Agriculture and Industrialization

Agriculture can provide resources for industrialization in two ways:

In this second case, the prices of agricultural goods are kept down, whilst the prices of manufactured goods are kept relatively high. Typical ways of keeping domestic food prices down are by using price controls or importing cheap food produced by farmers with higher productivity, or a combination of both. The prices of domestic manufactures can be kept high by giving domestic producers tariff protection from cheaper imports produced by more efficient foreign firms, or allowing domestic monopolies, or a combination of both. However the policy is organized, it has the effect of changing the terms of trade between manufacturing and agriculture: the relative price of agricultural products (and raw materials) falls, whilst the relative price of manufactures rises. This results in a net transfer of farmer income to the industrial sector. If food in the cities stays cheap, it also offers the possibility of workers accepting lower wages than they might otherwise have done. Policies of this type have been implemented in many of the Third World countries which have industrialized. Mexico is a classic example. But this mechanism was also of some significance in the early development of the USA: i.e. tariff policy was used to turn the rural-urban terms of trade against domestic agriculture.

This mechanism obviously involves the State: it’s a matter of public economic policy, and public economic policy tends to be determined by the outcome of conflicts between different factions for control of the State. Any attempt to make national agricultural interests pay for industrialization is not likely to appeal to those interests, but there are obvious differences in terms of the political power available to the agrarian sector in different historical contexts. When the Corn Laws were repealed in Britain, political opposition was led by landowners who formed the upper tier of an agrarian structure which was already capitalist in the classical Marxian sense. In continental Europe, large-scale agrarian capitalism was much less entrenched, and this was even more true in the case of post-revolutionary Russia, or in Mexico, where the number of peasant farmers had been increased by the expropriation of great landed estates (haciendas) in the second half of the 30s. It’s also clear that whether we’re talking about capitalist Germany or Japan, or Bolshevik Russia, the processes of modernization and industrialization were actually brought about under the aegis of the State, rather than by ‘market forces’ operating spontaneously. Large-scale proletarianization of peasants also usually involves the expropriating class or classes being backed up by the coercive power of the state, since peasants are apt to resist expropriation. So we have to bear the political dimension of processes of social change and the role of the State in mind throughout any discussion of agrarian change and capitalist development. Any attempt to separate ‘economics’ from ‘politics’ here is obviously rather artificial.