The Agrarian Origins of Commerce and Industry: A Study of Peasant Marketing in Indonesia

216 Pages·1993·17.31 MB·English

by  Yujiro Hayami

STUDIES IN THE ECONOMIES OF EAST AND SOUTH-EAST ASIA
General Editors: Peter Nolan, Lecturer in the Faculty of Economics and
Politics, University of Cambridge, and Fellow and Director of Studies in
Economics, Jesus College, Cambridge, England; and Malcolm Falkus,
Professor of Economic History , University of New England, Armidale,
NSW, Australia
In the last decades of the twentieth century the small and medium-sized
nations of East and South-East Asia have begun a process of potentially
enOlmous political and economic transformation. Explosive growth has
occurred already in many parts of the region and the more slowly
growing countries are attempting to emulate this vanguard group. The
impact of the region upon the world economy has increased rapidly and
is Iikely to continue to do so in the future.
In order to understand beuer economic developments within this vast and
diverse region, this series will aim to publish books on both con
temporary and historical issues. It will include works both by Western
scholars and by economists from countries within the region.
THE AGRARIAN ORIGINS OF COMMERCE AND
INDUSTRY
The Agrarian Origins
of Cotntnerce and
Industry
A Study of Peasant Marketing in
Indonesia
Yujiro Hayami
P/'ofesso/' of Illtel'llational Ecol/omics
Aoyama-Gakllil/ U"il'ersiIY, Tokyo
and
Toshihiko Kawagoe
Associale P/'ofesso/' of Ecol/omics
Seikei U"il'ersity, Tokyo
Foreword by
C. Peter Timmer
lIal'l'al'd Ullivel'sity
© Yujiro Hayami and Toshihiko Kawagoc 1993
Forcword © C. Pctcr Tinllllcr 1993
Softcover reprint of the hardcover 1s t edition 1993
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First puhlishcd in Greal ßritain 1993 by
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ISBN 978-1-349-22516-3 ISBN 978-1-349-22514-9 (eBook)
DOI 10.1007/978-1-349-22514-9
11 10 !) 8 6 4 3
06 0" 04 ü:\ 02 0\ 00 99 !l8
First publishcd in the Unitcd States of Ameriea 1993 by
Scholarly and Rcfcrcnee Division,
ST. MARTIN'S PRESS, INC.,
175 Fifth Avcnuc,
Ncw York, N.Y. 10010
ISBN 978-0-312-08621-3
Library of Congrcss Calaloging-in-Publicalion Dala
Hayami, Yujkiro, 1932-
The agrarian origins of commcrcc and industry: a sludy of peasant
markcling in Indoncsia I Yujirn Hayami and Toshihiko Kawagoc;
foreword by C. Pclcr Tinuner.
p. cm.
Inc\udcs bibliographieal rcfcrcnccs and index.
ISBN 978-0-312-08621-3
I. Farm producc-Indoncsia-Markcling. 2. Markcling ehannels
-Indoncsia. 3. Pcasanlry-Indonesia. 4. Indonesia-Commerce.
I. Kawagoe, Toshihiko. 11. Tillc.
IID9016.166H38 1993
380.1 '4I'09598----{jc20 92-18420
CIP
Contents
FOl'ell'ol'd by C. Pe/eI' Timme/' IX
PI'(iace XIII
Abbl'el'ialions xv
Peasant Economy and Pcasant Marketing
1.1 Peasant marketing or agriclIltural marketing 2
1.2 Pcasants and markets 3
1.3 Agenda of the peasant markcting stlldy 13
1.4 From village lo bazaar 16
1.5 Stlldy periods and price levels 21
1.6 Plan of the book 21
2 A I~rototype in Upland Java 23
2.1 Environment of lIpland Java 23
2.2 Organization of marketing 35
2.3 Tradc practices and contracts 45
2.4 Prices and marketing margins 52
2.5 Structllre of processing indllstries 60
2.6 Income and employment generation 67
2.7 Summary 73
3 The Scene of a Transmigration Area in Sumatra 76
3.1 Environment of the transmigration area 77
3.2 Marketing organization in the transmigration area 87
3.3 Infrastructure and market competition 96
3.4 Prices and marketing margins 97
3.5 Summary 108
4 Marketing Innovation for Commercialized Production 111
4.1 Environment of a new product innovation 111
4.2 Two channeIs of vegctable marketing 122
vii
viii Content,l'
4.3 Thc intcr-villagc collcetor in interregional trade 125
4.4 8azaar vendor in the loeal market 134
4.5 Prices and marketing margins 143
4.6 Rural ineome generation 152
4.7 Summary 161
5 From Peasant Marketing to Modern Commerce and
Industry 165
5.1 The organization of peasant marketing 165
5.2 Polieies for market dcvclopment 169
5.3 Peasant entrepreneurs in modernization: Indonesia
and Japan 171
Appendix A Marketing C/ulllnels.for Riee 174
Appendix B Estill1ation (~r Credit Costs for Vegetabil?
Producers under Altemative Credit Arrangements 176
Notes al/(/ Referellces 180
Glos.wry 184
Bibliography 186
Name Index 192
Su/~ject Index 194
Foreword
Economis1s usually do no1 worry about how markets are eS1ablishcd
or who participatcs in their runctioning. ßy asslllning away such
complexilics as 'invisible hunds'. il is possible 10 prove lhal economic
resollrces will be allocated erticiently when markets do I'unclion
perrectly. ßut do they" How do markets, especially in newly develop
ing cOllntries, actllally runction: And how do lhey slart'!
The importancc or answering thcse qucstions rar cxcecds thc
expeetutions or Yujiro Hayami and Toshihiko Kawagoe whcn thcy
bcgan their field work on pcasant markcting or upland field crops in
1986, in the Indonesian province orWest Java. No-one predicted 1hen
that all socialist economies would collapsc by thc end or the decade,
slarling a mad search ror ways 10 lrallsrorm centrally planned
allocalion systems inlo markel-oricnled ones. From Poiami 10 Bulgar
ia, the Ukraine to Mongolia, cven China to Vietnam, policymakcrs
want to know how to 'start' a nmrket economy.
They would do weil to read this book. Hayami and Kawagoe do not
bclabour the critical roles played by a markeling systcm in transrorm
ing a trudilional ugriclllIUl'al system into a commcrcially dynamic one.
Thcir rocus is on lhe parlicipanl in lhe actual conslruction 01' such a
system and the nature or the relationships among all 01' thcm. from
peasant rarmcr to urban wholesaler, that underlie the working or
'invisible hands' in the markcts. In their own words, the approach is
'pedestrian', timt is, the researchcrs walked and talked with the traders,
Jistened and questioned, but made no attempt 10 fill out slructured
questionnaires to generate sta1istical da1a ror computer analysis.
I am highly sympathetic to this methodology ror unders1anding
actual marketing transactions and the nature 01' decisions being made.
A decade ago, Fcmel Polier Analysis made the rollowing observations in
the in1roduclion 10 'Understanding lhe Marketing System':
da ta rrom field observations. even informal weckend sUl'veys. add
crilical Oavor and insight into lhe mechanisms lhat gencrate
published statistics. For example. riding with a bag or rice as it
changes hands repeatedly between the rann gate and retail stall and
understanding all lhe deeisions made along the way will guarantee
the analyst a better pcrspective on market decision-making und price
ix
x Fo/'e1\'m't!
formation than a host of statistieal analyo;es donc in thc officc. (C,
Pctcr Timmcr. Wallcr P. Falcon. and Scoll R. Pcarson. Foot! Polic,l'
AII(/~\',\'i,\', John J-Iopkins Univcrsity Prcss for thc World Bank, 1983,
p. 1(5)
Normally, only anthropologists havc thc paticncc and pl'Ofcssional
insighls 10 pursuc this typc of rcscarch. 11 is not surprising thut much
of thc lifcraturc on pcasants and markcts is anthropologieal or that thc
kcy intcllcctual issucs Imvc bccn fnllllcd in their tcrms. In rcvicwing
this litcraturc, Hayami and Kawagoc arguc that thc anthropologieal
pcrspcctivc has misscd an important dimcnsion of the issuc: the
distinclion bctwccn static rclationships bctwccn peasants and markct
agcnts and thc dynamic rcsponsc of those rclationships to ncw
tcchnology, rural infrastruclure, schooling opportunitics, or rising
rcal incolllcs. Thc important qucslion for Hayami and Kawugoc is
not whcthcr pcusants huvc cvcr bccn 'cxploitcd' by thc Illurket, 01' huve
failcd 10 parlicipatc as aclivc nmrkcling agcnts in thc PUSI, but whcthcr
thcy huvc thc capacity to Icarn thc cntrcprcncurial skills nccdcd tn
participatc slIcccssflllly as ncw markct opportunitics arc gCllcnttcd.
Thc answer, atlcast for thc samplc of villagcs in Indoncsiu, is a elcar
and rcsounding ycs. This finding is lilllc short of rcvolutionury.
Indoncsia has bcen thc brecding ground fOt' scveral powerful and
inllucntial countcrhypothcscs, espccially thc 'traditional pcusant I'unc
tioning in a dual cconomy' of Bockc and thc 'pcasant on an
illlmiscrizing trcadmill 01' agricllitural involution' 01' Gccrtz. Whatcvcr
thc rclcvance of thesc hypothcses at carlicr historieal juncturcs, they
simply do not hold today, Thc modcrn rcality is 01' a mullitudc of small
pcasants activcly trading their own and neighbollrs' producc in local
markcts, co-opcrating productiOil with anticipatcd market dcmund,
ami taking gcnuinc linancial risks in carrying out thcsc functions.
Thc broadcr significancc of thesc lindings might bc lost if thc rcadcr
dweils on thc details of each pClly tntnsaction. Dut thc rclevancc of thc
rcscarch to socialist econol11ies in their transition '1'1'0111 Marx to thc
markc!'. to usc a rcccnt covcrpagc hcadlinc in 11/(' Ecollo",i.~1 (11 May
1991), it is vcry dcar. First, in thc right cnvironment. marketing skills
ami the markcts timt utilizc thcm can spring frol11 unpromising rural
settings, a linding that Huyami and Kawagoe argue is consistent with
experiencc in la te Tokugawa und carly Meiji Jupan.
Second, the proccss docs not happen ovcrnighl. Huyami and
Kawagoc list scvcral prcrcquisitcs for activc pcasant participation in
markcting cntrcprcncurship. including a signilicant illlprovcmcnt in
ForC'lI'ord xi
agricultural productivity. Governments can both help and hinder the
process, bul most governmenls repress lhe emergence of indigenolls
markeIs and traders in lheir efforls 10 keep lhe ubiquilous middleman
from 'exploiting' the pcasant and the consIImer. Thc best stratcgy,
argue Hayami and Kawagoe, is for govcrnmcnts 10 foster easy entry
into trading by improving rural infrastructure, pl'Oviding marketing
information as widely as possible. developing reliable and appl'Opriate
property rights and contract mechanisms with grades and standards.
and by staying out of the business themselves.
This is all sensible advice. It lays the essential foundation for two
imporlanl government roles in building an efficient and dymllnic
marketing system. First. marketing investments, even marketing
investments by small-scale pcasants, are set in a macroeconomic
context as weil as the specilic micro-Ievel village context observed by
Hayami and Kawagoe. Apart from the pernicious effects of an
overvalued domestic currency, subsidized credit programmes, and
inappropriate project designs. which Hayami and Kawagoe discuss,
the stability of the economic environment is an imporlanl element in
the willingness of investors to look beyond short-run speculative
profits. Indonesia 's success in stabilizing its rural economy helped
not only to raise agricultural investment and pl'Oductivity but also to
provide fertile ground for the small-scale marketing sector that
Hayami and Kawagoe observed.
Second, an efficient agricultural marketing system contributes to
economic growth. It deli vers new technology into the countryside,
carries agricultural and food products out and delivers urban services
and industrial products back to rural households. Although each
micro-Ievel actor in this system can carry out individual transactions
efficiently, the system itself can realize economies of scale in transmit
ting information, lowcring transaction costs, and spreading risks over
larger numbers of participants. Governments can hclp a marketing
system realize these potential economies of scale lhrough appropriate
investments in the basic public infrastructure that provides the roads.
eleetricity. telephone lines, ports, commereial codes, and private
confidence, which are fundamental to a market economy.
Mosl governments under-invest in this infrastructure and over
invest in their own enterprises and efforls 10 carry out agricultural
marketing direclly. If policymakers lrusled their peasants more und
fearcd middlemen less, this government bias could be reversed. Most
policymakers have never met a peasant. much less one with entrepre
neurial skills engaged in risky trading activities. Hayami and Kawagoc