Sunday, April 8, 2007

The Roots of Inequality

Lebanon’s cultural and environmental heritage is deeply rooted in its rural society. Our food traditions, our folklore and our landscape are kept alive by small family farmers. As rural people become impoverished and marginalized, they leave their lands, and our culture, society and environment erode. This has tremendous implications: poverty creates despair, which is conducive to political violence. The dissolution of the ties between people and land creates nations of passers-by, countries with employees but without citizen. This is a great part of Lebanon’s problem.

If it’s any consolation, all countries of the Mediterranean basin (and most countries of the world) have experienced the same deruralization phenomenon, coupled with the fragmentation of farm property and the decline of rural society. Countries of the North Mediterranean (Spain, France, Italy…) have developed and implemented policies to deal with the problem, with a certain measure of success. Countries of the South Mediterranean are still struggling with the issue, and their situation appears to be desperate. They have been unable to reduce the number of the rural poor in spite of the adoption of policies that favor agriculture. Why?

Analysts have studied the causes underlying the breakdown of small holder family farming and the resulting impoverishment and migration in many developing nations (see International Commission of the Future of Food and Agriculture). There is general agreement that these can be attributed to a set of interdependent national and international issues. Prominent among them are: poor governmental support services to agriculture, especially to the small holder; insecure land tenure; and the adoption of the neo-liberal economic policies package built around free trade and market fundamentalism. All of these apply unquestionably to Lebanon.

Trade-based agriculture, based on “comparative advantage” and “export-oriented agriculture”, has been Lebanon’s approach to food way before the IMF adopted the approach as part of its structural adjustment package. The founding fathers (mostly bankers and merchants) saw Lebanon as a big trading agency. They fought in parliament for minimal taxation on imports of food and other products, in order to increase the volume of trade and their own profits. Although they looked down at rural people, they were not opposed to farming per se: they invested in silk production, which required the planting of large areas of mulberry trees to replace the traditional food systems. They imported wheat and other foods and sold them to the farmers. And when the “allied” blockade was imposed on Beirut during WWI, and trade routes were cut, tens of thousands of rural poor died from famine and malnutrition because, unlike silk worms, they could not eat mulberry leaves. This caused a massive wave of migration and immigration which heralded the new urban Lebanon. Eventually, the silk trade died, and so did the mountain. Sometime in the 1950’s apple orchards started replacing mulberries as a crop for export to the emerging oil economies. This was successful in the 1960’s and 70’s, until global trade intensified. Today, Lebanese apple growers compete with US apple producers on the Lebanese market!

One would think that food export would be a good way to even out the hopelessly ailing import-export balance of Lebanon, and to inject hard currency into the country. This is only partly true. While the potential impact of food exports on the balance is likely to remain small (the gap is several orders of magnitude wide), there are many disastrous drawbacks to an agricultural strategy based on export. Producing efficiently for export requires a critical mass of assets including land, capital and knowledge that is beyond the vast majority of the small landholders, family farmers. Large-scale, export-oriented agricultural production is built on monocultures, which cause tremendous environmental damage due to the abuse of agrochemicals and to their impact on biodiversity. It is also a major cause of social dislocation, as poor rural people are driven out of farming to become underpaid farm workers who do not benefit from any form of social security, and to whom labor laws do not apply. It favors large, dehumanized agribusinesses at the expense of small farming communities. Export-oriented farming is good for business, but only that of a few people.

Intrinsic to the concept of export-oriented production is the notion of “comparative advantage”. This is something we love to brag about in Lebanon, without really capturing the implications. Due to a combination of environmental, technical and economic reasons, some countries can produce food commodities more competitively than others. The country in question is then encouraged to produce more of this specific commodity for export, while importing basic food commodities produced elsewhere. Syria has standards of living and incomes that are lower than Lebanon. It has mountains, plains, water, cheap labor and state subsidies for agriculture. It is mostly a rural nation. Syria therefore has serious comparative advantages over Lebanon. In principle, we should not complain about the “dumping” of food products from Syria, because we practice a liberal trade policy. Cheap imports from Syria (or Jordan) reduce the cost of food, which is, in theory, good for the consumer. In fact, it turns out that Syria is not one of our major food import partners. It is however one of our main food export partners (we export to and through Syria). Our 3 main food import partners are: The US, France and Germany (FAO data, country profiles). They are the countries that have the most comparative advantage over us. They sell us most of the food we eat.

Farmers in industrialized countries such as our major import partners acquire their comparative advantage through state subsidies. The EU and the US agricultural subsidies are widely recognized as the biggest source of distortion to the world food trade; resulting in the catastrophic collapse of smallholder farming in developing countries (Oxfam has a long standing campaign on the issue). For example, in 2005, the EU paid €300m a year to tomato processors mainly in Greece, Italy, Spain and Portugal, representing 65% of the value of the entire crop. This enabled them to be the world’s leading exporters of tomato paste. The EU also subsidized its fruit-juice processing industry, mainly in Italy and Spain, at a rate of more than 300%, or €250m a year. Growers from Argentina, Brazil, Costa Rica and South Africa could have earned $40m a year more if the EU removed its subsidies and the world juice price rose by just 5% (Oxfam data).

Yet, both governmental policies (when they exist) and international aid to developing countries, including aid to Lebanon, continue to base their projects on the production of commodities for export based on “comparative advantage”, while promoting imports from the industrialized countries. Recently, the Lebanese agricultural private sector (represented by the Chamber of Commerce, Industry and Agriculture, to which most small farmers do not have access), together with the Ministry of Agriculture agreed on a six points program to revive agriculture. Each one of these points is about improving exports, with not a single mention of the small holder family farmer. Needless to say, the large agribusiness operators are thrilled!

Civil society activists in the Industrialized North are constantly lobbying for a fairer trade environment for the developing nations. The final declaration of the Euromed Civil Forum in 2006, included a strong call to give the Mediterranean Partner Countries (Lebanon included) the right to protect their food security, instead of insisting on “reciprocity” in on-going and future trade negotiations. Meanwhile, we in the developing nations enter into “reciprocal” trade agreements that cannot be advantageous to us. Take the European Partnership Agreement, which Lebanon signed 5 years ago. The agreement opens up our markets after a grace period of 5 years to food products from the EU, with taxes not exceeding 5%, while the EU opens its markets as soon as the agreement is signed (reciprocity). With a small proviso: Lebanese products have to abide by EU quality standards and to work around Brussels’s bureaucracy. No small producer can satisfy these requirements! But wait, there is worse: the EU is not one of our main food export partner, Saudi Arabia and the Gulf are. The EU is however our second most important food import partner! So we have agreed to open our markets to countries from which we already import food by the billions. In return, they have agreed to open their markets to us, a country that does not, and will not easily, export to them. That is a sweetheart deal! No wonder they gave us 10 million Euros to “improve the sector” in partnership with the Chamber of Commerce, Industry and Agriculture! They’ll get their money back in one week, and the large Lebanese agribusiness companies will be able to increase their wealth. Meanwhile, the small holder farmers will continue to get poorer because these policies do not target them directly and effectively.

Herein lies the great paradox of agriculture, farming and rural society: support to agriculture as an economic sector via market-fundamentalist policies, without distinguishing between poor and rich can increase the returns from the sector, but it will creates more inequalities. As a matter of fact, research (by the World Bank!) has shown that in countries where land is distributed unequally (as in Lebanon), policies to increase agricultural income can cause more inequality in income distribution, if the poor are not adequately targeted (Adams, 1999). This is attributed to the fact that inadequate land distribution pushes the poor out of the agricultural sector and into the non-farm sector, and leaves the rich to benefit from sectoral support. Indeed, the beneficiaries of such policies are often big landowners producing crops aimed at mass marketing and for export. They are those who have most benefited from IDAL’s Export-Plus program and the Kafalat government supported loan programs. In Lebanon, we use the taxes from the poor to subsidize the rich. No wonder the poor are upset!

This article was previously posted on Ms Levantine.

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