People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)

Vol. XXX

No. 33

August 13, 2006

The Crisis Of Petty Production


Prabhat Patnaik


THE rural distress, the suicides of farmers, that we see in our country are not phenomena confined to our country alone. They reflect an agrarian crisis that is at present a global phenomenon, afflicting the entire third world and even the erstwhile socialist countries like Poland which have sizeable peasant agriculture. This crisis is already having important political consequences, bringing in governments that promise succour to the peasantry and stand in opposition to the neo-liberal policies associated with the phenomenon of globalisation which exclude such succour. Where a Left opposition to globalisation exists, such as in Latin America, peasant anger has brought in Left governments, the latest example being Bolivia where Evo Morales was recently elected president. But where Left opposition does not exist, other forces, even forces of religious orthodoxy, have come to power by promising support to the peasantry: president Ahmedinejad’s election in Iran certainly owed much to his championing the cause of the peasantry.


The advocates of globalisation, who for long denied the existence of an agrarian crisis altogether and even showed utter cynicism by attributing peasant suicides to the fact of government help for the suicide victims’ families, now try their best to show that the agrarian crisis is unrelated to the process of globalisation. Even prime minister Manmohan Singh who came out with a “Vidarbha package”, against the backdrop of numerous peasant suicides in that region, offered only interest-payment relief, and did not accede to the pleas for imposing an import duty on raw cotton as a means of offsetting the price-crash in the region which is the main cause behind peasant distress. Such protection would have gone against the neo-liberal thrust in trade policy of which he is a votary. He was in other words willing to see debt as the villain of the piece but not free trade that has led to the growth of debt in the first place.




Globalisation has given rise to the agrarian crisis in several different ways. First, since globalisation consists above all in the globalisation of finance, and since globalised finance always wants a deflation of State expenditures, the boost to aggregate demand in the capitalist world provided by State expenditures gets curtailed. The world capitalist economy gets into a phase of prolonged relative stagnation which keeps the prices of primary commodities subdued, not only relative to manufactured good prices, but even absolutely. And with trade getting liberalised, these low international prices get “imported” into every country, pushing its primary producers, including the peasants, into distress and crisis. Of course, this price decline for primary commodities is what occurs on average, through fluctuations. But such fluctuations have an even more deadly impact. Peasants get lured by price booms and get badly trapped by the price collapses, becoming, all the more surely, victims of this trend decline. 


At the same time, the curtailment of State expenditure in the country in question manifests itself above all as a curtailment of rural development expenditure, which entails reduced purchasing power in the countryside, and hence increased unemployment and poverty among the rural population, including especially agricultural labourers and poor peasants. It also means a deterioration in the quality of the rural infrastructure and of public services like education, health, and sanitation, which lowers the quality of life.


Together with this we also find a rise in the input costs of the peasants owing to the withdrawal of State subsidies, which is another feature of a neo-liberal policy regime. Apart from fertiliser, diesel, and electricity, there is also an increase in the cost of another crucial input, credit. This increased cost of credit arises from the decline in institutional lending to peasant agriculture, owing to the withdrawal or whittling down of schemes like Priority Sector lending and Differential Interest rates, all of which the World Bank denounces as “financial repression” and all of which are progressively abandoned in the course of financial liberalisation.




The withdrawal of State subsidies, the abandonment of State provision of cheap credit, the curtailment of State expenditure in the countryside, and the progressive replacement of State price support by exposure to world prices, are all part of a general withdrawal of support to peasant agriculture by the State. Such support had characterised the pre-liberalisation economic regime; its withdrawal is the hallmark of liberalisation. The agrarian crisis is a direct result of it. But the agrarian crisis in turn is only a part of a more general crisis that afflicts petty production in the era of liberalisation. 


The tendency of capitalism is to destroy petty production. This tendency had been kept in check to an extent by the post-colonial State, since the promise of such a check had underlain the anti-colonial struggle. The ruthlessness with which the peasantry had been pauperised during the Great Depression of the 1930s, had not only drawn this class to the anti-colonial struggle, expanding the sweep of this sttruggle, but had also extracted from this struggle a programme of protection of this class. And this is what the post-colonial Sate did to a certain extent until the onset of the neo-liberal regime.
Why, it may be asked, should we shed tears over the decline of petty production? After all, that is a characteristic feature of capitalism, and the development of capitalism through all this “blood and dirt” is what creates the basis for the transition to socialism which is our goal. Isn’t this decline of petty production bringing our goal nearer?


This argument would be pertinent if the decline of petty production was associated with a swelling of the ranks of the proletariat. But this does not happen. Capitalist development which leads to the destruction of petty production does not give rise to much expansion in employment, so that the size of the work-force directly exploited by capitalist production hardly increases (a phenomenon referred to in common parlance these days as “jobless growth” which characterises not just our economy but the capitalist world in general). It follows then that the decline of petty production only leaves behind a vast pauperised, unemployed or underemployed mass, steeped in poverty and destitution. This was a phenomenon already theorised about by the Sixth Congress of the Communist International which had put forward the thesis that in the colonial world we have a “pauperisation of the peasantry, not its proletarianisation”. This perception remains true, and even more resoundingly true, in the current era of globalisation, which is so reminiscent of, and represents in many ways a throwback to, the colonial era.




The struggle of the working class for socialism therefore has to take into account the position and the demands of this vast class of pauperised petty producers. In fact no march towards socialism is possible without the support of this vast segment. And what is more, if the socialist forces do not champion the cause of the vast mass of petty producers, agricultural labourers and marginalised peasants, then other forces, reactionary forces, will get into the act, and inflict great damage not just to the cause of progress and socialism, but to society itself.


Not only should the socialist forces ally themselves with the peasants and petty producers, and take up their cause, but they alone can chart out an economic programme, which is an alternative to the neo-liberal programme and which can support and sustain petty production even while ushering in economic progress and the all-round development of the productive forces. The reactionary elements which can cash in on the anger and frustrations of the petty producers who are getting pauperised, are incapable of putting in place any economic programme or policy that constitutes a viable alternative to the neo-liberal policies of globalisation. The example of Turkey where a fundamentalist government came to power on the basis of the anger of the people against neo-liberal policies, but, having come to power, proceeded to pursue the very same policies, illustrates the point. In fact one can put the matter clearly as follows. What distinguishes the Left from all other forces today is that it alone can put in place an economic policy regime and an economic programme, which is an alternative to globalisation, and which not only ensures all round inclusive development, but also constitutes the only feasible basis for advancing towards socialism. 


The key elements of such a programme will have to be: support and protection (including tariff protection) for the agricultural and petty production sector; food security based on domestic production; a change in the organisational basis of petty production through the formation of co-operatives to start with; technological upgradation of this sector to raise the output-capital (or output-land) ratio and to increase value addition; broad-based and sweeping industrialisation based primarily on the expansion of the home market arising from a more evenly distributed growth of agricultural production; strengthening of the public sector not just as a provider of social services but also as a bulwark against the domination of MNCs; and, as a precondition for all these, a strengthening of the nation-State, through a change in the nature of the State arising from the hegemony of the basic classes, whose autonomy is ensured by a de-linking from the process of globalisation of finance.