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Debt and industrial agriculture: a sacred union
by Giulia Simula , Anouk Renaud
27 October 2014

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 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 rate and to Western banks encouraging Southern countries to borrow. This constituted the private part of Southern countries’ sovereign debt. [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 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 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), granted new loans with conditions attached: better known as Structural Adjustment 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 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 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. 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. 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 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 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. [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.

Footnotes :

[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.

Giulia Simula
Anouk Renaud

Militante au CADTM Belgique