People's Democracy

PS MEMORIAL LECTURE

The New Primitive Accumulation

and the Peasantry

Utsa Patnaik

A renowned authority on agrarian issues, Professor Utsa Patnaik expressed happiness at the growing signs of the peasantry changing its mode of resistance from a passive one (suicides) to active one (struggles against SEZs) in various parts of the country. She called upon the democratic movement to further intensify the movements of the peasantry against the disastrous neo-liberal economic policies being championed by prime minister Manmohan Singh and company.

Professor Patnaik made this appeal while delivering the Putchalapalli Sundarayya memorial lecture in Hyderabad on May19, 2010, the 25th death anniversary of Comrade PS.  The auditorium in Sundarayya Vignana Kendram was jampacked with those who turned out to listen to the lecture titled “The New Primitive Accumulation and the Peasantry”. Many of them could not get inside the auditorium and had to view it on a big TV screen put up outside.

Professor Patnaik recalled how Comrade Sundarayya corresponded with her in detail about agrarian issues in response to an article she wrote. In continuation of that correspondence she met Comrade Sundarayya during the Emergency period at a

fellow comrade's house. She said that the entire correspondence and the discussions with Comrade Sundarayya would shortly be published as it has historical value.

Professor Atlury Murali of Hyderabad Central University and member of Sundarayya Vignana Kendram Trust Board presided on this occasion. Earlier, secretary of the Trust, Y Siddaiah presented the annual report of the activities of the Kendram.

Elsewhere in the state, remembrance meetings were held in most districts. Party state secretary and Polit Bureau member B V Raghavulu participated in the meeting at Vijayawada.

Below we publish an abstract of the lecture.

INTRODUCTION

THE idea that the advanced country holds up a mirror of its own future to the developing country, is not true with regard to the fate of the peasantry. The third world peasantry, including tribal communities, will not disappear but will resist successfully the attacks upon their livelihood and assets under the present neo-liberal dispensation. Petty production did disappear as agricultural relations were capitalistically transformed in today’s advanced countries in the course of their 19th and 20th century industrialisation. A striking fact however is that the large scale capitalist agriculture which developed there was never able to  meet the wage –goods, raw materials and energy needs of industrialisation or diversify Northern consumption baskets, and this remains as true today as it was in the past. The advanced capitalist world today is again out to acquire control over the superior productive capacity of tropical lands and obtain access to the mineral and energy resources of developing countries.

The historical conditions under which today’s advanced countries industrialised are so specific and indeed unique, that they cannot possibly be replicated by third world countries. The unemployment situation is worse today owing to the ever falling labour-intensity of production which implies not only jobless growth but job-loss growth in the most advanced manufacturing sector. Unemployment is endemic to capitalist production driven by technical change in today’s developing countries, but their millions of peasants today have nowhere to migrate to and little possibility of absorption into the secondary sector. Large labour-surplus developing economies like India and China in particular, do not have the choice of seizing entire continents from indigenous inhabitants to export their population increment abroad or of financing their capital formation through transfers from other nations without impacting own domestic mass consumption. They have to solve their unemployment and livelihoods problem primarily through expansion of their own internal market in forms which represent a drastic modification of the classical capitalist paradigm. The unemployment problems of developing nations cannot be solved through standard forms of industrialisation destroying small scale production, because in a globalised world competitiveness demands highly capital intensive technology with very low or zero elasticity of employment with respect to output.

Formerly colonised and subjugated developing countries have been lectured so long on how poor they are, that their own populations and intellectuals do not understand to this day that the situation is in reality the opposite, that today’s advanced countries have been in the past and continue to be at present, heavily dependent on imports from these allegedly poor countries for maintaining their high living standards.   Slave labour-based and later indentured labour-based plantation systems were developed in tropical lands for producing and exporting to cold temperate Europe the crops that it could never produce. In the Indian case there was heavy taxation of peasants and direct use of taxes to purchase export goods. These primary imports into Europe, vital for its industrial growth and for improving and diversifying consumption baskets, were the commodity form of taxes and rents wrung from subjugated third world populations, and so they represented not normal trade, but unpaid exports or transfers. Export of capital from Europe to develop North America and areas of white settlement, was crucially dependent on the balance of payments flexibility the world capitalist leader obtained because it controlled and used the exchange earnings of the colonies from the rest of the world.

Further, large scale out-migration took place from industrialising Europe to regions of recent settlement, defusing economic crisis and political tensions at the core of capitalism, as technical change rapidly displaced labour and rising domestic unemployment inevitably accompanied capitalist industrialisation. Today’s advanced countries exported their unemployment not only through out-migration but also through the export of goods to colonially subjugated markets, leading to de-industrialisation and unemployment in them. The Ricardian theory that benefit for both countries necessarily results from each country specialising according to ‘comparative cost advantage’, contains a logical error. It is crucially based on the assumption that both countries can and do produce both goods, which is not true since today’s advanced countries cannot produce at all a large range of products which, however they wish to consume and therefore import. Ricardo’s trade theory is an incorrect theory based on a material fallacy, but it has been promoted and popularised by advanced countries because it served their ends well. It is an intellectual rationalisation and justification of an international division of labour which had nothing to do with ‘comparative cost advantage’. The international division of labour in which developing countries were de-industrialised and became primary product exporters, in reality was imposed earlier by force, while today it is imposed through the exercise of intellectual hegemony including propagating the false theory of comparative advantage.

The developing world paid a very heavy price for the forced opening up of their agriculture to trade, for with growing exports the production and availability of basic food staple crops per head of their own populations, actually fell and their people were also obliged to shift to cheaper foodgrains or to tubers and potato consumption.  Long-term decline in nutritional standards made them vulnerable to famine which did occur regularly. The most devastating famine however, took place not in a tropical colony but in the only temperate land colony, Ireland, where over one-eighth of the population perished in the 1846 famine. In the last three decades the developing world is again paying the cost of free trade, since their per head food grain production has fallen sharply as exports rose, and nutritional standards have declined.

THE UNEMPLOYMENT AND

LIVELIHOOD PROBLEMs

Unemployment is endemic to capitalist production driven by technical change, but millions of peasants today in the third world have nowhere to migrate to and little possibility of absorption into the secondary sector. Large labour-surplus developing economies like India and China in particular, have to solve their unemployment and livelihoods problem primarily through expansion of their own internal market in forms which represent a drastic modification of the capitalist paradigm. The unemployment and livelihood problems of developing nations cannot be solved through standard forms of industrialisation destroying small scale labour-intensive production. In a globalised world competitiveness demands highly capital intensive technology with very low or zero elasticity of employment with respect to output, so that labour cannot be shifted out of the primary sector into industry but only to low productivity jobs in the services. Thus India despite its high GDP growth rate has seen falling absolute employment in organised industry and its growth has been rightly called ‘jobless growth’.

The old primitive accumulation of capital concerned seizure of primary resources including energy resources from today’s third world countries. A new phase of primitive accumulation of capital is visible today with a renewed thrust from advanced nation corporations to access tropical lands in the global South, through contract systems which formally subsume the peasantry under capital, or through outright land acquisition. This thrust complements the contested struggle of advanced countries to control world energy resources. From exclusive reliance on fossil fuels, capital is turning once more to the land to fill energy supply deficits, making world food stocks disappear and leading to crisis situation in those developing countries which had already become import dependent for food.

An obvious proposition bears repetition for it is never theoretically recognised by the  economists. Agricultural land is a resource which is not produced by human labour (though its productivity can be improved by investment) and once the technological limits to productivity within a given social production system is reached, it becomes conceptually on par with non-renewable energy resources. There is a struggle by advanced capitalist countries for control over the productive capacity of limited tropical land resources all over the world, just as there is a struggle for control over fossil energy resources. Moreover, energy resources are once more sought to be produced from crops. After a century and half of reliance on fossil fuels and with spiralling oil price as imperialist USA fails to ‘pacify’ Iraq, the matter is again coming full circle, back to the land. Agriculture is under renewed and strong pressure today to grow bio-fuels and devote a rising part of grain and sugarcane output to conversion to ethanol. The end-use of foodgrains is again seeing a rising fraction being used as fuel.

This development is a recent, very serious addition to the threat to food security in developing countries already posed by growing external demands by advanced countries for procuring traditional and new export crops from limited tropical lands.  The issue of diversion of lands to bio-fuel in advanced countries like USA and upper middle income countries like Brazil exists.

The more advanced societies demand the use of the productive and bio-diverse tropical lands of developing countries to underpin their rising living standards and energy needs, the less land is available for meeting the essential requirements of local poor populations. The entire matter becomes a zero-sum game. Increasing areas of foodgrains growing land are diverted to export crops, and over time a rising share of the foodgrains is used as animal feed and bio-fuel which are mainly consumed by the rich or exported. Even where absolute foodgrains output does not decline or continues to rise, since it rises less fast than population is rising and its end-uses change away from direct consumption to animal feed, industrial consumption and bio-fuels, we find that  there is  decline in the domestic availability of foodgrains for direct consumption, per head of population. (Availability is defined as net output minus net exports and minus net addition to public stocks). In extreme cases this can become a steep absolute decline in domestic availability. 

All this leads to declining nutritional standards of the poor in the country engaging in this type of specialisation and increases mass hunger, since foodgrains alone account for seven-tenths or more of the energy intake of the poor. Any type of shock to the system (severe drought, rapid food price rise) can precipitate visible famine. Even without this extreme outcome, declining nutrition levels are bad enough. Such ‘hidden famishment’ is the price that poor developing country populations are made to pay as the cost of free trade, but it is a cost which is neither recognised nor therefore addressed by their own governments, which pretend that poverty is declining, and continue to follow the same policies increasing mass hunger and malnutrition. Today it is de rigeur for international organisations to talk of the problems of child and maternal malnutrition, but the fact that there is increasing under-nutrition within the general population as a whole in India including at least 250 million men, is never recognised or mentioned. This strange reverse gender bias is to be seen in the writings of even progressive Indian academics taking their cue from the discourse of the international organisations.

To summarise, given the nature of tropical land as a limited resource which cannot be augmented by human labour as regards its extent, and whose supply is thus virtually fixed, external demands lead to a decline in domestic food production for local populations to accommodate rising exports. The economic mechanisms urged by developed countries, through which this is brought about, include trade open-ness, specialisation in export crops, reduction of government’s intervention to maintain domestic food security systems and, most important, macroeconomic deflation hitting the mass of the population even as incomes for a minority rise fast.

SEVERE IMPACT

ON FOOD SECURTY

A severely adverse impact on our food security following adoption of greater trade open-ness in India, was to be expected on the basis of the past and current experience of present day developing countries and I have been warning of this outcome since 1992. That is indeed what has happened: 8 million hectares of land has been diverted away from foodgrains production mainly to export crops within a total gross sown area which is stagnant or somewhat declining, and the end-use of grain is also changing with a higher share going as animal feed, industrial use and bio-fuels. Yield rise having slowed down, has not compensated for area decline and the growth rate of foodgrains output has halved in the 1990s compared to the 1980s and has fallen further to only 1.4 per cent over the period 2000 to 2008.  Per capita grain output has been declining more steeply than before and has touched a historic low of 155 kg, per head annual average in the triennium ending 2004-05. This is the same level as 50 years ago during the First Plan, and actually lower than the pre-War average during 1937-41 which was 157 kg (Blyn 1966, detailed output series in Patnaik 2003).

Per capita availability fell even faster than did output between 1998 and 2002. The large gap between the two trends reflects the fact that by July 2002 public foodgrains stocks of 64 million tonne had built up, 40 million tonne in excess of the norm of buffer stock for that time of year. The reason was the severe contraction in purchasing power of the mass of the mainly rural population. At the same time private grain exports also rose. Unlike every previous short episode of per head domestic output decline which had been always compensated by net imports and drawing down of public stocks to maintain domestic availability, this long period was highly abnormal in seeing the opposite – as per head output declined, more stocks built up and more was exported, reducing availability more and more to a historic low. 

The majority of Indian economists as well as the Indian government ignored the real reason for the lower absorption which was loss of purchasing power and demand deflation, and wrongly argued that the problem was ‘over-production’. It put the blame on  ‘too high’ minimum support price to farmers which allegedly gave ‘the wrong signals’ leading to a higher output than the market demanded. Instead of putting back purchasing power and food into the hands of the poor, which the situation demanded, it proceeded instead to export 22 million tonnes of grain out of stocks during 2002 and 2003, freeze procurement price and reduce public procurement, allowing  transnational companies like Cargill to come in to purchase from the distress-hit farmers. Farmers have been repeatedly urged to ‘diversify’ output away from foodgrains to the horticultural and other products required by the global food corporations for supplying supermarkets in advanced countries. The entry of these corporate entities, both foreign for contract farming and domestic for supply retail outlets in cities, has been facilitated by state governments.

The trend of falling grain output and availability per head which I anticipated in 1992 and have been writing about since then, reached crisis proportions by 2001 with availability per head dropping to 151 kg compared to 178 kg in the early nineties. This is what led me to title a public lecture delivered in early 2004, ‘The Republic of Hunger’. I pointed out that the average Indian family was absorbing 115 kg less of foodgrains per annum by the three years ending 2002-03 compared to a mere six years earlier, the triennium ending 1997-98.  I also pointed out that official poverty estimates were gross underestimates because they took a food basket which was over 30 years old, and that poverty measured by applying the official nutrition norm directly to the consumption data showed that 75 per cent of the rural population did not reach the norm by 1993-94.

Both academics and the government seemed oblivious to the hard reality of a food and nutrition crisis that every data source revealed and which was so blindingly obvious. In retrospect this ‘conceptual blindness’ probably arose mainly because the inflation rate had reached a historic low and it was inferred by them that therefore the poor were becoming better off. While the Consumer Price Index for Agricultural Labourers, heavily weighted by food, rose by 45 per cent between 1993-4 and 1999-00, it rose by only 11 per cent in the next five years to 2004-05. However it was forgotten the inflation rate can go down not only when supply increases faster than demand, but also when demand falls faster than supply is falling. It was this latter and worst scenario which was operative. In Keynesian terms, it was a severe squeeze on aggregate effective demand, fall in mass purchasing power, which was showing up as lower inflation despite the fall in output per head. The adjustment to lowered per head supply was taking place through increasing hunger, which the government refused to recognise.

The wrong policy measure of freezing the procurement price led to a steep decline in foodgrains output per head during 2002 to 2008 with the annual growth rate falling to 1.4 per cent, much further below the (declining) population growth rate than during  the 1990s. Per head output has been fallen faster than  ever before in the present decade . India was therefore ill-prepared for the global food price inflation  and has been experiencing a very high rate of inflation since 2007 which is eroding real incomes fast.

Reality does not go away when policy-makers bury their heads in the sand. The NSS consumer expenditure data show that 74.5 per cent of rural persons could not reach 2400 calories daily intake in 1993-94 while the percentage had reached an unprecedented high of 87 per cent by 2004-05. While 58.5 per cent of rural persons could not access 2200 calories in 1993-94, while nearly 70 per cent were below this level by 2004-05.  The percentage below the lowest level of 1800 calories, the poorest of the poor, rose from 20 to 25 per cent over the period. 

Official estimates are much lower because they do not apply the nutrition norm directly to the current data but update the cost of a by now 37 year old fixed consumption basket using a price index. This strange procedure is ‘convenient’ for it cumulatively underestimates the poverty line over time - these poverty lines allow the consumer to access nutrition levels which are lower and lower over time – a fact not mentioned to the public. By 2004-05 the official poverty line or OPL was less than Rs 12 per day (US 27 cents per day), so low that only one bottle of water could be purchased with it. Some academics estimated from the data that ‘extreme poverty’  defined as those spending less than half the OPL, had become zero –  positive sounding indeed , until an examination of the same  data showed that there were no observations at such levels of spending, people ceased to exist before reaching these levels! For the reader who is interested in poverty measurement questions my critique and alternative estimates for rural and urban India are published in Patnaik (2007 and 2009).  China’s rural poverty lines appear to be as unrealistically low as India’s – 1067 yuan per annum in 2007 or just below 3 yuan per day was equal to Rs 15 at the then exchange rate.

Macroeconomic deflationary policies advised by the international financial institutions include reduction in State expenditures, monetary austerity and high real interest rates for producers (but easy consumer credit), reduction in the ratio of budget deficit to GDP, caps on wages aided by labour retrenchment policies, and currency devaluation. All these together add up to a strongly deflationary package which has been implemented by successive Indian central governments since 1991 regardless of their political composition. The pattern has been that three years or more of severe contraction immediately after a general election is followed by two years or less, of more expansionary policies as governments try to regain electoral support eroded by the hardships they have inflicted on the people. 

The attack on production has severely undermined both the food security and asset possession of petty producers while generating bitter resistance from them. The developments in India under neo-liberal reforms indicate increasing unemployment and deepening poverty as well as loss of land and livestock assets for the majority mainly owing to  unrepayable debt. The peasantry is resisting the attacks on it, in forms which are beginning to turn from passive forms like suicides to active forms of resistance to land acquisition. These forms have the potential of undermining the political stability of third world countries. Therefore governments whose rule depends on the popular will be obliged to modify their blind and unwise pursuit of a growth strategy which seeks to imitate that of today’s advanced nations with no regard to the specificity of their own livelihood and unemployment problems. Alternative strategies which generate livelihoods and genuine development for the majority must necessarily mean not the destruction but on the contrary, the preservation of petty production. This preservation and encouragement of labour-intensive petty production must however be on the basis of voluntary co-operation permitting economies of scale, higher productivity and incomes, and allowing the mass of the people to live their lives with dignity.

(Emphases added – Ed)