Global Capitalism, Deflation and Agrarian Crisis in Developing Countries

The issue of land rights and that of gender equality are strongly affected by the prevalent economic and social policy regimes, at both national and global levels. The dominant policy regimes decide to what extent movements for securing land rights or gender equality encounter favourable conditions and have some hope of securing positive gains. This paper seeks to analyse the nature of the economic policy regimes associated with globalization, and to contextualize the issues of land rights and gender in the present era. It illustrates the main theoretical propositions with reference to the experience of India in the 1990s.

The paper is divided into five sections. The first deals with the deflationary impact of global finance capital on the large number of developing countries that have implemented loan-conditional structural adjustment and trade liberalization policies promoted by the Bretton Woods institutions (BWIs) during the last two decades.

After a discussion of how the industrialized countries managed to avoid indebtedness during their transitions from agrarian to industrial economies, section 2 outlines the broad contours of land reform in India. According to the author, a promising start in the 1950s was subverted over time by insufficient expansion of the internal market, a market that only a prospering peasantry could provide. Because most states in India have preserved land monopoly, productivity growth within agriculture has been constrained (those monopolizing land do not have an adequate incentive to invest, and those forced to lease land or to labour for hire do not have the means). Land monopoly also means that incomes hardly grow, and hence the market for consumption goods stagnates. Many believed, naively, that economic liberalization would solve growth problems. Yet more than a decade of structural adjustment, and trade and financial liberalization have led to a crisis of unprecedented dimensions, in which employment growth has collapsed and the purchasing power and food security of the poorer majority of the population have been severely eroded.

In section 3, the author discusses recent developments in the agrarian sphere, especially the crisis induced by the prolonged fall in primary product prices. She links the crisis directly to the contractionary fiscal policies of governments undertaking neoliberal reforms, and to trade liberalization in a context of worldwide recession. The author thinks that this agrarian crisis is likely to persist as long as the present policies of openness to the world market continue, because the global conditions of trade in primary commodities are likely to remain unfavourable.

After a brief upsurge in the early 1990s, the prices of primary products mainly exported by developing countries have fallen, as have the prices of cereals exported by industrialized countries. Since the decline began in 1996, grain prices have remained depressed at levels about half those prevailing earlier in the decade. As a consequence, with the removal of quantitative restrictions and freer global trade, not only are those developing country farmers engaged in growing exported cash crops suffering, but the livelihoods of millions of foodgrain producers are also being undermined as a result of imports of exceptionally low-priced foreign grain. The depression in global markets is thereby being imported into the domestic economies of liberalizing countries.

In section 4, the author illustrates these arguments with the Indian experience, especially with reference to food security and employment. She deals with the impact of liberalization and adjustment on rural livelihoods, land use and food security. Observers of long-term trends in India see a sharp contrast between the pre-reform 1980s and the 1990s, which started with income-deflating economic reforms. During the Seventh Plan period (1985–1990), public expenditures on rural development and employment generation rose to 13.2 per cent of the gross domestic product (GDP), almost double the previous level. The positive effects of these trends on food security and poverty reduction came to an end in 1991. In July 1991, on the advice of the BWIs, the central government slashed development expenditures to contain the budget deficit and made it more difficult for state governments to borrow. By 1993, rural development expenditures had fallen to 7.8 per cent of GDP, and they had fallen to 5.9 per cent by 2001. By 1992, at the all-India level, poverty had risen sharply, and the crude death and infant mortality rates rose in a number of states. The rate of agricultural growth also slowed markedly under these reform policies. At the same time, there was a significant shift in land use and cropping patterns toward export crops at the expense of foodgrains consumed by the local population. The author uses the example of cotton cultivation to illustrate the problem with unregulated primary export thrust.

The fifth section explores possible strategies for protecting rural livelihoods. It focuses particularly on the West Bengal experience with respect to tenancy reform and addressing gender inequality in land control.

In conclusion, Patnaik says, unregulated capitalist exploitation of bio-resources by big landlords, rich farmers and town contractors has produced a crisis for the majority of India’s rural inhabitants by way of deforestation, lack of firewood, falling sub-soil water tables and acute scarcity of drinkable water. Such factors, combined with falling non-farm work (as governments wind up employment-generating programmes), income-deflating policies and export thrust, have had devastating effects on the livelihoods of the poor.

Yet in many Indian villages, the people affected by such crises are adopting much the same model of co-operative effort which over 40 years ago allowed poverty-stricken rural populations in China to improve their situation. There are a number of successful joint community efforts to invest and diversify activities within a voluntary co-operative framework. These are helping to preserve livelihoods and generate enough income and flexibility for hitherto poor households, so they can remain in villages rather than migrate seasonally to cities, and can send their children to school rather than to work.

This, the author believes, is also the way forward in other developing countries. It is not easy in places where local government institutions have not been democratized and where state support is lacking; it often encounters resistance because better incomes and empowerment of the disadvantaged may be seen as a real threat to their domination by local landed employers. Where there is at least a minimal level of state support and activism against deflationary globalization, however, it can be generalized to a relatively successful stabilization of livelihoods.

Utsa Patnaik is professor of economics at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, in New Delhi. She has written extensively on the political economy of development and on the agrarian question.