Question

Why do farmers periodically go into debt? b. How has debt been a factor in farmers losing their land? c. In which historical periods do we see farmers borrowing money to expand when crop prices are high, only to lose everything a few years later when crop prices fall?

Answer 1

Farmers go into periodical or seasonal debt. This is because farming in quite a seasonal activity depending on the crops. Farmers borrow money to buy tools, machineries, seeds, fertilizers and so on. The short term instant credit is normally provided by the the rural money lenders at a high rate of interest. Quite often due to a poor harvest season selling the crops in the market does not allow the farmers to acquire the initial amount. This causes the farmers to go bankrupt. This may be due to drastic fall in crop prices or poor yield.

Frequently there is an unwritten contract with the rural moneylender to keep a piece of land belonging to the farmer as security, submtting the land papers. When the money cannot be repaid back they have to lose their land. Thus failure in repayment of loans caused the farmers to lose their land.

In the colonial India, period mainly between late 18 and early 19 century we see that the farmers having to lose due to falling crop prices in the market. Under Britsh hegemony repayment of loans in kind was abolished to boost the moneylenders. Thus, due to slash in crop prices the borrowed money could not be recovered. Thus, farmers' wasted creadit made them lose everything they had.