Analytical Monthly Review, published in Kharagpur, West Bengal, India, is a sister edition of Monthly Review. Its September 2007 issue features the following editorial. — Ed.
No truths are more vigorously avoided, disguised and denied in our media than the disastrous and devastating results for the majority of the post-1991 economic “reforms” and the real rural class base of the ruling groups. Yet the truth will out, sometimes in a single illuminating story. Such an instance is the recent suggestion of an expert technical group formed by Reserve Bank of India (RBI) that rural usury be legitimized by suitable legislation.
Ever fearful of peasant rebellion, and to some degree influenced by Marxist-educated intellectuals, the post-1947 Congress-dominated governments slowly introduced measures that provided affordable sources of credit in the agricultural sector. A sense of urgency was provided by the initial success of the naxalite revolutionary movement in the late 60s. Rural banking was expanded after the 1970 nationalization of banks, and co-operative banks were encouraged by legislation. The share of moneylenders in rural debt was brought down sharply from 36.1 per cent to 17.5 per cent between 1971 and 1991. But with the introduction of neo-liberal economic measures from 1991, and the enhanced exploitation by transnational input suppliers such as the seed, pesticide and insecticide company Monsanto, farmers have been put in a more precarious condition and ever more dependent upon credit. With liberalization came profit focused competition in the banking sector and cost cutting became essential for banks. Rural branches lost out; transaction costs are high, repayment rates are low. There is also another aspect to be noted; a World Bank survey showed that corruption was rampant in rural banks and bribes amounted to nearly 20 per cent of loans. The imposition of neoliberal “reforms” in the economy has meant the triumphant return of the usurer in the village. According to a recent All India Debt and Investment Survey, the share of moneylenders in the total cash dues of rural households increased from 17.5 per cent in 1991 to 29.6 percent in 2002, the date of the most recent information. If the trend has continued, and there is no reason to think it has not, usurers now have more of a stranglehold on cultivator households than in 1971.
The role of usury in the economy and society is well understood. Some of the main points may be set out here (from “Division of Profit into Interest and Profit of Enterprise. Interest-Bearing Capital,” Capital Vol. III Part V):
- “Usury centralizes money wealth where the means of production are dispersed. It does not alter the mode of production, but attaches itself firmly to it like a parasite and makes it wretched. It sucks out its blood, enervates it and compels reproduction to proceed under ever more pitiable conditions. Hence the popular hatred against usurers, which was most pronounced in the ancient world where ownership of means of production by the producer himself was at the same time the basis for political status, the independence of the citizen.”
- “Usury has a revolutionary effect in all pre-capitalist modes of production only in so far as it destroys and dissolves those forms of property on whose solid foundation and continual reproduction in the same form the political organization is based. Under Asian forms, usury can continue a long time, without producing anything more than economic decay and political corruption.”
- “Interest-bearing capital retains the form of usurer’s capital in relation to persons or classes, or in circumstances where borrowing does not, nor can, take place in the sense corresponding to the capitalist mode of production; where borrowing takes place as a result of individual need, as at the pawnshop; . . . or where the producer is a non-capitalist producer, such as a small farmer or craftsman, who is thus still, as the immediate producer, the owner of his own means of production; finally where the capitalist producer himself operates on such a small scale that he resembles those self-employed producers.”
Pre-capitalist and feudal relations persist, and at the first opportunity usury reasserts itself. The present RBI report says that in Andhra Pradesh the share of moneylenders in rural debt has now reached 53.4%. According to the Report of the Commission on Farmers’ Welfare, Government of Andhra Pradesh, based on a survey of select villages, interest rates are over 45% in more than a third of all agricultural loans. The “microfinance” fraud, despite lavish praise from the media, has made no difference. The confirmed suicides of some 20 rural borrowers from the fledging microfinance sector in Andhra Pradesh during the last year cast a dark shadow. Four leading microfinance institutions were charged by government inspectors for levying interest rates in excess of 40%.
The Constitution empowers the States to regulate moneylending, and in addition there are the Usurious Loans Act of 1918 and the Interest Act of 1978 of All-India application. This wealth of legislation prohibits abusive means of enforcing repayment and variously requires that rural moneylenders be registered, and that interest rates be limited. The RBI report acknowledges that today this legislation is ineffective, largely ignored both by usurers and the authorities, and that where enforced the penalties are so slight as to be meaningless. The only reference to police pressure for more stringent penalties in the RBI report is from Kerala: “The concern of the police was that suicides had been taking place because of the pressure tactics adopted by moneylenders.” More typical is the situation in Bihar, where the required registration and reporting of moneylenders has been “discontinued over time” and no information is available since the 1980s. In this scenario, marked by the renewed dominance of lawless usury in rural India accompanied by an accelerating wave of cultivator suicides, the RBI “expert technical group” — dominated by superannuated top-level bureaucrats — adopts the Bihar approach. If the laws inconvenience the usurers, the laws need to be changed.
Once again we are served up the usual shopworn “market” propaganda, but now with the village usurer as the market “reform” hero of our times: “Their mode of operations, viz, maintaining inter-personal relationship with the borrowers, their informal approach, round-the-clock availability of finance, etc., have made them the most important lenders in the villages. Their policy of ‘any time, anywhere, any amount’, which is borrower-friendly, has strengthened their position in the villages, thus reducing the role of banks. They offer a variety of products tailor-made to the needs of the borrowers.” And just like their near relatives, the superstar hedge fund managers, it seems some village usurers have demonstrated the potential for development inherent in market relations by inventing innovative products — “some moneylenders in Karnataka and Rajasthan had introduced a new product viz. 100 days loan. Under the scheme, the principal amount of Rs.1,000 is lent after deducting an interest amount of Rs120 (upfront) and a sum of Rs10 is collected on a daily basis for the next 100 days. The interest collected works out to 44 per cent per annum.” The conclusions of the report will come as no surprise: legislation that limits interest rates that violate “market reality” should be repealed, and moneylenders should be given privileges to encourage them to register. Usurers are now to become “Accredited Loan Providers.” Banks are to help by providing funds to the usurers rather than to the cultivators. Naturally, these advances will then be treated as part of the mandatory priority sector lending by banks.
The estimated demand for credit by farmers comes out to be around 54 thousand crore rupees (as calculated from All India Debt and Investment Survey, 2002), and is increasing continuously with the rise in the costs of inputs. From the point of view of the limitless appetite for profit of the globalized capitalist financial sector, this is a lucrative debt market with a high rate of return. The RBI proposal was cheered by the Chairman and Managing Director of Vijaya Bank: “Any tie-up with moneylenders is bound to bring down transaction cost of banks in reaching out to certain niche segments like rural and agricultural clientele. Yes, the income level in rural economy is rising and if moneylenders can channelise these into banks, business is bound to be there.” Here the new and the old faces of the rulers of India begin to merge. In the village the landlord and the usurer (often the same person) are the base on which the ruling parties have been built, while Chidambaram&Co. answer to their masters at Blackstone and Citibank.
Yet, for the majority in India the reality is precarious existence in a marginal economy conditioned by extensive pre-capitalist remnants of deep-rooted feudal relations. The imperial capitalist market ideology of Chidambaram&Co. in the village now proudly takes the form of the village usurer, for many cultivators a cause of misery so great as to make suicide a preferable option. There is a significant truth here once again revealed: the fight against imperialism is inseparably bound up with the fight for revolutionary change in the countryside.