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The Modernisation Game

The World Bank is the largest single lender for agriculture. It dominates both the funding and philosophy of rural development. Yet its policy of pushing peasant farmers into the money economy can only increase rural poverty.

The World Bank, FAO, UNDP, and most other ‘development’ agencies propose as a solution to the problem of rural poverty the further extension of agricultural ‘modernisation’: massive transfers of capital, in the form of fertilisers, pesticides, earth-moving equipment, and expensive foreign consultants.

This arsenal of modern inputs and techniques is already enabling many large commercial farms in the Third World to produce beef, grain, vegetables, and flowers for urban and export markets. Now, with the ‘new look’ in agricultural lending inaugurated by the World Bank in 1973, attention has turned to using these inputs on the land of small farmers as well as large ones.

But the core of the rural poverty problem is represented by the landless labourers, and for these the Bank has nothing to offer except the now discredited ‘trickle-down’ theory and a few temporary works projects.

The Bank has found it easiest to find a rationale for assisting those poor who possess ‘some tangible assets, however meagre (a small farm, a cottage industry, or a small-scale commercial operation in the urban center)’, according to the Bank’s publications.

But these are the very people who are, or will become (if the aid programmes are successful), the hirers of labour supplied by the really poor people.

Poverty can be attacked effectively only by programmes which will raise the general level of real wages for the poor. The World Bank, by contrast, has typically exerted its influence to keep wage levels low in order to encourage foreign investment and export sales.

Bank President Robert S. McNamara has said. ‘Throughout the developing world, the rural poor have neither shared adequately in their country’s progress nor have themselves been able to contribute significantly to it. Their destitution has in effect ruled them out of the entire development process.’

McNamara’s rhetoric, however, ignores the historical, and in many cases quite recent, origins of inequality and poverty. The poor are poor not because they have been left behind or ignored by their country’s progress, but because they are the victims of modernisation.

Most have been crowded off the good farmland, or deprived of land altogether, by rich elites and local or foreign agribusiness. Their destitution has not ‘ruled them out’ of the development process; the development process has been the cause of their destitution. Yet the Bank is still determined to transform the agricultural practices of small farmers.

Bank policy statements make it clear that the real aim is integration of peasant land into the commercial sector through the production of a ‘marketable surplus’ of cash crops, whether for the domestic urban market or for export.

‘Rural development,’ says one policy paper, ‘is concerned with the modernisation and monetisation of rural society, and with its transition from traditional isolation to integration with the national economy.’

‘The Bank will continue to support special project authorities, such as those created in limited areas of Africa, as instruments to draw farmers from subsistence to commercial agriculture.’

There are still large areas of the underdeveloped world where the farming population participates in the cash economy only marginally, growing the bulk of their own food needs in small plots.

The income of such people is low in cash terms, but this does not mean that they are deprived of basic necessities, or consider themselves poor. They are not isolated from markets.

They may have to sell some part of their crops in order to pay taxes and rent; otherwise they participate in these markets on a relatively small scale and voluntarily, trading for the goods which they need or fancy while still relying on their own plots to provide the bulk of their diet.

They are not dependent on the market for the near-totality of their sustenance, as ‘modern’ people are.

The purpose of the World Bank is to induce such peoples to supply a larger proportion of their crops to the market. But commercial farming means risks, additional to the natural phenomena which are intrinsic risks of farming anywhere: the risks of market prices which fluctuate according to happenings in other parts of the globe and of prices of seed, fertiliser, and machinery which may be higher than is justified by the increased output.

Small farmers may correctly view cash farming as a gamble in which a few may win but the majority are likely to lose what they have.

The Bank and its member governments, in their eagerness to transform subsistence farmers into surplus producers, often enforce this transformation with authoritarian methods which compel the peasants to change their cultivation and marketing practices on pain of losing their own land.

The Bank’s new interest in the productive potential of the small farmer comes just at the time when large agri-business firms are realising that direct ownership of large tracts of land is expensive and counter-productive; and that their best strategy for the future lies in control over production through contracts with the producer-suppliers.

Supervised smallholder production is a cheaper way to obtain the labour of an entire family, and creates a stratum of land-proud, isolated producers who are likely to be less troublesome politically than a plantation proletariat.

The World Bank finances a number of ‘outgrower’ projects of this type, in which smallholder settlers grow such crops as rubber, palm oil, tea, and coffee under the management of private multi­national concerns such as Brooke Bond, Liebig, Michelin, and Booker McConnell - the same companies which are involved in the purchase, processing, marketing of the commodities grown by the small­holders.

The real beneficiaries of these projects are the trading corporations who obtain their raw materials more cheaply thanks to the Bank’s sponsorship of export agriculture.

It is significant that the only type of land tenure reform which the World Bank actively supports with funds is the transformation of land from customary tenure, where every family has a right to a plot of land, to individual private ownership.

This measure (currently underway in Malawi, previously funded by Bank loans to Rhodesia and the colonial government of Kenya) is rationalised as providing, security’ to the farm owner, facilitating greater capital investment in the land. In reality, however, it destroys the security of the customary tenure arrangements, allowing land to be bought and sold, and alienated to absentee landlords who will certainly want to deliver a surplus to the market.

The colonial governments, from the beginning of their rule, tried to draw peasant agriculturalists into producing commodities for export and for urban markets.

When peasants could not be enticed into the market with the bait of imported consumer goods, less voluntary methods such as forced cultivation and money taxes were imposed.

Now the World Bank is promoting the same process with agricultural credit - which has to be repaid in cash or marketable commodities - as the instrument.

Although the land each smallholder owns is small, collectively the total is significant. Rural development and agricultural credit programmes are the tools with which the Bank can supervise the integration of this land and the people who live on it into the commercial economy.

But they are no solution to the problem of rural poverty, because they represent a wider extension of the very process of ‘modernisation’ which is a major cause of poverty in today’s world.

*Cheryl Payer* is the author of ‘The Debt Trap - the IMF and the Third World’ (Pelican books).

A case study in Mexico

Credit programmes for small farmers are a key element in the World Bank’s new strategy to ‘help the poorest’. Just how this works in practice is illustrated by a project launched seven years ago in the southeast of Mexico.

The Bank and the government agreed to establish marketing boards to ‘commercialise’ the farmers’ products, and new crop varieties and cultivation methods were introduced.

A programme of technical aid was planned which would organise the farmers into ‘credit unions’ - formed on the basis of mutual responsibility for the repayment of debt.

In order to receive credit however the farmers were obliged to shift from a variety of crops for their own consumption to the production of single crops which would then be sold to state-owned enterprise or to private traders.

However the ‘guaranteed prices’ paid by the state-owned enterprise were so low that the small farmers were not even able to cover the costs of their ‘modern’ production.

Private companies could however pay higher prices and still make large profits. The small farmers became so heavily indebted that more than half of them could only escape by contracting all their future produce to agro-industries - a result which was quite acceptable to the project authority.

The project has certainly produced ‘modernisation’ in that it has increased production. But indebtedness and poverty among the small farmers has nevertheless increased.


Ted Davis, of the Bank’s Agricultural and Rural Development Department, asked to reply to Cheryl Payer’s argument, dismissed such criticisms as ‘old hat’, He agreed that the main aim of Bank programmes was to move peasants into the cash economy. ‘The poor are poor because they have low incomes. Cash is important to alleviate poverty,’

Maurice Asseo, of the Caribbean Regional Office, added: ‘A cash economy is an opening to the outside world.’ Better health and better education, he said, ‘can only be achieved through an economy of exchange.’

They did not agree that moving peasants into the cash economy usually moves them into such excessive debt that they. cannot pay for the inputs that are part of World Bank projects.

‘Debt is a mark of growth, said Mr. Davis, ‘Developed world agriculture has always relied on debt.’ Asseo pointed out that it was not up to the World Bank, but to the recipient governments, to ensure that peasants did not fall too deeply into debt. They should so this in particular by setting high enough prices for the peasants’ crops. He agreed however that this often did not happen in countries which had a policy of providing cheap food to the cities.