Journal Issue
Finance & Development, December 1974

A viable model for rural development: One way to reach the very poorest people in rural areas is to involve them directly in the development process

International Monetary Fund. External Relations Dept.
Published Date:
December 1974
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Albert Waterston

Regional and subregional planning may be comprehensive, in the sense that it covers all functional sectors, or it may be partial when it covers only a few or even one. It may concentrate on rural or urban areas and, within rural areas, on agricultural as opposed to rural development. Agricultural development is an essentially sectoral activity, one which is concerned with occurrences within the agricultural sector, as usually defined. In contrast, rural development is generally conceived of as a multisectoral activity which includes, besides agricultural development and rural industry, the establishment or improvement of social overhead facilities or infrastructure (schools, clinics, roads, communications, and water supply), and welfare services or programs, which could be for disease control, improved nutrition, widening adult literacy, or family planning.

Some rural development projects or programs are “selective” rather than “integrated” in the sense that they cover a particular nonagricultural activity like health, education, or family planning. However, as generally employed, and as employed here, rural development is an integrated multisectoral activity which includes the development of agriculture and social overhead facilities.

While the primary objective of agricultural development is usually increased growth of agricultural output, the primary objective of rural development is the enrichment of the material and social welfare of the rural population, always including poor farmers, and sometimes, landless farm workers and others in rural areas.

Agriculture: an essential part of rural development

Although it may not have been intended specifically, agricultural development has frequently benefited the rich rather than the poor farmers in developing countries, because the rich have, and the poor often lack, the education, credit, and other attributes required to respond adequately to new opportunities. Studies of the green revolution, for example, suggest that programs which concentrate on the adoption of improved techniques for the use of new seeds and fertilizers have tended to benefit the middle income and rich farmers rather than the poor. In fact, productivity increases concentrated on larger farms can undermine the position of small farmers by reducing agricultural product prices, putting pressure on tenancy, and restricting the access of small farmers to credit and other resources. This has increasingly led the World Bank and other donor agencies and countries to concentrate on promoting development providing poor farmers in developing countries with the infrastructure and services required to enlarge their share of increases in agricultural output and incomes. However, prodigious difficulties stand in the way of mounting rural development programs which will provide a sustained increase in the welfare level of a significant proportion of poor farmers in an underdeveloped country. While governments in these countries may provide social overhead facilities and services to the rural poor, it is difficult to make these facilities and services self-sustaining, since they contribute only marginally to economic development.

For rural development to be self-sustaining, it is essential that it include a self-supporting agriculture which can consistently provide surpluses for financing social overhead facilities and services. This is not only because people’s expectations of what can be supported become excessively inflated when central governments provide rural areas with water supply, drainage, roads, buildings, and other facilities at little or no cost, but also because most developing countries do not have the resources to finance the establishment, operation, and maintenance of rural infrastructure and services indefinitely. While it is true that agricultural development, by itself, often ends up by benefiting rich farmers more than poor ones, it is also true that if agricultural development does not have a high priority in a rural development program, rural communities are unlikely to be able to accumulate funds from current income to establish, maintain, and operate clinics, schools, access roads, and other infrastructure and services. When communities look to governments for continued support, rural development programs become little more than welfare. Even Tanzania has run into this problem.

Governments in many countries have devoted considerable sums to social overhead facilities in rural areas, at the expense of allocations to improve agricultural production, and have been left with schools without teachers, clinics without doctors, and chronic unemployment on their hands. In contrast, countries which have given priority to production have been able to generate the resources required to finance social overhead facilities. Communes in the People’s Republic of China, for instance, have expanded health and education facilities from their own savings, which is the only way they are permitted to do this.

The model

Since self-supporting agriculture is the key to self-sustaining rural development, a rural development model is needed which, unlike the usual one for agricultural development, benefits a substantial number of poor farmers in rural communities. The elements of such a model are suggested by the experience in the People’s Republic of China, the Republic of China, Tanzania, and Israel.

First, since surplus agricultural labor is a problem in most developing countries, low cost labor-using, rather than capital-using, techniques must be employed to the greatest extent possible in agriculture.

Although the ultimate solution to rural underemployment in many countries probably lies in the permanent migration out of agriculture of labor not required for farm production, a viable program of rural development can provide preparatory training for rural workers who eventually migrate to urban rights and spread the migration over time. Low-cost labor-intensive techniques imply that the capital (including working capital) cost per unit of labor, as well as capital output ratios, should be kept as low as possible.

Second, since even labor-intensive agriculture is unlikely to provide year-round full employment in rural areas with surplus labor, “employment generating” minor development works with high labor content—the construction of feeder roads, irrigation, and other waterworks—as well as social overhead facilities, such as schoolhouses, or clinical buildings, should be carried out with underemployed and seasonally unemployed rural labor. To minimize housing and transport costs, productive activities should be concentrated as much as possible in areas with the greatest excess labor. Local materials should be used wherever possible, to provide employment and reduce transport costs. By using local labor to create some of the infrastructure needed in rural communities, the handicap of underemployment of the labor force can be converted into an advantage. In the People’s Republic of China, peasants have constructed irrigation, flood control, terracing, and other works and have reforested local areas. Rural populations in Pakistan at the thana (or tehsil) and union levels were used in the Rural Public Works’ Program to construct roads, bridges, embankments, and other works. In India, small capital formation projects have provided work and supplemental incomes to small cultivators and landless agricultural workers.

Third, small-scale, labor-using, light industries with low capital requirements should be established in rural areas to supplement employment opportunities in agriculture. However, certain light industries are better than others. For best results, as experience in the People’s Republic of China and Israel has shown, light industry should concentrate mainly on two kinds: (a) the processing of agricultural commodities produced in the area concerned, which might include fruit and vegetable canneries, flour and rice mills, woodworking factories, slaughterhouses, creameries and milk powder plants, sugar refineries, paper mills, and processing units for cotton ginning and edible oils; and (b) the fabrication of inputs for agriculture, such as cattle, pig, and poultry feed mills, fertilizer mixing plants, small toolmaking shops, and clay, brick, and tile works. However, wherever it was “economically feasible,” rural industry could also produce consumer goods and building materials for capital construction and infrastructure projects.

To be “economically feasible” requires that considerations of efficiency not be abandoned to solve the unemployment problem. In this connection, India’s experience in attempting to foster rural industry during the period of the First Five-Year Plan is instructive. The rural industrialization program emphasized consumer goods, particularly textiles, produced with traditional labor-using village technology. Efforts to revive traditional industry failed for several reasons. There, although the traditional textile industry was labor intensive, it sometimes used as much capital per unit of labor as was used in India’s modern textile plants. Traditional industry also required large quantities of working capital for the procurement of raw materials and distribution of output. Because traditional industry was highly dispersed, it also raised management and coordination problems which were beyond the capacity of the managers. Moreover, demand for the textiles produced by rural industry was not high enough to attract investment, and capital could not easily be obtained for rural industry. In contrast, the greater demand for textiles produced in the modern sector permitted economies of scale which made it possible to sell textiles produced in this sector at much lower prices than those produced in the traditional sector. Although the public sector eventually provided financing for the program, it had to be abandoned as a failure.

The agro-industries of the type using agricultural inputs all involve weight or bulk losing processes, and therefore have locational advantages if established near their sources of raw materials. Some of the second type of agro-industries (those producing products intended primarily for the use of farmers in an area) have transport advantages when located near their markets. This is especially true if their products are heavy (such as brick, tile, and concrete blocks) or bulk gaining (harrows, chicken brooders, and seed drills), or if their major inputs can be purchased in large quantities (fertilizer for mixing or steel and wrought iron for toolmaking). Many kinds of agro-industries are therefore, well-suited to small- or medium-scale production in rural areas.

Self-help an essential foundation

Fourth, to be self-sustaining, the model must rest on a foundation of local self-reliance or self-help. Simply stated, this means that those communities which benefit from rural development must assume responsibility for raising a reasonable proportion of the resources. What constitutes a reasonable proportion depends on the circumstances, but in each situation criteria for judging the success of any rural development program would include a measure of the extent to which local or regional jurisdictions contribute to the support of rural social services. A second criterion would measure how quickly, as well as how far, local or regional jurisdictions take over the support of rural facilities initially financed by the central government or other outsiders.

Where regional, subregional, or local areas are completely dependent on grants and loans from above, rural development planning becomes a matter of drawing up shopping lists for outside funding, without making the hard allocative choices which realistic planning requires. If the lower jurisdictions are to participate in the planning process, as good planning demands, it is likely that the quality and reliability of rural investment choices, as well as their management, will be improved if they have to raise and risk significant quantities of their own resources. Moreover, the total quantity of resources raised for rural development in most poor countries is likely to fall short of what is needed unless a portion of the funds come from the countryside itself. The best way of raising this is to challenge local authorities and institutions to provide parts of the funding, through taxation or otherwise, with government producing matching grants or using other appropriately devised incentives to reward results.

Self-reliance is becoming increasingly important as the basis for rural development. Kenya, Tanzania, and other countries have emphasized “self-help” as integral parts of their rural development programs. As already indicated, in the People’s Republic of China, communes can expand health and educational facilities only from their own savings. However, the county government provides teachers and doctors once a commune has built the basic facilities. The People’s Republic of China has probably gone further than any other poor country in this respect. For example, when major campaigns were launched to control the five major parasitic diseases—malaria, filariasis, hookworm, kala azar, and schistosomiasis—great emphasis was placed on having the “masses” take specific action whenever possible, rather than have everything done for them by outside “experts.”

Success rests on a precise combination of all factors

Experience indicates that this combination—labor-intensive agriculture; labor-using, minor development works; agriculturally oriented, small-scale, light industry, using labor-intensive techniques with low capital requirements; and an atmosphere of self-reliance—offers the best prospect for developing a self-supporting agriculture which can, in turn, provide the increased incomes and savings for the social overhead facilities and services required for self-sustaining rural development. Since self-supporting agriculture is the backbone of self-sustaining rural development, it should have the highest priority of all the elements in the model; and since it is difficult to organize effective agricultural development based on labor-using techniques, time should be allowed to make it viable. The precise combination of agriculture and industry, as well as the timing for introducing industry, will depend on the circumstances in each country. In Pakistan’s Punjab, for instance, farmer demand led to the establishment of more than 100 small factories employing a total of over 1,000 workers to produce diesel engines, principally from local materials, for tube wells and grain mills. In the Punjab of India, which has a dynamic agricultural sector with a broad-based distribution of income, there was a significant increase in the effective demand for consumer goods and services. Some of these, like milk and milk products, were old items of consumption, while others, like bicycles and sewing machines, shoes and soap, were new consumption items. Increased demand and the consequent increase in the profitability of investment often brought about a significant mobilization of rural savings for the provision of goods and services. While government may find it expedient to make available some social overhead facilities and services, these should be correlated with the development of the agricultural component over time to insure that earnings from local agricultural output will ultimately be sufficient to take over support of these facilities. The provision of social services in rural areas of Africa has been found to be effective in sustaining people’s interest in development projects and in mobilizing self-help efforts in rural areas, particularly for capital works’ projects. On the other hand, experience in Africa also leads to the conclusion that unless the rural community accepts the principles of self-help and self-financing, social services are unlikely to be viable.

The preparation and implementation of a program of self-sustaining rural development is necessarily a long-term task which requires much planning and farmers’ support. This means, therefore, that it must be a product evolved by the country concerned, as well as its farmers; and by the same token that it cannot be the product of short-term missions of international or national lending agencies. These agencies can do much to support rural development by financing components of rural development programs, but it would be unreasonable to expect them to provide the continuing, long-term effort which viability requires. Only the country concerned can do that.

Organization for rural development

The preparation and implementation of a self-sustaining rural development program also requires major changes in government organization. This is so because each ministry, department, or agency tends to concern itself only with its own functional sector or subsector. However, a rural development program requires coordinated action among ministries, departments, and agencies which cuts horizontally across the vertical organization typical of most governments.

Experience in countries such as the People’s Republic of China, the Republic of China, and Israel make it clear that where rural development has been adopted as a national policy, it is normal for government structures and procedures to be adjusted accordingly. Each ministry establishes appropriate groups and administrative procedures to facilitate the coordination of its own activities with those of others on a continuing basis. Moreover, at national and regional levels, interministerial or other bodies, under the chairmanship of the minister of agriculture or another suitable person, are established to synchronize the related activities of the different ministries, departments, and agencies. Thus, what are exceptional activities for ministries when individual rural development projects or programs are involved become normal routine when rural development is national policy.

In the absence of a national policy for country-wide rural development, it is unlikely that conventional ministries, departments, and agencies will be able to deviate from their normal structures and procedures to deal effectively with the requirements of a rural development program in one or a few regions of a country. This is also true of crop programs, e.g., for high-yielding varieties of rice or wheat, which may be concentrated in a few regions of a country. In these cases, experience shows that it is best to establish a special agency to deal with the program or regions concerned.

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