Response from Oxfam: Governance, land grabs and tricky statistics

by Ricardo Fuentes-Nieva and Marloes Nicholls

It is encouraging to read the post from Aid Thoughts. We appreciate the time he put into Oxfam’s analysis on large scale land deals. Indeed, we were hoping that our blog would spark debate and bring more attention to this topic.

As a quick summary, we took two databases, the Land Matrix and the World Governance Indicators and found that land deals are more likely to occur in countries with lower levels across different governance indicators.  We specified that “This analysis is only the first step towards a more in depth research project. Next steps include a more in depth analysis on the determinants of the number and location of deals

Aid Thoughts seems to take issue with the use of this kind of analysis when they are so preliminary. There are two things to say to this:  Firstly, and as Aid Thoughts acknowledges, there is other evidence in the development literature that points to the fact that land deals are concentrated in poorly governed countries. Our conclusions were not based only on our analysis and we used the best evidence at hand (both internal and external) to generate a better understanding of the problem (which Aid Thoughts actually helped with his critical review). So, we stand by our decision to publish the preliminary results.

Now, there are a couple of things to discuss on the technical front of his critique. Here are some:

 

1) Investors or governments?

AidThoughts replaces governance indicators with income per capita because they better explain the existence of land deals. This leads him to suggest that “Maybe investors aim for countries who are more willing to sell off land, not because they are poorly governed, but just because they are poor.” This is an interesting idea but if we put aside the regression tables and reflect for a moment, is it sensible to think that land investors are attracted to countries for being poor? Why would investors be attracted to the characteristics of poverty, such as poor infrastructure, limited public services and low levels of education and health? A more interesting hypothesis that AidThoughts raises, and which we think is worth exploring too, is that it might not  be investors who target countries, but bad governments who sell the land of their citizens.

 

2) Truncated sample bias.

AidThoughts recognizes that running OLS with two control variables, as reported in Table 3, is not serious analysis (and yet he managed to muddle the significance of the estimators in his table). But what’s really puzzling is that, in order to prove his point, he then goes on to throw the entire kitchen sink of governance indicators into the next table (Table 4). These indicators are highly correlated amongst them, and it is difficult to find a sensible explanation to specify the model that way.

He then goes on to say of this table:

“In column (1), prior controlling for income, only one of the relationships we expected to see has returned: countries rated low on the rule of law index are more likely to have land deals. Political stability/violence is also associated with land deals, but unfortunately that wasn’t part of Oxfam’s theoretical model. Now, voice and accountability is positively correlated with land deals! Of course, most of these relationships vanish when we toss in income, although it is worth noting that the rule of law measure keeps its significance and sign. So the relationship between governance and land sales seems to be a lot more complex than the Oxfam brief is suggesting.”

That’s a lot of explanation for a badly specified model that includes highly correlated regressors. But that’s not even the most puzzling part of that table. AidThoughts then tries to explain the number of land deals with the same variables but he does not correct for the truncated sample (look how his sample drops from 212 and 183 in the first two columns to just over 50 in the last two). Ignoring the bias in the observed sample is a mistake and something we had identified as a problem, and that’s why we suggested exploring  a double hurdle estimation to understand the issue better.

 

3) Reported land deals bias.

Aid Thoughts briefly mentions the potential problem of bias in the Land Matrix, but we don’t agree that he identified the right direction of bias. He argues that land deals are more likely to be reported in developing countries by diligent activists than in developed countries like the UK. On the contrary, we argue that land deals are much less likely to be ignored in richer countries with freer press, more access to information and better organized civil societies. Does Aid Thoughts seriously believe that a land deal can be more easily concealed in the UK than in the DRC?

Overall, we are very encouraged by Aid Thoughts’ response. He mentions that he can be convinced of the problem with more data and more, better data is on its way according to conversations we’ve had with the people managing the Land Matrix. So here’s our proposal for Matt: let’s work together – rigorously and objectively – on this issue in the next few months to try to better understand what’s driving the land rush. The problem deserves as much attention as we can give to it.

Land grabbing: whatever you do, don’t mention the G-word.

Large scale land purchases get some more media attention, this time from Jonathan Glennie over at The Guardian:

“A new report on land acquisition by the Munden Project/Rights and Resources Institute brings an important angle to the land “grab” debate. Rather than focusing on the ethics of land grabbing, the report makes the business case for working with local communities, arguing that failure to inform or fairly compensate affected locals heightens the risks to investors. Why? Because affected communities start to make life difficult for abusive or lazy companies, leading to massive unexpected costs or even an eventual full-scale retreat.

What is slightly disconcerting is that Glennie managed to write an entire article on land grabs while only using the world “government” once. NGOs and the media have largely painted the land grabbing story as a situation where evil companies are parachuting in and snatching land away (for example, check out Oxfam’s recent campaigning). In reality, land acquisitions which circumvent local property rights are only possible when governments themselves are incompetent, corrupt or overly-impatient. Of course campaigners realise this, but it’s much easier to set this up as story of evil capitalism than it is of governance, the latter being harder to sell and even harder to treat. I’m not trying to pick on Glennie for leaving out a lengthy discussion of governance in his article, but it would be nice for people to start using the g-word a bit more.

Property Righteous

GET OFF MY PROPERTY!

I was skimming through one of my history books recently, and was struck once again by how much more circumspection they afford to the creation of property rights than the majority of economics and development texts that deal with them. There’s a strong strain in development thinking to the effect that fixing property rights is a necessary precursor to both economic development and economic justice. This comes up in work on fragile states and on non-conflict affected areas, with the strong implication that it’s not only necessary for economic development, but that it reflects a kind of moral progress for society.

There’s absolutely no doubt that there is a correlation between the existence of property rights and the onset or acceleration of economic development, a fact that has been long recognized by historians (indeed, one of the principal benefits to economic development brought by colonization on the Indian subcontinent was the association of property rights with legal structures able to sustain and enforce them). Having said this, though, there’s need to provide a little subtlety in the analysis of property rights by acknowledging some of the complexity in how they emerge and the mechanisms through which they impact on economic growth and social stability.

Perhaps the first misconception we need to shake a little relates to the presumed moral dimension of property rights. The recognition of property and rights to it is generally assumed to be a socially progressive step in the development of a society. Historically, this has rarely been the case; it has been a developmental step, but the establishment of mechanisms through which property can be formally claimed and protected through the coercive power of the state have usually followed land grab, asset seizure and similar means of regressive redistribution. Most commonly a powerful elite or group of elites seizes land by force and then uses its influence and financial clout to ensure legal ratification of its actions and protection of the assets and land seized. The classic example of this is the enclosures movement in England. Property rights, when domestically generated through internal demand systems, tend to come when one group has gained contested property and needs protection; when there is a social consensus of what property is and when the existing distribution of it is seen as just, property rights are lower on the agenda.

Following this thought a little, it also becomes apparent that the timing of the creation of property rights matters a great deal. If property rights are formalized after the redistributive process described above, they can be an important means of stimulating capitalism by creating a distinct classes of landowners or asset holders and landless or asset-less workers. This disjunct lies at the root of the capitalist/industrial transformation, as it sets up the system of capital applied to wage labour, creating the incentive structure that powers the extraordinary innovative impulse and dynamism that we find in modern economies. If, however, property rights are formalized rigidly early they can greatly reduce the possibility of accumulation, while protecting the rights of those less-powerful citizens; yet capitalism is based on just this accumulation.

This dilemma then brings us to a further subtlety often overlooked in discussions of property rights: that a central characteristic of property regimes must be flexibility. With flexibility, it becomes possible to facilitate the accumulation that at some stage must occur for the development of capitalism while maintaining a level of protection (and compensation) for those who must inevitably be losers in this process. This can soften the economic transitions that capitalism begets, but may also slow the process: a trade off that each society needs to assess for itself.

Finally, property rights might have some claim to universality as a concept, but as Hernando de Soto has shown, different societies have vastly different conceptions of what property is and how it should be recognized – something that policy on property rights rarely recognizes. International organisations are keen on transposing western property systems onto new areas, but the reality is the way in which property is codified and transferred differs quite greatly between different countries, even in the West, and in particular the ways in which property rights evolved in each country was dramatically different.

So what am I saying? Property rights are far more complex than simply being ‘a good thing’ that ‘must be prioritized for economic development’. We need to think much more sharply about exactly when and how they should be formalized, the rules and mechanisms that should be associated with them, how to match them to specific local conceptions of property and its transmission between owners. Economic development and transformation will not be the only criteria in this: social and political stability will matter as well. In short, property rights should be dealt with as a practical issue and not an abstraction.