Friday, April 17, 2015

Land Acquisition, Primitive Accumulation and the State

Arindam Banerjee

Land acquisition continues to remain a difficult question for the Indian State and establishment. Growing criticism of the colonial Land Acquisition Act of 1894 amidst intensified resistance in defence of land rights led the UPA II government to enact the Land Acquisition, Rehabilitation and Resettlement Bill (LARR), 2011. The LARR, 2011 brought in requirements of Social Impact Assessment (SIA) and ‘consent of at least eighty per cent of project affected people’; these clauses, along with the definition of ‘public purpose’, have now emerged as contentious under the NDA government, voted to power in May last year.

The LARR, 2011 was already compromising transparency as it waived the requirements of SIA and ‘informed consent’ for projects in the domain of atomic energy, railways, mining, national highways, electricity and a few other areas. The new Land Acquisition Bill proposed by the NDA government, adds to this list defence projects, rural infrastructure, infrastructure and social infrastructure under private-public partnership, affordable housing for poor and industrial corridors. Private schools and hospitals are now defined as ‘public purpose’, and allegedly ‘private hotels’ were also desired to be defined as such, an idea the government dropped eventually. The new bill attempts to increase the share of private investments and acquisitions in projects, which can avoid transparency or accountability.

In the UPA Act, though some additional award for resettlement and rehabilitation was provided for, the basic compensation for land was still based only on the market value of assets in the form of money (with a vague and restricted provision for annuity, Clause 30(j), LARR, 2011). The new bill continues with this erroneous and inadequate idea of compensation.

Any accumulation (and not merely transfer) of property rights at throwaway prices or inadequate compensations qualify in the category of ‘primitive accumulation of capital’ (PAC). The concentration of ‘claims to assets’ in the hands of a particular class (largely the corporate class in the Indian context under neo-liberalism) also serves in ‘freeing up’ the labour of petty producers, which can then be cheaply exploited.
‘The capitalist system presupposes the complete separation of the labourers from all property in the means by which they can realize their labour.’ (Marx, Capital Vol.1 Ch. 26, page 668)

The dispossessed, newly created working class need not necessarily be used in the formal, organized sector but can flock to informal and low-paid activities, which plays its role in cheapening of labour in the economy.  The PAC also need not be a ‘historical process of divorcing the producer from the means of production’ that Marx goes on to say in the above passage but a continuous process on which the capitalist system is contingent and parasitic.

Why market prices are not relevant for compensation?
Before we look at why market prices of land are possibly not a suitable benchmark for determining the compensations for land acquisition, we need to examine a recent argument that agricultural land prices are high in comparison to the world. Chakravorty (2013) estimates the average price of agricultural land in 2010 based on productivity at 2.9 lakhs per acre (the present discounted value of future incomes) and contends that this value is much higher than agricultural land prices in the USA[1]. This then forms the premise that such high market prices can be a starting point for determining the compensation, at say four times the market price.

The reasoning that Indian agricultural land prices are high simply because they surpass the value of their US counterparts is erroneous. Even with far-advanced technology of farming, the US agricultural lands are less productive than that in India. Based on FAO data on total value of agricultural produce and cultivable area, if we calculate the gross value of output per hectare for 2012, the figure comes to $1564 (in international $). The same for US is 2012 is $1509[2]. This should not be surprising as tropical regions are usually richer in bio-diversity, but such lands can be cultivated more than once, unlike temperate lands. That tropical lands were more productive was not only one of the primordial reasons of colonialism in early 16th century, but continued to remain so in the later phases of colonialism.

Rather, with the emergence of an agrarian crisis (though uneven across regions) in rural India, one would expect, that agricultural land has lost its value relative to other assets in the economy. The market price or the capitalized value of expected future incomes will be depressed when the past stream of income from agricultural lands have been arrested or grown at relatively lower rates (more on this later). One has to compare returns in agricultural activities with the return on gold or financial assets in recent times to realize this. For millions of small and marginal farmers, where even simple reproduction of their farms becomes difficult, the net returns are zero or negative.

The market price of land is a reflection of the wilful transaction between a seller and a buyer. This is not so relevant for land acquisition, when the land of an entire village or community is taken over. Typically, a large number of community members do not participate in the land market because they perceive the value of their land to be much higher than what the market is offering. That land acquisitions are usually not from ‘willing’ sellers is evident from the use of ‘eminent domain’ by the State in almost all instances of land acquisition in India currently, and in the past. This is why the LARR, 2011 talks of ‘informed consent’ which in actual implementation is often a legitimate way of forcing sellers to be ‘willing’ through State intervention.

The conventional and prevalent approach to land acquisition actually does not deny this but argues that this can be addressed by fixing the compensation as a multiple of the market price to account for this higher valuation as well as relocation and resettlements costs. This, however, simplifies the issue ignoring some very important dynamic impacts of land takings.

The experience of land acquisition, discussions on compensation and the resistance of people clearly indicate that the value of land is determined by a more complex set of factors than merely current and future returns generated from land. Apart from the role of land in ensuring social status, asset security or insurance against unforeseen circumstances, the value of land is also linked to the question of livelihood that land-owners face and that too within the specific development trajectories that they are subject too. This is why any discussion on the value of land needs to be linked with livelihood destruction or changes within the contemporary development context.

The lack of adequate meaningful alternative livelihood opportunities and the absence of state support in that regard, makes the land owned and cultivated by them an indispensable and non-alienable asset i.e. land often becomes ‘priceless’.  The market land prices rarely capture the psychological and other costs of a transformation of livelihood or falling into unemployment or underemployment. The proliferation of the informal economy in recent times in the country, with only casual and low-paid employment opportunities for the displaced creates a condition, where rural households dependent on their small pieces of land for their livelihood and food security think best to hold on to their tiny plots. Consequently, the reservation price for selling the land is very high and often unconnected with what land markets reflect.

Any meaningful compensation for land takings cannot be in monetary terms but must also be based on principles of ‘assets for assets’ (in a somewhat comparable sense) and alternative livelihood provisioning under state support or regulation. The land acquisition question in India, however, acquires a deeper complexity when we examine it from the lens of the PAC.

Primitive Accumulation of Capital and its ‘Inevitability’:
It is often argued that any capitalist development is necessarily accompanied by a PAC, primarily for two reasons. First, the PAC ensures a re-allocation of assets to more productive uses, which also enhances their value. Secondly, capitalism continually requires a generation of a working class through dispossession of petty producers, which augments labour supply in the economy. It is also increasingly understood that PAC is a continuous process within capitalism rather than merely a pre-history to capitalism.

No PAC is meaningful unless the assets are acquired at relatively low prices and realized at relatively higher prices. This incremental asset value between acquisition and realization is what makes PAC so attractive, and crucial for injecting life into the capitalist system. However, Dobb (1946) points out that PAC cannot be carried out simply by acquiring property by the bourgeoisie using their savings but ‘special circumstances’ are essential. The argument is lucidly presented through the following passage:

The presence of such a special circumstance could, indeed, be a necessity, …even for any considerable accumulation to occur by the process of saving out of income; since without it the efforts of the bourgeoisie to acquire a certain type of property, for example land, would exert an upward pressure on its value, and the subsequent attempt by the bourgeoisie to dispose of this property in order to invest in industry would exert a downward pressure on its value to their own detriment. The attempt to accumulate would accordingly be self-defeating. The outcome would be a decrement, instead of an increment, in the property … this loss in capital-value …nullify the attempt of the bourgeoisie to enrich themselves. [Dobb 1946, Ch. V, page 180]

Such enhancement of asset-values is not possible through normal buying and selling in the markets. Writing in the context of medieval England, Dobb, identified the crisis of feudalism (which depressed land prices) and colonial plunder of the ‘new world’ in the American continent as providing these special conditions for PAC. The trading profits and inflows of silver from Americas allowed the merchant explorers to often gobble up estates from decadent nobles but also the lands of small petty farmers. Later, large-scale Enclosures ensured that land was concentrated in the hands of big farmers. While the absolute value of these lands may have increased to some extent with some investments over time, their relative value increased much faster when they could be possibly exchanged for cheaper labour supplies created by dispossession of petty producers - facilitating capitalist investments.

In contemporary India, the multi-faceted impact of neo-liberal policies on the economy provide for these special circumstances. A combination of the agrarian crisis and stagnation which depressed land-value and allow its accumulation at lower prices and the real estate boom which enhances the land valuation immensely after a change in its use enables the process of PAC. In fact, the increment in asset value in such a case is rapid and momentous and does not happen over decades and centuries as Dobb observed and surmised in the case of early capitalism. Even where land is directly not acquired for real estate, but say for corporate industries, the linkage of the latter with the financial markets ensure that these assets are financialized and yield much higher (though volatile) returns than what they did when used by petty farmers.

Any law that slows down (or raises the cost of) this process of changing property rights and land-use suitably and enhancing asset-values massively is bound to face resistance from the accumulating corporate class. The LARR, 2011 while clearly inadequate with regard to determination of compensations, potentially would slow down the PAC, which gained pace under neo-liberalism, with the SIA requirements and ‘consent’ clauses. The new NDA bill expectedly tries to undermine such provisions.

Any process of land and resource grabbing is essentially violent, often explicitly. Instances of displacing Amerindians from their lands in the 16th century leading to their near-extermination or the burning of the cottages of resistant clansmen in Scottish Highlands in the almost forgotten Clearances of late 18th century to create sheep pastures are examples of such explicit violence. The role of the State controlled by accumulating classes has always been to manage this violent process of PAC in a ‘civilized’ and ‘legitimate’ fashion through enabling laws and regulations. Deporting the poor by branding them as convicts or as indentured labour to the ‘New World’ was one way to manage the outcomes of such uprooting of people; increasing colonial exploitation and tribute appropriation to create more industries and jobs domestically, de-industrializing colonies, was another. But parliamentary deliberations and legislations were no less important.

In the final wave of enclosures between 1760 and 1870 in England, 7 million acres, or roughly one-sixth of the country, was reclassified as private enclosed land from their ‘common property’ status. The 4000 Acts of Parliament which did this, preceded by discussions and representations before committees and tribunals, make this appear as a very democratic and just process of changing property rights. Except that the English parliament and government committees were largely comprised of big land-owners, merchants and aristocrats; the cotters and small farmers who lost their land through these enclosures were kept out of the representative democracy which was yet to grant universal suffrage (Fairlie, 2009). Needless to say, ‘conflict of interest’ was unheard of!

The Indian State today does not have many options of managing the PAC that imperial States had. There is no access to new uninhabited lands where the ‘unwanted surplus population’ can be sent, neither are colonies available for exploitation. Manipulation of the legislative processes by ruling classes thus assumes more significance than ever. Even so, there are greater challenges posed to any such manipulation, when the legislative is based on universal franchise. The accountability of the Parliament to all citizens, including the petty land-owners, forced it to respond to increasing land-struggles in the form of LARR, 2011; even though a far from satisfactory response. Consequently, the government finds it difficult to get its new, corporate-friendly version of the Bill passed in all Houses of the Parliament.

Bypassing the Legislature to promulgate an Ordinance and ‘Proroguing’ the Upper House to re-promulgate the same ordinance later are the blunt and embarrassing tactics that the State resorts to protect the corporate interests. But this simultaneously reduces the credibility of the State. Creating a benign, sanctimonious and class-neutral concept of ‘development’, pitting it against petty land-based producers and branding the latter as anti-development, however remains the best chance of manufacturing a social consensus to hasten land acquisitions and facilitate PAC at the current juncture.

Chakravorty, Sanjoy. 2013.The price of Land: Acquisition, Conflict, Consequence, OUP India
Dobb, Maurice. 1946. Studies in the Development of Capitalism.Routledge and Kegan Paul, London
Government of India, The Land Acquisition, Rehabilitation and Resettlement Bill, 2011
Fairlie, Simon. 2009. A Short History of Enclosure in Britain, The Land, Issue 7 (, accessed on 12th April, 2015)
Marx, Karl. 2010. Capital.  Vol. 1, LeftWord, New Delhi

The author is Assistant Professor at Ambedkar University Delhi

[1]Chakravorty (2013) uses farm output as a proxy for farm income, which can be problematic for a period when costs of cultivation and credit have risen faster in India, under economic reforms, often outpacing the growth in output prices. This has stagnated profitability of agriculture even when the output has grown.
[2]Computed by the author from FAO data on ‘Value of Agricultural Produce’ and ‘total cultivable area’ from the World Bank database for India and USA in 2012. Other years show similar results.

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