Under‐investing in public goods: evidence, causes, and consequences for agricultural development, equity, and the environment

A common factor that explains why agriculture causes too much environmental degradation, grows too slowly, and has been ineffective in reducing rural poverty is the generalized tendency by governments to under invest in public goods despite the high rates of return to such investments. A large share of rural public expenditures is deviated to private goods (mostly subsidies to the wealthy), which generally have low or even negative rates of return. Behind such an obviously aberrant choice are political economy forces; a highly unequal political lobby market leads to government policies that are biased in favor of economic elites and detrimental for both the environment and rural development. Globalization may affect this important distortion on the allocation of government expenditures in various ways. One such way is by restricting the ability of governments to repress the political mobilization of the poor to counter the almost unchallenged power of the elites in the lobby market. This may contribute toward creating conditions that are more consistent with sustainable and socially equitable development.