Interlocking Transactions: Obstacles, Precursors or Instruments of Agrarian Capitalism?

Journal of Development Economics 23 (1986) 177-203. North-Holland

INTERLOCKING TRANSACTIONS

Obstacles, Precursors or Instruments of Agrarian Capitalism?*

Gillian HART

Boston University, Boston, MA 02215, USA

Received November 1984, final version received March 1985

Rural labor arrangements often change rapidly and in ways that prevailing theories cannot explain. Explicit understanding of the exercise of power in rural society sheds considerable light on how and why rural labor arrangements change in the course of economic development. This paper shows how different labor-tying arrangements embody exclusionary mechanisms that can serve as instruments of both labor management and social control. Macro political and economic conditions shape the ways in which these mechanisms operate, and are in turn influenced by them. Viewing labor arrangements in this way helps resolve problems confronted by the prevailing theories, and allowsfor a broader understanding of dynamic processes.

1. Introduction

Recent empirical and historiographical studies are increasingly uncovering enormous variations in the forms of agrarian labor arrangements, often within the same area. These institutions range from simple, commercial transactions to many far more complex contracts in which labor is tied in with land, credit and other relations. Further, agrarian labor arrangements sometimes change very rapidly, and the patterns of transformation are also quite varied. In some instances these changes tend in the direction of impersonal, single-stranded transactions for the purchase and sale of labor power. In many others, however, different forms of tied labor not only survive but are often adapted, reinforced and embellished in many ways.

While the ubiquity of interlocking transactions is now widely acknow- ledged, how and why they change over time has become highly contentious. This dynamic question is vitally important. Not only are the institutional arrangements governing rural labor deployment closely linked with changes in agricultural productivity, they are also a key to interpreting trends in income distribution and levels of living of poor rural people [Hart (1986a)]. More fundamentally, they are central to the analysis of structural transformation and agrarian class formation.

*Pranab Bardham, Amit Bhaduri, Sara Berry, Peter Doeringer, Christine Jones, Sutti Ortiz, Steven Stoft, Lance Taylor and Vijay Vyas have made valuable comments and criticisms, but are not responsible for the errors and omissions that remain.

0304-3878/86/$3.50 © 1986, Elsevier Science Publishers B.V. (North-Holland)

178 G. Hart, Interlocking transactions

This paper comprises a critique of alternative theories of the fate and functions of interlocking transactions in the course of capitalist development, together with an effort to delineate an alternative approach to the analysis of institutional change. In taking issue with existing theories, the present study focuses on the need to understand how macro political-economic structures both influence and are influenced by the institutional arrangements governing rural labor deployment.

The key lies in a clearer understanding of mechanisms of both labor management and social control, and the ways in which they interact with one another. In particular, many different types of labor tying arrangements entail the selective extension of 'privileges' to particular workers while simultaneously excluding others. These exclusionary mechanisms can in principle operate so as to ensure effort [Stoft (1982)]. In addition they are closely associated with the exercise of power and social control in rural society. Viewing agrarian labor arrangements in this way allows for a more powerful analysis of dynamic processes. It also helps resolve important problems confronted by the prevailing theories.

The framework outlined in this paper grows out of my work on Java [Hart (1984, 1986a, b)]. In extending the analysis, I have drawn primarily on evidence from India and Chile, a choice dictated both by the availability of historical material and because these two countries constitute the chief empirical referents in many theoretical debates. In order to illustrate the possible generality of the arguments, I have also included some supplemen- tary material from 19th century Prussia and contemporary California.

Several caveats are in order. First, this analysis applies particularly to agrarian settings characterized by unequal control over the means of production in which the bulk of labor is hired and a relatively small group accounts for most of the labor hiring. Second, it deals with sharecropping only in this context as one of a range of possible modes of labor control and excludes from consideration situations in which the sharecropper is the economically stronger partner [Finkler (1980)] and sharecropping as a relatively symmetrical joint venture [Lehmann (1984)]. 1 Third, this paper presumes neither to develop a predictive model nor to undertake a compre- hensive analysis of agrarian class formation. Its purpose rather is to sketch the contours of a more dynamic approach to the analysis of agrarian labor arrangements and to suggest directions for future research.

The paper is divided into two parts. Section 2 reviews prevailing theories in terms of their internal consistency and in light of evidence from a wide variety of agrarian settings. Taking as its point of departure important phenomena that none of these theories are able to explain, section 3 contains the outline of an alternative approach.

1This paper also does not deal with other manifestations of interlocking transactions such as outgrower schemes, franchises, and so forth.

G. Hart, Interlocking transactions 179

2. The interlinkage debate: A review and critique

The 'interlinkage debate', as it has come to. be called, stems from Bhaduri (1973) which argued that tenancy-cum-credit contracts act as barriers to technological innovation and investment in agriculture. According to Bhaduri, landlords withhold yield-increasing innovations because increases in tenants' income would allow them to reduce their indebtedness which in turn would curtail income from usury. Even if the gain in productivity were to exceed the loss of usury income, landlords would still oppose such innovations since their economic and political power derives from maintaining tenants in a state of perpetual indebtedness.

The Marxist response to Bhaduri reflects an effort to come to terms with evidence showing that agricultural development is often accompanied by the resurgence of labor-tying arrangements. This evidence is also inconsistent with Lenin (1899), the most fully developed theory of agrarian change, which asserts that the development of agrarian capitalism entails the withering away of different forms of labor tying and the emergence of impersonal, single-stranded wage labor relations. The response is most deafly articulated in a recent paper by Pearce (1983) who concedes that sharecropping and other types of tied labor such as labor rents may be compatible with the early stages of agrarian capitalism, but that they are essentially transitory phenomena which inevitably disappear in the process of capitalist development.

The vociferous non-Marxist critique of Bhaduri amounts in effect to the contention that, since interlocking transactions can be analyzed as market relations, they are perfectly consistent with capitalist development. 2 In their efforts to refute Bhaduri, critics have developed a series of interlinkage models which, while not neoclassical in the strict sense of assuming given wages and prices confronting an individual decision-maker, are firmly within the micro choice-theoretic tradition.

The discussion which follows examines both the internal consistency of these competing theories, and their explanatory power.

2.1. Bhaduri's model: Interlocking transactions as semi-feudal

Bhaduri's model of interlocking transactions is best viewed in relation to Lenin's analysis of agricultural backwardness. In Lenin's view, labor service arrangements are holdovers of feudalism that can assume a variety of different forms:

2The literature which grows out of the mainstream critique indeed exemplifies Pasinetti's observation that neoclassical economic theory generally responds to challenges "by making every effort to absorb the new developments into the old theory', thereby rendering them sterile [Pasinetti (1981, p. 18)].


'Sometimes peasants undertake for a money payment to cultivate with their own implements the fields of the landowner . . . Sometimes the peasant borrows grain or money, undertaking to work off either the entire loan or the interest on it. Under this form a feature peculiar to labour-service system in general stands out with great clarity - the bondage, the usurious character of this sort of hire of labour. In some cases the peasants work "for tresspass" ... or work simply "out of respect" i.e. gratis, or just for a drink, so as not to lose other "employments" by the landlord. Lastly, labour-service in return for land is very widespread in the shape either of half-cropping or directly of work for land rented, for grounds used, etc.' [Lenin (1899, p. 200), emphasis added].

Closely related to bondage and usury, the other defining feature of labor service is that it 'always presupposes the personal dependence of the one hired upon the one who hires him, it always presupposes the greater or lesser retention of "other than economic pressure"' [Lenin (1899, p. 206), emphasis added]. The inevitable consequence of labor service arrangements is the perpetuation of low labor productivity, since 'the labour of the bonded peasant cannot but approximate, in quality, to the labour of a serf' [Lenin (1899, p. 206)].

Bhaduri's model can thus be seen as an effort to formalize Lenin's assertion that labor service, bondage and usury are crucial factors retarding the development of rural capitalism [Lenin (1899, p. 189)-I. The model evoked a storm of criticism directed both at its internal inconsistencies and at the evidence on which it was based [Griffin (1974), Newbery (1975), Ghose and Saith (1976), Srinivasan (1979)]. Of the former, among the most telling is the point that 'if a landlord has sufficient monopoly power to exploit the peasant and to withhold the innovation then he ought to have sufficient power to extract the extra profits generated by that innovation' [Newbery (1975, p. 270)]. Newbery also observed that Bhaduri's static equilibrium model is decidedly non-Marxist despite Bhaduri's claims to the contrary.

The chief empirically-based critique stems from a series of surveys in northeastern India, the area to which Bhaduri referred in developing his model. These studies show not only that technological progress has taken place, but also that interlocking contracts are more common and appear to be on the increase in technologically more advanced areas [Bardhan and Rudra (1978, 1980a, b)]. For instance, although landlords are often an important source of credit, income from usury is not significant and landlords often play an active role in promoting new technology and improved cultivation practices. Also, although many attached laborers take consumption loans from their employers, most of these loans are interest-free.


Substantial increases in labor-tying arrangement have also been reported in Haryana, a state in northwestern India which has experienced major advances in wheat production and large increases in labor demand [Bhalla (1976)]. These new contractual forms, many of which are adaptations of older arrangements, have as their key component consumption indebtedness. Bhalla comments on the 'infinite variety of permutations and combinations' in the actual terms of contracts, but points out that most involve some type of managed borrowing. She stresses, however, that the factor which ties the worker more closely to the employer is not the level of interest rates nor the amount of debt per se; indeed, interest rates are lowest in the most advanced area with the highest incidence of permanent labor contracts [Bhalla (1976, p. A-29)]. Other examples of labor-tying arrangements accompanying agricultural intensification are provided by Ganjanapan (1984) in Thailand, Fegan (1981) in the Philippines, Kasryno et al. (1982) and Soentoro et al. (1982) in Java. As in the Haryana case, usury appears not to be an important element in these contractual arrangements.

Even in instances where labor tying arrangements involving high levels of indebtedness exist in the context of agrarian backwardness and the power of employers to exercise extra-economic coercion, the mechanisms through which they operate are not necessarily those identified by Bhaduri and Lenin. A classic example is Breman's (1974) study of bonded labor in South Gujarat, India, as it evolved through the colonial period. This analysis of indebtedness and bondage is, if anything, the obverse of Bhaduri's. According to Breman, servants did not try to limit their debts - let alone working to pay them off and escape from bondage:

'It is more than doubtful that the bali [servant] strove to end his attachment. His being coerced to work is usually inferred from the condition that the servant was not allowed to leave his master as long as he was indebted to him. But the debt was rather fictitious in character and, if only for this reason, the term of debt slavery applied to this form of servitude is not very felicitous. Not only was repayment merely theoretical on account of the hall's minimal remuneration, but it was not envisaged by either of the parties ... [The master] tried to keep this debt within reasonable limits, as he well knew he could not recall it. The hall, on the other hand, did his best to maximalize it, and tried to get something out of his master as often as he could' [Breman (1974, p. 44)].

Until the first half of the 19th century, running away rendered a hali (bonded laborer) punishable by law. Thereafter, although these controls were officially abolished, the power of the dominant caste was such that they could still mobilize the help of local police functionaries in compelling a runaway laborer to return [Breman (1974, p. 65)]. Many 19th century


reports assert that servants rarely ran away, however, and the dominant caste seldom invoked the 'extra-economic coercion' at its disposal [Breman (1974, p. 63)]. Breman argues that this was primarily a reflection of the comparatively privileged position in which bonded laborers found themselves.

Just as the Asian evidence suggests mechanisms very different from those identified by Bhaduri, so too a closer examination of the inquilino system in Chile casts doubt on its characterization as a feudal hangover [Laclau (1971)]. This was a system of estate labor which required the service holder to furnish labor for the hacienda lands in return for the usufruct right of an arable plot and sometimes also pastures. The Chilean encomienda system, whereby the conquistadores exercised seignorial rights over the indigenous population, was outlawed in 1791 [Bauer (1975, p. 15)] and through the course of the 19th century the inquilino system expanded significantly. This system was not, however, simply a survival of the encomiendas; rather, 'it emerged in the seventeenth and eighteenth centuries as part of the process of internal differentiation and polarization of the formerly quasi-military society of conquistadors' [Richards (1979, p. 488); see also Bauer (1975, pp. 14-15)].

The insten system which prevailed in 19th century Prussia and which has also been widely regarded as a survival of feudalism constitutes a valuable comparative case. Like the elimination of the encomiendas, the Bauern- befreiung or land reform in the early 19th century which abolished com- pulsory labor services from peasants accelerated the spread of the insten system, which operated along lines very similar to the inquilinos [Richards (1979, p. 487)-1.

Estate workers in 19th century Chile were not legally compelled to remain on the estate, and their Prussian counterparts could leave at the end of their annual contracts. The corollary of this mobility was, however, considerably greater insecurity than that confronted by peasants under classic West European fuedalism. Whereas common fields provided the latter with a degree of autonomy in their dealings with the lord, inquilinos and instmann could be arbitrarily dismissed. In other ways, too, Prussian and Chilean lords wielded an extraordinary degree of power at the local level relative to their feudal West European counterparts of earlier times. Unlike manorial feudalism where more than one lord often had a claim to a particular village, Prussian and Chilean lords exercised unchallenged sovereignty over their estates as well as significant judicial and executive powers at the local level [Richards (1979, p. 489)].

In a comparison of the insten and inquilino systems with the Asian evidence outlined above, two factors stand out with particular clarity. First, as in the situation described by Breman where landlords had the potential for exercising extra-economic coercion, it appears that extraction via indebtedness was unusual [Richards (1979, p. 489)]. Second, as in some of the recent cases reported from Asia, the spread of both the inquilino and insten


systems during the course of the 19th century coincided with the expansion and commercialization of agriculture. Unlike the 'green revolution' in contemporary Asia, agricultural expansion in Chile and Prussia during the 19th century was primarily a response to the growth of the world wheat market and involved very little development of productive forces [Bauer (1975), Wunderlich (1961)1. At the same time, however, the heavy market involve- ment of the estates meant that cost-cutting strategies were of considerable importance; particularly in the Prussian case, the Junkers had to 'become modem farmers and cool calculators if they wanted to survive' [Richards (1979, p. 491)]. Taken as a whole, then, these features of the Prussian and Chilean systems defy the 'feudal' label so often attached to them just as much of the Asian evidence fails to conform to the notion of semi-feudalism.

2.2. The Marxist response: Interlocking transactions as transitory phenomena

This and other evidence is contrary not only to Bhaduri's model but also to the basic tenets of Leninist theory. In taking up the challenge of explaining such anomalies, Pearce (1983) invokes Banaji's (1977) elaboration of the distinction between the formal and real subsumption of labor under capital. The core of his analysis, however, rests on the concept of transactions costs which is receiving growing prominence in the non-Marxist literature)

The analysis of transactions costs in the context of labor arrangements has arisen primarily in the debate over the efficiency of sharecropping. The standard neoclassical defence of sharecropping as an efficient institution by Cheung (1969) simply assumes away the central problem confronting the landlord - namely the difficulties of monitoring effort. By introducing transactions costs - specifically the costliness of supervision arising from asymmetrically distributed information about worker's effort - different analysts have sought to explain why sharecropping could be a superior institution to wage labor. 4 While the equilibrium achieved under sharecropping is second best as a consequence of informational constraints, it nevertheless delivers higher levels of effort than wage labor because the share received by the tenant constitutes an incentive, albeit partial. Further, insofar as a sharecropping contract provides the landlord with access to the labor of other household members - notably women and children - which would otherwise be sold, its attractiveness to the landlord may be considerably enhanced. As discussed more fully in the following section, the recent interlinkage models develop this theme still further.

In appropriating the notion of supervision costs, Pearce attempts to explain institutional arrangements in terms of the factors which determine such costs.

aFor a review of the non-Marxist literature, see Binswanger and Rosenzweig (1984). 4Several neo-Marxist analysts - notably Martinez-Alier (1974) and Sen (1981) - have drawn

attention to the ways in which sharecropping elicits Chayanovian 'self-exploitation'.


First he argues that they will vary inversely with the level of class dominance which is defined primarily in terms of the unevenness of distribution of the means of production, mitigated by the existence of alternative employment opportunities. His second and central proposition is that the labor process also determines supervision costs, a somewhat circular argument given that the definition of 'labor process' includes both technology and the organization of labor [-Pearce (1983, pp. 57-58)]. The discussion of how the labor process influences supervision costs makes clear, however, that he is referring primarily to the capital-labor ratio, assuming it to bc exogenously given, and claiming that it is inversely related to supervision costs [Pearce (1983, p. 60)]. High supervision costs as a consequence of labor-intensive technology render sharecropping functional in the early stages of capitalism, but 'With a substantial intervention of capital into the labour process ... the more the performance of labour is determined by those forces with which labour is combined' [Pearce (1983, p. 63)]. Hence the assertion that 'sharecropping can be consistent with capitalist relations but only in a transitional sense', and hence also the inevitable demise of sharecropping in the course of capitalist development.

While a broad statistical correlation no doubt exists between the extent of mechanization and the prevalence of sharecropping, Pearce's model is grossly inadequate as an explanation of the structure of institutional arrangements in any given setting and the processes through which they change. In the first place it perpetuates the dichotomy between sharecropping and wage labor which, as discussed more fully below, is a central problem in the mainstream literature because it neglects both the wide range of labor tying arrangements which do not fall neatly in either category, and the coexistence of different institutional arrangements.

A more serious problem is the crude technological determinism that underlies the analysis of institutional change. This approach largely ignores the forces which hasten or retard the capitalization of agriculture, many of which are reflected in the contractual arrangements governing labor deployment. For instance, wheat production in Prussia was mechanized in the late 19th century, whereas in Chile the mechanization process occurred only fitfully after the 1930s. While differences in the structure of labor supply explain part of the difference, a number of other important political and economic forces shaped the entry of capital into agriculture. Similarly, Gill (1983) describes how Tuscan landlords in the 19th century deliberately eschewed the modernization of agriculture for predominantly political reasons, choosing instead to perpetuate sharecropping in clearly deteriorating agricultural conditions.

In a decidedly non-dialectical manner, Pearce also ignores the ways in which contractual arrangements themselves generate forces which shape the process of structural transformation. For instance, Kecgan's (1983) study of sharecropping in the South African highveld in the early 20th century shows


how the surpluses generated by sharecropping in part made possible the investment in agriculture which, in conjunction with a variety of other forces, contributed to the demise of sharecropping. Another striking example is provided by Jimenez (1981) who reveals how the terms under which Colombian coffee tenants were originally organized enabled them to resist the process of proletarianization. More generally, as Cooper (1983) has noted in his analysis of urban labor in Africa, each form of labor control tends to generate its own form of resistance.

Viewing labor tying arrangements simply as transitional phenomena also fails to explain the flexibility with which such arrangements sometimes reappear after a period of decline, at times with remarkable speed. A prime illustration is an attenuated form of sharecropping known as kedokan which is known to have existed in Java since the 19th century. There is a classic study by van der Kolff (1936) who found that in 1922 - a period in which the Javanese economy was experiencing a major boom - apparently 'precapitalist' forms like kedokan were giving way to wage labor paid in cash. However, when he returned to the same area in the depths of the depression in 1936, there had been a sharp increase in kedokan and 'people were unanimous in sounding its praise'. In the late 1960s there was a rapid resurgence of kedokan in many parts of Java after a period of apparent decline, although more recently it has vanished quite suddenly in some areas [Hart (1986b)].

Sharecropping in California constitutes perhaps the most vivid example of the reappearance of labor-tying arrangements and of their capacity to exist in settings which are unquestionably capitalist. It also demonstrates the limitations of arguments cast purely in terms of technology. In her discussion of the labor-intensive strawberry industry in California Wells (1981) describes how, between the 1940s and the mid-1960s, sharecropping gave way to simple wage labor contracts. After the collapse in 1964 of the Bracero program which supplied large quantities of cheap Mexican labor power,

'Large growers have adopted the sharecropping system to increase control over their work forces and reduce vulnerability to rising labor costs. Smaller growers have informally enhanced the reciprocal bonds of personal obligation with their workers to achieve the same ends' [Wells (1981, pp. 693-694)].

In summary, the notion that sharecropping and other labor tying arrangements constitute simply a stage in a linear evolution towards wage labor relations fails to hold up to closer scrutiny. To what extent, then, does the mainstream critique offer a satisfactory alternative?

2.3. The mainstream critique: Interlocking contracts as market relations

The mainstream opposition to Bhaduri in the interlinkage debate is


predicated on a sharp distinction between 'market' relations and those which incorporate extra-economic coercion or 'non-economic' forces: 'Any trans- action in the services of these factors [i.e., land, labor and credit] based primarily on economic principles (as opposed to extra-economic coercion or obligation) is deemed as a "market" relationship for our present purpose even though the transactors do not always bid their prices or offer their services in the impersonal atmosphere of an open market place' [Bardhan (1980, p. 83)].

This dichotomy is identical to the one drawn by Lenin. However, whereas Lenin , and, it may be added, conventional neoclassical theory - defines market relations as single-stranded, Bhaduri's critics extend the definition to incorporate multi-stranded arrangements. Thus, for example, 'indebtedness to one's employer for consumption credit or homestead does not necessarily make one a bonded laborer, just as an office worker borrowing from his provident fund account or living in company quarters is not an unfree laborer, even though he may not be in a position to switch jobs easily for economic reasons' [Bardhan (1980, p. 84)]. The explicit implication is that, since these are market relations, they can be analyzed in abstraction from the political, legal and ideological context within which they occur.

This assumption in turn serves as justification for the micro choice- theoretic models which are the instruments of opposition to Bhaduri in the interlinkage debate. These models fall into two main categories. First is a model by Bardhan (1979) which predicts that the importance of tied contracts will increase with the intensification of agriculture. The rationale is that, with a general tightening of the labor market and greater emphasis on the timeliness of operations required by new technology, employers will use these contracts in order to minimize recruitment costs and ensure an adequate labor force. On the face of it, some of the evidence outlined in the previous section is consistent with Bardhan's model. As discussed more fully below, however, the model does not explain all cases, nor does it carry one very far in explaining how and why labor arrangements change.

The other set of models focuses on credit-cum-tenancy contracts. One of these is by Braverman and Srinivasan (1981) who invoke some rather stringent assumptions which contain the conclusion that in equilibrium a tenant's utility under sharecropping will be the same as that of a full-time wage laborer. A more interesting line of reasoning, pursued by Mitra (1980) and developed more fully by Braverman and Stiglitz (1982), recognizes that subsidized consumption credit (as well as other types of subsidies) potentially constitute the 'carrot' component of a strategy of labor control - or, as Mitra puts it, 'an attempt to improve allocative efficiency in the face of moral hazard'.

It is in seeking to define the 'stick' that these critics embroil themselves in a set of inconsistencies not dissimilar to those of which Bhaduri himself stands accused. More specifically, a highly anomalous feature of these


sharecropping models is they take recourse to something very close to 'extra- economic coercion' in order to explain contract enforcement. The most egregious example is Braverman and Srinivasan's (1981) model which assumes that, once the contract has been agreed upon, the landlord can prevent the tenant from working for other landlords or in the labor market: An analogous instance is the way in which Braverman and Stiglitz (1982) analyze the implications of different ways in which landlords attempt to deal with the problem of default. They show that a bankruptcy clause (whereby the tenant is 'allowed to default on his loan whenever his income is sufficiently low') tends to decrease tenants' effort and, conversely, that subsidized credit will only have the desired effect if backed up by a bonded labor clause which is unfavorable to the tenant. Implicitly, of course, this assumes that the tenant is unable to abscond.

A second problem concerns the dichotomy between models of sharecropping and those which focus primarily on wage determination. In a recent review of the non-Marxist literature on rural labor arrangements, Binswan- ger and Rosenzweig complain that

'Progress towards a richer, integrated theoretical framework ... has been hampered by the evolution of theory along two mutually inconsistent paths. The rural wage determination models developed so far assume the complete absence of a land rental or sales market; that is, they take land distribution as exogenously given. The contractual choice models, on the other hand, treat the wage rate as exogenously given, while concentrating on land and credit market transactions; thus they have little to say about the determination of earnings and employment' [Binswanger and Rosenzweig (1984, p. 39)].

This dichotomy is particularly serious in light of evidence showing that (a) sharecropping and other labor-tying arrangements coexist with simpler institutional forms, and (b) that those incorporated into the more complex arrangements tend to be somewhat better off than those who are excluded. Breman notes for instance that not only were the halgs better dressed and had more food than those who were not attached, but that 'Dubla farm servants also rated higher in social esteem than their fellow caste members. The unattached laborers among the Dublas, some sources state, were even despised' [Breman (1974, pp. 44, 61)]. In somewhat similar vein, Bhaduri himself notes that in West Bengal the tenants who form the focus of his model constitute a category distinct from agricultural laborers who 'find employment typically only during the agricultural peak seasons' [Bhaduri (1973, p. 121)]. Unlike most agricultural workers, share tenants frequently have a tiny plot of their own [Bhaduri (1973, p. 121)]. In the Haryana case examined by Bhalla, there is a clear division between those involved in various land/credit arrangements and casual laborers; although BhaUa does


not provide detailed information on levels of remuneration, she observes that 'tied' laborers consider themselves superior to those employed on short-term, impersonal contracts. Similar types of divisions underlie a number of different institutional arrangements found in Java [Hart (1984, 1986a, b), Husken (1979), Kasryno et al. (1982)]. Nor are such patterns limited to the Asian cases. Bauer notes that, particularly in the first part of the 19th century, the inquilinos were the 'cream of rural labor' and were significantly better off than the large mass of peones who roamed the countryside in search of casual work [Bauer (1975, p. 56; see also Ch. 6)]. Similarly in Prussia 'Instmann were guaranteed an income from their land and employment on the estate, placing them at an advantage vis-~i-vis subsistence farmers outside the estate, and certainly the local landless population' [-Winston (1982, p. 399)]. Finally, the California core workers and sharecroppers are in a distinctly superior position to seasonal laborers who are often employed by the sharecroppers.

Elsewhere in the sharecropping literature there exist efforts to explain why tenants' welfare could exceed that of wage laborers in terms of untradable human or physical capital resource endowments such as managerial skills, as well as draft animals and 'family' (i.e., female and child) labor for which there is no ready market. Such answers are at best partial and fall far short of an 'integrated framework', however. For instance, in the type of settings with which we are concerned, managerial skills are far less important than effort; as technology becomes more complex, the terms of contracts are generally revised to strengthen the landlord's control over key managerial decisions. These types of arguments may carry some weight in situations where draft animals are important to the production process and where the market for female and child labor is circumscribed, but such conditions are far from universal. For instance, the attenuated form of sharecropping which is widespread in Java specifically excludes operations requiring draft animals and occurs in conditions where markets for female and child labor are highly developed. More generally, although those incorporated into multi-stranded arrangements often have higher levels of resource endowments than those who are excluded, these resources do not necessarily enter directly into the productive process. What is needed, therefore, is a better understanding of (a) the mechanisms responsible for the exclusionary and preferential features of multi-stranded arrangements, and (b) the principles which guide recruitment.

The third and most serious shortcoming of the interlinkage models is that their capacity to explain how and why labor arrangements change is severely limited. In the previous section we saw how labor tying arrangements are highly flexible and subject to rapid transformation, and also that these changes fail to conform to a linear progression towards simple wage labor contracts.

Bardhan's model mentioned earlier is something of an exception in that


it shows how tightening labor market conditions can lead to a rising incidence of labor tying arrangements. The rationale, as may be recalled, is that employers use such contracts in order to secure an adequate labor force. Labor-tying is found in slack labor market conditions as well as in tight ones, however. The Chilean inquilino system described in the previous section illustrates this point very clearly:

'Although credit and supplies may have been advanced to the inquilinos, central valley estates had little need to bind labor to land through debt. A hacienda with good land to let had no difficulty attracting resident labor and we may be certain that there were always men willing to accept the limited plots available on the estates' [Bauer (1975, p. 52)].

Moreover, kedokan and other labor-tying arrangements which are widespread in Java flourish in slack labor market conditions and disappear when labor demand becomes more sharply seasonal. While the disappearance of kedokan in some areas of Java in the late 1970s can be traced to changing patterns of labor demand, the same reasoning is incapable of explaining the sudden increase in kedokan and related arrangements in many different parts of Java in the late 1960s [Hart (1986b)]. More generally, just as labor market conditions per se cannot explain the existence of interlocking transactions, neither do they form an adequate explanation of institutional change.

2.4. Issues and problems It is the very ubiquity of interlocking transactions that renders their

explanation so problematic in terms of any of the standard theories. As the foregoing review has amply demonstrated, labor tying arrangements exist in conditions both of agricultural backwardness and of productive reinvestment and accumulation in agriculture, as well as in both slack and tight labor market conditions. Other important issues with which the prevailing theories are unable to come to grips satisfactorily include the question of contract enforcement and the coexistence of different arrangements.

The overriding problem that pervades all three theories is that they are incapable of explaining the essential unruliness of institutional change and, in particular, its refusal to conform to an orderly, unilineal pattern.

3. An alternative appraoch

The discussion that follows outlines a framework for addressing these problems. The analysis proceeds in three steps:

(1) section 3.1 shows how interlocking transactions constitute essentially similar mechanisms of social control in widely divergent settings and are closely associated with the exercise of power in rural society.

190

(2)

(3)

G. Hart, Interlocking transactions

section 3.2 relates these mechanisms to labor management and shows how in principle they help resolve some of the problems confronted by the interlinkage models, section 3.3 illustrates how the interaction of labor management and social control helps elucidate the dynamics of institutional change.

3.1. Interlocking transactions and social control

'Social control' refers in general to the ways in which those who control the means of production attempt to exercise power in non-labor spheres over those with little or no access to assets. These social and political relations between workers and employers are not simply vestiges of 'traditional' patronage networks or of extra-economic coercion that can be expected to wither away once commercialization and market rationality take hold. Instead, they are often crucial elements in strategies to maintain and reinforce positions of economic dominance over the longer run.

While the particular manifestations of social control are enormously diverse, I suggest that there are fundamental similarities in the ways in which rural elites attempt to exercise such controls. The common element which unites many different instances of social control is the extension of 'privileges' to particular groups while deliberately excluding others. The benefits be- stowed by a patron simultaneously constitute instruments of control because they carry with them the implicit or explicit threat of withdrawal.

The principles of selectivity and exclusion are central to the effectiveness of this strategy. The key mechanism through which the patron/employer seeks to influence the client/worker is the latter's perception of being in a relatively privileged position. Fear of jeopardizing this position is the motivating force which elicits compliance and which creates and reinforces relations of dominance and dependency.

By enhancing divisions among less powerful groups, exclusionary tactics tend also to have a demobilizing effect on agrarian organization. How these divisions are drawn will, of course, depend on the particular circumstances of social control, but one can hypothesize that those with the most to lose are more likely to be recruited into comparatively privileged arrangements.

Another important element is that of uncertainty. In general, those who seek to exercise control through these means are likely to want to retain as much discretion as possible. It is this discretion which allows those in positions of power to assume the appearance of a benevolent patron vis-~-vis the client/worker. By sustaining this element of uncertainty, the patron is better able to manoeuvre the weaker party into a position of clientist dependence. However, in some situations, discussed more fully below, the terms may become more specifically contractualized.

Social control can assume a variety of forms. In the types of agrarian


settings with which we are concerned, the maintenance of social stability, protecting property rights and preventing the rural poor from challenging those in positions of economic and political power are likely to be significant concerns of the rural elite: While the lower concentration of population does not pose the same type of threat of mass actions which prevail in urban areas, rural property owners are highly susceptible to what James Scott has termed 'everyday forms of resistance'. Also, while the state's capacity to police rural areas may be more circumscribed in economically-backward areas, agricultural progress itself could generate tensions which raise the needs for such controls.

Another potentially important dimension of social control is the extent to which it is necessary for the rural elite to mobilize and sustain a political following within rural society in order to ensure positions of power. The types of patronage relations thus engendered are by no means limited to economically backward agrarian societies. On the contrary, situations in which the state is actively involved in dispensing subsidized credit, 'modern' inputs and so forth could well stimulate such factionalism and competition within the dominant group. As I have argued more fully elsewhere, however, the particular nature of the state and its relations with the rural sector are central to understanding these structures [Hart (1984)], as well as the other forms which social control assumes.

When one enquires beneath the surface of what are ostensibly labor arrangements, the consistency of these mechanisms is readily apparent despite the diversity of sources and types of social control which dominant groups seek to exercise. The Chilean case discussed earlier is an important example. Earlier we saw how Chilean landlords exercised substantial administrative and judicial power at the local level, a reflection in part of the virtual absence of a state policing system. While administrative and judicial functions served in some ways to enhance landlords' power, they were also a source of vulnerability and insecurity. Richards for instance notes that that landlords were 'highly vulnerable to low level resistance, such as sabotage and arson' [Richards (1979, p. 498)] while Bauer observes that 'outright coercion or social control was exceedingly difficult given the lack of effective local or national Police' [Bauer (1975, pp. 148-149)]. 5

By generating an identity of interests, albeit highly asymmetrical, between landlord and tenant, the inqu i l ino system was a means not only of organizing labor but also of exercising social control both directly and indirectly. For instance, 'a principle duty of service tenants was to guard the estate against f o r a s t e r o s - the outsiders - and to ride in escort with the owner' [Bauer (1975, p. 164)]. The long-term repercussions of this identity of interests were

SParticularly prior to the riots of 1848, the situation in Prussia was closely analogous to that in Chile.


reflected in 'the suspicion with which all forasteros were seen during the recent agrarian reform [and] how ready the inquilinos were to organize "their"fundo and quickly exclude other workers' [Bauer (1975, p. 164)]. 6

Breman's study of bonded labor in the state of Gujarat in pre- independence India provides an example of patronage operating in rather similar ways in an entirely different context. The need for a client following by the dominant Anavil Brahmin caste - particularly the upper layer of revenue farmers (desais) - arose partly out of the exercise of force entailed in revenue collection, particularly in the unstable political conditions of the 17th and 18th centuries. Although the supralocal power of the rural elite was curtailed over the course of 19th century colonial rule,

'Within the village community they remained completely sovereign. There, the members of the dominant caste vied with each other for the largest following in the village. In this situation of permanent rivalry, to have many followers at one's disposal was to be able to settle a feud by force if need be. Under the circumstances, having several farm servants in the permanent nucleus of the client group bore witness to prudent foresight and was not at all an excessive luxury' [Breman (1974, p. 56)].

Among the lower ranks of the Anavil Brahmins, moreover, mobilizing a client following was also an important means of upward mobility into the ranks of the desai, thereby gaining access to 'the influence and prosperity which the office of desai brought with it' [Breman (1974, p. 48)]. The loyalty of clients was crucial, and they were expected to exhibit unswerving commitment to their patrons even if this meant coming into conflict with fellow caste members. The mechanism through which such loyalty was assured was not pressure so much as the protection and security afforded by the comparatively privileged position in which Dubla (low caste) clients found themselves.

The contractual arrangements described by Bhalla (1976) in North India are similarly designed to 'institutionalize and strengthen the personal obli- gations of the individual labourer to the cultivators' and reinforce 'traditional individual relations of awe, subservience and dependency' [Bhalla (1976, p. A-28)]. In contrast to the economically backward conditions described by Breman, however, these arrangements have arisen in the context of the rapid modernization of agriculture. As a consequence of the growing division between permanent and casual labor which these arrangements have engendered, 'embryonic expressions of solidarity among labourers have been nipped in the bud' [Bhalla (1976, p. A-28); see also Bardhan and Rudra (1980b)].

The emergence of sharecropping in California has also been shaped by 'the changing leverage of labor in the region':

6Similarly, Weber (1979, p. 186) draws attention to the resilient bonds which separated the instleute from casual workers, thereby inhibiting the development of class consciousness.


'Smaller growers select workers they consider most resistant to unioniza- tion and immigration policies, and they reinforce loyalty and flexibility through bonds of interpersonal obligation. Larger growers have secured the advantages of stabilizing personal ties through the sharecropping system, which subdivides large farms into smaller nuclei of personal acquaintance and differential reward' [Wells (1981, p. 700)].

Java constitutes perhaps the most striking example of a sudden, massive shift in the context of social control. Over the first part of the 1960s, the Indonesian Communist Party (the PKI) was actively engaged in mobilizing the poorer peasantry for 'a more peaceful variant of Mao Tse Tung's strategy of surrounding the cities from the countryside - the object of which was to force the Indonesian elite to disgorge at least a measurable portion of its power to the PKI' [Mortimer (1975, p. 4)]. This strategy coincided with burgeoning inflation and the disintegration of the bureaucracy. The New Order regime which came to power in 1966/67 brought about a vast strengthening and militarization of the bureaucracy and the closing down of most forms of political activity at the village level. As discussed more fully elsewhere [Hart (1984, 1986b)] and outlined below, this shift in the context of social control is central to explaining the sudden changes in labor arrangements reported in many different parts of Java since the late 1960s. In order to analyze this and other cases, however, we need first to see how techniques for eliciting loyalty, docility and compliance in non-labor spheres can in principle also be used to ensure effort, care and diligence in the labor process.

3.2. Interlocking transactions and labor management

The impersonal, single-stranded types of worker-employer relations usually associated with capitalist wage labor typically involve simple and overt threats like termination and/or withholding of pay, as well as comparatively high levels of direct monitoring. Under a wide variety of circumstances, however, employers have at their disposal cheaper and more effective methods of managing the labor process. The basic mechanisms through which these more indirect systems of labor management operate are fundamentally similar to those discussed above in the context of social control: (a) by extending 'privileges' to particular workers, employers are better able to manage them, and (b) in order to be effective, these privileges must be extended selectively.

The analytical basis for this argument is developed by Stoft (1982) who shows that asymmetrically distributed information about work effort leads to labor market segmentation and involuntary unemployment even when workers are identical. Within this model it is macro conditions - specifically the rate of unemployment - which ensure work effort.


The argument that employers selectively extend 'privileges' to particular workers in order better to manage the labor process rests on essentially similar reasoning. In principle, as in Stoft's model, these privileges can take the form of wages somewhat greater than the worker's opportunity cost. In practice, however, non-wage 'privileges' are likely to be more effective because they can more easily be withheld and also because, to the extent that non-wage payments are portrayed as 'gifts', they are more effective in eliciting compliance than a wage which is more readily perceived as a right rather than a privilege.

Thus, for example, in California ' the grower provides his workers with a number of intangible and material benefits which, because voluntarily given, reinforce his image as a generous patron: on-the-job flexibility ... unrequired improvements in working conditions and benefits (knee pads, overshoes, gloves, health insurance, overtime pay, permission to take home odd boxes of berries); and access to supplemental resources (housing, legal assistance, translation), either directly from the grower or through his intercession' [Wells (1981, p. 697)]. Wells goes on to note that growers pursuing this line of action report the best quality and quantity of yields in the business.

Whether or not these more indirect strategies of labor management obtain, the forms which they assume and their consequences in terms of labor productivity depend not only on labor market conditions and the technical characteristics of the production process, but also on the context of social control. Before analyzing the interaction of labor management and social Control, we need to see how viewing labor arrangements in this way helps resolve key problems with the interlinkage models.

First, it provides an explanation of contract enforcement which does not require the invocation of 'extra-economic coercion'. As mentioned earlier, the benefits which an employer conveys upon a worker simultaneously constitute instruments of control because they carry with them the implicit or explicit threat of withdrawal. This threat in turn is enhanced by the existence of a less privileged group of workers. Therefore, to the extent that these arrangements are by their very nature exclusionary, they tend also to be self- reinforcing, at least in the short run.

Second, this approach sheds new light on the question of co-existence of different institutional arrangements as well as on the failure of rural labor markets to clear - both of which are central problems in the mainstream literature [Binswanger and Rosenzweig (1984)]. Earlier we saw how most of the choice-theoretic interlinkage models have difficulty coming to terms with evidence showing that multi-stranded arrangements often co-exist with other, much simpler institutional arrangements, and that the former group of workers tend to be somewhat better off than the latter. The approach of this study not only explains these phenomena; it also replaces the sharecropping/ wage labor dichotomy with a more general framework for analyzing how


different institutional arrangements combine incentives and threats, and how these arrangements in turn are related to one another.

A third advantage of this approach is that it helps explain why multi- stranded arrangements can exist in both slack and tight labor market conditions. In considering this question, it is important to distinguish generalized from seasonal tightness in the labor market. Where labor supplies are sufficiently limited to enhance the bargaining power of labor and render divisions within the workforce infeasible, the exclusionary strategy is likely to break down. 7 When tightness in the labor market takes the form of seasonal peaks, however, interlocking transactions constitute an ideal way to ensure adequate, seasonal labor needs, particularly in situations where alternative sources of income in the slack season are limited [Bardhan (1979)]. As we saw earlier, Bardhan explains the resulting wage differentials in terms of differential recruitment costs.

The approach of this study suggests that the employer's concern is not only that of ensuring an adequate labor force, but also a compliant one. Viewing interlocking transactions from this perspective enables one to explain the existence of segmentation even when there is little or no seasonal tightness in the labor market. For instance, the attenuated form of sharecropping (kedokan) common in Java tends to disappear when labor demand becomes more sharply seasonal [Hart (1986a)], although it may well be replaced by the type of credit-tying arrangements described by Bardhan. This alternative approach also suggests a different interpretation of the principles which underlie recruitment.

Just as exclusionary arrangements can be used to ensure an adequate and disciplined workforce in conditions of seasonal tightness in the labor market, so too they enable employers to take advantage of substantial supplies of labor. As increasing supplies of labor operate to weaken the bargaining power of labor, the 'privileges' needed to elicit compliance not only decline in quantitative terms, but may also undergo important qualitative changes. For instance, as labor market conditions become increasingly uncertain, workers are likely to attach growing importance to job security. Conversely, the provision of job security to a select group of workers constitutes a cheap and potentially highly effective method of ensuring labor discipline, at least in the short run. Further, the weaker the bargaining power of labor, the more likely it is that relatively preferential arrangements will incorporate mechanisms which enable the employer to extract part of what appear to be worker benefits [Hart (1986a)].

Precisely because interlocking transactions can in principle occur in slack as well as in tight labor market conditions, the state of the labor market

7The problems confronted by S~o Paulo coffee planters in their efforts to devise workable sharecropping contracts prior to the large-scale immigration to Brazil [Stolcke and Hall (1983)] illustrate this point very clearly.


does not constitute a sufficient explanation for the structure of institutional arrangements in any given setting, or of the way in which they change. The answers to these and other questions lie in the interaction between labor management and social control.

3.3. Dynamic processes: The interaction of labor management and social control

The explicit incorporation of social control focuses attention on how agrarian labor arrangements both reflect and alter wider political and economic conditions. The discussion which follows shows how, by viewing agrarian labor arrangements in terms of the interaction between labor management and social control, we are better able to establish the connections between macro political-economic forces and processes of institutional change at the local level.

The most obvious advantage of taking account of social control in relation to labor management is that it explains why interlocking transactions are found both in economically backward and advanced agricultural conditions. Contrary to Bhaduri's model, it is not the interlocking character of labor arrangements which retards agricultural development, but the larger forces of which these arrangements are a reflection and which they also influence.

For example, in pre-independence Gujarat the dominant group's need to bind clients in order to maintain and extend their power bases diverted resources away from productive investment in agriculture:

'By taking on more servants than he [the master] needed he reduced the proceeds of his holding. On the other hand, as his prestige was determined by the size of his property, not by the income he derived from it, he was evaluated by the number of his servants, not by the standards of whether, as a good cultivator, he knew how to use them in the most effective way in agrarian production. The question facing the Anavil landowner of the past was not how many servants he needed, but how many he could provide for" [Breman (1974, p. 55)].

As indicated earlier, this question was important because the chief sources of accumulation lay beyond agriculture. Accordingly, the point is not that the rural elite failed to act as 'economic men', but rather that the larger structures within which they operated dictated strategies which hinged on mobilizing a loyal client following. At the same time, to the extent that the conflict between agricultural labor deployment and investment in clients undermined the income-generating capacity of agriculture, such avenues of upward mobility were inherently unstable and circumscribed. The gradual disintegration of the hali system as economic conditions and political- administrative structures beyond the village were transformed in the late


colonial and early post-independence periods [Breman (1974)] helps illustrate its contingent nature.

The causal connections between the perpetuation of backward agricultural technology and the extension of the inquilino system through the 19th and into the 20th centuries also lie in the wider political-economic system. That agricultural growth in Chile entailed mobilizing additional land and labor at very low levels of technology and productivity is attributable in part to the abundance of both relative to the costs of imported machinery together with maintenance problems [Bauer (1975, pp. 101-108)]. While relative factor prices are clearly important, there are nevertheless indications that investment in agriculture was sub-optimal, particularly prior to the 1930s:

'The explanation for low capital investment - or reinvestment - must be sought in the nature of society i tself . . . The landowners were the dominant political force in the country: they formed policy for the most important credit institutions and made themselves the principal beneficiaries of loans ... Some of this credit was used to clear land, construct irrigation works and buy equipment: but a great deal was undoubtedly used to preserve a traditional agrarian system and to provide the Santiago-centered landed elite with the ready cash it needed to reinforce its social and political control of the Republic' [Bauer (1975, p. 111)].

In the years after 1860 when nitrate and copper production expanded rapidly, many of the large estates were broken down and purchased by new buyers from commercial and mining circles. Instead of transforming agriculture, however, the new landowning elite by and large emulated the pattern of low agricultural investment and absenteeism.

Landownership was not only a source of prestige and collateral, but also a political base: 'a quiet and cooperative rural mass continued to provide landowners with the votes needed for political survival [Bauer (1975, p. 223)]. Herein lies an interesting parallel with the situation in Gujarat. In both cases, control over land and labor were primarily a means whereby the landowning elite gained access to wider spheres of accumulation. Viewing the inquilino and hall systems within this context allows us to see them not so much as a cause of agricultural backwardness, but rather as a reflection of the macro structural foces which Operated so as to inhibit investment in agriculture.

Institutional change in Java since the late 1960s clearly exemplifies the argument that the transformation of agrarian labor arrangements is a consequence not just of changing technology, labor availability and commercialization, but also of changing political conditions and the tensions and contradictions which the institutional arrangements themselves generate.

The most striking change which has taken place in Java is the rapid


spread of exclusionary labor arrangements - such as the kedokan system mentioned earlier - from the late 1960s onwards. These changes need to be seen in the context of the relatively open system of access to agricultural labor which seems to have prevailed in the first part of the 1960s. The open harvest, in which all who wish to participate are paid a share of the paddy they reap, is commonly regarded as the archetypical 'poverty-sharing' institution. More careful analysis by Stoler (1977) has shown that super- ficially open harvests often mask a highly differentiated structure of arrangements. It seems generally to be the case, however, that restrictions on access to harvesting opportunities as well as to preharvest jobs increased dramati- cally from the late 1960s onwards, s

A vitally important clue as to why the relatively open harvesting system gave way to exclusionary arrangements like kedokan in the late 1960s lies in the tensions which these arrangements generate:

'The exclusive right to harvest is an expensive privilege, materially as well as spiritually. The holder may suffer from social isolation in his own village community by being condemned as greedy or anti-social by his fellow villagers, who are themselves fighting for their day-to-day livelihood from limited opportunities to work. Likewise although by maintaining a ceblok or ngawesi [i.e. kedokan] relationship a wealthy landowner may acquire greater material benefits, he is likely to lose popularity as a result. Sometimes he becomes the target (bulan-bulanan) of his fellow villagers, with the risk of greater loss or damage to his crops' [Boedhisantoso (1976, p. 24)].

This author reports that kedokan was banned in the north Krawang area of West Java in 1969 'to prevent the social tensions which might arise out of such monopolistic privileges' [Boedhisantoso (1976, p. 24)]. This area is one of the most fertile and productive in Java, but is surrounded to the south and east by regions of much lower agricultural potential. Particularly during harvesting and planting periods, huge numbers of itinerant workers pour into north Krawang. The banning of kedokan in north Krawang was dearly a response to the security threat posed by denying work to the unusually large volume of migrant labor surging into the area, and is in many ways a special case.

At the same time, by focusing on the tensions elicited by exclusionary arrangements in the context of massive supplies of labor, the case of north

aThe rapid expansion of arrangements such as kedokan is typically explained in terms of technologically-induced commercialization [Collier (1978), Palmer (1977)]. This view is refuted by those who claim that the chief cuase is population growth in the face of stagnant technology [Hayami and Kikuchi (1982)]. As I have discussed more fully elsewhere [Hart (1986b)], however, neither explanation is able to account for the pattern and speed of institutional change.


Krawang points the way towards a more general understanding of why exclusionary arrangements increased so rapidly from the late 1960s onwards. The answer lies in the large-scale agrarian unrest which pervaded the Javanese countryside over the first part of the 1960s as the Indonesian Communist Party (the PKI) pursued its strategy of mobilizing the poorer peasantry, and the massive political and administrative changes brought about by the New Order regime after it came to power in 1967. In some areas it appears that Gerwani (the women's organization of the PKI) managed to outlaw kedokan in the early 1960s. Even where this did not happen, the internal characteristics of kedokan-type arrangements are such that they are less likely to occur in conditions where political mobilization enhances the relative bargaining power of workers. When employers are subject to organized pressure from below, exclusionary strategies based on job security are simply less feasible. In "these circumstances, the open harvests which prevailed through the first part of the 1960s can be seen not simply as a 'traditional' poverty-sharing institution, but as a rather defensive effort on the part of large landowners to maintain social stability. As one of Husken's (1979) respondents in a village in north Central Java observed:

'Previously in the zaman abang (i.e. the 'red era' between 1955 and 1965 when the communist peasant union and the women's movement had a big following in the village) the women received far too much. Then we couldn't do anything about it. But now everything is back to normal' [Husken (1979, p. 146)].

Viewing labor arrangements in this way explains why the damping down on agrarian organiTation by the New Order regime was accompanied by a sudden rise in exclusionary arrangements. The militarization of the bureaucracy together with depoliticization at the village level contained any threat of organized reaction from below, thereby facilitating the emergence of arrangements which enhance labor discipline by extending job security to some workers while deliberately excluding others. As I have discussed in more detail elsewhere [Hart (1986b)], subsequent shifts in the position of dominant rural groups over the course of the New Order helped perpetuate these types of arrangements.

This example demonstrates the limitations of the notion that interlocking transactions are simply transitory phenomena [Pearce (1983)]. Analyzing labor arrangements in terms of the interaction of labor management and social control also helps explain how and why interlocking transactions are, in principle, perfectly consistent with rapid growth and capital accumulation in agriculture. The reason is not that they are simply market transactions. On the contrary, the development of capitalism itself generates needs for social control, albeit of different kinds from those in economically backward settings.


The essential similarity between the labor systems described by Wells (1981) in California and Bhalla (1976) in Haryana help illustrate this point. In both instances, employers had instituted a structure of preferential arrangements with a select group of workers in order to avert and circumvent labor organization. These arrangements operated not only to undermine worker solidarity, but also to enhance labor discipline and productivity.

While apparently functional in the short run, such arrangements may well contain the seeds of their own destruction. For instance, to the extent that more privileged workers are able to entrench their position, they may be better able at a later date to press for greater advantages or to resist other efforts to limit their bargaining position. Particularly the situation described by Bhalla, it is also possible that the very process of exclusion contributes to the development of worker consciousness and organization among the less privileged group. In the California case, Wells notes that pre-existing ties of friendship, kinship and ethnic identity tend to counteract the fragmentation of the labor market, and also that the stabilization of the previously transient labor force engendered by the new arrangements could have a positive effect on labor organization. She concludes that 'however ingenious the growers' defensive strategies might be, they may not be proof against eventual resurgence of union pressure' [Wells (1981, p. 701)-].

4. Concluding observations

The brief answers to the questions posed in the title of this paper are as follows: First, while interlocking transactions often exist in situations of agrarian backwardness they are not in and of themselves obstacles to productive investment in agriculture, but rather a reflection of larger structural forces which shape and constrain the development of rural capitalism. Second, although certain types of labor tying do tend to vanish in the course of capitalist development, there is nothing intrinsic to the internal logic of labor tying per se which renders such disappearance inevitable. In some circumstances interlocking transactions may well function as instruments of agrarian capitalism, but for reasons quite different from those advanced by recent choice-theoretic models. These models also ignore the disequilibria generated by such arrangements.

The common consumption that unites these competing theories, and which also accounts for their shortcomings, is that the transition from precapitalist to capitalist modes of labor control entails the progressive dimunition of 'non-economic' factors along with the ascendance of economic or market motivations. By the same token, the key missing element in all these analyses is their abstraction from a crucial feature of rural labor relations - social conflict and tensions, and the structures of power and privilege with which they are associated.


The central argument of this paper is that those who control the means of production must not only devise ways of mobilizing the labor of others and ensuring work discipline; in addition they confront the problem of exercising social control. By the same token, those with little or no access to productive assets are not simply passive units of labor supply. Their efforts to secure a livelihood are part of a larger struggle in which they forge social and political relations with other direct producers and with those on whom their livelihood depends. While the particular forms which these struggles assume are shaped by historically-specific conditions at the local level, they are facets of class and power relations at the level of the political-economic system as a whole and can only be understood within this larger context.

By focusing on mechanisms of both labor management and social control embodied in different types of labor arrangements, the alternative approach outlined in this study has sought to bridge the dichotomy between market and non-market forces. In the process it replaces the narrow, linear conception of institutional change with a far more flexible framework for identifying the interplay between macro political-economic forces and the dynamics of change at the local level.

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Interlocking Transactions: Obstacles, Precursors or Instruments of Agrarian Capitalism?

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