Rural capital and its transformation

Abdul Bayes Loosely defined, rural livelihood system (RLS) goes to imply a matrix of options and opportunities that households embark upon to eke out a living in a regime of limited endowment of natural resources and plentiful supply of labour. The concept is a congregation of many factors including, obviously, crisis-coping mechanisms. RLS encompasses actions on the part of the households that are being undertaken not only for ensuring a bare minimum living or for facing crises, but also for seizing upon opportunities to expand the frontiers of choice set. Such a system thrives not only on production system per se but also on rural markets (e.g. credit, tenancy, land, water etc.), rural non-market institutions and social and infrastructural facilities available in rural areas. LIVELIHOOD ASSETS: Five types of capital or assets can be identified in this context: natural, physical, financial, human and social. Assets are both created and destroyed as a result of the trends, shocks and seasonality of the vulnerability context. Vulnerable people always tend to vent for extraction of the natural resources, no matter what they value in terms of sustainability. To them, the present is of more serious concern with regard to livelihoods than the future, and the poorer the household, the higher is the discount for the future. Land, water, and biotic resources (crop varieties and beneficial organism) are important natural capital, which people can draw on for agricultural production. Physical capital, such as agricultural and non-agricultural machinery and equipment or livestock holdings, are formed from the utilisation of surplus of agricultural production over what is required for the basic needs of the family. It is, of course, true that a single physical asset can generate multiple benefits. For example, access to secure land may lead to the access to financial capital or livestock may generate social capital (prestige and connectedness to the community) for owners as well as emerge as a source of productive physical capital. It may be noted here that government's policy to invest in basic infrastructure or technology generation or the existence of local institutions could help arrest encroachment upon natural resource base and thus contribute to the creation of assets. Availability apart, the determinant of access to the assets is ownership rights, markets and institutions regulating access to common resources. NATURAL CAPITAL: Natural capital is the term used for the natural resource stocks from which products and services (e.g. nutrient cycling, erosion protection) are derived for livelihoods. Examples of natural capital are land, forests, marine and wild resources, crop varieties and beneficial organisms that help sustain natural biological control. Access to natural capital is very important to those who derive all or part of their livelihoods from resource-based activities such as farming, fishing, forest extraction and mining. The survival of human kind would be at a stake without the key environmental services and the food produced from natural capital. Within the sustainable livelihoods framework, the relationship between natural capital and the vulnerability context is very important. This is the source of livelihood for the 'have-nots' but, could also seriously jeopardise the livelihoods of the 'haves', since the latter group depends on natural capital. For example, if for the sake of livelihood, the poor encroach upon trees and forestry, use too much fertiliser and pesticides for raising the yield of crops, the consequent costs could land on the shoulders of the rich in terms of degradation of soil fertility and other environmental hazards. Therefore, support to the preservation of biodiversity (through technology and direct action) and the provision of services/inputs emerge as paramount policy palliatives. HUMAN CAPITAL: Human capital represents skills, knowledge, health etc. that enable people to reap a better harvest from their hard labour. This is the building block or means of achieving livelihood outcomes. Good health is the most important human capital for the poor. The accumulation of human capital for accessing information and living an enlightened life can also be an end in itself. SOCIAL CAPITAL: There are many connotations to this but, suffice it to say, it implies social resources upon which people draw in pursuance of their livelihoods. The main pillars of social capital are network and connectedness, formalised group setting and trust, reciprocity and exchange. PHYSICAL CAPITAL: Infrastructure such as roads, rails, telecommunication is essential ingredients for the integration of remote areas where many poor people live. The presence of infrastructure, such as roads and telephones, cuts into the crisis in two distinct ways: first, it enhances mobility of the people in terms of migration and second, increases malleability along the ladder of opportunity set. This results from better-informed environment. For example, when people tend to know more about market prices, they can access more to job opportunities or smoothen the supply of input and output. But the demand for the infrastructure should come from the users. While good infrastructure is a factor, the livelihood approach also takes into consideration the deployment of transport to help the poor. FINANCIAL CAPITAL: Financial capital - savings, inventories, access to credit - goes to denote financial resources that are needed (and people try to take hold of) for livelihood objectives. Financial resources are not end in themselves but means to an end e.g. livelihood. Financial capital can be converted into other types of capital in varying degrees, and depending upon transforming structure and process. Second, it can be considered as an instrument for achieving direct livelihood outcomes e.g. purchase of food for reducing food insecurity. And, rightly or wrongly, it can also be transformed into political influence and enable people to participate actively in policy formulating agencies. The question of institutional sustainability is important here. Unless people believe that institutions like NGOs (non-governmental organisations) have come to stay or they would charge relatively low rate of interest, the sustainability could remain as a suspect. TRANSFORMING STRUCTURE AND PROCESS: The presence of capital of various types could recoil if the proper organisations, policies and legislations that shape livelihoods do not emerge concomitantly. In fact, the transforming structure and process goes a long way to determine "inclusive development". Values, mindsets, class structure, rules and regulations and their applications, tolerance of the society to corrupt practices etc. largely determine who are excluded and who are included in development activities initiated and implemented by the state machinery. The framework so presented serves useful purposes. In particular, it provides important issues and interconnections between issues. It also calls for attention to the core concerns. Livelihood strategies should be set in terms of the framework to achieve livelihood outcomes. The outcomes are: * More income * Increased well-being * Reduced vulnerability * Improved food security and * More sustainable use of natural resources. Abdul Bayes is a Professor of Economics at Jahangirnagar University. [email protected]