Utsa Patnaik

Jawaharlal Nehru had written that once Britain obtained political control over India—which started effectively from 1765 with the East India Company wresting the right of tax collection in Bengal—our country’s economic development could no longer be understood in isolation, without considering its relation to international capitalism.

This observation remains even more true in present times.

Formal political control by the industrial North on the Global South may have gone decades ago, but neo-colonial control through other mechanisms is alive and well, mechanisms that are incessantly pushed by the industrial North through the financial and trade institutions fashioned in the post- Second World War world.

We need to understand that the farmers’ struggle over the last four years is not just for promoting their own economic interests but is nothing less than a struggle against the recolonisation of Indian resources, a struggle every patriotic Indian must support to the hilt.

The cold temperate industrial North desperately wishes to control the enormously rich primary productive capacities of the warm lands of the Global South and change cropping patterns there for its own benefit, to sustain its manufacturing and the increasingly varied consumption basket of its own populations. With its single cropping season dictated by climate, the North is permanently incapable of producing a vast range of foodstuffs and raw materials that only the Global South can produce. All the North can produce in bulk, after shelling out large subsidies to its farmers, are foodgrains in mountainous surplus of domestic needs, and feed-grain based animal products; whereas their populations demand a range of tropical products their lands cannot produce, mandating heavy import-dependence.

As regards fossil fuels, also a primary product, only 11 per cent of the world’s known reserves are located within the territorial boundaries of the countries of the industrial North, which however consume nearly 40 per cent of total commercial energy.

While the geopolitics of control over oil is well known, the geopolitics of control over other primary products has hardly been discussed. During formal colonial control, the metropolitan countries paid nothing for their imports from Southern lands (imports in excess of the manufactures dumped on the latter) because they used local taxes, raised from farmers and artisans, to “pay” for the export goods sourced from the very same farmers and artisans. This meant that only theformof the taxes changed, from cash to export goods. Local producers were not actually paid and were being taxed out of their products, but they did not know it.

Without direct fiscal control, the industrial North can now no longer get goods completely free, but they nevertheless ensure that they pay only a pittance, by continuous pressure on Southern countries to devalue their currencies. At Independence, Rs.3 bought one US dollar, while today Rs.83 buys one US dollar, that is, the purchasing power of the rupee is less than 4 per cent of its initial level. Similarly the exchange rate against the British pound has declined from Rs.15 to Rs.100 over the same period.

Let no one imagine this has anything to do with the demand and supply of currencies; it is the result of active management. As long as it suited Britain, since through direct control it could take all of India’s global exchange earnings, the pound sterling-rupee rate was kept steady between narrow limits for over a century. With political independence, it has suited the industrial North to manipulate continuous devaluation, not only with respect to India but other Southern countries as well, so that the average unit dollar price of the goods they import have been declining steadily, ensuring high average living standards for their populations.

Southern populations are constantly being told that they are poor and backward, to the extent that their intellectuals have become conceptually blind to the wealth of Southern resources and uncritically peddle the fallacious and self-serving trade theories developed in the era of imperialism. The most influential theory on which later trade theories are based has been David Ricardo’s incorrect theory of comparative cost advantage, which blithely assumed that all countries could produce all goods, including all crops, to improperly draw the inference that countries specialising according to their cost advantage would necessarily benefit from trade. No theory could be more untrue because its premise is untrue; what is the cost of production of sugarcane in Germany or of coffee in the US? Since for climatic reasons output there was zero in the past, is zero today, and will remain zero in future, unit production cost cannot even be defined for a large range of crops, and there is always a one-sided demand on the South to satisfy the yawning gaps in the North’s consumption basket.

Far from leading to mutual benefit, what we saw in history is trade at gunpoint and conquest in order to obtain tropical goods completely free of cost as the product-equivalent of taxes, leading to sharp decline in the nutritional standard of Southern populations and periodic devastating famines. By the eve of Independence, the annual post-trade grain output retained in India for consumption had fallen to 137 kg per capita compared to 200 kg in year 1900, an average decline of 600 calories daily per head, implying an even greater decline for the labouring poor.

The present Northern pressure on the South to supply the former’s manifold consumption demands has intensified greatly compared to colonial times, because the sharp reduction in air freights, especially since the 1970s, means that unlike in the past, perishable products (fresh vegetables, fruits, flowers, fish) can be and are being flown in 8 to 15 hours from South Asia to Europe and the US, and in an even shorter time from countries in Africa and Latin America.

“The cold temperate industrial North desperately wishes to control the enormously rich primary productive capacities of the warm lands of the Global South and change cropping patterns there for its own benefit.”

To a substantial extent the industrial North has already achieved its aim of reconfiguring land use in the Global South to serve its own needs; dozens of smaller countries have been pressurized already into unwisely giving up their domestic procurement, stocking and distribution systems on the argument that their “food security” lies in importing grain from the North and that they would gain from specialising in the non-grain crops the North demands—and Ricardo’s fallacious theory is always invoked to justify this in international fora.

But what is wrong with such a pattern of international specialisation, some might ask. What is wrong is that first, basic food security is far too important a matter to be left to dependence on the interests and whims of Northern countries. After the debacle of the second Gulf war, the US quadrupled the diversion of its grain to ethanol production over a few years starting 2002, followed by European countries; global foodgrain prices spiked in 2008, leading to food riots in 37 countries that had already become import-dependent.

Per capita grain availability

India only just managed to draw back from the brink—for the preceding six years procurement prices had been kept virtually unchanged, grain output in Punjab had become stagnant, farmer suicides had grown apace, all this amid a vitriolic ideological attack on India’s green revolution. Credulous local academics had joined in the orchestrated cacophony demanding an end to “water guzzling” rice production in Punjab and advocating “crop diversification”, quite unmindful of the fact (in fact, quite ignorant of the fact) that India has ranked globally for years right at the bottom, even lower than the least developed countries, in the annual per capita consumption of grain as food plus feed. The global food price spike at least alerted a somnolent government—giving up public procurement was no longer openly advocated, procurement prices were again raised, reviving production, and a long-term grain policy was formulated. Even so, the present per capita annual grain availability in India (171 kg) for food plus feed remains considerably below the average for Africa (190 kg) and the least developed countries (205 kg), and is less than half the level in China (360 kg).

Farmers as producers face a double hazard—first, their output level is uncertain, subject to the vagaries of weather even when they have done all the right things with regard to cultivation practices; in addition, they have been subject to uncertainty of prices since the mid-1990s with neoliberal policies of free trade exposing them to the high volatility and fluctuations of global prices. Debt-induced farmer suicides were unheard of before the 1990s; with increasing free trade, farmers who spent money to increase the output of crops when their global prices rose, then faced unexpectedly sharp price declines for years on end, leading them into an impossible debt-trap. The present government, for reasons known only to itself, has embarked again on a spree of free-trade agreements with Northern countries that will impact our farmers adversely.

After suffering nearly three decades of falling real incomes and employment and deep distress in particular areas leading to over 1,50,000 debt-induced suicides, our farmers and workers are determined to combat these iniquitous policies. They have no wish to chase high global prices one year and suffer catastrophic decline the next year. They want to sell their output to the state whose officials are accountable to the public, not solely to private corporations out to fleece them. All that our farmers want is that uncertainty in the prices they receive for their crops is reduced and a basic income is assured, through the government buying from them at a minimum support price for crops that covers their cost of production and gives a modest return to maintain their own consumption.

This was, in fact, the system prevalent for three decades, from the 1965 setting up of the Food Corporation of India followed by the various Commodity Boards that procured a substantial share of grain and cash crops at reasonable prices from farmers, a system that ensured relative price stability for farmers and consumers alike. From the mid-1990s, with neoliberal reforms, the important procurement function of the Commodity Boards was given up entirely and the operations of the FCI were run down, right up to the crisis of the global grain price spike.

The pattern of specialisation that industrial countries want is being forced on India and the Global South by deeply unfair means whereby the North subsidises its own agriculture heavily while attacking the meagre subsidies given for public procurement and stockholding in the South. For over two decades, since the Doha round of negotiations, developing countries have been fighting to retain their sovereign right to procure and stock foodgrains and ensure food security for their populations against the unremitting and unprincipled attack by industrial states aiming to export their own surplus foodgrains.

Agreement on Agriculture

In the Agreement on Agriculture (AOA) implemented in 1995 by the World Trade Organization—which will surely go down in history as the most intellectually dishonest document ever formulated—the industrial North retained its massive subsidies for agriculture by converting them to direct cash transfers, after carefully labelling such direct transfers as “non-trade distorting” and not requiring reduction. However, reducing the meagre price support that developing countries gave to their own farmers was mandated by labelling these as “trade distorting” and subject to reduction. No developing country participated in the formulation of these terms—the use of meaningless jargon like “trade-distorting” is a hallmark of intellectual deceit designed to diddle policymakers in the South.

In a 1997 paper, this author had pointed out that by shifting 94 per cent of its $96 billion farm subsidies to direct transfers under various heads the US satisfied, on paper, its reduction commitments within two years while actually retaining its massive subsidies. They continue to rise to this day with every Farm Bill passed, and in many years reach half of the entire value of its agricultural output. With less than 2 million farming enterprises, direct transfers take under 1 per cent of the annual budget of the US, including the annual $127,000 per farmer transfer to cotton producers. West Europeans give subsidies to an even higher extent of their total farm output value as they are even more inefficient producers than north Americans. At prevailing world prices for grain and other crops, without the massive subsidies they get, farmers in the US, Canada and West Europe would be completely out-competed by farmers in China, India, Egypt, and other countries. They would disappear as sellers in the global market.

Not only India with its over 100 million farming families, but other developing countries too with their substantial peasant populations cannot possibly administer direct cash transfers; their tried and tested method is state procurement at minimum support prices. At current exchange rates, the price support India has been giving for wheat is negative, that is, the domestic administered price that our farmers get including bonus is lower than the international price; with rice it is slightly higher, but price support is still well below the 10 per cent of output value specified in the AOA. The US, however, filed a complaint against India at the WTO alleging that it had given price support to wheat and rice to an average extent of 65 per cent and 80 per cent of output value between 2011 and 2014 violating the WTO rule.

The basis of this calculation is an outrageously illogical provision deliberately included in the AOA, that the international crop price during 1986-88 would be taken for ever after as the “fixed external reference price”; further, the rupee-dollar exchange rate of that time, about Rs.12.7 per dollar, is used by the US to calculate India’s domestic support a quarter century later. The global wheat price during 1986-88 was just under $28 per quintal amounting to Rs.354 at Rs.12.7 per dollar; for rice the corresponding figure was Rs.235 per quintal. To qualify for zero domestic price support, the price payable in 2014, nearly three decades later, to Indian wheat growers still remained Rs.354 per quintal, ignoring both the 2014 exchange rate of Rs.60.5 per dollar and the nearly fivefold rise in input prices.

India’s actual wheat support price, including bonus, in 2014 was Rs.1,386 per quintal. The difference between this and Rs.354, namely Rs.1,032 per quintal, is stated by the US to be the positive price support given to Indian farmers. Multiplied by the total wheat tonnage produced and divided by its value, it produces the 65 per cent number that “violates” the WTO rule.

A similar exercise for rice yielded 77 per cent of output as the putative price support.1 No level of chicanery is too low for advanced countries in pursuit of their economic interests. One can well imagine the justified anger of our farmers if they knew that Rs.354 and Rs.235 per quintal for wheat and rice are supposed to be adequate for them to carry on production today, and any payment in excess of this invites penalty according to the absurd and self-serving rules written into the AOA. Meanwhile, advanced countries continue to give 50 to 100 per cent of their output value as subsidy with complete impunity because, as explained, they have declared their form of subsidy to be perfectly benign.

With their independent base in production and their strong communitarian values of solidarity, our farmers have succeeded in the past and will succeed in future in their historic struggle against neo-colonialism. They need the support of all those who value sovereignty against servitude.

Utsa Patnaik is Professor Emeritus, Jawaharlal Nehru University.

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