Here’s a nicely done, interesting, and largely on-point, article from the Irish Times about the need to give Chinese farmers more secure rights to land. Right now, the reporter notes: “farmers lease their land for 30 years from their village collective, run by the local Communist Party, and they are allowed to own the crops they produce, but not the land.” Because they do not own the land farmers have a thinner bundle of legal rights than they otherwise would: they themselves may be able (or may not be able or likely need permission) to sub-lease lands and they cannot use land as collateral for commercial loans. Whether smallholder farmers would actually succeed at using land as collateral is a contentious issue: given how risky agriculture is, given than many plots will be small, distant from markets, and maybe not worth much, given transaction costs for banks, limited credit histories for farmers, social norms against dispossession, and the need to house families and informal businesses, many bankers and many farmers may find land as collateral just too risky a proposition. But the bigger point the article raises is right: clarifying and “thickening” ownership rights will shift incentives towards increased agricultural production and food security. As a number of southeast Asian nations struggle with transitions (Cambodia, Laos, Burma) China’s leadership on this front can play a hugely important role.
August 22, 2012