Alexander Chayanov, the Peasant Economy, and North Korea

Alexander Chayanov (1888-1937), rarely invoked in academic circles today, pioneered a new way of thinking about pre/non-capitalist agricultural economies that radically broke from the conventional formalist views based around the “rational peasant.” When the English edition of The Theory of Peasant Economy was published in 1966, he launched a debate that had wide ranging implications for the discipline of economics and development. Although he only examined empirical evidence gathered from agrarian communities in Russia and presumed in his analysis that non-labor farming inputs, especially of land, was widely available (which is not a universal case; nor can one readily assume that his 1920s assessment can take into account facets of modern agriculture such as complex equipment, petro-chemical fertilizers, modern credit system, etc. – see Teodor Shanin’s commentary), his views on the rationale of productivity in non-capitalist agrarian communities contain elements to bear in mind when looking at the reform efforts in North Korea.

Chayanov’s basic premise lay with the idea that peasant family farms should be seen as a different form from capitalist farming, even in an environment dominated by capitalism. He notes that the peasant economy, characterized by family labor and the communities’ relative autonomy in the usage of that labor, was far more resilient (“self-defining and self-perpetuating”) than capitalist agriculture because the family unit, even working at a nominally negative profit, will survive falls in returns through the use of unwaged labor.

With the absence of wages, the behavior of the family farm cannot be accounted for in terms of standard theories based on traditional factors of production such as wages, interest, rent and profits. In this non-wage economy, the individual and the collective retain a specific conception of profitability. In particular Chayanov focused on the labor-consumer balance between the satisfaction of family needs (i.e. size of dependents including children and elderly) and the “drudgery” of labor (i.e. quality of hardship). According to his analysis, optimization of size and enterprise occurs within this balance and it is the increase and decrease from this optimality that determines the level of productivity in a peasant economy.

In this model, workers receive not the marginal product but the average net product, which takes into consideration long-term insurance against bad harvest, etc. One can see that under these circumstances, the production does not make room for surplus beyond what is necessary for the long-term satisfaction of the community’s needs.

It is here that Chayanov opposed the Soviet policy of rampant expropriation of grain – because he recognized that peasant societies only produce what is vital without making room for private gains (as Lenin assumed).

But Chayanov did recognize the problem of the peasantry in a modern economy – subsistence productivity cannot support the urban population nor a growing industrial sector. To prompt growth, he proposed a “vertical” concentration of capital where investments are made in processing and marketing to prompt the peasants to enterprise by appealing to their need to sustain satisfaction in the longer term.

This was in opposition to Stalin’s “horizontal” model of collectivizing the peasants into massive farms and milking agricultural surplus by pursuing maximization over optimization. Readers of history are well aware that this was a recipe for disaster.

Though an ardent supporter of Marxism and a fierce critic of capitalism, Chayanov’s research yielded conclusions that were contrary to the state-mandated policies. He was tried and executed in 1937.

But in the long-run, Chayanov’s basic premise proved correct and the application of his analysis  into policy resulted in greater productivity.

Teodor Shanin notes

[Hungary] first followed the Soviet “horizontal” pattern and after the 1956 revolution reorganized and tried it out again. What resulted was a decline of stagnation of agriculture and chronic shortage of food supplies (to which, before 1956, harsh repressions meted out to a resentful rural population should be added). Neither mechanization nor the deportation of “Kulaks” and the arrest of the “saboteurs,” nor bureaucratic orders and campaigns solved the permanent agricultural crisis. Then the Hungarian leadership demonstrated the courage of retreat… Village-scale units were now combined with both multi-village and single family ones… external controls declined, compulsory sales were abolished, and “vertical” chains of mutually profitable production arrangements were set up and facilitated (e.g., a small holder buying fodder at a price satisfactory to him from the large-scale collective enterprise of which he is a member, to produce within his family… which is then sold on a “free market” or under contract)… [This shift in policy succeeded in] not only resolving the problems of supplies but establishing Hungary as an exporter of food.

What are the policy implications for the North Korean state? It is not quite all clear because Chayanov’s case studies operated under different circumstances from North Korean agrarian communities. Nonetheless, certain general lessons can still be drawn:

Pyongyang, instead of attempting to increase productivity by forcing rural labor to be invested in collective farms currently accounted for in the current state logistics (although making the units smaller and more autonomous would have been laudable first steps… had they been implemented), ought to expand the scope of its statistics to include the private plots and de jure legalize their cultivation. These were after all, resilient sources of production that kept families alive during the famine and their productivity in this “black agricultural market” must be assessed for its potential.

Furthermore, increased supply to urban areas and production need to be incentivized in more ways than tinkering with the percentage of the crop that the community is allowed to keep. Direct links must be established between food processors, distributors and the farmers themselves on a contractual basis that is as free as Pyongyang will allow it to be. This has probably already happened at a micro-level through the jangmadang (street markets), but more must be done to formalize and expand these institutions.

Of course there are divergent interests within the upper echelons of power that prevent drastic changes in the economic organization of the country. At the same time, the Korean Workers’ Party has already shown, through the announcement of the June 28 Policy (albeit short-lived), that to a certain degree it has the courage to semi-retreat.

Time for Kim Jong-un to man up.

More to come, after more thought and analysis.

For further readings see:

Alexander Chayanov. The Theory of Peasant Economy, Manchester University Press, 1966.

Mark Harrison. “Chayanov and the Economics of the Russian Peasantry.” the Journal of Peasant Studies 2:4 (1975), pp. 389-417.

Teodor Shanin. “Chayanov’s Message: Illuminations, Miscomprehensions, and Contemporary ‘Development Theory.’” In preface to Alexander Chayanov. The Theory of Peasant Economy, Manchester University Press, 1966.

Chayanovian Alternative. from the University of Manchester (?)


About Yong Kwon

I develop trade advocacy strategies for a DC-based consulting firm. Studied economic history at the London School of Economics, and can be found on twitter at @ykwon88
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5 Responses to Alexander Chayanov, the Peasant Economy, and North Korea

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