No.s 66-67, May 2017
No.s 66-67 (May 2017)
VII. Peasants as Subjects
In previous chapters we have been talking about the agrarian crisis as if there were agreement about what it is. But in fact there are two basically opposed, rather mutually exclusive, views as to what it is, and hence about how it should be addressed.
All ruling class programmes claiming to address the agrarian crisis ultimately separate the question of India’s agriculture from the question of those who work it. Their ‘solutions’ are defined in terms of the ‘productivity’ and the profitability of some future agricultural operators (this is what Modi means when he talks of ‘doubling’ farmer incomes), not in terms of the subsistence and productive capacity of the today’s actually existing peasantry. In essence, as we discuss below, this means maximising the returns to big capital, and assuring people that big capital will generate employment for those among them displaced.
The rulers in fact consider the existing peasantry to be the main obstacle to the sort of transformation they wish to bring about. For their aim is to create, within the sea of India’s agriculture, islands of high returns based on sizeable investments linked to global capital, while consigning the rest of the peasantry to a twilight of multiple subsistence employments in agriculture and elsewhere. Unsurprisingly, this ruling class programme faces resistance from peasants.
Representing as we do a contrary set of interests, we must start from the premise that the agrarian crisis of this country is that of the peasantry, particularly the small, marginal and landless peasantry – i.e., the vast majority who actually work the agriculture of this country. It no doubt encompasses many questions – of low productivity, unremunerative and volatile prices, and degradation of the environment. But it is perverse and anti-people to separate these questions from the question of the productive employment of the vast majority of the peasantry. The agrarian crisis cannot be resolved without mobilising that vast majority – not only for the defence of existing peasant livelihoods (though that must be the starting point), but for basic change in agrarian relations as part of a broader change in the social order. For, without such change, it is not possible to expand, progressively develop, and diversify agricultural and rural livelihoods in a sustainable way. Nor would it be possible to restructure the entire political economy of India in a progressive direction.
To the extent ruling class programmes take note of the peasantry, peasants (and even workers) are treated as if they were atomised profit-maximising entities, responding to specific external stimulii provided by the market or the State. But peasants are not anything of the kind; they are social beings, carrying on production in varied specific conditions, acting on natural forces, within a specific set of social relations. Collectively, they possess a vast wealth of knowledge and experience about the very varied physical conditions they face, and about how to work with them. At the same time, the existing social relations actually hamper, or prevent, them from realising their full potential.
Instead of viewing these questions statically, we need to see them as a process; and we need to view agriculture in its interaction with other sectors of the economy. That is, the aim is not some get-rich-quick programme for agricultural producers, which is a mirage; rather the aim is a steady path of development for the economy as a whole, in which peasants are active participants.
So, for example, the bar for agriculture is very short: the value added per worker in agriculture is just 29 per cent of average value added per worker in the economy as a whole. By contrast, the ‘labour productivity’ of workers in the finance, insurance and real estate (FIRE) sector is more than seven times the average productivity of all workers, or 25 times that of workers in agriculture. However, the bar for the FIRE sector is very thin – representing the small share it constitutes of the total workforce.
As the Chart depicts, the overwhelming bulk of employment in the country is still at low levels of productivity. Table 7 shows that the unorganised sector employs 85 per cent of the workers but gets only 22 per cent of the income. Gross value added per worker in unorganised manufacturing is just 5.1 per cent of that in organised manufacturing.
This is so not only for agriculture and unregistered manufacturing, but for other segments of the unorganised sector as well. We know, for example, that the steep expansion in employment in rural construction activity since the mid-2000s has been accompanied by a sharp fall in the value added per rural construction worker.1 Similarly, if unorganised and organised sector services were to be presented separately in the above Chart, we would see that value added per worker in unorganised sector services is less than one-third that in organised sector services.2 The abysmal conditions of work in the unorganised non-agricultural sector were documented by the National Commission for Enterprises in the Unorganised Sector (NCEUS) in various reports.
Thus it seems that, rather than draw workers out of agriculture into a better life, these unorganised sectors act as refuge employment for the unemployed, or as a supplementary employment for peasant families struggling to survive. At the other end of the spectrum, parasitic sectors such as finance, employing a handful, enjoy a bloated share of national income.
Development as destruction
The crux of the problem of ‘development’, and the divergent views of what constitutes ‘development’, relate to the course taken to increase output. The course gets decided by who stands to gain by one choice or the other.
The present ruling class response to the situation depicted in Chart 1 is that there are ‘excess’ workers in low-productivity sectors like agriculture and unregistered manufacturing. In its view, there is no scope to increase employment in these sectors; indeed, one can remove workers from these sectors with zero reduction in output. The ruling class solution is to eject the ‘excess’ workers simply by doing whatever needs to be done to maximise the returns to capital. By the assumptions of their theoretical frame, once returns to capital are maximised, adjustments will necessarily take place to bring about full employment of labour.
Maximising returns to capital means forcibly acquiring land for projects, promoting the concentration of land, promoting corporate entry in agricultural trade, dismantling protection for small industry, promoting large retail, and so on. Ruling class economists claim that the workers so released will, in a truly free market economy, automatically be absorbed in other sectors. If this benign process has not yet started despite 25 years of liberalisation, they ascribe it to some lingering non-market restraints, like labour laws, land ceilings, or protections for small-scale industry; remove these, and full employment will follow.
This approach is exemplified in two recent editions of the Government’s annual Economic Survey, namely, 2012-13 and 2015-16 (the principal authors being Raghuram Rajan and Arvind Subramanian, respectively). The principal theme of the 2015-16 Survey is that a market economy “requiresexit so that resources are forced or enticed away from inefficient and unsustainable uses.” Destruction, say, of small units and small farms, is necessary in order to create a new economic structure from within the old one. The 2012-13 Survey pins the blame for poor job growth on various restrictions which prevent such ‘creative destruction’: Government regulation of private businesses, Government incentives to small industry, labour laws protecting workers, legal restrictions on leasing land, and so on. These measures are intended to protect jobs and wages, but in the Survey’s view they prevent growth: “In India, too many small firms stay small and
The Survey contrasts the above with its happy liberalisation scenario:
Thus, when the 2012-13 Survey devotes a page to “Land Reform”, it is not using the historically established meaning of land reform, such as redistribution of land from larger holdings to the landless or poor peasants, or to the transfer of ownership to poor tenants. Rather, it lists steps to facilitate land acquisition for projects as well as land leasing.3
Will today’s organised sector absorb displaced peasants?
That is, even after discounting for price rise in the interim, Rs one lakh of investment would have yielded 4.5 times the number of jobs in the 1980s as it would today.Of course, this trend was to be expected if consumers started spending a larger share of their budgets on phones and cars, and a smaller share on shirts, shoes and soap. However, labour intensity has fallen not only in capital intensive industries, but in even labour intensive industries. That is, even shirts, shoes and soap are being made with a smaller component of labour, and a larger component of machines than in the past.5
As a result, the share of organised manufacturing workers in the total workforce has not gone up.6 This share has failed to grow despite a sweeping de facto relaxation of labour laws in favour of factory owners, making workers both cheap and easily disposable.7 According to conventional economic theory, all this crushing of labour should have persuaded factory owners to add cheap workers rather than machines. But they did the reverse.
There are several reasons for this decline in labour intensity. Prominent among them are (i) trade liberalisation and reduction of import tariffs on capital goods, which have relatively cheapened imported capital goods, and (ii) the progressively greater orientation of industry to cater to a narrow elite market consequent to growing inequality – that is, industry shifts to where there is purchasing power, and the rich have purchasing power. The elite market increasingly mimics consumer trends (including brand loyalties) of the advanced capitalist countries. At any rate, the main point here is that the capacity of the organised sector to absorb displaced workers is negligible, if not negative. (These negative trends in organised manufacturing are likely to worsen even further with the latest developments in automation which are being introduced in the developed world, and will find their way to India’s organised sector.)
Hence any workers displaced from the agriculture sector get consigned to very low-productivity activities in the unorganised sector, which face basic constraints. Some may spread their family’s labour time between agriculture and unorganised non-agriculture, trying to eke out a living through multiple low incomes.8
The second, contrary, approach is the one in which peasants are seen as active subjects, agents of change. This approach hinges on (i) vast numbers of petty producers getting organised to enhance their own productivity, with the help of the State; and (ii) drawing petty producers out of agriculture progressively into manufacturing by developing it as an integrated component of a progressive political economy. Instead of destroying existing employment and sources of subsistence to create isolated centres of high productivity and profit, and thereafter claiming to incorporate some ‘inclusiveness’ through assorted schemes, this approach treats the spheres of production and distribution in an integrated way.
In agriculture, this means, rather than relying on advanced machinery and waiting for the necessary capital to come in from those who have it, mobilising instead the vast pool of under-employed workers in agriculture – such as through small-scale water-harvesting, irrigation and drainage works. Given the right set of social arrangements, this labour power can be mobilised without paying money wages, but as part of a collective effort which self-organised groups of peasants would undertake to build a better, more productive future for themselves.
Large pool of labour power available
(i) According to Census data for 2011, one out of every four persons employed in India was a ‘marginal worker’ – i.e., one who is employed less than six months of the year. During two decades of liberalisation (1991-2011), more than half the persons added to the workforce were ‘marginal workers’. That is, the economy added 167 million jobs, but of these, 91 million were of marginal workers.(ii) An unusually large proportion of India’s working-age population falls outside the labour force. In 2013, in fact, the Labour Force Participation Rate (labour force as a proportion of those over the age of 15) was only 52 per cent in India, as compared to 71 per cent in China and 65.5 per cent in Brazil.9,10 This is a telling indicator of the incapacity of the existing political economy of India to develop its productive forces.
(iii) As we mentioned earlier, large numbers are employed in tiny enterprises, earning very low incomes in what could be termed ‘refuge employment’. Thus, in the rural unorganised sector enterprises (employing 53 million workers in 2010-11), the value added per worker was a meagre Rs 37,000 or so – even lower than the value added per worker in agriculture itself.11
These facts show that there is a large pool of labour power which can be mobilised for productivity-enhancing labour in agriculture and allied activities, if they are confident that they will reap a share of the benefits of this enhancement in future.Further: rather than wait indefinitely for large industrial units to draw workers out of agriculture and into manufacturing, this approach implies the setting up of small-scale units in the rural areas, drawing on locally available raw materials to the extent possible, employing local labour power (much of which is idle outside peak agricultural seasons), and catering to local markets for items of mass consumption or rudimentary tools and household items.12
In order to so draw out a sizeable number of workers from agriculture in this manner, manufacturing units must be set up as would not require large sums of capital per worker (otherwise the limited capital available would severely restrict the number of workers drawn out), and such manufacturing units should be easily replicable on a wide scale. Of course such units can be only one leg of balanced industrial development; heavy industry would necessarily be the other, though its growth rate may be slower to the extent resources are diverted to small industry.
The real barrier
Firstly, socially dominant parasitic forces (landlords, usurers, traders, officials, political leaders, etc.) drain away a good portion of the surplus in agriculture to unproductive uses, and thus depress the peasant economy. In the case of China, Victor Lippit conservatively estimated that extractions by rural exploiting classes in the form of rent, profits on hired labour, and usurious interest on loans was about 17 per cent of national income, plus another 2 per cent in the form of taxes paid by peasants. The agrarian revolution, which ended exploitation by landlords, usurers, and officials, thus was able to both return much of these extractions to the hands of the peasants and still redeploy a portion for development of the national economy.13
On the face of it, it seems India bears no resemblance to China in this respect. In today’s India, agriculture is a much smaller sector of the economy than the China of 1949; indeed, according to the latest GDP data for India, all of agriculture generates less than 17 per cent of national income. If we view the question within the ruling class frame, then, change in India’s agrarian relations would not yield surpluses of that order of national income, and hence would not be relevant for development.However, if we view the problem in a ‘labour-ist’ frame,14 i.e., maximising employment in productive activity, and increasing the productivity of that labour, we arrive at a very different conclusion. In a labour-ist frame, agriculture is the single most important sector of the economy, as it accounts for half the workforce; and small scale manufacturing is a very important sector of the economy, employing 85 per cent of the workers in manufacturing. Hence it becomes critical to ensure the fuller and more productive engagement of labour in these sectors. For these ends, the surplus available in agriculture is large enough to have a substantial impact, if it is channeled away from parasitic sections.
Secondly, under the social-cultural weight of socially oppressive and parasitic forces, any independent collective effort by landless and poor peasants would get crushed, both psychologically and physically.
Indeed, it is the very process of overthrowing the domination of these parasitic forces and social oppressions that can forge unity among the vast majority of peasants, and open up the way to their cooperating in production. And such collective material interests and collective consciousness are essential in order to mobilise people’s labour resources to create new assets and enhance productivity. How can the available surplus labour time scattered among different rural households be pooled? Who will pay the workers to do so? Who will own the assets? All these questions become impossible to solve in the existing rural set-up, which is characterised by inequality, social oppression by the propertied classes and isolation of the producers from one another.15
As for industry, the conditions and prospects of small independent manufacturing units remain bleak in the existing order. Those units that cater to the needs of mass consumption or to the productive requirements of small producers face an acute paucity of demand, due to the poverty of their customers (the vast masses of the people) and lack of access to organised distribution. They obtain negligible bank credit, and are unable to expand their operations even if it would profit them to do so.16 The better-off segment of their potential market is cornered by capital-intensive large firms with well-advertised brands. The only way small and micro-units can compete with larger firms is by squeezing their workers. (In the case of the lower segment of such industry, the owners are themselves workers; the average for micro, small and medium units is just 2.3 workers per unit.) A section of them also survive through contract production for big firms (which thus proves that big firms are not needed for production of such items), but this too is an insecure business. The continued growth of small-scale units has less to do with their viability than with the lack of alternative employment. (As we mentioned with regard to Table 1, unorganised sector manufacturing accounts for 85 per cent of workers in the manufacturing sector, but garners only 22 per cent of manufacturing GDP.)
For viable small-scale manufacturing activity, radical change in agrarian relations – through measures such as redistribution of land, collective control of natural resources, cancellation of usurious debts, and an end to exploitation by traders – would be beneficial, since an improvement in the economic conditions of these sections means an improvement in the conditions of the customers of small-scale manufacturing, and hence an expansion of its potential market. Even a small increase in the income and security of the rural masses can spur the growth of industrial employment, in the right kinds of industry.
Expansion of the market
According to the NSS for 2011-12, per capita spending on all these items together was estimated at Rs 80 per month in rural India, i.e., Rs 964 a year. This is a desperately low figure; and this is only an average, with two-thirds of the rural population spending even less than this. (It is strange but true that most of these persons do not fit the official definition of ‘poverty’, according to which only 25.7 per cent of the rural population was poor in 2011-12.) Similarly, the per capita spending on footwear is under Rs 17 per month, or Rs 196 per year.
Given these abysmally low levels, additional income in the hands of the rural poor through agrarian reform would result in vast numbers of people spending more on clothing, bedding and footwear. Both clothing and footwear are potentially labour-intensive, low-technology industries, and these can be set up with small amounts of capital in rural areas. (In fact, in many light consumer goods industries there are not significant economies of scale in production, and so there is no economic need for setting up large firms for these goods.)According to data in the Economic Survey 2016-17, an investment of Rs 1 lakh generated 24 jobs in the apparel industry (one-third of them for women), 7 jobs in the leather and footwear industry, and 4 in the textile industry, as compared to 0.3 in the automobile industry. The Survey makes a plea for promoting export of employment-intensive goods such as apparel and leather goods, pointing out that Rs 1 crore additional export demand would generate 8 jobs in the apparel sector, or about 7 jobs in the leather and footwear sector.17 However, it ignores the vast potential domestic demand for these goods, which is suppressed by the existing agrarian structure as well as depressed wages. Even at the existing depressed levels of purchasing power of the masses, domestic purchases of clothing and bedding (in 2011-12) would be nearly Rs 136,000 crore; the corresponding figure for footwear would come to nearly Rs 29,500 crore.18
Increases in the purchasing power of the masses could generate vast additional demand for such goods, and in turn generate widely dispersed employment to meet this demand.
Hence agrarian reform could enormously boost rural industry of this type, and help diversify rural employment by drawing (rather than pushing) the workforce out of agricultural under-employment. Moreover, a new agrarian order, leading to cooperative forms of agriculture, can open up potential sources of capital for small manufacturing activities in the rural areas. All these truths are well known; but they are being treated as ‘outdated’.
In contrast, radical agrarian reform promises nothing to the private corporate sector. It hardly needs to be said that, unlike small rural units, large firms have access to ample sources of capital for their activities, and would hardly dream of tapping investment from rural collectives. Secondly, the rural wealthy constitute a more important market for the corporate sector than do the rural poor. As such any redistributive programme would reduce the market of the private corporate sector.
More importantly, radical agrarian change would effectively pose a grave threat to the private corporate sector. For the actual process of such change would be a social upheaval without precedent in India’s history; a breach of legally sanctified property ‘rights’; and a wave of democratic assertion and organisation. All these imply a political threat to the position of a corporate sector that has fattened itself on sweated labour, State subsidies, and capture of natural resources. Hence, while it was once the norm to talk of the need for a change in agrarian relations in order to sustain industrial growth, that question itself is no longer fashionable or mentionable in the economics discipline. Indeed, a section of economists consider the agrarian question itself either resolved or irrelevant.
The contrary views depend on two mutually opposed class standpoints. The need for agrarian reform would be felt depending on the nature of industrial growth which is being sought – whether it is sought in order to fatten the existing private corporate sector, or to bolster a people’s industrialisation movement. The latter would be possible only under a different social order.
1. J.J. Thomas and M. P. Jayesh, “Changes in India’s Rural Labour Market in the 2000s: Evidence from the Census of India and the National Sample Survey”, Review of Agrarian Studies, January–June, 2016. (back)
2. Report of the Working Group on Employment, Planning and Policy for the Twelfth Five-Year Plan, 2011, p. 69. Data is for the year 2004-05. (back)
3. It lists three steps: “to map land carefully and assign conclusive title, to facilitate land leasing, and to create a fair but speedy process of land acquisition for public purposes.” The first is a step preparatory to the next two. (back)
4. Kunal Sen, Deb Kusum Das, “Where Have All the Workers Gone? Puzzle of Declining Labour Intensity in Organised Indian Manufacturing”, Economic and Political Weekly (EPW), 6/6/15. (back)
5. Radhicka Kapoor, “Creating Jobs in India’s Organised Manufacturing Sector”, Indian Council for Research on International Economic Relations (ICRIER), 2014. (back)
6. It was 2.3 per cent in 1993-94, 1.9 per cent in 2004-05, and 2.5 per cent in 2011-12. Using ASI data for organised manufacturing sector employment; total workforce from S. Mehrotra, J. Parida, S. Sinha, and A. Gandhi, “Explaining Employment Trends in the Indian Economy: 1993-94 to 2011-12”, EPW, 9/8/2014. (back)
7. Three facts illustrate this de facto relaxation: (i) the steep reduction in the organised sector workforce during the late 1990s (which shows that owners in effect have enjoyed the right to sack or to close their factories at will); (ii) the massive increase in the use of contract labour, such that contract workers are now the majority of workers in the organised sector; and (iii) the stagnation in real wages, and the steep fall in wages in value added. Real wages in organised manufacturing peaked in 1995-96, then declined till 2006-07, after which they recovered till 2012-13 (the last year for which data are available). However, real wages in 2012-13 are still lower than in 1995-96. (This is based on wages data from Annual Survey of Industries, deflated by the Consumer Price Index for Industrial Workers.) (back)
8. As Thomas and Jayesh, op. cit., point out, this is why the Census shows a rising workforce in agriculture while the National Sample Survey (NSS) shows a declining one: some of those who get counted as agricultural workers in the Census are shown as construction workers in the NSS. (back)
9. Thomas and Jayesh, op. cit. The term ‘labour force’ should not be taken to mean that those outside the labour force do not want employment, or cannot be employed productively. For example, take the sharp rise in the labour force participation rate (LFPR) in advanced capitalist countries during the 20th century: In the US, the LFPR for women rose from very low levels to 33 per cent in 1948 to 60 per cent in 1999; it has since dipped to 57 per cent. (back)
10. In the main, it is women who are missing from the ‘labour force’ in India. Of course, this does not mean they are not working; it just means they are doing unpaid work inside and outside the home, activities which are essential to society, but are devalued due to the social institution of gender.The conventional System of National Accounts (SNA), by which GDP is calculated, ignores these activities, in which women play the overwhelming role. In partial recognition of this discrimination, the following were classified as “extended SNA activities”: household maintenance, management and shopping for own household; care for children, the sick, elderly and disabled for own household; and community service and help to other households. In India, a Time Use Survey in 1998-99 found that while women accounted for a greater percentage of total labour hours than men, only 19 hours were in SNA activities, and 34.6 in extended SNA activities; the corresponding figures for men were 42 and 3.6 hours. (See Economic Survey 2015-16, pp. 199-200) Thus women accounted for 54 per cent of total labour hours, but only 31 per cent of hours spent in SNA activities. All this does not mean, however, that women cannot be mobilised into activities outside the household. It does mean that the democratic redistribution and socialisation of some of their unpaid work will facilitate that mobilisation. (back)
11. Value added per worker in rural unincorporated enterprises calculated from NSS 67th Round, for the year 2010-11. The value added per worker in agriculture would have been about Rs 54,000-57,000 (GDP in agriculture in 2010-11 divided by estimated workforce in agriculture in that year). (back)
12. Harry Magdoff, “Capital, Technology and Development”, Monthly Review, January 1976, states this position with characteristic beauty and simplicity. (back)
13. Victor Lippit, Land Reform and Economic Development in China: A Study of Institutional Change and Development Finance, 1974. (back)
14. Krishna Bharadwaj, “Paradigms in Development Theory: Plea for a ‘Labour-ist’ Approach”, EPW, 27/1/1990. (back)
15. “Essentially, what is required for costless capital formation is a system of ‘deferred wages’, that is, everybody agreeing to work harder without an immediate rise in income, for by its very nature an asset creating project has a certain gestation period and cannot yield immediate income. Everyone has to agree to work harder now for a higher income in the future. But, how to operate such a system within the atomistic private property where it is not clear to whom the new assets will belong?... It is precisely in permitting the pooling of surplus labour time and, hence, in enabling the effective mobilisation of the potential labour surplus in the form of discrete units of workers for capital formation, that the strength of the cooperatives and the communes lay.” Utsa Patnaik, “The Economic Ideas of Mao Zedong: Agricultural Transformation”, in Across the Himalayan Gap: An Indian Quest for Understanding China, ed. Tan Chung, 1998. Available at ignca.nic.in. (back)
16. The 4th All India Survey of Micro, Small and Medium Enterprises (MSMEs, including manufacturing and services units) found that 90 per cent of such units depend on informal sources of credit. Of their credit requirement of Rs 2.6 lakh crore (Rs 2.6 trillion), the banking sector extended them only Rs 1.1 lakh crore (Rs 1.1 trillion). – S.S. Mundra, Deputy Governor, Reserve Bank of India at the 2nd CII National Conference on MSME Funding, 23/8/2016. (back)
17. Economic Survey 2016-17, pp. 130, 137. (back)
18. The figures are arrived at by multiplying the Monthly Per Capita Expenditures on these items for rural and urban areas by the rural and urban population in the period of the 2011-12 Survey. (back)
All material © copyright 2017 by Research Unit for Political Economy