This document discusses the effects of globalization on poverty and rural transformation. It provides an overview and conceptual framework for assessing the links between globalization and poverty. The key drivers of globalization are identified as markets and trade, investment and capital flows, and information and innovation. The document examines how these drivers impact poverty and rural economies through increased trade, foreign direct investment, technology adoption, and information access. The summary concludes that while globalization can reduce poverty through economic growth, the impacts are mixed and both winners and losers exist at the household level depending on ability to participate in new opportunities.
The scope for food and agriculture policy research in Central Asia and the Ca...
Globalization,Rural Sector Transformation, and Poverty
1. International perspectives on poverty and transition in rural areas
Globalization,
Rural Sector Transformation,
and Poverty
Joachim von Braun
International Food Policy Research Institute
IAMO Forum 2007
Halle, June 27-29, 2007
2. Overview
1. Issues and conceptual framework to
assess globalization – poverty links
2. Key drivers of globalization
- 1) Markets and trade
- 2) Investment & capital flows
- 3) Information & innovation
and impact on poverty
3. Policy and research implications
Joachim von Braun, IFPRI, June 2007
3. Context of change around the
world food and agriculture system
1. Global economy’s fast growth
2. Governance and decentralization
3. Energy price and climate change
4. Health risks and agriculture
5. breakthroughs in science and
technology
6. Urban/rural change & migration
Not all global change is “globalization”
Joachim von Braun, IFPRI, June 2007
4. Questions
1. what are the effects of globalization of
the agri-food system on the poor?
2. Institutional challenges of (erstwhile)
transforming economies & globalization:
how did globalization impact on poverty
in these economies?
Joachim von Braun, IFPRI, June 2007
5. Patterns in TCs: Growth
LOW
&
RUSS MID
ETH UZB VIET UKR CHIN FED POL HUN Y
Agriculture, value added (annual % growth)
1990
-94 1.4 -0.1 3.3 -8.0 4.6 -7.2 -4.2 -7.5 2.2
2000
-04 3.5 6.0 3.8 6.8 3.4 7.1 2.6 7.4 3.1
GDP growth (annual %)
1990
-94 0.7 -3.5 7.3 -12.3 10.9 -8.8 1.1 -3.2 2.8
2000
-04 5.2 4.8 7.2 8.4 9.2 6.9 3.1 4.4 4.9
Joachim von Braun, IFPRI, June 2007 Source: WDI 2006
6. Towards urbanization of poverty?
Urban and rural share of the poor (%)
1993 2002
18.88 24.67
75.33
81.13 urban share of the poor (%)
rural share of the poor (%)
Source: Ravallion et al., 2007
Note: Poverty line is set at $1.08/day
Joachim von Braun, IFPRI, June 2007
7. Mixed Evidence: Poverty headcount ratio at
$1 and $2 a day (PPP) as % of total population
Share of people living on less than $2 a day
(% of population)
Share of people living on less than $1 a day
(% of population)
100
70 90
80
60
70
50
60
40 50
30 40
30
20
20
10
10
0 0
1981 1984 1987 1990 1993 1996 1999 2002 1981 1984 1987 1990 1993 1996 1999 2002
East Asia & Pacific Europe & Central Asia East Asia & Pacific Europe & Central Asia
Latin America & Caribbean Middle East & North Africa Latin America & Caribbean Middle East & North Africa
South Asia Sub-Saharan Africa South Asia Sub-Saharan Africa
Source: Based on data from the 2006 WDI database
Note: 2002 data are preliminary
Joachim von Braun, IFPRI, June 2007
8. Regional Hunger Trends
45
40.3
40
GH I 1981
35 GH I 1992
32
GH I 1997
30 27.9 27.3
27 26.6 GH I 2003
25.4 25.1
25 22.5
20
15.1
15 12.6
11.9 10.9 11.4
9.4
8.4 8.0 7.9
10 7.5
6.6 6.0 5.6
5
0
Sub-Saharan So uth A sia So utheast N ear East & Latin A merica Eastern
A frica A sia N o rth A frica & C aribbean Euro pe &
F o rmer So viet
Unio n
Joachim von Braun, IFPRI, June 2007 Source: Wiesmann, 2006
9. What is “globalization
of agriculture and food systems”?
Definition: Global integration—
across national borders—of
production, processing,
marketing, retailing, and
consumption of
agriculture and food items
Joachim von Braun, IFPRI, June 2007 Source: von Braun and Diaz-Bonilla (2007)
10. Conceptual framework: drivers and examples
of changes at different levels of analysis
MARKETS INVESTMENT INFORMATION SOCIAL
& & POLICY
CAPITAL INNOVATION
FLOWS
Exogenous factors
GLOBALIZATION
Increased Improved ICTs
Aid;
LEVEL I
access to
Expansion human
outputs, Innovation &
of FDI right to
inputs, IPR
food
labor
Competition
Technology
DOMESTIC
policy
LEVEL II
POLICY
policy Pro-poor
Market
social
opening Political &
Public R&D actions
institutional
investments
changes
RIGHTS
HOUSEHOLDS
LEVEL III
PRICES
EMPLOYMENT
HOUSEHOLD CONSUMPTION
PRODUCTION
ENDOWMENTS
Joachim von Braun, IFPRI, June 2007 Source: von Braun, 2007
11. 1) Markets and trade
Joachim von Braun, IFPRI, June 2007
12. 1. Trade: Stagnation of developing countries’ export shares,
more global integration on the import side
Agriculture trade in percent of production
Export/Production 1960s 1970s 1980s 1990s 2000-02
Latin America and the Caribbean 23.6 24.7 24.5 26.7 31.4
Sub-Saharan Africa a 28.5 23 17.2 15.3 13.2
Asia Developing 5.4 5.7 6.4 6.4 6.4
All Three Regions 12.1 11.8 11.3 11.0 11.6
Import/Production 1960s 1970s 1980s 1990s 2000–02
Latin America and the Caribbean 6.7 8.6 11.2 14 15.7
Sub-Saharan Africa a 8.1 9.4 12.6 12.3 13.5
Asia Developing 7.1 7.7 9.2 8.9 8.8
All Three Regions 7.1 8.0 10.0 10.1 10.5
a Does not include South Africa.
Data source: World Bank, WDI 2005
Joachim von Braun, IFPRI, June 2007
13. Regional trade trends
Agriculture trade in percent of total merchandise trade
Agr. Exports/Total Merchandize 1980 1990 2000 2003
Transition countries 7.6 5.9 5.3 5.5
Latin America and Caribbean 27.8 26.1 17.4 20.6
Sub-Saharan Africa a 19.8 20.0 15.2 16.9
East and Southeast Asia 13.3 7.7 3.7 3.8
South Asia 33.8 18.6 10.8 10.6
Agr. Imports/Total Merchandise 1980 1990 2000 2003
Transition countries 18.4 14.1 9.3 8.4
Latin America and Caribbean 11.6 12.3 9.0 10.3
Sub-Saharan Africa a 15.4 16.3 17.1 17.9
East and Southeast Asia 14.2 8.0 4.8 4.7
South Asia 13.8 10.3 9.3 9.3
Data source: FAO, 2004; Note: a Does not include South Africa
Joachim von Braun, IFPRI, June 2007
14. But: global increased trade in processed
and high-value goods
World export value (billions of US$)
100
90 Coarse Grains
80 Fruits & vegetables
70 Meat
60 Milk
50
40
30
20
10
0
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Data source: based on data from FAOSTAT 2006
Joachim von Braun, IFPRI, June 2007
15. Poverty effects: Trade
• Empirical results mixed
• Trade reform impacts at household level
e.g. Hertel et al., 2003 (Brazil)
Higher poverty in non-agricultural and wage
dependent households
Lower poverty in agriculture-dependent
households
Winners (majority) and losers;
effect of trade liberalization on poor
households’ income small
Joachim von Braun, IFPRI, June 2007
Source: von Braun (2007)
16. Estimations of welfare benefits of trade
liberalization: studies 1999 - 2006
Source: Bouët, IFPRI, 2006
Joachim von Braun, IFPRI, June 2007
17. 2) Investment & capital flows
Joachim von Braun, IFPRI, June 2007
18. Drivers:
(2) Investment and capital flows
1990
Industrial countries Developing countries FDI in food and Agriculture
100
80
as % of world total FDI
60 1990 and 2004
40
20
0
Agriculture, hunting, Food, beverages and 2004
forestry and fishing tobacco
Industrial countries Developing countries
Transition countries
100
80
60
40
20
0
Agriculture, hunting, Food, beverages and
forestry and fishing tobacco
Source: based on data from UNCTAD, 2004
Joachim von Braun, IFPRI, June 2007
19. Poverty effects: FDI
FDI
Labor Intensive Capital / Knowledge
Sector Intensive Sector
Unskilled labor Skilled labor
Reduced Increased
Poverty Poverty
• Other: Economic growth through forward and backward
linkages + knowledge spillovers;
• government revenue from corporate taxes for pro-poor
investments
Vietnam: FDI in rural areas, direct impact on poverty
insignificant (Nguyen, 2003)
Joachim von Braun, IFPRI, June 2007
Source: von Braun (2007)
20. With a blending target of 15 percent of
transport fuel…
3) Information & innovation
Joachim von Braun, IFPRI, June 2007
21. Drivers:
ICT and information flows
Ongoing technological advances
Privatization of national telecom.
monopolies in many developing
countries in 1980s and 1990s
Joachim von Braun, IFPRI, June 2007
22. Drivers: ICT Revolution
500
Fixed line and mobile phone subscribers
400 (Per 1,000 people)
300
200
100
0
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002
150 Internet users
World (Per 1,000 people)
100 Low income
Middle income
50
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Data source: World Bank, 2006
Joachim von Braun, IFPRI, June 2007
23. Poverty effects: ICT
(macro-level results)
• ICTs reduce transaction costs + open
markets + additional network externalities
• Tele-density is positively associated with
growth:
- 10 more mobiles per 100 people increase
GDP p.c. by 0.6% (Wavermann et. al., 2004)
- Minimum threshold: around 15% to get
strongest growth effects, actual is only 6%
Torero and von Braun, 2006
Joachim von Braun, IFPRI, June 2007
24. Regional integration: trading Systems in Comesa
Warehouse Receipt
Commodity Exchange
IFPRI
EAGC
• Rules of Trade
Uganda Commodity •Contracts
Exchange KACE
Warehouse Receipt
EU
Commodity Exchanges
• ACE
• MACE
Warehouse Receipt
• ZACA
SAFEX
25. Poverty effects: ICT
(micro-level results)
Consequences of limited rural access
• Rural households willing to pay more than prevailing
tariff rates per local call:
Peru: US$ 0.25 to 0.35
Bangladesh: US$ 0.10 to 0.26
Source: Torero and von Braun, 2006
Joachim von Braun, IFPRI, June 2007
26. Science and technology
• Rapid expansion of R&D spending:
- China: 2007 = No. 2 (136 Bill.$; 926.000
Scientists) ; USA = 330 Bill$; EU = 230 Bill$)
- India: fast growth
- Africa’s new policy (AU Summit)
• Rural / Agriculture science and R&D?
9 of 17 innovations scoring highest in the 2006
RAND assessment relate to rural & agric.
• China, India, Brazil go global with their
innovation systems in agriculture (in different
ways; research, higher education)
Joachim von Braun, IFPRI, June 2007
27. Global Public Agricultural R&D: 1981 and 2000
1981 2000
$15.2 billion* $23.0 billion*
100%
Middle East-North Africa
Latin America-Caribbean
80%
Other Asia-Pacific
60%
India
China
40% Sub-Saharan Africa
Developed
20%
0%
* in 2000 international prices
Joachim von Braun, IFPRI, June 2007
28. A changing environment for
innovation
• Introduction of patent rights for
agricultural inventions under TRIPS
agreement
• Bio-safety regimes and reduced exchange
(e.g. genetic resources)
- Technology spillover pathways to
developing countries for productivity
enhancement reduced
- Less global public goods research when
we need more of it (climate, etc.)
Joachim von Braun, IFPRI, June 2007
29. 3. Policy implications for pro-poor
globalization
• Global and national market & trade policy
• Facilitation of capital and aid flows
• Development in rural areas, where the
poor are (ICT, and infrastructure)
• Enhancing the global innovation systems
• Rural social protection policy
Joachim von Braun, IFPRI, June 2007
30. Toward global social policies
• Global social policy ? Promising but not
comprehensive efforts:
- Human right to food
- Global emergency aid
- Disaster response
- Child labor in agriculture
- Global health policy initiatives
• Innovations in social policy [e.g. conditional
cash transfers]
• G8 call for social protection
Source: von Braun, 2007
Joachim von Braun, IFPRI, June 2007
31. The world food system globalizes:
global value added and competitiveness ?
Agricultural Food
Consumers
input processors Food
industry Farms and traders retailers
top 10: $37 bln Agricultural top 10: $363 bln top 10:$777bln
value added:
• Syngenta $1,315 bln • Nestle • Wal-Mart
• Bayer • Cargill • Carrefour
• BASF 450 million • Unilever • Royal Ahold
$4,000 billion
• Monsanto >100 ha: 0.5% • Metro AG
• ADM
• DuPont • Kraft Foods • Tesco
< 2 ha: 85%
Source: von Braun, 2005
Joachim von Braun, IFPRI, June 2007
32. What future for the small farms?
Number of farms
Farm Size (ha) % of all farms
(millions)
<2 85 387
2 - 10 12 54
10 - 100 2.7 12
> 100 0.5 2
Total 100 455
The numbers still increase in Africa and South Asia
Source: von Braun, 2003
Joachim von Braun, IFPRI, June 2007
33. Where will be the jobs?
sectoral & spatial labor flows
in global employment …2020 (Bill.)
Farm Services & Services & Total
Industry Industry-
Rural areas Urban areas
2005 0.9 0.6 1.5 3.0
2020 0.6 1.0 1.9 3.5
Change - 0.3 +0.4 +0.4 +0.5
2005-
2020
Estimates based on ILO economically active populations projections
and own estimates of sector shares, J. von Braun, 2005
Joachim von Braun, IFPRI, June 2007
34. Small farms and small businesses
can participate
+25 jobs
From a 2 ha. rice farm to fruit
processing firm
in Uttar Pradesh: training (her),
banking was key;
and the road
Joachim von Braun, IFPRI, June 2007
35. Questions & preliminary answers
1. what are the effects of globalization of the agri-
food system on the poor?
• Generally favorable but mixed;
• exclusion of the poorest in rural areas
2. (erstwhile) transforming economies +
globalization: how did globalization impact on
poverty in these economies?
• Strong evidence of poverty reducing growth
• domestic policies more important than global
context
And all these remain research issues
Joachim von Braun, IFPRI, June 2007