Twelve Theses on Agricultural Prices
While several concepts and meanings used in discussions of the agrarian question have been much open to debate, those relating to prices have always appeared to have a greater degree of definitiveness and clarity. Perhaps related to this, in recent times mainstream economic orthodoxy has relied upon the apparent clarity of the concepts of various relevant prices to push a policy stance that argues for almost total dependence on the 'free market* mechanism and the prices emerging from it, in dealing with the agricultural sector. The general argument runs as follows. The major impediment to output expansion and income growth in most developing economy agricultures is the existence of distorted prices which send wrong signals to economic agents. The prices are distorted in the sense of deviating from international (border or c.i.f.) prices, and typically create a system of relative prices which are not in accordance with international comparative advantage, ultimately discriminate against agriculture and so inhibit investment and output in that sector. Such prices usually result from government intervention either in the form of macro-economic, trade or industrial policies which affect the whole economy, or sector-specific taxes and subsidies. The solution to the problem of agricultural development and increasing the employment and incomes of those dependent upon agriculture for a livelihood, is thus seen as one of 'getting prices right', which in turn is seen as resulting from the minimisation of government intervention.
The argument is certainly not new, having found an early and forceful expression in Little Scitovsky and Scott (1966) and being continuously reiterated by agencies like the World Bank (for example in the World Development Report 1986). However, in the past few years it has achieved the status of dogma in most discussions of agriculture in developing countries as well as in formerly 'socialist1 countries, and for that reason alone it merits further consideration at present. In what follows, some of the main propositions which form part of the overall argument are discussed very briefly and schematically.
* Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi.
Social Scientist, Vol. 20, No. 11, November 1992