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McKinsey’s agriculture plan

A skewed vision

by Kanj Hamade

When the conclusions of the $1.4 million McKinsey Lebanon Economic Vision first came to light, social media feeds were flooded with videos praising the consultancy firm’s magical solutions to the country’s economic woes: avocado and cannabis. 

Many even began to imagine a Lebanon on its way to becoming an avocado toast and cannabis-infused-water-pipe millennials’ paradise.

These headline grabbing snippets from the McKinsey report actually hid the core of the firm’s diagnostic of the Lebanese economy. An economy that “over the last 40 years, did not create any significant incremental wealth,” and in which “persistent corruption and legislative inefficiencies have further perpetuated the government’s inability to spur economic growth.” The country has, the report states, an “unconducive business environment and lagging infrastructure” (Lebanon ranks 133 out of 190 countries for ease of doing business, and 121 out of 137 countries for road infrastructure). The avocado and cannabis wow factor also did not allow for a critical reading of the report’s sector-specific recommendations and action plans, in particular its policy initiatives for agriculture.

To put McKinsey’s proposed agricultural plan in context requires reflection on the country’s historical agricultural policies. In 1920, after Mount Lebanon had suffered a devastating famine during World War I, the food security prerogative was the key argument in justifying Beirut and Mount Lebanon’s annexation of the Bekaa, Akkar, and the south (the formation of the “Grand Liban” that would then become the independent modern state of Lebanon). In fact, Lebanese leaders at the time thought of agriculture in the annexed regions as a food production sector that could answer food security needs. However, this vision changed in the early 1950s with the oil boom and the increasing demand for fruits and vegetables (i.e. high-value crops) from the Arab Gulf states. Lebanon’s ruling class of bankers, traders, and large estate landlords saw a great business opportunity, and so supported the transformation of local agricultural systems in the annexed regions into export-oriented agriculture. Quickly, citrus, apples, apricot and cherry orchards, and intensive potato production came to replace wheat, barley, lentils, and small ruminant grazing areas. The tobacco monopoly was also an effective way for the Lebanese ruling class to control farmers and generate significant income through exclusive rights to tobacco exports and the local sale of cigarettes. The lack of pro-poor rural development policies—coupled with the clientelism governing dynamics between political elites with local farmers and workers—widened inequality and failed to generate jobs in rural areas. Consequently, Beirut city’s poverty belt grew, contributing to the gradual descent of the country into the mid-1970’s civil war.

McKinsey’s agricultural vision today does not differ greatly from that of the 1943 “Lebanese Merchant Republic” vision. The international consulting firm conceptualizes the sector as totally subordinated to trade, aspiring to become the “Middle East’s high value crops breadbasket.”  The report diagnoses agriculture production as relying on low-value crops with no export potential, and characterizes it by poor access to global markets because of non-compliance with international trade standards and the lack of post-harvest infrastructure. 

Well-trodden path

Based on the above conception of the role of agriculture, the McKinsey report recommends three main lines of action. First, it recommends targeting commercial farms, suggesting support to transform and transition agriculture toward higher-value crops (tomatoes, avocados) and livestock, while improving export potential by facilitating access to international markets. Second, it recognizes the need to bolster family-based farmers by promoting and supporting the application of modern methods and technologies to boost productivity, while improving the governance of the local food market. Third, it suggests the establishment of a state monopoly for the production and trade of medicinal cannabis.

The first line of action duplicates the development path that prevailed in the 1950s, i.e. supporting a process of restructuring agricultural production that would exclude farmers and producers who are unable to cope with such changes, and that would concentrate the wealth generated by farmers in the hands of input suppliers and agricultural traders. Historical development in Lebanon has shown that export-oriented agriculture does not benefit small and medium farmers—and does not induce economic growth in rural areas. An agriculture sector that is subordinate to trade will always put the interest of traders first. Furthermore, the report disregarded the impact of such changes on natural resources including water and soil. For example, the vision that tobacco and olive fields could be replaced by avocado and mango trees shows a lack of understanding of the reasons why farmers have planted tobacco and olives in the first place—resource constraints, lack of irrigation infrastructures, lack of cooperative structures, and the preference toward low-input, low-risk modes of production.

Although the report rightfully divides the focus of its line of actions between commercial farmers and smallholders, it fails to understand that commercial farmers have already restructured their production toward high-value crops. However, these commercial farmers are a minority, and smallholders constitute the majority in need for proper development policies and supportive auxiliary services. In this regard, the actions proposed in the second line of intervention are relevant and highly needed. They should be the core of the government’s action in supporting the restructuring of production at the level of smallholders without necessarily linking it to export-oriented crops only.

The overall policies do not prioritize an agricultural sector that puts the producer and the agricultural workers first, and the traders and political elite second. The development of policies and legal frameworks is a must for the development of the sector, together with the restructuring of production. The policies should include: a legal framework that formalizes agricultural activities and defines agriculture workers’ rights, support for the establishment of independent and sustainable farmers’ cooperatives, and protection against the clientelism and control mechanisms that govern access to subsidies. These policy prerogatives—and the fact that today agriculture is a de facto informal system—were totally ignored by the McKinsey report, as they have been totally ignored by successive Lebanese governments since 1943.

cui bono

In fact, the McKinsey report’s agricultural chapter seems to have been written with a Lebanese merchant and politician mindset. A trader-politician that has seen a great opportunity in monopolizing the production, transformation, and trade of cannabis for health purposes. The proposed legalization of cannabis under a state monopoly is a further confirmation that McKinsey’s suggested agricultural plan does not have any consideration for rural social dynamics. The establishment of a state monopoly for cannabis production, similar in its mechanism to the tobacco monopoly, is likely to have a high negative impact on rural areas. The state and—more importantly—the traders that will benefit from cannabis trade concessions are likely to control and receive most of the wealth generated by the production, while farmers will be left with little. Furthermore, the legalization of cannabis for medical purposes, without a parallel legalization of recreational use, will not lead to the end of the recreational market. Traders of “illegal” cannabis will offer prices to producers that are higher than the price the state is ready to pay. The increasing prices of recreational cannabis will be an incentive for rural youth to engage in illegal trade, while the “illegal” parallel trade will be a direct threat to the state-led monopoly. The latter will have to defend its interests by violent means in rural areas, reproducing a situation that will be worse than the one we currently face in remote areas of the Baalbek-Hermel governorate. Cannabis production is certainly a great opportunity for Lebanon—just as it is a great opportunity for Canada and California—but it has to go through a regulated legal competitive market for both recreational and medicinal cannabis.

When taken out of context, the action points proposed by the McKinsey agricultural plan could indeed be applicable to ensure the growth of Lebanese agriculture, or any other agriculture in the world for that matter. The major mistake of the international consultancy firm is looking at the role of agriculture from a mere productivity lens, taking the sector’s development path out of its historical and socio-political context, while also ignoring new agricultural paradigms that look at agriculture as a multi-functional sector. The sector should not be restrained to exporting raw agricultural commodities, but should also play a role in community development, environmental and cultural preservation, landscape preservation, natural resources preservation, social cohesion, and rural social changes. Lebanon is in need of an agriculture sector that fulfills these roles, not one whose main objective is to export raw commodities at the benefit of traders, and at the cost of depleting land and water resources. Such policies could allow for sustainable rural development and save us the bitter taste and violent repercussion of unequal development and social inequalities.

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Kanj Hamade

Kanj Hamade is an economic development consultant and academic based in Beirut and Athens, with over 15 years of experience in food security, sustainable livelihoods, labor market dynamics, and rural development. He works with international and local organizations to evaluate, adapt, and enhance projects that prioritize local communities' needs and place them at the center of change. Kanj holds a PhD in economics and politics of agriculture and food from the University of Bologna – Italy and is co-managing Economic Development Solutions (EDS) – a consulting firm based in Beirut

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1 comment

Jad Haj Chahine January 27, 2020 - 4:37 PM

Great article Kanj! Couldn’t agree more with your on you criticism of the McKinsey report it seemed very generalized and targeting the agricultural sector in big attractive words without taking rural development into consideration and the social aspect with its high level of complexity in its strategy.
Personally I have always believed in the creation of cooperatives as one of the main solutions for the agriculture sector, and it would be the best solutions for small to medium sized farmers. Aside from its most obvious benefits, It can improve the quality of the product since standards will be set for its members, these cooperatives can be much easily targeted by international development agencies and ministries for further technical help and benefits, sales will be better driven because they will have better funding to start with post harvest practices and reach out for stable foreign high paying markets.

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