"Most of the people in the world are poor, so if we knew the economics of being poor, we would know much of the economics that really matters. Most of the world's poor people earn their living from agriculture, so if we knew the economics of agriculture, we would know much of the economics of being poor." - Theodore W. Schultz, accepting the Nobel Prize in Economics, December 8, 1979
More than thirty years ago, Theodore W. Schultz won the Nobel Prize in Economics for his work on economic development and agriculture in developing countries. Last week, Cornell University Professor Christopher Barrett told Stanford students, faculty, and community members that Schultz's ideas suggest a powerful approach to breaking persistent cycles of poverty in modern rural Africa.
Barrett, a Professor of Applied Economics and Management and an expert in poverty and international development, visited the Stanford campus for a two-hour symposium entitled "Assisting the Escape from Persistent Ultra-Poverty in Rural Africa." He described the economics of poverty and agriculture in rural Africa as a series of downward spirals in environmental and human health.
The struggle to survive on insufficient resources, he explained, leads to disease and degradation that result in still deeper poverty. Escaping this cycle requires an influx of assets - a "lump of starting capital" in both private and public goods - that Barrett said the international community can provide.
"It takes money to make money," Barrett said. "Asset holdings, and their productivity through technology and markets, matter enormously."
When African farmers and pastoralists slip below a certain threshold of asset poverty, Barrett explained, they face negative feedbacks that set off a steep decline.
For example, a farmer who cultivates the same tiny plot of land year after year depletes soil nutrients to the point where even heavy fertilizer applications cannot revive the crop. Similarly, a pastoral family that begins with a small herd may become sedentary if they are unable to provide for the elderly and infirm while keeping their animals on the move. Stuck in one place, the herd exhausts local resources, and animals and humans alike suffer the health consequences of insufficient food and water.
A farmer who begins with plenty of land can sustain higher yields and invest surplus profits in education, health care, better equipment and still more land. But for the small farmer, incentives to invest in a better future are low, because the consequences of losing even a little income - an accelerated decline toward deeper poverty - are so severe.
Subsistence activity takes precedence, and when bad weather or disease strikes, the results are devastating. Limited access to credit, technology, and markets; weak government; and a harsh physical landscape make it still more difficult for rural Africans to invest in productive assets and recover from chance shocks.
These negative feedbacks and perverse incentives, Barrett said, make African poverty uniquely persistent.
While poor families in the developed world usually experience brief deprivation as a result of job loss or another isolated event, ultra-poor families in rural Africa have exhausted their land, livestock, and other productive assets. Without the means to restore natural and human capital, they may face a lifetime of poverty.
"In the US, poverty, while distressingly widespread, is a short-term phenomenon," Barrett noted. ""It is qualitatively and ethically different to talk about people who have very little hope of leaving poverty."
But Barrett said that the next generation of rural Africans has reason to be hopeful. While there is no one-size-fits-all approach, targeted investment could improve the outlook for many poor African nations. Barrett cited a generation of successful poverty relief efforts in Asia, where ultra-poverty rates in some countries have fallen from the high teens to less than five percent.
"East and Southeast Asia were at least as grim a generation ago as Africa is today," Barrett emphasized. "We know from the historical record that the world can move a lot of people out of poverty very quickly."
Citing Schultz's Nobel Prize acceptance speech, Barrett suggested that the international community focus first on reversing the cycles of decline that have pushed so many African farmers into meager subsistence agriculture.
Farm output, he said, universally impacts the rural poor. When output increases, poor farmers gain directly by selling their surplus. The extra supply also keeps local food prices low, benefiting the vast majority of rural Africans who consume more food than they produce.
Barrett described several possible "entry points" to stimulate agricultural productivity, including direct land and livestock grants, organized provision of rural education and health care, and renewed commitment to African crop research.
Private entrepreneurs, he said, are particularly well situated to invest in the technology and infrastructure needed to open rural markets, support soil and water conservation, and improve communication between buyers and sellers.
Barrett said that relief efforts should ultimately turn their attention to moving rural Africans out of agriculture. High rural population densities have compressed average farm sizes to a fraction of a hectare, he explained, making farming an unsustainable enterprise. More and more rural Africans are suffering the consequences of trying to do too much with too little.
"They find farming hard work," Barrett said, "and they'd like their kids to be able to find something else to do."
Barrett already sees a brighter future for those farmers and their children. "With governments and private investors already increasing their commitments to agriculture and rural development in Africa," he said, "I firmly believe we are in the early stages of being on the way."
This talk was the third in FSE's Global Food Policy and Food Security Symposium Series.
FSI researchers consider international development from a variety of angles. They analyze ideas such as how public action and good governance are cornerstones of economic prosperity in Mexico and how investments in high school education will improve China’s economy.
