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Resource centre on India's rural distress
 
 

Silent Report by Prabhat Patnaik

In a report released on January 30, and covered by the world’s press the next day, the United Nations has warned of a severe resource crisis that would overtake the world if current trends persist. A growing population and a rise in the number of middle-class consumers will increase the demand for resources so rapidly that even by 2030 the world will need at least 50 per cent more food, 45 per cent more energy, and 30 per cent more water. Absolute poverty, which is supposed to have been reduced to 27 per cent of the world’s population on the latest reckoning from 46 per cent in 1990, will increase by as much as 3 billion. This means that well over half of the world’s population will be living in poverty 20 years from now. It asks for a set of “sustainable development goals”, and an “evergreen revolution”.

The warnings in the report have to be taken seriously, but precisely for that reason mere generalities like “sustainable development goals” and “evergreen revolution” are inadequate. The report however resorts to such generalities because its perspective is flawed, which is not surprising, given the fact that all UN reports represent intellectual compromises based on implicit or explicit negotiations between conflicting positions of the rich and the poor countries.

The basic problem with the report’s perspective is that it looks at the resource crisis, in particular the food crisis, in a purely Ricardian-Malthusian setting. (Notwithstanding major intellectual differences between Ricardo and Malthus on other issues, which underlay for instance the famous “glut controversy”, on this they shared common ground). And this sees the food crisis as a result of reaching the limits of producible output on the available land with the available technology. It follows that the only solution to the crisis lies in technological progress that can raise land productivity (the “evergreen revolution”), or in lifestyle changes that are analogous to technological progress though far more difficult to bring about. What is missing from this entire perspective is the issue of distribution and its impact on the food crisis.

There is, indeed, a striking paradox here. David Ricardo had predicted that because of the fact that good quality land was limited, getting more and more output from land would entail increasing costs of production in agriculture, relative, say, to industry. Hence there will be a secular shift in the terms of trade between agriculture and industry in favour of the former. Yet, for the last 140 years, barring war years, which hike primary commodity prices, there has been a secular shift in the terms of trade against agriculture and in favour of industry, and this despite the fact that the pace of cost reduction has been much more rapid in industry than in agriculture. No theory’s predictions have been so contrary to real-life developments as Ricardo’s on inter-sectoral terms of trade.

The reason for this divergence is simple: because of the international division of labour imposed under the colonial (and semi-colonial) order and sustained to this day (even the recent shift of manufacturing to certain Asian economies relates only to low-end manufacturing), industrial producers have enjoyed a monopoly position vis-à-vis the primary producers, and used it to tilt the terms of trade in their favour. Ricardo, of course, never anticipated that distribution could be so shifted. But given the fact that it can, the constraint on primary product expansion can no longer be located in some “natural” phenomenon like Ricardo’s so-called “diminishing returns” from agriculture, but must also take into account the social phenomenon of the distribution of income.

Primary commodity output, in other words, cannot be expanded, even when not all available land that can be used for agriculture is so used, if the producers are so squeezed that, let alone getting a surplus over subsistence from their production activity, they cannot even obtain a subsistence level from it — that is, even “simple reproduction” becomes impossible.

Something of this sort has been happening of late in the world economy. Between the decade of the 1980s and the last decade, there has been a decline in the per-capita world cereal output and, in general, in the per-capita foodgrain output. For instance, while for the quinquennium, 1980-85, the average annual per-capita cereal output in the world was 335 kilogrammes, for the quinquennium, 2000-05, it had declined to 310 kg. Yet, during this period when there was, expectedly, an acute food crisis in the world, the terms of trade between foodgrains and manufactured goods moved sharply against foodgrains. For instance, between 1980 and 2000, the terms of trade between cereals and manufacturing moved against the former by as much as 46 per cent.

World income went up over this period in per-capita terms, and since the income elasticity of demand for foodgrains, taking both direct and indirect absorption (the latter through animal feed and processed foods) into account, is positive, there should have been an excess demand for foodgrains, resulting in an inflation in food prices relative to money wages, and to manufactured goods prices (which tend to be linked to unit wage costs). The fact that the very opposite happened is indicative of the drastic squeeze that was imposed under the macro-economic policy regime of neo-liberalism on the purchasing power of the world’s poor, who are the most significant buyers of food at the margin.

This policy regime included, among other things, deflation of government expenditure on rural development and as transfers to the poor, and a drastic increase in the costs of services like healthcare. The victims of this squeeze in purchasing power included the peasantry itself, because of which, even as demand was being compressed for foodgrains (which explains the adverse terms of trade shift), output too was being compressed (which accounts for the decline in per-capita output). The onset of food-price inflation since 2008 is because, even out of this declining per-capita output, a large and growing share is now being diverted towards use as bio-fuels, which effects a curtailment of availability that even outweighs the demand compression. Of course, speculative forces have greatly exacerbated the price-rise: in fact the bio-fuel link implies that any bullish tendency arising either in the oil or in the foodgrain market pushes up foodgrain prices.

It follows that if the food crisis is to be overcome, then not only must larger investments be made, above all by the State, for ensuring the provision of inputs and on research for developing better cultivation methods, but food production must also be made more profitable. Because it has not been profitable, land that can be used for food production, and has been so used in the past, is reportedly not being used for such production and even being left fallow in India and elsewhere. Far from reaching the Ricardian limits we actually have a decline in land use for food production; and even the current world-wide food price inflation has not changed the picture because much of the benefit of the high price has gone not to the peasantry but to those who control the world food market — namely, the clutch of multi-national corporations from the advanced countries.

The spontaneous tendency of capitalism is to squeeze and destroy petty production including peasant agriculture. The immediate post-war years of dirigiste development marked a break from this. This was because the post-colonial governments over much of the third world could not renege on the promise made to the peasants during the anti-colonial struggle, in the context of acute peasant distress in the 1930s, and as a means of enlisting their support for this struggle, to protect them against encroachments by big capital. Besides, the dirigiste regimes sought to develop the national economies, for which encouragement of peasant production was essential. Under the neo-liberal dispensation, however, when domestic big capital is integrated more closely with international capital and the national economy is no longer the object of focus (with the nation itself getting fractured between the globalized bourgeoisie and the upper middle class on the one side and the rest on the other), the spontaneous tendency of capitalism to squeeze peasant agriculture reasserts itself.

This is what underlies the food crisis. Unless this is reversed, which is a matter of class relations (both domestic and international) that determine distribution, “sustainable development goals” and “evergreen revolution” remain empty phrases. One can scarcely, however, expect a UN report to say this.

The author is a former professor, Centre for Economic Studies, Jawaharlal Nehru University, New Delhi