Thoughts on economics and liberty

India needs a non-interfering agriculture policy

[Published in the November 2010 issue of Freedom First]

All that a government is required to do in for farmers, as it is required to do for others, is to ensure security (including biosecurity in this case), strong property rights, and justice. Justice, in the case of agriculture, includes minimising harm to the environment (see my Freedom First article of May 2010 for how this can be achieved.)

In addition, a government can legitimately undertake a few other functions for agriculture, such as maintaining a strategic reserve of foodgrains; facilitating agricultural research through (private only!) universities and the private sector; ensuring infrastructure such as irrigation canals through private enterprise and public-private partnerships; and supporting the re-skilling of agricultural workers who want to move into more productive vocations. Beyond that, the free market should operate. That, in essence, should be the agriculture policy of India.
 
Freedom is vital to food security
Innovation is a direct outcome of freedom. As a result, free nations manage to produce huge quantities of food, cheaply. I love the story about a young couple, Craig and Helen Elliott, who started with virtually nothing in their pocket in 1995. Without any government assistance, they built a farm in New Zealand which generates 26,000 litres of milk per day. Between the two of them they milk 900 cows each day![1]
 
Similarly, just 3.5 lakh farmers, representing four per cent of Australia’s workforce, produce food not only for Australia but export it in huge quantities. So also, in free societies the share of food in family budgets has declined to less than 10 per cent while in unfree nations like India up to 70 per cent of the family budget is spent on food[2].
 
The Indian farmer is bound and gagged
Markets, operating through the price system, allocate resources optimally to the production, supply and distribution of all commodities, including food. But socialist India has never tolerated markets. The Essential Commodities Act (ECA) enables the government to “control of the production, supply and distribution of, and trade and commerce, in certain commodities”. As a result, every aspect of agriculture is whimsically distorted in India, making agricultural investment a game of chance.
 
Input and output prices are distorted by fertiliser and electricity subsidies which can only be exploited by wealthy farmers, by the price support system, and by compulsory procurement. Subsidies on fertilizers have increased over the past decade, as have the number of states that supply electricity free of charge to farmers. This has under-priced ground water and reduced incentives for efficient water management.
 
Opportunities to develop private crop insurance have been blocked, and logistics and trade (including exports) literally strangulated. By blocking markets in forestry and wildlife products these resources are now grossly undervalued and hence over-harvested. The loss of habitat due to socialism is almost irreplaceable.
 
Zoning of agricultural land prevents farmers from receiving the true value of their land, and efficient farmers are prevented from expanding through the imposition of land ceilings. Reservations for small scale industry in agro-processing and restrictions in foreign direct investment in the food supply chain destroy incentives for innovation, destroying huge quantities of perishables.
 
Not happy with strangulating the farmers, the corrupt public distribution system (PDS) creates huge deadweight losses and destroys massive quantities of food. Corrupt politicians use the farm sector (which pays almost no land revenues, and no income tax) to launder black money. Confused environmentalists like Vandana Shiva attack the use of science and technology. By blindly opposing pesticides and biotechnology including GM crops (I’m only referring to those that have been fully tested), agricultural potential is significantly impacted. And not to be outdone, Hindu fanatics – who don’t seem to know their own religion and culture – prevent farmers from using cattle in the most productive manner.
 
With all this, and more, it is a miracle that any food gets produced at all. One thing is sure, that no farmer’s child wants to work on the farm. And our system doesn’t allow well trained agriculture experts to buy and operate large farms, which is how the Western farming sector works.
 
The reform package
Indian agriculture can’t be liberated without first ensuring that no farmer or his family goes hungry. Poverty must be eliminated first, using methods outlined in my May 2009articlein Freedom First. There should be people support, not price support, for those below the poverty line. Once poverty has been eliminated, a range of liberation policies can be introduced.
 
Agricultural subsidies would need to be phased out quickly, and barriers to agricultural trade eliminated by abolishing the ECA, the Agricultural Produce Market Committees Act and thePDSalong with all shades of compulsory procurement. Modest strategic reserves can be procured at market price, and stored privately.
 
Property rights must be absolute, subject only to strongly demonstrated public purpose. Long diluted by Indian socialist governments, these rights must be strengthened so that farmer who own land must have full rights to its use (including when and whom to sell). It is legitimate for a government to acquire land to prevent public roads from bending at the boundary of each farm. But nothing beyond obvious public purpose can be used as ground for land acquisition. Ceilings on land holdings would necessarily have to be abolished, allowing the more efficient farmers to buy out their less efficient neighbours. Similarly, by abolishing land zoning and encouraging strong local governments, small towns will boom, reducing the pressure on large cities.
 
A well-regulated insurance industry would then provide high-quality crop insurance, with futures markets allowing farmers to hedge. Farmers will study the markets carefully for relevant signals and if their crop fails, both crop insurance and, in the worst case, the social minimum (frugal subsistence) will protect them.
 
Agricultural regulation motivated by religious interference would have to be repealed. It should be possible, given the great diversity of religious beliefs in India, for those who do not wish to slaughter cows to sell them to those who will. What is needed are, instead, are laws (with strong enforcement) to prevent cruelty to animals, as part of the justice system.
 
Finally, we should stop worrying about WTO matters. If foolish Western nations want to destroy their taxpayers’ wealth through agricultural subsidies, by all means let them. We should exploit such foolishness by buying their products at throw-away prices. We must, however, to insist on selling our agricultural products to them freely, and insist that foreign aid, which comes tied to insidious objectives, come to an immediate halt.
 
With these policies India will become a powerhouse in all sectors, including in food production. Lack of freedom today has meant that our farmers are one of the least productive in the world. Over half of India’s workers, over 20 crores, are engaged in agriculture but produce only 17% of our GDP. Free India can produce sufficient food with less than 1.5 crore professionally qualified expert farmers.
 
Freedom Team of India
I once again request you to join the Freedom Team of India (http://freedomteam.in/) or at least becoming a Freedom Partner to politically oppose India’s misgovernance.

[1] John Dyson, ‘A Rich Harvest and No Handouts’, Reader’s Digest, January 2008.

[2] A 2003 report by Economic Research Service of the United States Department of Agriculture. [http://ajol.info/index.php/jfecs/article/download/52867/41469]
 
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4 thoughts on “India needs a non-interfering agriculture policy
  1. Vijay Mohan

    Dear Sanjeev,
    I agree to the policy .. just dont understand some of your view points ( vandana Shiva who is fighting for freedom  from patents and huge cost for inputs.. She just teaches and go other places for teaching further ..Farmer is free to choose from the two options…  she preserves the varieties of seeds  evolved for centuries .. and much more ..  our long continued  never ending debate ) ..
    But that does not matter. Policy is excellent.
    Thanks
    Vijay

     
  2. Sanjeev Sabhlok

    Thanks, Vijay.

    I’m not advocating that we reduce the genetic diversity of our crops. Let farmers (and the market) decide what they prefer.

    Re: Vandana Shiva – I’ve not read a lot about her views. So all I’d suggest is that so long as she permits choice, I have no issues with whatever she advocates. I’m just very wary of the demand for subsidies (of all sorts) that eco-fanatics insist on.

    Regards
    Sanjee

     
  3. Sharam Agaya

    I have a problem with firstly you called Vandana Shiva “confused”, and then your rather detached response of “let the market choose.” I don’t have a problem with the concept, but with how removed from the subject on which you purport yourself as an expert.
    Vandana Shiva blames Chemical Agriculture for compounding the plight of the poor because of it’s deleterious effects it has on the people that employ them. It pollutes the ground water, farmers are exposed to deadly toxins, it promotes the idea that nature is to be tamed instead of not worked with, thereby creating monoculutures, as we see in the industrial farms of the mid-west. Smaller low-input mixed cropped organic farms produce 8 – 10 times more food per acre, than industrial systems. America calls itself a food surplus country, but it mostly grows corn and canola, to feed cows (who are supposed to eat grass not grain) and for fuel, and HFCS. 
    It’s a tenant of Private Property that you should not pollute your neighbor, so naturally herbicides and pesticides should be BANNED, as it seeps into the ground and pollutes water that other people drink. Also it detracts from choice because after farmers have been farming with chemicals after a couple of years, they find that the land is BARREN and cant grow anything without buying expensive chemical fertilizers, it can take 3-6 years before yeilds return to it’s former glory. Also the people that manufacture BT and chemicals take patents on seeds. It’s astonishing! Companies were taking out patents on the NEEM tree!!
    there is so much to be said about agriculture, and i’m sure ms. shiva explains better than I… perhaps the reason why she is able to make so many court cases against miners, and give so many speeches across the world. 

     
  4. Sanjeev Sabhlok

    Dear Sharam

    All your facts are unfortunately wrong.

    a) “Smaller low-input mixed cropped organic farms produce 8 – 10 times more food per acre, than industrial systems”.

    This is incorrect. The reverse is true, on average. Please cite ANY international study to prove this. The obvious fact is that farmers are not fools and if they could have got such heavy productivity without chemicals they would never use chemicals.

    b) “America calls itself a food surplus country, but it mostly grows corn and canola, to feed cows (who are supposed to eat grass not grain) and for fuel, and HFCS.”

    This is incorrect. The agricultural production of US is the following. The 1997 data show this:

    Corn $24.4 (value in billion)
    Soybeans $17.7
    Wheat $8.6
    Alfalfa $8.3
    Cotton $6.1
    Hay, other than alfalfa $5.1
    Tobacco $3.0
    Rice $1.7
    Sorghum $1.4
    Barley $.9

    Corn is not all fed to cows, and even if it chooses to do so, what does it matter to anyone else outside USA? That is purely its own business.

    c) “herbicides and pesticides should be BANNED, as it seeps into the ground and pollutes water that other people drink”

    I have referred to regulatory regimes in developed nations (not Third World socialist dens of corruption like India) where pesticides are carefully regulated to avoid all harm to the environment. India’s is a different case. Nothing sensible can work under the current dispensation.

    d) “land is BARREN and cant grow anything without buying expensive chemical fertilizers, it can take 3-6 years before yeilds return to it’s former glory”

    This is incorrect. In the West farmers are HIGHLY EDUCATED and know exactly how to manage the precise chemical consequences of various fertilisers. Nitrogen fixing and other crops are suitably rotated. I suggest the solution is education of Indian farmers.

    e) “Also the people that manufacture BT and chemicals take patents on seeds.”

    Sure. They have spent millions in research. Now they must recover the costs. The seeds are highly productive, hence provide a surplus to farmers sufficient to pay the extra cost of seeds. Many such seeds reduce the need for pesticides and other costs.

    f) “Companies were taking out patents on the NEEM tree!!”

    Patents aren’t granted easily. There are HUGE systems to check authenticity. Please be very clear when you make such statements. Which part of the tree was patented. Please provide full details.

    Regards
    Sanjeev

     
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