2. Theoretical Framework
2.4. Theories on Land Reform
2.4.3. Access Theory
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statements describe opportunities and constraints that create expectations about other actors’ behavior” (Ostrom, 2005). When the institutions are defined, uncertainty is reduced and it provides a structure to daily life. The institutions are therefore the fundamental determinants of economic performance in the long term.
In a land reform program, considering institutions in this way shows how the reform process eliminates or reduces constraints and create incentives to access and invest in land. Furthermore, it helps to understand how property rights can be organized to avoid externalities to the landowners and the society in general. In this context, the structuring of property rights is fundamental to a land reform program. Correct structuring of property rights can help to ensure socially fair, equitable, and legitimate outcomes, as well as reducing the costs of investing in land.
This thesis follows the NIE's approach, and its associated property rights theory, to explain how land reform institutions work. It also investigates the institutional changes and barriers to implementation, as well as the progress provided by land reforms and property rights institutions for enhancing access to land and investment in agriculture.
Therefore, this approach is related with the second factor suggested in the literature review “Institutions” and gives us an insight on how institutional structure matters.
2.4.3. Access Theory
The Access Theory developed by Ribot & Peluso (2003) describes how accessing things, such as resources, is more than simply having rights to it. Having “access”
involves a web of powers, in which property allows actors to improve, control, and maintain access to their resources, in order to participate and obtain benefits from them.
Therefore, a property is not only about rights, but also about all different forms of
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getting access and holding power. In this context, among the many forms of power that provide access to resources, rights are just one of them. Moreover, this theory also helps us to understand why certain people or institutions take advantage or benefit from resources, having or not rights to it.
The definition of access, used in the access theory, facilitates the analysis of who really benefits from land reforms and what are the processes they are willing to go through.
Thus, access in the land sector is related to the cases where powerful actors are able to use their authority or power in the land market in order to restrict those people with rights (property), their ability to obtain benefits from the land. This is a characteristic usually seen in developing countries, where people could have the right of using their resource but due to different factors such us bureaucratic factors or intermediaries, they are not able to have access to it and therefore, the benefits that can be obtained from that resource are totally or partially denied.
Hence, this approach is related with the third factor suggested in the literature review
“Guaranteed rights and incentives” and helps us to understand how guaranteed rights or access to the land are important to create incentives for the peasants in order to improve and invest in their lands. So, as we can see this is an important factor that could determine the success or failure of a land reform program. If the peasants cannot have guaranteed rights or access to their land, they will not be satisfied and won’t be willing to work the land efficiently as they will not receive the total benefits of their work.
To summarize, land reform will be consider in the present work as a complete program that aims to provide not only land to the landless but also governmental support to the new farm landowners and according to Elias Tuma, it success will depend on the performance of its economic indicators (Production, productivity, income, employment,
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and investments) and social indicators (Political and social stability, and decision making and peasant participation). According to the literature review, the possible factors that could explain why land reform worked in Taiwan but not in Peru could be related to the factors “State support in investment & technical assistance”, “Institutions”
and “Guaranteed rights and incentives”. At the same time, three theories related to the explanatory factors were found. The first one is “Economic Efficiency”, which is related to the factor “State support in investment & technical assistance” and where the historical concern of the government to increase the food supply for the population, lead the government to take measures for agrarian interventions in order to increase the production efficiency in the agrarian sector. The second theory is “The New Institutional Economics”, which is related to the factors of Institutions. In this case, Institutions are fundamental to a land reform program in order to be socially fair, equitable, and to reduce the costs of investing in land. And finally, the “Access Theory”
is related with the factor “Guaranteed rights and incentives”. Where having “access”
involves a web of powers, in which property allows actors to improve, control, and maintain access to their resources, in order to participate and obtain benefits from it.
This then brings to the conclusion of this particular chapter. The following chapter discusses the background and process of the land reform in Taiwan.
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CHAPTER 3
LAND REFORM IN TAIWAN
3.1 Background of the Land Reform in Taiwan
Between 1895 and 1945, Taiwan was under the Japanese administration. During this period, Japan improved the Taiwanese agriculture, especially in the production of rice and sugar. The Japanese technicians transferred technology and innovation to the agriculture sector, mainly on issues of water management and new crop varieties. The principal purpose of the colonial administration was to enhance Taiwanese agriculture so that larger supplies of food could be exported to Japan to sustain its industrialization effort (Yu-Kang & Schive, 1995). According to Samuel Ho, during this period,
“Taiwan developed an effective administrative system; a fairly extensive infrastructure;
an agricultural sector that was, after Japan, the most advanced in Asia; the beginning of an industrial sector; and some modern commercial and financial institutions” (Ho, 1987). In this aspect, all those investments in material and human capital made during the colonial period helped the Taiwanese farmers to be prepared for the land reform that would take place a few years later.
Another important contribution of the Japanese administration was the cadastral survey of all the land properties between 1898 and 1904. This report showed the characteristics and conditions of the properties and cultivated lands in order to eliminate the “double property” in 1905. This survey also allowed the administration to identify the landlords that were not paying taxes. This helped to increase the income for the government, which later would be invested in the development of Taiwan (Vander
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Meer & Vander Meer, 1968). Nevertheless, this measure did not solve the problem of tenancy conditions. During the Japanese period, 40% of the farmers were tenants, 25 % part-owner and 56% of the cultivated land was rented (King, 1977).
According to King (1977), the following tenancy conditions were also presented during the Japanese administration
In 1930, only 6% of the landlords possessed half of the cultivated lands.
Few contracts were written and generally were violated by the landlord.
The tenants used to pay exorbitant rent to the landlord, and also the tenant had to deposit a large amount of money to secure their lease.
The rent was between 50 % and 70% of the annual crop and farmers had to pay for it in rice.
Subletting of the land was common and it leads to cumulative exploitation.
About 82% of the farmers that needed credit, asked private moneylenders, which usually were landlords.
Between 1926 and 1940, a yield of rice per hectare increased by 1.4% annually, lands rents increased 1.2 % and the value of paddy land, 2%.
Additionally, during the later stages of the World War II, Taiwan was bombarded by the Allies and the damages caused by this and from severe typhoons, made Taiwan reduce its agricultural production by 12% annually.
According to Chang, under this system of tenancy, the productivity of land and the farmer’s incentive to produce were limited, and this produced an increment on the poverty of the rural society. Therefore, because of their situation of poverty and the uncertainty of tenure, tenants were not willing to make any long-term investment in their land (Chang, 1974).
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However, after the Japanese defeat at the end of World War II in 1945, General Order No. 1 instructed Japan to surrender its troops in Taiwan to Chiang Kai-shek, leader of the Chinese Nationalist Party Kuomintang (KMT). This new situation made people from the urban area of Taiwan to move to the rural areas. As a consequence of the pressure over the lands, it made the landlords increase the price of the rents even higher. In addition, the population grew with the migration of 1.5 million refugees from mainland China and the 630,000 nationalist armies. In this situation, the landlords had to support the KMT of taking the administration of Taiwan, because they were afraid that the communist party could come to Taiwan and introduce a drastic reform. So, it was better that KMT, a group of intellectual elite, could manage the government of Taiwan (Burisch, 1969).
3.2 Process of the Land Reform in Taiwan
The Kuomintang land reform took place in three stages. Firstly, farm rent reduction in 1949, where rents were limited to a maximum of 37.5% of the main crop yield.
Secondly, the sale of public land previously owned by the Japanese nationals. And finally, the “Land to the tiller Act” in 1953, where most of the landlords were forced to sell their lands to the tenants.
3.2.1 First Stage: Farmland Rent Reduction
The first measure of rent reduction was enacted in 1949, but since it was evaded by the landlords, another Act was enacted in 1951 called the “Farm Rent Reduction to 37.5%
Act”. The objective of this measure was to reduce the rent by a maximum of 37.5% of the standard annual yield of the main crop. However, the landlord established the rent according to their expectations of the annual yield in each particular holding and according to the local conditions. So, in this case, the agrarian cadaster made by the
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Japanese with 26 categories of dry and irrigated land was of so much help. This generated that tenants with a higher yield above the standard yield of their main crop, were satisfied with the rental, and those with a lower yield below the standard through poor weather conditions ended in rental cancellations for that season (King, 1977).
According to King (1977), during the implementation of the Farmland Rent Reduction, the following measures were also implemented:
Extra burdens to the tenants, such as payment in advance and security deposits, were eliminated. This provided the tenants with security of their rights never experienced before in Taiwan.
The contracts had a minimum of 6 years (before was 3 years). And even though the contract finish, the landlord could have his land back only if he met one of the three requirements: (1) Evidence that the landlord can work the land, (2) His income is insufficient to sustain his family or (3) the tenant has proofs to be supported by the government.
The subletting was not allowed, and to write contracts was mandatory.
A hierarchical structure of committees was implemented from the national to the local areas. This helped to improve the operations of the land reform without any bureaucratic limitation.
After all those implementations, there was an exhaustive revision of all the contracts (377,000 in total), which involved about 300,000 hectares of land. At the end of the revision, the Act of 1951 revealed that an approximate of 35,000 of the contracts signed in 1949 had been violated, mainly by the landlord. After the revelation of this Act, many landlords decided to sell their lands because they perceived that rent reduction had been affecting their incomes severely. On the other hand, there were others that speculated
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about a future expropriation of land, so that they preferred to sell part of their lands at very low prices. This early sale of lands with prices below the market created an incentive for the tenants to start buying those lands. Those prices offered by the landlords were even below the prices that would be offered later in the “Land to the Tiller” program (Burisch, 1969).
As a result of this first phase of the land reform, it generated economic changes with the decline of the land value. According to a survey conducted by the China Institute of Land Economics, it revealed that in December 1949, the year of the enforcement of the rent reduction program, the average price of paddy fields dropped by 19.4% and by 42.4% the dry lands. However, the living standards of agrarian families were improved, without the need for radical changes in tenancy structure. Since extra production was now to be enjoyed entirely by the tenant, it increased the incentive to produce more for them and for the market (Chang, 1974).
As well as providing the farmers with a better quality of life, this first phase of the land reform created certain prerequisites for future phases of land reform. On the one hand, it generated an organizational structure with the rent committee and the establishment of an efficient local tenancy, with the help of the cadaster. And on the other hand, in the psychological aspect, the reduction of the land prices made the tenants be aware of future opportunities.
3.2.2 Second Stage: Sale of Public Land
The sale of public lands, previously owned by the Japanese, started in 1948. The majority of the public land was transferred to public enterprises, such as the Taiwan Sugar Corporation. But, this was stopped with the “Farmland Rent Reduction” program
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implemented in 1949. However, this project of public land sale was implemented again in 1951. Between 1948 and 1958, six sales were made, where two of the main sales were the national and provincial lands in mid - 1951, and the expropriation of the Taiwan Sugar Corporation in 1952 (King, 1977).
Before the sales of land, the tenants on public lands used to pay 25% of the annual crop.
But, after the sale of public lands, the financial burdens were higher. Even when the 20 semi-annual repayments to the government within ten years were equivalent to the rents of 25% of the annual crop, the taxes and other charges increased the farmers’ expenses According to the calculations of Koo, including all the taxes and other charges, the total rents were between the 25.5% - 32.5% of the standard annual crop yield, a proportion that was below the proportion paid by the tenants with the 37.5% law. This situation generated high expectations for the new landholders to have a complete right over their lands within ten years (Koo, 1968).
In the process of public land sales, the priority was directed to the former tenants or local farmers with insufficient land. As a result, an approximate of 130 000 tenant’s families bought a total of 70 000 hectares, giving an average of a ½ hectare per family.
It is also important to mention that this process was relatively slow. On the one hand, it was due to the care in the selection of the new landowners and the decisions about the repayment methods. But on the other hand, it also showed the obstructionism of public enterprises against the enacted law and the discomfort of the small-scale private farming (Koo, 1968).
Finally, as a result of the second phase of the land reform in Taiwan, by selling 40% of the public lands and transforming tenants into new landowners, this program served as a pilot stage before the final phase of the land reform “Land to the Tiller”.
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Through the Act of 1953, it empowered the government to expropriate the lands of the landlords with lands above a certain limit and to create new owner-farmers. The private landowners could have up to 3 hectares of rice field and up to 6 hectares of dry land, both types of lands of average quality. Rice was the most important agricultural product for Taiwan and the rice sector was influenced immensely by the land reform (Chen, 1994). The lands from above those limits were mandatory purchase by the government for about 2.5 times the standard annual crop yield, where 70% of the compensation was in form of land bonds linked to the prices of agricultural products and 30% where paid with the participation in stock shares of government enterprises (Chang, 1974).
The tenant had to pay 2.5 times the standard crop yield, plus a 4% of interest for over ten years in twenty installments, one payment after each crop yield. The payment in both rice and cash was less than the payment with the rent reduction program of 37.5%
during the last four years. Moreover, regarding governmental investment, the state made a considerable financial commitment in order to promote agricultural modernization. During the 1950’s, agricultural investment represented a fifth of the total national investment. Additionally, land reform was complemented with a strong program of agricultural extension directed by the Sino-American Joint Commission on Rural Reconstruction (JCRR), which promote the creation of associations of farmers.
Those associations developed new technologies, marketing and credit cooperatives, and participated in agricultural planning. As a result of the final stage of the land reform, about 140,000 hectares of land were sold to 195,000 new owner-farmers, which generate the increment of the proportion of owner-farmers from 56% to 86% of the total farmland between 1948 and 1959 (Koo, 1968).
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According to Jolly, as was the case half a century earlier with the Japanese land reform, the expropriation of land was made easier by the fact that the government had no interest in the support of the landlords. The Kuomintang leaders, coming as they did from the mainland China, also felt no obligation to the local elite (Jolly, 2003).
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CHAPTER 4
LAND REFORM IN PERU
4.1 Background of the Land Reform in Peru
In order to understand the land reform in Peru is necessary to specify that Peru is divided into three main regions: the coast (Costa), the highlands (Sierra) and the jungle (Selva).
Each of these regions had different characteristics in its agricultural structure. For instance, in the highlands, the agrarian system was composed mainly by the hacendados, which were privileged with the arable lands; while the poorest lands belonged to the traditional communities. On the other hand, the agricultural system in the coast was characterized for having largely irrigated lands, which were specialized in the export of sugar, and where 65% of the sugar plantations belonged to foreign enterprises. Finally, the jungle was characterized for having extensive areas of forest, some of them inaccessible and others exploited because of its natural resources. So, due to the significant difference in the agricultural structure of these three regions, a very important issue discussed by the government was the land reform issue. If the government wanted to start a process of development and modernization, a change in the tenure system was fundamental (Carroll, 1970). In order to understand the situation of the tenure and agrarian system before the land reform, the following paragraphs will
Each of these regions had different characteristics in its agricultural structure. For instance, in the highlands, the agrarian system was composed mainly by the hacendados, which were privileged with the arable lands; while the poorest lands belonged to the traditional communities. On the other hand, the agricultural system in the coast was characterized for having largely irrigated lands, which were specialized in the export of sugar, and where 65% of the sugar plantations belonged to foreign enterprises. Finally, the jungle was characterized for having extensive areas of forest, some of them inaccessible and others exploited because of its natural resources. So, due to the significant difference in the agricultural structure of these three regions, a very important issue discussed by the government was the land reform issue. If the government wanted to start a process of development and modernization, a change in the tenure system was fundamental (Carroll, 1970). In order to understand the situation of the tenure and agrarian system before the land reform, the following paragraphs will