This thesis examines the politics and impacts of mediated markets for rural development in light of the austerity regime recently established in Brazil. Theory and praxis tend to overlook relational complexities between rural people and the state and their interplay with livelihood opportunities and self-reported wellbeing. Focused on Brazil’s Fome Zero Food Acquisition Programme, we analyse the political economy surrounding its establishment and subsequent retrenchment and the impacts of this rise and fall on rural people in two contrasting study areas. Paying attention to geographical, economic and demographic differences, we adapt political ecology and livelihood frameworks to investigate how peasants in São Paulo and Amazonas have coped with austerity. The research uncovers an underlying tension in nested markets for rural development, in which principles of equity and social justice are to some extent subsumed as policy principles by a modernisation project represented by a ‘pedagogy of marketisation’. Under this project, rural people are encouraged to move away from community self-provisioning to a market economy - which would transform them from being people belonging to the country (peasants or camponeses) into workers or controllers of the land (family farmers or rural entrepreneurs). This tension threatens to absorb peasants into the corporate food regime and undermine ecological and cultural diversity. Our findings suggest a complex set of impacts such as income-poverty alleviation, progress towards gender equality but limited effects on structural inequality or market integration. The significance of this thesis is that it informs our theoretical understanding of rural development through nested markets by introducing a political economy/ecology focus hitherto lacking – and informs our empirical understanding of wellbeing, public procurement, food, agrarian, environmental and social policy.