Land Reform in Developing Countries

Property Rights and Property Wrongs

Michael Lipton

• Publisher: Taylor & Francis
• Year: 2009
• eBook ISBN: 9781134863136
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Land reforms are laws that are intended, and likely, to cut poverty by raising the poor's share of land rights. That raises questions about property rights as old as moral philosophy, and issues of efficiency and fairness that dominate policy from Bolivia to Nepal. Classic reforms directly transfer land from rich to poor. However, much else has been marketed as land reform: the restriction of tenancy, but also its de-restriction; collectivisation, but also de-collectivisation; land consolidation, but also land division.

In 1955-2000, genuine land reform affected over a billion people, and almost as many hectares. Is land reform still alive, for example in Bolivia, South Africa and Nepal? Or is it dead and, if so, is this because it has succeeded, or because it has failed? There has been massive research on land reform and this book builds on some surprising findings.

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• Small farms' share in land is rising in most of Asia and Africa.

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• This is not driven (as widely claimed) by growth in rural population or farm productivity, but by the relative efficiency of small farms, and in some cases by land reform.

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• Whether land reform helps the poor depends not only on land transfers, but at least as much on its effects through employment, non-farm activity, GDP growth and distribution, as well as the village status and power of the poor.

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• Avoidance, evasion and even distortion of land reform laws sometimes advance their main aims.

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• Liberalisation and its accompaniments (such as supermarkets) can be powerful friends or fatal foes of small farms and land reform.

This book will be of great interest to students, researchers and consultants working on agriculture, farm organisation, rural development and poverty reduction, with special emphasis on developing countries.

1 Goals

(a) What goals? Whose? What policy implications?

The main goal of land reform’s supporters is to reduce gross inequality of rural land rights, and thus to cut poverty. Much genuine land reform has happened, and has achieved this goal, in developing countries. Some is still happening, though often in new forms, but why not more? The obvious reply: because big landowners lose from land reform and can sometimes stop it. However, much land reform also enhances farm output (chapter 2). Extra output means, in principle, that land gainers can still gain, even though land losers are compensated to the extent politically or morally necessary or desirable.¹ Extra output also makes it easier for the State to borrow, or tax, to provide public-goods infrastructure for reform beneficiaries. Why, then, has not much more land reform happened?

The usual answer is resistance by, and power of, self-interested groups. First, big landowners usually want to resist, because they doubt that they will be properly compensated for full land value, which may include leverage in other markets (for credit, work or crops) and local political power. Second, big landowners usually can resist. They are well connected to the power élite, including the judiciary. They can also organise more readily than can potential land recipients. Each of a few dozen huge owners, paying a subscription to support a pressure group, can check that colleagues do the same. Each of many thousand potential land recipients cannot [Olson 1971]. Also, the rural poor often have cause to fear sanctions from big landowners if they agitate for land reform. Third, it is ‘seemingly ubiquitous’ [Novemsky and Kahneman 2005] that people are readier to invest time, money and effort in avoiding a loss than in securing an equivalent gain.² Fourth, powerful people other than landowners may feel threatened by land reform. The urban rich may fear that, if it succeeds, their own interests will be challenged next. Poor urban food buyers may fear that smaller farmers will eat their product, rather than supplying it cheaply the cities.

However, these explanations do not suffice. The rural poor are a big, and (despite the difficulties) in many countries increasingly organised, interest group. It is in the interest of other groups to accommodate them peacefully. The cost to others of peaceful, well considered land reform can be contained, or compensated to some extent, and is less than the cost of rural unrest.

If self-interested group opposition to land reform is to explain why much more has not happened, there needs to be intellectual backing to convince neutrals, in and out of power. This backing is the argument that land reform will harm other key goals, on which objective persons largely agree. Even if land reform cuts rural inequality, will it address poverty, in particular manifestations (female poverty, ethnic poverty and so on) or generally? Even if so, is land reform the best way to attack poverty? If so, will there be grave cost to another goal: liberty, and (arguably part of that) respect for legitimate property rights? Will land reform harm output, efficiency or growth, perhaps because large farms are more efficient or dynamic than small ones?³ Does land reform threaten environmental sustainability, or economic stability? It is the belief that land reform will harm largely shared goals that allows its opponents to plead not self-interest but virtue; puts reformers in the opposite position; and makes it harder to persuade neutrals. This chapter identifies the goals themselves, and the channels through which land reform may affect them.

Each group – big landowners, rural land-hungry, urban food buyers, politicians – has goals. Often they are self-interested, but there is considerable consensus for personal freedom, growth, ‘just’ asset distribution, stability and sustainability. Big disagreements remain, not only about trade-offs among goals⁴ but also about defining goals: big landowners and the landless differ about what is a just land distribution. Also, even if a goal is agreed, most people would prefer others to pay for it. Nevertheless, progress in land reform is likelier if we define people’s policy goals, and assess how land reforms affect them.

(i) Goals, groups, coalitions, procedures, aims and programmes

A land reform itself has no goals: people do. People try to improve their score of final goals, which in economic matters are more,⁵ stabler, and more sustainable income, assets, leisure and independence. To achieve such goals, people seek intermediate aims, e.g. to implement, defeat, or change a proposed land reform. An opponent may switch to neutrality or support of an intermediate aim, if she becomes convinced that continued opposition is not worth its costs – e.g. that it is too costly, time-consuming or risky to fight a land reform, given the prospect of success vis-à-vis failure, and the implications of each for final goals. A landowner may be persuaded that achieving his intermediate aim, of preventing a land reform, would impede the growth of local markets for processing facilities that he owned, and would therefore harm, not help, a final goal (income). Or he might decide that offsetting gains – compensation for land lost, better farm prices, reduced risk of revolution – would be more, or more reliable, than he had believed.

When seeking their goals via an intermediate aim such as a land reform, people usually cannot achieve much except as a group: a kin network, landowners’ association, farmworkers’ union or political party. A group pursues a programme: a set of intermediate aims, selected and weighted by compromise from the individual wishes of its members, seeking to achieve members’ goals. A group that jointly pursues a programme is called a coalition. The goals of those seeking a particular land reform, to the extent that they are achieved, advance the programme of one or more coalitions, but may damage the programme of others. Opponents of a proposed land reform may turn into supporters, if they become convinced that, as implemented, the reform will after all advance their programme; or that costs of opposing the reform, or benefits from being seen to support it, will exceed the gains of preventing or modifying it.

As coalitions argue with each other about land reform, each seeks to detach members from other coalitions to support its own programme, even at the cost of amending it. The objective is to build a larger coalition, strong enough to get its way. This usually means accepting amendments that leave some members of the original coalition feeling that they might now better achieve their individual aims by defecting to rival coalitions (hence no debate about a land reform is over till the fat lady sings). The process can involve a wide range of procedures by which members of coalitions are attracted, removed, or frightened off: common tactics include meetings, marches, boycotts, bullets, bribes, new evidence, debates in parliament and even in professional journals, and sometimes all of the above.

(ii) Goals, power, options, procedures: outsiders, interested parties, governments

We need to distinguish the actions and influences of three types of person: ‘disinterested’ outside observers; members and officials of governments and their agencies; and people with direct or indirect interests in the amount and terms of land transfer. These three may differ in goals, intermediate aims, types and structures of power, options for (and gains and losses from) coalition-formation, and therefore procedures.

Disinterested outside observers (hereafter called ‘outsiders’) comprise those academics, policy analysts, journalists, etc. who seek, or are paid, to tell things as they are. Sometimes outsiders are incompetent or prejudiced: they are no more angelic than anyone else. But their rewards, professional rules, or preferences normally lead them to analyse, and if appropriate support or oppose, a land reform on grounds of what they believe is its impact on well-being. Their concern is with the likely effects, in their view, of the reform on the following goals: income, status or power for the poor; fewer gross or unearned inequalities; growth; sustainability; and stability. Their procedure is to explore those effects; (sometimes) to consult people affected by the reform; and to publish and reason. Ideally outsiders do consult, and their findings depend on evidence and analysis based on law, economics, other social sciences, agronomy or moral philosophy, rather than on hunch, prejudice or anecdote.

Governments are legitimate to the extent that they are widely accepted as acting in a national interest, and can be changed if a legitimising body, such as a majority of adults or a parliament representing them, so wishes. Government agencies’ concerns are sometimes assumed to be the same as those of outsiders; both speak of land reforms as being likely, or unlikely, to achieve poverty reduction, efficiency, etc. However, it did not need public-choice theory (chapter 7(b) (viii)) to discredit the view of the State as a benevolent despot, or a Platonic (or Fabian) guardian. Politicians and administrators, while often driven by a vision (or dogma) of the public good, also seek other goals: at worst, self-enrichment, patronage, or revenge; often, political stability, which may mean avoiding civil war or revolution, or just staying in office. In extreme cases – not only ‘failed states’ but also kleptocratic or avenging governments – neither land reform nor other policy advice has much point: outsiders can at best seek benevolent ‘policy-proof’ interventions (Vernon Ruttan’s term): perhaps, sometimes, improved crop seeds, health care, or training inputs delivered via a non-governmental organisation.

Interested parties are who those directly or indirectly gain or lose from a land reform. Directly affected are those among whom land rights are transferred: in classic land reform, big farmers, and small farmers or workers who receive land; in decollectivisation, State and collective farm managers and those who receive land; in tenancy reform, landlords and tenants. All these seek more land for themselves or their community, or more compensation for lost land. Sometimes, they use the reform to try and improve the legal or customary terms on which they relate to other land users: workers, owners, tenants. Indirectly affected are rural workers who neither gain nor lose land, but whose employment or wage-rates change due to land reform; and consumers, especially the poorer⁶ urban and rural non-farmers, if land reform affects the levels (or fluctuations) in prices or availability of farm products, especially the main staple food.

The land-reform goals of governments can overlap with those of interested persons or outsiders. Governments improve their chances of keeping power if their land legislation secures or improves the land rights of many rural people, or helps to increase farm output, thereby providing resources to compensate losers from the legislation. Thus or otherwise, the land legislation can secure wide support, without sufficiently inducing enough powerful ‘losers’ to act effectively against the legislators. This is tightrope-walking, but has been done quite often,⁷ with governments selecting land legislation that most affected people will support, or at least tolerate. To outsiders, land policies that increase farm output and reduce gross inequalities in land distribution are normally desirable,⁸ and the evidence on the ‘inverse relationship’ (chapter 2) suggests that these two goals can be achieved by much the same set of land reforms. Such policies leave governments more popular, with (in the long run) a broader tax base, and better able to afford to buy off, overcome, or anticipate opponents. Hence many affected people will support such policies beforehand, and feel benefit afterwards. So why isn’t there much more land reform? Why don’t governments get on with land policies that meet welfare goals, confident that, if implemented, they will satisfy interested parties too?

We have suggested an answer: big landowners, able to organise, often do not believe that compensation, plus reduced risk of land invasions or other violence, will offset the reform’s costs to them. But why? These landowners – especially where the present land dispensation is very unequal, based largely on inheritance, racial or tribal, or all of the above – have reason to believe that most people do not accept their right to much of their land. If so, they will expect that compensation, even if promised, will not be paid, or will be inflated away. They may also fear that one reform, far from making them safe, would strengthen the pressure for more. If such landowners are powerful, they may be able to block reform. Also, urban pressure groups may have a strong motivation for derailing land reform, and much power to do so. They often fear (though this seldom happens in the long run: chapter 2(h) (iv)) that land redistribution will reduce food sales to urban areas, lowering the purchasing power of wages, and raising the pressure on employers to pay more. Even neutral urban attitudes damage reform; if the urban rich refuse to pay any part of its costs, the rural rich will not believe in compensation, and will be less disposed to accept any reform.

Outsiders can sometimes achieve much, if they believe – and can persuade others – that a land reform will achieve widely acceptable goals. However, usually the power of the opponents of reform needs to be reduced too. J. S. Mill’s devastating analyses of the effects of Irish land tenure advanced its radical reform, but this also required that Irish landlords were politically marginalised in England in 1850–1910 [Mill 1848–71: 324–36; Ensor 1936: 73–74, 92, 187, 358–59, 450–51; Hollander 1985: 847–54]. Outsiders matter, but are seldom decisive (or as influential as Keynes and others asserted⁹)if opposed by the State and many powerful and wealthy private persons. This is likely in the case of many land reforms.

The procedures of outsiders, governments and interested parties differ as they seek to affect land reform. Outsiders publish and persuade. Governments legislate and implement, or do nothing. Interested parties mobilise and lobby, threaten and cajole, or boycott¹⁰ and strike. Because of these different procedures, we separate the analysis of how outsiders, governments (including donors) and their agencies, and interested parties seek to influence or modify land reforms. This discussion first concentrates on outsiders’ goals because, if they do their job well, they establish standards for evaluating arguments advanced by others.¹¹ We then review goals of governments, and of groups expecting to gain or lose from land reform.

Outsiders evaluate land reform, in general or in a particular case, by reference to its likely effects in advancing or retarding (1) a more just distribution of income, power or status, and (2) reduced poverty. Also important – though seldom the main aim of its supporters or opponents – is (3) improved efficiency or faster growth (chapter 2). Outsiders are also concerned with how land reform affects (4) agricultural sustainability and (5) stability of farm income and output: these are seldom specified as goals by land reform advocates, yet few – and hardly any outsiders – would welcome a reform that badly destabilised farm incomes or made them less sustainable, even if it advanced the other three goals. So outsiders should predict the impact of a land reform on all five goals. For most people, too, (6) increased freedom of choice is a further aim of policy, to which a land reform should contribute.¹² Land reform has most impact on these six goals in rural areas, but that is not the whole story. A land reform that improved intra-rural income distribution and poverty might be inadvisable if the side-effects involved substantial income transfers from rural people, or the urban poor, to the urban not-so-poor.

We next ask if plausible land reforms are likely to advance outsiders’ ‘objective goals’ (deferring goal (3) to the next chapter). Next, we consider two goals of governments in doing land reform, and of some donors in supporting it: mobilising agricultural surpluses, and avoiding political violence. Then we ask: what do rural people themselves want from land reform, and can it achieve their goals?¹³ The task is to discover what sort of land reform, if any, is indicated to meet people’s goals, and to devise policies to achieve it.

(b) The main goal – reducing poverty and gross inequality: links to liberty

(i) Specific forms of poverty and inequality

Outsiders, if they support a land reform, usually do so mainly because of its supposed contribution to the goals of reducing poverty and/or inequality. Suitable indicators would vary with particular situations, but might include, for example, the extent to which a reform cut poverty among rural households below the poverty line,¹⁴ and inequality between the poorest and the richest fifth. However, reformers are often concerned to reduce poverty and/or inequality of status, not just overall, but in specific forms. ‘Horizontal inequalities’ [Stewart and Langer 2006; Stewart 2008] usually mean the concentration of poverty upon women; people of a particular tribe, ethnic group or caste; inhabitants of a region, especially people in remote areas; workers in particular stigmatised activities, or economic sectors, such as the rural sector; or households of a particular type or structure, e.g. with several small children and only one earning adult. Before asking how land reform affects overall poverty and inequality, we look at its effect on horizontal inequalities, and hence on ‘poverties’ specific to groups, such as women, the rural, or the remote.

I. Gender Although in most developing countries women or female-headed households are no likel...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of Tables
• Acknowledgements
• Introducing Land Reform
• 1 Goals
• 2 Output, efficiency and growth goals: beyond the inverse relationship
• 3 Land reforms: the types, and the classic paradigm
• 4 Tenurial options: tenancy reform, titling, patrialisation
• 5 The terrible detour: collectivisation, decollectivisation
• 6 Alternatives, complements, diversions, ‘new wave land reform’
• 7 The alleged death of land reform
• Appendix: Defining land reform
• Glossary
• Notes
• References