From poverty to power - Oxfam-Québec

3 POVERTY AND WEALTH LIVING OFF THE LANDamong recalcitrant aid donors, and especially at the negotiating tableswhere trade and investment agreements are hammered out. All suchaccords curb the scope for state intervention in the economy. Tradenegotiations must catch up with the new thinking on agriculture andthe role of the state, or they will risk binding countries irreversiblyinto agreements that could undermine their long-term development(see Part 5).The answer to rural poverty and inequality is not to give up on thestate, but to reform and enhance its support for agriculture and smallfarmers, especially in the early stages of development, as well as to curbthe proclivity of governments and large landowners for intervening inways that undermine poor farmers. Studies of successful agriculturaltake-offs show that the process of transformation must be ‘kick-started’with the assistance of government interventions. In India, for example,subsidies on credit, fertiliser, and seeds were effective, as were extensionservices such as training in new technologies and techniques, statespending on irrigation and roads, and steps to curb the volatility ofprices paid to farmers. 75 By reducing risks to producers, such measuresencouraged them to invest in their farms.Malaysia’s transformation from agricultural economy to manufacturingexporter in the space of three decades was built on effectivestate intervention in agriculture. This pursued twin objectives: tostabilise rice prices and improve the incomes of the country’s millionsof small rice farmers, and to generate revenues from exports such asrubber and palm oil. For rice, the government provided input subsidies,particularly for fertilisers, and made large investments in irrigationand land development, especially during the early years. It also guaranteeda floor price for producers, in contrast with other countries thatsqueezed rural producers in order to keep prices low for urban workers.Outputs and yields responded by growing rapidly during the 1970s,reducing poverty and the risk of inter-ethnic conflict, while exporttaxes helped to fund the country’s industrialisation. 76In recent years, Malawi has shown what state action can achieve interms of poverty reduction, if not yet in terms of broader economictake-off. After a series of poor harvests left almost five millionMalawians facing food shortages, the government defied pressurefrom the country’s aid donors and introduced subsidies on seeds and141