Frameworks for Rural Development Policies

The foregoing discussion has touched on the main themes that characterize a successful rural development program. Such programs normally have a territorial dimension, in the sense that they comprise a set of activities to be carried out in specified geographical areas. However, a rural development program can be implemented in many areas throughout the length and breadth of a country. More importantly, effective rural development programs concentrate on increasing the capacity of rural families to improve their economic status through their own efforts. Rural development programs are more productive if they aim at reducing the causes of poverty rather than simply treating the symptoms of poverty. Sometimes, the symptoms are so acute, as in cases where people are undernourished, that urgent attention has to be given to ameliorating them. However, to prevent recurrence of the symptoms, the responsibility of development programs is to increase the abilities of rural families to produce more and work at more productive occupations. Approaching the problem in this way means implementing both programs aimed at individuals and families directly and programs aimed at improving the economic and institutional environment in which they live and work.

Five principal classes of constraints hold back the efforts of rural families to improve their lot, and on the basis of these constraints five classes of rural development policies and programs may be designed and priorities among them may be defined separately for each community. The classes of constraints or limitations represent insufficiencies in the following areas:89

(1) Human capital: low education levels and insufficient training in topics relevant to their work. 'Education increasingly involves lifetime skill acquisition for management and for acquiring and processing information'.90

(2) Social capital: low levels of community organization, producers' organization, etc., reflected in an inability to undertake productive efforts in co-operative or associative ways.

(3) Physical infrastructure: inadequate roads, communications facilities, energy supplies and irrigation water.

(4) Institutional infrastructure: weak agricultural research and extension, underdeveloped rural finance systems, inadequate rules and institutions for defining property rights and resolving conflicts over those rights, weak contract enforcement, and so forth.

(5) Private physical capital: insufficient land and on-farm irrigation infrastructure, and inadequate investment levels in livestock, tree crops and other productive capital. This represents the constraint of insufficient farm-level physical capital for the poor.

This perspective on the rural development problem is similar to the framework for agricultural development proposed earlier in this chapter. The main difference is that rural development efforts concentrate on the rural family, and on increasing its ability to control its world and improve its standard of living, whether through agriculture or other occupations. Agricultural development benefits from such an emphasis as well, but the orientation in agricultural strategies is more toward agricultural production per se.

Both human capital and private physical capital represent forms of capital owned by rural families themselves. Social capital represents the capacities of communities and other local groupings to work together. Building social capital is facilitated by higher levels of human capital and also by appropriate policies. Physical infrastructure and institutional infrastructure are forms of capital in the broader environment surrounding rural communities. Increasing their availability normally requires the assistance of national or regional efforts, as opposed to purely local efforts.

A rural development program cannot provide all of these forms of capital, but it can be linked to a national rural or agricultural strategy that highlights needs in the area of institutional infrastructure and develops policies for meeting those needs. Rural development programs are especially appropriate vehicles for strengthening the first three forms of capital: human capital, social capital and physical infrastructure. In addition, although international agencies are frequently reluctant to make loans or grants for private

89. Preliminary proposals along these lines were formulated for the Ministry of Agriculture and Forestry in Nicaragua with the support of the Inter-American Development Bank.

90. IFAD, Rural Poverty Report 2001: The Challenge of Ending Rural Poverty, Oxford University Press, Oxford, UK, 2001, p. 105.

physical capital for the rural poor, this form of capital can be a powerful instrument for poverty alleviation in the context of a rural development program. Since funding is made available for private physical capital when financial support is given for market-assisted land reform, which usually contains a subsidy element, it should be possible to extend the approach to other kinds of on-farm investments, provided the recipients are appropriately screened.

The endowments of water should be considered in the light of basic human subsistence needs, and not only for irrigation:

The poor share even less in farm water than in farmland, and suffer serious drinking-water shortages.91

This framework for rural investments can be applied to develop concrete recommendations by village or rural area. In a first phase of the work, diagnoses would be made as to the degree of adequacy of each kind of capital, and then in the second phase priorities would be defined to address the needs identified. For example, if most of the adults in a village were found to be illiterate, then human capital needs would figure among the priorities, and adult literacy programs could be a way of fulfilling that priority.

Each of the five forms of capital represents a path along which a rural community must advance in order to become self-sustaining in economic development. Rural development - in the sense of strengthening the capacity for self-development of families and communities - cannot occur with advances along only some of the five paths. All five kinds of capital and infrastructure need to be created in adequate amounts and quality. In the area of physical infrastructure, for example, the first three priorities probably would be transport, communications and energy, in that order. For a village with access to the outside world only on foot part of the year, clearly a road would be a high priority investment. For human capital, the order of priorities would be functional literacy, completion of primary school, and the acquisition of specialized skills through training courses, such as farm management, gender awareness, marketing and irrigation management. Without basic literacy, there would be little point in offering training in farm management, but once primary school had been completed, many options would open up for further development of human capital.

In this manner, priorities can be defined along each of the five paths, and the needs of each rural area can be assessed against those priorities. Policies and programs can then be developed accordingly. Education might become a priority in some villages, while organizing groups of women for marketing and credit management (social capital) could be a priority in another one, depending on how far each village had already advanced along each of the paths. Putting in internet communications, with solar power for the energy source, might become a priority in other villages, as has been the case in parts of India.

Figure 9.2 illustrates three of the five paths, or axes, of rural development, showing the principal stages of progression along each of them. This kind of framework can also be used in the design of surveys for monitoring advances in rural development in selected districts or regions.

While rural families and communities themselves have to play a role in expanding their endowments of all five kinds of capital, outside institutions participate in the process as well. For developing human capital, central government, local government and NGOs all have roles to play. In some countries, NGOs have been the most innovative force in rural education. For strengthening social capital, local governments, NGOs and local associations make the most critical contributions, although national governments can direct some of their support to programs in this area.

For physical infrastructure, central and local governments have the main roles to play, but communities participate as well, often assisted by NGOs. Development of institutional infrastruc-

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COMMUNITY-LEVEL PHYSICAL CAPITAL (INFRASTRUCTURE)

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Long-term usufruct rights to land

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Irrigation, tree crops, livestock and other form of capital

| | The essential advances in each rural community toward which policy should be oriented, before planning other kinds of policy interventions

Figure 9.2 Basic dimensions of rural development: Stages of evolution of the capacity for development through own initiatives ture depends crucially on appropriate national policies, but NGOs sometimes play a major role, as in the case of rural financial institutions. All of the foregoing four kinds of capital contribute vitally to expanding endowments of private physical capital, but in this area the efforts of families, communities and NGOs are also essential.

In the area of social capital, there is little doubt that the priority should be placed on removing gender disparities, on both equity and efficiency grounds. This issue can be addressed at the community level, through programs of education and awareness building and through economic empowerment of women, and through sector policies in the ways indicated in the foregoing chapters. It also can be addressed through national policies and legislation regarding inheritance rights, eligibility for land under agrarian reform, domestic violence, women's health, and related topics.

Such policies and programs can have tangible results, as commented upon in a recent study of gender-oriented women's programs in China, which in any case has had a long history of enlightened national gender policies:

Recent empirical evidence from many countries has repeatedly shown that gender-focused public policy generates substantial social externalities, including improvement of child welfare (e.g. health, nutrition and education attainment) and reduction of gender bias and fertility rates.

. . . when combined with the income effects identified . .. our analysis provides empirical evidence to support the claim that the gender-focused programs that emphasize promoting women's participation in both economic and social community activities can generate significant benefits.. . .

We find support for the view that. . . programs [of empowering rural Chinese women] can substantially increase the household incomes of participants but that some of this comes at the expense of negative income externalities for non-participants. Our results also suggest that the program is extremely successful at increasing participation rates within villages and that the program's income impacts depend sensitively on the ability to achieve such increases. The more successful the program is at increasing participation rates the greater both the positive impact on participants' incomes and the negative impact on non-participants' incomes, with the former substantially greater than the latter. In this sense, in the presence of the program, the gains from participation come from protecting oneself from these negative effects and from buying into the substantial income gains accruing from increased participation rates.

In conclusion, then, our results support the view that public policies geared towards increasing women's economic and social participation can generate substantial economic and social returns.. . . Our results also lend support to the view that the range of gender-focused public policies implemented over the last few decades provides a complementary background, which contributes to the success of effectively implemented gender-focused

programs.92

The IFAD has summarized the arguments in favor of giving priority to education of females in persuasive terms:

There are huge gaps between male and female educational access and literacy levels. These gaps are greater in rural areas, and greatest for the rural poor. Inequity helps cause inefficiency: female schooling does much more at the margin for income, poverty reduction, and child health and nutrition than extra male education. Women's lower adoption of agricultural innovations is due entirely to lower levels of education; at the same level, women farmers are as quick to adopt as men. Extra education raises household income more if it goes to females. Across Indian States in 1957-1991, the responsiveness of poverty to initial female literacy was higher than to any other initial condition. Mothers' education is also associated with better child health in many studies, often holding income constant.93

A framework based on the five paths - the five kinds of capital required for development -would have to be expressed in different concrete terms in each setting, and in a much more detailed form than has been traced out here. In whatever form it is utilized, it provides logical backing for the proposals in a rural development strategy and a way of integrating the disparate pieces of action that would comprise the strategy, so that they are mutually reinforcing. It also offers guidance for establishing investment priorities, on the basis of an assessment of the degree of advance of each community along the five paths.

To put this approach in a broader context, Gustavo Gordillo de Anda has properly stressed the importance of political transparency and a strong institutional framework which reduces the uncertainty associated with economic transactions in rural areas. Uncertainty - about whether

92. David Coady, Xinyi Dai and Limin Wang, 'Community Programs and Women's Participation: The Chinese Experience', Working Paper No. 2622, The World Bank, Washington, DC, USA, June 2001, pp. 22 and 24-25.

an agreed payment will be made, about whether deliveries will be made on time, etc. - is almost a defining characteristic of underdevelopment, and the cost of overcoming it is very high. Gordillo has said:

What is important is to understand that rural development is not only a set of economic policies, but that it also has to take into account the political and social conditions that have been the result of the economic modernization and the democratization of our societies.

. . . the new approach for rural areas requires three central ingredients:

• Provide incentives for opportunities to progress and improve well-being

• Create certainty

• Foster social cohesion [increasing social capital]94

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