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1.1 Mega-Trends Impacting the Rural Economy

Liberalization of Trade in Agricultural Crops

Along with structural adjustment and reforms that were conducted in the 1980s and 90s, many developing countries have liberalized their economies in different dimensions. In particular, their national agricultural markets as well as international trade in agricultural produce – both in food crops such as cereals and in cash or export crops such as coffee, cocoa, and cotton – became less controlled.

After decades of state monopoly for trading and marketing crops in most countries, this change first led to disarray at the level of small farmers and farmers' organizations, followed a few years later by a boom in new private actors. This filled the gap left by the closing down/privatization of many governmental structures.

The private actors involved are of all sizes and intervene at every possible segment of the commodity chain. Some are large firms, national or international, that bided for the acquisition of the state-owned firms. Some are large or medium trade companies. But what was the most remarkable was the number of micro and small entrepreneurs who took this liberalization as an opportunity to set up businesses in agricultural value chains. This is the starting point for new entrepreneurial behavior in the rural population in every local economy.

The result of the liberalization of the economy could be seen in the growth of GDP that has taken place in the vast majority of developing countries during the last decades. Countries that have applied deregulation reforms have performed significantly better than others. Reformers among African states have delivered a GDP growth in average two percentage points higher in the 2000 to 2008 period, compared to the group of non-reformers.[1]

However, this liberalization has not necessarily resulted in a rise in prices of crops to local producers and, therefore, in income at the level of rural households, since it has been also combined with acceleration in globalization of trade and in unfair competition. Many small producers who are still lagging in a subsistence economy have not found the way into the new market environment.

Table 1, published by the Word Trade Organization (WTO), shows a correlation between the growth rate of merchandise exports and of GDP.

Table 1. Merchandise Exports and GDP by Region 2007–2010

Annual % change

2007

2008

2009

2010a

Volume of merchandise exports

World

6.5

2.2

–12.2

13.5

Developed economies

4.8

0.8

–15.3

11.5

Developing economies and

9.0

3.8

–7.8

16.5

Real GDP at market exchange rates (2005)

World

3.8

1.6

–2.2

3.0

Developed economies

2.6

0.4

–3.5

2.1

Developing economies and

8.0

5.7

2.0

5.9

a Projections

Source: WTO Secretariat.

After the 2008–2009 crisis, 2010 is expected to be an exceptional year in terms of the growth rate for trade; developing economies are counting on exports (16.5 percent) to pursue strong growth in GDP (5.9 percent).

In a decade or so, the GDP per capita of developing countries has doubled.[2]

Demography and the Place of the Youth

Many analysts have been warning decision-makers about the phenomenon of everincreasing populations of young people who are going to represent more than 60 percent of the population in the developing countries.[3]

The youth are better educated than in previous generations and, above all, more mobile. They have been seasonal migrants, going to search for work in neighboring towns and cities, in wealthier regions within the country, in neighboring countries, and even across the oceans. This mobility has served as an eye opener for other ways of life, behaviors, and opportunities. Some who come from rural areas choose afterwards to settle in towns and cities. Others may go back to their villages to have a family but still aim at a better life than that of their parents. They bring new attitudes to rural areas. This includes innovations in production, commercialization, housing, and new qualities in relations with other members of the family and the community, such as the use of financial services like savings and credit in order to support investment.

Without over-generalizing on such a wide and crucial issue, one could observe that the rural youth in developing countries tend to be more individualistic. They are also more entrepreneurial in farming, like in the choice of crops to grow, in integration in value chains, in business links with others, be it fellow producers or buyers or bankers.

Girls and young female adults may be a little bit less determined to face the criticism of the family and the community; however, we also see a lot of them traveling to look for work. When they have the chance to escape from burdensome social structures, they will not go back to the village.

Migration as a Way of Life and a Capital Building Strategy

Migration for economic purpose has been there since memorial time. The Chinese and Indian diaspora, for instance, can be found everywhere in the world and those who have succeeded abroad are now investing back home, both in highly qualified human resource and in capital, bridging markets, and cultures.

With the influence of the media and the facility of transport, generations of youth from developing countries are migrating abroad to find jobs, to earn money and send remittances back home: But they also experience a new life, probably with more freedom. It has become a way of life, even for the poor in developing countries.

Remittances from migrant workers represent billions of dollars or euros and account for a significant part of GDP of many developing countries. Migrants tend to come from poor and remote villages in rural regions. Hence, when they send money home, it is to families still living there. Remittances have become the main source of income in many rural regions in developing and transition countries and also very often the main source of investment in individual and collective infrastructure, for social and for productive purposes. For instance, in a region of Mali, such as Kayes, migrants have financed clinics, schools, warehouses, and small dams for irrigation, as well as health insurance systems.[4] They are the best depositors in microfinance institutions (MFIs).

Studies that the author completed in the early 1990s on “life stories” of small entrepreneurs in developing countries (Asia and Africa) show that the vast majority has been able to accumulate their startup capital during their years of work abroad, where the pressure of family, relatives, and the community is reduced by distance and therefore allows for them to save[5]. It is often also an opportunity to observe the management of modern organizations, to get acquainted with banking services, and to learn skills. Micro, small, and medium-sized enterprises (MSMEs) created by these former migrants tend to be better run, grow faster, create jobs, and ultimately are more sustainable. For instance, in the Philippines the majority of small and medium enterprises (SMEs) in secondary towns, financed by the MFIs, are created by migrant workers who have stayed several years in Saudi Arabia or other countries in the Middle East. Far from being a problem, migration is being seen by local stakeholders as an asset for economic development of developing countries and of poor rural areas.

Awareness on Climate Change and New Opportunities

The awareness of the impact of climate change on local production and economy is rather recent, at all levels. So is the awareness of what causes the deterioration of the environment and the responsibility that everyone bears to preserve and protect the environment, starting at the local level. Despite the negative effects on rural communities that climate change is likely to produce, the social and business reaction on climate change may also carry some chances. It needs at least to be taken into account because of its effect on rural economies.

It is not rare, for example, to see communities organizing themselves to prevent against desertification by planting trees, and to try to maintain arable land by constructing new dams or flood-control retention basins. A lot more solar energypowered devices can be found in homes and offices, as well as in schools, health centers, pumps, and market places. Solar energy is being considered as an industry. Used water and waste garbage is retreated; recycling is seen as a potential business for firms from the private sector.

  • [1] See McKinsey Global Institute (MGI), “Lions on the move: the progress and potential of African economies”, MGI Research Report (June 2010).
  • [2] See IMF, “The World Economic Outlook Database”, IMF publication (October 2009).
  • [3] See David Lahm, “The Demography of Youth in Developing Countries and its Economic Implications”, World Bank Policy Research Working Paper, Vol. 4022 (October 2006).
  • [4] See AfDB and French Ministry of Foreign Affairs, "Le transfert de fonds par les travailleurs migrants au centre des efforts de développements en Afrique”, (2008).
  • [5] See Renée Chao-Béroff, “Histoires de vie des petits entrepreneurs en Asie et en Afrique”, Fondation Charles Leopold Mayer (2004).
 
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