(Part 2 of a 3-part article. Part 1 was published in the previous issue of Janata blog.)

In the previous part of this article we saw that the Indian rulers are actively preparing the legal groundwork for parting peasants from their land. In the following part we place this in an international context.

The world economy is witnessing an intensifying drive by international investors to get control of land, including agricultural land, in the Third World. Why is this so?

The imperialist economies have been afflicted by a long-term trend of slowing growth, for reasons inherent to capitalism in its present stage. Over decades, capitalism has sought to counter that tendency toward stagnation by employing various means. In particular it has sought to do so by expanding financial sector activity – i.e., the activity, not of generating surplus in the course of production, but of acquiring and trading claims over the surplus.

Despite this extraordinary growth of finance, the captains of world capitalism remain pessimistic about the prospects for growth. Indeed, even prominent ‘mainstream’ economists now predict that the advanced countries will undergo ‘secular (i.e., long-term, chronic) stagnation’ for the foreseeable future. (However, they avoid linking this tendency to the nature of monopoly capitalism, which indeed is at the root of it.)

Thus global capital, uncertain of accumulating wealth through expanding wealth, is increasingly seeking to accumulate wealth through predatory means: by capturing existing assets and natural wealth. While predatory features were inherent in imperialism from its inception, imperialist predation has acquired a special urgency in the present period. Even at the risk of sparking social unrest and opposition, global capital has pressed for the removal of various restraints on capture of hitherto safeguarded (or non-commodified) types of wealth such as genetic resources, forests, land, and water. It has pressed for these types of wealth to be accessible in a form that can be easily converted into financial instruments. In this fashion, finance is able to grab assets remotely, and often by stealth.

Now new elements have been added to the above longstanding trends. One such element is growing environmental stress. Such environmental stress has resulted from the capitalist accumulation process itself. Various natural resources appear to be reaching their limits in the course of wasteful use and wanton despoliation. The world climate itself is changing as a result of the leading capitalist powers’ longstanding refusal to reduce their emissions, and in future it may change sharply in ways that are difficult to predict fully now.

The world’s corporate chieftains themselves are acutely aware of the phenomenon. The Global Risks Report 2020 of the World Economic Forum (the leading platform of the transnational corporate elite) concluded, for the first time, that “‘Failure of climate change mitigation and adaption’ is the number one risk by impact and number two by likelihood over the next 10 years.” The just-released Global Risks Report 2021 similarly declares that “In the 5-10 year horizon, environmental risks such as biodiversity loss, natural resource crises, and climate action failure dominate.”[1]

A new class of assets for global investors

Even when capitalism cannot eliminate a source of risk, it finds ways to manage, and even profit off, the impact of that risk on its profits. For instance, where the world sees a threat to both farm incomes and food security as a result of environmental stress, global finance sees an opportunity to make profitable acquisitions of natural resources. As one study points out, “Agriculture has historically been seen as a risky venture that generated low returns. This has changed in recent years, and the food system has come to be seen as a sector that will guarantee long-term growth.”[2] (It is revealing that billionaire investors in the United States have turned to purchasing farmland: the largest individual owner of farmland in the US is now Bill Gates, and Jeff Bezos, owner of Amazon, is not far down the list. What investments such billionaires might have made in other, poorer, lands will be near-impossible to trace, as these would be done through various shell companies.)

In line with this shift in global investors’ interest in Third World agricultural land, the World Bank devoted its annual World Development Report 2008 (hereafter WDR 2008) to agriculture. After a gap of more than two decades, the WDR decided “it is time to place agriculture afresh at the center of the development agenda, taking account of the vastly different context of opportunities and challenges that has emerged….”[3]

What were these “opportunities” and “challenges”? WDR 2008 appeared in the midst of a two-phase food crisis: first international food prices soared in 2007, placing food out of the reach of large numbers; then, with the Global Financial Crisis of 2008, farmgate prices of crops crashed, but consumer prices of food did not drop to the same extent. With the financial crash, employment and incomes fell, and hence large numbers of working people were still unable to buy food.

This two-year episode triggered widespread panic: “the food crisis, the financial crisis, and the mounting evidence of how climate change is already disrupting food systems have all undermined confidence in global trade as a reliable mechanism for the delivery of food security.”[4] Countries which were dependent on food imports began trying to secure ownership or control of vast stretches of farmland in other, less developed, countries, especially in Africa.

This “global land grab” attracted widespread criticism. But such land grabs were not being attempted only by food-insecure import-dependent countries like Saudi Arabia or South Korea. Now multinational agribusinesses and giant financial investors of the world’s richest countries, too, were in the hunt for land. Indeed the very growth of food insecurity signified to them that investments capturing the entire value chain of food, from ‘farm to fork’, may yield them rich dividends in an otherwise uncertain future.

Multinational grain traders and international finance

These investors included the so-called ‘ABCD’ companies, i.e., the four giant grain traders (Archer-Daniels-Midland; Bunge; Cargill; and Louis Dreyfus) that dominate world trade in foodgrain and oilseeds.

In this more recent period, the firms have moved away from their tendency to maintain an arm’s length distance from producers and farmland, to becoming more closely linked to production processes than ever before…. Rather than simply marketing agricultural commodities that farmers independently decided to produce, these firms have now become careful managers of entire agricultural value chains. The grain trading companies consider themselves to be “originators” of grain supply, and they have become a central focal point for management along entire commodity chains—from land ownership to input supply, to advice and insurance, to growing contracts, to purchasing, to storage, to processing and retail, as well as being active in building and maintaining storage and transportation infrastructure and financing all along the chain.[5]

These firms have strong interests in finance, with sophisticated investment divisions actively speculating on world financial markets. They also receive large investments from developed-world investment funds devoted to agriculture (for example, Deutsche Bank in 2012 had $200 million invested in Archer-Daniels-Midland alone[6]).

They are joined in this by pure financial firms: “The high profit margins of some crops, especially ‘flex’ crops [multi-purpose crops, which can be used for food, feedstuffs, or fuel, such as sugar cane, soybean, and African palm] have persuaded some investment funds to invest in the purchase of land in the [Latin America and Caribbean] Region. Among the buyers of large-scale areas of land are the investment funds, be they private savings funds or institutional savings funds…”[7] In South America, mega-farms, sometimes extending over millions of acres, are created by large financial institutions of the developed world, such as European hedge funds and private equity firms.[8]

Entry of organised retail giants

A second motor of this trend is the spread of retail giants of the advanced countries. These firms have entered the Third World in search both of exotic commodities and of the upper-income markets of poor countries. “A new wave of investment promoted ‘non-traditional exports’— particularly seafoods, fruits, and vegetables, either off-season or exotic — from developing countries to metropolitan markets.”[9] WDR 2008 predicates Third World agricultural growth on this new source of demand: “Rapidly growing local and international demand for high-value agricultural products opens important new growth opportunities for the agricultural sector in developing countries…. The emerging new agriculture is led by private entrepreneurs in extensive value chains linking producers to consumers.”

WDR 2008 found that fresh and processed fruits and vegetables, fish and fish products, meat, nuts, spices, and floriculture accounted for about 47 percent of the agricultural exports from developing countries, which in 2004 amounted to $138 billion. “Continued growth of these high-value exports will require efficient value chains, particularly domestic transport, handling, and packaging, which make up a large share of the final costs;” hence, the World Bank says, it is necessary to open up to foreign investment.

World Bank refuses to acknowledge the dangers of food import dependence

As mentioned earlier, WDR 2008 was published amid a global food crisis, with food prices on international markets rising steeply from the start of 2007 to early 2008. A large number of poor countries were dependent on imports, with food imports often representing more than 20 per cent of available foreign exchange. Price rise placed unbearable strain on their economies, leading to demonstrations and riots at many places. This underlined the danger of depending on the international market for basic food requirements.

Yet WDR 2008 emphasized the opposite: “Today, agriculture’s ability to generate income for the poor, particularly women, is more important for food security than its ability to increase local food supplies.”[10] The entire thrust of the document was towards “high value” agriculture for export/domestic elite markets, in place of ensuring food security.

Similarly, the OECD (the Organisation for Economic Cooperation and Development, essentially a club of the world’s rich countries) criticised India for seeking “food security through policies that seek to enable a country to become self-sufficient in particular staple crops.” It claims that “recent work by the OECD has found that self-sufficiency policies are not the most effective policy in dealing with issues of food security. Indeed, … such policies may be counter-productive for food security”. It claims that “opening domestic staples markets… to international and regional supplies can significantly enhance food security.” The prescription, then, is to import staple foods and export higher-value crops: “participation in international markets and through agro-food global value chains (GVCs) has the potential to provide opportunities for income growth”.[11]

Examining the new agricultural Acts in this light, the following sequence emerges:

(1) As the Agricultural Produce Market Committee mandis shut down, and official procurement of foodgrains declines, peasants in the foodgrain-surplus regions will be unable to sell their crops at the Minimum Support Price. Many of them will stop, or reduce, foodgrains production as a result.

(2) India’s foodgrain market will be opened to imports from the developed countries, via the ABCD traders. With this opening up in mind, the Essential Commodities Act has been amended to remove restrictions on hoarding.

(3) A section of erstwhile grain-growing peasants will be forced to shift to other crops (the “high-value agricultural products” to which the WDR 208 refers); this is the aim of the new Act regarding contract farming.

Organised retail displaces small farmers

But the story does not end here. Once organised retail becomes the procuring agency, small farmers get squeezed. Retailers prefer larger suppliers because:

(1) dealing with large suppliers lowers transaction costs, i.e., all the costs of making the purchase.

(2) it becomes easier to standardise the product according to the requirements of large retail.

(3) it makes it easier and cheaper to trace each product to the producer, as well as certify it.

(4) larger producers are able to afford various equipment to meet various standards.

As WDR 2008 itself admits, “Supermarket buying agents prefer to source from large and medium-size farmers if they can (for example, for tomatoes in Mexico and potatoes in Indonesia); if large and medium-size farmers have sufficient quantities, smallholders are not included.” It claims that farm size is not always the determining factor; it can also be “access to physical, human, and social assets: to education, irrigation, transport, roads, and such other physical assets as wells, cold chains, greenhouses, good quality irrigation water (free of contaminants), vehicles, and packing sheds…. Most farmers lacking these assets are excluded.”[12] But it is almost always the bigger farmers who own these assets, and so in practice farm size determines whether or not the crop finds a buyer.

Studies of organised retail in India find that the supermarket collection centres source disproportionately from medium/large farmers. “Given the requirements of supermarkets in terms of quality, consistency, and volume, this may then eventually pose a challenge to asset-poor farmers…. Processes of land consolidation and rental market development seem to be underway in these zones and are leading to a differentiated farm sector.”[13]

Further, a host of special standards, which are added to from time to time, are imposed by the buyers. WDR 2008 observes that periodic “food scares” in industrial countries, as well as new scientific knowledge and greater public concern about various food-related risks, have led to a tightening of sanitary and phytosanitary (SPS) standards (related to food safety and agricultural health risks). As export markets multiply and tighten food safety and health measures, it is a “concern for developing countries”: “The standards could further marginalize weaker economic players, including smaller countries, enterprises, and farmers.”[14] Even though large farms are not more productive or lower-cost than small farms, large farms can better afford the costs of making agricultural products traceable to the farm level, certifying them, and testing them.

Since a giant retail chain is often a monopsony – i.e., the sole buyer – for specific produce, whereas there are a number of suppliers for any produce, the buyer can simply shift the costs of compliance to standards onto the suppliers. One way they do this is by applying the toughest global standards to all the produce it buys, whether or not it is applicable in the exporting country:

“Regional and global chains want to cut costs by standardizing over countries and suppliers as this occurs – which induces a convergence with the standards of the toughest market in the set, including with European or United States standards. One sees this in Wal-Mart between Mexico and the United States, one sees this in the Quality Assurance Certification used by Carrefour over its global operations that include developing countries, one sees this in the regional chains such as CARHCO discussed above. In some cases this has meant that global chains actually apply public standards from their developed country markets as private standards to suppliers to their local developing country markets, such as the use of FDA standards for some products by United States chains.”[15]

In other words, as Indian agriculture shifts from supplying Indian mouths to US, European or Japanese mouths, standards from the importing countries are imposed on Indian agricultural production.

We can get a sense of the impending changes by looking at underdeveloped countries where foreign retail has entered in recent years. Organised retail accounted for 10-20 per cent of food retail in Latin America in 1990; by 2000, it had risen to 50-60 per cent, almost approaching the 70-80 per cent share in the US or France. One study notes: “Latin America had thus seen in a single decade the same development of supermarkets that the United States experienced in five decades.”[16]

Concentration of organised retail leads to concentration of suppliers

The same pattern is being repeated in East/Southeast Asia and Central Europe, southern and eastern Africa, and now south Asia and western Africa. Organised sector retail in these regions is “increasingly and overwhelmingly multinationalized (foreign-owned) and consolidated”, i.e., the bulk of the market share is concentrated among four or five firms. Suppliers have to alter their production processes and make sizeable investments to conform to the requirements of these retail giants, and this is leading to the elimination of small suppliers:

“Some of these investments are quite costly, and are simply unaffordable by many small firms and farms. It is thus not surprising that the evidence is mounting that the changes in standards, and the implied investments, have driven many small firms and farms out of business in developing countries over the past 5 to 10 years, and accelerated industry concentration. The supermarket chains… seek constantly to lower product and transaction costs and risk – and all that points toward selecting only the most capable farmers, and in many developing countries that means mainly the medium and large farmers. Moreover, as supermarkets compete with each other and with the informal sector, they will not allow consumer prices to increase in order to “pay for” the farm-level investments needed. Who will pay for wells with safe water? Latrines and hand-washing facilities in the fields? Record keeping systems? Clean and proper packing houses with cement floors? The supplier does and will bear the financial burden. As small farmers lack access to credit and large fixed costs are a burden for a small operation, this will be a huge challenge for small operators. It is thus inevitable that standards demanded by consumers are increasingly a major driver of concentration in the farm sector in developing regions. Retail concentration will cascade, sooner or later, into supplier concentration.”[17]

And indeed, a study finds that the concentration of land in Latin America is much higher than what it has been in the past. The scale of concentration “is much bigger now than what it was earlier in the 20th century, when it was considered necessary to undertake agrarian reforms”. The study correctly calls for a study of the impact of these trends on small farmers, food availability, the environment and employment.[18]

India: the path from indebtedness to loss of land

All this is set to take place in India, a country where the peasantry is already in a deep crisis, a crisis engendered by India’s political economy itself and accentuated in its latest, neoliberal, phase.

The National Sample Survey carried out a special survey of farmer households in 2012-13. It found that average farmer household income from all sources was Rs 6,400 per month. For almost 70 per cent of farmer households, total income from all sources (cultivation, farming of animals, non-farm business and wages) was less than consumption expenditure. That is, these households were running a deficit.

Evidently, what in Marxist terms is called ‘simple reproduction’, mere re-creation of the initial conditions of production, is itself under threat for the majority of the peasants. This is what lies behind the over three lakh peasant suicides since the late 1990s, a terrible phenomenon that now is nationwide – from Tamil Nadu and Telangana to Maharashtra, Punjab and West Bengal.

According to the NSS data, the percentage of indebted farmer households rose from 49 per cent in 2002-03 to 52 per cent in 2012-13; two out of three states saw an increase in prevalence of indebtedness of farmers. The debts of farmer households, as a percentage of their annual income, rose from 50 per cent in 2002-03 to 61 per cent in 2012-13. The NABARD All India Rural Financial Inclusion Survey 2016-17 similarly found that 53 per cent of farmer households were indebted, with an average outstanding debt of Rs 1.04 lakh per indebted household. On the other hand, the average annual income of an agricultural household was Rs 1.07 lakh.

Nor is even this the complete picture: a number of studies indicate that farmer debt is greatly underestimated in official surveys. Moreover, peasant indebtedness to the non-institutional sector (mainly moneylenders and traders) is at least twice that to the institutional sector (banks, cooperatives, Government). The interest rates on informal debt are very steep.[19] Similar rates are charged by micro-finance institutions as well.

As a result, the NSS (2012-13) found that the net investment in productive assets per farmer household was a meagre Rs 6,200 per year, or 8 per cent of income. Moreover, even this low figure is impossible for the poor farmer to fund out of income, as the annual savings per farmer household are only Rs 2,400. Investment would have to be funded out of debt. However, studies reveal that there is a sharp decline in the share of bank lending going to long-term agricultural loans.

In this situation, when State policy induces generalised agrarian distress, as during 1997-2003, or again during the last few years, peasants are forced to use cash loans to finance even their basic consumption, and hence sink deeper in debt. The High Level Committee on Estimation of Savings and Investment pointed out that, in 2002-03, far from saving and investing, cultivator households were unable to meet their consumption expenditure from their earnings, and hence dissaved at the rate of 2.8 per cent of GDP. Cash loans to these households were 3.3 per cent of GDP in that year, “indicating thereby that the gap between income and consumption expenditure is financed by borrowings.”[20]

Against this background, if public procurement is ended, poor peasants in foodgrain surplus regions will struggle to keep their heads above water. If they enter into farming contracts with powerful corporations, as we have seen from international experience, poor peasants will be unable to bear the costs; and at any rate large retail firms and exporters will prefer to deal with larger farmers. Moreover, national and international markets for “high value agricultural products” are limited, and not all lands and locations are suitable for such crops; hence many other peasants will have no scope to become part of those global value chains, and they will continue to grow staple crops of one type or the other. The only difference is that they will earn less than before. Finally, indebtedness and unremunerative prices will force many of these peasants to part with their land.

At the same time, peasants in foodgrain deficit regions, that is, most of India, who have depended to a sizeable extent on the public distribution system for basic nutrition, will see their subsistence costs rise. They, too, may fall deeper into debt, and similarly part with their land.

The proliferation of middlemen

Developments at the international and national plane get filtered down to the village level in different ways, and the predatory hunt for land parcels has been on for some time. Anecdotal reports from different parts of rural India tell of all sorts of middlemen making enquiries about village land for the last 15-20 years or so, trying to persuade or pressurise peasants to transfer their land for a pittance. In anticipation of a chance to receive bribes at the time of a transfer, many village officials have stopped recording land rights in favour of poor peasants, and have left the land record ambiguous. When family disputes take place, or when a peasant family faces an emergency need for cash (e.g., for medical treatment), land brokers step in to offer cash, and suddenly village officials become active in smoothing the transfer. Private encroachment on common lands, too, has grown apace. That is, at a subterranean level, the rural land market has been more active than in the past. Although the National Sample Survey and Census data disagree on the number of cultivators and casual workers in India’s agriculture, they agree that there has been a decline in the number of cultivators and an increase in the number of casual workers in the 2000s. This indicates rising landlessness.

Now the present drive for ‘conclusive titling’, combined with the restructuring of agriculture reflected in the three recent laws, will accelerate these processes.

In the following part of this article (Part 3), we attempt to foresee the prospects for India by examining the experience of Mexico, which has traveled much further down the same road. Mexico’s experience shows that, even if we ignore the displacement and suffering of the poor peasantry, the new agricultural regime does not signify a development of productive forces in agriculture – far from it.

Notes

[1] Indeed, the international corporate elite is audaciously appropriating the banner of environmentalism, and pseudo-‘greening’ itself as an aggressive new method of accumulation, as brought out by the journalist Cory Morningstar – see the website http://www.wrongkindofgreen.org/. Unfortunately we cannot go further into this question here, although it is linked to the subject under discussion.

[2] Murphy, Sophia, David Burch, and Jennifer Clapp, Cereal Secrets: The world’s largest grain traders and global agriculture, Oxfam Research Report, 2012.

[3] World Development Report 2008: Agriculture for Development, 2007, pp. 1, 134, 8.

[4] Murphy et al., op. cit.

[5] Clapp, Jennifer, “ABCD and beyond: From grain merchants to agricultural value chain managers”, Canadian Food Studies, September 2015.

[6] Murphy et al., op. cit.

[7] The Land Market in Latin America and the Caribbean: Concentration and Foreignization, Food and Agricultural Organization of the United Nations (FAO), 2014.

[8] Murphy et al., op. cit.

[9] John Wilkinson, “The Globalization of Agribusiness and Developing World Food Systems”, Monthly Review, September 2009.

[10] World Bank, World Development Report 2008: Agriculture for Development (WDR 2008), p. 95.

[11] Review of Agricultural Policies in India, Trade and Agriculture Directorate, Committee for Agriculture, OECD, July 2018, p. 45.

[12] Ibid., p. 127.

[13] Reardon, Thomas, Peter Timmerc, and Bart Mintend, “Supermarket revolution in Asia and emerging development strategies to include small farmers”, Proceedings of the National Academy of the Sciences of the United States of America, pnas.org

[14] WDR 2008, pp 128-30.

[15] Reardon, Thomas, Peter Timmer and Julio Berdegue, “The Rapid Rise of Supermarkets in Developing Countries: Induced Organizational, Institutional, and Technological Change in Agrifood Systems”, electronic Journal of Agricultural and Development Economics, Agricultural and Development Economics Division (ESA) FAO, Vol. 1, No. 2, 2004.

[16] Ibid.

[17] Reardon, Thomas, Peter Timmer and Julio Berdegue, op. cit.

[18] The Land Market in Latin America and the Caribbean.

[19] These points are discussed in more detail in India’s Peasantry under Neoliberal Rule, RUPE, 2017; see https://rupe-india.org/66/partthree.html and https://rupe-india.org/66/parteight.html

[20] Report of the High Level Committee on Estimation of Saving and Investment, Ministry of Statistics and Programme Implementation, 2009, pp. 264-65.

(Research Unit for Political Economy is a trust based in Mumbai that brings out material seeking to explain day-to-day issues of Indian economic life in simple terms and link them with the nature of the country’s political economy.)