Around the mid-1980s, my interest grew in the extent of subsidies rich developed countries were giving to the agriculture sector. If farmers in rich countries were allegedly doing so well, why did these governments, all champions of the free market, have to provide subsidies to their farmers? Generally speaking, no political regime wants to subsidise Agriculture; they would rather put all the eggs in the corporate basket.
Then during my travels to the USA and Europe, especially the countryside, I witnessed the devastation market-oriented agriculture had done to rural communities in America, Canada, and in Europe. We are constantly told in India that developed countries are so prosperous and their farmers are in such good shape that we need to copy the same model. In reality I found that whatever remains of the American agriculture today is entirely due to the massive subsidies the government provides.
When WTO came into existence, I was commissioned by British journal The Ecologist to do a column on how the WTO regime would benefit Indian farmers. In that column I compared Indian farmers to a European cow, comparing the subsidies that a European cow received vis a vis an Indian farmer’s income. It became a major talking point among the economists and the UN Human Development Report by the UN and the World Development Report by the World Bank both mentioned dairy subsidiaries in comparison to developing world.
Dominant economic thinking is that we have to reduce the size of the population dependent on agriculture to achieve higher growth. when I visit foreign universities, economists endlessly argue that there is no other way than this. One of our former RBI Governors in fact went on record to say that the biggest reform in India would be when we can move people away from agriculture to urban areas, which need cheap labour.
If we take this migration of people to the cities as employment generation – creating an army of dihadi mazdoor - there is something fundamentally wrong with our economic thinking. There are lessons from the lockdown last year, when we saw the plight of migrant workers, as hundred million walked back long distances to their villages. I call these migrant workers ‘agricultural refugees’. They were pushed to the cities because the economic paradigm created by the dominant thinking has made rural areas economically unviable.
In America , 1.5 percent or so of the population depends on agriculture, agriculture by this warped definition should have been a lucrative profession. But it is not. Agriculture in American is facing a severe crisis, with farmers saddled with a bankruptcy of $425 billion as of July 2020. The idea that fewer people engaging in agriculture will ensure prosperity has clearly outlived its utility and it is time for economists to stop flogging this dead horse.
There is another flawed argument that larger the land holding size, the better the bargaining power. The average land holding size in the US is 440 acres while 86 percent of Indian farmers have land holdings of less than 5 acres. It is therefore argued that we need aggregators and contract farming, which would enhance bargaining power of farmers and there will be price discovery. My question is why did this then not happen in America? Or Or in France where the average land holding size is 135 acres? Or Canada where it is 3000 acres; or in Australia where it is a staggering 10,800 acres?
When Ronald Reagan was encouraging big corporates to replace the allegedly inefficient small farmers, the world did initially go into surplus food production, prices fell and consumers were happy . But a country where over 50 percent of the population are involved in agriculture, we do not have to follow what America did but go by what Gandhiji said, production by the masses, not production for the masses. In fact, that is what PM Modi also envisages, Sabka Saath Sabka Vikas.
As I have said before, economists have to be held accountable for the crisis the agriculture sector the world over is facing. They have misled us to believe that this model of economic growth works. They need to go beyond Economic theory and look at the ground realities. The reverse migration we saw in India should be a lesson for them to go into reverse economic thinking. Rather than pushing people to the urban areas, the challenge is how to make rural areas economically viable and profitable.
***
Indian farmers are still on the streets. Their agitation is far from over and the whole world is eagerly observing how it shapes up. The movement has moved out from the Delhi border to various parts of the country as farmers have started going to villages, holding maha-panchayats and taking their message to more and more people. This is possibly the greatest mass movement of our times.
Just two years back, the chief economist of the US Department of Agriculture admitted that since the 1960s, American farm income has seen a steep decline if you adjust for inflation. Whereas in India we are told that free market agriculture model would make farm income go up. I fail to understand why that did not happen in first world countries after they opened up?
Bedabrata mentions in his Times of India that the price American farmers get for wheat today is less than what they used to get during the American civil war. In Canada the wheat price in 1867 when adjusted for inflation was $30 per bushel. 150 years later, in 2017 the price had come down to $5 per bushel. This is what free markets have done to agriculture.
In the US, 40% of average farm income actually comes from subsidies. It clearly demolishes the argument that markets lead to price discovery. A study of cotton in America shows that around 2005 there were 20,000 cotton growers. American farmers were getting a subsidy of 4.7 billion dollars in 2005 to produce a crop which was sold at 3.9 billion dollars. It depressed global cotton prices. Farmers in Africa and India were priced out.
We were led to believe that our farmers were inefficient and unproductive; but in reality, Indian farmers were priced out because of subsidies that American farmers received from their government. On top of it, America provided an additional subsidy of 180 million dollars to the textile industry to buy the subsidized cotton. Still Brazil continues to heavily subsidize cotton growers.
According to the Centre for WTO Studies, New Delhi, America provides a subsidy of 85 lakh rupees to each cotton grower every year while in India the subsidy a cotton grower gets is Rs. 1500.
Situation is not much different in Europe. Despite the massive subsidies for the agriculture sector, every minute one farmer is quitting agriculture. EU provides a subsidy support of 100 billion Euros every year. Imagine if this subsidy is withdrawn, what would happen to the farmers in EU? Even in France, the top most agriculture producer in EU, recently farmers hung dozens of suicide dolls from trees in front of Parliament to highlight their plight.
So why do we want to borrow this failed model? It’s a question I have been repeatedly asking.
Sonny Perdue, Donald Trump’s Agriculture Secretary had said, “In America the big gets bigger, the small go out.” To illustrate in 1970s there were more than 6 lakh dairy farms in America. 93 percent of American dairy farms have closed down. Does that mean milk production has come down? No. On the contrary it has gone up, which drove the prices down and dairy farmers committed suicide. Today there is so much surplus milk with mega dairy farms, each with 7000 to 15000 cows that America is trying to find a market for its surplus milk; and that’s why the US is pushing India for market access in dairy.India is the largest producer of milk in the world and yet we are under pressure to open up our markets to dairy companies for milk..
Even for India, the Director General of International Food Policy Research Institute, Washington DC, comes up with similar advice, “Move up or move out.”
Bedabrata mentioned about the nexus between political power and big corporates in America. In fact there is another player - the economists. The mainline economists all over the world speak the language of capitalist power , a language that has failed to enhance farmers’ income anywhere in the world.
Agrarian crisis is so severe in America that one of the farmers called me up the other day asking what is happening in India. As I explained the situation he said, “We know that living in debt is living in hell. We are very happy that Indian farmers are standing up and fighting our battle.” Another farmer in France said that agriculture is being sacrificed to keep consumers happy. Not only in France or US, the crisis of farm debts is the same everywhere. It is actually caused by the denial of rightful income to farmers which is the biggest issue globally farmers are facing.
Prior to the Indian farm protests in hundreds of tractors had marched into Washington DC in Feb 1979 asking for guaranteed price. . They camped for 4-5 weeks but they could not get what they wanted. Jimmy Carter, then American President could not meet farmers demand. If he had not failed, American agriculture would have been a global model for economic viability of the farmers.
What farmers need everywhere today is a guaranteed price for their produce which alone can pull them out of the prevalent crisis. Markets would automatically adjust to it. Don’t forget when the debate about minimum wages had started, corporates had objected saying this would upset their balance sheet but eventually they had to provide minimum wages and adjust their business plans accordingly. If there can be minimum wages for workers, it is time we provide minimum support price (MSP) to the farmers as a matter of right.
Let us look at the confectionary industry with a turnover of $212 billion. Chocolate is a major component. Guess what the average income of a cocoa farmer is, it is Rs 100 per day, less than the price of a standard chocolate bar. Coffee industry is no better. There are around 50-60 lakh coffee bean farmers across the globe and 80 percent of them earn less than $1.9 per day, which the World Bank defines as acute poverty line imagine if these farmers had received a minimum support price all these years rather than being left to face the brutalities of the market.
Source: Lessons for Indian Agriculture. National Herald. April 17, 2021. https://www.
