History of Land History of Land Concentration and ReformConcentration and Reform

Workshop on Land RedistributionWorkshop on Land RedistributionJuly 9-14, 2007July 9-14, 2007

SADC/World Bank InstituteSADC/World Bank Institute

Hans P. Binswanger-Mkhize Hans P. Binswanger-Mkhize And Klaus DeiningerAnd Klaus Deininger

IntroductionIntroduction

Family farms that rely mostly on family labor are Family farms that rely mostly on family labor are usually more efficient than farms operated primarily usually more efficient than farms operated primarily with hired laborwith hired labor– In terms of profits per hectare owned or operated, not yields In terms of profits per hectare owned or operated, not yields

on land actually cultivatedon land actually cultivated

Why are there many countries with very large farms?Why are there many countries with very large farms?– Why do land markets not redistribute land to smaller, more Why do land markets not redistribute land to smaller, more

efficient family farms?efficient family farms?– Why is land reform necessary to allocate land to the Why is land reform necessary to allocate land to the

landless?landless?

OutlineOutline

The emergence of property rights in landThe emergence of property rights in land

Aggregating land and extracting tribute Aggregating land and extracting tribute and rentand rent

Success and failure in land reformSuccess and failure in land reform

Credit, policy distortions, and land sales Credit, policy distortions, and land sales marketsmarkets

Policy implications for redistributive land Policy implications for redistributive land reformreform

The emergence of property The emergence of property rights in landrights in land

Low population densityLow population density– Members of self –identified groups have a Members of self –identified groups have a

general right to gather, hunt and later cultivate in general right to gather, hunt and later cultivate in a specific territorya specific territory

– Labor is the scarce factor of production, not landLabor is the scarce factor of production, not land– Shifting cultivation restores soil fertilityShifting cultivation restores soil fertility– No rights are required to specific parcels of land No rights are required to specific parcels of land

to provide investment incentives into landto provide investment incentives into land

With rising population density and markets With rising population density and markets

Land gets scarcerLand gets scarcer– Fallow periods decline until there is continuous cultivationFallow periods decline until there is continuous cultivation– The plow, manure, fertilizer and land investments become The plow, manure, fertilizer and land investments become

necessarynecessary

Rights emerge early on to use specific parcels of land, Rights emerge early on to use specific parcels of land, and pass them to one’s heirsand pass them to one’s heirs– Rights to common pastures and woodlands survive for a long Rights to common pastures and woodlands survive for a long

timetime

Land rental markets emerge, followed by sales within Land rental markets emerge, followed by sales within the communitythe communityWhen sales to outsiders become unrestricted, the When sales to outsiders become unrestricted, the transition to private property is completetransition to private property is complete– Land can only then becomes a major form of collateral Land can only then becomes a major form of collateral

But usually there was a ruling class of But usually there was a ruling class of chiefs or landlords chiefs or landlords

Extracted tribute, taxes, and/or rent, in labor, Extracted tribute, taxes, and/or rent, in labor, kind or cashkind or cash– They rarely owned the land and could not sell itThey rarely owned the land and could not sell it– These rights were often granted by a higher lord or These rights were often granted by a higher lord or

kingking– We will call their rights over people and/or land a We will call their rights over people and/or land a

“manorial estate”“manorial estate”

Peasants’ rights to their land may be unaffectedPeasants’ rights to their land may be unaffected

How could the peasants be made to pay to or How could the peasants be made to pay to or work for their overlords?work for their overlords?

CoercionCoercion

Whenever there was a lot of land that could be Whenever there was a lot of land that could be used for shifting cultivation people had to be made used for shifting cultivation people had to be made un-free to stay on the manorial estateun-free to stay on the manorial estate– SlaverySlavery

Capture slavery – mainly in subsistence systemsCapture slavery – mainly in subsistence systemsMerchant slavery – only in market systemsMerchant slavery – only in market systems

– SerfdomSerfdomSometimes survived into market systemsSometimes survived into market systems

– Indentured labor contractsIndentured labor contractsWhere there was an abundant labor reserve to source workersWhere there was an abundant labor reserve to source workers

– Dept peonageDept peonageSurvives even when land becomes scarce Survives even when land becomes scarce

Economic distortionsEconomic distortions

Reduce land available to peasantsReduce land available to peasants– By allocating titles to “unoccupied” landBy allocating titles to “unoccupied” land

Differential taxation on free peasantsDifferential taxation on free peasants– Head, hut or poll taxes in cash or in kind, laborHead, hut or poll taxes in cash or in kind, labor

Restricting market accessRestricting market access– Prohibitions, monopoly marketing, concessionProhibitions, monopoly marketing, concession

Confining infrastructure and services to the Confining infrastructure and services to the farms of the rulers, and/or subsidizing themfarms of the rulers, and/or subsidizing them

COUNTRY LAND MARKET INTERVENTIONS TAXES AND INTERVENTIONS IN LABOR AND OUTPUT MARKETS

EUROPE: Prussia

Land grants; from 13th centuryMonopolies on milling and alcoholRestrictions on labor mobility; 1530Land reform legislations; 1750-1850

Russia Land grants; from 14th centuryService tenure; 1565

Restrictions on peasant mobility: - Exit fees; 1400/50 - Forbidden years; 1588 - Enserfment; 1597 - Tradability of serfs; 1661Home farm exempt from taxation; 1580Debt peonage; 1597Monopoly on commerce; until 1830

S. AMERICA:Chile Land grants (mercedes de tierra); 16th century

Encomienda; 16th centuryLabor services (mita); 17th centuryImport duties on beef; 1890Subsidies to mechanization; 1950-60

Mexico Resettlement of Indians; 1540Expropriation of communal lands; 1850

Encomienda; 1490Tribute exemption for hacienda workers; 17th c.Debt peonage; 1790Return of debtors to haciendas; 1843Vagrancy laws 1877

Viceroyality of Peru

Land grants; 1540Resettlement of Indians (congregaciones); 1570Titling and expropriation of Indian land; 17th century

Encomienda; 1530Mita: Exemption for hacienda workers; 1550Slavery of Africans; 1580

ASIA: India (North)

Land grants from 1st century Hacienda system; 4th century BCCorvee labor; from 2nd century

China (South)

Limitations on peasant mobility; ca 500Tax exemption for slaves; ca 500Gentry exemption from taxes & labor services; ca 1400

Japan Exclusive land rights to developed wasteland; 723

Tribute exemption for cleared and temple land; 700

Java and Sumatra

Land grants to companies; 1870 Indentured labor; 19th centuryCultivation System; 19th century

Philippines Land grants to monastic orders; 16th century

Encomienda RepartimientoTax exemption for hacienda workers; 16th century

Sri Lanka Land appropriation; 1840 Plantations tax exempt; 1818Indentured labor; 19th century

Subsaharan AfricaKenya Land concessions to Europeans; ca 1900

No African land purchases outside reserves; 1926

Hut and poll taxes; from 1905Labor Passes; 1908Squatter laws; 1918, 1926 and 1939Restrictions on Africans' market access; from 1930: - Dual price system for maize - Quarantine and force destocking for livestock - Monopoly marketing associations - Prohibition of African export crop cultivationSubsidies to mechanization; 1940s

Sokotho Caliphate

Land grants to settlers; 1804 Slavery; 19th century

Malawi Land allotments to Europeans; 1894 Tax reductions for farm-workers; ca 1910

Mozambique Comprehensive rights to leases under prazo; 19th century

Labor tribute; 1880 Vagrancy law; 1899Abolition of African trade; 1892Forced cultivation; 1930

South Africa Native reserves; 19th centuryPseudo-communal tenure in reserves; 1894Native Lands Act; 1912 - Demarcation of reserves - Elimination of tenancy - No African land purchases outside reserves

Slavery and indentured labor; 19th centuryRestrictions on Africans' mobility; 1911, 1951Monopoly marketing; from 1930Prison labor; ca 1950Direct and indirect subsidies; 20th century

Zimbabwe Reserves; 1896 and 1931 Poll and hut taxes; 1896Discrimination against tenancy; 1909Monopoly marketing boards; from 1924- Dual price system in maize; - Forced destocking in livestock; 1939

Forms of manorial estatesForms of manorial estatesHaciendasHaciendas– Workers farm some of their own land and provide Workers farm some of their own land and provide

unpaid labor services to the home farm of their unpaid labor services to the home farm of their masters (Western Europe, Russia, Latin America, masters (Western Europe, Russia, Latin America, Eastern and Southern Africa…) Eastern and Southern Africa…)

Landlord estatesLandlord estates– All land is farmed by tenants who pay rent or crop All land is farmed by tenants who pay rent or crop

shares to their masters or tax collectors (Japan, shares to their masters or tax collectors (Japan, China, Eastern India, Iran, Egypt, England…) China, Eastern India, Iran, Egypt, England…)

It took centuries of struggles, revolutions, land It took centuries of struggles, revolutions, land reforms to overcome these systemsreforms to overcome these systems

And they still continue in parts of Africa, Asia, Latin AmericaAnd they still continue in parts of Africa, Asia, Latin America

Outcomes of land reform depend onOutcomes of land reform depend on

Whether the estate was a hacienda or a Whether the estate was a hacienda or a landlord estatelandlord estate

Whether the reform was gradualist or all at Whether the reform was gradualist or all at onceonce

Whether the reforms occurred in a socialist Whether the reforms occurred in a socialist system or a market economysystem or a market economy

Whether the peasants were cohesive and Whether the peasants were cohesive and got help from the bourgeoisiegot help from the bourgeoisie

From landlord estates to From landlord estates to family farmsfamily farms

Right to tax or rent disappears, land becomes ownership of Right to tax or rent disappears, land becomes ownership of previous tenantprevious tenantOrganization of production remains unchanged, peasants have Organization of production remains unchanged, peasants have farming skills, implementsfarming skills, implementsNew owners often obtained substantial state support for New owners often obtained substantial state support for technology, inputstechnology, inputs– But limited cost of infrastructure, housing, etcBut limited cost of infrastructure, housing, etc

Impressive productivity gainsImpressive productivity gains– Based on investment, technology, better labor incentivesBased on investment, technology, better labor incentives

Stable political systemsStable political systems

Bolivia, Eastern India, Ethiopia, Japan, Korea, Italy…Bolivia, Eastern India, Ethiopia, Japan, Korea, Italy…

From Haciendas to From Haciendas to “Junker estates”“Junker estates”

Unlike plantations, junker estates produce a variety of Unlike plantations, junker estates produce a variety of products with hierarchy of hired supervisors and workersproducts with hierarchy of hired supervisors and workersEmerged via expansion of home farms at the expense of Emerged via expansion of home farms at the expense of peasant land; are cultivated by hired laborpeasant land; are cultivated by hired laborEmerged as a consequence of land reform, restrictions Emerged as a consequence of land reform, restrictions on tenancy, or in anticipation a land reform in favor of on tenancy, or in anticipation a land reform in favor of tenantstenantsJunker estates were often dependent on monopoly Junker estates were often dependent on monopoly rights, subsidies, or other restrictionsrights, subsidies, or other restrictions

Prussia, South Africa, Kenya, Zimbabwe, Prussia, South Africa, Kenya, Zimbabwe, most of Latin Americamost of Latin America

From “Junker Estates” to large From “Junker Estates” to large mechanized commercial farmsmechanized commercial farms

Emerged often as a consequence of state pressure:Emerged often as a consequence of state pressure:– ““Modernize, or face land reform”Modernize, or face land reform”– Obtained large subsidies for mechanization, inputsObtained large subsidies for mechanization, inputs

Led to massive loss of permanent employmentLed to massive loss of permanent employment– Rely on temporary hired workers resident in squatter camps Rely on temporary hired workers resident in squatter camps

or rural slums (boyas frias)or rural slums (boyas frias)

The resulting systems hard to reform The resulting systems hard to reform – because there are few workers with significant because there are few workers with significant

farming and management skills farming and management skills

South Africa, Zimbabwe, Kenya, Brazil, Colombia…South Africa, Zimbabwe, Kenya, Brazil, Colombia…

Wage plantationsWage plantations

Produce only one commodity, Produce only one commodity, – Under one management with hired laborUnder one management with hired labor– Examples: Bananas, Sugar, Tea…Examples: Bananas, Sugar, Tea…

Emerge when processing or marketing is associated with Emerge when processing or marketing is associated with large economies of scalelarge economies of scale– And the product is highly perishableAnd the product is highly perishable– So that processing and production and harvesting must be So that processing and production and harvesting must be

coordinatedcoordinated– Either via a plantation or via contract farmingEither via a plantation or via contract farming

They are efficientThey are efficient– Economies of scale in processing/marketing overcome Economies of scale in processing/marketing overcome

diseconomies of scale in farm productiondiseconomies of scale in farm production

Plantations are not good candidates for land reformPlantations are not good candidates for land reform

Tenure of reform beneficiariesTenure of reform beneficiaries

FreeholdFreehold– Most reforms of landlord estate systemsMost reforms of landlord estate systems

Japan, Korea, Eastern India, Italy, …Japan, Korea, Eastern India, Italy, …

– Some reforms of Junker estates, LCFSome reforms of Junker estates, LCFPrussia, Kenya,…Prussia, Kenya,…

Communal tenureCommunal tenure– Most reforms of Junker estates, LCFMost reforms of Junker estates, LCF

Mexico Ejido, South Africa, A1 farmers in Zimbabwe, Mexico Ejido, South Africa, A1 farmers in Zimbabwe,

Later transformation to freeholdLater transformation to freehold– Now an option in Mexico, South Africa Now an option in Mexico, South Africa

Reforms in Socialist EconomiesReforms in Socialist Economies

Landlord estates to family farmsLandlord estates to family farms– Initially in Russia, China, Ethiopia, VietnamInitially in Russia, China, Ethiopia, Vietnam

Later consolidated to CollectivesLater consolidated to Collectives– Russia, China, some in Ethiopia, VietnamRussia, China, some in Ethiopia, Vietnam

Junker Estates or LCF to State farmsJunker Estates or LCF to State farms– Chile, Peru, East Germany, Algeria, Mozambique...Chile, Peru, East Germany, Algeria, Mozambique...

The resulting inefficient systems have been The resulting inefficient systems have been disbanded (China, East Germany, Eastern disbanded (China, East Germany, Eastern Europe, or partly reformed (former Soviet Union)Europe, or partly reformed (former Soviet Union)

Why are collective farms Why are collective farms so inefficientso inefficient

Incentives problems with labor Incentives problems with labor – High labor supervision costsHigh labor supervision costs– Sometimes remedied by elaborate point systemsSometimes remedied by elaborate point systems

Poor incentives to invest profitsPoor incentives to invest profitsHigh incentives to reduce number of membersHigh incentives to reduce number of members– So that profit can be divided among fewer peopleSo that profit can be divided among fewer people

Have disappeared in all of Latin America, China, Have disappeared in all of Latin America, China, Vietnam, Ethiopia, most of Eastern Europe, Vietnam, Ethiopia, most of Eastern Europe, some remain in former Soviet Unionsome remain in former Soviet Union– Why is it still the preferred model in South Africa?Why is it still the preferred model in South Africa?

The Social Costs of The Social Costs of Delayed Land ReformDelayed Land Reform

Static efficiency lossStatic efficiency loss

Poor of incentives to invest in physical and Poor of incentives to invest in physical and human capitalhuman capital

Inability to absorb labor, provide Inability to absorb labor, provide employmentemployment

Rent seeking to maintain the distortions in Rent seeking to maintain the distortions in favor of large farmsfavor of large farms

Revolts and civil warsRevolts and civil wars

Brazil 1950-1980Brazil 1950-1980

Agricultural value added +4.5 percent/aAgricultural value added +4.5 percent/aLand under cultivation + 3.2 percent/aLand under cultivation + 3.2 percent/aAgricultural employment + 0.7 percent/aAgricultural employment + 0.7 percent/a– Unemployment in rural and urban slumsUnemployment in rural and urban slums– Boyas friasBoyas frias

Income inequality as high as in South Income inequality as high as in South AfricaAfricaEnormous contribution to macro-economic Enormous contribution to macro-economic instabilityinstability

RevoltRevolt

Thousands of peasant revolts across the worldThousands of peasant revolts across the world– Mostly unsuccessful, except when in alliance with Mostly unsuccessful, except when in alliance with

outside forces, especially the urban bourgeoisie outside forces, especially the urban bourgeoisie (Chile), urban underclass (France), or revolutionary (Chile), urban underclass (France), or revolutionary movements (Russia, China)movements (Russia, China)

Peasants often later deprived of the fruits of their Peasants often later deprived of the fruits of their successful revoltsuccessful revoltThe last sixty years has seen many protracted The last sixty years has seen many protracted civil wars and bloodshed fuelled by land issues civil wars and bloodshed fuelled by land issues – Algeria, China, Iran, Philippines, Colombia, El Algeria, China, Iran, Philippines, Colombia, El

Salvador, Guatemala, Nicaragua, Peru, Angola, Salvador, Guatemala, Nicaragua, Peru, Angola, Mozambique…Mozambique…

Why do large owners not simply Why do large owners not simply rent or sell to smallholders? rent or sell to smallholders?

Rental often leads to threat of land reformRental often leads to threat of land reform

The poor have no savings and cannot get creditThe poor have no savings and cannot get credit– However, large farmers could sell to them in installmentsHowever, large farmers could sell to them in installments

Insurance and collateral value of landInsurance and collateral value of land– These are capitalized into land pricesThese are capitalized into land prices– Land prices therefore exceed the capitalized value of farm Land prices therefore exceed the capitalized value of farm

profitsprofits– Therefore new owners cannot pay for the land without Therefore new owners cannot pay for the land without

reducing consumption below their imputed labor incomereducing consumption below their imputed labor income

Land must be purchased mostly out of savingsLand must be purchased mostly out of savings

Distortions intensify the problemDistortions intensify the problem

Growing population and urbanization can add a Growing population and urbanization can add a speculative component to the land pricespeculative component to the land priceLand is a good hedge against inflationLand is a good hedge against inflationLarge owners have lower transactions costs in Large owners have lower transactions costs in credit markets, and easier access to credit credit markets, and easier access to credit subsidiessubsidiesMany countries exempt agriculture from income Many countries exempt agriculture from income and other taxes, and it becomes a tax shelterand other taxes, and it becomes a tax shelter

These effects will be reflected in higher land prices These effects will be reflected in higher land prices

Policy ImplicationsPolicy Implications

Redistributive land reform can increase Redistributive land reform can increase efficiency, employment, wagesefficiency, employment, wages

Can reduce inequality and social tensionsCan reduce inequality and social tensions

Cannot be done by the market aloneCannot be done by the market alone

Unless the state buys the land and provides it at Unless the state buys the land and provides it at no or reduced costsno or reduced costs

Or unless the state provides grants to the poor Or unless the state provides grants to the poor to buy the land and develop the farmsto buy the land and develop the farms

Policy implicationsPolicy implications

Land reform in Southern Africa is more Land reform in Southern Africa is more difficult than in East or South Asiadifficult than in East or South Asia– Because of the system of large scale Because of the system of large scale

commercial farmscommercial farms– New farmers require efficient support servicesNew farmers require efficient support services

Land reform requires elimination of Land reform requires elimination of distortions in favor of large farmsdistortions in favor of large farms– As recently done in Brazil and South AfricaAs recently done in Brazil and South Africa

(With some exceptions)(With some exceptions)