A Coordinated Market Economy to Benefit the Poor

This article aims to investigate the possible role of agriculture with regard to poverty alleviation and development. It focuses more specifically on the problem of numerous smallholder farming families, who currently fail to get access to well and fair functioning market services and as a result get caught in the poverty trap and even face starvation. With reference to the framework of Transaction Costs Economy (TCE), it will be argued that market- and state failure are among the causes of this problem and that it is not likely to be solved through further liberalisation and more competition in global agricultural markets. A possible solution lies in state and other actors’ support for the development of markets and institutions that effectively support agriculture growth and strengthen the farmers’ bargaining power. The first sections will briefly describe rural poverty and the bottlenecks to agricultural development. Next is an elaboration on the concept “globalisation” and the differing economic views on globalisation and rural development. Finally, recommendations are made for policy changes.