The market trap

If agricultural wealth cannot be put on the free market, can we at least market-orient the inputs to agriculture — seeds, fertiliser, pesticides, water and electricity? To anyone sitting in Washington, it is self-evident that not only should this be done, it must be done. Getting market value for whatever is bought or sold is, after all, what the free market is all about. But if this had been our policy, the Green Revolution would have been limited to the most well-endowed agricultural regions of the country — Punjab in the north and Tamil Nadu in the south. There, in fact, is where the Green Revolution began — and was bitterly criticised for favouring the blessed at the expense of the less blessed. If the argument is not heard much now, the reason surely is that by subsidising and promoting the Green Revolution inputs, and ensuring a minimum support price for output, the Green Revolution has spread right across the benighted cow-belt and even overtaken our homegrown Stalingrad — the West Bengalof Comrade Jyoti Basu. Leave inputs entirely to market rates and the Green Revolution would collapse in much of where it has taken four decades to spread.

Where input prices are administered, output prices also have to be administered. Those who think the present surplus of wheat in FCI godowns is the consequence of state intervention in the market, might ask themselves whether they would prefer foodgrains output to fall below population growth in order to ensure mushrooms on the tables of the glitterati? If all agricultural goods were thrown on the free market, millions of farmers would go under if they make the least error in judging market trends. See John Steinbeck’s òf40óGrapes of Wrath. It is about the United States in the decade after Vajpayee was born. State subsidised agriculture is not, by the way, some Indian disease spread by a mad cow called Nehru. The first rule of economics is that the freer the market for manufactured goods, the more heavily subsidised is the agricultural economy. Thus, WTO’s Aggregate Measure of Support for Agriculture lists US agriculture as the most heavily subsidised in the world and Indian agriculture as among the leastsubsidised.

The European Union is, in essence, a deal between the member countries that a common market will be provided for manufactured goods in exchange for the more industrialised subsidising agriculture in the less industrialised through the Common Agriculture Policy. I recall as a young diplomat in Brussels hearing the legendary Belgian foreign minister, Paul-Henri Spaak, tell the tale of how he clinched the negotiations over the Treaty of Rome which in 1957 set up the European Common Market. As negotiations on the final day were being derailed with an argument among Agriculture Ministers, Spaak said he banged his gavel on the table and announced, "Gentlemen, the press are waiting outside. I shall go out and tell them that European unity is not possible because of the price of bananas!"

The biggest rows in US-EU trade have been over agriculture — grain mountains and milk rivers and wine lakes. The WTO has been negotiated to bring down subsidies on agriculture in Japan from 500 per cent and in South Korea from 700 per cent to levels that will certainly not bring in a free market in agricultural produce (such as the God-awful glutinuous rice the Japs eat) but to moderate what was till hitherto the internationally unregulated spiralling of agricultural subsidies in the most developed parts of the world. And here our "liberalisers" are setting up a cacophony over how we must not only eliminate our subsidies to the kisan but also leave to the mercies of the market everything he produces.

Economics is such a dismal science that it is often difficult to engage even the interested reader in its finer nuances. So, let me close with a literary example. Victor Hugo’s òf40óLes Miserables is set in 1832, half a century after the onset of the Industrial Revolution in France, and Charles Dickens’ òf40óOliver Twist ("Please, Sir, may I have some more?") is set in Victorian England a whole century after James Watt watched a tea-kettle boil and started the Industrial Revolution. Both are stories of what happened in the industrialised West when armies of the poor were driven off the land by the Enclosure Act in Britain and similar legislation in France. That is the horror which is already visiting us in our megapolises but which would be exponentially multiplied if land and its produce were thrown upon the market. Is that what we want?

The first rule of economics is that the freer the market for manufactured goods, the more heavily subsidised is the agricultural economy