Rural Development… for rich and for poor EU rural development Developing country rural development Jorge Nunez CEU Master course Economics Deserves subsidies? Does not deserve Subsidies?
Rural Development…for rich and for poorEU rural development
Developing country rural development
Jorge NunezCEU
Master course Economics
Deserves subsidies?
Does not deserve Subsidies?
Issues covered Rural vs. urban, trends and pressures The EU rural development policy – history,
objectives, impacts The changing landscape of rural economies
Rural development in developing countries Objectives Importance Changing focus
GLOBAL CHALLENGES Population is growing Urbanisation speeding up: Every day urban areas
grow by almost 150,000 new people, either due to migration or births. Between 2011 and 2050, the world urban population is projected to rise by 72% i.e. from 3.6 billion to 6.3 billion and increase the population share in urban areas from 52% in 2011 to 67% in 2050.
Urbanisation in last 40 years is equivalent to the urbanization achieved in the preceding 4000 years.
Since 2009 share of urban pop. Larger than rural. Urban and rural areas are competing for
resources, e.g. water and land.
Challenges For all:
Feeding world population Reduce the environmental impacts of production,
retain and enhance soil fertility Reduce food waste an improve food allocation across
social groups and countries Adapting to climate change Higher energy prices
Poor countries: Guarantee balanced nutrition
Rich countries: Avoiding rural depopulation Create non farm opportunities “Landscaping”
EU rural development policy It is the second pillar of the CAP Originally exclusively a farm restructuring support and
support for the food industry modernisation (very important in new MS)
Policy to promote specific objectives such as organic faming
Over the years more holistic – targeting rural economy not only farms (but clashed with EU structural funds)
European Commission publishes in 1988 “The Future of Rural Society” calling for a more global (holistic) Approach to rural development (rural economies depend of many sectors).
Growing internal and external pressures: Overproduction and rising costs GATT (WTO) pressures
EU Rural Development It is a policy in constant reforms It has 40 years history, but It is still defining its role The objectives and priorities are changing It success depends largely on non financial, non
regulatory aspects: Understanding problems in the ground Planning Coordination Collaboration
Characteristics Rural development policy covers all of the EU rural
areas, rich and poor Despite repeated reforms still focuses mainly on
agriculture. It has forestry and and other rural business
programmes, but underutilised. It is generally believed that the rural areas are
predominantly agricultural, poor and are losing population
While agriculture plays a very important role as predominant land user, it has declined significantly for the economy and employment. In fact, even in the predominantly rural areas employment in agriculture is around 13 % with both industry and services being more important (EU 25).
Areas of Natural Constraint Scheme (ANCs) (old LFAs)
Environmental programme: remoteness, difficult topography and poor soil conditions
In the past very weakly justified – a lot to socio-cultural programmes in rich areas.
The Council agreed to better definitions and finally increased focus for the new period 2014-2020
Before the LFA area distribution seemed “political” rather than needs based in nature, and the flat rate nature of payments may have created an element of over-compensation in areas where disadvantages compared to non-LFAs were minimal, and one of under-compensation in the most severely disadvantaged regions.
LFAs as a proportion of total UAA per member state Source: Court of Auditors (2003)
Agri Environment Introduced by Commissioner Fishler copying
Austrian system…. But criticised as actually finances existing
farming practices… In some areas though, it has reduced pollution.
However, in many cases taken up by farmers that already did it and not by those who did not.
New CAP tries to link normal payments to something similar, but is weaker -> Cross compliance and green payments.
Diversification Still linked with farming activities Otherwise it would clash with EU social funds However, some areas where RD is possible, other
funds are not available… restricting choice.
LEADER programme Successful but complex experiment to develop
rural areas But has little political support, as no strong
beneficiary group in it
Developing countries Developing world: 5.5 billion people - 3 billion live
in rural areas, nearly half of humanity. 2.5 billion are in households involved in
agriculture, and 1.5 billion are in smallholder households
Rural poverty fuels rapid urbanisation leading to urban slums (often worse than rural poverty)
Developing country poverty HAS declined, 80% of the decline from rural poverty reduction not caused by migration – but imbalanced, mainly South East Asia
Is agriculture the main development tool? No, but agriculture is a precursor for development In many developing countries there is a
comparative advantage that can help to lay the ground for further development. Is a source of capital.
It is important as a basis – but we need to create the right environment for moving further: Processing, packaging, high value goods (see
Thailand) Remember tariff escalation impact on development
Use rural development to educate the next generation – of engineers!
Agriculture has been neglected The role of agriculture in development has been
neglected. There has been a push towards urbanisation and
low value industrialisation after the green revolution in Asia, neglecting R&D in agriculture.
Lack of land ownership, the development of large exploitations and land grab has affected the environment and generated poverty.
Steps needed in agriculture
Property rights need to be clear – otherwise: Land degradation No borrowing possible, as there is no collateral -> poverty
Training (extension services) Creating credits systems for small farmers –
microcredit systems (see Grameen Bank) Increase in research and development in
agriculture Infrastructure improvement – water access Reduction in trade barriers, tariff escalation and
reasonable non-tariff barriers (e.g. SPS)
Foreign investment Depends how, the
Madagascar government was toppled
China does land grab to feed Chinese, not a development approach
Rapid changes are happening
Today’s investments in biotechnology, concentratedin the private sector and drivenby commercial intereststhe exception is Bt cottonin China and India. Low public investmentin biotechnology and slow Progress in regulating possible environmental andfood safety risks have restrained the development of GMOs that could help the poor. Benefits of these technologieswill be missed unless the international developmentcommunity sharply increases its supportto interested countries.
FOOD SECURITY impacts on Socio-political instability
Green revolution brought an elimination of food scarcity at global level… and complacency
Low investment in agriculture Urbanisation and climate change have hit now
hard Food prices increased and has led to many
concerns on food safety
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5-20% higher than 2012 levels for the next decade
But not higher than in 80s!
High food prices and unrest
Bellemare 2011, Lagi et al. 2011, Arezki & Brueckner 2012.
Food security worries can spark public protest when mixed w/sense of broader injustices.
But not everywhere Barrett et al:
Unrest is linked with social injustices in countries
Should we interfere in markets, or is the issue somewhere else.
Markets send signals, signals create effects of production, if we cancel price signals (global food stocks, for example), how will production react?
Is climate change increasing risks, or decreasing risks… both… for next lectures….