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close this bookCERES No. 068 (Vol. 12, No. 2) March-April 1979. The Case for National Planning for Disasters (Food and Agriculture Organization of the United Nations)
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Open this folder and view contentsFacts and figures
View the documentThe old barrier is disappearing...
View the documentThe counter-reform bloc
View the documentIncentives and mechanisms
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The counter-reform bloc

Foreign control over farmland is on the rise, often abetted by local monopolists

by Ernest Feder

To examine how transnational agribusiness compromises land reform-a wording borrowed from the 1976 Sixth Report on Progress in Land Reform -the simplest would be to look up the record. An ideal case would read as follows.

In Miseria, in Latin Africa, population 12.3 million, of which 92 percent rural, GNP $367 million, external public and private debt $3.3 thousand million, (ex) Admiral Montague Schwefel, formerly of the intelligence service, is director of the transnational General Fodsubito S.A., headquartered in Luxenstein, doing business in soybeans, wheat, rice, sunflower, tea, coffee, palm oil, bananas, pineapple, spinach, citrus, lime oil, meat, hides, electric motors, railway cars, microscopes, paints and newspapers. The concern has 125 subsidiaries in 124 countries and an annual sales volume of $6.4 thousand million. Without previous announcement, (ex) Admiral Schwefel enters the office of Miseria's president, Colonel Emilio Zapatescu, one rainy morning at 7.15.

"Colonel, see here. Parliament is discussing 'Amendments to the 1898 law on farm tenancy' and it has something there on expropriation - unutilized lands in farms over 4 500 ha, with compensation at current market values, as fixed by the owners, and (I really can't believe it) distributing that to peasants with a down payment of $250/ha. My company does not like that! Either you withdraw this bill..."

"But your Excellency, we only thought ..."

"Emilio, no more discussion, please. Either you withdraw this here bill by 9 or 1 telex my government to collect your 3.3 thousand million debt already overdue and I pick up my subsidiary and put it in Pooribia, right to the south of you." (Exit (ex) Admiral Schwefel.)

There is a simple reason why this approach would not get us very far. There may in fact be a number of instances where such firms interfere with local politics and use "big guns," metaphorically speaking, to sabotage land reform legislation and institutes.

And we are bound to accept that all such firms, no matter from what capitalist country they hail, simply do not like and are afraid of land reforms. But overt acts? Leaked to the press?

I know of only one case reported in The Guardian (3 December 1974) where the World Bank, staunch supporter and partner of transnational agribusiness corporations, put pressure on the Tanzanian Government, so it was alleged, to modify its ujamaa village programme to make it consistent with private entrepreneurship, if Tanzania wanted to obtain "development" loans; and the Bank promptly put out a denial. Agribusiness does not need to speak out or act overtly against land reforms. It "compromises" reforms in the Third World through an unsophisticated process- the ultra-rapid expansion of transnational monopoly capital - which goes on silently, day-in day-out, year after year. Its counter-reform action is inherent in the way transnational agribusiness firms operate.

How do the leaders of the capitalist system look at the redistribution of wealth, income and power, which is the fundamental purpose of reform? What are the economic and noneconomic resources and techniques employed to impede such a redistribution?

Reduces the risks to zero

The capitalist system is not always against "land reform" because it defines it in different ways. It tolerates, it even sponsors pilot project-type expropriations of medium sized landholdings cum redistribution to a handful of peasants. Or some sort of collectives, called optimistically "new forms of land tenure," which are really peasant groupings obtaining group credits because this reduces the banks' risks to almost zero. Or minor colonization schemes that harm no one when they involve virgin lands in which no sensible capitalist has as yet an economic or political interest. Thus we are confronted with the following real issue: what are the limits of wealth and income distribution schemes that the system will tolerate in developing countries?

The case has been put forward admirably by the World Bank, one of the pillars of the capitalist system, capital's principal banker and the system's foremost spokesman. The Bank also publishes important documents about land reform and the rural poor. Their general views have been outlined in the academic Redistribution with Growth, a collection of political essays edited by one of the Bank's directors. The authors have hailed their book as a "breakthrough" in development strategy, and so it must throw light on the question we are trying to answer.

However, the book is a breakthrough into absurdity. Its basic idea is simple enough. A modest redistribution of income to the poor does no harm to growth. Everyone knows that there can be no income redistribution without a redistribution of wealth. But this does not discourage the authors. They simply do not like redistribution of wealth-a socialist measure-so they speak about redistributing an increment in national wealth. But how? I should like to see it done, for example, in the case of a new factory, owned 49 percent by a transnational agribusiness corporation. The authors have no recipe. One solution would be for the poor to receive a small portion of the installation in shares or bonds-but no more than 2 percent which is the limit. If it were more, so the authors claim, the rich would not like it. A little thought quickly reveals that this scheme would favour the rich. The poor urgently need food, clothing, housing, medical care. They would have to sell their bonds or shares immediately at emergency discount prices through their brokers! Good for the brokers. The poor would gain a bit once and then relapse into poverty, and the rich would permanently stay richer. All I have done here is to follow the authors' logic a little more daringly.

So we turn to income distribution- one does not know how, since the wealth distribution scheme is inoperative. Again, the maximum must be 2 percent of the increment in national income. The proposition is evidently tied to "prosperity" when national income rises. There will be nothing to distribute if it stagnates or declines- precisely when the poor suffer most- unless the poor now re-redistribute 2 percent of the decline in income to the rich to compensate them for previous sacrifices. And if income increases really at a normal rate (say, 3 percent), the partitioning of 2 percent of this increment among millions of poor results in atomized benefits totally invisible to the latter.

Not an academic toy

Our answer is therefore that the system's margin of tolerance is obviously extremely narrow. In theory, the margin is "up to 2 percent," putting it plastically; in practice, it is near zero, because the theory is absurd. Redistribution with Growth turns out to be a hoax.

The new breakthrough strategy is not merely an academic toy. Its importance is enormous because it is at the base of McNamara's grandiose plan to " assist " 700 million rural poor with World Bank credit (Nairobi, 1973). Promptly, land reform plays an ephemeral role in the plan, as expected. In his 29-page speech, McNamara devoted 10 lines, plus a few ornamental comments, to this delicate subject as "involving reasonable land ceilings, just compensation, sensible tenancy security and adequate incentives for land consolidation" (not: giving land to the peasants on a large scale), and one need not be an expert to recognize that the speaker did not think of land reform when he mentioned the concept. In this respect, the World Bank is entirely consistent and simply does not "assist" land reforms anywhere, notwithstanding all the books it publishes about the subject. The key technique to redistributing income in developing countries now lies with agricultural credit. The thought is striking. More credit can be useful to enhance the status of the peasants. But when we consider the conditions prevailing in developing agricultures where every trick is used to deprive the peasants of their earnings and still more of any increased earnings; the impossibility of providing peasants permanently with a flow of credit funds, given the limited resources that the capitalist banking system, including the World Bank, is willing to devote to the scheme; and the insistence of the World Bank of wishing to work their scheme through existing institutions, all notoriously bent on giving the highest priority to their rich customers, the simplistic, if not hypocritical, character of the plan becomes apparent. What is more: there is now conclusive evidence that credit schemes, such as the World Bank's, are considerably more harmful than beneficial to the peasants.

The tip of the iceberg

Let us take it for granted that agribusiness really compromises land reform. How does it marshal! the power? The answer lies in the combination of financial resources, institutional and organizational integration, omnipresence at ail levels and political backing at home and abroad.

It is well known that few firms transact most food sales worldwide. Some one hundred concerns, each with annual sales over $1 thousand million in 1974, would now have a conservatively estimated total sales volume of some $300 thousand million. This statistic reflects the tip of the iceberg. I must insist again that, to appreciate the full power of agribusiness, one cannot see it as the summation of food firms. Rather it is a conglomerate of two groups of giant firms and agencies operating worldwide:

A. Transnational agribusiness firms engaged in production or distribution (or both) of agricultural food and non-food products; those engaged in the production (or local assembly) and distribution of agricultural inputs; and those engaged in supplying services.

No one has ever estimated the aggregate sales of products and services related to agriculture of all these firms, but the sum total must be truly fantastic, even though firms may be engaged simultaneously in two or all activities mentioned.

B. Private and public, national, bilateral or international agencies which sponsor or give financial and other support to overseas ventures of firms in "A", directly or indirectly. This includes private (super) agencies for investment planning and fund-raising; private banks; bilateral and international financial and technical assistance agencies; and many others.

The combined resources of these numerous agencies are also enormous. Their main function is to organize or improve the economic and institutional infra- and superstructure in the Third World to facilitate old and new overseas ventures of the firms in group "A." Their resources add to the weight that the firms in "A" can throw around in the Third World. What few realize is that "A" and "B" work together almost conspiratorially, so that the full weight of international monopoly capital and of the institutional structure which supports it is behind worldwide counter-reform.

To illustrate. When, in the 1960s, the demand for meat boomed in the industrial countries, private capital streamed into Latin America and Africa to expand cheap meat production rapidly. To support private investments, the World Bank and the Inter-American Development Bank (IDB) alone invested in 1971-77 an estimated $1 thousand million in livestock development projects in Latin America; the recipients contributed another $1 thousand million-a total of over $2 thousand million of public funds, all for the benefit of the rich countries. Latin America and Africa did not benefit: officially, the Banks' projects should improve the local diet, but meat consumption declines.

Destroys local research

Another example more illustrative of the coordination among private capital and public agencies. The previously mentioned livestock investments are activated mainly in tropical regions. Since 1965, the US boosted its research on tropical beef cattle pro-auction in the US significantly. In 1971, the establishment of the Consultative Group on International Agricultural Research (CGIAR), with financial backing from major industrial countries and private foundations, and with the cooperation of international agencies, provided for centralized financing and control of 11 major International Research Centres, of which three are for livestock. The way this network operates practically guarantees that Centre-research must be of exclusive benefit to transnational agribusiness corporations. The Centres monopolize, together with US research stations, practically all modern research knowledge and data. Under the circumstances, Third World countries are unable to carry out independent research on problems they might consider to have greater priority. As a matter of fact, CGIAR destroys local research in agriculture.

The real control by agribusiness, i.e. both private firms of group "A" and agencies in group "B." stems from the recent huge transfers of capital and technology. (Capital means here fixed and operating capital expenditures.) Here we encounter a real difficulty. It is nearly impossible to estimate, much less calculate, the aggregate volume of these transfers that are made at all levels in agriculture and in agriculture-related industries and services for two major reasons: absence of statistics (e.g., on investments in farmland or the volume of foreign operating funds), and the many devious ways by which they are manipulated (e.g., the use of strawmen to hide real -foreign-ownership). We obtain a rough idea when we examine the development assistance of the international agencies because they are the barometers of the flux of international monopoly capital. Development assistance, both financial and technical, is now explicitly consecrated to enhancing the business volume of agribusiness firms (group "A"), and it is logical that the resources of the agencies flow in the same direction as private monopoly capital.

For example, in Latin America, in only seven years, the World Bank and IDB "invested" nearly $3.8 thousand million for the benefit of agribusiness, but this figure has to be doubled to include national counterpart funds, many other agencies also spent funds there, the figure should be raised, perhaps doubled. I estimate that approximately $15 thousand million of public, including counterpart, moneys flowed into Latin American agriculture alone. If we assume that these funds represent about one half of all private and public investments going into agriculture (which is a very cautious approach), we arrive at a total of some $30 thousand million for only 1971-77-not including operating capital or technology transfers except those financed out of resources provided by the development agencies. (The Asian Development Bank spent nearly $1 thousand million for Asian agriculture during the same period which, together with the World Bank loans, represents a total of about $4.2 thousand million for the two agencies alone.)

True, the public funds tend to be concentrated, like private investments, in a few "privileged" countries. But foreign public and private moneys for local agriculture are always significant when compared to local private investments and public resources, and because they are made in the crucial and most profitable agricultural sectors, on the best available soils.

One conclusion from everything we have said so far jumps to the eye. To accuse agribusiness of compromising land reforms in poor countries is much too narrow a view. What compromises them is the ultra-rapid expansion of capitalism into all nooks and corners of developing agricultures, a process that destroys the remnants of the peasant sectors and even the traditional latifundio sectors as the latter become the appendix of international agribusiness monopoly capital. Let us comment briefly on the processes that lead to the destruction of the peasantry and its implications for reform.

The matter should be examined at three levels: local politics; agriculture and related industries and services; and demography.

Sabotaging aid

The presence of agribusiness reduces the margin within which developing governments can plan and execute social programmes (reforms, employment, food distribution, adequate minimum wages, etc., all of which would benefit the proletariat) to practically zero. Many governments are not inclined but may feel obliged to undertake such programmes to forestall popular discontent, whose potential increases obligatorily with capitalist expansion. The presence of agribusiness makes such action highly unlikely: either firms or agencies threaten to withdraw their ventures and "development assistance" or they sabotage new investments and "aid." Or the status of agribusiness is enhanced through arms sales, which takes care of popular discontent. At the same time? foreign enterprises build up a strong local clientele, including the bureaucracy, which supports the overseas ventures of agribusiness in return for the monetary rewards it receives from cooperating with them. Thus, international monopoly capital simply destroys any bargaining power that local governments might have had in favour of socially oriented programmes, including land reforms.

Equally important, if not more so, is the boost that agribusiness gives the local rural power structure. This occurs in three ways. First, there are the modernizing land monopolists- those who take advantage of the foreign private and public capital and technology transfers and become fully integrated (vertically) in the agribusiness system. They are bound to see in agribusiness the best economic and political ally they ever had-considerably better than local government because of its financial might. The "traditional" land monopolists benefit from the greater security of their tenure, as land reforms now have become a remote possibility, and from rising land and products prices. And there is agribusiness itself, a large, even huge landowner and tenant. This makes its political and economic interests and ambitions coincide with those of the other two groups. Even if the economic interests do not always coincide completely, their political interests must be the same: to maintain land monopolization and keep the peasants off the land.

Foreign control over farmland - the countries' best areas in terms of soil, water, climate and location - through ownership, rentals, the production contract system or purchase of crops in advance of harvest and including the control exercised by development agencies through their loan and technical assistance projects, is now so widespread that a significant proportion of the agricultural activities in the developing countries is managed directly by agribusiness, and this control is increasing rapidly. This process is accompanied by a dramatic increase in ownership concentration-the inevitable outcome of capitalist expansion. Here the modernization of the cattle sector, which the World Bank, IDB and other agencies have helped finance generously in recent years, as we mentioned earlier, plays a highly significant role, particularly in Latin America, because the livestock sector has been and continues to be the basis of the worldwide latifundio sector in many countries. Simultaneously, at the industrial and service level, a similar concentration takes place as agribusiness displaces local firms. The two concentration processes reinforce each other mutually. In sum total, the local and international counter-reform block is so potent that I do not see how it can be broken in the foreseeable future.

Tend to disappear

This, from the peasants' point of view, hopeless condition is further reinforced by-coincidental or intentional-demographic changes, which the activities of agribusiness bring about in the Third World. In the shorter run, the modernization of developing agricultures that the enormous capital and technology transfers seek to bring about and which consists in replacing manpower by capital, in combination with the rapid process of land concentration, eliminates both smallholders and rural wage labour in a relentless process. Not only are jobs lost by modernization in the aggregate - contrary to what the ´'green revolutionaries" maintain - but labour-intensive crop systems also tend to disappear by and by. In Mexico, for example, which is a model of capitalist growth under conditions of underdevelopment, the peasants' numbers were reduced by nearly 50 percent and wage labour by nearly 10 percent in only 10 years ( 1960-70). How otherwise could one account for the mushroom growth of small and large cities? The capitalist system simply cannot resolve this problem and does not seriously wish to resolve it- a reason why the schemes to "assist the rural poor" now strongly supported by the World Bank and other agencies cannot be taken seriously.

In the longer run, we are facing the depopulation of the countryside in the developing countries - as unreal as this may appear to be, given the present-day situation still. In a depopulated countryside, what would be the need for land reform? The problem simply would have taken care of itself. This probably does not escape agribusiness.