Friday, June 17, 2011

The small farm squeeze

I am not sure which I find more annoying, the magical thinking that comes from the right with its near religious belief in compounding economic return, or the redistributive nonsense from the left that believes that it is just a matter of divvying up everything fairly.

In the case here we have magical-left thinking.

India’s population is insanely large, and much of it very poor.  Previously protectionist policies had helped keep a lot of India’s small village farmers in business.  But with an ever expanding population, India’s protections were costing them money.  With a lot more citizens being born on a regular basis, they were looking at their citizens slowly sinking deeper into poverty, or expanding their economy to where India could grow its way to success. 

Amy Goodman, Democracy Now,  11 May 2011, Hat Tip NC.
The government has withdrawn significantly from the agricultural sector. It has reduced subsidies. It has decreased access to rural credit. Irrigation is insufficient and doesn’t reach most farmers who need it. And at the same time, it has encouraged a switch over to cash crop cultivation, of which cotton is one example.
Simultaneously, the market has been opened up to global competitors, which makes Indian farmers extremely vulnerable. And at the same time, foreign multinationals now dominate industries, such as the cotton industry, including dominating the key inputs that are needed for cotton. In the case of cotton, in particular, the genetically modified Bt cottonseed has been promoted so effectively in India that it now dominates the entire sector, and between its cost, quality and availability, has an enormous impact on farmer costs and profits and yields to the point that it’s landing them in enormous debt. And many of them, ironically, are actually consuming the very pesticide that they went into debt to purchase, to kill themselves when they can’t escape that cycle of debt.
They do note that many of India’s farmers do not own the land they are farming on.  They are in some type of tenant farmer relationship.  Owners have taxes and tenant farmers will usually have some inbuilt cash flow requirement to pay for the right to use the land:  mere self sufficiency will not suffice. 

The government also pushed a movement into more advanced agricultural techniques using gene modified seeds, commercial fertilizers and pesticides.  The use of these products can lead to much better yields.  But the always variable weather and the confusion of how to use the new inputs by the small farmers, and the highly variable nature of commodity markets  has lead to erratic results.  With the much higher cost of the new approach, when problems arise the small farmer quickly goes bankrupt.

The study itself has recommendations:

·         Ensuring greater access to official credit in rural areas and facilitating expanded access to credit for all populations, including women and other marginalized farmers.

·         Evolving just and equitable mechanisms to ensure farmers’ access to water, including irrigation water.

·         Implementing public provisioning of affordable inputs, such as seeds, pesticides, and fertilizer; facilitating the availability of traditional seeds through community-managed “Seed Villages”; and improving farmer yields by setting up “Seed Technology Training Centers.

The whole report talks about how the farmers kill themselves when they can no longer pay their debts. But one of their solutions is to create more debt.  This goes along the lines of the magical thinking –ponzi scheme of the micro-lending markets that has recently crashed back to earth. Then you are going to create water out of thin air and pipe it to all of these tiny landholdings. And finally we people will learn how to be successful commercial farmers on impossibly small landholding by educating them to do the impossible.

Mind you, I am not saying nothing should be done.  But realize that if you are going to do something for this group it is probably going to cost money.    This money is going to probably  have to come from some other part of the economy.   The net effect will be to have both a supported inefficient farming community AND a tax burdened productive sector.  As with most ‘work fare’ projects (which this is a disguised version of) it likely would be cheaper to pay people to stay home and watch soap operas and trial lawyer ads.

China, faced with some of the same problems as India, has also tried a growth strategy.  One primary difference is that they also put in place (much maligned)  zero-growth population measures as well.    The Chinese are not even remotely out of the woods yet either, but at least in theory the smaller population will eventually reduce the economic growth pressures.

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