Want to develop agriculture in a quick and easy way? Then try collectivization which, unfortunately, has had a bad history—in the way this was implemented in the People’s Republic of China more than half a century ago.
A system of collectivized farming—called communes—was adopted in China starting in the late 1950s, with the objective of modernizing agriculture that had been stuck in subsistence-type farming and low-level productivity since the historical times. Given the small size of family farms and little facility for trade and specialization, the operation was unsuitable for introducing modern farming techniques—irrigation facility; use of farm machinery; fertilizer and seed packages; efficient scale production—all critical ingredients for ensuring productivity growth and decent earnings by impoverished rural families.
Organizing the family farms in larger production units then seemed a natural option for increasing farm output and making agriculture contribute to economic growth at the national-level.
Farm-level cooperation in China began in the early 1950s with the establishment of Mutual Aid Teams or MATs, comprising five or six households. These teams were later consolidated and merged into Agricultural Producers’ Cooperatives or APC, making them larger units of 20 to 40 farming families who ‘pooled their lands and large agricultural tools and draft animals and worked the land together’.
In the last phase of progress towards organized farming, a commune system was introduced in 1958. Under this system, all lands were nationalized and managed by Communist Party cadres and government officials. Working families—former owners of the land—received wage incomes based on their work-points—amount of labor they had contributed to the farming activities.
GOOD AND BAD POINTS
Collectivized farms worked wonderfully in the beginning because of its several advantages over the family farms, including the ease of land consolidation and land leveling; provision of irrigation and drainage facilities; crop selection and specialization; adoption of new farming techniques; use of large-size farm machinery; and improved access to modern transport and efficient marketing of produce.
However, envisaged benefits of the commune system were seriously compromised because of its extreme politicization; near-prohibition of cash crops production to ensure national food self-sufficiency; price controls for keeping food prices low; and transfer of surplus earning of communes to finance industrialization. Above all, farmers-turned-laborers lacked incentives to work hard and be productive, since earnings were the same irrespective of individual effort.
Nepal will do well to emulate China’s collectivization methods. But with a twist.
Agricultural productivity stagnated until reforms were introduced under the household responsibility system starting in 1979, which allowed individual families title to the land they cultivated; choice of crops they could grow; guarantee of remunerative prices; and freedom to keep what they earned.
The switch to private farms and responsibility system had a predictable impact on production and productivity growth in China’s agricultural sector. For instance, comparable data available from 1980 to 2005 for India and China register remarkable divergence in the performance of major crops, with average farm productivity of Chinese farms more than twice that in India.
During the latest 15 years (1990 to 2005) period for which reliable data are available, India produced 124 million tons of rice a year, compared to 186 million tons for China despite double the size of paddy acreage in India. The widest divergence was noticed in the production of fruits and vegetables which, from a roughly comparable level of 60 million tons for both countries in 1980, leaped to 450 million tons for China in 2005, with Indian production just doubling to 135 million tons over the same period.
The explanations for this huge differential in performance may vary but the earth-shaking institutional changes that occurred in China with the introduction of the communes played a key role. While parts of Indian agriculture are modernized and have registered massive gains in productivity, the sector is overwhelmingly subsistence-based and, for most parts, development of commercial farming has been held back in the absence of any serious commitment to land reform.
LESSONS FOR NEPAL
Maoist ideology remains fixated on breaking-up the large land holdings and distributing them to small peasants and landless families. The thinking is that unequal distribution of land has been the main cause of rural poverty and any program for improving living conditions must give priority to a fairer distribution of land holdings.
However, as the Chinese experience shows, this route to land re-distribution would be a wrong way of helping the rural labor. A more sensible and effective way for doing so would be to promote land consolidation that would encourage commercial farming and facilitate the adoption of new farming methods, crucial for achieving rapid productivity growth and larger incomes for rural families.
How can land consolidation be achieved? The best way of doing this would be to encourage cooperative farming which, however, has been tried and failed, not only in Nepal but all over Asia. The main hindrance to success has been the difficulty of getting farming families combine their holdings; participate in production; and agree to share the proceeds in a fair manner. Too much of social and economic diversity exists among the landowning groups that tend to frustrate all efforts at voluntary cooperation, despite a common awareness that such cooperation is desirable and beneficial for all participants.
The last option to achieve land consolidation would then be to use some measure of force, in a way of the Chinese commune, with the main difference being that original owners will retain the title to their land and that farming operations will remain under private management, staffed by professional managers. In other words, government intervention will be needed just to facilitate consolidation; when efficient farms are established post-consolidation, the government would help put together a team of professional managers and experts who would be accountable to landowners only and, in large part, the operation will run like any private corporation.
In order for farming operation to run like a business, it will be sensible to establish share-ownership of the enterprise based on contribution of land by each family, with provision that shares can be transferred to heirs or sold to others at market value. Profits from enterprise would be distributed based on share holdings, with the government guaranteeing a minimum return to shareholders as a social-safety net provision.
Admittedly, it is hard to imagine implementation of such a decisive set of measures that would help change the course of the economy, towards growth and development. At the same time, there is little else to depend on for modernizing a traditional economy and creating an environment for shared prosperity.
The author teaches economics at various American universities
sshah1983@hotmail.com
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