Corporate Farming Ordinance (CFO) is a rude shock for all those advocates of rural-agricultural reform whose goals of such reform are not merely to increase land productivity in the short run at the cost of environmental degradation, labour displacement, joblessness, and a further impoverishment of the rural populace.
One must rest assured that this is no paranoia as these conclusions are based not just on ground realities here but also on empirical evidence from developing countries in general. The goals we seek are not utopian either. Through the choice of appropriate agricultural reforms and technology, economic development kicked off in many late developers including Japan, South Korea, Taiwan, and last but not the least mainland China itself.
A caricature of the late developing newly industrializing countries’ (NICs) development model is usually dubbed in free markets. This is a view that has been promoted by the IFIs especially since the end of the Cold War so as to popularize their view of the economy with a view to getting it liberalized the world over. This would allow easy flow of their goods, capital, and technology across national boundaries. As for labour, its mobility remains restricted with immigration laws made tougher by the day. The fate of a confined labouring class is, therefore, determined by national policies which, in turn, are influenced by global capital that is set to gate crash into our agricultural sector. We have too any advisers influenced by a free market doctrine that is free for some and closed on others. Those without purchasing power and shut out from the market system are, therefore, to fend for themselves in the fringe economy that is only likely to swell with a misunderstood notion of free markets in general and that of NICs’ development experience in particular.
Colin Bradford writes, “what seems to distinguish the East Asian development experience is not the dominance of market forces, free enterprise, and internal liberalization, but effective, highly interactive relationships between the public and private sectors characterized by shared goals and commitments embodied in the development strategy and economic policy of the government. The dichotomy between market forces and government intervention is not only overdrawn; it misconceives the fundamental dynamic at work. It is the degree of consistency between the two sectors—rather than the extent of implicit or explicit conflict—that has been important in the successful development cases. A coherent development strategy was not only formulated but followed by both the government and the private sector in providing an unusual degree of common direction to national energies in these cases.”
East Asian countries’ is a case of guided capitalism and not one of unfettered markets as the public is generally made to believe. And, what are generally believed as free markets in the world are not perfectly competitive either. Mostly, the structures are oligopolistic in nature. Outputs are, therefore, restricted and prices are high at the profit-maximizing levels. Consumer welfare is, therefore, not maximized. Oligopolists nonetheless reap huge profits. It is these kind of agri-business MNCs that we wish to attract in Pakistan’s corporate farming. They will bring in capital- and mechanical-technology intensive farming techniques which will give high yields initially but, through intensive cultivation, will lead to soil degradation and displacement of labour who will become jobless vagrants.
Also, profits will be repatriated and reliance on imported equipment will further create pressure on foreign exchange thus making it that much more difficult to close the forex gap. Domestic savings gap is not likely to narrow either as income inequalities are likely to worsen due to further disempowerment and displacement of labour. The existing rural power structures which appropriate a major share of rural incomes anyway will remain intact. To this power structure will be added the structure of capitalist MNCs thus skewing the power balance further against the low-income or no-income groups comprising the bulk of rural population.
Development is not about increasing the income shares of the top 10/20percent. It is about improvement in the living conditions of the bottom 40percent. None other than James D. Wolfensohn, President of the World Bank said in 1998, “Our primary goal in development must be to reduce the disparities across and within countries... The key development challenge of our time is the challenge of inclusion.” If the goal is to “include” and not “exclude,” then each new policy should first be given this acid test before adoption. Corporate farming will fail miserably in this test of “inclusion.”
The world renowned Paul Streeten is noteworthy on this score. He said in the context of outward-oriented market policies promoted by the IFIs as a sure recipe for LDCs’ growth and interventionist policies debunked by them as outmoded and obsolete, “Perhaps economists have been barking up the wrong tree when disputing which set of price policies contributes more to equality. In an inegalitarian power structure, both make for inequality; in an egalitarian power structure, both make for equality.”
So, it is a reliable conclusion from recent development experiences that nations aiming for growth with equity will ensure equitable distribution of incomes by redistributing (assets) before growth if the same are distributed inequitably. Otherwise, growth will redistribute disproportionately more in favour of the asset owning classes thus exacerbating the inequalities of both assets and incomes. So, while growth might take place, chances of “inclusion,” ala Wolfensohn, will be minimized. The goals of development, therefore, need to be adjusted accordingly.
That is, in a developing country, if the agricultural goal is to increase land productivity first, then the choice of production technique will be capital- and mechanical- technology intensive that will be labour saving and labour displacing. So, while land productivity may increase, total factor productivity (TFP) may not when it is TFP increase that should be sought. So, for both reasons of “inclusion” and total factor productivity enhancement, the agricultural strategy has to be given a shape that should neither “exclude” nor should increase productivity of land only. Corporate farming is designed to achieve the latter set of undesirable goals. Only smaller farmer-owned farms lead to not only “inclusion” but also increase in total factor productivity (TFP) as is borne out by developing countries’ experiences. In developed countries, however, large farms are more efficient which is not the case in developing countries.
Some argue that we should follow the methods that are in vogue in developed countries as that is the modern approach to agriculture. That is, huge farms cultivated through intense use of capital and technology. Those who argue thus ought to appreciate that the above route suits the labour-scarce economies where transformation from agriculture to industry and services has occurred thereby leaving fewer hands for farming. The technology used by them is, therefore, appropriate given their resource availability, level of development, and the structure of the economy. It is, therefore, efficient for them to have the kind of huge farms they have that they till with sophisticated mechanical equipment. However, it is most inappropriate for our part of the world which is labour-abundant, capital scarce, and has yet to go through the structural transformation the developed world has been through already.
Appropriate technology for our agricultural sector should, therefore, first deploy the resource the sector has in abundance which is labour. This is not to say that we have to live with very low yields for some time. For, scale-neutral biological and chemical technology can be used to raise the yields of small farms found to be more efficient than big farms in developing countries. Those who refuse to see the argument of appropriate technology would be unreasonable enough to wear overcoats, leggings, and earmuffs in December in Karachi just because they do so during this month in the snowbelts of Western industrialized democracies. If we dress up according to the weather conditions of a particular location, so should we strategize in line with the initial conditions prevailing in our underdeveloped economy.
Further. the goal of agriculture is also not to generate food surpluses for exports from a developing country as food self-sufficiency should be sought first since food is a strategic resource. Also, exports of agricultural commodities is not likely to yield the forex gains some want to see due to their low income elasticities. Further, increase in the world supply of agricultural commodities depresses their prices which would lower export earnings due to their low price elasticity. So, banking on agriculture for a quantum increase in exports is also barking up the wrong tree. Preoccupation with exports comes from another misconceived view touted by the IFIs that exports lead to growth in all cases when relationship is mostly the other way round. In the East Asian economies, it was successful development and growth that spurred exports which in turn pulled up growth as a sound infrastructure was in place. The IFIs’ view of the relationship between exports and growth is again half the NICs’ story told which we are naive enough to buy into and are now basing our agricultural strategy too on this half-baked lesson picked up by the IFIs for reasons.
There is, therefore, a very strong disagreement on what the goals of agricultural development should be and what is actually meant by agricultural development. It is this lack of clarity that is now making this nation bet on the wrong horse of corporate farming.
Is the goal to increase land productivity and thereby agricultural exports? If it is, then it will be at the expense of total factor productivity and the target of exports might also not be achieved. Hypothetically, even if the exports target is met, it will be at the expense of those goals of agriculture that a developing country should be having for broad-based, all inclusive, equitous growth. It will be only then that the rising unemployment, poverty, and misery will be stemmed. If the latter set of goals are adopted, it would be only too good to then dwell upon the agricultural-rural development strategy that should be!
