Institutions for Pro-Poor Growth Institutions, agriculture & economic growth in Bolivia & New Zealand

1. Institutions for Pro-Poor GrowthInstitutions, agriculture & economic growth in Bolivia & New Zealand Steve Wiggins Overseas Development Institute

2. Inspirations and questions • How do otherwise similar countries end up in such different circumstances? • Chance to address the Maputo question! • How much can this be attributed to economic institutions? • And in particular, how did such institutions develop in agriculture?

3. Stark comparisons

4. Agricultural Growth 1.6% pa 3.5% pa

5. Economic Growth

6. Institutions Compared • New Zealand: • Land: the family farm • Commercial intermediation ex late C19, govt initiatives • Collective action in agriculture: co-ops & consensus • Bolivia • Land: still in debate — small farms in highlands ex reforms of 1953, settlement & LSCF in Oriente • Chronic lack of trust in economic bargains • Solidarios pero solitarios

7. Bolivia: rent seekingIntriguing hypothesis • Resource-based economy; scale … mining, hacienda • Key institution: Property Rights conferred by state • …but … property rights confer Rents! • Profit = NR + state favour  rent-seeking • Feeble state: few public goods, favouritism •  no legitimacy  political instability •  high costs in rent-seeking Changing models, continuing patterns

8. But not always this way!Back to the 1870s in NZ • Land held highly unequally • > 50% land held by 1.5% farmers in holdings >4k ha, cover 3.25M ha (1882 Ag Census) • But then Chance: • Decline of sheep running • North Island bush • Refrigerated shipping (1882)  dairying

9. But also Design: Government acts to ‘burst up’ estates • 1877 Land Act, • 1891 Land tax, • 1891 Lands for Settlement Act, etc. • barrage of measures to encourage conversion of estates to family farms • 1910: estates cover 1.45M ha; • Farms up from 10k to 80k by 1914

10. 1870s BoliviaExvinculación! • 1874 Ley de Exvinculación • ‘Spare’ land of indigenous communities becomes public, sold off to haciendas • 1950: 98% area in holdings of > 100 ha • Yet land concentration when farming was barely profitable! • 1900: <15% pop of 1.8M urban, c 270k

11. Where’s the difference?Imagination!Some pointers … • Voting • New Zealand: 1879 all men (incl Maori) vote, 1893 all women vote • Bolivia: 1950 property, income, literacy reqs — 4% vote • 1952 universal franchise • Education • NZ: 1877 universal compulsory primary schooling • Bolivia: universal primary schooling awaits 1952 Revolution

12. Conclusions Path dependency: • Yes, but 1870s • sí, pero … lo del 52 …

13. Conclusions (2)Virtues of slow and inclusive development patterns New Zealand: GDP per capita constant, 1861 to 2002 1932-2002 1.6% pa 1861-1932 0.98% pa

14. Conclusions (3)A tale of institutions? • Economic institutions are secondary: totems? • Investment climate in widest sense matters • Holy Grail of modern growth theory • But where does climate come from? • Kiwi clues: political imagination