Abstract
The main theme is developed within the agricultural sector of a developing economy. Later, it is pointed out how this can be extended to cover the industrial sector as well. In this chapter, the major characteristics of such agriculture are described, stressing particularly the dualism that exists between the family and capitalist farms, the distribution of income between them, and the implication of that distribution for the structure of rural credit market.
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Notes
- 1.
Reserve Bank of India, Quarterly Report of Scheduled Commercial Banks, September to December, 2016.
- 2.
In agriculture, in addition to those two classes, there is also a class of landless agricultural labourers. In India, for example, according to the National Sample Survey (2013), landless agriculture labour households constitute 7.4 per cent of the total agricultural households. To begin with, this landless labour will not be considered in our analysis, but it will be shown later how its existence can be accommodated into the basic model without much change in analysis.
- 3.
The analysis does not change in any essential way if wage is considered to be paid in advance. Then an interest is charged on this wage and therefore, in effect, wage becomes a part of the consumption loan. It can be checked that the conclusions of this chapter are invariant with respect to the nature of wage payment.
- 4.
Nothing is altered in our basic analysis or in the final conclusion if the net income of the family farm is non-positive to start with. It will be demonstrated in Chapter 4 that, under certain plausible conditions, a dualistic agriculture can show an inherent tendency to approach a limiting state with respect to capital accumulation and impoverishment of the family farm. A situation of non-positive net income of the family farm simply means, as will be evident later on, that from the standpoint of analysis, this situation is even simpler to tackle since in this case one can skip certain intermediate steps. We think, however, that it is not enough to analyse only this terminal stage as it may relate to a dualistic agriculture, it is also necessary to understand and explain the historical process by which such an agriculture is actually brought to this terminal stage. That is why we have decided to start with an initial situation which is somewhat away from this terminal stage, being characterised by a positive net income for the family farm. The situation with a non-positive net income of the family farm will then come to be analysed incidentally as a part of the more complete analysis of the evolutionary process.
- 5.
It should be noted that the capitalist farm has control only over the amount of loan to be given to the family farm at a certain rate of interest. Beyond that, it does not have any control on the final allocation of that loan between production and consumption. That allocation is done only by the family farm and in accordance with its own objective function, as has already been mentioned.
- 6.
It is an interesting exercise to prove how starting with an initial distribution of income such as has been considered here, the relatively few capitalist farms will find it most profitable to have themselves spread over the entire sector so that each one can enjoy a monopolistic hedge in its local credit operation.
- 7.
It is crucially important to mention here the finding of a recent Task Force set up by the Government of India on credit-related issues of farmers. “The limited access of small and marginal farmers to institutional credit continues to be matter of concern and that proportion of such farmers is increasing and they form more than four-fifth of the total operational holdings” (Report of the Task Force on credit Related Issues of Farmer, Ministry of Agriculture, Government of India, 2010).
- 8.
Later on, in Chapter 8, we shall discuss briefly the possibility where imperfection of the credit market may also imply a monopsony in the labour market whereby the family farmers may be forced to work only for the local capitalist-cum-money lender.
References
National Council of Applied Economics Resources (NCAER). (2010). Table 6.5.
National Sample Survey, Government of India. (2013). Landless Agricultural Labourers in India.
Report of the Task Force on Credit Related Issues of Farmers, Ministry of Agriculture, Government of India. (2010).
Reserve Bank of India, Quarterly Report of Scheduled Commercial Banks, September to December, 2016.
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Dasgupta, A.K. (2018). Characteristics of the Economy. 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_2
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DOI: https://doi.org/10.1007/978-981-13-1633-3_2
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