'Credibility revolution' can better farmers' lot
The Nobel Prize for Economics this year reflects a shift in global economic thinking towards a more pragmatic and realistic approach to achieve growth.
The Nobel Prize for Economics this year reflects a shift in global economic thinking towards a more pragmatic and realistic approach to achieve growth. Knowing the obscene wealth equality the world is witnessing, where free markets have helped accumulate wealth in the hands of a few, the award this year will hopefully encourage economists to be more pragmatic and not to be swayed blindly by neo-classic theories.
What makes the award this year stand out is evident from the citation, which says: 'This year's Laureates have provided us with new insights about the labour market and shown what conclusions about cause and effect can be drawn from natural experiments. Their approach has spread to other fields and revolutionised empirical research.' Not only for the labour markets, the approach is also vital for the future of global agriculture and the transformation in food systems the world is expecting in the years ahead keeping the SDGs in focus.
We will try to understand how the 'credibility revolution' in empirical economics, based on 'natural experiments' can play a significant role in undoing the great harm supply demand principles have done to farm livelihoods everywhere in the world. After all, if markets were so good, and as we are repeatedly told that supply demand will lead to price discovery, why is that farmers are faced with a terrible agrarian distress, and are sometimes left with no other option but to take the fatal route? Perhaps the Royal Swedish Academy of Sciences, which awards the Nobel for economics, should now focus on the evidences available in farming to analyse the causal relationships, not forgetting that nearly half the world's population is directly and indirectly involved with agriculture.
This year's Nobel Prize for Economics, which has gone to three US-based economists – Prof David Card of the University of California, Joshua D Angrist of MIT and Guido W Imbens of Stanford University – explain the importance of 'natural experiments' over mathematical experiments, which can be easily manipulated. While Card, along with Kruegar, established that higher labour wages leads to higher employment, countering the market economy argument which emphasises on keeping wages low for increasing employment; whereas Angrist and Imbens demonstrated how investment in school education can help in higher incomes for students.
Knowing the pitfalls of applying randomised trials and mathematical experiments based on various models and formulae, which can be easily manoeuvred to match the end result the researcher wants, there is a growing realisation for the need to move instead towards evidence-based research.
Now let's try to see how realistic projections based on clearly available evidence can help transform global agriculture. There is no need for any randomised trials, and nor is there any need for applying any mathematical models to know how farmers have been at the receiving end all these decades.
The assumption that less the number of people in agriculture means higher farm income, and the bigger the size of farm means a higher bargaining power to achieve a higher price has fallen flat. In America, ever since Richard Nixon's agricultural secretary Earl Butz had made that infamous statement asking farmer to 'get big or get out' it hasn't helped farmers get a higher income. Nor has the large farm size led to a higher price discovery for farmers.
Despite less than 2 per cent of the American population remaining in agriculture, the median farm income has been in the negative for over a decade. In 2020, American farmers were saddled with a bankruptcy of $425 billion. The rate of suicide in rural areas is higher by 45 per cent compared to the urban centres. The average farm size has risen to 444 acres and still the farm incomes are very low. In Europe, the situation is no better. Like in US, massive agricultural subsidy support is required year after year to sustain the farming population. Prices have either remained static or declined over the years thereby acerbating agrarian distress. Farmers have increasingly abandoned agriculture and migrated to the cities looking for other jobs.
Even in far away Australia, where the average farm size is 4,331 hectares, nearly 25 per cent of the farms have closed down in 30 years. The rate of suicide among males in agriculture is twice the other sections of the society. So is the case with farm workers.
For past several years, I have consistently talked of the severe farm distress that prevails in the rich and developed countries. The evidence is all there. The international trade policies are designed to help the big multinational companies. Whether it is the World Bank/IMF or the World Economic Forum the same agribusiness design is now being pushed onto the developing countries, with the same flawed promise of increasing profitability for farmers. It didn't happen in the developed world, and it is not going to happen either in the developing countries. A London School of Economics study shows the same market reforms in agriculture failed to help farm incomes prop up for small producers in Kenya. But with policy planning, academia and media in the clutches of big business, agriculture so far has remained untouched by the 'credibility revolution.'
(The author is a noted food policy analyst and an expert on issues related to the agriculture sector. He writes on food, agriculture and hunger)