4 - Land and the supply of raw materials

Summary

The theories of under-development which emphasize the shortage of factors of production as the primary explanation generally follow the traditional grouping of factors of production under three heads: land, labour and capital. A further factor is generally added to account for the specific character of modern capitalism, viz., ‘organization’ (as in Marshall's Principles) or ‘entrepreneurship’ (as in Schumpeter's theory of economic development). In the present chapter we are primarily concerned with the factor ‘land’: more specifically, we are concerned with the way in which peasant agriculture in India responded (or failed to respond) to the demands for raw materials (and less directly, food) generated by the limited development of modern industry in India up to 1939. One must here guard against two different kinds of fallacies: there is the fallacy which regards the illiterate peasant as essentially irrational in his responses to economic opportunities. The fallacy here is caused by deductive reasoning on faulty premises; illiterate peasants in under-developed countries have traditional value systems and are trapped in pre-capitalist social structures. Hence they are incapable of recognizing the most profitable course of action when faced with new economic opportunities or, even if they recognize the most profitable course, their social organization prevents them from following it. Empirical work has disposed of the major premises of such a syllogism. The peasants' value systems are rarely so irrational that they are incapable of smelling good opportunities of making money.