A commercial - based approach to sustainable livelihoods: Review and syntheses

JOURNAL OF SCIENCE, Hue University, Vol. 70, No 1 (2012) pp. 207-216 207 A COMMERCIAL-BASED APPROACH TO SUSTAINABLE LIVELIHOODS: REVIEW AND SYNTHESES Truong Tan Quan1, Nguyen Van Toan2 1College of Economics, Hue University 2Hue University Abstract. Sustainable livelihood framework has been developed and used by several authors, organizations and studies. The purpose of the paper is to explore missing factors in the livelihood sustainable framework in previous studies. The result of reviewing and synthesis shows that the role of market has unliklely been exploited in the framework whereas most livelihoods is currently depending on the market system. Therefore, the market role has been integrated in the framework when traditional sustainable livelihood framework and supply chains analysis have been combined. 1. Introduction A considerable number of studies, projects and papers have applied a sustainable livelihood framework in their works to investigate the livelihood of people from households to community levels. However, it is likely that the role of markets is neglected in these applications, so intervention is not very effective and efficient yet. The purpose of this paper is to review and synthesize previous studies and then develop the framework that will be used to investigate household livelihoods in market-based production. The paper is structured into five sections. Following this introduction is the second section which discusses the conventional sustainable livelihoods framework and its relevance to household behavior. The third section discusses the linkage between livelihoods and markets in a market focused system. A commercial-based sustainable livelihood framework is then developed by integration of traditional sustainable livelihoods theory and supply chains analysis. Finally, some conclusions are drawn. 2. Sustainable livelihoods approach 2.1. Main features of conventional sustainable livelihoods Sustainable livelihood (SL) concepts have been widely used by many researchers, organizations and agencies after being first introduced at the World Commission on Environment and Development in 1987. At first, the thinking on sustainable development was mainly focused on the macro level, and then it developed to address the wellbeing of individuals and households (Solesbury, 2003). Subsequently, 208 A commercial-based approach to sustainable livelihoods many organizations and agencies such as the International Institute for Environment and Development (IIED), United Nations Development Program (UNDP), Oxfam, Care, International Institute of Sustainable Development (IISD), Department of International Development (DFID), Institute of Development Studies (IDS) and some other agencies have adopted the concepts to meet their goals, foci, and priorities (Carney, 2002; Solesbury, 2003). Accordingly, the SL approach has become diverse in terms of both users and uses. Although the concepts of SL have been adapted considerably by users, there are common components of the SL framework that are widely recognized and accepted. These components are described within DFID’s sustainable livelihood framework as follows (Fig. 1). Capital assets and capacity to access these resources has a major impact on sustainable livelihoods. These assets include human, natural, financial, physical and social capital (Carney, 1998, Soussan et al, 2001; Hussein, 2002; Sida, 2003; Odero, 2003). According to DFID (2001), these assets can be defined as follows. Human capital is the skills, knowledge, capacity to work and good health that together enable people to pursue different livelihood strategies and achieve their livelihood outcomes. Natural capital is the bio-physical elements such as water, air, soils, sunshine, woodland, minerals. It reflects the natural resource stock. Financial capital is defined as the financial resources that people use to achieve their livelihood objectives. Physical capital is the basic infrastructure and physical goods that support livelihoods. Social capital is the formal and informal social relationships (or social resources) from which various opportunities and benefits can be drawn by people in their pursuit of livelihoods. The second component of the framework is the transforming structures and processes. This component includes institutions, organizations, policies, and legislation that determine capacity to access capital, the terms of exchange between assets, and the returns on different livelihood strategies (DFID, 2001). Accordingly, insights into sustainability at different levels (micro, meso and macro), together with the constraints and restrictions imposed on different livelihood strategies, can be obtained through understanding these structures and processes. The understanding also clarifies opportunities to improve livelihoods of people through transforming the structures and processes. The third important component of the livelihood framework is the livelihood outcome. It is defined as the goal or the result of livelihood strategies (DFID, 2001). The outcome is generally to improve the wellbeing of people but its emphases or focus will be diverse, including both physical and emotional aspects such as poverty reduction, TRUONG TAN QUAN, NGUYEN VAN TOAN 209 increased income and sustainable use of natural resources. Fig. 1. DFID’s sustainable livelihood framework (Source: DFID (2001), Sida (2003)). In order to achieve the livelihood outcome, the livelihoods have been built from a range of choices, based on their assets, transforming structures and processes (DFID, 2001; Soussan et al, 2001; Cahn, 2002). Livelihood strategies are the combination of activities and choices that people make to achieve their livelihood goals or the set of decisions to best employ the assets available. This is a continuous process but there are always key decision-making points that impact on the success or failure of the strategy (Soussan et al, 2001). These points can include crop selection, selling time, involvement in a new activity, changing to other activities, and adjusting the scale of activities. According to Scoones (1998), there are three main livelihood strategies for rural households: agricultural intensification or extensification, livelihood diversification and migration. An alternative perspective known as Khanya’s framework focuses on the relationship with natural resources and categorises the three main livelihood strategies as natural resource based, non-natural resource based and migration (Hussein, 2002). Based on other criteria, in particular the relationship to external threats, Rennie and Singh (1996), and Soussan et al (2001) divide strategies into two categories of adaptive (long term change in behavior patterns) and coping (short term responses to immediate shocks and stresses). Clearly, there is no unique livelihood strategy but rather a range of livelihood strategies. Therefore, the important issue is how to select or introduce the strategy that is most relevant to the situation of particular households and which maximizes the utility of both the individual and society. The final major component of the sustainable livelihood framework is the 210 A commercial-based approach to sustainable livelihoods vulnerability context. This reflects the shocks, trends and seasonality. These factors can not controlled by people in the immediate or medium terms (DFID, 2001). Therefore, analysis of sustainable livelihoods not only focuses on how people use assets to achieve their goals, but addresses the vulnerability context that they may face, and the means by which people can cope and recover from shocks and stresses (Chambers and Conway, 1992; Soussan et al, 2001; Cahn, 2002). These core components work together, and interact with each other within a dynamic livelihood system (DFID, 2001; Soussan et al, 2001; Carney, 2002). As a result, the issues can be viewed holistically. The SL approach is people-centred, participatory and operates at multi levels across sectors. Given its emphasis on sustainability, it is useful in addressing poverty reduction, rural development, responses to emergencies, and community based planning where the issues or problems are usually multi-dimensional (Hussein, 2002; Cahn, 2002; Carney, 2002). Also, according to a range of authors, the sustainable livelihood approach, by focusing and building on strengths that people have rather than on what they do not have, is forward-looking and positive (Norton and Foster, 2001; Hussein, 2002; Cahn, 2002). There is also a range of concerns that have been raised relating to the sustainable livelihoods approach and its application. The first concern is that the framework does not focus sufficiently on the relationships between the factors (Cahn, 2002). Therefore, the importance of one or more factors can be underplayed. Linked to this, Carney (2002) claims that because of existing viewpoints and user experiences, unfamiliar aspects may be omitted, despite these aspects being crucial to livelihood. In addition, although the SL approach was developed to be used holistically across sectors, the reality is that most governmental organizations and agencies are operated and funded in relation to a specific sector. Consequently, the application of this framework can be very difficult in reality (Carney, 1999; Cahn, 2002). Another concern is that although the framework is intended to put people at the centre, some components such as political capital, gender, and a range of other power issues, are not emphasized or considered sufficiently (Hussein, 2002). Similarly, Carney (2002) claims that insufficient attention is given to the need to increase the power and rights of the poor. Another important concern is that markets, economic issues and the private sector are given insufficient attention. This concern comes from the fact that although the framework encourages researchers to understand the complexity of livelihoods and to take local contextual factors into account, its use as an analysis framework has largely been undertaken by non-economist, social scientists (Carney, 2002). TRUONG TAN QUAN, NGUYEN VAN TOAN 211 2.2. Adoption and application of the sustainable livelihoods approach Based on the main framework as described, the SL approach has been widely applied and adopted by governmental organizations, non–governmental organisations, researchers and practitioners. The most intensive and frequent use of the approach has been in relation to poverty reduction and rural development. The applications include project design, implementation, monitoring and evaluation at both macro and micro levels. Organisations to have used the SL approach include DFID, the World Bank, the IMF, FAO, International Fund for Agriculture and Development (IFAD), Save the Children (UK), Society for International Development (SID), European Commission (EC), Swedish International Development Cooperation Agency (SIDA), UNDP, CARE and Oxfam. Reports on these applications have been widely published (Turton, 2000; DFID, 2001; Hussein, 2002; Carney, 2002; Sida, 2003). Besides poverty reduction purposes, the SL approach has been widely applied to different sectors like natural resource management and fishing development (Alliison and Ellis, 2001; Allison and Horemans, 2006) or tourism development and livelihoods (Simpson, 2007; Tao and Wall, 2009). Market factors have begun to be exploited for livelihoods improvement, particularly in tourism studies, but only relating to particular aspects rather than the overall market system. 3. Market, livelihoods and linkages Hussein (2002, p. 36) refers to Oxfam’s belief that “improved access and or power in markets [is] critical to the livelihood of the poor producers and improve[ment in] wages and employment conditions for women”. However, it seems that the linkages between markets and livelihoods have not been widely explored. Important issues include both input and output markets, and both commodity and non commodity products. According to Dorward and Kydd (2005), there are three main exchange mechanisms. These are gift exchange, hierarchical exchanges and market exchange. These mechanisms may exist together in a livelihood system. The gift exchange is based on shared values and reciprocity. Hierarchical exchange is based on allocation of resources through command and control. In contrast, market exchange is based on voluntary participation and a ‘win win’ relationship which is precise in terms of quantity, quality, space and time. This market relationship normally has a supporting requirement of a monetary currency and an enforceable legal system. Globalisation and trade liberalisation are the dominant tendencies across most countries of the world. As part of this trend, commercialisation of agriculture is also occurring in most countries, although the rate of change varies across regions and 212 A commercial-based approach to sustainable livelihoods sectors. As a consequence, it is contended here that the livelihoods of people, including the poor, cannot be separated from the development of both input and output markets. Subsistence agriculture may have elements of gift exchange and reciprocity, where surpluses are gifted to others. In contrast, commercial agriculture operates under a market exchange system. This market can be a highly efficient mechanism for allocating resources, goods and services, but markets do not always operate well (Dorward, Poole, Morrison, Kydd and Urey, 2002). Accordingly, it is contended here that an understanding of market opportunities, constraints, and mechanisms, together with their limitations, is very important for improving the livelihoods of people. If markets are to function efficiently there is a need for an institutional and infrastructure framework that allows all parties open access combined with transparency of information. Markets of relevance include land markets, physical input markets, labour markets, credit markets and output markets. The development of these markets impacts not only on the accessibility and accumulation of assets, but also on selection of livelihood strategies. The converse also applies, in that poor people are often constrained from participating in these markets because of their lack of financial, social and human capital (Barrett et al, 2001; Dorward et al, 2003). Labour markets are of particular significance in the Vietnamese context. This is because population density in rural areas is high and there is typically a surplus of labour. Labour markets are important for transforming the labour force both between sectors and regions. A number of authors, including Carney (2002) and Dorward et al (2003) have identified that the development of markets can increase the vulnerability of some groups within society. Typically this can occur when some groups are either excluded or disadvantaged by power and institutional relationships that create asymmetry of information and bargaining power. Dorward et al (2003) also contend that over emphasis on non-farm activities relative to agricultural development can negatively impact on the poorest groups. Accordingly, it is contended here, and in relation to this study, that markets and livelihood analysis should be combined together in analyzing the constraints and opportunities for better livelihoods of the poor, particularly in the context of trade liberalisation and commercialisation. 4. Commercial-based /market- based sustainable livelihoods Although the role of markets in relation to livelihoods has been increasingly recognized by researchers and policy makers, questions remain as to the best way to bring markets and livelihoods together within an analytical framework. One way would be to analyse markets and associated supply chains alongside livelihood analysis as separate but complementary analyses. An alternative is to consider market development and associated supply chains as a specific factor that can be a transforming process TRUONG TAN QUAN, NGUYEN VAN TOAN 213 within the livelihoods framework. Within this approach, markets can be considered positive in that they lead to increasing living standards. They can also be negative in that they may increase vulnerability either through encouraging non sustainable practices or through further marginalization of specific groups within society. The risk with undertaking value chain analysis separately from livelihoods is that there will be undue emphasis on products and relations between actors within the chains, rather than exploring how people can use their assets or capital to create these products, and on the overall impact on livelihoods. According to Kanji et al (2005), the combination of livelihood analysis and value chain analysis can complement each other. The livelihood analysis can allow an assessment of possible trade-offs between choices (strategies and outcomes) while supply chain analysis can provide the essential picture of how the local market interacts with the global market. This combination also provides a more comprehensive understanding of both the structure of markets and the way in which markets for particular commodities interact with livelihood strategies. Both analyses can be conducted in a participatory way in which quantitative and qualitative elements can be used to complement each other. Thereby, interventions can be more effective in improving the livelihood of the poor. Although the idea of integrating sustainable livelihoods and supply chain analysis has been introduced within this section, the application of this integrated approach is still not well developed. Accordingly, the framework of Dorward et al (2003) (Fig. 2) is modified here to explicitly include markets and their interrelationships within the livelihood framework (Fig. 3). Fig. 2. Modified sustainable livelihoods framework (Source: Doward et al (2003)) 214 A commercial-based approach to sustainable livelihoods Fig. 3. Modified commercial based-sustainable livelihoods framework Within this framework, the livelihood is still the centre of analysis as it is within the conventional sustainable livelihoods framework. However, the interaction between livelihoods and markets is explicitly explored. In particular, consideration is given to different types of markets together with the possibility that these markets will impact in differing ways. The enabling factors (required interventions) such as transport systems and roading infrastructure for different types of markets, and the way that each market interacts with other elements of the livelihood system, become important elements of this framework. This includes fundamental elements such as changes in the pattern of household food consumption, and changes in production activities. The interaction between markets and policies, institutions and processes is also emphasized in this commercial based sustainable livelihood framework. Markets include inputs and output markets and their respective input and output chains. Input markets include land, labour, credit, and physical inputs. Output markets include commodity and value-add outputs. The benefits from the development of these markets and agribusiness chains can include direct employment creation, facilitation of new technologies and hence increased production, and reduced transaction costs thereby increasing economic efficiency. Market developments can be both facilitated and constrained by government policies, interventions and institutions. Market developments can themselves lead to new policies and institutions. Similarly, markets are not only impacted by shocks and trends, but can generate shocks themselves, create new risks, and thereby increase the vulnerability context. Land markets create opportunities for aggregations through both sales and leasing. These markets can also facilitate consolidation to reduce fragmentation, which itself impacts on commercialisation opportunities. TRUONG TAN QUAN, NGUYEN VAN TOAN 215 Labour markets include local, regional, national and also international markets in the context of globalisation. The efficient operation of labour markets facilitates the transition of labour out of the agricultural and rural sectors. This process not only creates more non-farm income but also creates opportunities to apply new labour saving technology. Physical input markets include machinery, seeds, livestock, fertilisers, pesticides, and weed killers. Accessibility influences not only transaction costs, but also creates new production opportunities. The consequent increase in production are enabling for further development of output markets. Output markets are driven by changes in patterns of food consumption that are caused by increases of income, globalisation, and westernisation. 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