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CAMBRIDGE LATIN AMERICAN STUDIES

GENERAL EDITOR
MALCOLM DEAS
ADVISORY COMMITTEE
WERNER BAER, MARVIN BERNSTEIN,
AL STEPAN, BRYAN ROBERTS

47

CAPITALIST DEVELOPMENT AND THE


PEASANT ECONOMY IN PERU
For a list of other books in the
Cambridge Latin American Studies series,
please see page 141
CAPITALIST
DEVELOPMENT AND THE
PEASANT ECONOMY
IN PERU

ADOLFO FIGUEROA
Professor of Economics
Catholic University of Peru

The right of the


University of Cambridge
to print and sell
all manner of books
was granted by
Henry VIII in 1534.
The University has printed
and published continuously
since 1584.

CAMBRIDGE UNIVERSITY PRESS


Cambridge
London New York New Rochelle
Melbourne Sydney
CAMBRIDGE UNIVERSITY PRESS
Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, Sao Paulo, Delhi

Cambridge University Press


The Edinburgh Building, Cambridge CB2 8RU, UK

Published in the United States of America by Cambridge University Press, New York

www.cambridge.org
Information on this title: www.cambridge.org/9780521253970

© Cambridge University Press 1984

This publication is in copyright. Subject to statutory exception


and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.

First published 1984


This digitally printed version 2008

A catalogue record for this publication is available from the British Library

Library of Congress Catalogue Card Number: 83—18861

ISBN 978-0-521-25397-0 hardback


ISBN 978-0-521-10160-8 paperback
To IVAN and ROCIO
Contents

List of tables and figures Page viii


Acknowledgments xi

1 Introduction 1
2 Scope and method 3
3 The economic unit and economic organization 13
4 Production and exchange 24
5 The level and structure of peasant income 41
6 The economic behavior of the peasant family 58
7 Stagnation in the peasant economy and the role of demand 82
8 Economic crisis and the peasant economy, 1975-1980 102
9 Conclusions: reality, theory and policy 114

Appendixes
I The sample 126
II Methodological notes concerning the calculation of
peasant income 129
III Andean food plants 131
IV Methodology used in the calculation of Table 7.1 132

Notes 134
Bib liography 137
Index 139

vn
Tables

2.1 Intersectoral relations in the economy of a peasant


community 6
2.2 Peru: total and rural population by ecological region,
1972 9
2.3 The sample communities 12
3.1 Size of family and labor force 14
3.2 Distribution of cultivable parcels between cultivated and
fallow land 16
3.3 Number of parcels cultivated by number of crops 18
3.4 Animal stocks 19
3.5 Stocks of implements per family 20
4.1 Intersectoral relations in peasant communities 25
4.2 Average annual expenditure on modern inputs 33
4.3 Structure of monetary exports 35
4.4 Structure of monetary imports 38
4.5 Ratio of non-monetary exchange in peasant communities 40
5.1 Structure of income of peasant communities: own-
consumption and exchange 43
5.2 Productive structure of the communities 45
5.3 Structure of income of peasant communities: wages, rents
and self-employment 46
5.4 Money transfers 47
5.5 Structure of monetary income of peasant families 49
5.6 Structure of monetary gross expenditure of the peasant
family 50
5.7 Inequality in family monetary incomes 53
5.8 Summary of the regression analysis 55
6.1 Temporary migrations 68
6.2 Destination of temporary migrants to external labor
markets 69
viii
List of tables and figures ix
6.3 Employment sectors of temporary migrants 71
6.4 Residence of the children who left parents' homes 77
6.5 Residence and occupation of permanent migrants 78
6.6 Returns of members in peasant families 79
6.7 Reasons for returning 80
7.1 Peru: growth, inflation, distribution and pattern of
growth, 1950-80 84
7.2 Input-output table for food production-consumption
analysis 91
7.3 Peru: production structure for food, 1969 94
7.4 Lima: structure of family spending, 1969 95
7.5 Peru: imports/domestic output ratios for basic imported
food 98
7.6 Changes in world export structure 100
8.1 Peru: indicators of economic crisis, 1970-81 103
8.2 Peru: indicators of income distribution in the modern
sector, 1970-80 104
8.3 Lima: minimum wage, unemployment and underemploy-
ment rates (percentages) 105
8.4 Food subsidy incidence by families, 1980 111
A.I Expansion of the sample 127

Figures
6.1 Seasonality in peasant communities of the sierra 62
7.1 Engel curve and derived rural income curve 93
Acknowledgments

This book summarizes much of my research work of the last five


years. I initiated the study of the peasant economy in Peru in 1976,
thanks to a grant from the Social Science Research Council. The bulk
of the study on peasant communities was done within the ECIEL
Program (Estudios Con juntos de Integration Economica Latino-
americana) and financed by the Inter American Development Bank
through a convenio with ECIEL, during 1978-9. I must also
acknowledge the financial sources utilized during 1977-9 from the
grants given to the Economics Department, Catholic University, by
the Ford Foundation and the Canadian International Development
Agency. The University of Illinois at Urbana-Champaign provided
me with computational assistance during my stay at the Economics
Department as visiting professor in 1980.
Juan Ccamapaza, Wilfredo Ccori, Oscar Chaquilla, Jorge Diaz,
Matilde Ladron de Guevara, Felix Olaguivel, Ramiro Oregon, Cirilo
Quispitupa, Zoilo Quispitupa and Aurelio Succa, participated in the
fieldwork. In the stage of computational work I was assisted by
Bruno Barletti, Augusto Caceres, Jorge Rojas, Mario Tello and
Edgar Norton (at the University of Illinois). They all did an excellent
job and I am very grateful to them. Special thanks must go to Maria
Gabriela Vega and Daniel Cotlear who helped me efficiently in all the
stages of the research.
Many friends gave me valuable comments and suggestions at
different stages of the study. I received great intellectual support from
the ECIEL Program. Philip Musgrove, the technical coordinator of
the group, checked the analytics of the study on communities, and the
other members of the group, Alberto Petrecolla, Hector Dieguez,
Jorge Rodriguez, Mauricio Carrizosa and John Elac (from the Inter
American Development Bank), were always interested in the econ-
omic and social problems of the peasantry of my country. Werner
XI
xii Acknowledgments
Baer and the late Robert Ferber, at the University of Illinois,
contributed valuable comments to my work.
David Lehmann, Thomas Reardon, Alain Threffersen, Melissa
Birch and Russ Smith were generous enough to help me not only with
ideas and comments but also with translations and improvements in
the presentation of my ideas in English. Chapters 2-6 were published
in Spanish by the Catholic University as La Economia Campesina de la
Sierra del Peru (Lima, 1981). I also thank the two anonymous referees
provided by Cambridge University Press for their comments.
I would also like to thank my colleagues and my students of the
Economics Department, at the Catholic University in Lima, for their
encouragement. Javier Iguiniz, Head of the Department, helped me
in many ways to get this book published. Carmen Rosa Polo made an
excellent job of typing the manuscript.
This study could never have been done without the help of the
peasant communities studied. My gratitude to them is enormous; and
my commitment to the solution of peasant poverty is even greater. I
only hope that this book can contribute to the correct understanding
of the problem.
Lima
November 1982
1
Introduction

Peasant families represent approximately 25% of the population in


Latin America. They get their family income mostly from their small
plots of land. Despite the undoubted importance of peasant econ-
omies, there are as yet no satisfactory accounts or explanations of
their economic functioning and dynamics. The peasant economy
constitutes a 'reality without a theory'.
The importance of the peasantry comes not only from the number
of people but also from the fact that they represent the poorest social
group in Latin America. Several studies have shown that poverty in
Latin America is concentrated in rural areas and particularly in the
peasant families. Inequality and poverty will continue to be an
unfortunate characteristic of this region unless the real incomes of
peasant families are increased substantially. Economic policy to
reduce poverty must have the peasantry as one of the most important
target groups. Policies without theory however will not be success-
ful, except by accident. Again, our understanding of this particular
reality becomes a necessity.
This study is concerned with the peasant economy of Peru. This
country presents one of the extreme cases of inequality and rural
poverty in Latin America. Also the peasant population in Peru is a
large fraction of the total population (around 30%) and of the rural
population (around 66%). The historical process has, on the other
hand, generated in Peru one of the most extreme cases of cultural
duality, if one compares the sierra peasants and the upper and middle
classes living in Lima. Nowhere else does the notion of economic
duality seem more applicable than in Peru.
The scope of the study includes the analysis of the functioning of
the peasant economy in its present historical form in Peru, that is, in
the context of a predominantly capitalist system. The specific forms
that the economic and social relations between the peasantry and the
1
2 Capitalist development and peasant economy in Peru
rest of the economy take are the central issues in this study. From the
understanding of these relations, the role of the peasant economy in
the entire economic system can be better analyzed. The changes in
that role over time are also part of the scope of the study.
The method of investigation consists of studying in great detail a
sample of peasant communities in the most traditional and backward
region of Peru, the southern sierra. The fieldwork lasted about four
years (1976-9) and, in addition to questionnaires to collect quanti-
tative data, an anthropological approach was used in order to
understand processes and collect more qualitative data, particularly
on economic rationality. The results of this study of communities
constitute the core of the empirical data used in the analysis.
However, secondary sources have also been utilized at several points
in the book.
Investigating the case of Peru has a great methodological value for
the understanding of the peasant economy in Latin America. Because
this study refers to a case of extreme dualism in Latin America, some
results will apply with greater force to the general case in Latin
America. For instance, if our empirical research shows that the degree
of economic integration is significant in the case of Peru, the
conclusion to be drawn is that the peasant economy is an integral part
of the economic system in Peru, but this degree of integration is much
higher in the general case of Latin America. Other results of our study
will enhance the understanding of the peasant economy in other
individual countries.
The book is divided into nine chapters. Chapter 2 presents the
hypotheses about rural poverty in Peru and Latin America, which set
the questions to be answered in the study. A framework of analysis is
then constructed. This framework has been applied to the study of the
peasant communities in the southern sierra region of Peru. As
indicated above, this region is one of the poorest and most
'traditional' rural areas in Peru and in Latin America, and the study of
this reality has also a methodological value. Chapters 3-6 present the
results of the research in those peasant communities. Chapters 7 and 8
place the peasant economy in dynamic context, within the Peruvian
experience, with economic growth since 1950 and economic crisis
since 1975 respectively. Chapter 9 contains some conclusions in
terms of the hypotheses on rural underdevelopment, the dynamics of
the peasant economy under capitalist development in Peru, and the
economic policies that the case studies suggest.
2
Scope and method

Hypotheses on peasant economies


The persistence of poverty in the peasant economy in Latin America
calls for an explanation. For this, the study of the functioning of the
peasant economy and its relation to the rest of the economic system is
required. In fact, the relevant hypotheses can be classified according
to the emphasis given either to the production process or to the
process of exchange as the main cause of the economic backwardness
of the peasantry.

The production process


There are two common views concerning peasant economies: (1)
they are inefficient in their use of resources; (2) they are over-
populated, due to the absence of capitalist rules of production and
distribution. Against these two hypotheses, Professor Theodore
Schultz (1964) has developed a new proposition in terms of
'traditional agriculture'. His hypothesis is basically the following:
there is no significant inefficiency or overpopulation in peasant
economies. Poverty here can be explained by the poor quality of
resources and the traditional technology in use. Peasant families are
poor but efficient. As he put it: 'the community is poor because the
factors on which the economy is dependent are not capable of
producing more under existing circumstances. Conversely, ... the
observed poverty is not a consequence of any significant inefficiencies
in factor allocation' (p. 48).
In a dynamic sense, Schultz argues that 'the factors of production
on which a community depends are expensive sources of economic
growth' (p. 97). This is to say that the rate of return of traditional
capital is very low. The peasant economy is highly endowed with
traditional factors of production; the idea that there is scarcity of
4 Capitalist development and peasant economy in Peru

capital in this economy and that the rate of return should then be very
high has no empirical base: the stock of traditional capital is very high
and, consequently, the rate of return very low. Moreover, this low
rate of return does not create incentives to save and invest in those
factors. The policy implication of this hypothesis is that the peasant
economy should shift to the use of modern factors of production.
Another hypothesis refers to the land tenure system. According to
this view, peasant families are exploited through non-capitalist social
relations, like share-cropping systems. These systems of production
and distribution would also have negative effects on the propensities
to introduce innovations and technical change in the production
process. A land reform program would be the policy to follow based
on this hypothesis.

The process of exchange


With regard to the exchange process, there are two conflicting
hypotheses. The first says that the peasant economy is not sufficiently
integrated into the rest of the economic system. This is the well-
known hypothesis of 'economic dualism'. The peasant economy is
basically a self-sufficient economy, outside the market system.
Therefore, the economic growth that takes place in the capitalist
sector does not spread to the peasantry due to the lack of linkages
between these two sub-systems.
The second hypothesis suggests exactly the contrary. The peasant
economy is well integrated into the capitalist economy through the
market mechanism and, therefore, the peasant family is subject to the
system of exploitation of capitalism. It is due to this integration that
the peasant economy becomes an underdeveloped economy (de
Janvry, 1974).
In order to test empirically the explanatory power of these
hypotheses, the process of production and exchange in peasant
economies must be studied. The particular reality which will be
studied for this purpose are the peasant communities of the sierra
region of Peru. The required analytical framework, which in-
corporates the basic elements of this reality, is presented below.

The analytical framework


Technological and market relations
The peasant community is not only an aggregate of families but a
social context which establishes certain economic relationships
Scope and method 5
among its members, and in which certain economic decisions are
reached collectively and certain economic activities are carried out
collectively. It is, indeed, the macroeconomic framework of the
peasant family which is the basic economic unit. As such, it comprises
three sectors of production: agricultural goods (A), livestock (P),
and a wide range of non-agricultural goods such as crafts, processed
foods, and construction which we shall call 'Z-goods' (Hymer and
Resnick, 1969). This mix of activities is found in most cases,
although, to be sure, there are also cases of specialization in potato
production, in pastoral activity, and in weaving.
In order to undertake production, the community possesses two
primary factors of production - land (T) and labor (H) - and three
types of initial stocks of products which correspond to the three
sectors mentioned above: seed (A), animals (P) and tools (Z). These
goods are produced, but since 'one needs commodities to produce
commodities', they must be already available as initial stocks if
production is to be undertaken. Other inputs enter into the
production of A, P and Z-goods, as flows, and they come either from
the community's annual production or from its imports. The
community as a whole exchanges with two 'external sectors': the rest
of the rural economy (JV) (other communities and haciendas) and the
urban economy (M).
A table of 'intersectoral relations' (Table 2.1) offers an analytical
approach to the relationships between primary factors of production,
initial stocks of goods and inputs on the one hand, and the annual
product and its allocation on the other. In Table 2.1 the agricultural
production of a particular year is represented by X±. This product is
net in the sense that it excludes the seed used, and it is allocated as
inputs to the same year's cattle production (e.g. as oats, barley and
other animal feeds), and to the production of Z-goods (the inputs
being processed into food, such as potatoes to be dehydrated for
chunoy and maize for beer, chicha). The remainder of the agricultural
production is for consumption (Cx), for the accumulation of further
stocks for the subsequent agricultural production cycle (71) and for
export or sale outside the community (Nx and Mx).
A year's livestock production is represented by X g . It comprises:
the number of animals produced, including chickens and guinea-
pigs; derivative products, such as milk, eggs, wool and skins; and
dung, which is used as fertilizer. Part of the production from this
sector is dedicated to the productive process as inputs: fertilizer for
agriculture; inputs for Z-good production (e.g. milk for cheese, wool
6 Capitalist development and peasant economy in Peru

Table 2.1 Inter sectoral relations in the economy of a peasant community

Consump- Invest-
Sectors tion ment Exports

A P Z C I N M Total

Agricultural
goods A h M
i X,
y A y
Livestock P : |
Z-goods Z *:; x
*2 01 J^ M X2
Imports
in kind N h 0 0 Xn
Imports
(monetized) M Im 0 0 Xm
Labor H 0 Mh Xh
Land T in X,\ l\: % 0 0 0 X,
Agricultural
goods A ^11 ^12 ^li
Animals P
Tools Z 3

for blankets and clothes). Part is consumed as meat, milk, eggs and
skins; part is invested, as when the stock of animals is increased; and
part is exported.
Z-goods constitute a varied list, of which the main elements are the
following:
(a) processed food: chuno, chicha, cheese and dried meat;
(b) textiles: clothes, blankets, ponchos, sweaters, cloaks, sacks,
straps, harnesses and lassos;
(c) tools, and repair thereof;
(d) construction: houses, public buildings, yards and enclosures,
roads, canals, and construction materials such as adobe bricks and
roof-tiles;
(e) fuel: firewood;
(f) trade;
(g) transport;
(h) other crafts: ceramics, leatherwork, carpentry.
Some of these Z-goods contribute to agricultural and cattle pro-
Scope and method 7
duction, others to final demand. They contribute to agriculture as
sacks and other containers and in the repair of tools; they contribute
to cattle production as ropes, harnesses and lassos; they are consumed
as woolen textiles; they are invested in construction; and they are
exported as cheese.
Imported products from the rural economy (Xn) go into pro-
duction as agricultural inputs, as inputs for livestock production
(black salt fed to animals) or as inputs for the production of Z-goods.
They also are consumed, as in the case of maize imported by upper-
highland communities, and invested. The same can be said of urban
imports: fertilizers, pesticides, medicines for livestock, and dyes for
handicrafts are intermediate production goods; salt, sugar and
kerosene are for consumption; and they go to investment (above all
as steel implements).
Annual labor, measured in person-days, is used in all three sectors
of production, although production may often be in two sectors at
once, for example when someone tends cattle and spins wool at the
same time. Ch refers to 'consumption of labor', in rest-days or fiestas.
Nh and Mh denote exported labor (migrating for temporary work
outside the community).
The stock of land (Xt) is measured by area, and is allocated to
agricultural production, to livestock production when sown to
alfalfa, and to production of Z-goods when used for building. Ct
refers to land set aside for homes, plazas or sportsfields.
The last three rows represent stocks of capital goods which are used
in the current year's production — as opposed to the top three lines
which representflows,that is, quantities produced during the year, j*
represents agricultural stocks required for agricultural production
(such as seed, S ). S is the stock of animals used in all three sectors,
e.g. for motive power (i.e. oxen), reproduction (expansion of the
stock), and transportation. Finally, S3 represents the stock of tools
used in the production of goods in all three sectors.
It should be clear that each column of the table represents the
combination of elements of production necessary to produce the
corresponding good: it is a vector representing a technological
process. The four right-hand columns represent vectors of final
demand: the composition of goods consumed, accumulated and
exchanged. It will also be noticed that the community produces four
types of commodities: agricultural goods, livestock, Z-goods, and
labor for export to work temporarily elsewhere in town or country.
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