Abstract
The importance of distribution of income and structure of credit market as factors responsible for this crisis is brought out more precisely in this chapter, where the results of this model are compared with those of a hypothetical situation involving a more equal distribution of income and a more perfect credit market. It is shown that the two crucial issues—equalisation of income and perfection of the rural credit market—are essentially interconnected. It is therefore not possible to lessen this imperfection without improving the equality-content of distribution of income.
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Notes
- 1.
We have noted in this connection that there are certain administrative problems connected with credit operation in the rural areas which help preserve the monopoly power of the local capitalist farm as the money lender. But, we have also seen that these administrative problems are again fundamentally due to the family farms having a low level of income and small amount of asset (land). Hence any attempt to perfect the rural credit market by focusing attention only on the administrative problems and without any regard to the fundamental cause of these problems is likely to be self-defeating. In India, for example, the attempts to solve the problem by setting up the cooperative banks, unaccompanied by any change in the basic income and asset position of the family farms, have often ended up diverting funds in favour of the capitalist farms. To solve the problem, therefore, it is essential to think in terms of improving the average income (and asset holding) of the family farm. But improving the average income of the family farm will also imply, in a situation of not sufficiently high rate of capital accumulation and in the absence of any significant exogenous change, a reduction in the average income of the capitalist farm (by Preposition 3) and therefore a redistribution of income, at least in the beginning of the process.
References
Bhaduri, A. (1983). The Economic Structure of Backward Agriculture. London: Academic Press.
Stiglitz, J. E. (2015). The Great Divide. New York: W.W. Norton & Company.
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Dasgupta, A.K. (2018). Significance of the Distribution of Income and Structure of Credit Market. In: Income Distribution, Market Imperfections and Capital Accumulation in a Developing Economy. Palgrave Pivot, Singapore. https://doi.org/10.1007/978-981-13-1633-3_5
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DOI: https://doi.org/10.1007/978-981-13-1633-3_5
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