I feel sad for the White-eared Kob, and the likely loss of one of the few remaining great plains spectacles left in the world.

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