Joe Studwell - How Asia Works: Success and Failure in the Worlds Most Dynamic Region

Part 1

Land: The Triumph of Gardening

I am the son of peasants and I know what is happening in the villages.
That is why I wanted to take revenge, and I regret nothing.

Gavrilo Princip, assassin of Archduke Franz Ferdinand of Austria

W hy should land policy be so important to development? The simple answer is that in a country in the early stages of development, typically three-quarters of the population is employed in agriculture and lives on the land. East Asia after the Second World War was no exception. Even in Japan, which began its development in the 1870s with a three-quarters rural population, almost half the workforce was still farm-based at the start of the war. With most resources concentrated in agriculture, the sector offers poor countries the most immediate opportunity to increase their economic output.

The problem with agriculture in pre-industrial states with rising populations, however, is that when market forces are left to themselves agricultural yields tend to stagnate or even fall. This happens because demand for land increases faster than supply, and so landlords lease out land at increasing rents. They also act as money lenders at high rates of interest. Tenants, facing stiff rents and expensive debts and with little security of tenure, are unable to make the investments for instance, in improving irrigation or buying fertiliser that will increase yields on the land they farm. Landlords could make the investments to increase yields, but they make money more easily by exacting the highest possible rents and by usury, which adds to their land holdings when debts cannot be paid and they take over plots that have been pledged as collateral. A situation arises where the market fails to maximise output. At the time of the Second World War, this scenario was present in varying degrees everywhere in east Asia, from Japan to China to Indonesia.

In conditions of a growing population, low security of tenure and no restrictions on the charging of interest, a market in land arises in which concentration of ownership trumps improvement of yields as the easiest source of income for land owners. The problem has plagued agriculture in poor countries around the world. What is different in some states in east Asia is that after the Second World War they made radical changes to land distribution and structured a different kind of agricultural market. It was a rural arrangement in which market forces tended to maximise output. There has been no equivalent policy change of such magnitude and effect anywhere else.

The vehicle for the change was a series of land reform programmes undertaken in China, Japan, Korea and Taiwan. Although the first was orchestrated by communists, and the second, third and fourth by anti-communists, the objective was the same in all cases. It was, roughly speaking, to take available agricultural land and to divide it up on an equal basis (once variation in land quality was allowed for) among the farming population. This, backed by government support for rural credit and marketing institutions, agronomic training and other support services, created a new type of market. It was a market in which owners of small household farms were incentivised to invest their labour and the surplus they generated towards maximising production. The result was hugely increased yields in all four countries.

Output booms occurred in conditions in which farming was essentially a form of large-scale gardening. Families of five, six or seven people tended plots of not more than one hectare. To most economists, theory dictates that such an arrangement must be inefficient. So-called free marketers and Marxists are united in insisting that scale is fundamental to efficiency. For Marxists in China, North Korea, Vietnam (and Russia before them) this fatally for millions of people meant switching household farming to large collectives.

In reality, the question of efficiency depends on what outcome you are looking for. Big capitalist farms may produce the highest return on cash invested. But that is not the agricultural efficiency that is appropriate to a developing state. At an early stage, a poor country with a surfeit of labour is better served by maximising its crop production until the return on any more labour falls to zero. Put another way, you might as well use the labour you have even if the return per man hour looks terribly low on paper because that is the only use you have for your workers. A gardening approach delivers the maximum crop output, as any gardener knows.

Try this at home

Fruit and vegetable gardeners will tell you (indeed they may already have done, at length) just how much you can produce on a tiny plot of land if you put your mind to it. What they omit to mention is the grotesque amount of labour involved. The techniques that maximise output in a backyard garden of a hundred square metres are also broad ly those that will maximise yields on a small family farm of 10,000 square metres (one hectare, or 2.47 acres).

The list of time-consuming interventions is almost endless. One of the most effective is to start off seeds in trays indoors so that they are only put in the ground for the more rapid maturation process. Soil-bed temperature also greatly affects yields and can be regulated by using raised beds in temperate climates or pits in tropical climates. Compost is most effective when applied with diligence high-yield fruit and vegetable gardeners deploy fertiliser on a plant-by-plant basis. Targeted watering (taller plants, for instance, tend to need more) and constant weeding also have a big effect on crop size. The most productive plots utilise an almost solid leaf canopy because close planting minimises water loss and discourages weeds; but this rules out access for machines. The use of trellises, nets, strings and poles all set up by hand maximises yields through vertical gardening; a single tomato plant can produce 20 kg of fruit. Inter-growing of plants with different maturities saves more space (the cognoscenti place radishes and carrots in the same furrow because the radishes mature before the carrots begin to crowd them out; but then the radishes can only be harvested by hand). Equally, shade-tolerant vegetables like spinach or celery can be raised in the shadows of taller plants to ensure that no space is wasted; but again, this must be done by hand.

The world of the home fruit and vegetable gardener including that of the contemporary, rich-world family growing its own organic produce is very familiar to the post-war east Asian peasant family with its mini-farm. Of course each person in the Asian family tends an area of soil thirty or more times greater than that of the hobby kitchen gardener. But the logic of the labour-intensive gardening approach to cultivation is the same wherever you do it: it gets more out of a given plot of land than anything else.

In the United States, as one example, well-managed vegetable gardens yield 510kg of food per square metre (12 l bs per square foot) per year, which equates to USD1122 per square metre at shop prices. In 2009 Roger Doiron, a blogger for the popular website Kitchen Gardeners International, weighed and checked the retail prices of all 380kg of the fruit and vegetables that his 160-square-metre kitchen garden produced; the gardens retail value was USD16.50 per square metre. That meant a total value from his plot of USD2,200 equivalent to USD135,000 per hectare (USD55,000 per acre). As a very loose benchmark, t he wholesale price of the USs most common and successful crop from large-scale farming, corn, equated to USD2,500 per hectare in 2010.

So why doesnt everyone do it? The problem is that the gardening level of output needs so much labour. If Mr Doiron gardened full time, he might be able to maintain his yields for 1,000 square metres of land. But that would still require ten Mr Doirons to earn USD135,000 across one hectare before costs. Consequently, American farmers are sensible and use big tractors to grow corn on farms that average 170 hectares. Indeed, the agglomeration of US farms, which started out except in the southern plantation belt as much smaller units in the early nineteenth century when the country was opened up by immigrants, is the story of gradually rising labour costs and the consequent pressure for mechanisation over two centuries.