Poverty, Policy, and Fanaticism

My admiration grows for the Quixotic Ones as Ian Welsh gets it almost exactly right on agricultural and trade advice given to less developed countries:

Tilting at Windmills - Agricultural Commoditization: And what the Western economists tell you is this - "you sir, have a comparative advantage in certain cash crops." It doesn't matter what those are - they could be bananas, coffee, oranges, sugar or a number of others.

But theres a problem with cash crops - with very few exceptions you can't produce large quantities of them with small, subsistence or near subsistence farms. You need larger farms with capital intensive investment. Especially if you want to take advantage of western high yield agricultural techniques. That means kicking those farmers off their land and since the new techniques need many less people, most of them will have to run to the cities.

So - you're not a complete idiot. You ask, "how am I going to feed all those people? How am I going to find them jobs?" And your advisors say, "you have a comparative advantage in these forms of agriculture. Although you won't be producing enough food, you'll be able to import enough from other countries. In fact, based on current prices of the commodities, you'll make enough money to reinvest in your economy, grow it, and give some of the displaced farmers new jobs."

...

Third - the net loss to the economy is more than you gain, in almost all cases. Oh sure, you've got that coveted hard currency, but you've lost net jobs, often most are never recovered. The new work produces very little in multiplier effect - the equipment isn't bought in country, the food isn't sold in country, it isn't shipped by companies who have most of their employees in country, the fertilizer probably comes from overseas and so do the seeds. Any improvements to the land are done at the instruction of foreigners, so the best jobs are often not for locals.

In the meantime you've destroyed the livelihood not only of all the farmers, but the middlemen who distributed the food, those who sold the food, those who sold goods to the farmers and the local villages which depended on trade from the local farmers.

Ian's only gotten better with time (and I'm not just saying this to return his compliment in his comments section a few days ago), but I have to quibble with this:

Fourth - the urban poor become a huge source of political instability and a drain on your cities. In many cases the slums that ring third world cities are as large or larger than the city proper and suffer from endemic violence, disease and malnutrition. And they still breed as fast as they ever did - but now they can't really support their children. Without any chance of a good life in this world many turn to religion, in which they find their salvation and the religion many of them turn to is fundamentalist Islam and while they don't become terrorists they do form a support network for terrorism.

I'm really not convinced that Muslim fanatics have a support network that is mostly explained by poverty. To me, this is a cop out.  And I'm not just saying this in the conventional, mainstream way: to presume that the only valid grievances are strictly poverty, and to deny that there is an underlying grievance in the Muslim world with nontrivial justification (even as it--obligatory disclaimer--doesn't justify random violence). 

The support network of Muslim fanatics doesn't come from the poor because they are poor.  It comes from the oppressed.  The oppressed often act in ways that are immoral, but that doesn't make them any less oppressed.  Under the right conditions, a highly developed country can be quite brutal.  A seeming democracy, a sham.

This doesn't detract from Ian's main point.  But I dislike seeing this frequent misconception repeated.