Markets and States in Tropical Africa: The Political Basis of Agricultural Policies: With a New Preface

This book examines a simple and important puzzle: why do African governments choose such terrible economic policies? These policies are especially bad for agriculture, even though most Africans are farmers. The answer is simple: African governments systematically favor urban interests. That means that they provide cheap food for urban workers, which means cheap labor for urban businesses (capital). These groups are outnumbered, but they live in the cities. This means that labor and capital can mobilize politically against the government in the capital city, while farmers - - who are scattered all over a large countryside with poor transportation links - - find it very difficult to pressure the government. Bates' basic claim has much to recommend it. It is simple, yet it served as a productive research agenda for other studies - - such as Michael Lofchie's comparison of Kenya and Tanzania, among others. It is no wonder that this book made Bates' reputation, and was a seminal contribution to political economy in its day. Its simplicity also makes the argument incomplete. Though he does discuss colonial legacies, Bates doesn't consider the wider international context. African countries would find it difficult to pursue pro-farmer policies because the rich world, especially in Europe and Japan, closes its markets to many African food products. Certainly this fact deserves to play an important role when we consider the poor choices that African governments make.

The decolonization of Africa was espoused by two ideals of the African people: political independence and economic development. The African nationalists attributed their economic backwardness to their colonial heritage and believed that `independence' would pave the way to prosperity. Yet facing the dilemmas of economic development and the limitations of the international system, they eventually ended up with inefficient industrial firms, impoverished peasantry, and increased economic inequality. Robert Bates' Markets and States in Tropical Africa analyzes the reasons for and the mechanism of state intervention in market in African states. Like every other country who has attempted to develop so far, independent African countries too faced the dilemmas of economic development, namely capital accumulation and market creation. The economies of Africa have been overwhelmingly rural in nature and the governing elites in Africa aimed to change this situation by through industrialization. The scarcity of capital led national elites to extract resources from agriculture and channel them into manufacture and industry. What is important here, as Bates emphasize, is that all nations seeking to industrialize have done this: "The African policies are thus notable not as exceptions but as examples of a larger class," (p. 119). The forms of economic manipulation were compatible with the prevailing economic doctrines: industry is the engine of growth, savings come from the profits of industry, rural sector should be squeezed for development, etc. (p. 97). The African governments had both economic and political incentives to channel resources from the rural agricultural sector to the urban industrial enterprises. On the one side they regarded this as necessary for the industrialization and economic development of their countries; on the other side, "the politicization of the electorate" in the nationalist era pushed the governing elite to follow clientalist policies to maintain their political status. As Bates put is, the resources allocated through governmental programs have been channeled to those "whose support is politically useful or economically rewarding to the state - that is, to members of the elite," (p. 56). As for the instruments of state intervention in the market, African governments mostly exploited taxes, tariffs, and subsidies to transfer resources from rural areas to urban ones. Government in Africa subsidized fertilizers, seeds, mechanical equipments, land, and credit for commercial farming (p. 50). The taxes collected from the rural areas constituted the bulk of these subsidies given to the urban and rural elites. Also, to promote industrial development, African governments constructed protective barriers between the world and domestic markets which sheltered local industries from foreign competition (p. 66). Apparently, the peasantry has been the victim of both policies. The history of African economic deve

In this work, Bates moves away from dependency theory in explaining the financial discrepancies between the Center and Periphery. Rather than concentrating on external catalysts to stalled development, Bates rational-actor model concentrates on the internal problems facing African development, particularly the pursuit of interests on the part of political and urban elites. Much of Africa is facing an agricultural crisis. Although generally populated by small farmers, many nations in Africa face food shortages. Bates argues that these crises are the result of inefficient policies (which intervene in, and distort markets) implemented by political and economic elites. The question becomes, why are these policies being pursued? Bates explains the implementation of these inefficient agricultural policies through a rational choice model. Bates suggests that these policies are developed and implemented by rational political and economic elites seeking to maximize their own utility - particularly in regards to garnering political support - rather than pursing the collective good. This often occurs at the expense of many small farmers. He writes, "Policies are designed to secure the advantages of particular interests, to appease powerful political forces, and to enhance the capacity of political regimes to remain in power" (5-6). The political and urban elites work in tandem to harvest economic resources garnered from the agricultural sector to promote industrialization. This is often done through the manipulation of market forces, particularly in keeping food prices low for urban interests. Doing so keeps the urban masses content, and allows industrialists to maintain low wages. In turn, the policy making elites garner political support. Bates spells out the beneficiaries of such policies clearly. "Owners and workers in industrial firms, economic and political elites, privileged farmers and the mangers of public bureaucracies - these constitute the development coalition in contemporary Africa" and hence benefit from the inefficient policies. In regards to production, such policies skew the incentive structure of smaller agricultural producers. When receiving below world market prices, farmers will lower production, in turn limiting food supply. Or farmers may pursue a policy of "out-migration" and moved to the urban areas in pursuit of jobs. In this regard, the peasants are too acting rationally according to Bates model. Bates also discusses the problems of mass organization in order to oppose these policies. The small farmers are so dispersed and politically weak that the collective action problems ensue. The government expands on these collective action problems by offering preferential disbursements of subsidies, etc. to those who tow the party line. This divide and conquer technique has limited the power of the rural masses to organize a coherent oppostion.

In this landmark study, Robert Bates offered an interpretation of African economic policies toward the agriculture sector that set the terms of the debate for the years to come. Why do African governments pursue policies that create market distortions, skewed incentives and misallocation of resources, despite their obvious costs for social welfare and long-term development? The core of Robert Bates' argument is that bad economics often makes good politics: governments choose to pursue policies that are clearly irrational from an economic viewpoint because their economic and social costs are more than offset by the political benefits that accrue to them and to the social forces that maintain them in power. Things did not have to turn that way. Political elites who took power at the time of the independences sincerely believed that they could put their countries on a path to economic modernization and social well-being. What trapped Africa into a low equilibrium of narrow clientelism and entrenched self-interests was a mix of bad institutions, bad advice and bad luck. African governments inherited from their colonizers institutions that were set to extract rents from the agriculture sector rather than to maximize the welfare of farmers. They chose a mix of development policies that emphasized the role of the state and the importance of a nascent manufacturing sector. And they benefited from a period of high commodity prices that led them to consider cash crops and natural resources as an inexhaustible source of foreign exchange revenue. The institution that came to symbolize the rent-extracting nature of African agriculture policies is the marketing board, which purchased cash crops from farmers at administratively determined prices and then sold them for a higher price on the world market, thereby accumulating funds that could be used for state-sponsored industrial projects or for social subsidies, if not for outright plundering. Another instrument of redistribution away from the agriculture sector was the local industrial firm that processed raw agricultural products acquired at artificially low prices, or the importation of foreign crops at prices below domestic ones in order to feed urban workers and lower the cost of living. This complex web of policies and institutions should not be seen solely as a way to transfer resources away from agriculture into the modern urban economy, thereby achieving the "primitive accumulation" that Marxist economists saw as a condition to industrial development. Some policies, such as large irrigation projects, the subsidization of inputs, the channeling of credit or the extension of public services to rural areas, benefit large landowners at the expense of small-scale farmers. Likewise, industrial development projects under protective trade policies give rise to large, capital intensive public enterprises which often operate below capacity and at high costs. Robert Bates makes heavy use of interest group