Market Systems: Late to the Resilience Party

February 20, 2015

Resilience has been a popular term in development for the past few years. Back in March 2013, the British newspaper The Guardian bemoaned its use as an ill-defined buzzword, stating, “Donors, recipient governments and implementing agencies are selling 'resilience' to the public without a clear definition or a money-back guarantee.” But while the literature and blogosphere abound with references to resilience, market systems developers have been slow to get on the bandwagon.

This is probably largely due to at least two perceived dichotomies: the first between promoting efficient, market-driven production on the one hand and fostering diverse, semi-subsistence livelihoods on the other; and the second, a difference in focus between facilitating the development of emerging commercial actors and building the asset base of the most vulnerable.

But, as the Leveraging Economic Opportunities (LEO) project has tried to show in its recent paper “Market Systems for Resilience,” households and communities need access to markets to become resilient, and these markets themselves need to be resilient to shocks and stresses. So—better late than never—market systems development is increasingly embracing the need to focus on resilience. Indeed, the U.S. Agency for International Development’s framework for inclusive market systems development states that the objective of market development is “to catalyze a process that results in a market system that is competitive, inclusive and resilient.” 

A review of the literature reveals a fair degree of agreement (although a dearth of supporting research) about the determinants of household resilience. These determinants include adaptive capacity (livelihood and risk diversification, access to credit, practices and technology to manage risk, positive coping strategies, etc.), the household asset base, access to and the availability of food, social capital, and women’s empowerment. Efficient and resilient markets play a key role in strengthening many of these determinants.

We know less about what makes markets resilient. But drawing from research on the resilience of non-economic systems, supply chains, and individual firms, the following emerge as likely characteristics of resilient markets:

  • Diversity of related products and diverse market channels (preferably with different risk profiles)
  • Redundancy of multiple buyers, sellers, and service providers
  • Trusting relationships that allow cooperation, communication, learning, and innovation
  • Market governance and policy environment characterized by transparency, equity, and consistency

This list may not be particularly surprising, but it does have significant implications for the way we develop market systems in places that are vulnerable to shocks and stresses. Instead of looking for those one or two products that will pull people out of poverty or for that one lead firm that will provide market access, we need to identify a mix of different but related products that can be sold into a variety of markets. We need to focus on the intangible aspects of cooperation and learning as well as on the more obvious issues of access to inputs and credit. And we need to keep in mind the importance of policies and norms for market performance. 

The writer Alain de Botton said, “A good half of the art of living is resilience.” Perhaps a good half of market systems development is, too.