- Email: [email protected]
The political economy of risk and choice in Senegal
395
Book reviews
That question inevitably touches on the issue of bias. George Stigler reviewing the dictionary in the Journal of Economic Literature, December 1988, claims that Marxism, Sraffa and Cambridge, England, capital theory had been given a disproportionate emphasis. The ideological bias detected by Stigler is relative to the mainstream of Anglo-Saxon economics. An unweighted average of world economics literature would be heavily Marxist but also of dreadful quality. Relative to the mainstream a bias towards economists with Cambridge, England, connections is as noticeable as a weakness for soft-Marxist theory, although both are apparent. In the case of economic development Sraffa’s ideas would not know how to intrude themselves so that problem is not replicated in this book. Stigler also complained of the exclusion of empirical work from the scope of the dictionary, a fault which the present work inevitably reproduces, and which seems especially unfortunate in a work on development economics. About a third of the entries on a rough count are authored by economists well to the left of centre. Only two non-biographical entries are written by economists on the right. That might be no bad thing if it gave us fresh and challenging treatments of vital topics. On the contrary, alas, the result is too many dreary and backward-looking expositions of doctrinal and semantic issues. A backward orientation is the volume’s most serious short-coming. Early writings and structuralist theory receive lengthy treatments, while trade and such changes in the structure of the world economy as Japanese economic success, newly industrializing countries, and industrial decline in the West are scarcely mentioned. It seems that a specialist volume accentuates many of the problems with the Nrw Palgrave. One would hesitate to recommend this book as an introduction to a student new to development economics, the inclusion of some line readable though many entries are. Despite individual essays, the overall picture is fragmented and confusing, all dialectic and no synthesis.
Nuffield
College,
Oxford,
John Waterbury and Mark Gersovitz, eds., The Political and Choice in Senegal (Frank Cass & Co. Ltd, London, bibliography, index, ISBN O-7 146-3297X, $47.50.
Christopher Bliss OX1 INF, England
Economy of Risk 1987) pp. 363 + xv,
This volume grew out of a program of study conducted by the Research Program in Development Studies at the Woodrow Wilson School, and draws
together the work of scholars from a variety of disciplines in a broad-based analysis of sources of and responses to risk in the agricultural sector in Senegal. The discussion focuses on the behavior of three agents: the peasants, the specific agencies of state intervention in agriculture, and the state itself. While the Preface indicates that the original audience for the work was the Government of Senegal, the papers in the volume will appeal to a broader range of scholars interested in Sahelian economies in particular and private and public sector responses to risk more generally. In Chapter 1, Gersovitz discusses and quantities the sources of uncertainty in the agricultural economy and producer responses to this uncertainty, focusing primarily on climatic shocks: He defines two types of producer responses: anticipatory actions undertaken before outcomes are known, and ex post responses to current and past realizations. He finds that rainfall is both variable and intertemporally independent, exhibiting no serial correlation either across or within rainy seasons. This climatic variation has serious real consequences, generating variation in yields, the effects of which cannot be effectively minimized by crop diversification. This implies that one potential course of anticipatory action is eliminated. Gersovitz does find several examples of ex post responses to weather realizations. The dominant result is that farmers tend to increase their emphasis on food production, both in terms of land allocation and yields, in years following bad weather realizations. Although there are a number of effects entangled in this net result, Gersovitz attributes at least part of this outcome to a desire to restore food stockpiles after bad years. The final section of the chapter discusses international price uncertainty as the other major kind of uncertainty facing the agricultural sector, and finds only mild evidence that price movements act to offset the production shocks generated by weather. This chapter provides the background material for the rest of the discussions in the volume. For a more general audience, it provides an excellent application of basic statistical techniques to the quantification of uncertainty and the use of aggregate data to describe economic responses, and would be useful to anyone planning a similar analysis. In Chapter 2, Waterbury provides a discussion of the organization and behavior of the Senegalese peasant in which he assesses the validity of several institutional and behavioral assumptions that commonly underlie economic analyses of peasant agricultural behavior. From the perspective of risk management, the most interesting section of the discussion addresses the issue of the applicability of the notion of the ‘improvident peasant’ to the Senegalese groundnut farmer. While Waterbury finds that the evidence does not enable him to reject the idea that peasants are in fact involved in a cycle of borrowing during the soudurr or hungry season and repaying, with substantial interest, at the harvest, he concludes that this is less a result of poor planning than of structural features of the economy which limit peasants’ options. causing them to get involved in exploitative relationships.
Peasant credit behavior and the structure of rural credit markets are the subject of Laura Tuck’s two excellent contributions to the volume. In the appendix to Chapter 2, Tuck presents data concerning the volume, composition, and institutional features of peasant participation in informal credit markets, based on surveys conducted expressly for the study. The appendix provides a wealth of information on the nature of these markets and addresses the relevance of some common assumptions about the nature of these markets. In Chapter 5, Tuck evaluates the success of government attempts to provide financial services to the agricultural sector. The chapter includes a brief description of Senagalese policy, followed by a more general discussion of the role of financial markets in risk management, profit enhancement and resource allocation processes in the rural sector, and an outline of important issues in institutional design. Although the focus is on Senegal, the approach is sufficiently general to provide valuable insight into the study of rural financial institutions in a broad range of contexts. In addition to providing insightful explanations of the failure of previous policies, Tuck also outlines the elements necessary for a successful program of formal credit market creation. She argues that a successful program should provide savings as well as borrowing services, untie lending from the purchase of specific inputs, and enforce sanctions against default, among other recommendations. On a broader scale, Tuck highlights the danger of limiting credit institutions to agricultural lending, due to the high degree of correlation of returns in the loan portfolio and lack of intertemporal variance in the demand and supply of funds. Her specific policy recommendations are applicable to a broad range of countries, and her discussion of the important issues is exceptionally clear and provides an excellent reference for students of rural credit problems and policies. Chapters 3, 4 and 6 focus on the agencies of state intervention. The first two are essays by Robert Tignor and Sheldon Gellar tracing the history of the cooperative movement in Senegal from 1907 to the present. As a pair, the chapters provide a good overview of the entire experience and highlight key reasons for the fundamental failure of the cooperative system to provide resources or act as agents of change in the rural sector. A common theme throughout these chapters is that the cooperative movement was not a popular movement of peasant activism, but a mechanism of the state. This resulted in a low level of peasant commitment to cooperatives, a drain on cooperative resources, and a failure of the cooperatives to take over their own management. The theme of antagonism and conflict of interest between the peasants and the government agencies is also reflected in Waterbury’s discussion of state intervention in agriculture in the area of enhancing groundnut production through the introduction of technical packages. The chapter provides a relatively detailed history of Senegalese programs and explanations for the
398
Book reviews
failure of these programs to produce real change in the agricultural sector. Taken together, these three chapters provide ample institutional and historical discussion of the Senegalese experience and specific policies, although they are less focused on discussions of risk and risk management than the other chapters in the volume. As Gersovitz points out in Chapter 1, price variability is an important source of risk to peasant farmers. The politics of the agricultural price determination process are described by Sidi Jammeh in Chapter 7. The paper describes the institutional framework and interests and behavior of actors in the price-setting process, and contends that uncertainties about the political environment, particularly the response of urban constituencies, has inhibited the formation of optimal pricing strategy. What the essay fails to do is discuss the implications of this highly politicized and sub-optimal price setting mechanism for the agricultural sector, or expand on his comment that the process is hampered by a lack of reliable empirical evidence concerning producer and consumer responses. The final two chapters in the book look at more macroeconomic sources of risk and macropolicy responses. In Chapter 8, which is by far the most technical chapter in the volume, Jorge Braga de Macedo presents a theoretical model analyzing the implications of a small country’s decision to participate in a full monetary union with another small country and to fix its exchange rate to the currency of a large country. The model is a stylized version of the structure of Senegal’s monetary relationship with France and the other members of the West African Monetary Union (UMOA). The important result of the model is that although a fixed exchange rate regime alone generates real exchange rates which are more stable than their nominal counterparts, the existence of a monetary union receiving external transfers will generate movements in real exchange rates. The second section of the paper provides a quantitative analysis of Senegal’s experience in UMOA, and argues that Senegal has experienced enormous variability in its real exchange rate. Although de Macedo argues that the empirical section can be understood without reference to the model, such a reading would be difficult. The model itself is straightforward, although the notation and exposition seem unnecessarily confusing. In the final chapter, John Lewis describes the adjustment crisis that has faced the Senegalese since 1978. After a brief description of Senegalese aid receipts since independence, Lewis describes the structural adjustment program instituted by the World Bank and the IMF in the late 1970s and describes the reasons for the program’s lack of success in restructuring the economy. Lewis contends that the failure of agriculture reform lay at the heart of the program’s overall failure, and lays the blame on the highly centralized and bureaucratized nature of agricultural sector policy, problems which were discussed in earlier chapters. Interestingly, Lewis concludes that
399
Book reviews
although efforts should be made to build agriculture, ‘. . . it may be wrong to hang the country’s future on major near-term advances in farm production’ (p. 323), and suggests a broader program of human resources development and economic diversification, and a coordinated effort between Senegal and its multi- and bilateral aid donors. This is a fitting conclusion to a volume that has, for the most part, described a history of failed policy attempts in the agricultural sector. The papers by Gersovitz, Tuck and de Macedo will appeal to the broadest audiences, for although they focus on Senegal they use models, methodologies and evaluation criteria which are relevant to a wide range of circumstances. The other chapters are likely to be most interesting to students of Senegal, in that they provide a wealth of institutional, historical and quantitative information about Senegalese agricultural policy, and less general analytical discussion. In terms of the volume as a whole, there is a fair amount of repetition of institutional and descriptive material across chapters, which makes it sometimes difficult to distinguish the disciplinary or methodological perspectives of the different authors, and causes sections of the book to be fairly tedious. Similarly, although the general theme of risk and choice is picked up throughout the volume, many of the individual papers could be more clearly focused around this issue. Overall, the book is a valuable contribution to the literature on agricultural risk and policy as well as to our stock of institutional and historical knowledge of Senegal.
Wellesley
College,
Ann Velenchik Wellesley, MA, USA
Deepak Lal, The Hindu Equilibrium, Volume I: Cultural Stability and Economic Stagnation, India, c. 1500 BC-AD 1980, Volume II: Aspects of Indian Labour (Clarendon Press, Oxford, 1988/1989) pp. xxvii + 345; xii + 197, E35.00. This two-volume work cannot be thought to constitute a coherent whole. The first volume presents us with the author’s views on Indian economic and social history over several millennia (to be precise, a period of just under 3,500 years). Professor Lal’s agenda in this volume is nevertheless unabashedly ‘presentist’: he wishes to argue that the Indian state today is predatory and ‘dirigiste’, and to recommend that it be replaced by a new regime wherein contract will displace custom, and the market economy will take the place of the ‘revenue economy’ that he sees as existing at present. However, rather than prove his case with an analysis of the current state of the economy, he chooses to range over a huge terrain, which in the first
Book reviews
That question inevitably touches on the issue of bias. George Stigler reviewing the dictionary in the Journal of Economic Literature, December 1988, claims that Marxism, Sraffa and Cambridge, England, capital theory had been given a disproportionate emphasis. The ideological bias detected by Stigler is relative to the mainstream of Anglo-Saxon economics. An unweighted average of world economics literature would be heavily Marxist but also of dreadful quality. Relative to the mainstream a bias towards economists with Cambridge, England, connections is as noticeable as a weakness for soft-Marxist theory, although both are apparent. In the case of economic development Sraffa’s ideas would not know how to intrude themselves so that problem is not replicated in this book. Stigler also complained of the exclusion of empirical work from the scope of the dictionary, a fault which the present work inevitably reproduces, and which seems especially unfortunate in a work on development economics. About a third of the entries on a rough count are authored by economists well to the left of centre. Only two non-biographical entries are written by economists on the right. That might be no bad thing if it gave us fresh and challenging treatments of vital topics. On the contrary, alas, the result is too many dreary and backward-looking expositions of doctrinal and semantic issues. A backward orientation is the volume’s most serious short-coming. Early writings and structuralist theory receive lengthy treatments, while trade and such changes in the structure of the world economy as Japanese economic success, newly industrializing countries, and industrial decline in the West are scarcely mentioned. It seems that a specialist volume accentuates many of the problems with the Nrw Palgrave. One would hesitate to recommend this book as an introduction to a student new to development economics, the inclusion of some line readable though many entries are. Despite individual essays, the overall picture is fragmented and confusing, all dialectic and no synthesis.
Nuffield
College,
Oxford,
John Waterbury and Mark Gersovitz, eds., The Political and Choice in Senegal (Frank Cass & Co. Ltd, London, bibliography, index, ISBN O-7 146-3297X, $47.50.
Christopher Bliss OX1 INF, England
Economy of Risk 1987) pp. 363 + xv,
This volume grew out of a program of study conducted by the Research Program in Development Studies at the Woodrow Wilson School, and draws
together the work of scholars from a variety of disciplines in a broad-based analysis of sources of and responses to risk in the agricultural sector in Senegal. The discussion focuses on the behavior of three agents: the peasants, the specific agencies of state intervention in agriculture, and the state itself. While the Preface indicates that the original audience for the work was the Government of Senegal, the papers in the volume will appeal to a broader range of scholars interested in Sahelian economies in particular and private and public sector responses to risk more generally. In Chapter 1, Gersovitz discusses and quantities the sources of uncertainty in the agricultural economy and producer responses to this uncertainty, focusing primarily on climatic shocks: He defines two types of producer responses: anticipatory actions undertaken before outcomes are known, and ex post responses to current and past realizations. He finds that rainfall is both variable and intertemporally independent, exhibiting no serial correlation either across or within rainy seasons. This climatic variation has serious real consequences, generating variation in yields, the effects of which cannot be effectively minimized by crop diversification. This implies that one potential course of anticipatory action is eliminated. Gersovitz does find several examples of ex post responses to weather realizations. The dominant result is that farmers tend to increase their emphasis on food production, both in terms of land allocation and yields, in years following bad weather realizations. Although there are a number of effects entangled in this net result, Gersovitz attributes at least part of this outcome to a desire to restore food stockpiles after bad years. The final section of the chapter discusses international price uncertainty as the other major kind of uncertainty facing the agricultural sector, and finds only mild evidence that price movements act to offset the production shocks generated by weather. This chapter provides the background material for the rest of the discussions in the volume. For a more general audience, it provides an excellent application of basic statistical techniques to the quantification of uncertainty and the use of aggregate data to describe economic responses, and would be useful to anyone planning a similar analysis. In Chapter 2, Waterbury provides a discussion of the organization and behavior of the Senegalese peasant in which he assesses the validity of several institutional and behavioral assumptions that commonly underlie economic analyses of peasant agricultural behavior. From the perspective of risk management, the most interesting section of the discussion addresses the issue of the applicability of the notion of the ‘improvident peasant’ to the Senegalese groundnut farmer. While Waterbury finds that the evidence does not enable him to reject the idea that peasants are in fact involved in a cycle of borrowing during the soudurr or hungry season and repaying, with substantial interest, at the harvest, he concludes that this is less a result of poor planning than of structural features of the economy which limit peasants’ options. causing them to get involved in exploitative relationships.
Peasant credit behavior and the structure of rural credit markets are the subject of Laura Tuck’s two excellent contributions to the volume. In the appendix to Chapter 2, Tuck presents data concerning the volume, composition, and institutional features of peasant participation in informal credit markets, based on surveys conducted expressly for the study. The appendix provides a wealth of information on the nature of these markets and addresses the relevance of some common assumptions about the nature of these markets. In Chapter 5, Tuck evaluates the success of government attempts to provide financial services to the agricultural sector. The chapter includes a brief description of Senagalese policy, followed by a more general discussion of the role of financial markets in risk management, profit enhancement and resource allocation processes in the rural sector, and an outline of important issues in institutional design. Although the focus is on Senegal, the approach is sufficiently general to provide valuable insight into the study of rural financial institutions in a broad range of contexts. In addition to providing insightful explanations of the failure of previous policies, Tuck also outlines the elements necessary for a successful program of formal credit market creation. She argues that a successful program should provide savings as well as borrowing services, untie lending from the purchase of specific inputs, and enforce sanctions against default, among other recommendations. On a broader scale, Tuck highlights the danger of limiting credit institutions to agricultural lending, due to the high degree of correlation of returns in the loan portfolio and lack of intertemporal variance in the demand and supply of funds. Her specific policy recommendations are applicable to a broad range of countries, and her discussion of the important issues is exceptionally clear and provides an excellent reference for students of rural credit problems and policies. Chapters 3, 4 and 6 focus on the agencies of state intervention. The first two are essays by Robert Tignor and Sheldon Gellar tracing the history of the cooperative movement in Senegal from 1907 to the present. As a pair, the chapters provide a good overview of the entire experience and highlight key reasons for the fundamental failure of the cooperative system to provide resources or act as agents of change in the rural sector. A common theme throughout these chapters is that the cooperative movement was not a popular movement of peasant activism, but a mechanism of the state. This resulted in a low level of peasant commitment to cooperatives, a drain on cooperative resources, and a failure of the cooperatives to take over their own management. The theme of antagonism and conflict of interest between the peasants and the government agencies is also reflected in Waterbury’s discussion of state intervention in agriculture in the area of enhancing groundnut production through the introduction of technical packages. The chapter provides a relatively detailed history of Senegalese programs and explanations for the
398
Book reviews
failure of these programs to produce real change in the agricultural sector. Taken together, these three chapters provide ample institutional and historical discussion of the Senegalese experience and specific policies, although they are less focused on discussions of risk and risk management than the other chapters in the volume. As Gersovitz points out in Chapter 1, price variability is an important source of risk to peasant farmers. The politics of the agricultural price determination process are described by Sidi Jammeh in Chapter 7. The paper describes the institutional framework and interests and behavior of actors in the price-setting process, and contends that uncertainties about the political environment, particularly the response of urban constituencies, has inhibited the formation of optimal pricing strategy. What the essay fails to do is discuss the implications of this highly politicized and sub-optimal price setting mechanism for the agricultural sector, or expand on his comment that the process is hampered by a lack of reliable empirical evidence concerning producer and consumer responses. The final two chapters in the book look at more macroeconomic sources of risk and macropolicy responses. In Chapter 8, which is by far the most technical chapter in the volume, Jorge Braga de Macedo presents a theoretical model analyzing the implications of a small country’s decision to participate in a full monetary union with another small country and to fix its exchange rate to the currency of a large country. The model is a stylized version of the structure of Senegal’s monetary relationship with France and the other members of the West African Monetary Union (UMOA). The important result of the model is that although a fixed exchange rate regime alone generates real exchange rates which are more stable than their nominal counterparts, the existence of a monetary union receiving external transfers will generate movements in real exchange rates. The second section of the paper provides a quantitative analysis of Senegal’s experience in UMOA, and argues that Senegal has experienced enormous variability in its real exchange rate. Although de Macedo argues that the empirical section can be understood without reference to the model, such a reading would be difficult. The model itself is straightforward, although the notation and exposition seem unnecessarily confusing. In the final chapter, John Lewis describes the adjustment crisis that has faced the Senegalese since 1978. After a brief description of Senegalese aid receipts since independence, Lewis describes the structural adjustment program instituted by the World Bank and the IMF in the late 1970s and describes the reasons for the program’s lack of success in restructuring the economy. Lewis contends that the failure of agriculture reform lay at the heart of the program’s overall failure, and lays the blame on the highly centralized and bureaucratized nature of agricultural sector policy, problems which were discussed in earlier chapters. Interestingly, Lewis concludes that
399
Book reviews
although efforts should be made to build agriculture, ‘. . . it may be wrong to hang the country’s future on major near-term advances in farm production’ (p. 323), and suggests a broader program of human resources development and economic diversification, and a coordinated effort between Senegal and its multi- and bilateral aid donors. This is a fitting conclusion to a volume that has, for the most part, described a history of failed policy attempts in the agricultural sector. The papers by Gersovitz, Tuck and de Macedo will appeal to the broadest audiences, for although they focus on Senegal they use models, methodologies and evaluation criteria which are relevant to a wide range of circumstances. The other chapters are likely to be most interesting to students of Senegal, in that they provide a wealth of institutional, historical and quantitative information about Senegalese agricultural policy, and less general analytical discussion. In terms of the volume as a whole, there is a fair amount of repetition of institutional and descriptive material across chapters, which makes it sometimes difficult to distinguish the disciplinary or methodological perspectives of the different authors, and causes sections of the book to be fairly tedious. Similarly, although the general theme of risk and choice is picked up throughout the volume, many of the individual papers could be more clearly focused around this issue. Overall, the book is a valuable contribution to the literature on agricultural risk and policy as well as to our stock of institutional and historical knowledge of Senegal.
Wellesley
College,
Ann Velenchik Wellesley, MA, USA
Deepak Lal, The Hindu Equilibrium, Volume I: Cultural Stability and Economic Stagnation, India, c. 1500 BC-AD 1980, Volume II: Aspects of Indian Labour (Clarendon Press, Oxford, 1988/1989) pp. xxvii + 345; xii + 197, E35.00. This two-volume work cannot be thought to constitute a coherent whole. The first volume presents us with the author’s views on Indian economic and social history over several millennia (to be precise, a period of just under 3,500 years). Professor Lal’s agenda in this volume is nevertheless unabashedly ‘presentist’: he wishes to argue that the Indian state today is predatory and ‘dirigiste’, and to recommend that it be replaced by a new regime wherein contract will displace custom, and the market economy will take the place of the ‘revenue economy’ that he sees as existing at present. However, rather than prove his case with an analysis of the current state of the economy, he chooses to range over a huge terrain, which in the first