The Good, the Bad, and the Ugly: World Bank Land Policies
February 17, 2004
Peter Rosset provides an overview of the World Bank's approach to land reform in this paper presented at the Seminar on “The Negative Impacts of the World Bank’s Policies on Market-Based Land Reform.” George Washington University, Washington, DC, April 15 -17, 2002. Rosset provides a compelling argument for why the World Bank's "one market, one world" policies result in unitended consequences for landless people around the world. A model for understanding the systematic efforts of the World Bank to move nations towards markets and privatization is provided.
The title of the old Clint Eastwood movie, “The Good, the Bad, and the Ugly,” pretty well sums up World Bank policies on land. I should begin by saying that the Bank has changed its policy on land over the past 15 years, to make land a much more important item, with a much higher priority than it had before. After structural adjustment and the imposition of all kinds of neoliberal economic policies, as well as large dam and large infrastructure projects, the Bank has come to the point where it sees the issue of land as fundamental to its strategy for rural development in many, many, different countries around the world. That is basically “the good” in “the Good, the Bad and the Ugly,” because 15 years ago, or 20 years ago, words like “land reform” were taboo in many countries, where just uttering the phrase might have put one’s life at risk in certain places. Yet now, in a sense, the World Bank has made it “safe” to use the phrase “land reform” by making their version of land reform into a center-pieces of their sectoral policies for rural areas.
Of course the Bank has tried to coopt the phrase, to make it mean what the Bank wants it to mean—which is basically neoliberal, market approaches applied to land—, rather than what social movements or historical usage might suggest. Nevertheless, the Bank talks about “land reform” in its policy dialogue with most of our governments, which means it’s okay now to talk about the issue, and more importantly, it opens space to struggle over the content and meaning of land reform. That is the “good.”
Before I go into “the bad” and “the ugly,” let me briefly explain why I think those at the World Bank changed their policies, to give land issues a higher priority. There are three factors, two of which really concern the Bank, and one which is mostly rhetorical in nature. The first is the issue of economic growth, which is like a mantra to the Bank. Their own economists have shown via cross-country comparisons that very unequal distributions of assets (i.e. land) retard economic growth rates, and thus that some redistribution might aid growth. The second factor is investment in rural areas. The rate of investment in rural areas in Latin America, Africa, and Asia has, according to the Bank, been very low. Because they are true believers in promoting private-sector investment opportunities, and see more investment as the key to greater economic growth, then ways to boost the flow of private investment into rural areas are important. The third factor, the more rhetorical one, is poverty reduction. Bank staff claim that their new policies around land are motivated by the issue of poverty, but as we examine the country cases studies in this seminar, we may develop serious doubts as to whether this motivation is rhetorical or real.
Nevertheless, “the good” is that we can now talk openly about land reform. The “bad,” then, refers to the actual policy packages that the Bank is actively selling to, pushing on, and imposing on governments throughout the world. There is great similarity in terms of recipes that the Bank is pushing on very widely different countries, and I propose a preliminary framework to organize our thinking about these policies, which is represented as a ladder in FIGURE 1. (PDF format)
All the policies that the Bank is negotiating with different countries can be thought of as fitting into a sequence where first you do one thing, and then you do the next, and then you do another, etc. We can think of that sequence as a ladder, where countries begin with certain policies and gradually move up the ladder, and in theory eventually get to other policies. At this point in time we have countries at very different points on the ladder, and others where the Bank is just beginning to talk to them about stepping onto the first rung.
Let me go through the typical sequence of Bank policies and explain briefly what they are, and why I think each one falls into the category of the “bad.” In the rest of this talk, I will be referring to Figure 1. The first series of policies fall into the general category of what the Bank calls “land administration” projects or programs. Many, many countries either have had land administration projects, are currently negotiating or renewing them, or are just starting to discuss the possibility of having them with the Bank. They have different names in different countries: land titling projects, land registry, mapping projects, etc., though sometimes they are just called land administration to group all the components together. They usually start with a cadastre, land registry, land surveys, mapping, etc.—basically what the Bank would call “putting the situation of land tenure in order,”—organizing things, reducing the chaos. The Bank wants countries to start with this step, because their fundamental goal is to create what they call “functioning land markets,” or markets for buying and selling of land, which actually function.
According to the Bank, without functioning and markets, transfer of land will not take place, and if transfer of land does not take place, then there is no possibility that poor people who do not have land will acquire land. Clearly we can question that argument, but that is what they say. They also mention—and this is what I think they are really concerned about—the issue of investment in rural areas. They feel that without functioning land markets where people can buy and sell land, and can use land as collateral to secure loans or give guarantees to investors, and where people—or companies or corporations—can have clear title with clear property rights, then according to the Bank, unless that’s the case, investors will not invest in rural production. Investors require the security of clear property rights, according to the Bank; and according to the Bank, reducing confusion and clearing up property rights will mean more investment, and thus more economic growth, and finally less poverty.
In fact the land ownership situation is unclear in many areas and in many countries, in terms of what the limits are for different parcels of land, who the owners are, where the land is registered, etc. Confronted with so much uncertainly, the Bank feels you have to start by organizing land administration as the first step toward creating land markets. Additionally, because there may not be enough private land to put into land markets to meet the demand for land—whether by the poor or by the wealthy and by corporations—, a major companion policy emphasis is on the privatization of public and communal lands. The privatization of public lands might take the form of concessions to companies who agree to invest in rural production, or might take the form of making land available for some kind of what passes for land reform at the Bank. The privatization of communal land in Mexico is a perfect case. The Bank-advised PROCEDE program is providing for the individual titling of ejidos, the very large areas of community-owned land created after the Mexican revolution.
The next rung on the ladder, or a rung associated with these two steps, is granting land titles that are alienable. Alienable means that you can sell the land, or you can use it as collateral at a local bank when you apply for credit, and therefore can also lose it if you default on a bank loan. It can also be your contribution to a joint venture with a private company, if you are a farmer or landholder—you’re investing your alienable land title, and most likely your labor, and the company is investing working capital. Of course if the business doesn’t work out, then everybody losses, including the farmers whose land titles are now alienable, and who lose their land. For the Bank, all of this is part of ‘facilitating land markets.’ When economies go through rapid growth ‘bubbles,’ land values can experience drastic short-term rises, inducing many small farmers to sell their now alienable land for what seems like a lot of money. Or when crop prices are depressed, farmers may sell because cash crop production is no longer profitable. All too often, however, the cash received for the land runs out quickly, and the family fails to find a substitute means of sustenance, rapidly becoming destitute. While they had the land at least they could eat, but without land or employment, they have nothing.
In this seminar we will see a tremendous number of problems associated with all of these steps. For example, typically the land administration-type projects are introduced into areas with complex communal land management systems, which in some parts of the world means multiple users of the same land, with multiple sets of rights. There may be somebody who has the right to let their animals use the land as pasture at one time of the year, somebody else who has the right to plant their crop on that piece of the land, somebody else who has the right to collect firewood, and somebody else who uses the water from the watershed where the land is located. When a land administration project arrives and starts delimiting clear borders to each parcel, and assigning each parcel to one owner, where that one owner can sell it, or do anything they want on that one piece of land, like building a fence around it and keeping everyone else and their animals off, what often happens is these mechanisms of cooperation and multiple use break down. In such cases only the one user is left with the rights to the land, and everyone else lose rights that may have been essential to their livelihoods.
Another kind of problem that often emerges are overlapping claims. For example, there are pre-existing existing land conflicts in many areas where such projects are initiated, as in the many areas of the world that are inhabited by indigenous peoples and have also been colonized in recent times by non-indigenous peoples who are also poor. When a land mapping-survey-cadastre-titling program is set up, it is automatically going to adjudicate a given piece of land in the name of one person or community that claims it, and not in the name of another person or community. We have seen, for example in Indonesia, extreme kinds of violent conflicts arising out of land titling programs in areas that already had less intense land conflicts. In other words, land administration projects can intensify land conflicts and generate poor-on-poor violence.
Of course, granting a secure title can in some cases respond to the legitimate and common demand of small farmers to really have ownership of their own piece of land. However, a very big problem arises, which is that this is all taking place in the context of neoliberal economic policies—promoted by the very same World Bank—which undercut the profitability and viability of family-scale agriculture. Typically, national market opening leads to enormous dumping in the local economy of cheap food produced in northern countries, which brings down the price that local farmers receive for what they produce, and basically makes agriculture or small farm agriculture be not economically viable (at least in terms of participation in the cash economy, as there may always be subsistence benefits to land access).
Where there are macro-economic policies, sectorial policies, and trade policies which all conspire to make agriculture not viable, and then you grant alienable titles to land, so that it can be sold, a typical outcome is the mass sell-off of land. So people finally get title, but because the price of corn or the price of rice or the price of whatever they produce is so low, they have no alternative but to immediately sell that piece of land. We see this in many countries, and unfortunately what happens, as described above, is that families receive a small amount of income for the sale, but a year later or a year and a half later they are destitute. Thus alienable titles in the context of neoliberal economics—you cannot evaluate land policies out of the larger economic context,—often result in increased landlessness and destitution through mass sell-offs. This can thus lead to the re-concentration of land in the hands of large landowners, who have the resources to buy the land that is being put on the market in what might be called desperation sales by poor people, poor people who cannot survive on (or off!) the land under neoliberal macro-economic policies.
In fact, the whole notion of land markets as the way to address poverty is very curious. The Bank claims that if there are functioning land markets, then it will be possible for poor people to acquire land. Unfortunately, as we all know, the market doesn’t respond to people’s needs, the market responds to money. Therefore, functioning land markets may lead in many cases to a net shift of land from poor people to wealthier and larger farmers, because poor people usually don’t have the financial resources to participate in land markets. This brings to the next policy rung on the ladder, the market-based or market-assisted land reform policies of the Bank.
The Bank has a general policy to create credit funds that are sometimes called ‘land banks’ or ‘land funds,’ for countries who have gotten to this rung on the ladder–who supposedly have functioning land markets—by which in theory poor people can get credit to buy land, and can in theory then participate in these functioning land markets and acquire land from wealthier people. This is the way the Bank claims redistribution will take place, and the poverty reduction objective will be met.
Here it is worth remembering the Bank’s emphasis on economic growth, and reiterating that the Bank’s own economists—in looking at the determinants of economic growth across many different countries—found much to their surprise, that countries with extreme inequality in access to resources such as land and wealth had very low rates of economic growth. Countries that were less unequal, or more equal, had higher rates of economic growth. Of course this is an empirical result that goes completely against historical Bank policy, but never the less it was something that sort of hit them on the head. Of course most of us would expect that countries with extreme inequality would have little growth, because the majority of the population is excluded from the economy if you have extreme inequality. In such cases, the economic growth measured as a national data point is only coming from a very, very small slice of the population, and the majority is marginal to economic life. So of course we would say that countries with extreme inequality will have low economic growth. But this was a surprise to the World Bank, this really shocked them, and to a certain extent led them to believe that they had to include some kind of mechanism for redistribution in their overall package of neoliberal economic reforms for the post-structural adjustment world. So they came up with this sort of ‘redistribution,’ and they called it ‘market-led land reform.’ But they were heavily criticized by people who said, “are you crazy? How can the market lead a process of land reform?” So the Bank changed the name to ‘market-assisted land reform.’ That was still too controversial, and they went through a process of changing names without changing the content, calling it at one point ‘negotiated land reform’ and at another, ‘community based land reform.’
The Bank argues that old style land reform, such as that implemented by newly independent and/or revolutionary governments based on expropriation, is not politically feasible in today’s environment, because economic elites resist that kind of land reform, and too much conflict would be generated. By paying money for land at market prices, they suggest, you would overcome the resistance of elites; because this would reduce conflict, and the price is negotiated as in any market transaction, they have used the phrase, ‘negotiated land reform.’ Whatever the name being used, in this model is the Bank does not actually put up money for buying land, because there is a Bank policy which prohibits buying land with Bank funds, but they provide various kinds of administrative funds and advice whereby governments create a land credit fund, either with their own resources or with resources they are able to get from other donors. The credit is made available to landless people, in theory, so they can buy land. This model is often called the “willing-buyer/willing-seller” model, because the goal is to not upset economic elites by confiscating their land, but to just buy that land which they are willing to sell, at the price at which they are willing to sell it.
The basic model varies slightly from country to country. In some countries a small portion of the money the poor receive to buy land is in the form a grant—the bulk is a loan—while in others the whole amount is a loan. But in general we can think of it this way: very, very poor people are given the opportunity to get a loan, which they must pay back, sometimes at very high interest rates—although we’ve seen that interest rates can sometimes be brought down via political struggle by organizations. They get a loan to buy a piece of land that a rich person is willing to sell. Right away there is a problem, because typically large landowners have both good land and bad land. They have some land that is very fertile, that has ample access to water for irrigation, that is close to markets; and they have some land that is on steep slopes, that’s on desert margins, or that’s in the middle of a rain forest, or is a swamp, and where there’s no access to markets. Perhaps they have wanted to sell that land for 20 years, but nobody would buy it. But now with the credit program under the Bank model, where typically government functionaries are orienting groups of poor people about what land they should buy, typically they are being oriented that they should buy the land that the landowner is willing to sell, which in some cases, perhaps not all, is vastly overpriced, useless land. [I should mention as an aside, that because of the economic crisis, in some cases landowners sell good land. But more typically they sell bad land.]
The ‘beneficiaries’ of these programs acquire a very large debt burden from the credit used to buy the land. The size of the debt is based on the price at which the land is sold. Here we find that one function of these programs in many different countries is to determine the price. The model itself invites corruption in which government land office functionaries collude with landowners, and in fact this type of corruption is rampant, and generally drives the price of land way up. Local government offices are charged with determining a ‘fair’ price in supposedly functioning local land markets. But in fact, in many of the areas where landowners are willing to sell land, there is no land market, because these are marginal lands that typically nobody will buy. We have seen cases where over the last twenty or thirty years there was not one sale or purchase of a piece of land. So that means that the government technician sets the price artificially, and that opens the door to corruption and collusion with landowners. In the end, we usually find that the land that is being bought by poor people is not only of poor quality, but is also highly over-valued or over-priced. In some cases these programs have contributed to a tremendous inflation of land values. In the end, it is probably safe to say that market-assisted land reform has been of greater benefit to landowners, who can dump poor quality at high prices, than to the putative beneficiaries—the poor.
Finally, then, the last step is usually some kind of production scheme for the ‘beneficiaries.’ In Columbia it may mean convincing them to rent their land to an African oil palm company, in other countries it may mean to start producing a non-traditional export crop, like snow peas or broccoli, which have high costs of production and require taking our more loans—substantially increasing the debt burden placed on the beneficiary families—and which also have highly unstable markets where prices fluctuate up and down all the time, thereby generating a very high risk of failure, default, and renewed land loss. These programs set up families for failure, failure which may leave them in a worse position than before.
Before I end I would like to briefly summarize what we’ve seen briefly in taking an initial stab at comparing the “willing-buyer/willing-seller,” market-assisted land reform model in different countries:
1. We have yet to see a country where the plans—in terms of the number of projected beneficiaries as a proportion of the total number of landless families—are very ambitious. Typically, full execution would only address about 1% of the landlessness problem, though in South Africa this is substantially higher. So even if there were full execution of these plans, they typically would not have a very significant impact on the problem of landlessness in a particular country. So right off the bat, the ambition is minimal.
2. We see in many countries that the actual execution of the goals is much smaller still. In South Africa, for example, which has the only goals that are even moderately ambitious, in the actual execution there has only been a very, very small proportion of where there was actual transfer of title. So that is one major problem that we see—first, not very ambitious goals, and second, very poor execution. Sometimes the poor execution is because the money that was supposed to be made available didn’t arrive, while sometimes it is because there’s not enough land being offered for sale. In most countries, that’s the case. We’re talking about extreme inequality, with huge landless populations, and for landowners to willingly put enough land on sale to address the size of the problem of landlessness is extremely unlikely. And we’re seeing that it is poor quality land in most countries, and the debt burden problem is very serious.
3. Another problem is that the design of the credit programs is typically such that in order to qualify, the ‘beneficiaries’ have to have to put up a certain amount of their own capital. In most countries the credit and/or the land grant that one gets from the land bank is not sufficient to actually buy land and make it productive. Families must have a certain amount of their own economic resources. So beyond all the other problems already described, this model automatically excludes the poorest of the poor—those who do not have their own economic resources with which to make as their own contributions. In many cases the beneficiaries who do acquire land then have no working capital, and cannot make the land productive. So it is a model that excludes the poorest of the poor.
Taking all of these observations together, our initial conclusion is that it would be impossible, even in theory—even if everything worked perfectly—to address the scale of the problem of inequality and landlessness through this kind of market-based approach. It is probably the single-most expensive model of land reform possible, because it’s based on the willing-seller model and because it is an invitation to corruption that inflates prices. To transfer a significant amount of land would imply an enormous amount of resources, way beyond the capacity of any government or any international agency—if this were to be the model that would end the problem of landlessness. So clearly it’s not, or it can’t be, such a program. It can only be, under the best of circumstances, something very small that doesn’t seriously address the overall problem. As we see in the Guatemala case study presented here, economic projections reveal that at best this model could not even keep up with the annual rate of increase amongst the landless population. In other words, landlessness would continue to grow, because the amount of land the model could give out would be less than the additional number of landless people added every year.
We have to examine this model all the way from the small scale—i.e. what happens to the individual families who go into these programs?—to the large, macro scale, projected into the future, and say even if it worked, would it make a significant difference? And I would argue that it doesn’t. Which begs the question being asked by many social movements the the Landless Workers Movement (MST) in Brazil: is this just a political ploy, based on symbolic but insignificant programs, designed to undercut these movements by holding out the illusion of another way, a less conflictive way? I fear that the Bank is trying to depoliticize land reform, to remove it from the realm of politics into the realm of the market. But we have seen that the market is incapable of dealing with the magnitude of the problem, a magnitude that is such that true political will is required if is to be addressed, political will that can only be generated through struggle and conflict.
FIGURE 1 in PDF format
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