Agrarian Reforms: Need and Components

Introduction

Despite its gradually declining contribution to the global Gross Domestic Product in relative terms, the importance of agriculture for any country, whether developed or developing, cannot be overemphasized. No country in the world has made significant and sustained industrial progress without first bringing about an agricultural revolution, and not vice versa. After all, it was the agricultural revolution that released the resources, both human and financial, and put Europe on the trajectory of accelerated growth, ensuring food security, improving the balance of payments position, besides providing a base upon which the whole edifice of their economies stood during the Industrial Revolution.

Keeping in view the crucial role agriculture plays in improving all the socioeconomic indicators in a developing country, the need to transform it from an underdeveloped sector to a dynamic one becomes all the more important. This calls for the implementation of comprehensive agrarian reforms, which could bring fundamental structural and institutional changes in the political economy of a county’s agriculture sector. Unfortunately, some heads of advocacy groups confuse these reforms with a related but distinct issue of land reforms in general and redistributive land reforms in particular.

Redistributive Land Reforms are essentially carried out to distribute lands, state as well as those confiscated from large estate holders, to the landless farmers, along with some changes in the tenurial relations, to achieve social welfare objectives of reducing the gross inequality in land holdings. There are still many countries where there is a need for such redistributive land reforms, i.e., South Africa, where the average size of a white Farm’ is more than 1000 hectares as compared to the average size of one hectare of a black Farm’. Similarly, the privatization of state-owned farms in some ex-centrally controlled economies to improve the efficiency and competitiveness of agricultural activities cannot be overruled.

In fact, such redistribution not only meets equity objectives but may also result in efficiency gains if it is accompanied by proper governmental support in the form of better extension services and the availability of credit to newly created landowners. However, there is a limit to how much land can be redistributed. These are in contrast with the Consolidative Land Reforms, where small land holdings are consolidated to enable the owners to reap efficiency gains through the application of agricultural machinery.

Agrarian reforms, on the other hand, are a different ballgame. These are meant to transform the entire socio-economic landscape of the rural areas of a country by introducing fundamental changes in all aspects of the rural landscape with the objective of increasing the productivity of farm and nonfarm operations in the rural areas, reducing their poverty levels, and thus improving the quality of life of people living in the villages. However, by equating the broader canvas of agrarian reforms with a narrower concept of land reforms, even some eminent scholars create confusion at the conceptual and practical levels.

Why not land reform?

While agrarian reforms are the need of the day to make agriculture a dynamic sector of the economy, redistributive land reforms is an idea whose time has gone forever in the face of several socio-economic realities and sheer technological imperatives. Historically, redistributive land reforms have been carried out at the initial stages of the development process when agriculture is contributing more than half of the GDP of a country, warranting redistribution of land for social welfare objectives as well as to obtain efficiency and equity gains. Now it contributes between 20 and 30 percent of the GDPs of the developing countries, with a few exceptions here and there. Notwithstanding its overall economic importance for a typical developing country, it is not a dominant source of wealth that should be redistributed for the purpose of equity.

On the other hand, these countries need to push their technological frontiers in the agriculture sector to enhance their productivity and improve the quality of life of their citizens. Both need an efficient, productive, and profitable agriculture sector whose growth is sustainable and whose outputs are competitive. This is possible only if we increase the pace of farm mechanization and technological innovation in all agricultural operations. In order to introduce technology on a commercial scale, the size of the farms is the basic condition. If we redistribute land and each farmer gets a parcel of land on which a tractor is not even economical, how can we increase our productivity?

Land reforms for the sake of land reforms or social justice are not a practical public policy option. Granted, we can distribute state lands free of charge to the landless tenants if we have enough land at the disposal of the state, but we cannot redistribute private lands, confiscated or purchased, to landless farmers on moral grounds or as a sound economic policy. The state cannot confiscate the personal property of someone on moral or legal grounds. If accepted on the grounds of social justice, then it would also apply to all sectors of society without discrimination: property tycoons, industrial magnates, the commercial traders. Purchasing land from the big landlords as suggested by some learned authors at market price and then redistributing it to the landless farmers is a nonstarter, not possible to carry out by a developing country which is by definition short of resources.

Components of Agrarian Reforms

As stated above, agrarian reforms are meant to transform the entire socio-economic landscape of the rural areas of a country by introducing fundamental structural and institutional changes in the political economy of a country’s agriculture sector. The World Bank evaluates agrarian reform using five dimensions: (1) price and market liberalization; (2) land reform (including the development of land markets); (3) agro-processing and input supply channels; (4) rural finance; and (5) market institutions. However, to me, these reforms are much more than the above. Some of the areas that need proper policy formulation, the creation of institutions, and the allocation of resources are as follows:

A. Formulation of a comprehensive Land Use Policy

B. Improving Agricultural Terms of Trade

C. Developing Rural Infrastructure

D. Improving Rural Governance

E. Ensuring Environmental Sustainability

F. Creating Linkages and promoting Investment

G. Gender Mainstreaming

H. Changing Production Relations

A. Formulation of Land Use Policy

Thanks to rapid population growth, economic development, and urbanization, valuable arable land is being converted at alarming rates for commercial nonfarm uses. Infrastructural development, though necessary is also renders fertile lands brick and mortar. According to FAO, ‘every year 19.5 million hectares of agricultural land is converted to spreading urban centres and industrial developments, often forcing farmers onto shrinking and more marginal lands.’ It has gained added urgency in the face of the looming threat of climate change. While extremely fertile land is being lost to urban sprawl and infrastructural developments, climate change is threatening arable cropping in dry lands, reducing the productivity of rangelands, and increasing sea levels, creating problems in coastal areas.

All these developments necessitate the formulation of a national land use policy by every country for rational use of its respective land resources. That is why, in 1992, Agenda 21 stressed the need for integrated planning and management of land resources that “facilitates the allocation of land to the uses that provide the greatest sustainable benefits” (Agenda 21, paragraph 10.5). There is thus an urgent need by all governments, particularly in developing countries, to formulate long-term comprehensive land use policies that should cover all uses of land relating to the security and distribution of land rights, land use and land management, and access to land, including the forms of tenure under which it is held. It should have a production and a conservation component whereby the state should restrict the use of arable land for property development by imposing heavy duties and, if need be, an outright ban on such use.

B. Agricultural Terms of Trade

Agricultural transformation demands restructuring, not merely fine-tuning, the political economy of rural areas, which are an integral subset of the overall economic structure of any country. One of the ways to do so is to improve the Agricultural Terms of Trade, the ratio of agricultural prices to industrial prices, both measured as price indices. With few exceptions, these terms of trade are always against the agriculture sector, more by design and less by default, as a deliberate policy of the government to transfer resources to the industrial sector for its rapid growth at the cost of farmers.

They are under the impression that any increase in the prices of agricultural commodities in general and of food crops in particular, would directly and proportionately increase the general price level in the country, creating labour unrest. The proponents of this point of view always come up with a lot of statistical evidence to prove their hypothesis, relying on neo-classical theories with a full battery of jargon. Unfortunately, the poor farmers do not have the sophisticated skills to reply, and their case for fair returns goes by default. Is it really so? Evidence and logic do not corroborate this hypothesis.

Every student of economics knows how complex these issues are, having multiple sources of origin and being affected by a myriad of economic and non-economic factors. No doubt, when a country is facing inflationary pressures, the prices of food items increase along with the prices of other non-food items. That is expected because inflation, by definition, means an increase in the general price level over a period of time, but in no way you can blame the farmers for causing this escalation in inflation. It is extremely difficult to pinpoint a single causative factor to blame for a complex and constantly evolving situation; you have to treat it with judicious use of a broad spectrum remedy, not a single shot dose.

Secondly, it is the duty of the state to formulate a comprehensive social safety network to help those affected by inflationary trends. You cannot put the entire responsibility of saving the poor on the shoulders of one stakeholder in the economy; let other sectors also play a role in this noble cause by paying proper taxes. Thirdly, if we do not incentivize the farmers to produce food commodities by paying them fair returns, it will result in reduced production of the very food crops that are supposed to keep the general price level stable, either due to a loss in productivity of their crops or a diversion of land use to more lucrative cash crops.

John F. Kennedy said about the plight of American farmers 50 years ago that “The American farmer is the only man in our economy who buys everything he buys at retail, sells everything he sells at wholesale, and pays the freight both ways.” It is as true a statement about any farmer today as it was true for American farmers 50 years ago. Only during the food crisis did the governments raise the procurement prices of agricultural commodities but forcibly purchase the surplus from the farmers, depriving them of the opportunity to receive the true market prices for their produce.

In order to stop this squeezing of the peasants,

1. Rationalize the prices of the inputs farmers use and provide subsidies for them
2. Ensure that the farmers get fair returns for their efforts through selective procurement when the prices of agricultural commodities crash
3. Improve the marketing infrastructure
4. Introduce a crop insurance scheme

C. Improving Rural Infrastructure

Urban areas do need good public goods and services, but so do the rural areas, where the conditions of roads, schools, and hospitals are deplorable. Not only is there an acute shortage of these facilities in the villages, but there are also complaints of a shortage of staff to man these health and educational schools where they exist. Complaints of substandard workmanship and their fast wear and tear due to a paucity of maintenance funds are also common. We should remember that agriculture has been squeezed too much in the past in the name of development; now it is its turn to reap the benefits of development

Of course, no government can afford to allocate the huge funds required for the above in the short term, but there must be a master plan for the construction of rural infrastructure over a medium- to long-term period. Besides improving the quality of life of the people living in rural areas, this improved rural infrastructure can strengthen linkages between the two essential components of rural areas, namely the farm sector and rural Non-Farm (RNF ) which in turn will act as income and employment multipliers for each other. At the same time, improved infrastructure will not only reduce the costs of doing business but will also help slow down the trend of migration from villages to cities, facilitating their smooth integration with urban areas.

Realizing the gravity of the situation, the government should

1. Improve both hard infrastructure (e.g. roads, electrification) and soft infrastructure (e.g. banking systems, market information systems)
2. Starting with farm-to-market roads for safe and speedy transportation of agricultural inputs and commodities as well as facilitation of rural commuters.
3. After roads, it is the uninterrupted supply of electricity for domestic consumption and tube well operation that should be the biggest priorities.
4. The provision of modern health facilities as a right, not a favour should be the next priority of the government
5. The importance of enhanced rural education for the development of both farm and nonfarm sectors is incontrovertible, as it is a strong determinant of the level of farm income and wages earned in RNF activities.
6. Along with education, more specific skills and training are necessary to transform agriculture from a subsistence economy to a modern, developed one

D. Environmental Sustainability

For too long, developing countries, in their zeal to industrialize themselves at a rapid speed, have ignored the threats posed by environmental degradation as a result of pursuing such policies. Unfortunately, the agricultural sector has been used indiscriminately to release resources for this purpose. The massive use of chemical fertilizers and pesticides, coupled with the pumping out of brackish subsoil water through tube wells, has now resulted in the loss of soil fertility at alarming rates.

Whether it was ignorance, incompetence, or a lack of resources, the disastrous consequences of shortsighted policies are now wreaking havoc on the lives and livelihoods of the people engaged in agriculture. Add the looming threat of climate change, and we have a perfect recipe for disaster. India is one such country where growth has wrought enormous environmental destruction.

In a recently released report commissioned by the Indian government, the World Bank estimates that “environmental degradation annually costs India a horrific 5.7 per cent of GDP. This shaves off almost all of the annual six per cent per capita GDP growth recorded between 2000–01 and 2010–11. Outdoor pollution alone kills more than one hundred thousand people every year. Almost a quarter of India’s child deaths can be attributed to inadequate availability of clean water and sanitation, itself related to environmental degradation.” We can safely assume that the situation will not be much different in other developing countries.

There is thus an urgent need to take adaptive and mitigating measures to not only stop environmental degradation but also reverse the trend. Creating awareness among the farmers about the looming threat of climate change/environmental degradation and popularizing good, sustainable agricultural practices among them should be the first priority of the state in developing countries. We will have to synchronize the extension services of the provincial agricultural departments and the marketing outlets of the private agro service providers to promote environment-friendly practices among the farmers.

Rapid advances in technology and its outreach to rural areas, particularly mobile phones, can play an important role in this awareness creation and motivation campaign. The government should also promulgate a legal/regulatory framework with adequate incentives and rewards for stopping practices aggravating the threat of climate change. It goes without saying that the allocation of sufficient resources for carrying out research to develop varieties responsive to climate change, adjusting the cropping pattern, planting and harvesting schedules, practicing crop rotation, and adapting irrigation practices and fertilization regimes is urgently required.

E. Improving Rural non-farm sector

Rural Non-Farm (RNF) Sector is a subset of the rural economy of a country in which people earn their incomes from wage-paying activities and self-employment in commerce, manufacturing, and other services. It is an important resource for farms and other rural households, including the landless poor as well as rural town residents. Unfortunately, this sector has been neglected by policymakers due to what FAO calls an ‘institutional vacuum"—no ministry owns it.

Providing almost 50% of income and jobs in rural areas, it has strong forward and backward linkages with agriculture and presents tremendous opportunities for adding value to primary production at the farm level. Besides serving as an immediate market for the farmer's farm products, and increasing their access to food, the RNF sector provides farmers with much-needed credit in times of need without much hassle. Furthermore, a developed RNF including agro-processing, distribution, and the provision of farm inputs, may increase the profitability of farming. Increasingly significant for food security, poverty alleviation, and farm sector competitiveness, the development of this sector helps in the smooth integration of rural areas with urban centres, thus preventing rapid urbanization.

There is thus an urgent need to fill this ‘institutional vacuum’ by developing efficient agri-based supply chains that link the agriculture sector with its corresponding upstream and downstream links in the rural nonfarm (RNF) to the national and international markets. To create these linkages, governments should create an enabling environment by taking action in four interrelated areas, namely

1. Improving the general education level and technical/managerial skill formation in the rural non-farm sector
2. Encouraging the establishment of modern agricultural produce wholesale markets through public-private partnerships. At the same time, the government should introduce a warehouse receipt system for easy realization of sale proceeds to farmers
3. Encouraging processing and value addition of agricultural produce to fetch better value, creating links between rural and national wholesalers, and helping them subsequently enter export markets.
4. Integrating informal money lending with formal banking institutions to increase the outreach of formal credit and reduce the scope of fleecing farmers by the money lenders

F. Promoting Agricultural Investment

We need to enhance the productivity of the agricultural sector, reduce the cost of production, improve its quality, and meet global food safety standards to make its produce competitive in a rapidly globalizing world. This is only possible if we make substantial investments to increase efficiency in all agricultural operations. Unfortunately, the flow of investment funds towards agriculture, which has recently picked up, is still far below the desired levels. The government should therefore encourage the private sector through appropriate fiscal and non-fiscal incentives to construct agro-based industries as well as infrastructure for the storage and processing of agricultural goods.

The focus should be on developing airport facilities for wide-bodied cargo planes to land at airports in the main production areas, improving handling facilities at ports, providing one-window operation, and establishing effective and viable cold chain infrastructure (wholesale markets, pack houses, cold stores, and reefer containers) under public-private partnerships led and managed by the private sector. We need to motivate domestic and foreign investors to invest in seed production, fruit and vegetable processing, and agri-infrastructure development and encourage the development of commercially viable non-farm rural agriculture enterprises.

G. Gender Balance

There are studies illustrating how women are key contributors to economic growth, poverty reduction, and environmental sustainability. There continues to be a significant economic gap between women and men in most parts of the world. The proportion of women in the formal workforce has increased steadily over the past decades, but there remain significant differences in workforce participation rates, and women are concentrated in low-productivity, low-paying employment, and businesses.

Women receive less income for their labour than men and are more likely to be found in irregular, informal, and vulnerable forms of employment. This economic gender gap is a result of various, often deep-rooted constraints that women face in taking advantage of market opportunities. Women have difficulty obtaining the same specialised knowledge and skills as men, accessing equivalent business and financial services, inputs, and technologies; and linking up with profitable markets. Women also face institutional constraints such as biased legal environments that limit women’s ability to own or control assets and productive resources, or to engage in paid work, and a lack of gender-responsive workplace policies.

More broadly, women’s lack of decision-making power limits their ability to make or act upon choices about their own livelihoods or to influence community decisions that affect their livelihoods. There have been a number of initiatives worldwide to remove structural barriers to increase women`s participation in the labour market. This process has been successful in high-income countries but has achieved minimal results in low- and middle-income countries. There is a need for comprehensive policies to carry forward the reform agenda. The issue is for discussion and references focusing on low- and middle-income countries.

Rural women are under three pressures—nature, society, and family—which treat them unfairly in terms of status, ownership of resources, job opportunities, and empowerment. The third Millennium Development Goal is about promoting gender equality and empowering women, which sets an ambitious target of eliminating gender disparity in all levels of education by 2015. However, we cannot make much progress in this respect while clinging to centuries-old ideas about the role and status of rural women, denying their meaningful participation in political decision-making and socioeconomic development.

Although women make up the majority of the world’s poor, much of their work as housewives and agricultural producers is unpaid, and their contribution to the rural economy is never acknowledged. Lack of female empowerment has its own direct and indirect social and economic costs, ranging from high rates of undernutrition and infant mortality to wasted human capital and low labour productivity.

All these result in the underdevelopment of agriculture, which adversely affects the overall economic growth of a country. According to former Director General of FAO Mr. Jacques Diouf,

“They have far less access than men to land ownership, financial services, training, and other means of increasing agricultural production and improving family income, nutrition, and health. Women and female-headed households are disproportionately affected by economic recession and higher food prices”.

Without ensuring appropriate gender balance over a reasonable period of time under a targeted plan of action in all its programmes for agriculture and rural development, a developing country cannot achieve the goals of the eradication of hunger and poverty, and food security for all. One way to redress this imbalance is to improve healthcare and family planning facilities in rural areas to relieve them of their excessive childbearing burden. The state should actively involve civil society organisations to launch special rural female literacy and education campaigns by offering attractive monetary rewards. It would not only help in their empowerment but would also reduce domestic violence. Similarly ensuring women’s access to resources and assets, including ownership of land by creating awareness about their rights and promulgation and strict enforcement of legal framework could go a long way in the financial independence of the women in the countryside. This could be augmented by providing them opportunities to develop market-oriented skills and remunerative employment in rural areas.

H. Production Relations

Agricultural production relations relate to ways land is owned and cultivated and its produce is distributed among the stakeholders in rural areas. Presently, there are two dominant forms of land cultivation: relationship cultivation and tenant cultivation with multiple forms. Favourable terms of trade have resulted in increased commercial production and mechanization, with owner cultivation becoming more popular. There is thus a need to formalize the following three modern production relations in the political economy of the rural sector;

1. Contract Farming: also known as “out-grower schemes” in Africa, is a formal arrangement whereby agricultural production is carried out on the basis of an agreement between the buyer, usually a firm, and the farmers, specifying the quantity, quality, price, and date of supplying the produce. The government should promulgate proper legislation backed with effective implementation machinery and dispute resolution mechanisms, encouraging agri-based processors to supply inputs and technology packages to farmers on deferred payment with buy-back of produce at guaranteed prices.
2. Commercial Cooperative Farming: Traditional cooperatives have unfortunately not worked despite all the efforts of the state to popularize it among farmers. We need to develop new forms of cooperative farming whereby all the stakeholders, i.e., farmers, input suppliers, banks, and buyers, are engaged. These cooperatives should be professionally managed, adopt mechanized farming, and use collective bargaining to increase their profits, which should be fairly distributed.
3. Corporate Farming: It refers to the lease of commercially viable tracts of land to corporate-level entrepreneurs who are willing to practice high-tech export-oriented agriculture and share profits with the owners. Recently, these have come under heavy criticism, but the government should encourage corporate farming as it helps increase agricultural production by bringing new areas under cultivation and increasing the productivity of inputs with the help of technology and better management. However, respecting the right of the farmers to land, the government should encourage the firms to enter into leasing agreements with the farmers themselves in the spirit of mutual advantage.

The government should also consider leasing cultivable waste under federal or provincial control for corporate farming. As these cultivable wastelands are sources of livelihood for the communities living in and around these areas and serve as grazing fields and pastures for their cattle, the respective provincial and federal governments will ensure that the legitimate rights of these communities are adequately protected while leasing out the cultivable waste.

However, all three above need comprehensive legislation as well as strict implementation through a specially created institutional infrastructure.

I. Improving Rural Governance

It is not an easy task to dismantle centuries-old rural governance structures and replace them with modern, formal, contract-based rural public management in a short period of time, but it can be done in the long term. Start with education, literacy, and skill formation, which will shake the foundations of this feudalistic structure. Establish alternate dispute resolution mechanisms to replace the informal system heavily dependent on big landlords, supported by the police and petty revenue officials. Local body elections should be held as per a fixed schedule, which will bring in the leadership interested in improving rural infrastructure, the best guarantee of their fast journey to urban culture

Conclusion

Learning from history, we should remember that all over the world, it is the agricultural revolution that has preceded the industrial revolution and not vice versa. We should therefore carry out fundamental structural and institutional changes in the political economy of our agricultural sector to prepare it to be at the vanguard of the overall economic transformation of the country. However, it needs to be emphasized that the gains from this enhanced productivity be made available to all stakeholders without distinction.