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Land Reforms, Economic Revival And Decentralization
Dr.Akmal Hussain
Newspaper: THE NEWS
Dated: NOVEMBER 28, 1999

Pakistan is one of the rare countries in the developing world which have embarked upon economic development without an effective land reform. Countries stretching from Egypt in Africa, Turkey in the middle east, India in South Asia and South Korea in the Far East have all undertaken a change in the rural power structure and a major redistribution of land ownership in favour of poor tenants. This initiative in each case has laid the foundation of a process of industrialization. In countries across the developing world, the logic of land reform as a prelude to successful economic development is threefold:

1. Land reform by taking power away from the landed elite lays the basis of a modern political culture characterized by political equality, participation and tolerance of an opposed view point.

2. By providing ownership rights to tenants, land reforms enable an increase in investment and yields per acre of small farms, thereby increasing productivity and accelerating agricultural growth.. Thus Land Reforms provide a larger economic surplus for financing industrialization. Under a system of absentee landlords, agricultural growth in the small farm sector is constrained by the fact that the tenant has neither the incentive nor the ability to increase yields per acre. He lacks the incentive because of the knowledge that half the increase in output will be appropriated by the absentee landlord. He lacks the ability to increase productivity because with half his output being lost to the landlord, the tenant has no significant investable surplus available to him. With the acquisition of ownership rights by the tenant, he acquires both the incentive and ability to invest in increasing productivity. Equally important, as the tenant is liberated from ties of economic and social dependence on the landlord, he is able to acquire free access over the market for inputs such as credit, seed, fertilizers, pesticides and tubewell water

3. In a situation of highly unequal distribution of land ownership, where a few large landlords enjoy a lion's share of total agriculture income, there is typically wasteful luxury consumption by the landed elite, rather than the propensity to save and invest. With land reform, wasteful consumption in agriculture tends to decline and a larger agricultural surplus becomes available for financing industrial growth, the building of infrastructure and the provision of basic services by the government.

In Pakistan large landlords have historically been a major element in the national power structure and have dominated politics in parliament as well as at the local level. Consequently they have successfully resisted an effective land reform so far, by specifying the ceiling on land ownership in terms of individual rather than family holdings.

The imperative of land reform in Pakistan was first felt during the 1950s when agricultural stagnation began to constrain the growth of industry. Agriculture at that time provided not only food grains for the rising urban population but also provided most of the foreign exchange with which the industrial machinery and raw material were imported. Accordingly slow agricultural growth generated both a crisis in the balance of payments as well as food shortages in the urban sector (for example import of food grains as a percentage of total commodity imports increased from 0.5% in 1951-52 to 14.0% in 1959-60). When the Green Revolution technology became available in the late 1960s the ruling elite could breathe a sigh of relief. The new technology made it possible to accelerate agricultural growth through what came to be known as the "Elite Farmer Strategy", which concentrated the new inputs on large farms. In the late 1960s, unlike the pre Green Revolution period, the crucial determinant in yield increase, became not the labour input per acre, in which small farms had been at an advantage, but the application of the seed-water-fertilizer package, over which the larger farmers with their greater financial power had superior access. Thus the Green Revolution had made it possible to accelerate agricultural growth without having to bring about any real change in the rural power structure.

Today after over three decades of the Elite Farmer Strategy the growth of major crops has once again begun to stagnate. For example, the average annual growth rate of wheat output has declined from 7.4% in the 1960s to 2.3% in the 1990s. What is equally significant is the fact that underlying the decline in out put growth is a steady decline in the growth of wheat yields per hectare, from 4.4% in the 1960s to only 1.8% in the 1990s. The sharp decline in the growth rate of output of major crops has been accompanied by a historically unprecedented increase in rural poverty. The percentage of rural population below the poverty line has increased from 18.3% in 1987to 31.2% in 1999.

As the large farms approach the ceiling to their yields per acre in the prevailing conditions of production, future agricultural growth will increasingly have to depend on increasing the yields per acre for the small farm sector, which constitutes a substantial part of the agrarian economy. Farms below 25 acres still constitute over 80% of the total number of farms and over 50% of the total farm area. My recent research study for the ILO on rural employment, has shown that the small farm sector not only has a far greater potential for increasing over all agricultural growth than the large farm sector, but also has a much greater potential for employment creation than the large farm sector. (The employment per acre differential between small and large farms for example, is 3 times higher in the case of rice and 5 times higher in the case of maize). There is also evidence that the small farmers in the few cases where they are able to get credit, have a far better record of credit repayment. Even more significant is the fact that small farmers have demonstrated a higher propensity to save than large farmers. Therefore agricultural growth in future can be accelerated and sustained by replacing the Elite Farmers Strategy of the 1960s with the Small Farmers Strategy in the 21st century. Such a strategy would simultaneously accelerate growth and generate greater employment together with poverty alleviation.

The Small Farmer Strategy would be predicated on a "Land to the Tiller" version of land reforms, thereby eliminating absentee landlordism in large areas of Southern Punjab and Sindh. Land reforms should be followed by providing credit, technical support and marketing institutions, such that small farmers can not only increase the yields per acre for traditional crops such as wheat and rice, but also start producing for export, such high value added products as fruits, vegetables and milk in areas where agro ecological conditions allow them to do so. Such a policy would not only take Pakistan's agricultural growth to a dramatically new trajectory, but would also enable the small farmers to become major contributors to Pakistan's export earnings.

The issue of land reform has now become integrally connected with the issue of democratic governance. If democracy in Pakistan is to become real rather than purely formal, it would be necessary to decentralize state power from the center to the provinces, from the provinces to the districts, and from the districts to the level of village organisations. If such a process of decentralization of power is undertaken without a land reform, then it is likely to intensify the oppression of the poor peasants by landlords. In a democratic dispensation, without a land reform, decentralization would mean democracy at the center and autocracy at the local level.

As Pakistan stands on the threshold of the new millennium, Land Reforms offer the prospect of a liberated peasantry, becoming active subjects of a process of participatory democracy, and a self reliant and dynamic economy. Land Reforms now are necessary not only on grounds of economic efficiency or even equity. They are necessary for an integrated State and the fulfillment of the promise of Pakistani nationhood: Dignity, social justice, and material welfare not just for the elite, but also for the poor peasantry, who constitute the majority of the rural population.

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