Liang Qiang / World Bank - A farmer in Gansu province, China

Employment is the key to food security

Kees Blokland | 12 March 2013

Many small-scale farmers look for opportunities out of agriculture. The only way by doing this without increasing their food insecurity is rural employment. Farmer organisations can help, to spur up specialisation.

The conference "From Islands of Success to Seas of Change" (the Netherlands, April 2012) addressed the question "What works when scaling up inclusive agri-food markets?" Jim Woodhill, the former director of the Centre for Development Innovation at Wageningen UR, put it that this had to be done by rapidly including the 1.2 billion small-scale farmers of the world (working in over 500 million farms) into agri-food markets in a commercially viable way. Only then, according to Woodhill, will they have serious prospects for raising their standard of living and contribute to feeding 9 billion people by 2050. “This is the only way: a strong agricultural sector is a powerful engine for economic growth and tackling poverty among the rapidly growing population at the base of the economic pyramid”.

Woodhill is completely right that agriculture is a growth engine. Investment in this sector triggers more growth and employment than investment in any other sector, and therefore tackles poverty among the growing population. However, what he is wrong about, is that this has to be done by rapidly including those 1.2 billion farmers at 500 million farms into agri-food markets. It is exactly the other way around: the trick is to get as many people as possible out of agriculture into other employment, and generally providing employment and income to the population that can work.

The point is that the 500 million farms are not critical for feeding the world. That can be done with far less farms: there is no other road to development than a reduction in the number of farmers, first as a percentage of the total working population but eventually also in absolute figures. That is the structural transformation, by which productivity increases in all sectors, and agrarian economies become industrial and service economies with a minor percentage of farmers. As we all know, highly developed countries hardly have farmers.

In other words, the world food problem is not about engaging 500 million farms into agri-food markets. It is about creating employment. This can best be done by massive investments in agriculture (with a higher impact on growth per invested Euro) -  Woodhill is right about that! But the inclusion of small-scale farmers into agri-food markets is not the way. Another type of investments is needed, with another scale and place. The positive returns of investments in agriculture come when these occur in processing plants and other services of a more modest scale (more labour-intensive) and in rural areas, meaning that they generate more employment for the rural poor – and not so much in primary agriculture production, but especially in processing, and input delivery as well as in trade, banking and insurance for the primary production.

To illustrate my point I take you with me to Sabán in Mexico, where I did research for my master’s degree. Some 30 years ago the people there were part of that billion poor farmers subsisting on the basis of beans and corn grown on their 'milpa'. Thanks to heavy investment in the tourist industry, they moved out of poverty, building the hundreds of more than 1000 rooms hotels at the ‘Rivièra Maya’. The farmers of Sabán were not included in an agri-food market, but they got employment in the tourist sector – and benefitted greatly from this.

On the other hand, the beneficial impact of these tourism investments could have been much greater if they had been partly done near Sabán,  spreading investment also over the peninsula of Yucatán and enabling tourist to visit still undisclosed archeological sites. What happens in tourism also happens in agricultural investments, concentrated in high capital intensive business parks near cities. Providing employment for the hundreds of millions who have to get out of agriculture will take –in that way- a very long time.

There is one particularly obvious way to make this transformation to happen faster: by connecting the agricultural investments to cooperative societies and farmers’ unions that stand for and implement a relatively labour intensive and fast rural industrialization. To connect to their initiatives is to ensure that when investments in rural areas are done, they take into account the productive basis in the region and build upon it. Kenyan dairy farmers that get organised and build up their own cooperative processing and marketing unit, create employment in rural areas, albeit outside agriculture – it is as simple as that. The process happened in what is now one of the world’s most prosperous and egalitarian countries: the Netherlands, and there is no reason why it should not happen elsewhere.

Why is Holland so prosperous and egalitarian? In the late 19th century Dutch farmers founded local cooperative societies that mitigated the usual disruptive impact of structural transformation on employment and food availability, in a situation with a growing population that is increasingly employed outside agriculture. Mergers and growth transformed these local coops into successful farmer-owned cooperative societies. This gradual process guaranteed a relatively rapid economic growth and fast structural transformation, safeguarding –and this is important- employment and food balances; and fostering a more equal distribution of income and wealth. Transformation of the economy will take a long time, also in this way, but probably not as much as development with capital-intensive investments of the business park type, and surely with less socio-economic disruption and hunger. Strong farmers’ associations can make this happen!

Specialisation is key for the structural transformation. Farmers first taking care of every aspect of the production process from selecting seeds, to making ploughs and storing, selling, processing and eating their produce, later specialize on production and leave the other aspects more and more to outsiders. Specialisation is in that way the key to employment creation and income growth. A recent study in over 2,500 Chinese villages confirms this, showing how the presence of producer organisations fostered agricultural specialisation, and this specialization in turn made rural incomes increase. This means that villages with more cooperatives and more farmers in cooperatives were wealthier and prosperous than others.

So, the seas of change that we talked about in Scheveningen will come from massive investment creating employment in rural areas. It is exactly for reasons like these that Agriterra focuses its cooperation on economic activity at the bottom of the pyramid, initiated by the representative organisations of the farmers (m/f). They opt in policy and practice for a rural industrialization which is close to the farms and more labour intensive than the plants usually created by foreign and governmental initiatives. Our efforts to make farmers bankable address cooperatives and entrepreneurs on small family farms.

And let’s not forget that in a broader sense, those organisations are urgently needed when it comes to make the voice of the farmers heard and to steer investments in the right direction. We couldn’t agree more with Claudio Schuftan, who in a previous contribution to this blog said that “Policy makers do not always really (want to) listen...unless beneficiaries put pressure on them.” That pressure can only be exerted by representative organisations of those beneficiaries: farmers’ organisations and cooperatives. Listening to them, we understand that they have a point when they talk about democratisation of the economy  – and that it why it is so good to see Mainza Mugoya from the East African Farmers’ Federation participate in this blog. Nothing about farmers without them! – and that is also our recommendation for the Food and  Business Knowledge Forum that is to kick off later this year.

Photo credit main picture: Liang Qiang / World Bank - A farmer in Gansu province, China