BEIJING — Chinese farmers are getting higher rents for their land and increasingly renting it out for longer, a new survey says, in a trend that is enlarging the market for farmland and transforming the rural economy.
The changes — spurred by improved legal protections making such moves easier — could help to boost farm incomes and productivity, top priorities for what is still a heavily rural nation.
Median annual rent for farmland more than doubled from 2005 to 2008 in the survey, reaching the equivalent of $267 an acre. That figure, up from $125 three years earlier, is comparable to rents paid for irrigated cropland on parts of the U.S. West Coast, according to U.S. Department of Agriculture figures.
via China’s Farmers Raise Rents – WSJ.com.
Here we have another shining example of how the promotion of property rights and markets helps all. Decades past, the average farmer in the Peoples Republic of China was dirt poor and had no real say on the land she or he worked on. Indeed, under Chairman Mao’s dictatorship, the country experimented in one of the largest projects of collectivization of land. Misleadingly labeled “the Great Leap Forward” (perhaps this is a progressive ‘thing’), this scheme turned the bucolic part of China into a sea of famine. Untold millions perished in this example of a centrally-planned economy where liberty was at best ignored.
Fast forward to our time, and the teachings of Mao have been replaced by the teachings of Adam Smith in the Middle Kingdom. In an ironic twist of fate, the very political organization that gave us Maoism is now practicing capitalism. Where once the Politburo in Beijing quoted socialist garbage now echo the late paramount leader, Deng Xiaoping’s famous words “to get rich is glorious!”
Copyright 2009 Wall Street Journal
As reported in the Wall Street Journal, the livelihoods of these peasant farmers has gone up. Why? Respect of property rights which then equates to a better standard of living because of the incentive factor. When you have the state owning the land and forcing them to meet quotas, the average dirt-poor farmer will not work as hard. The threat of violence by the state if so many units of whatever is on the farm is the incentive that these folks have. And it isn’t just at the lowest levels either, as this pressure is also on their taskmasters. The farmer-laborer will do his job, but he will not do at well and he will not take care of the property being given to him, be it the hoe or the tractor or the land. If a quota is not met, maybe a few are taken into custody for “re-education,” but what goes for that lowly farmer goes to the bureaucrat who supervised the operation. So what you get instead is the establishment of fraud in the quota system, so as to avoid meeting the goals of their Five-Year Plans. Eventually the fraud’s corrupting tentacles reaches the upper echelons and the whole system collapses from within. This is what you saw with the Soviet Union, what started as a fidget of a number on some field went to “you pretend to pay me, and I pretend to work,” eventually the whole Moscow-run socialist economy was a sham.
Profit is one of the ultimate incentives for human beings outside of wanting to live. The vehicle for this is property rights, which are the rights of everyone to what they own as governed by natural law. Natural law states that property begins with yourself, your body is the first and ultimate piece of property that you own. Your home, your land, your car, these are extensions of said property. When the state takes away those items, the ultimate piece of property is at risk. This is why, those who love liberty, will always come to the protection of property rights.
These farmers were given property, they have a vested interest in where they work and live (assuming lodging is part of the deal). Well actually, let me back step here. The land is still owned by their local collectives, what they essentially got was rental space. If the state doesn’t intervene in the selection of product to produce, then these farmers have the freedom to produce what they wish. Because it is their land now, they must maintain it or they will lose everything. Yet reality also dictates that all that they consume can’t be planted on whatever lots they own. Thus the profit motive kicks in.
The farmer figures, as shown in the article, if they can make so much more on renting out that land than tilling it, they could meet their needs. Or, since they are essentially business owners with an agricultural concern, they could hire a workforce. China’s population growth has steadied a bit, but even at 1.3 billion people, that is large enough market to sell produce to. Farmers who don’t rent out their land, may hire workers to produce goods for the Chinese market. With an increasing population of Middle Class Chinese, the demand (and thus price) for the farmer’s goods will increase. Rising profits means more investment, be it in capital goods like tractors to paying more for labor.
Now why would a farmer want to pay more for labor? If there is a boom market for what they’re planting, more will get in on the act of selling such goods. Eventually there is a labor shortage or demand for labor to till the fields for those profitable product increases. If Farmer X doesn’t get the labor he needs, he won’t have enough manpower to produce those goods for market. He must compete with his fellow farmers for those hired hands. If, for example, Farmer X offers $1.50/hr and Farmer Y offers $2/hr, the latter most likely will meet his needs for labor while the first guy gets stuck. So Farmer X begins to offer higher rates, and others counter, the whole show repeating itself. Of course, eventually the price for labor has a ceiling that the market will identify, that resistance is when the cost of labor exceeds any profit margin. Markets, unless the state interferes, will have rebalance itself. The rental market for land is similar.
Farmer X may see that he may need more land to expand is profit margin. If he is selling, for example, if his land could produce 500 bushels of wheat, buying out someone’s lease on that collective farm or just renting it, he or she could double their yield. This is what you’re seeing in China, with the explosion in prices and demand for their goods, farmers are finding that subletting their leased land from the collective is earning them a sizable rental income.
“It’s really a good deal to rent out the land for half of each year,” says Zhang Deping, a 48-year-old farmer in the village of Shaban in Fujian province. “We can make more money than planting on our own….We can go to factories to work, or work in a field planted by someone else.”
He rents out his family’s plot from September to March each year, and grows rice for himself the rest of the year.
Shen Weifeng, who leases Mr. Zhang’s land along with that of nearly 500 other farming families, raises high-value crops such as kohlrabi, tomatoes and green peppers, and exports them to Russia and Mongolia. He started the business in the mid-1990s, but initially found few farmers willing to rent their fields to him.
“Now things have changed,” Mr. Shen says. “Most of the villagers are willing to rent their land out, and are even afraid that they might not be able to rent their land.” He has expanded from about 40 acres to more than 100.
Farmers who rent others’ plots often can be more productive. The survey found that 36% of farmers who rent others’ land make capital investments. “The pace of such investments has picked up markedly,” Mr. Prosterman said.
- excerpt from WSJ article. Copyright 2009 WSJ.com
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