As negotiations on the staff-level agreement with the International Monetary Fund (IMF) drag on, consensus is building on the need for wide ranging economic reforms. Former finance minister Miftah Ismail outlined his ‘10 pillar’ reform agenda on Sunday focusing on increasing literacy rates, prioritizing exports, strengthening democratic institutions, and rationalizing the exchange rate. On the other hand, financial analysts are suggesting the need for a reducing unproductive government expenditure to meet IMF conditionalities. Surprisingly, progressive commentators have not outlined their view of economic reforms to meet the current crisis. By discussing the historical development experience of Japan, South Korea and India, this article discusses the central role of agrarian reforms as a prerequisite for broad ranging economic reforms in Pakistan.
Liberal commentators have so far reiterated the doctrinaire view of how neoliberal policies pushed by the IMF will erode the state’s ability to provide an income safety-net for the poor. This ideological position will tantamount to gifting the ruling elite a free hand in rewriting the economic rulebook for the future. While the IMF’s dealing with developing countries has been far from perfect, focusing exclusively on the inequities of global capitalism would blindsight us to the possibility of galvanizing voters on the issue of land reforms as a first step towards social justice and economic development.
According to the World Bank, poverty in Pakistan is predominantly concentrated in rural areas (31%) in comparison to urban areas (12.5%), which corresponds to high incidence of landlessness and a skewed land distribution, particularly in Punjab. As food prices soar and agricultural productivity stagnates, the case for redistributing land from large landowners to tenant farmers and landless workers is compelling. Since 1959, several attempts to address land inequality have been made but given the historic socio-economic status of zamindars and jagirdars, land reform has always been elusive. Consequently, large landlords have consolidated their position as remain major employers in the countryside and have kept rural wages depressed.
Pakistan’s inability to undertake redistributive land reforms is not unique. Post-colonial development experience is replete with examples of how domestic elites use state institutions to protect their productive assets, particularly agricultural land by subverting land reform demands. However, under certain critical conjunctions of history, external actors have (unintentionally) played an important role in creating momentum for redistribution which not only creates the political will, but also the administrative capacity to undertake far reaching economic reforms. The experience of Japan, South Korea, and India can provide useful insights for Pakistan’s land reforms agenda.
After World War II, Japan witnessed a radical redistribution of rural land and political power from agrarian landlords. The reform placed a one-hectare ceiling on ownership of sharecropped land, and a three-hectare limit on owner-cultivated plots and any landholding exceeding these limits was confiscated and sold to landless workers and tenant farmers. Similarly, South Korea, enacted the Agricultural Land Reform Amendment Act (ALRAA) in 1950 which redistributed agricultural land from large Korean and Japanese landlords to tenant farmers. A land ceiling of three hectares was set and fearing appropriation by the state, most landlords sold their land for a modest compensation. This land was then bought by former tenant farmers who undertook productivity enhancing investments on the land.
Thinking about the domination of large landlords at home, readers may ask why the landed elite in Japan and South Korea agreed to land reforms which dispossessed them of their land? The answer in both cases is the presence of an external actor, the US military administration which was solely interested in reducing the power base of the elite and containing the appeal of communism in the countryside. Interestingly, to preserve the global capitalist order, the US military administration oversaw the most radical land reforms in the world. In both countries these land reforms significantly increased agricultural production, stabilized food prices, and set the stage for rapid export-based industrialization, also known as the East Asian economic miracle.
Similarly, external actors, particularly the IMF itself (indirectly) contributed to diminishing the primacy of landed elites in India. Until the 1980s, large landlords, used their political control to protect their social and economic domination in the rural economy. They kept wages depressed and continued to reap the benefits of increased agricultural productivity brought about by the Green Revolution technologies of the 1960s. However, after the economic crisis of 1991, the IMF forced India to undertake economic liberalization which led to the opening of markets, reducing import duties, and exchange rate rationalization. In addition to the ensuing economic growth and poverty alleviation, these reforms also contributed to the weakening of large landlords’ centrality in policymaking and led to the emergence of a new elite – software exporting service sector industries.
The Asian development experience suggests that reducing the economic and political power of landed elites not only leads to a redistribution of productive assets which reduces rural poverty, but also weakens the elite’s ability to manipulate and subvert industrial policy to their advantage. By contrast, in countries where the landed elite continue to control political and economic corridors of power, government intervention often devolves into rent seeking crony capitalism. High and continuing subsidies to the sugar industry in Pakistan underscores this phenomenon.
As the consensus around the need for wide-ranging economic reforms gains momentum, progressive politics in Pakistan should coalesce around the question of asset redistribution, particularly focusing on land reform in the countryside. This may require a shift in emphasis from what the IMF conditionalities are to how best to implement them keeping principles of economic and social justice in mind. For example, the debate should shift from whether tax revenues need to increase to how best to bring large landlords into the tax net. In short, we must present an alternative economic vision aimed at increasing productivity and economic redistribution to meet the challenges posed by the crisis. Ironically, the IMF may have created a unique and unprecedented opportunity for land reforms in Pakistan.