How Can NIE Inform Sustainable Livelihoods Analysis and Actions? 2.1.3 NIE and Livelihood Activities

We identify two principle thrusts of NIE’s contribution to understanding of livelihood activities.

First, given the importance of institutional arrangements, the development and maintenance of these arrangements becomes a critical livelihood activity. Productive and equitable arrangements are not only an important part of social capital as a livelihood base, but also a livelihood outcome in themselves, enhancing dignity and freedom. Poor people demonstrate this by investing resources in such activities, and such investment should be understood, valued and supported.

Second, NIE provides a framework for exploring relationships between technological change for productive activities and institutions that different technologies require. Increased productivity is commonly achieved by product and process specialisation, with greater numbers of linkages between actors producing and consuming different goods and services or involved in different stages of production. Such linkages, however, carry transaction costs and risks, and require low cost institutional arrangements.

There are several obvious, but easily forgotten, implications of this. First, much technological change relies on institutions if it is to be practical and realise its potential benefits. At its simplest, increased productivity often needs product markets, but there are often also needs for input markets, for credit and savings facilities, and for investments in specific assets. Where the institutional environment is weakly developed (with weak laws or enforcement, high crime rates, corruption, poor macro-economic management, etc.), where communications are poor, or where people are risk averse due to poverty and vulnerability, then the scope for more productive technology is severely limited.

Under such circumstances attention needs to be focussed

• on technologies which are institutionally ‘appropriate’ and make much more limited institutional demands,
• on the development of communications and of the institutional environment,
• on reducing peoples’ vulnerability and risk aversion (without reducing the incentives for success), and
• on the development of non-market, intermediate, collective or state arrangements to support essential transactions.