Debt and industrial agriculture: a sacred union

27 October 2014 by Giulia Simula , Anouk Renaud

Debt and industrial agriculture are deeply interrelated. To understand this connection we need to go back to the vicious cycle of debt. Firstly, by looking at how conditionality attached to International Financial Institutions (IFIs) loans has favoured extractive agriculture and reinforced the dependency of the South. Then by looking at the correlation between the intensive agricultural system and the private indebtedness of both southern and northern peasants.

How did debt influence agricultural policies?

From the colonial system…

The colonial period has restructured the agricultural system in southern countries to provide specific products to the metropoles. [1] During this period, Europe was importing tropical raw materials (spices, sugar, coffee, cotton, rubber etc.) from its colonies as well as grain in order to feed the urban masses thereby facilitating the industrialisation process. Southern countries were thus forced to establish an export-led agricultural system. [2]
After decolonization, newly independent countries tried to intervene into their economies, particularly into agriculture, to reverse the dependency from foreign imports. But soon the interventionist state was accused of inefficiency and the old colonial administration was essentially replaced (and still is) by the debt mechanism that became fundamental to maintain that dependency relationship alive.

…to the debt regime

During the 1960s, Western banks were over flooded with eurodollars, (mostly coming from the Marshall Plan Marshall Plan A programme of economic reconstruction proposed in 1947 by the US State Secretary, George C. Marshall. With a budget of 12.5 billion dollars (more than 80 billion dollars in current terms) composed of donations and long-term loans, the Marshall Plan enabled 16 countries (notably France, the UK, Italy and the Scandinavian countries) to finance their reconstruction after the Second World War. for the reconstruction of Europe after the Second World War) ready to be invested. From 1973, the oil crisis caused a 70% rise in oil prices securing high revenues for oil-producing countries. The capital stem from the sale of oil was secured in Western banks that accumulated even more capital thanks to the so-called petrodollars. This high availability of cash led to a considerable fall in interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. rate and to Western banks encouraging Southern countries to borrow. This constituted the private part of Southern countries’ sovereign debt Sovereign debt Government debts or debts guaranteed by the government. . [3] Moreover, the oil crisis also triggered an economic depression in Europe leaving northern products unsold due to market stagnation and unemployment. For this reason, northern countries started lending money to the South in order to create a market where their products could be sold, with the pretext of favouring the development of southern countries. Essentially, the money lent was to be spent in the creditor’s country: “I lend you 10 million with low interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
on condition that you buy from me 10 million worth of products.” [4] This debt will have then constituted the bilateral part of developing countries’ debt.
From 4-5% in the 1970s, interest rates skyrocketed to 16-18% at the end of the decade mostly due to the unilateral decision of the USA to increase the key interest rates. As the loans were at a floating rate, southern countries suddenly had to reimburse three times the amount of the initial interests. Meanwhile developing countries had to face another detrimental event: the big price-drop of raw materials and agricultural products that they exported. Indeed, their specialisation in exportable goods, led to an abundance on the global market and therefore to a drop of price. In addition, due to a low demand, export to the North decreased. Southern countries that needed liquidity Liquidity The facility with which a financial instrument can be bought or sold without a significant change in price. to reimburse their debt compensated this lack of export with an increase in production that pushed the prices further down. [5]
Throughout the 1980s the South found itself in a vicious circle of indebtedness and unable to reimburse its debts: the debt crisis had started.

As a response to the southern debt crisis IFIs, particularly by the International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
(IMF), granted new loans with conditions attached: better known as Structural Adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

Programs (SAPs). Highly in fashion at the time, these facilitated the establishment of an export-led agriculture and reinforced the relationship of dependence initiated during the colonial past. Corrupted elites in the South have also played a fundamental role in maintaining neo-colonial policies. Governors that opposed this dependency system, were soon overthrown by coups d’état and wars fought with arms provided from the North.

The measures implemented through SAPs were of neoliberal imprint: (liberalisation, privatisation and rolling back the role of the state) Under imposition of the IMF, Southern countries were therefore forced to open up their frontiers and as a result, became unable to compete vis-à-vis northern subsidized and mass-produced goods. Moreover, developing countries were forced through SAPs into an export-led and intensive agriculture in order to channel the revenue into debt repayment. Therefore, SAPs have not only exacerbated the debt crisis, but also caused the loss of many local crops as well as the biodiversity and the potential of food self-sufficiency in the South. Since economic liberalizations are the condition to receive credit from IFIs, the policies required were mainly designed to facilitate northern accumulation and control over the South.

“While represented as a win-win outcome, the reality is that debt is deployed as a technology of control, since it embeds farming in commodity relations that reduce and/or eliminate food self-reliance and local food security.” [6]

How policies of industrial agriculture favour peasant indebtedness both in the North and in the South

In addition to the obligation to prioritise exportable commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. and adopt free trade policies in agriculture, the IFIs have demanded, (within the framework of SAPs), the dismantling of various public subsidies to farmers. Public banks offering subsidized rates to farmers have then been privatized, forcing them to rely on the private sector or microfinance institutions. [7] Furthermore, the industrial agriculture that has been imposed and consolidated throughout SAPs proves to be very greedy of investments, since it involves the use of countless inputs (seeds, pesticides, machinery...) feeding therefore the constant private debt of peasants.

From Chhattisgarh…

The numbers are staggering: as of today we count 284,000 Indian farmer suicides, fell into the mirage of the “green revolution” behind which the spiral of debt was looming. [8] For some of them it was to obtain the genetically modified cotton Bt. But the shift to this type of cotton originally expected to increase seed production has led to many additional costs. Not only have these seeds required twice as much the amount of water, they were also unable to resist local diseases thus requiring the use of pesticides. Finally, like many GMO Genetically Modified Organisms
Living organisms (plant or animal) which have undergone genetic manipulation in order to modify their characteristics, usually to make them resistant to a herbicide or pesticide. In 2000, GMOs were planted over more than 40 million hectares, three quarters of that being soybeans and maize. The main countries involved in this production are the USA, Argentina and Canada. Genetically modified plants are usually produced intensively for cattle fodder for the rich countries. Their existence raises three problems.

- The health problem. Apart from the presence of new genes whose effects are not always known, resistance to a herbicide implies that the producer will be increasing use of the herbicide. GMO products (especially American soybeans) end up gorged with herbicide whose effects on human health are unknown. Furthermore, to incorporate a new gene, it is associated with an antibiotic-resistant gene. Healthy cells are heavily exposed to the herbicide and the whole is cultivated in a solution with this antibiotic so that only the modified cells are conserved.

- The legal problem. GMOs are only being developed on the initiative of big agro-business transnationals like Monsanto, who are after the royalties on related patents. They thrust aggressively forward, forcing their way through legislation that is inadequate to deal with these new issues. Farmers then become dependent on these firms. States protect themselves as best they can, but often go along with the firms, and are completely at a loss when seed thought not to have been tampered with is found to contain GMOs. Thus, genetically modified rape seed was destroyed in the north of France in May 2000 (Advanta Seeds). Genetically modified maize on 2600 ha in the southern French department of Lot et Garonne was not destroyed in June 2000 (Golden Harvest). Taco Bell corn biscuits were withdrawn from distribution in the USA in October 2000 (Aventis). Furthermore, when the European Parliament voted on the recommendation of 12/4/2000, an amendment outlining the producers’ responsibilities was rejected.

- The food problem. GMOs are not needed in the North where there is already a problem of over-production and where a more wholesome, environmentally friendly agriculture needs to be promoted. They are also useless to the South, which cannot afford such expensive seed and the pesticides that go with it, and where it could completely disrupt traditional production. It is clear, as is borne out by the FAO, that hunger in the world is not due to insufficient production.

For more information see Grain’s website :
seeds of biotech giant Monsanto, Bt cotton is sterile which forces farmers to buy them from one year to the other and therefore to borrow.- [9] Microfinance is also part of these allegedly ‘good solutions’ to which farmers have resorted to modernize their agriculture, because creditors’ usury rates and have squeezed them even further.
That being said, the effects of indebtedness are not only limited to farmers in developing countries…far from it!

…to Plouigneau

Since the post-war period, European agricultural policies, first and foremost the CAP, have transformed agriculture by promoting the expansion, concentration and industrialization of farms. So much so that in France, over the last fifty years the number of individual farms has dropped by three quarters while the average size of a single farm has quadrupled over the same period. 78,000 hectares [10] of agricultural land are lost every year and 50% of the land is owned by 10% of farmers. [11]These phenomena of disappearance and accumulation carry with them an increase in the price of land, thus, at present, access to land is demonstrating to be the major obstacle for the small French peasantry, forced into debt. The land problem is combined with the increase of agricultural equipment. In order to cope with a growing production imperative, farmers contract new debts in order to modernise (and to compensate, among other things, the loss of agricultural labour). However, the pressure of debt repayment, combined with the international competition and especially the market grip on both agricultural production and prices of goods pushes farmers to increase their output going toward a more and more intensive type of agriculture and reducing the possibility of getting back to a more sustainable agricultural production system. [12] Changing production mode is even more difficult given that organic farming can hardly compete with intensive agriculture in terms of profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. . Intensive agriculture relies on a vast use of pesticides, sometimes on the use of genetically modified seed as well as on the soil exploitation through monoculture Monoculture When one crop alone is cultivated. Many countries of the South have been induced to specialize in the production of a commodity for export (cotton, coffee, cocoa, groundnuts, tobacco, etc.) to procure hard currency for debt repayments. . On the contrary, organic farming, by respecting more the soil (and the workers) and the environment, insure a smaller output per head and therefore can end up being more expensive. So, if organic farmers cannot count on any public subsidies that allow them to at least cover their costs (the market price being often smaller than the production cost), they cannot economically afford to continue with organic agriculture.

In 2011, the average debt of a French farm was 163,700 euros against 50,000 in 1980. [13] The sad French award of agricultural indebtedness goes to the Breton pig industry with an average farms’ debt rate exceeding 70% (even though this number includes strong disparities among producers). Thus, farmers survive on Common Agricultural Policy’s [14] subsidies (which itself threatens food crops Food crops Crops destined to feed local populations (millet, manioc, etc.), as opposed to cash crops, destined for export (coffee, cocoa, tea, groundnuts, sugar, etc.) in the South flooding their markets with subsidized products) and have the highest suicide rate among all socio-professional categories with 400 cases each year.

Agribusiness and debt: sacred union

Both in the North and the South, the “health” of the agricultural industry rests directly on that of private banks. In fact, private banks give farmers the ability to borrow in order to buy products from agribusinesses. At the same time, the production race that surrounds industrial agriculture provides to the banking sector many business opportunities. At the end of the day, sustainable agriculture and local production do not create profit to big agribusiness companies: it does not boost exports or imports and it does not utilise many inputs. We assist this way, to the foreseeable partnership of industrial agriculture and the debt regime, constantly feeding and reinforcing each other. If debt is an important feature of the industrial and intensive agriculture, it also becomes a powerful tool to ensure that this system remains in place by preventing the emergence of a more organic and ecological agriculture.
The 2008 annual report on global development by the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

illustrated the lack of public investment in the agricultural sector in the southern countries over the past twenty years. It then advocated an increase in government spending in the rural domain that amounted to, for example, in Sub-Saharan Africa, only 4% of GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
. [15]
Not only the financial institutions shows to be hypocritical for requesting extra investments after having required its dismantling; but also the “agriculture for development” which is promoted by the World Bank, pave the way for intensive, competitive, extractive and polluting agriculture, destructive for small farmers and local crops.


[1Renaud DUTERME and Eric DE RUEST, La dette cachée de l’economie - Le scandale planétaire. Le liens qui libèrent, 2014, p.112.

[2Harriet Friedmann (1982) The Political Economy of Food: The Rise and Fall of the Postwar International Food Order. American Journal of Sociology Vol. 88, pp. S248-S286.

[3Damien Millet. La dette du Tiers Monde?


[5Nicolas Sersiron. « L’agriculture industrielle, un dramatique extractivisme » :

[6Philip Mcmichael (2013) p. 687. Value-chain Agriculture and Debt Relations: contradictory outcomes, Third World Quarterly, 34:4, 671-690

[7See the very comprehensive article by Nicolas Sersiron :

[8Ibid, p.18

[10Equivalent to 25 m2 of vegetable garden per second, a football stadium every 5 minutes and a French region every 7 years

[12Renaud DUTERME et Eric DE RUEST. 2014. “La dette cachée de l’économie: Un scadale planétaire” p.116

[14The CAP was established in 1962 and had initially five objectives: to increase the agricultural productivity by promoting technical progress and optimizing producers’ factors; to ensure a fair standard of living for the agricultural community; to stabilize markets; to ensure security of supply; to ensure reasonable prices for consumers. The goal of environmental protection emerged only later.

Anouk Renaud

Militante au CADTM Belgique



35 rue Fabry
4000 - Liège- Belgique

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