I can accept views which do not coincide with my own if they are backed up with some evidence. This post simply ignores virtually all the work that people from all ends of the political spectrum have done. Its sad in more ways than one.

Then there are the ideologically insane. The members of the sect have no interest in either farmers or agriculture. Only in upholding their Gospel. For them, farmers are dying because they have not been reached by free market reforms. If more of them keep dying after they are reached, it’s because the “reforms have not gone far enough.” It hangs a halo of righteousness around wanton ignorance. [...]

As long as politics is alive (not a bad thing) the retreat won’t happen. In the short term, the government can actually pay for insurance (and not force bank to write-off loans) and have insurance industry dictate terms to farmers as what they can plant to mitigate risk instead of uncontrolled year-after-year disaster.

Over the long term, government can play role with better policies such as argricultral reform - allowing bigger industrial farms to lease land from farmers and allowing migratation to towns/cities (the push), thereby providing them with a steady stream of income; insurance reform - allowing foreign players with decades of argricultural insurance product expertise (if anything, it would force local gaints to think about new markets and innovate products); and labour reform so that vast factories, to make widgets - including those unproductive mercedes benzs, can be built that can pull unskilled/semiskilled labour away from unproductive farming year-after-year.

But don’t expect sane ideas from the current govt.

Industrialisation inevitably creates in its wake a ‘proletariat’. This ‘proletariat’ normally leans towards more collectivist solutions to problems (ie it is often strongly anti-market in connection with how to handle declining industries and normally favourable to increasing state regulation). Typically this favours parties of the left. But reforms are driven through (in the main) by parties of the right. In a democracy at the industrial stage the ‘reform’ party finds it hard to get a natural majority, unless….. unless it forms an alliance with rural interests. This is one of the reasons why you never really get a free market in agriculture, since there is an in-built tendency to provide generous support to rural interests. Obviously France would be the archetypal example of this process at work, but the position of the interior states in the US would not appear to be profoundly different.

Of course this ‘most favoured segment’ policy only comes into being following the rationalisation of agriculture into larger scale profitable units, and following the displacement of a large part of the existing agricultural population off to play the role of the ‘proletariat’ which needs counter-balancing.

In the end this is just another explanation of why I think the ‘pure markets’ view of what comes next in Indian agriculture is oversimplifying things a little.

This just reminds me of one small point: not everything here is about ‘markets’. Only fanatics would suggest, I contend, that the simple(ton) uses of market forces will resolve India’s agricultural problem. What is involved, as I say, is a massive and convulsive transition out of agriculture. This has nowhere and never been done by the mere use of market forces. Look at British history in the 19th century, or the US in the 1930s (or read John Steinbeck), or Japanese rice farmers, or the European Union Common Agricultural Policy. It is obvious that market mechanisms have a decisive role to play in deciding how much of what is produced (and as we are seeing in the post, in breaking down bureaucratic-guaranteed market rents), but the transition itself, this needs a lot of planning and regulating, and really the conclusion I am coming to is that this is the biggest reform that India needs, in its mechanisms for achieving consensually grounded rational strategic plans. After that all the rest would be (nearly) plain sailing.

It is obvious that India needs a large dose of de-regulation and free market reform, but it also needs a modern and mature public sphere to make all this work, let’s never forget that.

I mean what the hell do people think goes off ‘on the Hill’ in Washington, what are all those ‘lobbies’ all about. As I said, nowhere and never.

But I also understand that those of us ardent believers in the common sense of letting the market forces “play” are somewhat miffed by such an unorganized frustration, which is what it is. But, really, who are we kidding here. We only have to remind ourselves of what Buchanan’s public choice theory informs us, to contextualize what is happening with the farmers suicides.

Theories, just as free market strategies, need time, to make their effect felt, don’t they? We know that the rate at which this agrarian crisis has been taking people’s lives - the very people who would otherwise be the agents in the same free market enterprise - has far exceeded the speed with which the free market strategies, if any, were able to help it. Can we deny that?

That remark about Benz loan for 4%, I read it as just an illustration of the glaring contrast between his own choices and the choices for the farmers. Not much more need be made out of it.

Here’s the bottomline: When a man or a woman is so passionate about bringing the problems to the fore - and credible, not just a talking head - the same person is usually the right person to parlay the solutions too. But where are they, in practice?

In this present situation, the credibility loss is not Sainath’s but the government’s, for all obvious reasons this post highlighted.

Regards,
Crazyfinger

There are other points one can raise just on the snippet quoted which one does not have the time nor the inclination to go into right here.

As is my custom, if I could just quibble a bit: I would say the crisis isn’t CAUSED by the government policies in question, but it is surely EXACERBATED by them.

The issue surely goes much deeper than Sainath imagines, since even if you had a more efficient financial framework the urban rural interest differential would probably still exist. The problem is there is a risk differential.

If the Indian farmers borrowed more money but did not raise productivity they would simply get into more debt. The interest rate differential is in part a reflection of a productivity differential. Productivity is rising in the urban areas, while it is stagnating or deteriorating in the rural ones.

To improve rural productivity you need more economic value being produced with less people employed. This is the connundrum, and this is the real issue to which there is no easy short term solution.

If the problem was simply the availability of funding, then people like Sainath could undoubtedly help a lot by practicing some sort of well-intentioned ‘carry trade’ and borrowing money on behalf of sponsored farmers, and then recovering the money from them.

Much of the money borrowed in this way would probably be unrecoverable, and at worst would produce more suicides as even more people got into even more debt.

The problem is that India is a country in economic transition and in the transition there are winners and losers. Everyone in India will be much better off - including the descendants of today’s farmers - when this transition has been made, and when the agricultural sector constitutes a proportionately smaller part of GDP, and when the proportion of the population who earn their living from agriculture is greatly reduced. The human dimension of the problem is of course much greater because of the extreme economic fragility of many of those involved, but the central issue is in principle not greatly different from the reductions in the mining workforce in Europe or in the car sector in the United States in the last quarter of the twentieth century.

Of course, the day all these farmers start having substantially less children, then that day this problem will start to ease off in and of itself, since then the cheaper money which may become available from more efficient financial markets could then be used to get into more capital intensive agriculture to make up for the missing sons no longer able to work.