It takes a village to transform a farmer’s life
The Afar story
Two years or so ago, I had to coordinate farm household surveys in Ethiopia’s Awash river basin. The survey’s thrust was to get a better understanding of the economic returns of irrigation water in the basin. The survey covered irrigation hotspots in the basin, spanning from Akaki, Addis Ababa’s outskirt, to Asaita, near lake Abi where Awash river ends. Water gets scarcer as one moves from Addis Ababa to Asaita because Asaita, which is downstream, receives little rainfall. Besides, recent times have witnessed a surge in the number of irrigation projects upstream, diminishing the Awash river’s flow downstream.
Moving toward Asaita, one would thus expect to observe farmers growing less water-intensive crops. This is true to some extent, but not to the extent that I was hoping to see. In Asaita, for example, the major crop grown through irrigation is maize, which demands more water than the area can afford. Here, when farmers are asked about the major issues that they wrestle with, crop failure triggered by water scarcity stands out. So, why are not these farmers switching to a less-water-intensive crop such as sorghum?
I asked the above question to one of the farmers in the area. He responded, “If I only start growing sorghum, birds would have no other farm to feast but mine.” As a result, he added, “switching to sorghum would make me worse off than continuing producing maize.” It is important to note that although birds could also attack maize, their adverse effect on a single maize farm is likely to be minimal since most farmers in the area grow maize and share the burden of feeding the birds collectively.
Farmers in this farming system appear to be trapped in a situation where they cannot shift to a crop that could make all of them better off. So, the question is what it takes to leapfrog this farming system into a more productive one that makes the best use of the available resources sustainably.
Unfettered markets and coordination failure
The Neoclassical Economics (NE) based development thinking that dominated in the 80s and 90s puts primacy on markets to coordinate seemingly disorganized agents’ actions harmoniously without the government’s interventions. NE relegates the role of government to mainly maintaining law and order and protecting private property. According to its proponents, an unfettered market then does its miracle by unleashing entrepreneurial spirit.
The above Afar story is a typical example of what economists call coordination failure. Coordination failure arises when a viable business opportunity is left unseized for the sole reason that the business case for the first movers does not exist. What does this mean in the Afar case? It means that there is no incentive for the first few farmers to switch to sorghum. However, once a few farmers engage in sorghum production, it will be a profitable venture for fellow farmers to follow suit.
The question is now whether a market will solve the coordination failure that holds farmers back from moving into a more productive and sustainable farming system. According to the proponents of NE, the answer is YES, and the following is how they reckon how a market system will work out to solve the coordination failure problem. Consider that birds hinder the move toward sorghum-based farming system from a predominantly maize-based farming system. Although farmers fail to coordinate themselves to move toward a more productive farming system, entrepreneurs will emerge to turn this coordination problem into a business opportunity. Entrepreneurs with the aid of experts will, for example, innovate bird-scary drones that could check birds from being a source of coordination failure. In doing so, entrepreneurs will facilitate the move toward a predominantly sorghum-based farming system—a more productive one—while incubating new businesses.
But coordination failure will not be easily solved by the market’s sole power, as the proponents of NE often claim. For starters, businesses that would innovate bird-scary drones may fail to incubate since they might also be trapped in a similar coordination failure type. Moreover, there might be multiple sources of coordination failure, including lack of value chains that could hinder the emergence of more productive farming systems.
Even if a market system solves the coordination problem eventually, the journey will be a long haul. Awaiting the market systems per se solve such problems is tantamount to condone the human suffering and possibly environmental degradation to continue unabated until such time arrives. Thus, to tackle coordination failure problems in the shortest possible time, governments should step in and create favorable conditions for the market system to take its course.
Conclusion
I used the Afar story as an example to showcase how coordination failure hinders the development of more productive farming systems in Ethiopia. But the problem is pervasive in every sector of our economy. Moreover, the problem is dynamic: When an existing coordination failure is solved, a new one emerges. In fact, the process of economic development can be somehow thought of as continuously addressing coordination failures. A market system is necessary but not sufficient for addressing coordination failures and bringing about economic development. A government’s interventions are also required to expedite the process by which a market system solves coordination failures.
Ethiopia’s government has espoused a developmental state model that emphasizes the need for an active government for economic development, albeit with rhetoric changes in recent times. The government, for example, has followed an active industrial policy. It has identified potential subsectors in the industry sector. And it has provided generous support for the first movers in these subsectors, aiming at addressing coordination failures to realize the potentials of these subsectors. Similarly, the government has recently promoted cluster farming for a few crops where farmers in adjacent areas are encouraged to produce similar crops using similar input uses. Promoting cluster farming is an interesting intervention that may help coordinate fellow farmers and other actors in the value chain. However, the effectiveness of cluster farming is yet to be seen.
Like in the Afar case, most farmers in Ethiopia today appear to be stuck in less-than-optimal farming systems, constraining them to adjust to new opportunities and challenges. Individual farmers pursuing their self-interests may not lead the farming community into more productive farming systems in a reasonable short time. Nor could other businesses immediately help airlift farmers into more productive farming systems by addressing coordination failures, as often assumed. Thus, the government’s interventions are needed to speed up solving coordination failures in Ethiopian agriculture. The interventions may take different forms. One option could be to incentivize a few brave farmers to break the status quo and create the business case for fellow farmers. Alternatively, the government could support businesses to develop social and technological innovations that can deal with coordination failures inflicting the agriculture sector.
