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Arne Haselbach (1986) [1]

Development Strategies: Challenging Assumptions [2]

(>21) Having achieved political independence, developing countries began systematically to pursue development efforts. A few decades have since passed, yet hardly anywhere have the high expectations at the time of independence been fulfilled.

These expectations, and development strategies, were based on a number of assumptions - assumptions about time sequences in economic development, about economic mechanisms and their effects, and about what must be done and what would follow automatically.

Might it, then, not be useful to take a close look at some of the more basic implicit assumptions on which the development strategies pursued were based?

Four of these implicit assumptions were:

  1. migration to cities is a normal and harmless by-product of development;
  2. industry will absorb people made redundant in agriculture;
  3. imports of Northern technology will lead to international competitiveness, so that production for export will allow most needs to be met by imports; and
  4. increasing production is the alpha and omega of development.

Have these assumptions, which were based largely on Northern economic theory, stood the test of time? And how will the validity of these assumptions be affected by the structural and technological changes presently taking place in the world?

Let us consider these assumptions in relation to the African crisis, to recent economic history and to present trends.

 

Is rapid urbanization a harmless by-product of development?

The rate at which African cities are growing at present is in the order of seven to ten per cent a year, with Nairobi leading at about 13 per cent per annum. In fact, Africa's urbanization is more rapid than that of any other region.

Here, the assumption was that migration from the rural areas to the big cities is a normal, harmless, and - with some delay - even positive process, leading to increased contributions to the national economy and, for the individual migrants, to more gainful employment, to availability to them of better facilities and to their participation in other positive aspects of life.

(>22) In practice, however, this process of over-concentration of people in a limited number of places has led to the appearance of vast shantytowns, with hunger, poor health conditions and growing crime rates. Neither city administrations nor national governments are in a position to provide decent shelter or most of the other facilities one expects to be available in cities.

Strictly speaking, the ongoing urban explosion is not a process of urbanization. Migrants are not becoming integrated in a normal urban way of life. What we are witnessing is rather a process of 'quasi-ruralization' of cities, where survival is based on informal production and exchange systems with even less resources than in the countryside and on subsidized food prices - at insupportable human and financial cost. At the same time, the countryside suffers from losing many people at their most productive age, leaving important tasks undone, households headed by women a widespread phenomenon, etc. Contrary to the above-mentioned assumption, mass migration to the cities is inhuman and harmful, and is a by-product not of development, but of a distortion of the latter.

Since the process is one of a 'quasi-ruralization' of the cities, since total costs of creating the basic facilities for the migrants in towns, including shelter, are higher than in the countryside, and since there are more productive resources available in the countryside, why, then, not redirect the enormous amounts of money which have to be spent on even the most rudimentary urban facilities and on food subsidies towards development of the rural areas?

 

Will industry absorb surplus labour?

Has industry absorbed population growth and people made redundant in agriculture and other traditional occupations? And will it do so in future?

According to the Economic Commission for Africa, in 1980 the estimated share of the total labour force in developing Africa working in industry did not exceed 15 per cent of the active population.

The overall trend in world development of technology for industry is towards machinery producing ever more output with less and less labour. It can be safely assumed that the breakthroughs in automation, robotics and information technology will lead to a further intensification of this trend. In consequence, the share of the potentially active population working in industry is likely to decrease in the highly industrialized societies. Any economy, and especially economics as open as the African ones, will find it difficult to halt the trend at their doorsteps.

Clearly, industrialization is important and industry will absorb some additional manpower in the future. But data from UNIDO show that more than 50 per cent - and often more than 75 per cent or even 100 per cent - of the intermediate products used as inputs in present African industrial production come from abroad, excessively limiting the manpower needs of manufacturing. Even if this is corrected, as it must be, population growth rates and technological trends will limit the absorptive capacity of industry.

Thus, the assumption that industry will be able to absorb most of the additions to the labour market cannot be upheld.

 

Will export-led development strategies pay for imports?

Some countries have based their strategies on the assumption that imports of Northern technology would lead to international competitiveness in industry. If one concentrated a large part of the development effort on production for export, both in industry and in agriculture, the proceeds would allow most of the inputs required for production and consumption to be imported.

Lecturing at the Vienna Institute for Development, Professor Abebayo Adedeji, Executive Secretary of the Economic Commission for Africa, recently formulated the consequences as follows:

"Africans are today producing what they do not consume and consuming what they do not produce. Africa is presently exporting raw materials at low and declining prices in order to be able to import semi-finished and finished products at high and rising prices."

Recent economic history shows that economic growth in Europe after World War II was not primarily due to scientific and technological breakthroughs, nor even to the availability of cheap energy. Of course, all that was important. But the real key to growth was a constellation of social forces, of entrepreneurs and of trade (>23) unions, which brought about the necessary investment and - simultaneously - sufficient purchasing power to buy the goods produced. In the North, even in the smaller countries, production to supply national purchasing power and to satisfy domestic demand forms the backbone of the national economics.

Of course, exports, production for export and income from export, are important. But - with the exception of a very limited number of countries - exports cannot form the backbone of the economy.

The backbone of any economy consists of nationally integrated resource-production-consumption chains. Where the resources-production-consumption chain of a given product is fully within a country, so too will be both value added and multiplier effects. Strengthening the backbone of the economy means adding such chains, one by one, by concentrating on producing goods for national consumption on the basis of locally available human, agricultural and other material resources. That is what reducing economic dependence is all about. Exports must be an addition to, not a replacement for nationally integrated economic circuits.

 

Is increasing production a sufficient focus of development efforts ?

Increasing production has been seen as the main focus of development. "If only we succeed in producing more, the standard of living of our people will improve." Today this remains the basis of most national development plans, of most sectoral development strategies and of most development projects.

But has this assumption really stood the test of time? Why do millions of people still go hungry? Why is it that so many people have to fight for survival with incomes way below the absolute poverty line?

Increased production of goods and services is certainly a necessary condition for improving living standards and satisfying people's needs. But it is not a sufficient one.

Decades of development efforts have proved that increasing production in large-scale agricultural enterprises or capital-intensive industry, with less and less labour, does not create the income needed to buy the additional goods produced. In consequence, production also lags, and the needs of the population remain unmet.

Thinking of development only in terms of production implicitly assumes that, somehow, people will have access to the goods thus produced. It was this implicit assumption that proved a fallacy. Thinking of development only in terms of the supply side, i.e. in terms of production, has made us forget that a person's living standards will only improve if some of the additional production becomes available to him.

The one-sided focus on production has made us forget that one has to ensure access to goods and services, that one has to think of the demand side, i.e. in terms of the income - in cash or in kind - of those whose living standards one wants to improve.

Thus, the assumption that "development is increasing production" is only a half-truth. The other half of the truth should be "development is increasing the income of the people". Development strategies will reach their objectives only if both these objectives are consciously pursued, at the same time and with equal vigour.

There will not be much objection to a general statement of this kind. But such a statement is not enough. What is needed is the drawing of consequences, and a rethinking of development strategies and actions with this double objective in mind. And this, in practice, means a considerable re-orientation. For example, national agricultural strategies and food plans presently focus on production - if one wants to prevent hunger and malnutrition equal stress must be put on improving opportunities for the people affected to provide themselves with food or to generate income in cash.

 

Development by and for the people

The facts speak for themselves: there are more than 230m smallholders in Africa. Smallholders are the backbone of the African economy. They are the major sources of food supply, of export earnings (in the non-mineral exporting countries) and of raw materials for domestic industry.

Without regular increases in the production and income of smallholders in the rural areas one cannot conceive of stable recovery and development in African countries - either in the agricultural sector or in the overall economy.

(>33) But smallholders are often very poor. World Bank data show that absolute poverty per capita income levels in rural areas vary widely across countries in each region - in sub-Saharan Africa between $49 and $253. They also show a wide variation in the percentage of the rural population living on less than the absolute poverty income - in sub-Saharan Africa, from a low of 12 per cent in Mauritius to a high of 85 per cent in Burundi and Malawi.

Of all people living in rural areas in ten of the 13 sub-Saharan countries for which data are available, 50 per cent or more have per capita incomes below the absolute poverty line.

If rapid urbanization is costly and under-productive, if industry will be unable to absorb the people made redundant because of present agricultural policies, if Africa is presently not producing what the population consumes owing to over-stressing production for export and if, despite their poverty, the smallholders are the backbone of the African economy, an IFAD-type policy must become by far the most important component of African development strategies.

Concentrating on development in the rural areas, focusing on the rural poor and helping to make Africa's 230m smallholders more productive, thus increasing their income in cash or in kind, holds the key to a prosperous future for Africa.

Following an IFAD-type strategy will do more to bring about stable recovery and development in Africa than development strategies based on assumptions which have been found wanting.

 

References

Adebayo Adedeji, »The African Economic Crisis and the International Community«, Lecture at the Vienna Institute for Development. Vienna, August 1st, 1985.

Lawrence S. Eagleburger and Donald F. McHenry, (Co-Chairmen), »Compact for African Development«, Report of the Committee on African Strategies. Washington DC, December 1985.

Economic Commission for Africa, »Survey of Economic and Social Conditions in Africa, 1983-84«, Addis Ababa, April 1985.

International Fund for Agricultural Development, »Annual Report«, Rome, various years.

UNIDO, »Industrial Development - Trends and Policy Options«, Vienna, May 1985.

 

Notes

[1] At the time of writing, Dr. Arne Haselbach was Director of the Vienna Institute for Development.

[2] The following article was published as: Arne Haselbach »Development strategies: challenging assumptions«, in: OPEC Bulletin, Vol. XVII, No 2, March 1986, pp. 21-33..