Export-Oriented Agriculture and Food Security

in Developing Countries and India

Utsa Patnaik
The set of economic policies labelled economic liberalisation, stabilisation and structural adjustment adopted by
developing countries over the last 15 years have had and are having a profound impact on the nature of the development
process in these countries, and especially on their food security. It is the aspect of food security as affected by food
availability and income shifts which is the focus of this paper.
The paper argues that the undeclared aim of these policies appears to be the restricting of domestic income growth
and absorption of the products of developed countries by the populations of developing countries in order to release
resources for growth of the exportable products demanded by the developed world. In support of this the paper
looks at the international division of labour in agricultural production in a historical perspective and contends that
the theory of comparative advantage cannot explain either the history or the pattern of international specialisation
because it contains a logical fallacy: relative costs cannot he defined at all for a large range of trade relations.
The paper also comments on the new pattern of demands on tropical agriculture emerging in the developed countries
and the new drive to obtain tropical importables on favourable terms.

DURING the last 15 years, 1980 to 1995,
more than 80 developing countries have
been following over various sub-periods a
virtually identical package of economic
policies, labelled 'economic liberalisation,
stabilisation and structural adjustment
programmes' under the tutelage of the inter-
national lending agencies - the International
Monetary Fund (IMF) and the International
Bank for Reconstruction and Development
(World Bank). They have done so as the
obligatory condition imposed on them for
borrowing in order to finance their external
payments deficits. Such a comprehensive
orchestration from metropolitan centres of
policy measures with an identical overall
thrust for developing countries across the
globe, is unprecedented and has never been
seen before in the post-war era. These policies
have had and arc having a profound impact
on the nature of the development process in
the countries concerned, and on their food
security in particular. It is the aspect of food
Security as affected by food availability and
income shifts on which we propose to focus
in this paper.
India is a relative latecomer to the group
of adjusting countries in that the Fund-Bank
determined package started being
implemented from mid-1991; the macro-
economic impact of the policies, though
predictable on theoretical grounds and on
the basis of the experience of other countries,
isshowing up in the data sources only with
considerable lag, though in some respects
he direction of the impact is already quite
clear. In discussing the impact of the policies
on the agrarian sector and on food security
on India, we w i l l therefore draw upon the
Experience of other developing countries,
while supplementing it with the available
information on the trends in the domestic
Economy.
This paper is in three parts. In the first we
discuss the main content of the Fund-Bank
administered policies and argue that even
though the ostensible aim is the correction
of external payments imbalance and
'structural' reforms required to sustain this,
the policies themselves are internally
contradictory and not consistent with this
declared aim. They do appear to be fully
consistent however with the undeclared aim
of restricting domestic income growth and
absorption of their own products, by the
populations of developing countries, in order
to release resources for growth of the
exportable products demanded by the
developed world. They arc also consistent
with opening up markets for metropolitan
capital where substitution of domestic
productive capacities by imports rather than
income expansion, appears to be the main
mechanism of securing larger markets.
We argue that the rationale of the first
objective emerges clearly when we look at
the international division of labour in agricul-
tural production, in a historical perspective.
The climate-soils specificity of crops and the
concentration of natural bio-diversity in
tropical and sub-tropical areas, has led histo-
rically to a high degree of import dependence
by developed countries on imports from
these regions and their policy regime vis-
a-vis third world agriculture has been geared
accordingly to sustaining their imports-based
high living standards. The populations of
northern countries have made continuous
and sustained demands on the limited produc-
tive capacity of tropical lands while the con-
verse has not been true. The theory of 'compa-
rative advantage' cannot explain either the
history or the present pattern of international
specialisation because it contains a logical
fallacy: relative cost cannot be defined at all
for a large range of trade relations.
We argue that despite some advances in
productivity in the third world and in bio-
technology in advanced countries, to date
the sustenance of imports-dependent high
living standards in the latter appears to have
beer, possible only at the expense of the
decline of basic foodgrains production for
local third world populations. It is in this
respect that there is a strong adverse effect
on food security. The emerging inverse
relation between food production and
exportable production is a pan-developing
countries phenomenon which is particularly
marked in those which have taken structural
adjustment loans in the 1980s and have been
pushing agri-exportables for a number of
years. The inverse relation is just beginning
to emerge in India as well.
The second section comments on the new
pattern of demands on tropical agriculture
emerging in the developed countries during
the last two decades and the new drive to
obtain tropical importables on favourable
terms. It argues that the present economic
policies (SAP with trade and investment
liberalisation) objectively achieves this aim,
whatever the putative aim might be, by
restricting domestic mass consumption
growth in the third world countries against
a scenario of declining investment, and
through opening up of the agrarian economy,
induces cropping pattern and product use
shifts away from basic necessities for local
populations. Food security is seriously
undermined and in countries which started
with low average levels of nutrition, prc-
famine conjunctures are rapidly created. Any
moderately severe economic shock is then
enough to plunge the vulnerable into actual
starvation.
The third and last part briefly explores the
emerging class dimensions of support for
and opposition to the new policies in India.

Economic and Political Weekly Special Number September 1996

 I Let us see what the IMF itself has to say development indicators, have unfolded a
Putative and Real Agendas in about the policy measures actually imple- damning indictment. In 55 countries imple-
the Agrarian Sector mented under its guidance by 78 indebted menting SAP during 1980-85, out of a total
countries in the course of the 1980s. of 124 years for which data were available,
The new economic orthodoxy which has It is evident that demand-contracting in 71 years change in real investment rates
been introduced globally, by now is so well measures were undertaken in almost all cases were cither negative or showed negligible
known as to require only the briefest and wage restraint plus exchange rate change compared to the previous year; out
recapitulation. It involves at the national adjustments in a majority (Table 1). The cuts of 186 years, in 155 years GDP per capita
level the apparent 'withdrawal of the state' in central government expenditure and either fell or showed insignificant change.
from economic activity however an essential reduction in the budget deficit ratio, as is In a majority of countries, proportionately
aspect of this 'withdrawal' has been well known by now, were almost invariably more so in Africa and in Central America,
unprecedentedly vigorous and active state achieved by slashing productive investment poverty levels rose, as did infant mortality
intervention to reverse previous policy and cutting outlays on health and education. rates, while literacy campaigns received a
packages and introduce completely new ones; These were the logical corollary of the setback as health and education outlays were
far from being passive, the state actively emphasis on the reduction of state investment, cut sharply under the mandatory Fund-Bank
implements a new policy package under privatisation and the promotion of market requirement of reducing government
Fund-Bank tutelage. Short- to medium-term pricing of health and education services. expenditure [Pinstrup-Andersen, Jaramillo
measures include very tight fiscal and Now income deflating, demand-contracting and Stewart 19871. However much the Fund-
monetary policy amounting to sharp domestic fiscal and monetary policies have been time- Bank might protest that it does not specify
deflation, devaluation, removal of protection honoured though crude and painful ways of that productive investment and the social
(trade liberalisation), removal of subsidies; reducing imports and thus helping to correct sectors be cut, the signals it sends out
longer run measures include opening up the an external deficit. When an entire regarding the desirability of the withdrawal
economy to the free inflow of foreign capital, population's average income falls owing to of the state from investment,privatisationof
privatisation of public-sector enterprises deflation, it is obviously forced to consume, hitherto public-sector enterprises, and a
including the financial sector, removal of save and import less. In a developing country 'rational' market costing of health and
exchange controls and eventually full where average income is low and the education services, are all consistent with
convertibility, export promotion and in the distribution of income is highly skewed to public expenditure cuts necessarily taking
agrarian sector encouragement to agri- begin with, income deflation has serious these forms.
exports and commercial agri-business. results: there is higher unemployment, and A more recent paper by Ravander Hoeven
While all this is put within a framework poverty increases further from already high (1994) summarises the latest IMF studies on
of the desirable, 'efficiency' promoting levels. This happens even with unchanged Latin America. Taking all countries which
effects of the free operation of capitalist income distribution owing to the fall in implemented liberalisation and adjustment,
markets, this is evidently something of a average income; in addition regressive fiscal between 1980 and 1990 the per capita GDP
smokescreen, in that a reified notion of 'the and other policies (lower tax rates on the declined by 9 per cent, the minimum wage
efficient market' is used to validate specific well-to-do, cuts in social subsidies, wage by 31.7 per cent and agricultural wage by
packages of interventionist measures which restraint) also worsen income distribution. 26.5 per cent. The proportion of the poor
have never been implemented in this form Public goods availability suffers with social rose from 41 to 44 per cent with a larger
in the developed countries themselves even sector cuts. impact on the urban poor. The averages
when they had payments imbalance But is it really necessary to incur such a naturally conceal large variations with a few
problems, but are today exclusively applied high economic and social cost which is countries performing reasonably and others
to developing countries. The benefits of mandatory with a generalised deflation? approaching disaster scenarios with up to 25
these policies in turn accrue exclusively to Many economists not subscribing to the per cent decline in per head income (Bolivia,
the global metropolitan sector. current economic orthodoxy have argued Argentina, Guyana, Haiti, Nicaragua) while
The core of the new economic dispens- that it is not necessary: the desired effect of countries like Chile, Colombia and Barbados
ation, then, is deflationary contraction of the reducing imports and improving the trade have seen stagnation in per head GDP. The
economy combined with the privatisation of balance, can in fact be obtained at very much absolute numbers of people in poverty in
industry and infrastructure, and the dismant- lower social cost by specifically targeted Latin America have increased by 45 per cent
ling of all controls and protection in the export promotion and import controls, and from 91.4 mn to 132,7 mn over the decade
process of promoting liberalisation', that is through a system of allocating scarce foreign [Psacharopoulos 1993]. The cold statistics
the unrestricted inflow of goods and capital. exchange to priority uses. The associated conceal acute social distress: in some
'Deflation' is to be understood as income internal budgetary balance can be improved, countries worst affected, bizarre symptoms
deflation and not price deflation; indeed rapid not by growth-reducing cuts in investment of social tensions have emerged, as in Brazil
price inflation in necessities like foodgrains and in vital social sectors, but by widening where large numbers of urban child beggars
is a preferred instrument of mass real income the tax base, ensuring less evasion and by
deflation in many cases including in India. cutting unnecessary state expenditures.
(While pushing for the full liberalisation of Generalised deflation of the economy is not
trade and investment flows into indebted necessary for the desired end; it has been
countries, even the most ardent northern likened to trying to cure a headache by
liberalisers do not however advocate the free cutting off the head.
mobility of labour or question immigration
restricting policies in their own countries). EXPERIENCE OF ADJUSTING COUNTRIES
To sum up, the policy package extends in
fact far beyondtherequirements of correcting A well known set of UNlCEF-sponsored
external imbalance alone; the latter is used as studies [edited by Comia, Jolly and Stewart
a validating device to bring in a total reversal 1987] on the impact of SAP and liberalisation
of the policy regime hitherto followed. on capital formation, growth and human

2430 Economic and Political Weekly Special Number September 1996

are killed by police and slavery is reported
to have re-emerged as the destitute give up
their freedom in return for subsistence.
The I B R D data on sub-Saharan Africa,
show that during the decade 1980-1989 out
of 33 countries, 12 countries with 40.8 per
cent of the population of the region registered
average annual per head GDP decline ranging
from zero to 2 per cent and another nine
countries with 40.4 per cent of total
population registered declines exceeding 2
per cent per annum. Thus 81.2 per cent of
the total population of sub-Saharan Africa
in a total of 42 countries, experienced fall
in income per head; taking all 46 countries
of the SSA region as a whole per head GDP
fell by 1.1 per cent annually over the decade.
Since the elites in African countries protected
their incomes, the decline for the rest must
have been larger. As a part of Fund-guided
wage-restraint policy, real average and
minimum wages were cut by a quarter over
just five years, 1980-85 in two-thirds of the
countries for which wage data are available
( I M F reports, summarised in vander Hoeven
1994).
Such sharp mass income deflation over
such large populations, is unprecedented in
the post-independence history of developing
countries; nor is it a matter of 'a few years
of adjustment' after which the economy
starts growing again: on the contrary, since
the basic problems of external imbalance
and increasing indebtedness are not solved
but aggravated by SAP policies, the indebted
economy enters on a permanent merry-go-
round of more income deflation, more
devaluation, more raising of interest rates
for fear of hot money flight, more poverty
for the masses combined with a more import-
dependent consumption for a minority
towards whom the income distribution shifts.
In Latin America and SSA this has been
going on now for a decade and half.
Both regions, the Latin American countries
as well as sub-Saharan Africa have seen a
highly 'successful' export drive in primary
products which has served to push out
increasing volumes of exports to the advanced
countries. 'Successful' from the point of
view of the latter, but not from that of the
former, since sharply declining international
terms of trade for primary products relative
to manufactures (a minimum of 50 per cent
decline in the 1980s contnuing into the1990s)
have meant that any African developing
country which 'only' doubled export volume
over the decade, was left with no increase
in exchange earnings at all. The 'successful'
export thrust was therefore accompanied by
worsening trade balances, since imports were
simultaneous liberalised while terms of trade
moved adversely.
These trends should cause no surprise.
When the same policies of devaluation and
primary exports thrust are strenuously pushed
Economic and Political Weekly Special Number September 1996
under Fund-Bank tutelage in over 80
developing countries which are thus made
to compete against each other to augment
world supplies, it is hardly surprising if
international prices decline; particularly since
there is no sharp expansion of demand in
importing countries. On the contrary the
advanced countries' economies continue to
register stagnation or low growth under the
regime of the high interest rates demanded
by finance capital. For the African countries
during the last 15 years, the decline in external
terms of trade has amounted to a collapse
which continues into the 1990s. We will
have more to say on terms of trade in relation
to India later. For the importing developed
world on the other hand these price trends
combined with successive rounds of Fund-
pressured devaluation in the exporting
countries, have meant continuously lowering
dollar prices for a range of necessities these
countries cannot produce, and has helped
them to maintain and even raise their real
standard of life despite their own very low
rates of income growth. It is hardly surprising
that there is a veritable cacophony of theories
emanating from northern universities which
castigate the poorer countries' alleged 'export
pessimism', urge them to open up and export ;
usually the examples of 'export success' are
drawn from the state-interventionist, neo-
mercantilist countries like Taiwan, South
Korea or Singapore, none of which are debt-
constrained SAP implemented, and are
therefore totally irrelevant to the case of
those developing indebted countries of which
India is a prime example.
Fund-Bank income-deflating policies in
poor indebted countries, despite being
widely criticised for a decade on the basis
of their own data for reducing investment
and growth, increasing poverty and leading
to regression in health and education
indicators, continue today to be geared to
imposing the same punishing regime of
income and demand contracting measures.
India as a recent entrant into the group of
adjusters, has been implementing exactly
the same set of policies. All the talk of
'adjustment with a human face' has not
changed by an iota the basic agenda. The
package India has been implementing from
mid-1991 is no different in substance from
the packages implemented from a decade
earlier by countries in sub-Saharan Africa
and in Latin America, with very adverse
results, as we have seen.
DOWNWARD SHIFT IN TREND INVESTMENT AND
GROWTH RATE- UNDER S A P
The first act of the governing regime in
mid-1991 was to devalue the rupee by 25
per cent and after allowing the exchange rate
to slide further one of its last acts in the
course of 1995 has been to carry out a further
devaluation by another 16 per cent despite
the existence by then of large reserves; in
total the rupee has depreciated against the
dollar in nominal terms by over 50 per cent
since 1991. In between it has imposed de-
flationary income contraction on the economy,
engineered inflation in necessities prices,
and slashed social subsidies which taken
together have increased unemployment,
reduced investment and growth, cut the real
incomes of the masses and raised poverty.
As in dozens of other countries earlier, in
India too both public and private productive
investment and the social wage have seen
severe cuts since 1991, resulting in a down-
ward shift in the growth rate of the economy
and a rise in poverty. The most severe
income deflation was applied in 1991-92
and 1992-93, with the reduction in the ratio
of the fiscal deficit to GDP from 8.4 per cent
to 5.9 per cent and large administrative price
hikes especially in issue prices of foodgrains
under the PDS. The total capital expenditure
of the central government declined by 16 per
cent to 20 per cent in real terms (depending
on the price deflator used) over these two
years alone. The economy stagnated in the
first year; it grew by 5 per cent in the next
year, but this was mainly because of good
agricultural performance. The rise in
administered food prices led to a phenomenal
increase in poverty by 1992, especially in
rural areas to 48.1 per cent compared to 36.6
per cent In 1990-91 according to the
Tendulkar-Jain (1995) estimate.
In 1993-94 and 1994-95 however the
budget deficit to GDP ratio rose above the
'desired' SAP-compatible levels, attracting
warnings from the Fund-Bank, but the
expansionary effects were limited by the fact
that it was the revenue deficit which grew
fast at the expense of continuing stagnation
in productive investment. However, some
expansionary effect was present nonetheless
and the growth rate improved though it
remained at less than half of the annual rate
for every one of the eight years before SAP.
Also this growth as the mere partial
recapturing of the development loss of the
preceding two years did not represent a net
TABU- 2 A N N U A L AVERAGE o r GROWTH RATES IN
G N P , N N P AND N N P PER H E A D
(At Factor Cost in 1980-81 Prices)
GNP NNP NNP
Per Head
Three years:
188-89 10 1990-91 7.46 7.63 5.37
Six years:
1985-86 to 1990-91 5.78 5.73 3.50
Post SAP
Three years:
1991-92 to 1993-94 3.13 2.83 0.90
Source: Economic Survey 1994-95. Appendix
Statistical Table S3.
2431
 Economic and Political Weekly Special Number September 1996
2432
gain. Indeed the Net National Product per
head rose by an annual average of a mere
0.9 per cent over the three years starting with
1991-92, compared to 5.7 per cent the three
years peceding the reforms (Table 2)
according to the data in the official 1994-95
Economic Survey. Poverty incidence came
down by 1994 as the inflation rate moderated
but it was still noticeably higher than in
1989-90, as c o n f i r m e d by the Sen-
Chandrasekhar estimate. With the general
elections approaching fast the deviation
towards SAP-incompatible higher budget
deficit ratios has necessarily continued into
1995-96.
Manufacturing growth in particular has
decelerated severely. A simple average of
annual growth rates gives 1.9 per cent for
the first three years of the reforms, 1991-92
to 1993-94, compared to an average of 7.4
per cent during the preceding six years
1985-86 to 1990-91 calculated on a similar
basis (Table 3). With the SAP- incompatible
rise in the budget deficit ratio, the growth
during 1994-95 was much higher at 8.5 per
cent (and for 1995-96 it is claimed to be even
higher); even so however the four-year
average starting 1991-92, is less than half
of the average for the years preceding the
reforms.
The trade deficit is expected to be back
to about $ 5 billion in 1995-96, which is
short, but not much short, of the $ 5.9 billion
of 1990-91, despite significant export growth
in the interim. The reason lies in a surge in
imports in the last couple of years, partly
owing to the industrial expansion but partly
also owing to the import liberalisation that
has been a feature of structural adjustment.
It is noteworthy that the composition of
imports is changing towards the particular
types of 'capital goods' required for the new
durable consumption goods. This again
replicates the experience of other developing
countries under liberalisation: however much
export growth is hiked, freeing of imports
particularly of the non-developmental kind
leads to a private spending spree by the well
to do, so that in a few years the payments
problem is usually back to square one, while
in the meantime a high and quite unnecessary
price has been paid by way of more poverty
for the rest of the population. The decline
in the savings rate in the Indian e c o n o m y
is consistent with this spending spree by the
well-to-do.
Inflation, stimulated by the 25 per cent
devaluation of the rupee in 1991, was added
to by the cut in fertiliser subsidy in August
1991 which raised fertiliser prices by 30 per
cent, and by effective cuts in food subsidy
six months later when issue prices for
foodgrains from ration shops were raised
sharply, A record rate of inflation, of 22 per
cent (last month basis) for agricultural
labourers, resulted. In the face of criticism
Economic and Political Weekly Special Number September 1996
about the impact on grain output, the fertiliser
price hike was partially reversed; but the
damage is beginning to show up in stagnating
food output. Research yielding some regional
field data shows a sharp decline in 1992-93
in value added per hectare and per worker
owing to input cost rise.
The total rise in the official index of
wholesale prices over the four years of the
new policies has been over 50 per cent,
which is very high by previous Indian
standards. For the wage-earners in the
informal sector and labourers in agriculture
the rise has been much higher: the consumer
price index for agricultural labourers has
risen by 70 per cent over the four years.
Since the major part of the wage-paid
workforce has no indexation of earnings to
inflation, its real earnings decline has been
substantial; perhaps this is one reason the
Central Statistical Organisation appears to
have stopped giving the break-up of GDP
by factor incomes.
The Indian experience so far has replicated
the familiar contours of the experience of
adjusting countries in the 1980s: reduction
in the growth rate, especially of industry;
very substantial real income decline through
the route of necessities prices inflation
affecting the wage earners and the poor who
are net purchasers of food, pushing more
people below the poverty line. The export
growth rate has shifted upwards but so has
the import growth rate. We will argue later
that rapid export growth especially of
agricultural products far from being a positive
indicator, under conditions of stagnating
overall investment can only be at the expense
of decline in mass domestic consumption of
basic foodgrains. The only concession to
criticism has been talk of 'safety-nets' for
the poor as part of 'adjustment with a human
face', but there has been no change at all
in the basic agenda of reducing growth. (The
analogy might be of a person with a limp
who is advised to cut off a portion of her
good leg in order to ensure stabilisation of
gait and is then generously offered a set of
crutches).
TABLE 3: AVERAGE A N N U A L GROWTH RATES OF REAL G D P ( A T FACTOR COST)
BY SELECTED M A I N SECTORS
Agriculture
and Allied
Source: Economic Survey 1994-95 and 1995-96, Appendix Statistical Tables
The implacable, relentless insistence on
the growth-reducing and poverty-increasing
agenda, in itself suggests that however well-
documented their adverse effects on the
general population in developing countries,
these policies will continue to be mandatory
because they have been highly successful in
implementing the real, as opposed to the
putative Fund-Bank agenda, where the real
agenda is viewed as expressing primarily the
economic interests of the developed nations.
We argue that reduction in the rate of growth
of income and hence of demand in the deve-
loping countries serves a definite positive
function favourable for the capitalist deve-
loped countries in the present conjuncture,
for the economic disenfranchisement of the
majority of the third world population
benefits them. This strong proposition is
advanced not hastily but advisedly, after
looking at the evidence. Why and how
restricting growth in third world countries
benefits advanced countries, is a question
we explore for the agrarian sector. Before
that, let us briefly recapitulate the existing
estimates of poverty in India.
INCREASE IN POVERTY AND IN IMR
Given the marked downward shift in the
trend growth rate of the economy over the
last four years of the new policies, and the
rise in the rate of inflation which erodes the
real incomes of the unorganised labour force,
not surprisingly the incidence of poverty has
risen quite sharply. The findings of Gupta
(1995) and Tendulkar and Jain (1995)
confirmed this for a comparison of 1990 and
1992. Both showed substantial rise in poverty
TABLE 4: ESTIMATES OF RURAL POVERTY
Source: Chandrashekhar and Sen (1996)
Manufacturing GDP
Construction and
Public Utilities
2433
incidence. Data from the new quinquennial
survey for 1993-94 have been since processed
by the Planning Commission to show that
between the two quinquennial surveys,
1987-88 and 1993-94 poverty has declined
and this finding has been used by proponents
of structural adjustment as proof of the
beneficial impact of the new policies on
poverty.
However 1987-88 is the wrong base for
comparison, being both an exceptionally
poor agricultural year and also too far back
from the date of initiation of the 'reforms'.
Also, the Planning Commission used a
traditional, questionable methodology which
had been criticised by an Expert Commission,
namely, it took the difference between the
CSO aggregate consumption estimate and
the lower NSS estimate and distributed this
difference over each NSS expenditure group
in the same proportion as that group's share
in unadjusted consumption. There are reasons
to believe how ever that the extra consumption
not captured by the NSS is likely to be
skewed towards the higher expenditure
groups. Upon rectifying these defects,
Chandrasekhar and Sen (1996) find that
rural poverty (similar estimates for urban
poverty have not been made) which was on
a downward trend has started rising again
and in each of the post-reform years has been
higher than either in 1989-90 or 1990-91
(Table 4).
The Indian experience during the last four
years thus substantially replicates the
experience of dozens of other countries:
reduction in investment and growth, and rise
in poverty. The infant mortality rate which
is a telling indicator of the level of mass
well-being, registered a slow but steady
decline all through the late 1980s, but during
the reform period. 1991 to 1994 the rale of
decline has slowed down and in a number
of states the urban 1MR has actually risen
(Shiva Kumar, A K, 'Urban I M R and
Economic Reforms' in Frontline, 1996).
States in which urban IMR has been stagnant
or has risen include Rajasthan, Haryana,
Uttar Pradesh, Bihar, Karnataka and Tamil
Nadu; many had higher than average IMR
before the rise.
At the same time, there have been large:
inflows of foreign capital, about three-
quarters of it in the form of mobile 'hot
money' attracted by high interest rates, and
a large accretion to reserves - not arising,
it may be noted, from any export surplus,
but arising substantially from borrowing. To
this extent the very source of larger reserves
carry a hefty interest burden.
Large reserves arc a cause for satisfaction
if they permit a bolder programme of state
investment for development than would
otherwise be possible, as was the case for
example with sterling reserves accumulated
by India during the the second world war
2434
which permitted the bold Second Plan of
much higher state productive investment,
since these sterling reserves provided a
buffer against the inevitable external
payments imbalance accompaying growth.
Accumulating large reserves makes very
little economic sense however if a state-led
investment thrust is anathema under SAP as
at present; on the contrary the Indian state
is required, and it has already obliged, to
deliberately emasculate itself by cutting its
own productive investment, privatise PSUs
and to start scouting for foreign finance
capital. Rise in external debt - a significant
part of which falls in the category of 'hot
money' - and increased vulnerability to
speculative capital outflow are the result. By
early 1996 India's external debt has reached
the third largest size in the world at nearly
a hundred billion US dollars (exceeded only
by Brazil and Mexico) and servicing this
debt is expected to absorb an increasing
share of export earnings. From the third
quarter of 1996 as the phased principal
repayment of structural adjustment loan taken
in 1991-92 falls due, the pressure on the
balance of payments will increase sharply.
We may expect a scenario of further pressure
by the lending agencies for more devaluation,
more liberal imports and further export-
volume increases in the coming months,
which will be quite compatible with further
worsening of current account deficits and
further rise in indebtedness.
These policies are hardly rational from the
viewpoint of the mass of third world
populations; they continue however to be
pushed strenuously by the Fund-Bank and
continue to be implemented by indebted
third world governments. The only rational
explanation seems to lie in the undeclared
but transparent agenda, namely, their
usefulness in accessing and cheapening third
world exports lor consumers abroad, and
opening up hitherto protected third world
markets.
There arc strong incentives which are
offered by the new policy regime to the
minority constituting the domestic well-to-
do, to support these policies because the
distribution of incomes shifts noticeably in
their favour: direct taxation rales on
individuals and companies are reduced,
subsidy cuts on food and the health and
education sectors reduce workers' bargaining
strength through a drastic reduction in the
social wage, a profit inflation for business
is ensured as necessities prices rise and real
wages are restrained, and access to
international consumption standards assured
for the minority with the means as scarce
foreign exchange is freed for consumer
imports which were restricted earlier.
The domestic state, increasingly
representing openly the interests of the well-
to-do minority of its own population,
Economic and Political Weekly Special Number September1996
implements these policies because it finds
it easier to borrow abroad than to tax the
rich, and more expedient to pass the burden
of deflation onto the poor than to impose
discipline on its own profligate consumption,
(It is noteworthy that budgetary deflation
does not even impose any real discipline on
the budget since, as has been repeatedly
pointed out by analysts, the government's
revenue deficit continues to widen and the
overall cut is achieved by slashing productive
expenditures). The vision of 'national
development' has been replaced by the
economics of class expediency.
Some of the key influencers of decision-
m a k i n g in t h i r d w o r l d governments
undergoing structural adjustment (and India
is no exception in this respect) are themselves
ex-employees of the I M F or IBRD, and can
revert to these institutions, whose agenda
they are implementing so faithfully, almost
at any time they wish. They are as a faction
of a class already 'globalised', and care little
if the costs of imposing 'reforms' are borne
by the mass of their countrymen who, unlike
them, have access neither to dollar incomes
nor to migration opportunities: their own
'safety nets' are already well in place, so that
in the event of a collapse of the system they
are administering, they can easily migrate
to their metropolitan havens. This represents
an e n t i r e l y new phenomenon, when
'nationalism' and 'patriotism' for this class
mean little and indeed are treated as laughably
outmoded ideas.
All this is not an individuals-specific matter
but reflects larger forces, indeed a new phase
of world capitalism itself with the re-
emergence of the dominance of highly mobile
international finance capital. These decision-
makers enjoy not merely the support but the
virtual adulation of a section of the urban
well-to-do in India, who similarly today
have personal access to international travel
and consumption standards through their
own jobs, and through children and relatives
settled abroad. Though a tiny fraction of the
total population, perhaps less than half per
cent or so, in absolute terms their number
is large and their influence is much larger
than their numbers; they are supporters and
beneficiaries of the new policies, which are
entrenching their interests further at the
expense of their ordinary countrymen. They
can now insulate themselves from their
fellow-countrymen in oases of high lifestyle
comparable with or even better than anything
abroad (since local labour remains cheap).
On present indications they have been
prepared to support the imposition of mass
income deflation (via food price inflation
and cutting state investment;, the main-
tenance through repeated devaluations of
a low effective exchange rate beneficial
for the advanced country importers, the
dismantling of domestic food security, the
carte blanche to M N C ' s to displace domes tie-
producers and take the country towards an
overall scenario of rising debt, low growth
and increasingly more skewed income
distribution.
No advanced capitalist country today will
countenance being caught in a scenario where
all of them are simultaneously carrying out
devaluations as well as deflations. The last
time this happened in the developed world
was 65 years ago in the slide to the great
inter-war depression. Country after country
undertook deflation to remain on the Gold
Standard; later, as the Gold Standard
collapsed they undertook competitive
devaluations in an attempt to capture a larger
share of by then declining world trade. The
end result of combining simultaneous (viz,
across countries) deflations combined with
similarly simultaneous devaluations was, to
say the least, distressing, and is now the stuff
of economic history [see for example
Kindelberger, The World in Depression
1929-1939].
Third world countries today are being
asked to do precisely this: to competitively
deflate and competitively devalue. There is
in fact a remarkable similarity between the
pre-Keynesian, quite disastrous economic
policies that finance ministers the world
over followed in the late 1920s, and the
Fund-guided programmes that the indebted
third world countries are obliged to follow
today. The main difference is that today
these policies are advised for the developing
countries alone.
Devaluation squeezes real wages while
deflation accentuates unemployment. A
combination of the two - which when
undertaken competitively by many countries
does not even achieve its putative aim has
a severe impact upon the working masses.
And yet indebted developing countries, with
2 per cent of the per head income of the
developed world, are expected under the
Fund-Bank package to cope with the burden
of simultaneous deflation and simultaneous
devaluation (Table 1 covering 78 countries
in the 1980s shows that the intersection set
of countries implementing both, was at least
half the total number). There is a ruthless
implacability about the agenda, which, we
would argue, is owing to the need for
releasing exports, especially from the primary
sector at cheapening rales from developing
countries, by reducing domestic demand
and absorption of their own products by the
mass of the population.
It might be argued that reducing growth
rates in the developing world adversely
affects markets in them for advanced
countries' exports and is therefore against
their interest in this respect. However it has
to be remembered that rise in their per head
income is not the only way that developing
countries can absorb more imports; after
Economic and Political Weekly Special Number September 1996
liberalisation and dismantling of tariff
barriers, the eroding of the developing
countries' domestic industrial sector by dis-
placing its production, or deindustrialisation,
performs the same function equally well
from the viewpoint of international capital.
That is the basic reason for the insistence
of the advanced w o r l d on clauses of
mandatory market access in the G A T T 1994.
Studies of a number of African economies
undertaking adjustment in the 1980s, have
reached the conclusion that significant
deindustrialisation has occurred already.
Why should the reduction of demand and
absorption of their own products by third
world populations, be necessary at all, and
of benefit to advanced countries? This is the
question to which we try to put forward the
answer in the next section with reference to
the agricultural sector. The answer involves
a rejection of the entire body of previous
t h e o r i s i n g , based on ' c o m p a r a t i v e
advantage', i n v o l v i n g today's tropical
developing countries.
INTERNATIONAL DIVISION OF LABOUR AND
LOGICAL FALLACY IN COMPARATIVE
COST THEORY
There is a fallacy of logic in using the
theory of comparative costs to explain that
pattern of international division of labour
which involves the export of agricultural
products by the tropical and sub-tropical
countries and the import of manufactured
goods f r o m more advanced northern
countries. The fallacy lies in the fact that
relative costs cannot be defined at all. This
argument is explained further below.
There is a fundamental i f obvious
d i f f e r e n c e between a g r i c u l t u r e and
manufacturing, the economic consequences
of which art usually not taken into account.
Manufactured goods whether cement, textiles
or steel, can be produced anywhere in the
world, on the basis of imported raw materials
if these are not locally available; but crops
are ineluctably specific to particular climate-
soil complexes. The overwhelming bulk of
the earth's bio-diversity in general and
botanic diversity in particular, is concentrated
in the earth's tropical and sub-tropical areas
which include India, where high ambient
tempertures ensure year round plant growth.
In northern countries there is only one single
natural growing season, the range of crops
is relatively limited, and artificially extending
the growing season is a highly energy-
intensive and p r o h i b i t i v e l y expensive
proposition.
No amount of capitalist innovations can
alter the fact that under field conditions
Yorkshire can never grow bananas, Bavaria
can never grow sugarcane and New England
can never g r o w coffee. W i t h a vast
expenditure of energy derived from the fossil
fuels, prohibitively expensive hot-house
cultivation may enable growing them in tiny
quantities as in a botanical garden, but
commercial cultivation on any scale is out
of the question and imports are mandatory,
for these products arc by now essential
elements in northern consumption baskets.
Large countries like India cannot only
grow all the typically tropical crops, but
potentially if not actually every crop that
grows in Yorkshire, Bavaria, or New
England, In addition to the specifically
tropical crops, the temperate-land summer
crops, fruits and vegetables are also easily
grown in winter in sub-tropical climates.
Where topography is such as to provide land
at varying elevations, a highly diversified
product-mix is possible.
Tropical lands with their unique capacity
to produce a large variety of crops, are not
in u n l i m i t e d supply. We might not
conceptualise tropical cultivable land as a
completely non-renewable resource as we
do the fossil fuels; but it is definitely a
resource whose 'supply' can only be
augmented with the greatest difficulty.
Lateral expansion of cultivable area is no
longer easily possible as it was in the last
century and can only take place by further
forest destruction carrying long-term adverse
effects on rainfall and survival of species.
(In some Asian countries cultivable area is
actually falling as commercial, industrial
and residential construction grows). Making
an existing acre do the work of two or three
by raising output per unit area, is thus the
only rational alternative. Heavy investment
in research and in irrigation is required
however to raise the yields from existing
c u l t i v a b l e area, and after the 'green
revolution' of the 1960s in the cereals no
new really big breakthrough is as yet in
sight. It is still potentially toxic heavy
chemical fertiliser application on irrigated
land to non-lodging varieties which is the
source of yield rise,
Further, the present logic of Fund-guided
contractionary programmes has led if
anything not to increase, but to prolonged
deceleration in investment in irrigation and
in agriculture in most tropical developing
countries. Certainly we know that in India
investment in agriculture has been declining
from the partial liberalisation of the 1980s
and the present phase of SAP has seen a
continuation of the decline. In the absence
of adequate investment tropical land becomes
a resource in virtually fixed supply, implying
that growth in one component like agri-
exports can only be at the cost of decline
in domestically consumed output. We will
return to the emerging inverse relation
between agri-exports and domestic food
supply below. This emerging inverse relation
is indeed the single most important outcome
of the liberalisation of agriculture, carrying
2435
 very serious implications tor food security
for the poor.
The basic of obvious fact of the con-
centration of botanic diversity in tropical
regions has determined the world division
of labour in agricultural production. Its
historical origins lay, not in Ricardo's
'comparative advantage' (which is probably
the cleverest rationalisation of national self-
interest ever put forward by an economist),
but in the use of mercantile arms backed by
state power to secure for European
populations, access at the cheapest possible
rates to tropical products. The fact that Britain
could grow no cotton, did not prevent the
cotton textile industry emerging as the leading
sector of the Industrial Revolution; but this
improbable development was only made
possible by securing an elastic supply of
colonial raw cotton under the mercantilist
system of prohibiting textile manufactures
in the colonies while pushing the cultivation
of the raw material. The fact that Japan, that
other island-nation on the edge of a continent,
could grow little sugarcane itself, did not
prevent the emergence of a large Japanese
sugar refining industry ; but this in turn was
only possible by seizing and colonising sub-
tropical Taiwan and developing sugarcane
production.
The specialisation of Britain or Japan in
manufacturing and their colonies in primary
products, and the ensuing trade pattern, had
nothing whatever to do with any Ricardian
'comparative cost advantage' or indeed
'absolute cost advantage'. There is a
fundamental logical fallacy in trying to
explain such specialisation using Ricardian
theory. This theory (the standard two-
country, two-commodity model) is only
applicable where both countries can produce
both commodities; this is a necessary
condition for calculating and comparing
production costs. Tropical primary products
are by definition not producible at all in
temperate regions, so production cost simply
cannot be defined for these commodities for
these regions; hence neither absolute nor
relative costs are definable.
To say for example that Britain had a
comparative advantage in textiles relative to
India whose advantage lay in sugarcane (or
jute, or tea), is a nonsensical proposition; for
while the cost of both goods can be defined
for India, sugarcane, jute or tea cannot be
produced in Britain, hence its cost cannot
be defined. I f cost cannot be defined, cost
ratios are undefinable. We can attempt a
mathematical solution to the problem perhaps
by assuming a fictional output of sugarcane
(or jute or tea) in Britain and imputing an
infinitely high cost of production to it. But
this is not Ricardo's theory which assumes
that both commodities are producible, and
are actually produced in the pre-trade
situation, in both countries: only on this
2436
basis can Ricardo show that the availability
of both goods improves for each country
through trade (in the sense of more of one
good and no less of the other good, i e,
vectorwise improvement). Fictional out-
puts have no place in Ricardo's theory be-
cause the vectorwise improvement in the
availability of both commodities in both
countries through trade is the explanation
as well as the justification of trade in the
comparative cost theory [see Samuelson
1965, pp 426-38 for a formal exposition of
Ricardo which is based precisely on the
production of both goods in both countries
in the pre-trade situation].
On the other hand one might try to rescue
the theory by interpreting the 'vectorwise
improvement' to mean a Pare to improvement
in utilities in each country rather than an
improvement in the physical commodity
bundles available in each, in the post-trade
situation as compared to the pre-trade one.
This is trying to arrive at a weaker version
of Ricardo's conclusion about mutual benefit
from trade, without making Ricardo's
assumption (making use instead in the
process, of fictional outputs with infinitely
high costs of production); but this device too
w i l l not work. The conclusion about
beneficial effects of trade even in this sense
does not necessarily follow. Indeed for the
tropical country trade becomes positively
harmful: because of the inelastic supply of
tropical land - in the absence of adequate
investment which the market itself does not
call forth - the export of tropical products
w o u l d necessarily reduce domestic
availability of such products or of foodgrains,
and leave the mass of the population worse
off, for which manufactured imports from
the north, no matter how cheap, cannot
compensate.
The comparative cost theory thus breaks
down for all trade involving tropical products
vis-a-vis northern countries. Relative cost
cannot be defined at all where some goods
cannot be produced, and rescue efforts
through various logical stratagems like
assuming fictional outputs and weakening
the mututal benefit condition, do not work.
This simple point which nevertheless
constitutes a powerful logical critique of the
common fallacy of invoking Ricardian theory
to explain international specialisation, has
not been made before to our knowledge.
As a matter of fact, the criticism is
applicable not only to the present use of
Ricardo's theory; it is equally applicable to
Ricardo's original example of specialisation
in wine production by Portugal and in cloth
production by England, which would occur
if the relative cost of wine production was
lower in the former. This is an example
which finds a place in every economics
textbook to this day and is uncritically taught
the world over to students, This particular
Economic and Political Weekly Special Number September 1996
example by Ricardo is logically untenable
as well since commercial large-scale grape
production was not possible in England,
located as it was in the northern part of
Europe, owing to its cooler and more variable
summers compared to the central and
southern continental countries. The cool
temperate lands generally cannot cultivate
grapes. Since grapewine could not be
produced its relative cost could not be
defined. (The natural, genetically untampered
grapevine or vitis could indeed perhaps be
grown with great care though giving low
yield, in England in a few very limited
south-facing and wind-sheltered locations
in Cornwall or in heated conservatories; but
not on any scale under field conditions.
Incidentally it is amusing to note that
Samuelson 1965, ibidem while providing a
modern exposition of Ricardo's theory,
quietly substitutes 'food' for 'wine' in the
original two-commodity two-country model
of Ricardo without mentioning why he does
so. Food is of course producible in both
countries while wine is not. It is possible
that he smelt a rat in the original example
but thought it best not to explore the issue,
with its subversive implications for the
'mutual benefit' conclusion, any further).
Britain wanted a large supply of in-
expensive grapewine lo consume but could
not produce it. The real reason for warmer
Portugal obligingly exporting its low-value
wine and giving access to its own markets
for higher value cloth to Britain - resulting
in the relative dec line of its local cloth
production, or deindustralisation - lay in its
relationship of naval and d i p l o m a t i c
dependence, indeed near subjugation, to
Britain both when Portugal was fighting
Spanish rule over its population as well as
later in the course of the war of the Spanish
Succession. Britain's naval ascendancy left
Portugal with little choice in the matter of
trade. Britain had even succeeded through
a combination of naval b u l l y i n g and
diplomacy, in wresting from Portugal the
coveted, h i g h l y lucrative Asien to or
monopoly of supplying slaves to the Spanish
empire in South America from Portuguese
West Africa; and later obtained more trade
concessions for its merchants located in
Lisbon including the agreement on the
exchange of cloth for wine [see Boxer 1969
and Hill 1966].
The central role of military violence,
interestingly, drops out of the picture entirely
once we come to the subsequent theorisation
of the trade pattern by English political
economists: Ricardo's illustration and
explanation is entirely in terms of neutral,
technologically given cost factors. The very
fact of the emphasis on cost ratios serves to
divert attention from the basic point of
whether cost is at all definable; it acts as an
intellectual sleight-of-hand. Without entering
into the vexed and perhaps unanswerable
question of to what extent Ricardo was aware
of what he was doing, as far as his theory
is concerned it clearly played the role of
rationalising - as being mutually beneficial
and therefore voluntarily entered into by
bothsides—andthus intellectually justifying
a trade pattern which in reality was to Britain's
benefit and to the trading partner's detriment.
The rationalisation was powerful because it
was stated in terms of what looked like
objective economic law, even though the
real historical mechanism leading to that
trade pattern as well as its welfare outcome
were quite the contrary of that postulated.
The obfuscating power of the intellectual
construct should be clear from the fact that
every economics textbook uncritically carries
to this day this logically incorrect illustration
of Ricardian comparative advantage. Further,
the theory is used systematically to suggest
that the trade pattern historically imposed
by armed force and economic coercion upon
subjugated or colonised peoples by the west
Europeans, resulted in a mutual advantageous
specialisation. So successfully has the
hegemonic theory suborned the capacity for
independent logical thought that we find
third w o r l d historians and economists
themselves putting forward this fallacious
argument, vide the invocation by K N
Chaudhuri in the Cambridge Economic
History of India 1985, o f R i c a r d i a n
comparative advantage as the explanation of
India being reduced to importing Lancashire
cloth and exporting primary sector products
in the early 19th century.
D u r i n g the last three centuries, the
consumption basket of Europeans including
those who Emigrated and populated the
temperate areas of the Americas, has been
transformed: but only partly owing to
improvements in their domestic agriculture,
and very largely o w i n g to increasing
dependence on imported tropical and sub-
tropical products which provided the physical
basis for rising standards of living. Reliance
on the products of their own agriculture had
historically meant a very limited consumption
basket for the Europeans. Late medieval
temperate agriculture had a remarkably low
productivity owing to a short growing season
confined to a few summer months over much
of Europe, a seed to yield percentage as high
as 25 to 40, and the fact that only one-third
to half of cultivable land at any given time
could actually grow anything because
fallowing to keep up soil fertility was neces-
sary in the absence of adequate manuring
[van Bath 1963]. The inability to grow enough
foodgrains for humans as well as fodder for
animals entailed mandatory livestock culling
at the onset of winter and lowered the
availabilty of manures which in turn kept
yields low and perpetuated the vicious circle.
Latin Europeans however were somewhat
Economic and Political Weekly Special Number September 1996
better off and enjoyed the saving grace of
the vine, the olive and some citrus fruit.
Analysing the data on the diet of serfs and
lords on the feudal estates of Germany and
Sweden in the 16th century, van Bath (1963)
finds that the average diet provided more
than adequate calories at about 3,500 to
4,000 per head but was grossly ill-balanced
and monotonous, consisting of large
quantities of bread, rancid saltbutter, a little
cheese, and meat of which only 10 per cent
was fresh and 90 per cent preserved and
heavily salted. Vegetables and fruit were
limited to the few summer months; the highly
saline diet generated an 'oceanic thirst' so
that beer consumption per head was some
40 times higher than in present times.
Herrings supplemented this diet for coastal
peoples. Vitamin and other micronutrient
deficiency diseases (rickets, night blindness,
scurvy, etc), hypertension and cardiac disease
must have been much more common than
today.
By contrast, in the Ain-i-Akbari, part of
the Akbarnama written by Abu'l Fazl Allami
during emperor Akbar's reign in India in the
late 16th century, we find a list, slated to
be not exhaustive, of the market prices of
35 kinds of fruit and 26 kinds of vegetables
(see A in 27 and A in 28,Akbarnama translated
Blochmann 1887]. Consumption may have
been limited by income, but not by the
inability to produce. Net yields of cereals
per unit of arable land were substantially
higher than inEuropeowing to low fallowing,
at least two growing seasons in the year, a
low seed to yield percentage of around 10,
and the ability to multiple-crop under
irrigated conditions.
The improvements in European agriculture
starting in England from the 18th century,
involved root and leguminous fodder crops
which permitted livestock to be fed through
winter; convertible husbandry increased the
supply of fresh meat and manures, breaking
the late medieval vicious circle of very low
productivity. The 'agricultural revolution'
in Britain, the country w i t h the most
improvements, seems all the same rather
unimpressive: Mingay tells us that grain
output rose by 50 per cent at most during
1700 to 1850, which gives us an annual
compound growth rate of only 0.27 percent
[Mingay 1967], which fell behind the
estimated population growth rate by the
m i d 18th century. Nevertheless the
consumption basket of the British and other
west Europeans through the 18th century
was being transformed, and this was owing
to the institution of mercantilist trade patterns
following their seizure of the Americas, parts
of Africa and the colonisation of Asia and
the Caribbean. The greatest land and resource
grab ever in the history of human societies
by the Europeans, predates the rise of
industrial capital.
With the seizure of tropical colonies, we
know that Europeans proceeded with great
energy to exploit for themselves the benefits
of tropical botanic diversity, by dispersing
a range of commercially valuable crops
(sugarcane, rubber, cotton, tea, coffee and
so on) from their countries of origin to
colonies with similar climatic conditions,
for plantation production for export to
metropolitan markets. For this purpose
they similarly trasported West Africans,
kidnapped and enslaved, and later Asian
indentured workers, thousands of miles to
serve through their labour the interests of
the new globalised capital. W A Lewis (1978)
estimates that from the second half of the
19th century alone about 50 m i l l i o n
Europeans migrated to settle and develop
the resources of the temperate lands they
seized, while a similar number of Africans
and A s i a n s , about 50 m i l l i o n , were
transported by them as cheap slave and coolie
labour to work the mines and plantations
feeding m e t r o p o l i t a n i n d u s t r y and
consumption.
As the leading colonial power, Britain by
1830 already had tropical imports amounting
to as high as 40 per cent of its own domestic
production by value if we consider primary
goods and by 1860 this had increased to a
staggering 60 per cent [calculated from data
in Mitchell and Deane's Abstract of British
Historical Statisics 1966]. These are
underestimates given the method of valuation
used in the statistics. A developing country
today with even half this degree of import
dependence would at once plunge into
balance o f payments crisis. External
payments problems seldom troubled the
European colonisers however, because with
political control the tropical import surplus
for them, became costless. It was financed
by using a large part of the tax revenues
obtained f r o m the colonised people
themselves to purchase the importables; the
metropolitan import surplus of goods from
the colonies thus represented a different
economic category from an import surplus
under normal trade, it was nothing but the
transfer of the commodity equivalent of a
part of the colonial tax revenues. As far as
Britain was concerned on average over half
its huge tropical import was re-exported to
temperate countries (mainly Continental
Europe) to pay for its imports from them,
thus solving potentially serious payments
problems given inelastic demand for British
exportables.
INVERSE RELATION OP FOOD AVAILABILITY
AND AGRI-EXPORTS
In the modern world the mechanism of
taxation is replaced by that of the external
debt of third world countries, whose servicing
requires an export thrust and absorbs a
2437
 Economic and Political Weekly Special Number September 1996
2438
substantial part of their export earnings. The
heaviness of debt in third world countries
is partly the result of their attempt to develop
today in a much more hostile w o r l d
dominated by the early industrialisers and
with no access to large transfers such as
those advanced nations historically enjoyed
from today's developing countries. The
heaviness of debt is also the outcome of the
developing countries not being paid enough
for their exports compared to their imports,
and continuous pressure on them to cheapen
their exports further.
The reason for dwelling on the mechanism
of tax-financed exports in colonial times, is
to stress the fact that it necessarily operated
via a domestic deflation. If a part of budgetary
revenues is set aside every year in the colony
for paying local exportable producers and
the foreign exchange earned by the export
surplus does not accrue to the producers but
is diverted to metropolitan use, then this is
equivalent to the folio wing scenario; a surplus
budget is being operated (the surplus being
equal to the magnitude of the transfer abroad)
to reduce domestic demand, and the
commodities so released are then bought up
using the unspent revenue and taken out as
unrequited exports (for the modus operandi
of colonial fiscal policy see S Sen, Colonies
and Empire, 1992). Income deflation was
a necessary economic mechanism from the
rulers' viewpoint because the rate of growth
of Indians' income had to be limited in order
to keep in check their market demand for
domestically consumed goods, and thus
divert a larger part of available limited
resources especially irrigated land, away
from these domestically consumed goods to
the production of the tropical primary exports
needed by the industrialising powers.
The most i m p o r t a n t d o m e s t i c a l l y
consumed necessity was foodgrains, and its
growth necesarily declined to accommodate
the growth of exported crops. 'Necessarily'
is used here in a contingent sense; had the
colonial government pumped large enough
investment into irrigation, improved seeds
and fertilisers in order to raise grain
productivity, then food output could perhaps
have been maintained even with increasing
agri-exports. But no colonial government's
priority was to see that the average local
producer continued to eat at least the same
amount of food as before commercialisation.
Its priority was to secure a cheap and elastic
supply of the commercial tropical raw
materials which fed its home industry and
the tropical consumption goods which had
become a part o f the the essential
consumption basket of the home population
or which could be exchanged for imports
from other temperate land countries.
We extend the argument to present times;
as in the past, there is a basic asymmetry
which continues to exist with respect to
Economic and Political Weekly Special Number September 1996
global agriculture. Every developed northern
country continues to make systematic and
ever larger demands on the limited productive
capacity of tropical and sub-tropical lands,
while the converse is not true; the populations
of developing countries have neither
historically made demands on temperate
lands, nor do they wish today to become
wheat importers from them. They are
perfectly capable of meeting their own food
requirements i f they were left alone to do
so and were not called upon to meet the
demands of northern countries which are
habituated by now to consume a huge range
of products only producible in Southern
lands. With no access to tropical colonies
other than the Philippines for any length of
time, the US too has developed a highly
import-dependent consumption pattern
ensured by the contractual control exercised
by its transnational food companies on third
world producers.
In this context it will be worth bearing in
m i n d that strawberries in July and
strawberries in January are analytically two
'different' crops; most of Europe or north
America can produce the former but not the
latter; so northern demand is by no means
confined to typically tropical crops like
sugarcane or coffee, but includes all crops
which are seasonally limited in temperate
lands but are easily producible in winter in
countries like ours. Hence the thrust by the
TNCs in the global food business is to
displace third world land already under
foodcrops, to those vegetables and fruits
which will iron out seasonal imbalance of
supply for northern populations. Fresh,
frozen and canned vegetables and fruits are
cheaply available all the year round to
consumers in western Europe and north
America, whereas consumption patterns to
this day in east Europe or Russia which
never colonised or exploited the third world,
are much less diversified, more primitive',
seasonally constrained and local products-
dependent.
It is not the priority of any advanced
country today, to ensure that the demands
it makes on tropical agriculture are consistent
with local populations retaining enough to
eat themselves. True, the advanced countries
strenuously push wheat exports to them; but
since the price of tropical exportables are
under continuous downward pressure, terms
of trade tend to turn against the developing
world reducing its ability to import food and
forcing consumption decline. In fact we
already find, in the countries with the most
successful agri-exports drive, severe decline
in per head food production and since food
imports usually cannot be increased enough
to compensate o w i n g to d e c l i n i n g
international terms of trade, there is also a
decline in availability and a rise in the
numbers of the famine-vulnerable. Some
data from sub-Saharan Africa are examined
later. It is evident from a study of history
that the cost of ensuring a cheap stream of
agri-exports to the metropoles was very high
for the colonised populations: no less than
a substantial decline in their own absorption
of basic foodgrains, a decline in their level
of nutrition. In India for example, exportable
commercial crops grew more than 10 times
faster at 1.31 per cent annually compared
to only 0.11 per cent per annum for the
foodgrains over the period 1894 to 1947
according to G Blyn's estimate for British
India. The per head exportables production
rose, but the production and availability per
head of foodgrains declined by 25 per cent
overall for British India in the inter-war
period. The decline was highest in Bengal,
Bihar and Orissa at 38 per cent while even
the most dynamic region, Punjab saw an 18
per cent decline [see Blyn 1966]. We have
elsewhere argued [see Patnaik 1991] that
this secular fall in food availability, com-
bined with the adverse movement in the
international terms of trade for primary
products, created the preconditions for
famine. Traditional systems of food security
were continuously undermined by exports
and the inter-war decline in terms of trade
in a completely open, liberalised economy,
sharply increased the numbers of famine-
vulnerable. Any shock to the system could
then set off actual famine, as indeed happened
in Bengal in 1943-44.
The scenario of falling nutrition levels for
the colonised as a direct result of exports
to the metropole, was a general one. Japan,
during the relatively short periods that it
colonised Korea and Taiwan (1910 to 1945
and 1895 to 1945) developed these areas
vigorously as suppliers of rice and sugarcane.
Despite the fact that it pumped in a good
deal more of investment to ensure high
growth than Britain had done in India, in
Korea so large was the increase in exports
of rice (rising from less than 1 per cent to
65 per cent of increasing rice imports into
Japan during 1897 to 1937) that consumption
of foodgrains by the Koreans fell (see
Grabowski 1986]. Inferior millet from
Manchuria substituted for rice in the
colonised Koreans' diet, but the calorie
content of the average diet is estimated to
have declined by 18 per cent over the two
decades before the second war. The poorer
peasants were reduced to eating wild grasses
and tubers for two to three months in the
year [see Hayami and Ruttan 1970].
We put forward the proposition here that
the real as opposed to the putative rationale
of imposing income deflation on all indebted
third world countries today by the Fund-
Bank, is no different from the rationale in
colonial times. Given inadequate growth of
production the only way that more exports
can be squeezed out at low prices is through
2439
2440 Economic and Political Weekly Special Number September 1996
limiting the absorption of their own products
by the third world populations. Mass income
deflation does not correct long-run payments
imbalance when accompanied by trade
liberalisation and more skewed incomes over
social classes, as the experience of dozens
of adjusting countries amply demonstrates;
but it does serve as a very effective economic
mechanism for reducing the growth rate of
third world consumption and releasing
exports (which are either only producible in
these countries or are producible at much
lower cost than elsewhere). Now as then, the
maintenance of the developed world's high
living standards is crucially dependent on
a cheap and elastic supply of imports from
developing countries; we would argue also
below, that there are recent shifts in
consumption patterns which are resulting in
fresh demands on the limited productive
capacity of fragile tropical and sub-tropical
lands.
The structural characteristics of the colonial
syndrome in the agrarian sphere - the growth
of exports and decline in the absorption of
basic food staples by the poorer majority of
local populations - is being replicated today
all over the developing world as a general
trend which is sharply accelerated in the
countries following trade liberalisation and
SAP. It is important to remember, and it will
bear repeating, that the regime of primary
sector export drive in every third world
country undertaking liberalisation and SAP
today, is also the regime of mandatory
macroeconomic contraction, and hence of
decline in rates of productive investment
and growth including in agriculture. There
is thus not the remotest possibility of
combining high agri-exportables growth with
high growth of domestically consumed crops.
Where investment rates are falling,
increasing exports can only take place by
reducing domestic absorption. Income
deflating policies thus are the 'necessary'
mechanism to lower domestic absorption of
basic foodgrains and other necessities, divert
scarce tropical land and investment to agri-
exports which are pushed strenuously by
state policies. Rising export volumes are
squeezed out at falling prices as more and
more developing countries are required to
follow the same policies and compete against
each other to export similar products. What
we are witnessing today is the economic
recolonisation of third world agriculture,
but under less transparent and hence more
effective forms of subversion of their national
food security. It is a subversion which is
aided and abetted by a section of the
governing elites in these countries which
have been intellectually suborned by
powerful ideological constructs (including
modern use of the logically incorrect theory
of comparative advantage) and materially
suborned by being g i v e n access to
Economic and Political Weekly Special Number September 1996
international living standard provided they
help to immiserise their countrymen.
Contraction in economic activity continues
to be the unchanged Fund-Rank putative
recipe for 'adjustment' although it is not a
necessary condition for achieving the
declared aim of external and internal balance,
and it is zealously implemented in every
case. Because in fact it has been highly
successful in squeezing out third world
exports at declining prices, to the great benefit
of the developed world, and also highly
successful in tilting income distribution
further in favour of the third world rich, we
believe it is going to continue to be imple-
mented regardless of how much evidence is
compiled (including by individuals employed
by these organisations) of the extremely
adverse effects on poverty, food security,
health and education levels in the exporting
countries. No change in the highly successful
basic agenda can be expected. We can expect,
rather, more programmes to limit the most
distressing manifestations of income-
reducing policies.
The reasons for the international lending
agencies, talking a great deal about the need
for poverty reduction and of 'safety-nets' -
even though it is the deflationary, mass
income contracting policies administered
under the close guidance of these agencies
which in fact increase poverty - lie in their
fear of the outcomes of possible passive
revolt through migration of a section of third
world producers and of widespread socio-
political upheaval. To consider the colonial
analogy, it was certainly not in the long-term
interests of the British in India that peasants
should be over-exploited to the extent that
they died off in such vast numbers in famines
induced by colonial policies themselves, as
to adversely affect total taxable incomes; for
that would amount to killing the goose that
laid the golden eggs. What might be called
a 'sustainable rate of exploitation' was thus
a rational desideratum, and famines had to
be contained and limited at the same time
as the basic policies leading to famines,
continued to be followed.
It is similarly certainly not in the interests
of the advanced world today that the
exploitation of the third world should be so
excessive as to affect the political stability
of the existing international order (although
in fact we see this outcome in some individual
cases, where amongst other factors, Fund-
Bank induced economic crisis has helped to
catalyse social disintegration via ethnic and
communal strife: Sri Lanka is an example)
An important consideration underlying
the anxiety to contain poverty, is the present
c o n t r a d i c t i o n between the c o m p l e t e
international mobility of goods and capital
which is demanded and substantially
obtained by the advanced countries, and
their insistent sabotaging of the complete
international mobility of labour, through the
imposition of restrictions on immigration of
unskilled labour from developing countries.
The advocates of liberalisation, are both
inconsistent and hypocritical in that they
want the full liberalisation of goods and
speculative capital movement from their own
countries to the developing world (and indeed
this is part of loan-conditionalities), but they
wish to regulate strictly the inflow into their
own countries, of third world labour displaced
from their occupations owing precisely to
the de-industrialisation induced by the
unregulated inflow of goods into these
countries and the winding up of their public
enterprises.
However, there are limits to control: as
more third world producers are displaced or
marginalised they w i l l take higher risks to
migrate illegally to advanced high-wage
countries which in turn will have to devote
more resources to keep them out, or face the
rise of domestic fascist organisations, which
are indeed already gaining strength on the
European continent largely on an
unemployment and anti-immigrant platform.
Given such a scenario it becomes important
to advanced countries to ensure that at the
same time that the exploitation of the third
world continues, poverty there is sufficiently
contained through various schemes as to
induce the bulk of the unemployed and
destitute to stay put in their own countries,
even as the movement of capital and goods
is fully internationalised.
CHANGING PATTERN OF ADVANCED
COUNTRIES' DEMAND ON FRAGILE TROPICAL
AGRICULTURAL PRODUCTIVE CAPACITY
The high living standards of western
European and north American populations
today depend crucially on the availability
of an uninterrupted, elastic supply of cheap
energy on the one hand, and of a large range
of imported goods from tropical and sub-
tropical countries on the other hand Ensuring
the continuing cheapness of these two crucial
factors underpinning living standards, has
been probably more important than ever
before as the recession which started in the
1980s continues in most advanced countries
and so do fairly high unemployment rates.
This in turn, it has been argued, has to do
with the new phase of dominance of finance
capital which ensures its international
mobility in search of speculative profits, to
the detriment of productive investment and
growth in real sectors [P Patnaik 1993]. The
advanced countries have had some of the
lowest per capita annual growth rates in the
world in the last 15 years, falling to negative
rates in many years and seldom exceeding
1 per cent when positive; this period has also
seen a dramatic increase in the rates of
surplus value in these countries, and yet real
2441
 l i v i n g standards have not o n l y been
maintained, but have risen for substantial
sections owing to the remarkable price
stability they have ensured, to which the
steady fall in imported primary products
prices have contributed substantially.
We know that each north American uses
up over 8,000 units of oil-equivalent of
commercial energy every year compared to
over 5,500 units in western Europe and
3,600 units in Japan, while India's per head
energy consumption is only around 220 units
and China's is less than 600 units (these
orders of magnitude were quoted during the
Earth Summit in 1992). These are very
roughly proportional to the respective per
head incomes. Thus, India ' s per capita energy
use is only one-fortieth and one-twenty fifth
of the north American and European levels,
China's being one-fourteenth and one-ninth
respectively. This implies a very high degree
of skewness in global energy consumption,
most of which is derived from the fossil
fuels. With barely 5 per cent of world
population, north America alone accounts
for a third of world energy consumption,
while at the other extreme with nearly 38
per cent of world population, India and
China account for only 12 per cent of global
energy consumption.
There is a great deal of talk about the
developing countries especially India and
China being over populated. The relevant
concept here however is not the nominal
population but the standardised or real
population, where the basis of standardisation
is an index derived from the per head demand
on non-renewable resources, for which the
energy demand can serve as a proxy. Taking
the Chinese per head energy use as the base
of such a simple index, China's nominal and
real population would be identical at 1200
million, or 1.2 billion. India's real population
works out to 0.33 billion, while north America
has a real population of as much as 4.1
billion; western Europe and Japan together
would contribute at least another 2.9 billion.
Thus, the advanced countries represent a
real population of 7 billion compared to the
mere 1.53 billion real population of the two
most nominally populous countries in the
world.
A similar order of drain on the fragile
productive capacity of tropical and sub-
tropical lands is imposed by the northern
countries owing to their high incomes, and
hence their high 'effective populations', as
on world energy resources the bulk of which
is derived from the fossil fuels. Tropical and
sub-tropical land may not be an entirely
exhaustible resource like the fossil fuels, but
as earlier argued it is in practice in sufficiently
inelastic supply for a serious problem to
arise for the mass of third world populations
when there is rise and diversification of
consumption by the metropolitan centres
2442
which today monopolise 75 per cent of world
income. They demand complete opening up
of the agricultural sector of developing
countries because this will allow the powerful
magnet of advanced countries' effective
demand to restructure third world crop
production to their own requirements.
Every northern household today is
habituated to consuming daily a large range
of products imported from tropical and sub-
tropical countries, which cannot moreover
in the main be ' i m p o r t - substituted'
domestically except for a few items where
synthetic or other substitutes have been
developed (e g, synthetic vanilla flavour,
high-fructose corn syrup replacing sugar in
some uses): but without ever completely
displacing the premium market for 'the real
thing'. From the moment of awakening in
the morning to retiring at night the typical
consumer's high standard o f l i f e is
underpinned by a plentiful and cheap
availability of imported products. Beverages
like coffee, tea, cocoa, and fruit juices;
vegetables and fruits in fresh, frozen or
canned forms; vegetable oils in liquid and
hydrogenated forms; cane sugar and flower-
specific honeys; lean meat; fish and sea-
food; cocoa and sugar-based chocolates,
syrups, ice-cream and confectionery; spices
and flavourings; tropical cereals, nuts, sugar-
based alcoholic beverages and tobacco; salt;
flowers and ornamental plants comprise some
of the large range of imported items in daily
use.
Other tropical products are essential
elements in the pharmaceutical and cosmetics
industries. In textiles, cottons and fibres that
'breathe' owing to the admixture of cotton
are increasingly preferred to pure synthetics.
The imported vegetables and fruit arc not
confined to tropical varieties alone; equally
important is the evening out of otherwise
large seasonal supply variation through the
import of northern summer varieties in their
barren winter season. The TNCs engaged in
agri-business operate m an oligopolistically
highly competitive world; where debt-
conditionalities prise open fresh lands in
developing countries suitable for potentially
lower-cost production, they move in fast and
often demand reverse land reform such as
the lifting of restrictions on maximum farm
size. Where direct control over land is
difficult the TNCs have worked out forms
of contractual control over local producers
who arc offered initially attractive terms.
Often consumer tastes in advanced markets
are created by the very operation of the
TNCs, and new products (such as kiwi-fruit)
are constantly added. Diversification has
been aided by the marked spread of health-
consciousness within the general mass of
northern populations.
A typical northern supermarket say in the
US at present carries on average about 12,000
Economic and Political Weekly Special Number September 1996
items of food in raw and processed form
[Friedman 1990]. Many foods are available
in several presentations (for example in sugar,
from regular granulated to caster and varieties
of brown and demerara). Speciality shops
or special counters in supermarkets provide
exotic foods from every part of the world.
A quick survey w i l l indicate that at least
three-fifths of all food items on display in
a supermarket are wholly or partly tropical
to s u b - t r o p i c a l in o r i g i n ; for ethnic
supermarkets the proportion would be even
higher.
To an observer from a developing country
like India where import dependence for items
of direct food consumption is nearly zero,
such a high degree of physical import
dependence of northern populations is a
very striking phenomenon. If for some reason
the supply of these commodities was to dry
up and they were to disappear entirely from
the supermarket shelves, leaving locally
available temperate land goods alone, then
the high living standards to which west
Europeans and North Americans arc
habituated would drop sharply. They would
drop, if not to near-medieval levels, then at
least to the levels still prevalent in the east
European countries, which are viewed
contemptuously by west Europeans. The
cast Europeans historically never enslaved
or colonised anybody, thus had no cheap
access to tropical lands, and continue to have
much more 'primitive' and hardly diversified
local-products dependent consumption
patterns.
The reader should not imagine that our
argument is limited to a purely 'geographical'
one or necessarily requires the absolute
inability to produce a particular good by the
northern country. The natural monopoly of
botanic diversity in the third world countries
continues to be of very great importance, but
it is the limiting case of a general situation
where as long as northern demand cannot
be satisfied by local northern production,
there will be pressure on the inelastic supply
of third world land. Thus, if we consider a
large country like the US which itself contains
some sub-tropical areas in its southernmost
states capable o f g r o w i n g crops l i k e
sugarcane or pineapple, we find that it
nevertheless imports these commodities on
a large scale, for local production can only
satisfy a fraction of national demand and the
crops are producible more cheaply abroad
in low-wage economies. Similarly the typical
temperate land fruits and vegetables other
than the highly perishable ones are also
profitably imported by TNCs from countries
where their seasonal spread is larger and
where they arc often producible at a lower
cost than in the temperate countries
themselves, ensuring larger profits for the
TNCs, That such trade is of benefit to northern
countries can hardly be doubted; but the
benefit to the developing country promoting
agri-exports can be negative insofar as there
is diversion there of land and investment
away from domestically consumed goods
whose availability falls.
It will not do to argue that these products
imported from developing countries today
make up a small fraction of total consumer
expenditure in advanced countries or that
raw materials and minerals are a small fraction
of value added in industry, and that they are
therefore unimportant. What is important is
their ubiquitous physical presence in northern
life-styles. One may as well argue that the
air we breathe is not important because it
appears to bear a zero fraction to our income.
Our argument is precisely that primary
imports from tropical regions are bound to
be a small proportion by value of northern
incomes because they are obtained on such
favourable price terms by the importers.
They have very high use-value but are
assigned a relatively low exchange value by
the international market, which can be viewed
as the expression of a historically structured
set of power relations Another way of saying
the same thing is that northern living
standards are high at least partly because the
prices paid to the third world producers for
a range of imported goods which by now
are taken for granted as necessities, are so
low; and are deliberately lowered further
through the imposition of a specific set of
loan conditional policies more cross-
country simultaneity of competing export
thrust, more s i m i l a r l y competitive
devaluation).
International prices tor primary products
do not reflect today, any more than they did
earlier, the cost to the third world societies
supplying them. The cost has been, and is
very high, at best, there is a slow long-term
trend of lowering of basic food consumption
and of nutrition levels for the poorest sections
of the population which may be the majority:
at worst, where the initial levels of food
consumption were low to begin with, there
is the creation of pre-famine conditions as
resources are diverted to exports, and
outbreak of actual famine can then occur
with any economic shock. Much of sub-
Saharan Africa has already reached the
second stage. The solution advocated by
world lending agencies for their crisis,
predictably, continues to be more income
reducing and poverty creating policies: more
export promotion, more 'fiscal discipline'
and more devaluation.
There are quite noticeable shifts in
consumer tastes among m e t r o p o l i t a n
populations which we would argue, on
balance have been increasing their demands
made on tropical agriculture, and which
underlie the new thrust to obtain cheap
importables. These shifts in the pattern of
consumer demand are partly the function of
rising real income and partly the outcome
of increasing health consciousness and
knowledge of what constitutes a healthy diet
and life-style, which from being the preserve
of a few people considered eccentric earlier,
has been spreading rapidly amongst the
general population during the last decade in
particular. Environmental consciousness has
also increased greatly and the 'green'
movement has had an appreciable impact on
peoples' perception of organically grown
food, free of artificial preservatives and
colourings, as more healthy; this in turn has
p r o f i t a b i l i t y implications in capitalist
societies.
Prone to cardiac disease, cancers and
digestive tract disorders, the illnesses of
affluence, consumers in advanced countries
are, under medical advice, cutting down
relatively on fats especially of animal origin
(lard and butter) as a cooking medium and
shifting to vegetable oils. They are also
shifting from fatty meat to lean meat, fish
and sea-food; they are urged to include less
carbohydrate per se and more fibre and
vitamins in their diet which traditionally
is based on over-refined, excessively
starchy and fatty foods. To this end there
is higher demand for whole grain cereals,
green vegetables, fruit and other sources of
fibre. W o r d s like ' c h o l e s t e r o l ' and
'monounsaturated oils' are today part of
every educated person's vocabulary,
including the well-to-do in the third world
countries themselves. Food processing
companies bombard consumers with valid
and spurious health claims tor their products.
Only a traction of the increased demand
for vegetable oils, fruits, vegetables and
fibre can be met from increased local
production in cool temperate lands; the main
local adaptations have been to reduce the
refining of a part of wheat and other cereals
to retain more protein and fibre, produce
more whole-gram bread and increase citrus
fruit output, most of which comes from the
U S. The bulk of the new demand for vegetable
oils, fruits and vegetables however is
expressing itself as a new onslaught on the
limited productive capacity of tropical to
sub-tropical lands. Hence the new round ol
relentless pressure on them to 'open up" their
agriculture and engage once more in an agri-
export drive as they were obliged to do in
colonial times.
It would be misleading to expect any
absolute decline in the consumption levels
of high-fat milk, butter cheese, etc, or even
of meat in the advanced countries. On the
contrary we find that there has been a large
rise in their levels from austere war
conditions, in the course of the long post-
war European economic boom. Japan is also
seeing a marked shift in consumption patterns
as new generations favour a more 'western'
diet model based on milk and meat products,
as indeed are the younger generation of the
well-to-do elites in the developing countries.
However within a rising trend of animal
protein consumption, relative shifts are taking
place influenced by health consciousness.
The use of lard (hog fat) and butter for
cooking was widespread in Europe three
decades ago; it is being partly replaced and
partly supplemented by vegetable oils; this
is reflected in the spurt in sunflower and
safflower production, replacing foodgrains
especially millets, in third world countries
including India, under the aegis of the TNCs
engaged in agri-exports.
The per head consumption of meat has
increased greatly in the course of the long
post-war economic boom in Europe. The
shift to lean meat from fatty meat within a
rising demand trend, has necessarily involved
via the activities of the trans nationals, a
relocation of animal-production on the hoof
to warm countries. Since fat is nature's
protection to animals against cold, by
definition lean animals cannot be raised in
cold countries easily unless they spend their
lives in heated houses; genetic engineering
to breed low-fat animals does not fully solve
the problem of the expense of housing them.
Hence the rapid relocation of beef production
on the hoof to warmer countries: this has
gone very far in countries like Mexico and
El Salvador, displacing human foodgrains
by animal fodder for feeding exported
livestock, and with a lag a similar process
is underway in many other developing
countries including India.
Increased production offish and sea-food
for export is not as innocuous as it sounds:
prawn culture for export is currently in the
process of destroying paddy land through
salination and creating unemployment in
India as it already has in Thailand. As the
North Atlantic and Sea of Japan fish yields
arc currently dropping sharply owing to
over-exploitation, the industrial countries
demand access to the Indian Ocean, among
other rich and under-exploited seas; the entry
of the giant mechanised foreign owned
f i s h i n g fleets displaces local f i s h i n g
communities and begins to step up the rate
of depletion of marine resources to high
levels.
The TNCs also displace area under
foodgrains by contracting for the production
of a range of fruits and vegetables destined
tor northern supermarket shelves in fresh,
frozen or canned forms. In India the
promotion of such agri-exports has been
declared an official priority area, and a larger
share of falling resources arc to be devoted
to this.
If the
neither overwhelming superiority in money
power for funding research nor the w i l l to
appropriate the very genetic basis of this bio-
diversity for developing and patenting a

Economic and Political Weekly Special Number September 1996 2443

range of potentially h i g h l y profitable
applications for the advanced world in the
areas of pesticides, foods, cosmetics and
medicines. As the long-term adverse toxic
effects become known of using synthetic
chemical pesticides and weedicides,
fertilisers, food flavours, preservatives, dyes
and cosmetics; and the adverse side-effects
of many essential drugs become clearer,
there is now a premium on biological pest
control, organic fertiliser, use of natural,
safer vegetable sources of sweeteners,
preservatives, flavours, dyes, and herbal
cosmetics; and on exploring new organic
sources of safe and effective drugs for treating
disease. For international corporations
operating out of the advanced countries there
is a potential market estimated to run into
nearly a t r i l l i o n d o l l a r s f r o m these
applications.
A l l this involves a fresh onslaught by
them on tropical bio-diversity; for the
overwhelming bulk of the basic plant and
animal resources, i n c l u d i n g m i c r o -
organisms, which can provide the genetic
material for these new research applications,
are physically located in the developing
countries. Particularly rich are the tropical
rain forests, special isolated bio-niches like
the Malagasay, and the sub-Himalayan eco-
systems. N o r t h e r n scientists closely
associated with industry are already in the
process of recording the traditional medical
knowledge of local communities, searching
for, locating and removing for research the
plants, roots and other organisms used in
traditional systems - all without any
compensation whatever to these communities
or countries. It should be noted that advanced
countries have a very strong system of
individual and other forms of property, but
no norms are followed when it comes to
physical removal of the bio-resources of
developing countries. A pittance may be
paid to the simple tribal people whose
knowledge is appropriated and who are used
to guide the northern 'ethno-botanists' to the
location of the local rare plants and
organisms; local scientists can often be
manipulated for similarly minute individual
sums and rewards to surrender knowledge
of potential importance to the developing
nation.
The substance of the new 'trade related
intellectual property rights' or TRlPS regime
of the G A T T 1994 agreement as applied to
agriculture, is to ignore completely the natural
monopoly of bio-diversity that the third world
has, by m a k i n g no p r o v i s i o n for
compensating them for the use of these
products. (The International Biodiversity
Convention on the other hand remains a
statement of pious intentions with no teeth
for enforcing the property rights of local
peoples). T h e T R I P S p r o v i s i o n s i n
agriculture make mandatory new rules of
2444
rewarding only one type of monopoly,
namely, that of research funds. Existing
Patents Acts in signatory countries are
required to be amended in order to include
product patents in all spheres (medicines
and agriculture had been earlier excluded)
in addition to already existing process patents,
and to increase the period of patent (doubling
it from seven to 14 years in the Indian case).
Given the fact that only 1 per cent of all
patents are filed from developing countries,
the disproportionate gains likely to be derived
by foreign transnational and governments
monopolising research funding, is clear.
The new patent regime relating to agri-
culture initiated under G A T T 1994 pointedly
ignores the fact that the overwhelming bulk
of genetic materials have been in the past
and continue to be today, stolen from the
developing countries by advanced countries'
corporations and scientists, without any
payment whatsoever for the natural
monopoly that these countries have; it
concentrates instead e f f e c t i v e l y , on
legitimising this filching by allowing those
who do it to file patents on products obtained
from these genetic materials and enjoy rent
from the higher prices that can be charged
once a monopoly is granted.
FOOD SECURITY
Returning to the question of food security,
let us briefly review the experience of Mexico
and of the sub-Saharan African countries
first, in 'successfully' engaging in an export
thrust of such dimensions as to undermine
their own food security and plunge substantial
sections of their populations into a spiral of
declining basic food consumption.
In Mexico which had pioneered the high-
yielding wheat varieties and had achieved
a green revolution in the 1960s, food self-
sufficiency was lost by the early 1970s, as
under debt-induced liberalisation a massive
new agri-exports thrust was initiated,
displacing foodgrains relative to exportables
and turning the northern provinces of the
country virtually into an enclave tied to the
US market. Despite the vastly increased
agri-exports however, interestingly the
agricultural sector in Mexico became a net
loser of foreign exchange from 1974, as
imports of foodgrains (wheat, maize and
beans) had to be stepped up greatly. This
was aggravated by the trend of absolute fall
in prices since 1979 for tropical exportables
relative to constant or slowly rising price of
wheat and maize exported by the developed
countries (Canada, the US, and of late the
EEC).
The 'metropolitan demand', as it should
be defined, comprises two segments: first,
the Mexican rich, whose share of national
income has been rising from already high
levels and who spend a higher share of their
food budget on animal foods; and the US
Economic and Political Weekly Special Number September 1996
market, which has a much larger weight and
whose impact has altered cropping patterns
and land use in Mexico dramatically in a
matter of two decades. The US demand
comprises lean meat on the one hand and
a range of fresh and frozen fruits and
vegetables on the other: both together have
displaced the output of maize and beans, the
staples produced by the small-scale peasants
whose economy has been caught in a spiral
of deterioration as official price policy and
investment priorities have favoured the new
exportables (a trend little affected by the
brief Lopez-Portillo interlude of privileging
food during 1980-82). The exportables are
grown by farmers under contract to the US
-based transnational giants of the food
industry, such as Birdseye/General Foods,
Pet Inc, Del Monte, Gerber, Clement Jacques,
etc, and live cattle supply is controlled by
Ralston-Purina, Anderson-Clayton, Ciba-
Geigy and others. This has ensured a growing
supply at low prices of fruits and vegetables
to US and western European supermarket
shelves, and meat for the fast-food industry.
While the 'new exportables' growth
spurted, the production of maize stagnated
at only 0.7 per cent per year and beans out-
put fell at -1.5 per cent annually between
1965-67 and 1976-78; their output per head
of the Mexican population thus declined, as
did the incomes of farmers in the subsistence
sector. The traditional cash crops like
sugarcane and cotton also declined as the
new exportables increased. Many thousands
of small farmers were forced to leave farming
altogether and migrate in search of wage-
paid work, swelling the army of the urban
poor. Some of the displaced peasants succeed
in running the gauntlet of the armed anti-
immigration groups patrolling the US-
Mexico border, and swell the army of illegal
entrants into California, offering themselves
for hire at five dollars a day as against the
minimum wage of 40 dollars. No other
developing country, however, has the benefit
of a common border with the US: the
labourers in India currently being displaced
by the agri-export activities of the local
capitalists and the TNC's unlike Mexican
peasants have little hope of emigrating
anywhere.
The M e x i c a n case illustrates the
c o m p e t i t i o n between foodgrains and
feedgrains, reminiscent of medieval Europe,
which has resurfaced in the third world but
with the scales tilted decisively in favour of
feedgrains, because there is a high income
elasticity of demand for meat among middle
income metropolitan consumers, and it is
their superior purchasing power which bids
away land and resources from the basic grain
staples consumed by the poor (Yotopoulos
1985). Cattle raised on Mexican ranches are
fed according to a strict regimen prescribed
by the T N C ' s engaged in supplying beef for
the US groundbeef and processed food
industry. The growth rate of sorghum which
is used as animal feed, has averaged 10.6
per cent annually over more than a decade
ending in the triennium 1976-78 (seeTable 5)
and has risen further giving an annual rate
of 13 per cent during 1970 to 1980, the
highest for all crops. The proportion of total
cultivated area under fodder crops, mainly
sorghum, rose from 6 per cent to as much
as 23 per cent and the share of grain output
fed to livestock went up from 5 per cent to
32 per cent in the course of the two decades
ending in 1980 [Rodrigues 1990].
Sorghum or jowar is at present a human
foodgrain in India, grown and consumed by
the labourers and small farmers in the low-
rainfall areas of the country. Learning from
the Mexican story, clearly any decline which
is likely to be taking place in food availability
for humans cannot be measured by looking
at simple grain production data alone but
requires also looking at the end-use of grain,
namely what share of it is going into animal
feed particularly for export either as feed
itself or converted to meat. [The substitution
of meat for cereals and pulses in diets is
known to be a highly land-using pheno-
menon, since the most efficient-practice
meat production from large animals requires
on average about 8 hectares of land for
producing a mere quintal of meat (a part of
this being pasture and the rest arable: see
Bernstein et al 1990).] The displacement of
human foodgrains can be very fast, as in
Mexico, once a rapid growth of meat export
starts for metropolitan consumption. The
similarly devastating effects of cattle
ranching for export in El Salvador have been
well documented by now.
In India this process has already started
quietly with livestock production growing
last, in response first to urban demand from
the well-to-do leading to a 45 per cent rise
by 1989-90 over the 1981 base; and since
the export promotion drive from 1991 it has
accelerated with the Gulf countries providing
the main market for meat exports so far, so
that total livestock product index has been
rising at an annual rate more than double
that of the foodgrains. Apart from direct
meat exports there is a fast growth of the
output and export of high-concentrate soya
cakes used as animal feed; the expansion of
soya-bean has been displacing the coarse
grains, in the peninsular states of India
(Madhya Pradesh in particular), as we will
see later.
There is an important logical corollary
from this trend of what the Latin American
Economists have long called ganaderizacion'
or increasingly livestock-oriented
production, as domestic income distribution
worsens and liberalisation subjects the
Economy to the powerful pull of richer
Countries' demand patterns. The corollary
Economic and Political Weekly Special Number September 1996
is that the food availability decline for human consumption, as some part of bananas are
consumption is likely to be greater than the in fact exported, some part of cassava used
official figures indicate. for commercial starch production, and some
The official Indian practice (of the annual part of grain is used for livestock feed for
Economic Survey) which has been followed export. This overstatement makes the test
for over 40 years, is to calculate 'food for our argument of decline in domestic food
availability' by simply deducting a standard production affecting human consumption
fraction (at present one-eighth) for seed and levels, a more stringent one.
feed from gross foodgrains output. This is It is the convention in countries with a
already out of date, for it does not take large potato output like China, to aggregate
account of the accelerating trend of livestock tubers and grain by using the conversion rate
production and its growing draft on grains 5 kg tubers = 1 kg grain. We follow the same
for feed. Researchers need to estimate what convention in the table below for tubers as
precisely is the fraction of grain output actual - well as plantains in calculating total food
ly remaining for domestic human consump- output.
tion, before any complacent statements are The six most populous countries (Nigeria,
made regarding the adequacy of availability Ethiopia, Sudan, Kenya,Tanzania and Zaire)
for the 80 per cent of the Indian population accounted for nearly three-fifths of the total
which cannot afford anything but the basic population of the region. From our estimates
staples. The official 'food availability' figures above it is clear that they have seen as much
in grams per head per day which are widely as a 33 per cent decline in cereal output and
used, no longer reflect actual availability for 20 per cent decline in overall food per head
human populations. in less than a decade. This is a faster rate
The fact of the decline of per head food of decline than colonial India saw in the
production in sub-Saharan Africa is well inter-war period. All six countries liberalised,
known, but what is usually neither per- and engaged in a strong export drive during
ceived nor discussed, is its direct association this period; four out of the six had Intensive
with the successful drive for agri-exports. adjustment programmes' involving taking
Looking at food output decline first, the three structural adjustment loans (SAL), one
calculations in UN publications (such as took two SALS, and one started adjustment
African Development Indicators 1992) are before 1986. All saw rising non-food
idiosyncratic in including palm-oil and exportables output per head at the same time
sugarcane in 'food crops' whereas these are that food output per head declined.
in fact commercial non-food crops. We adopt The following are country-wise figures of
a more logical definition of food crops to growth of 'non-food crops in four of these
include cereals, potatoes and other tubers, which had taken SALs and implemented
plantains and bananas; noting that although agri-export promotion (palm-oil and sugar-
in Asia only cereals out of these are included cane have been left out since the source puts
in foodgrains, the importance of tubers and them in 'food crops' and does not give the
plantains as a food staple in many African country-wise figures of these crops so that
countries make their inclusion mandatory. adjustment by adding on to the other non-
This definition of output is not the same as food crops is not possible. We had earlier
output available for local human presented these data in Patnaik 1992). The
2433
bulk of all irrigated area is under exportable What complete liberalisation means is that no fall in importables prices. Terms of trade
crops in these countries. The inverse relation the land-use and cropping pattern of a tropical internationally have shifted against primary
between exportables growth and food crops country will be substantially altered by the exports oriented African countries by an
growth is clear though not one-to-one in the action of the powerful magnet of international average of 50 per cent over the decade and
sense that the sharpest rates of decline in demand with its own specific commodity the adverse movement is continuing into the
foodcrops is not necessarily associated with structure, just as,it was during the colonial 1990s. With over 80 countries competing
the highest rates of rise of export crops. period. Every time a northern consumer with each other under substantially identical
The decline in foodcrops output including reaches out to the supermarket shelves for Fund-Bank orchestrated programmes of agri-
tubers and plantains for all 46 countries a bottle of vegetable oil, a tin of pineapple, export promotion (given continuing recessio-
taken together (Table 8) was 11.5 per cent a bunch of bananas or a packet of frozen nary conditions over much of the advanced
over the decade of the 1980s. This has strawberries, she is helping to bid away world) it is hardly surprising that world
effectively undermined food security, given scarce tropical land from production of low- prices of primary products and minerals
that the initial levels were low to begin with value food for locals to these exportables. have declined so much, to the great benefit of
only 138.5 kg gross per head in 1980 These acts of 'free consumer choice' the developed world. Once the economy is
compared to around 190 kg in India and 285 multiplied daily millions of times, translate locked into the regime of debt-conditional
kg in China. By 1987-89 this had declined back in to the activities of the transnationals export promotion, the deflation of domestic
to only 122 kg. As we have seen the absolute which are busy promoting exportables demand for foodgrains becomes an endemic
figures may be underestimated; even if we production and agri-processing by feature.
revise all annualfiguresupwards by as much contracting with local producers, displacing
as 20 per cent, we obtain an initial figure land and resources from foodgrains The
of 166 kg, still well below the current Indian proposition that a reduction in food-crop
level, and a terminal figure of 151 kg. It is production in a liberalised' economy leads
hardly surprising that a decline by 1989 of simultaneously to a reduction in food
such a substantial magnitude in sub-Saharan availability is so contrary to the tenets of
Africa combined with decline in per head orthodox economic theory that an elaboration
real income, should have created pre-famine of it is in order even at the risk of some
conditions for the poorer majority of the repetition. We may be asked for example:
population, such that any shock such as why cannot the exchange earnings from
more than one drought year, a severe drought cash crop export be used to import foodgrains
or accelerated inflation could set off actual so that food availability is augmented rather
famine. In 1992-93 there was a crisis in than reduced through trade? The reason is
Zambia, Mozambique and Western that the very process of making exports
Transvaal which most academics attributed available for the metropolitan market is one
only to the severe drought. Newspaper reports of demand deflation for food-crops, so that
in June-July 1992 (especially The Guardian) the supply as well as the demand for food
however also wrote, significantly, of the shrink simultaneously. The foreign exchange
substitution of locally consumed millets by earned from the export of cash crops is used
horticultural exports having become very partly for profit repatriation by the TNCs Source' African Development Indicators 1992
marked in the preceding years in these areas. engaged in agri-business and partly for (UNDP, World Bank, Washington, DC)
Actual famine was only averted by a massive financing larger manufactured goods imports We have reworked the basic cropwise
food aid effort, adding to the region's from the metropolis. Over time however (up to six cropseachcountry) and country -
indebtedness. International financing and even this exchange availability declines wise (46 countries; data for ten years,
1980 to 1989, to obtain new aggregates
aid agencies have redefined 'food security' owing to the simultaneous pursuit of export
of food crops defined as follows: Cereals
to mean, not self-sufficiency in food promotion by a multitude of third world include wheat, maize, barley, millets;
production, but making food available from countries, all subject to structural adjustment; Tubers include potatoes, cassava and
donor countries in time to target populations but this does not alter the fact of domestic yams; Plantains include bananas and
to avert the more distressing manifestations demand deflation for foodgrains; if anything plantains. The Sahelian countries had
of famine, which leaves untouched the basic this deflation is tightened as the pressure to no recorded tubers or plantains output
structural cause of crises, namely the export increases with declining terms of and produced about one-tenth of the
diversion of scarce resources to exportables. trade. (Even if, taking a hypothetical case, total food output of the entire sub-
Saharan region Cereals, tubers and
The truth of the matter is that Africans agri-export prices declined to a point relative plantains have been aggregated
with their low (340 dollars per head) and to the dollar prices of internationally traded following the convention 5 kg tubers or
declining real incomes cannot compete in foodgrains where the domestic production plantains - 1 kg cereals.
the global market against the superior of the latter became profitable, such
purchasing power of northern consumers production would, given the fact of deflation,
(15,000 to 18,000 dollars per head), any be earmarked for exports rather than domestic
more than can the ordinary population of consumption. The link between production
other low-income developing countries like and availability of foodgrains in this case
India, Sri Lanka and Bangladesh (320-380 would have been broken but the latter would
dollars), once their economies are opened not have increased.)
up fully to the pull of international demand. In the case of African and other countries
They see their own land and resources being there has been an absolute decline of between
bid away by the pull of northern effective 40 to 60 per cent in unit dollar price of pri-
demand, from the production of the basic mary products including minerals, over the
foods they need themselves to the production decade (depending on the composition of
of exportables. the exports of the country concerned) and

Economic and Political Weekly Special Number September 1996

2446
 A typical exporting country has had to
double volume exports, that is have export
volume growing at a compound annual rate
of 8 per cent over the decade merely in order
to have the same stagnant exchange earnings
at the end of 10 years, given the average fall
by half in unit prices. Indians w i l l readily
recognise the similarity with the dismal
contours of their own inter-war experience,
when Indian peasants similarly faced with
falling international prices were desperately
pushing out more and more volume exports
to maintain exchange earnings and finance
the large obligatory transfer abroad. Replace
'transfer' with 'servicing of debt' and the
same scenario holds today. With over a
decade of falling per head incomes despite
- indeed because of — liberalisation, the SSA
countries are castigated in the latest World
Bank Reports for failing to maintain volume
exports at a high enough rate to compensate
for adverse terms of trade!
EMERGING INVERSE RELATION BETWEEN
AGRI-EXPORTS AND FOOD AVAILABILITY
IN INDIA
Until recently large Asian countries like
India and China strictly controlled their trade
in agricultural products and insulated their
peasant producers from the harsh impact of
adverse movement in international terms of
trade. There was relative stability of internal
terms of trade and farmers enjoyed
improvement over most o f the period,
compared to periods of adverse movement
and large fluctuations in the international
terms of trade, as Karshenas argues lor the
1960s (Graphs la and lb). While India and
China may not have benefited from the
upswing in commodity prices in the 1970s,
equally they have not been subjected to the
prolonged fall in primary product prices in
the decade of the 1980s, which continues
into the 1990s. In India this is now changing
as the agri-export thrust gets under way. In
fact by virtue of being a large producer the
very fact of India's entry into the world
market in a number of key commodities
like rice and cotton is likely to depress
international price.
Starting from the 1950s both India and
China had followed policies of promoting
foodgrains production and building food
security, China with greater success than
India after the mid-1960s owing to its more
egalitarian economic structure. In output
terms the Indian achievement was creditable
since food output nearly quadrupled between
1951 and 1991, from 46 mt for a population
of 363 m to 170 mt for a population of
N32 m. The distortedpre—independencetrend
of a 10 times higher growth rate for exportable
crops compared to near-stagnation for
foodgrains, was altered dramatically to a
more normal equality of the two rates of
growth: food output grew 30 times faster at
Economic and Political Weekly Special Number September 1996
around 3 per cent while the non-food crops
growth also trebled to a similar rate. The
earlier fall in per head production was
reversed and a modest 16 to 18 per cent rise
secured, which still has not compensated for
the 25 per cent fall under colonialism.
Moreover the composition of the average
diet for ordinary people has worsened with
a halving of the availability of pulses, hitherto
the main source of protein for the poor.
D u r i n g the f i v e years since trade
liberalisation in agriculture, foodgrains
growth has slowed down, the average of
annual growth rates being only 1.71 per
cent. Within foodgrains while wheat and
rice have an average percentage growth of
3.48 and 2.53 the pulses growth rate has
averaged only 1.1 per cent while the coarse
grains show the most alarming picture with
lowest average growth rate of a mere 0.37
per cent. The gross area under foodgrains
has declined by about 4 m ha over the reform
period (Table 9): coarse grains have declined
markedly by about 3 m ha and combined
with decline in the pulses area accounts for
the 4 m ha decline, which is quite substantial.
As we have been led to expect from the
experience of all the liberalising countries
discussed so far, the output of potential or
actual exportables has grown much faster
than the foodgrains in general within which
the sub-category of coarse grains in particular
is stagnant. Indeed the 1995-96 output is
expected to finally be around 30 mtonne,
lower than the 1990-91 output of 32 mtonne.
The oilseeds like sunflower, safflower mus-
tard and soya are replacing the coarse grains
In the low and erratic rainfall areas of Andhra
Pradesh, Maharashtra, Madhya Pradesh,
Gujarat and Rajasthan where the coarse grains
arc traditionally grown as food staples.
With such a decline in the production of
coarse grains as a result of displacement by
the exportables catering to domestic and
foreign metropolitan demand, what is
happening to the consumption of the
labourers and small fanners in these areas
for whom these coarse grains like bajra,
jowarandragi are the traditional food staples?
This is a question that researchers should
examine carefully. Not the most ardent
liberalisers can argue, given the fall in real
wages of rural labour and rise in poverty,
that these classes are switching over to
superior cereals. In fact the demand compres-
sion through real income decline of labourers
and small farmers is the economic mechanism
through which diversion of resources is made
possible from the local food staples to the
exportables. Their level of consumption must
of necessity have declined.
SUPPORT FOR AND OPPOSITION TO NEW POLICIES
What are the main forms of growing agri-
exports; who will gain, and who will lose,
from the new export-orientation of Indian
agriculture? These are the questions we
address briefly here. Foreign companies
entering into agreements for agro-related
business in India numbered 293 during
1986-93 compared to 111 during the 35
preceding years. A number of domestic large
companies like Tata and Modi have also
shown an interest in this area. The com-
modities which are expanding today and are
likely to grow in future to meet metropolitan
demand are rice, cotton, vegetable oils,
animal feeds, vegetables,flowers,ornamental
plants and orchids, prawn and other sea
food, and hardwood timbers for luxury
furniture and house fittings. All of them
involve problems by way of displacing food
growing land, displacing hired labour, and
some by causing irreversible forest and land
degradation. A minority of capitalist farmers
enter into these areas for short-term
profitability and act as the conduits through
which exportables are pumped out to meet
metropolitan demand.
At the current exchange rates, rice is
competitive on the international market and
the export of rice is growing fast from a low
initial base. The main area of commercial
rice production is North India which has
been supplying so far over two-thirds of the
rice procured by government for the public
distribution system (the areas where nee is
a traditional staple crop for the growers are
in eastern and southern India but only one-
third of output is sold compared to over nine-
tenths in northern India). With exports
gathering momentum the government has to
2447
compete with the global market to keep its
own ration shops supplied. The result has
been a sharp rise in the administered prices
of foodgrains. In the new atmosphere of
licence to profiteering, a larger fraction of
stocks meant for the ration shops appear to
be getting diverted to the free market. Ration
rice when available at all, costs now double
what it did five years ago, making the gap
between the open-market and ration-shop
price so small that many lakhs of the poor
have been priced out, and offtake from the
ration shops is exceptionally low.
It has been argued cogently that since
India is a large producer accounting for 22
per cent of world rice output whereas world
trade in rice is around 4.4 per cent only of
world output, India's entry on any scale into
the world market, is likely to depress the
price (Nayyar and Sen 1994). Thus by
exporting a mere 5 per cent of its own output
India would augment world market supplies
by 25 percent exerting a downward pressure
on the price. We are very likely to be caught
in the current African scenario of larger
volume exports at falling prices. Groundnut
(35 percent of world output), cotton, wheat,
sugarcane (all around 8 to 10 per cent) are
other crops where India has a substantial
weight in world output.
Raw cotton demonstrates the problem to
domestic consumers posed by indiscriminate
and unregulated agri-exports. Even before
full scale liberalisation, there was a ten-fold
rise in exports in 1990-91 compared to
1989-90. While volume exports have
fluctuated since 1991, it has averaged 148
thousand tonne annually during 1991 -92 to
1995-96 or over four times the average level
of 35 thousand tonne before 1990-91. The
price of raw cotton has trebled and yarn price
has doubled over the same period. Lakhs of
handloom weavers whether independent or
in co-operatives are facing sharp income
decline while small powerloom enterprises
are also reportedly closing down. In Andhra
Pradesh in 1990 many weavers had
committed suicide as they were ruined by
the suddenrisein yarn price. With the present
sharp inflation economic distress faces
weavers again, to the extent that the govern-
ment has been forced by their acute distress
to announce a temporary bank yarn subsidy
scheme, despite subsidies being anathema
in the Fund-Bank theology.
Large industrial houses have been
acquiring agricultural land in the traditionally
paddy growing coastal areas of Orissa,
Andhra Pradesh and Tamil Nadu for
conversion to prawn fisheries while rich
farmers have also joined in since at present
the returns are high. The rapid growth of
prawn fisheries in coastal and paddy-
producing land during the last five years, is
generating enormous tensions between the
companies and individuals engaged in this
2448
lucrative export business on the one hand, in favour of the unfettered growth of export-
and environmentalists, fishermen and the oriented agro-capitalism.
local labourers displaced from paddy It is reasonably clear that the new trends
production, on the other. Illegal and semi- will lead to an accentuation of the economic
legal land-grabbing by the exporters, prawn differentiation which already exists strongly
raising leading to salination of soils making in rural society, to a point of sharp dualism
them unfit in the long run for paddy, depletion between a minority of export-oriented
and salination of groundwater resources by capitalist farmers and companies out for
the prawn fisheries affecting neighbouring quick profits regardless of social costs on
farmers, diseases caused by effluents, loss the one hand, and a mass of cultivators
of traditional access by localfishermento whose returns from the domestically
the coast and beaches with privatisation, are consumable crops falls as a direct result of
some of the many issues involved. The the relative price shifts inherent in the new
immediate loss of livelihood for agricultural policies and their active promotion by
labourers with the labour-intensive paddy government. The livelihood of rural labourers
being replaced by the fisheries, has provoked is under threat and irreversible environmental
resistance by labourers in Tamilnadu, problems are in the making.
organised by the octogenarian Gandhian There have beeen two diametrically
leader, S Jagannathan. However given the opposite sets of responses from the farmers'
vertiginous rise of earnings at present from movements in India; a minority response,
sea-food exports of which prawns comprise strongly backing the new policies, and clearly
over three-quarters, and with the government representing the interests of the capitalists
strongly backing it, the expansion is likely and business houses anticipating quick
to continue. As with every exported profits. It would be fair to say however that
commodity such as cashewnuts earlier, the majority of farmers are alarmed by the
prawns which today are highly prized by the implications of the new policies by way of
Northerner as a protein source, have also the displacement of foodgrains, loss of
been priced out of the reach of the Indian employment, environmental damage and
domestic middle class whereas it routinely extension of control by big industrial houses
figured in its consumption basket a few and TNCs. The movements led by
years ago. However as long as exports Nanjundaswamy in Karnatakaf by Jagan-
affected the consumption basket of the middle nathan in Tamil Nadu, by Banka Behari Das
class alone the argument against it was still and others in Orissa, by Sunderlal Bahuguna
weak. This is no longer the case; the export in UP are all in their different ways, against
drive has started affecting the basic
availability of staple foodgrains for the poor.
Other avenues of ongoing displacement
of foodgrains meant for human consumption,
include vegetables and fruit production under
contract to the TNCs which started with
Pepsico International's activities in Punjab;
the dissemination of genetically engineered
sorghum seeds by Cargill in an apparent
attempt to initiate areplicationof the Mexican
story in Karnataka (which has been stemmed
by opposition from the militant farmer's
movement); expansion and export of cut
flowers; and the rapid growth of sunflower
and soya production in hitherto millets
producing land in northern and peninsular
India. (The sunflower is processed to give
'healthy' oil for export, the soya is exported
as livestock feed concentrate). There has
also been a mushroom growth of companies
promising (via press advertisements) up to
70 per cent rate of return on investment in
teak plantations and horticulture for export.
The land for these ventures have been
acquired very often by dubious means and
by encroaching on common property
resources. With proposals to amend the
existing law regarding 'ceilings' on
land holding, some state governments are
sending clear signals that implementation of
the existing land reform laws are to be shelved
and indeed reverse land reform caried out
Economic and Political Weekly Special Number September 1996
the new policies. The struggle of the labourers
in Tamilnadu is supported by the Communist
parties as well. These protests are buttressed
by the protest against environmentally
damaging industry such as the proposed Du
Pont- Thapar acrylic plant in Goa, which has
led to police firing and deaths.
Some very limited successes have been
scored for example in the widespread public
campaign against the provisions of the
Dunkel Draft during 1993-94, which put
pressure on the Indian government to ensure
the c o n t i n u a t i o n o f the p u b l i c f o o d
distribution system (though it is being
contracted) and to clarify that farmers' rights
to grow and exchange their seeds w i l l not
be affected. The amendment to the Patent
Act 1970 in accordance with G A T T '94
requirements, has been blocked so far by
widespread opposition in Indian parliament.
D i r e c t action by farmers and local
environmental activists has prevented the
plans of Cargill to set up sorghum seed
dissemination in Karnataka and a giant salt-
production project in Gujarat.
Decline in area sown to foodgrains and
other crops in a particular year is not
uncommon if rains fail; but recovery is
usually fast. For the first time in Independent
India, we find a persistent decline in the
absolute area under foodgrains: the figures
for all the years after 1990-91 are distinctly
lower than that for any year between 1980-81
and 1990-91 (Table 11). It is hardly surprising
that per capita food availability, looking at
comparable years has declined (Table 10).
This is on the conventional official definition
of availability, without taking account of
any possible increased diversion of grain to
sustain fast growing livestock production.
The actual situation may of course be much
worse.
[This is a revised and enlarged version of a paper
presented at an international workshop on
Agrarian Questions in May 1995 at Wageningen,
Netherlands and also incorporates material from
Patnaik (1992) and Patnaik(1993). Iam especially
grateful to Henry Bernstein and Prabhat Patnaik
for their comments.]
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