Rural Diversification: What hope for the poor?1

This short paper considers the poverty impacts of livelihood diversification and the potential challenges of creating a pro-poor rural non-farm economy (RNFE). Rural diversification can be defined as economic development of non-agricultural activities or a livelihood which has multiple, part-time components. It can be associated with a booming or recessionary economy or with accumulating or immiserating livelihood strategies. There are clear conditions that lead to either positive or negative outcomes and the theory behind these is summarised. Sub-sectors and returns from the RNFE are highly diverse, access inequitable, and labour markets casualised and multi-spatial. In turn this leads to class and gender inequality, insecurity and reduced social cohesion. However, diversified economies may also provide positive effects such as a check on falling wages and increased social mobility. The state has an important role to play in supporting positive potential and mitigating ill-effects. Prescriptions for investing in rich versus poor areas are considered, together with the difficulties of economic and political priority setting. The mode of development is debated, highlighting the possible disadvantages of a populist microenterprise approach. Finally, the importance of regulating or mediating rural labour markets is discussed. In conclusion we consider private and public investment flows into the RNFE and the need for state intervention to support ideals of spatially equitable growth. In the long term, an expanding RNFE and multiple livelihoods are a temporary phenomenon of structural transformation. However, the growth process is slow and these symptoms will be with us for many years to come.