Nepal occupies a unique global position as a peripheral social formation subject to decades of
relative isolation from capitalism. Although the agrarian sector has long been understood to be
dominated by pre-capitalist economic formations, it is important to examine whether contemporary
changes underway in the country are transforming the rural economy. There has been an expansion
of capitalist markets following economic liberalization and improvements in the transport
infrastructure. Furthermore, neo-liberal commercialisation initiatives such as the Agriculture
Perspective Plan provide the ideological justification and pre-conditions for the broader process of
capitalist expansion, despite the pro-poor rhetoric. However, just as neo-liberal poverty alleviation
strategy is flawed, there are also shortcomings in many Marxian understandings of the transition from
pre-capitalist to capitalist agriculture in peripheral social formations. There is a tendency for
political-economic theorists to assume the inevitable ‘dominance’ of capitalism, contradicting
considerable evidence to the contrary from throughout the world. The central objective of this thesis
is to understand how pre-capitalist economic formations have been able to ‘resist’ capitalist
expansion in rural Nepal. There is a necessity to understand the mechanisms through which older
‘modes of production’ are reproduced, their articulations with other economic formations – including
capitalism – and how they are situated globally. As a case study, one year’s fieldwork was completed
on Nepal’s eastern Terai using both qualitative and quantitative methods. The research suggested
that surplus appropriation through rent in a mode of production which can only be described as
‘semi-feudal’, has for a majority of farming households impeded accumulation and profitable
commercialisation, a precondition for the emergence of capitalist relations. Semi-feudalism has been
reproduced for decades internally by the political control over land and externally by Nepal’s
subordinate position in the global economy. The latter process has constrained industrialization and
rendered much of the peasantry dependent upon landlords who have no incentive to lower rents. The
economic insecurity which has arisen in the context of semi-feudal production relations has allowed
further forms of surplus appropriation in the sphere of circulation to flourish, through for example,
interest on loans and price manipulation on commodity sales. This further hinders profitable
commercialisation amongst both semi-feudal tenants and also owner cultivators who farm under what
can be termed an ‘independent peasant’ mode of production. Even wealthier independent peasant
producers who could potentially become capitalist farmers are constrained both by high cultural
capital expenses, oligoposnistic activity by industry in the capitalist grain markets, and Indian rice
imports which depress local prices. Furthermore, development initiatives which could potentially
facilitate capitalist transition through the introduction of productivity boosting techniques have had
limited success under the prevailing relations of production and the associated ideological relations
of caste and gender. The above findings are of crucial significance if one is to develop policies and
political strategies for equitable change in peripheral social formations such as Nepal.