THEORETICAL FRAMEWORK
CHAPTER 111
THEORETICAL FRAMEWORK
A dominant political questton, which has assumed great
significance in recent years is how to develop. Diverse formulas
have been suggested to achieve this universally accepted objective of
development. The classicals considered economic development as a
function of land, labour and capital. They pointed towards the
importance
of
capital
accumulation
through
agricultural
The neo-classicals d~dn'tattach any significance lo
development
agricultural development.
Thc dcvelopnirilt theories of Leibenstein, Nelson and
Kosrntein Icodan stressed the importance and need for large capitill
investments
111
accelerating thc process of economic developnient.
Kosenstcin Koden and Nurkse eniphasi;.ed the necd fbr s~multaneous
development
of agricultural and industrial sectors in the
development programmes of the economy, whereas llirschman
considered industrial sector to be the leading sector in economic
development.
The Growth stage theories put forward by Marx and Kostow
maintains agricultural product~vity as a precondition to the
emergence of industrial capitalism.
Mobilisation of savings to
generate sufficient investment was the necessary
mechanism for Rostow's take-off.
economic
Structural- change Theory developed by Lewis and RanisFei focuses attention on the process by which underdeveloped
economies transform themselves to developed economics through a
change in their domestic economic structures. While the Lewis
model ignores the agricultural sector except as a reservoir of labour,
the agricultural sector was rediscovered and the structural
interdependence of the agricultural and non- agricultural sectors was
emphasized in the two sector models of Ranis and Fei. Ragnar
Narkse developed the thesis that disguised unemployment p r e v a i l ~ n ~
in the agricultural sector can be a source of capital formation in
underdeveloped countries.
Simon Kuznets (1966) outlines the trcnds In the sectoral
or~ginof aggregate output, which generally accompanied modern
economic growth. It includes 'a decline in thc share of agriculture
and related industr~es;rises in the shares of manufacturing and
public ut~litiesaiid increases in the shares of some service groups.
This combination produced marked shifts in the sectoral allocation
of the labour force, a somewhat greater decline in the share of
agriculture and related industries, a somewhat lesser rise in the share
of industry and a distinct rise in the share of services'.
The Dualistic Development Thesis represents the existence
and persistence of increasing divergences between rich and poor
nations in the international economy.
Dualism also refers to
differences in the degree of geographic development within an
economy. Dualism may either arise naturally as a result of
specialization or be imposed from outside by the importation of a
capitalist system (Thirlwall, 1999).
Gunnar Myrdal (1968) builds his theory of economic
underdevelopment and development around the idea of regional
inequalities on the national and international planes by using the
notions of 'backwash' and 'spread' effects. Backwash effects refers
to all relevant adverse changes of ccotlomlc
expansion
tn a locality
caused outs~dcthc locality while sprcad effects are ce~itrifugalforces
of expansionary momentum from the centres of economic expansion
to other regions. The main cause of'regional ~nequalities,according
to Myrdal has been the strong backwash effects and thc weak spread
effects in underde\eloped countries.
The concept of growth pole. which has a bearing on regtonal
inequalities in development was first introduced by Perroux in the
year 1955 (Higgins, 1988). To Perroux, economic development does
not spread Itself evenly throughout space. It is the expansion or'
economic activities in the hinterland, which generates growth of its
urban centre rather than vice Versa. Boudeville ( 1968) strengthened
the geographical content of the Perrouxian growth pole hypothesis.
In his thesis the spread effects emanate from an urban area to the
surrounding hinterland. Hirschman (1958) introduced the notions of
polari~ationeffects and trickling down effect. which coincides with
Myrdal's backwash effects and spread effects. In some cases, the
polarization effects generated in the growth centres may turn out to
be stronger than the trickling down effect which may create a dual
society.
The neoclassical dependence model view developing
countries as beset by institutional, political and economic rigidities,
both domestic and international and caught up in, a dependence and
dominance relationship with rich countries (Todaro, 2000). In this
model underdevelopment is seen as an externally induced
phenomenon, in contrast to the linear stages and structural change
theories. wh~chstress on internal constraints such as insufficien~
savings and investment. The main proponents of the dependency
model are Andre Gundcr Frank, lmmanuel Wallcrstein and Samir
Amin (Chew & Denemark, 1996). According to the dependency
thesis, modem 'underdevelopment' is not 'histor~calbackwardness',
the result of late and insufficient capitalist development, it is the
product of capitalist development, which is polarizing in nature
(Samir Amin, 1996). Concepts such as core-periphery, dependent
development, uneven development, and metropole- satellite were
created to describe the dependent state of economic transformation
of specific nation states in the periphery (Chew & Denemark, 1996).
It was assumed that decolonisation will lead to the modernisation
and economic development of the periphery. But what actually took
place was 'the development of underdevelopment' (Aseniero, 1996).
A typical peripheral society has pyramidal income distribution in
which there is a small rich elite, a small middle class and very large
mass of poor people. These processes have occurred in tandem with
and are dependent on the peripheral capitalism and neocolonialism in
the periphery and these have produced the greater relative
inequalities within peripheral societies (Chase- Dunn, 1996).
Baldwin (1956) and North (1959) have pointed out that
extreme concentration of wealth in the hands of the very rich will
manifest itself in the demand for luxuries rather than for domestic
manufactures, even when farm or export income grows. The export
orientation of primary products and foreign dominance of the
developing countries has limited the growth of the domestic market
and the establishment of basic industries for widespread
development throughout the whole economy.
The international.
natiunal and local capitalist systems alike generate economic
development for the few and underdevelopment of the many.
Having discussed the important theories on economic
development, we now proceed to analyse the theoretical role of
plantations in regional economic development. With regard to the
role of plantations in economic development two main strands of
thought have emerged. One set of writers (Courtney, 1965, Jorge
Hardoy, 1982, Jorge Balan, 1982, Graham and Floring, 1984,
Karunatilake, 1971) emphasis the role of plantations in regional
development and consider 'plantations as agents of development'.
They show how plantations have contributed to the economic
development of Latin America, Argentina, Malaysia and Sri Lanka
through a policy of export promotion and import substitution. These
writers who belong to the Modernization school, neither characterize
plantations as 'enclaves' nor do they see the existence of 'dualism'
in the internal structure of plantation economies.
Those writers who subscribe to the viewpoint that the
plantations have not been beneficial to their respective econoni~cs
belong to the Dependence school. They view underdevelopment as
an economic, social, political and cultural condition made up of
negative processes such as 'enclave'.
colonialisn~ and econonlic dualism.
'monoculture', internal
They denounced colonial
capital, which had played an important role in the creation of export
sectors of plantation crops in various countries, because it produced
'virtual enclaves' that had no effect on national economies but were
geared to serve the interests of an outside economy. Prominent
among these
writers
are Best
(1968),
Beckford
(1972),
Shanmugaratnam (198 1 ), Umadevi (1 989), Paul Baak ( 1997) and
Ravi Raman (1997).
Most of the studies on plantation economics bring out the
dualistic nature of the regions. On the onehand, there arouse a
modem sector consisting of market- based production of cash crops.
while on the other there existed a traditional subsistence sector
engaging in paddy
cultivation.
Plantation
agriculture is
fundamentally different from traditional agriculture. Myrdal (1968)
considers
development
industrialization.
of
plantations
as
a
process
of
He defines plantations as 'large scale, capital
intensive, highly specialized commercial enterprises employing
wage labour'. This definition brings out clearly the main features of
plantations- heavy initial capital investment, employment of wage
labour and production not for self-consumption but for the market
and makes it more akin to a modern factory. Hired labour, which is
the 'Chief sign of capitalism' in agriculture, is one of the
characteristic features of plantations.
Commercialization of
agr~cultureviewed as a conconlitant of plantation agriculture is
cons~deredto be the principal element in the transition fronl precapitalist to capitalist modes of production (Raj. 1985).
The
development of capitalisnl in agriculture has led to the differentiat~on
of the peaantry (Lenin, 1899). 'One type include rural bourgeoisie
or the well-to-do peasants who carry on commercial agriculture and
are owners of commercial and industrial establishments. The other
type include the rural proletariat which covers poor peasants,
landless peasants, unskilled labourer and building worker who are
unable to exist without the sale of labour power (Lenin, 1899).
Byres (1977) maintain that capitalism In agriculture has to
perform two important functions for promoting economic growth.
On the one hand it must generate and release sufficient surpluses and
on the other, it must contribute to the creation of the home market.
While analyzing Latin American underdevelopment Dos Santos
(1996) considers plantations to be the generator of socio-economic
inequality and a block to the development of the peasantry and
creation of a domestic market.
The forgoing theories provide the appropriate framework for
analyzing the growth of plantations and regional economic
development. Most of the scholars (Umadevi, 1989, Paul Baak,
1997, Ravi Raman, 1997) who studied the impact of plantations on
the regional
economy of Kerala
can
be categor~zed as
'dependentistas'. They treat plantations as a mode of exploitat~on
used by the imperialist powers for surplus extraction. There is no
doubt; it was the colonial powers that recognized the state's potentla1
as a venue for plantation crops. In the beginning, most of the
plantations were owned by European. Paul Baak (1997) shows how
metropolilan planters formed a hegemonic political force which
together with colonial support influenced governmental policy with
regard to grant of land for planting, export duties and state financial
support for roads and dispensaries in the plantation districts. Baak
(1992) also shows the negative implications of plantation
development to the state treasury and employment in the state of
Travancore. Ravi Raman (1997) points to the immiserisation of
plantation labourers, which accentuated with an increase in the
repatriation of plantation surplus. Umadevi (1989) opines that the
export-oriented nature of the plantation commodities limited the
growth of the domestic market and the establishment of basic
manufacturing industries for widespread development throughout the
whole economy. According to Ram Mohan (1996) the dominance of
the metropolitan capital over trade and production restricted the
space for development of Travancorean capitalists.
The surplus
generated from plantations was siphoned off to other countries,
which was a drain on state's economy (Ram Mohan 1996).
Umadevi (1989) maintains that plantations ushered in a dual
economy in the state. A modem sector consisting of a market based
production of cash crops existed side by side with a traditional sector
engaging in paddy cultivation. Thc dualism within the agrarian
system together with other complementary factors has led to Intraregional dualism in the state economy.
Colonialism has been the predoniinant vehicle for the
penetration of capitalism in traditional agrarian economy of
Travancore. The capitalistic content of plantation agr~culturchas
been widely recognized in almost all the writings on agriculture. In
the words of Oommen (1979) 'the plantation industry first
established by British capital and later also by indigenous capital has
been a strong capitalist sector with clear class cleavage'.
As a
'mechanism of surplus extraction' (Gilbert and Gugler, 1987)
plantations were based on the exploitation of abundant natural
resources and cheap labour oriented specifically to the requirements
of an outside market (Kannan, 1998). Tharakan (1998) maintain that
capitalist organization developed within agriculture with the
introduction of plantations. Baak (1997) and Ram Mohan (1996)
consider the emergence of a rich elite in Travancorean peasantry as
the direct outcome of a shift to cash crops. lssac and Tharakan
(1986) observe that the indigenous capitalists saw plantations as an
attractive investment venture, which was a major cause for the
industrial backwardness of the region. Land reforms introduced in
the state as a means to redistribute property in land 'for the benefit of
small farmers and agricultural workers' (Warriner, 1970) did not
impede plantation developnient in any way. The land reforms not
only protected the planting community but also promoted plantation
development (Oommen, 1979, Paul Baak, 1997). The negative
linkages of the plantation sector with the rest of the economy as
evidenced in some of the writings (Umadevi. 1989, Paul Baak, 1997.
Ram Mohan 1996) reveals that agrarian transition to capital~srnin
Kerala was not successful in achieving the functions put forth by
Byres ( 1 977).
Although the plantation sector still retains a capitalist class in
Kerala, there exists no immiserisation of labour.
In India, the
conditions of plantation labour are statutorily regulated through the
Plantation Labour Act, 1951 which was implemented with effect
from 1954 onwards and later amended. It is considered to be one of
the most comprehensive and welfare providing among all the labour
legislations in the country. Sunil Mani (1992) argues that the
plantation worker in Kerala is one of the better-paid workers in the
organized sector o f the economy. The effective wage of a plantation
worker compares very favourably with actual wage received by
hisher counterparts in other agricultural operations (Sunil Mani,
1992).
The increase in real wages coupled with poor relief
programmes, sustained process of social development in educat~on,
health and related activities created better conditions of living and
the rural labour households were able to reduce the incidence of
poverty (Kannan, 1998).
The size of holdings is found to have a direct effect on the
distribution of income in plantation regions. In the case of large
holdings, there is greater concentration of wealth in the hands of a
few which in turn creates greater inequalities in income distribul~on.
Among the plantation crops, the average size of holdings is found to
be high in the case of tea, coffee and cardamom while in the case of
rubber, small holdings predominate. Kerala's share in total area
under small holdings in the country is around 92 percent compared
to the state's share of 86 per cent in total area under rubber crop in
the country (Tharian George, 1999). According to the Report of the
' ~ 1997), the average size of
Taskforce on plantation crops ( 1 ~ plan,
holdings were .49 ha, .98 ha, 2.2ha, and 8.44 ha. respectively for
rubber, coffee, cardamom and tea. The process of structural diffusion
of rubber holdings has been accelerated by the implementation of
land reforms exempting all plantation crops from land ceilings,
progressive nature of the provisions of the agricultural income tax
and plantation land tax (Tharian George, 1999). Rubber gets the best
institutional support among the plantation crops in Kerala, which
includes financial incentives for planting and replanting and
marketing of the output along with research and development
activities for improving the varieties. Recent trends emerging in the
production sector indicate a steady shift towards homestead farming
of rubber in Kerala (Report of the Taskforce on Plantation crops,
IXth plan, 1997). Since the degree of htruc~ural and geograpiiical
concentration of rubber crop shows a relatively more dispersed
position compared to other three plantations crops, a greater equality
in the distribution of income originating from rubber plantations can
be expected.
In the 1960s and 1970s, economists accepted the proposition
that highly unequal distribution of income is a necessary condition
for generating rapid growth (Todaro, 1990). It was assumed that
high personal and corporate incomes were necessary conditions of
saving which made possible investment and economic growth. But
in reality it has been observed that greater equality in third world
countries may be a condition for self-sustaining economic groath
(Todaro, 1990).
The plausible explanation for the inadequate
regional development of plantation dominant regions has to be
sought within this framework.
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