India’s Runaway ‘Growth’: Distortion, Disarticulation, and Exclusion

July 31, 2008

Contents:

Introduction
I. Economics as Mechanics
II. How Capitalism Emerged in Europe
III. Colonial Rule: Setting the Pattern
IV. India’s Runaway ‘Growth’
IV 1. Missing Links
IV 2. The External Stimulus and Its Implications
IV 3. Private Corporate Sector-Led Growth and Exclusion
IV 4. The Condition of the People
IV 5. The Agrarian Impasse and Its Implications

V. Unlocking the Productive Potential of the Entire Labour Force

This analytical article has been sourced from Aspects of India’s Economy, Research Unit for Political Economy (R.U.P.E). Nos. 44 - 46 (April 2008)

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Introduction

India’s economy has seen rapid growth since 2003-04. The scale of this growth was not anticipated by many of the critics of the neo-liberal economic policies. [1a] In particular the following features were unexpected:

(i) GDP growth has been sustained for five years at high levels, and is widely predicted to continue at high rates well into the future.

(ii) Rapid growth is no longer restricted, as in the past, to the services sector, but has extended to manufacturing.

(iii) There have been unprecedented increases in the rates of savings and investment.

Among the proponents of the current economic policies, these developments seem to prove that India is on its way to join the ‘developed world’, indeed, even become an ‘economic superpower’.

At the same time, the proponents of the present policies have been unable to explain why, amid this extraordinary boom, the following have persisted:

(i) Mass malnutrition worse than that of sub-Saharan Africa prevails, with average calorie and protein consumption actually declining over the period of liberalisation.

(ii) The growth and quality of employment have been abysmal.

(iii) Real wages are stagnant/declining in the economy as a whole.

(iv) Agricultural investment and growth are stagnating/retrogressing.

(v) There is a profound crisis of the small peasantry (highlighted by their suicides).

Thus the present conjuncture poses more sharply than ever the question of the pattern of growth, and the meaning of ‘development’.

In this issue of Aspects, we wish to explore this question. In doing so, we must take account of the conflicting approaches to understanding the economy.

I. Economics as Mechanics

“Faster growth is the answer to poverty”

The current economic policies are based on the current orthodoxy reigning among economists worldwide. This view, called ‘neoclassical economics’, argues that growth will automatically spread from the current boom sectors to the backward sectors, and that all that needs to be done is to accelerate growth. The Finance Minister concluded his 2007-08 Budget speech thus: “our human and gender development indices are low not because of high growth but because growth is not high enough…. As Dr. Muhammad Yunus, the Nobel laureate, said, ‘Faster growth rate is essential for faster reduction in poverty. There is no other trick to it.’”

How is growth to be accelerated? The neoclassical economists claim that Government intervention is harmful. According to them, all that needs to be done is to ensure that nothing interferes with the incentives for individual gain. The focus should shift, then, from macro-economics to the micro-economic environment, the level at which individuals make decisions.

Thus, in the name of accelerating growth, the supporters of this approach demand that various subsidies, supports, regulations and restrictions concerning the backward sectors be removed. For example, they demand that, in agriculture, official procurement of crops be ended, restrictions on private corporate procurement and contract agriculture be removed, ceilings on land holdings be removed, new seed technology be allowed entry and patent protection be strengthened for it, restrictions on agricultural import and export be removed, restrictions on domestic trade in agricultural commodities be removed, restrictions on commodities futures markets be scrapped, and so on.

For industry, they demand that labour laws providing security to workers be relaxed, and that the remaining sectors under the public sector be privatised or ‘opened up’ to private capital. Restraints on the entry of foreign capital into various sectors should be removed. Tariffs on imports should be reduced to very low levels. Such subsidies as remain, hidden or open, should be scrapped. All such measures, they say, stifle the incentives for individuals – the incentives for investors to invest, for workers to work harder or learn new skills, for farmers to switch to growing crops for which there is demand, and for the under-employed to shift to sectors in which employment is growing.

Once all restraints are removed, they say, capital will flow to low-wage regions and under-invested sectors, and raise the productivity of labour in them, thus improving incomes of the people in those regions/sectors.

In fact, they celebrate the growth that has been taking place in the last few years as proof of their theories. The Economic Survey 2007-08 proclaims: “Faster economic growth is… translating into more inclusive growth, both in terms of employment generation and poverty reduction.” Whenever there is a sign that GDP growth is flagging, they demand that yet more neo-liberal ‘reforms’ be carried out along the above lines.

Neoclassical theory

Behind such arguments lies a certain conception of the economy and society. In the seventeenth century Isaac Newton discovered the laws of the action of forces upon material bodies, known as classical mechanics.1 Just as Newton’s mechanics spell out the laws of motion of objects, the reigning school of economics, known as neoclassical economics, imitates Newtonian mechanics to analyze human society. [2a] It sees each participant in the economy – each worker, peasant, big landowner, capitalist, and so on – as an independent actor. Each one acts on his/her own, striving to get the greatest possible satisfaction (termed his/her ‘utility’). Neoclassical theory claims human beings’ actions throughout history have been (and will continue to be) driven by individual, selfish gain. Yet the sum of their strivings, pushing and pulling in different directions, brings about an ‘equilibrium’, a state of balance, which yields the greatest sum of ‘utility’ possible in the given conditions. (What exactly ‘utility’ is, and how, if at all, it is to be compared, measured or added up, was never meaningfully defined.)

In this conception, every participant in the economy is, in a sense, a trader, and the forces driving the actions of all these individuals are fundamentally similar. It portrays each individual – worker, land-owner, industrialist – as possessing some resource: land, capital, or labour, which it calls ‘factors of production’. The worker hires out his labour; the landowner rents out his land; the capitalist gives the use of his capital. Each does so for a price (the price of hiring labour is wages; the price of hiring land is rent; and the price of hiring capital is the rate of interest).

That price, according to the reigning theory, is determined by supply and demand in each market. According to the proportions in which these three factors – land, labour, and capital – are available in a particular society, their prices automaticallyand simultaneouslysettle at some equilibrium which makes full use of all of them. Where capital is scarce and labour plentiful, interest rates would be high and wages low. In that case, it would be attractive to capitalists to employ less capital-intensive methods of production, that is, hire workers rather than buy machines. If any of the three resources lay idle, its price would fall till it was fully absorbed. Full employment is a central assumption of this theory.

However, say the neoclassicals, if prices are kept artificially low or high by outside intervention, all factors might not be employed fully: the gears become sticky, as it were, preventing the machine of the economy from running smoothly. For example, if wages were prevented from falling to ‘equilibrium’ level by minimum wage laws, or by trade union action, capitalists would tend to buy machines that replace labour; and so some labour looking for work would remain unemployed. Thus unemployment, according to this theory, is the result of wages not being allowed to sink low enough. [3a]

Price plays the key role in this theory. Price not only signals how much to use of each ‘factor of production’, but also how much to produce of each commodity. Every consumer, whether worker, peasant, capitalist, or landlord, whatever his/her income, is driven by the same considerations. Each consumer chooses what to spend on in a way that gives him/her the greatest possible satisfaction (‘utility’). This sends the required signal to the producer on what and how much to produce. When demand for a commodity grows, some consumers would be willing to pay more for it, and its price would rise. The higher price makes it profitable for producers to produce more of the good, and its production rises (with the increased supply, the price then falls, and further adjustments take place up and down till it settles at some equilibrium level). Again, any ‘interference’ with market forces is counter-productive: If the price of a good is kept artificially low (eg by price controls), it would deter capitalists from investing in producing that good, and hence it would remain in short supply.

This theory assumes that producers can shift their production seamlessly from one commodity to another. Each producer can adjust the quantity he/she produces. Each consumer too can shift his/her purchases from a given product to a substitute. No producer or consumer (or group of producers/consumers) can directly influence prices, since there is a large number of producers and consumers (if you price your goods higher than others, you will lose customers; if you price them lower, so will others, and you will not gain customers, but lose profits). Only when individuals increase or decrease their production or purchases do they affect prices, indirectly, by changing supply or demand. That is to say, perfect competition is assumed by the theory.

Nor could there ever be a shortage of demand in relation to production. The orthodox theory assumes that all that is left after consumption goes directly or indirectly toward investment. So the whole of income creates demand for what is produced.

The beauty of this theory is that, given the different quantities of land, capital and labour individuals possess, and their demand for different commodities, the laws of supply and demand work to deliver full employment and the maximum ‘utility’ possible for consumers in the circumstances automatically. If a change takes place in the conditions – for example, if more land, or labour, or capital, becomes available – the system automatically adjusts its mix of the three to absorb fully all of them. Like a pendulum which, when pushed, rocks back and forth but ultimately comes to rest on its own, the equilibrium, when disturbed, gets restored automatically.

Some aspects of classical theory appeal to us because they correspond to ‘commonsense’. We all know that if something becomes scarce its price goes up. And we also easily accept the notion that people are fundamentally motivated by the desire for individual gain, and that this cannot be changed; after all, is that not what we see around us every day?

The obvious fact is that this theory serves to justify capitalism. It provides a justification for profit and rent – these are presented as just the prices of hiring capital and land. (The problem of where the capitalist’s capital come from is not answered; it is assumed that he was thrifty, and saved it up.) And at any rate, whatever the distribution of wealth, unfettered capitalism is shown to maximise the use of resources of society; it maximises utility (whatever that means) in society; every participant in the economy makes individual, voluntary decisions – about how much to work, how to spend, and so on. Innate, immutable human nature (which, in its view, is greedy and selfish) is not suppressed, but harnessed; no section is oppressed, but a harmony of interests is automatically achieved. Any attempt to run counter to this system harms the interest of the whole of society.

Questioning this economic orthodoxy

With the onset of the Great Depression in 1929, certain economists (the best known among whom was Keynes) began questioning parts of the above theory. They showed how the system does not automatically create demand for the whole of production, or bring about an equilibrium in which there is full employment; rather, it spontaneously tends to break down. When for some reason capitalists do not anticipate enough demand in relation to production, they stop investing, and cut production. That in turn lowers demand further, making investment even more unattractive to them. And so the economy sinks to a level at which there is large unemployment and unused capacity.

The insight of these economists undermined the entire structure of neoclassical economics. For now it was clear prices don’t play the magic balancing role accorded to them in neoclassical theory. Contemporary capitalists don’t keep cutting prices of their products till they are able to sell all they can produce, irrespective of whether or not they make a profit. Instead, they prefer to cut production. Capitalists who are already saddled with excess capacity don’t borrow money, even if the price of capital (i.e. the rate of interest) falls to very low levels. Moreover, a fall in the ‘price of labour’ (the general level of wages), far from making investment more attractive to capitalists, reduces aggregate demand, which makes investment less attractive, dragging the economy down further. All this would suggest that in the present era the underlying tendency of capitalist economies is towards stagnation and failure to realize productive potential.

However, the situation of underdeveloped economies, like India’s, has a further dimension. The manner in which production is organised – the social and economic order under which production takes place – itself does not permit even an approach to full employment. [4a]

The Indian economy has been deregulated over the last 15 years, labour laws have been given a de facto burial, and various sectors have been opened up to, or handed over to, private capital. If the prevailing economic theory were correct, one ought to have witnessed a more even spread of income growth and a steady rise in employment.

Instead, the gap between the growth rates of different regions has grown; the gap between the growth rates of different sectors of the economy too has grown; the rate of employment growth has slowed, resulting in massive growth of unemployment; and employment in the organised sector, where wages and conditions meet some minimum norms, is actually falling. Inequality in incomes and wealth has grown. And the bulk of the workforce remains in agriculture, the sector that is stagnant or retrogressing.

Thus the currently prevailing economic theory does not help us to understand the current state of affairs – boom on one side, and destitution and retrogression on the other. So this orthodox theory cannot help us change it, either. In fact, such change is the main concern of the vast majority of people.

The view of classical political economy

Before the rise of neoclassical economics in the late 19th century, the dominant stream was what is now called ‘classical political economy’. Its founders, stalwarts of the capitalist system, are now cited in textbooks for those aspects of their thinking which were later adopted by neoclassical economics. Adam Smith is cited for his belief that each person had a propensity to trade; that in the pursuit of selfish gain each person would advance the common good, “as if led by an invisible hand”; and that State intervention could only harm the natural harmony of social interests that arose from free competition. David Ricardo is cited for his theory showing how trade between two countries benefited both. However, important questions explored by them were cast aside by neoclassical economics.

In the work of Smith and Ricardo, the participants in the economy do not appear as independent, atomistic actors, but as classes – workers, landowners, capitalists – characterised by their roles in relation to production. They tried to work out the principles by which income created in the course of production is distributed among these three classes in the form of wages, rent, and profit.

The discipline of political economy developed in a period of rapid change – the era of the rise of capitalism in Europe. Thus Smith and Ricardo were interested to find the driving force of development. They located it in the production of a surplus over the consumption of the labourer, and the accumulation of the surplus in the form of the growth of productive capacity.

In the course of their investigations, it emerged that the interests of the three classes (workers, landowners, capitalists) are in conflict: The surplus over the consumption of the labourers is distributed among the other two classes (i.e., landowners and capitalists). Of course, in their view, the capitalist’s share of the surplus, i.e., profit, benefits society: for it goes toward accumulation, expanding the productive capacity – unlike the landlord’s share. Smith termed various sections other than labourers and capitalists as “unproductive” (he included among “unproductive labourers” the king, the armed forces, churchmen and lawyers). Ricardo was concerned with preventing a rise in either wages or rents, which would lead to a decline in profit and thus development. Thus, in their approach, struggle between classes played an important role in shaping economic processes.
Marx developed aspects from Smith and Ricardo’s thought, while rejecting other aspects, in creating a comprehensive and consistent analytic system. His work marks the culmination of classical political economy. At the same time, he introduced aspects which went far beyond its frame. [5a]

Historical approach

Neoclassical theory sees the economy as a snapshot – in which supply and demand in all markets simultaneously and instantly arrive at equilibrium. Each successive change is a new snapshot, a new equilibrium. By contrast, Marx viewed the economy and society as a process. This approach allowed him to analyse development in the economy. It follows from this approach that in order to understand the present, we must trace the process back – that is, look at history.

In Marx’s historical approach, classes in each society are stamped by their specific history. It is the character and strength of the contending classes that not only shape society itself, but determine that society’s place in the world economy. Only armed with this approach can we understand the vast diversities of the world: how some countries developed first, and colonised or otherwise dominated others; or how some countries today have developed so highly, while the bulk of them, containing the vast majority of the world’s population, remain underdeveloped and in misery.

The source of wealth

Neoclassical theory, as we saw, begins and ends with the market. Classical political economy too gave great importance to the role of market forces and the operation of supply and demand; but its account centred on the sphere of production. Drawing on the analysis of his predecessors, but taking it further, Marx showed that the whole of ‘civilized society’ rests on the surplus created by the working people in the course of production. The manner in which that surplus is generated, the level of the surplus, how it is distributed among different classes, how much of the surplus is accumulated (i.e., re-invested), and in what manner it is accumulated – these give us the key to understanding the economy.

Crucially, classical political economy located the source of society’s wealth in human beings’ interaction with nature in the form of labour. [6a] The wealth of a nation is measured by how productive its labour is, and what proportion of its labour force is employed in productive labour. Whereas in the currently dominant theory, the wealth of a nation is measured by how much capital a country has accumulated and production per unit of capital. By this measure, a nation grows wealthy by carrying out large investments and using the latest technology, even if this involves keeping a large proportion of its labour force unemployed or under-employed or engaged in work that does not yield it a subsistence. The approach of classical political economy implies that such a deployment of the labour force is a suppression of the nation’s potential wealth.

In neoclassical theory, markets operate on their own; State intervention is represented only as a harmful phenomenon, preventing the markets from ‘clearing’ and arriving at equilibrium. [7a] And the use of coercion is missing in its account; indeed, it claims there is no need of coercion in a free market; in a free market, by definition, exchange must be of equivalents.

By contrast, Marx and his followers pointed out that under exploitative societies before capitalism, such as slave society and feudalism, extra-economic coercion was a necessary part of surplus extraction: slaves and serfs toiled for the ruling classes of their times because laws, traditions and armed force compelled them to do so. No doubt, in capitalist society it is principally economic coercion that compels the worker to labour (he/she needs to labour in order to eat); but the use of organised force, and its highest form, the State, is essential to the operation of the social and economic order. If the workers set their hands on the capitalist’s private property (which after all has been created by the workers’ labour), they face the armed force of the State. (Indeed, they face it even when trying to reduce the extent of surplus-extraction by fighting for higher wages and better conditions of labour – for example, the use of police against striking workers.) All this can be understood in the Marxist framework. And even the State’s own economic activity – its taxes, its expenditures and subsidies, its production of goods and services – can be understood with the class analysis of Marxism.

Study of the social-economic formation

Finally, neoclassical theory does not take note of the distinct social and economic relations within different societies; it merely talks of ‘advanced’ and ‘backward’ economies. In its view, the difference between the two is merely quantitative: the backward economy has less capital (for example, less industry). As the backward economy develops, it will eventually reach the condition of the advanced economies today. They believe that contact (in the form of free trade and investment) between the advanced and backward economies accelerates the development of the latter, benefiting both in the process. The increasing wealth of one economy (or of a class within an economy) will eventually percolate to the rest; there is no relation between the wealth of some and the poverty of the rest.

Evidently, in such a framework it is impossible to understand why some countries took the trouble to colonise others, and why, centuries later, the gulf between the colonisers and the once-colonised persists in various forms. By contrast, Marx uncovered the character of different stages of social development, and further looked at the specific historical path each society has travelled. Later Marxists extended this to understand the phenomena of colonialism and its development into latter-day imperialism. With the Marxist approach, we can understand how social institutions like caste, race, and gender developed, and in turn their role in shaping particular patterns of economic development. In sum, Marxism does not make a separation between economics and sociology: both are aspects of study of the social-economic formation.

Amid the confusing processes we are now witnessing in the Indian economy, the neoclassical approach cannot explain the strange pattern of growth we are witnessing today. We all the more need the class, surplus-based and historical approach of political economy.

Indeed, in order to understand the historical process by which the Indian economy has developed, we need to look, by contrast, at the process by which capitalism developed in Europe. Though this is a lengthy detour, the reason for our taking it will become evident when we return to look at Indian society.

II. How Capitalism Emerged in Europe

What capitalism is, and how it emerged in Europe over the course of several centuries, is a vast and complex subject. But in order to contrast that process with what occurred in India, it is useful to mention a few aspects. (A warning: we have not presented developments in chronological order, since the aim is to describe processes.) Some readers might find this a tedious digression, and others might find it over-simplified. Nevertheless, our reason for mentioning these aspects will become clear later, as we describe the pattern of development in India.

Class struggle within feudal society propelled social development

Capitalism in Europe was preceded by feudalism. Under feudalism, land was overwhelmingly the main means of production. Land was owned by feudal lords, and a large number of peasants bound to the land worked it in small farms. There was also a smaller number of artisans, who owned their meagre means of production. The surplus product of these peasants and artisans, the direct producers, was extracted by law, custom and force by feudal lords. The form in which the surplus was extracted ranged, depending on place and time, from serfdom with forced labour to the point of mere payment of tribute (in kind or cash). Secure in a stagnant society, these lords had little interest in improving technique and expanding output, which grew, at best, very slowly.
The basic conflict in feudal society, the conflict that propelled society forward, was between these direct producers and the landowning lords. In order to maintain their class power, the feudal lords tried to maximise the rent they extracted from the peasants. [1b] The peasants struggled in various ways to end, or at least curtail, this extraction of the surplus, sometimes by open revolt, sometimes by fleeing the land.

In the course of these struggles many peasants were able to relax the stranglehold of the lords, to keep some surplus for themselves, and to improve and extend their cultivation. Additionally some artisans and merchants became wealthy enough to buy land in their own right, breaking the lords’ monopoly on land ownership. And so another process began: some producers improved their production faster than others, and were able to accumulate some capital within the petty mode of production itself; and over time there developed a class of relatively prosperous farmers alongside impoverished peasants. This polarisation helped lay the basis for the wage labour that would be needed under capitalism.

Growth of merchant capital; decline of the old order

Over the centuries of feudal society, as the surplus grew to some extent, trade also grew. Around that trade grew towns where merchants enjoyed some political power. These merchants chafed under certain feudal restrictions and irrationalities. Since trade suffered under the multiple authorities and taxes of various feudal lords, it was in the interest of the merchants to promote a strong central nation-state, as developed from the 15th century. [2b] Yet the merchants were hardly an anti-feudal force: they fed off the declining feudal order and prospered under it, enjoying official monopolies and high margins. Merchant capital did not lead to industrial capital through its own development.

Nevertheless, the money power of the towns’ well-to-do, the relative political freedom of the towns, and the contact with ideas from distant lands (such as the vibrant Arab civilizations), helped germinate far-reaching changes in religious doctrines and philosophy, mathematics and science. On the one hand religious movements, known as the Protestant Reformation, arose against the authority of the Catholic Church (which, located in Rome, was itself a great feudal landlord throughout Europe, irksome to rising nation-states like England). Even more radical was the revolution in mathematics, science and philosophy brought about by Francis Bacon, Copernicus, Galileo, Descartes, Leibniz and Newton: now men learnt that the universe did not revolve around the earth, rather the earth revolved around the sun, and the laws governing its motion were discovered and propagated.

The associated change in the world-view of the intelligentsia has been termed the Enlightenment: in the new ideology, the force of human Reason now unseated established authority, such as the Church and the King. The State itself was now no longer seen as God-given, but the product of Man, a ‘social contract’ among men for their benefit. That implied that if the State were not functioning for their benefit, it was justified to overthrow it and replace it with a new one.

While the broad masses of people, who bore the burden of the feudal order on their backs, had neither the education nor the opportunity to study all these theories, elements of such thought filtered down to them. When the bourgeoisie seized power from the feudal class, it was generally a violent affair in which the bourgeoisie needed the help of the masses, and so the masses were stirred up with slogans of liberation. Thus it was that the British waged a civil war and eventually chopped off the head of their King in 1649; and the French in 1789 began a far more profound revolution, not only decapitating their royalty but sweeping away feudalism much more comprehensively. The French revolution declared “liberty, equality, fraternity” as its motto.

The creation of the working class, the rise of capitalism

However, the bourgeoisie used the struggle of the masses against the feudal order not to put the masses in power, but in order to seize power for themselves. With the rise of capitalism the fate of the labouring poor was to be dispossessed, and have nothing to live by but by selling their power to labour. In England, as forward-looking landlords saw money to be made in farming in the new commercial way, they got around the feudal restrictions which prevented land changing hands, and ousted their numerous tenants, hiring a much smaller number of landless labourers as wage labour. Moreover, small holders in economic distress could be got to sell their land cheap. And, eager to supply the growing market for wool, budding agricultural capitalists seized and enclosed the once-common lands of the village as their private pasture for their sheep, impoverishing and uprooting local peasants.

These terrible upheavals were essential to the growth of industrial capitalism: First, the improved methods of agriculture introduced on consolidated, larger farms by the profit-oriented landowners multiplied output and made it possible to feed a much larger workforce outside agriculture; secondly, the huge numbers of peasants thus ousted from agriculture added greatly to the workforce available for manufacturing goods.

Under feudalism, most household requirements – shoes, clothes, tools, furniture – were made at home. A limited number of goods were produced for the market by artisans/craftsmen employing, say, two or three men, working with their own tools and raw materials. But as trade grew, merchants, seeking to increase production, began supplying materials and purchasing the finished goods from the craftsmen; the latter still owned their own tools, but they largely lost their independence and were now working for the merchant.

However, what definitively marked the emergence of capitalism was not simply production for the market, but the system in which all the means of production – the tools/machines, the raw materials, and the location – belonged to the capitalist, [3b] and the labourer had nothing to sell but his/her own labour power; labour power had itself become a commodity bought and sold on the market. Feudalism had needed the use of custom, law and force to extract the surplus from the producers, who possessed plots of land, or artisans’ tools/equipment, but under capitalism it was no longer necessary to rely on such non-economic methods. The worker had the choice of working for the capitalist or starving. Surplus extraction now was carried out by the impersonal laws of the market.

The new capitalists demanded, and got, the abolition of monopolies and privileges in trade and industry on which merchant capital had fattened under feudalism, and thus established free competition at home.

Primitive accumulation; the protection and acquiring of markets

Setting up capitalist enterprises would require considerable investments; where did the initial sums come from? The religious sects promoted by the capitalists, such as Puritanism, preached that capital was accumulated by virtuous thrift (and some latter-day neoclassical economists preach much the same; they call the return on capital, for example, the “reward for waiting”). But in fact the initial capital was got largely by various types of plunder and forced labour. We have already mentioned the measures which ousted and destituted the peasants. Add to this the plunder of the territories overseas, the slave trade, and the use of slave labour in the colonies – all justified by the development of a racist ideology and backed by the European state powers. Marx described one aspect of what he called the “primitive (or primary) accumulation of capital” in a famous passage:

The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of blackskins, signalise the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief moments of primitive accumulation. [4b]

England, for example, generated huge trade deficits with its colonies (that is, it imported more than it exported to them), and in effect gave nothing to the colonies in exchange; it could do this only because it exercised military and extra-economic power over them. These amounted to giant, unrequited transfers. Even taking only England’s unrequited trade deficits with the West Indies and India, total investment in England was raised by between two-thirds to over four-fifths by these transfers during 1770-1820 – the very period of the ‘Industrial Revolution’ in England. [5b]

Apart from the initial capital, capitalists also needed to be assured of a market. While the new capitalists established free competition at home, they were happy to use State intervention against external competition. Once again the nation-state came in handy to capitalism. Large imports of cotton textiles from India not only threatened the market of English woollens manufacturers, but showed how profitable manufacture of cotton textiles in England could be – if only it could protect itself against imports of superior Indian cloth. And so, at the start of the 18th century, England passed laws banning imports of cotton goods, and even the wearing of such imported goods. Meanwhile, with the help of its military might, it opened up foreign markets. Not until the mid-19th century, when Britain was overwhelmingly the leading industrial power worldwide, did it dismantle protection and begin to champion ‘free trade’ – till it faced new challengers by the end of the century, whereupon it returned to protectionism.

Industrial Revolution

While productive forces developed to some extent before the bourgeois seizure of power (with the 17th century Civil War in England, or the French Revolution beginning in 1789), that seizure of power preceded the really dramatic development of productive forces.

In England, (i) the creation of a large uprooted labour force (assuring capitalists a steady supply of workers at low wages even as production grew); (ii) the pillage from the colonies and the grabbing of the commons; and (iii) the protection of the domestic market and the forcible prising open of foreign markets, combined to create conditions for new technology. It was in the 18th century, and particularly after 1760, that the famous series of innovations began that are now termed the Industrial Revolution: the flying shuttle that increased the speed of weaving and the widths of cloths, and the powerloom that increased that speed further; the spinning jenny, water frame and mule that successively increased the speed and quality of spinning; and the steam engine, that was first applied in a cotton mill in 1785 and to a railroad in 1804. The factory system reorganized work, with much greater division of labour, supervision of work and specialization of function. Where land was overwhelmingly the main means of production under feudalism, under capitalism, the main means of production became industry.

Massive expansions followed in the coal, iron and railroad industries, and thereafter in every sphere: “for the first time in human history, the shackles were taken off the productive power of human societies, which henceforth became capable of the constant, rapid and up to the present limitless multiplication of men, goods, and services.” [6b] So abnormal was the rate of change “as radically to transform men’s ideas about society from a more or less static conception of a world where from generation to generation men were destined to remain in the station in life to which they had been appointed at birth, and where departure from tradition was contrary to nature, into a conception of progress as a way of life and of continual improvement as the normal state of any healthy society.” [7b]

However, it is mistaken to credit this transformation merely to new technology: “industrial inventions are social products in the sense that… the questions that are posed to the inventor’s mind as well as the materials for his projects are shaped by the social and economic circumstances and needs of the time.” Some innovations had to wait to be implemented till economic and social circumstances were favourable: for example, the smelting of iron with coal was probably discovered in 1620, but it was only a century later that it was put to successful use. [8b] Nor was innovation mainly a matter of scientific genius: “the practical problem of smelting with coal… was solved before the chemistry of metallic compounds was properly understood. The problems these men of industry and invention put to themselves were formulated, not a priori, but out of the fullness of their own experience…. [T]he qualities and experience needed for successful synthesis and application are often those of an industrial organizer rather than of a laboratory worker.” [9b]

Innovation now became a compulsion: Each capitalist was driven to keep increasing the productivity of labour, failing which he would be swallowed by his competitors. Capital not merely reproduces itself, but it must do so on an expanded scale. The purpose of production under capitalism is to accumulate more capital. (Marx further foresaw that in this process the large number of small firms would be reduced to a handful by the action of the inherent laws of capitalistic production itself, by the centralisation of capital. “One capitalist always kills many.” [10b] But monopoly capital only emerged after an extended period of unfettered competition.)

Capitalists of humble origin; competitive markets; technology easy to diffuse

While the wealthy merchants financed these new enterprises, they were not the main agents of this change: “the personnel which captained the new factory industry and took the initiative in its expansion was largely of humble origin, coming from the ranks of former master craftsmen or yeomen farmers with a small capital which they increased by going into partnership with more substantial merchants. They brought with them the rough vigour and the boundless ambition of the small rural bourgeoisie; and they were more inclined than those who had spent their time in the counting-house or the market to be aware of the detail of the production process, and so to be alive to the possibilities of the new technique and the successful handling of it. Among the new men were master clock-makers, hatters, shoemakers and weavers, as well as farmers and tradesmen.” [11b]

At this stage of capitalism’s growth, the number of capitalist enterprises was large, and each firm was relatively small, so markets were competitive. The technological advances were still at a level where they could be easily diffused, and could not be monopolized by a few firms; these advances were soon spread to the Continent – despite attempts by Britain to the contrary – by export of British machinery and British skilled workers. Belgium, France, Germany and the U.S. all developed with the help of British know-how. [12b]

Massive shift of workforce to industry

One might imagine that, since innovations like the spinning-jenny and the powerloom meant that the same amount of production could be carried out with far fewer workers, they would reduce the size of the working class. No doubt, such innovations ensured the existence of an army of unemployed workers, so that wages did not rise to the point where they hurt profits. But they gave so great a boost to investment in a whole range of industries (machinery, coal, iron) within Britain that they resulted in a net increase in the demand for labour. Further, the development of railroads attracted enormous investment. Thus, in countries which underwent capitalist transformation, not only did industrial output soon dwarf agricultural output in national income, but the industrial workforce soon overtook the agricultural workforce. This shift took place first in England, where the share of the workforce in agriculture sank to 14 per cent by 1871, compared to 55 per cent employed in ‘industry and trade’.13 Although the pace of the shift was slower in other countries, a similar process was a necessary part of capitalist development in all such countries.

With urbanization, various items of mass consumption such as clothing and footwear were now no longer made at home, but had to be bought by workers. The sheer increase in the industrial workforce meant that the purchasing power of the masses multiplied. Thus industry gained a growing internal market for such goods, limited though it was by the fact that the workers were paid such low wages. The growth of capitalist agriculture too was sustained by demand from the growing number of workers absorbed in industry.

In order to compete with one another, capitalists required the constant cheapening of production, one element of which was the cheapening of raw materials. Capitalism brought this about by industrialising agriculture. The differences between the productivity of workers in the two major sectors of the economy, industry and agriculture, tended to narrow in this process.

Establishment of capitalist social values

The change in the class structure naturally resulted in a change in the dominant social values – which are always the values of the ruling class. “The hand-mill gives you society with the feudal lord; the steam-mill society with the industrial capitalist.” [14b] As we mentioned, the social background of many first-generation men of capital was humble, and, while they bought up titles and ranks with their new money, they advertised the fact that they were ‘self-made men’. The bureaucracy now was thrown open to a wider social section: the French Revolution instituted this by a system of national examinations. In Japan, where till 1868 only the samurai (military nobility) could bear arms or hold public office, all such privileges were abolished, all classes could be conscripted into the army, universal public education was instituted, and education and ‘ability’ were made the basis for recruitment to public office. Hobsbawm indeed claims that “The crucial achievement of the two revolutions (the Industrial Revolution and the French Revolution) was thus that they opened careers to talent, or at any rate to energy, shrewdness, hard work, and greed. Not all careers, and not to the top rungs of the ladder, except perhaps in the USA. And yet, how extraordinary were the opportunities, how remote from the nineteenth century the static hierarchical ideal of the past!” [15b]

The new ideology of course helped justify the miserable condition of the labouring masses, for evidently in such an open system poverty could only be the result of laziness or stupidity.

However, while the capitalist class had defeated the old classes and established its supremacy in the economic, political and ideological spheres, it had created a new class, vast and growing – the proletariat. At the time of the Revolution of 1649 or the Revolution of 1789 the proletariat in England and in France was not yet formed as a class, and was not conscious of its existence as a class; workers followed the lead of the bourgeoisie without advancing independent demands. Yet within a short time after the French Revolution, workers began organising on class demands, both economic and political. The Chartist movement of 1838-48 in Britain was the first political organisation of the working class; in 1864 the first International Working Men’s Association was born; and 1871 witnessed the first, albeit short-lived, state power of the working class, the Paris Commune. The publication of Marx and Engels’ Communist Manifesto in 1848, followed by Marx’s Capital in 1867, provided what eventually became the dominant ideological basis for working class organisation. Thus capitalist society was marked by the sharp contention between two great classes, the capitalists and the working class.

The above description is intended only to highlight a few aspects of the development of capitalism in order to bring out certain crucial linkages within it (they are not listed in chronological order; indeed they overlap):

(i) Class struggle, accumulation and class polarisation: The class struggle of peasants helped restrict feudal extractions; this helped the accumulation of some capital within the petty mode of production, and this accumulation helped the development of productive forces; this development increased the polarisation of the peasantry into different classes.

(ii) Ousting of peasantry, creation of working class and a mass market: A large labour force was ousted from agriculture by agricultural capitalists; the new methods then adopted in agriculture led to an increase in agricultural productivity, generating a surplus to feed the growing industrial workforce, and cheapening the raw materials needed by industry. Meanwhile the labour ousted from agriculture was substantially absorbed in capitalist industry; this increased the purchasing power of the masses and created a domestic market for mass consumption goods.

(iii) Creation of a machine-building industry, increased productivity displacing workers, yet growing working class: The Industrial Revolution and the development of factory production led to the development of an industry producing machinery, coal, iron, and railroads. Since these heavy industries, particularly the machine-building industries, developed within the same country as the light industries, the size of the working class as a whole continued to grow despite labour productivity increases in the light industries – i.e., workers displaced by productivity increases in light industry got absorbed in the heavy industries. Industry emerged as the main means of production in the economy. It had the dominant share not only of the national income but also, crucially, of the workforce.

(iv) Development of the nation-state as protector and capturer of markets: The development of the nation-state was spurred by the growing internal integration of the economy of a region. In turn, it promoted that integration. Both rise of the nation-state and the integration of its economy fueled the rise of national allegiance and national sentiment. Commercial interests stood to benefit, as the new State power worked actively to protect the domestic market and seize foreign markets.

(v) Competitive capitalism, diffusion of technology, and the rise of monopoly: When competitive capitalism developed in Britain, technological innovation progressed at relatively elementary level (without a specialized research and development division). Thus in this phase it was relatively easy to diffuse technology to other firms and other countries. Monopoly capital emerged only after and through an extended phase of competitive capitalism.

(vi) Ascendancy of different classes and their world-views: As the feudal order declined and new ideas germinated challenging established authority, the ground was prepared, at the ideological level, for the sharpening contradiction between the bourgeoisie and the feudal order. Society passed generally through violent mass upheavals before bourgeois hegemony could be securely established. It is through these upheavals that feudal consciousness and feudal allegiances declined and a bourgeois democratic consciousness was given birth. Triumphant, the capitalist class stamped society with its new social values. However, the same social developments also led to the formation and rise of the industrial proletariat. This class had the potential for conscious contention with the capitalist class and the capacity to advance its own world-view.

The above are not separate strings. They are intertwined, interacting with one another. They do not represent simple chains of causation, but rather the links between the various developments.

This was the classical pattern established in Britain; the course was not identical in any of the countries that industrialised thereafter. Upto the late 19th century, the later the entrant, the greater the advantage it had of being able to import the technology and to complete the process of industrialisation relatively fast; but, generally, the more it had to rely more on State intervention and subsidies to do so. The forced pace created certain strains and weakness of bourgeois democratic consciousness in countries such as West Germany and Japan. As the phase of competitive capitalism receded and was transformed into monopoly capitalism, this path of diffusion of capitalism was more or less closed to new entrants.

India, under colonial rule, did not merely traverse a different specific path to capitalist development: rather, while individual elements of development here resembled the development of capitalism in the capitalist countries, crucial linkages were damaged or broken in a way that Indian society and its economy were stunted and deformed. We need to keep in mind the linkages mentioned above as we look at the processes imposed by colonial rule in India.

III. Colonial Rule: Setting the Pattern of Distortion, Disarticulation, Exclusion [1c]

India was no exception to the laws of historical development. Before colonial rule, the feudal structure of Indian society was in the process of being undermined. Production for the market formed a large segment of the economy (since land revenue was collected in cash or sold for cash); domestic and foreign trade grew, and merchant capital flourished, with some merchants acquiring fabulous wealth; a sophisticated financial system developed, geared to the needs of commerce; and the urban sector expanded, in which a high proportion of the population was employed in industrial/craft production. New elements began to appear – instances of private property in land (whereby land could be bought and sold like any commodity); the emergence of cultivation performed with hired labour; the setting up of some manufacture and mining enterprises worked with hired labour. Most importantly, in response to the increasing extraction of rent, there arose stirrings, revolts and movements of the peasantry and artisans of various regions, sometimes clothed as religious movements, sometimes led by local chieftains. These dealt blows to the Mughal Empire and accelerated its collapse. [2c]

However, the new elements were still weak, scattered or sporadic; they were far from achieving the scale or cohesion to lead a social revolution. Whatever the reasons for the delay in the emergence of such a revolution (for which the tenacious caste system and the self-sufficiency of the village economy must have had some share of responsibility), it was forestalled by the arrival of colonial rule.

Transfer of surplus from agriculture to the imperialist metropolis

The effect of colonial rule can be glimpsed in two figures. In 1700 India’s share of world Gross Domestic Product was roughly the same as that of all of Europe – both were around 23 per cent; by 1952 India’s share was four per cent and Europe’s 30 per cent. India’s share of world manufacturing fell from almost one-fourth in 1750 to less than one-fiftieth in 1900. [3c]

The new British rulers took the already excessive land revenue levels of their predecessors as a starting point, and increased them steeply by re-assessment and more efficient collection. Common to the two main systems of land revenue they introduced – zamindari and ryotwari – was the drive to maximise revenue. Thus even in the latter – in which, theoretically, the cultivator directly confronted the State – parasitic classes developed rights over the surplus, since the cultivator was forced to borrow to make revenue payments. Since land could now be bought and sold, it became a commodity – but of a peculiar type, subject to a heavy rent/revenue. This huge drain from agriculture was also a drain from the country itself, because the land revenue formed the main component of British drain from India. Agriculture, thus drained of its surplus, retrogressed: while agricultural technique remained virtually frozen at the levels of Mughal rule, per capita foodgrains output declined considerably. Peasants had no surplus to invest in maintaining productivity, let alone improving it.

In one sense colonial rule superficially resembled classical capitalist development in that it forced an increase in the share of production for exchange; but this condition has aptly been termed a “deformed generalised commodity production”. [4c] The peasant now had to pay the (hiked) revenue in cash and that too before the harvest, when he was short of cash; this rendered him dependent on merchants and moneylenders. The merchants and the moneylenders had a stake in encouraging tradeable crops rather than subsistence farming, and brought about a shift in cropping patterns. The decline of subsistence crops and the expansion of cash crops served the process of transferring surplus from the colony to the imperialist metropolis: (i) these crops could be exported; and (ii) India was paid for these exports out of the taxes levied by the British rulers in India itself – in other words, India in effect received nothing in return. (Some writers talk of ‘export markets’ being opened up for India with British rule. This is similar to someone robbing one, and then paying for one’s goods with the money he has robbed.) Since the replacement of subsistence crops with cash crops depressed the consumption of the poor peasantry, it can be said that the ‘surpluses’ were transferred out of the very subsistence of the poor peasantry. The spread of cash crops went hand in hand with the spread of hunger. The late 19th century witnessed a series of devastating famines and epidemics that wiped out millions; even after that malnutrition persisted.

Before British rule, a portion of the land revenues used to return to the region from which they arose, through the nobility’s purchases of goods from artisans; now, with the ousting of the earlier nobility and their replacement by the British, this source of demand for artisans’ goods vanished. The British imposed internal tariffs on Indian textiles and heavy tariffs or outright bans on their import into Britain, whereas British textiles were imported into India at low tariffs. India was converted from a leading manufacturer and exporter of textiles to a massive importer of them. This destroyed the section of the Indian textile industry producing fine fabrics for consumption by the earlier feudal elite. The industrial cities of the earlier period – Agra, Dacca, Surat, Patna, and others – declined in economic activity and population. Large-scale unemployment was thus a direct and enduring product of colonial rule. The share of industry in the workforce fell, as did its share in national income. The share of agriculture in workforce and national income grew, not thanks to any development in agriculture, but because of the shrinkage of industry.

Deindustrialisation, pressure on the land, helplessness before feudal forces

The artisans and workers once employed in the textile industry now had to fall back on agriculture. Under Mughal rule there was a great abundance of land, which allowed cultivators to cultivate only the more fertile land, and to cultivate only half their land in a given year, thus maintaining its fertility. However, as deindustrialisation took place under British rule, and ruined weavers fell back on the land as the only means of livelihood, land became scarce. W.W. Hunter wrote in 1893: “In Bengal there was in the last century more cultivated land than there were husbandmen to till it. The landlords at that time were competing for tenants…. A hundred years of British rule has reversed the ratio…. It is [now] the husbandmen who have to compete with each other for land.” [5c]

This destruction of indigenous industry, and the retrogression of agriculture combined with its commercialisation, led to a new kind of distorted feudalism, or ‘semi-feudalism’. The peasants’ lack of any alternative to cultivation rendered them helpless before the landlords, merchants and usurers, who found it easy to increase their extractions to the point where they took away not only the surplus, but even a part of what was needed for the peasant to subsist and to reproduce the conditions in which he/she could produce again. The lack of alternative employment also meant that many landless or very small peasants preferred to tie themselves in ‘voluntary’ bondage to a feudal lord with the guarantee of some sort of subsistence. Finally, it meant that, however poor the returns from cultivation, however marginal the plot of land, the peasant would cling onto it tenaciously as the only defence against complete destitution. At the same time, those trying to eke out a living in all sorts of petty trade proliferated, since there were no ‘barriers to entry’ in this field. Thus the share of the services sector in employment grew, even as the income of those so-called self-employed in such petty activities remained even lower than the income of those involved in production.

No doubt the peasant was now linked with national and international markets, but these did not operate to stimulate greater production. First, the large revenue demanded of the peasant left him little or no surplus to re-invest. Secondly, taking advantage of the peasant’s need for cash before sowing, the moneylender-trader was able to tie the peasant in debt and force him to sell the crop to him at a depressed price. Thirdly, between these traders and the international market intervened large wholesale merchants, banks in India, and businesses and banks in the imperialist countries. Any rise in international prices could easily be retained by those links in the chain closer to the outlets in the imperialist countries; even if the peasant had information of improved prices, he lacked holding power to extract better terms in such a situation. (Thus any improvement in ‘terms of trade’ would not accrue largely to the peasant, but to these other links in the chain, including foreign ones.) On the other hand, any fall in international prices could be passed back down the chain to the peasant, who, as we mentioned earlier, lacked alternative employment, and was trapped in debt to the moneylender-trader, and hence had no option but to continue to produce on worse terms.

The usurping of the forests

Before British rule, the forests were to a large extent under the control of the tribals, for whom they were the source of their food, fuel, fodder, housing materials, raw materials for household needs, and medicines, and therefore an indispensable part of their social and religious life. Lacking ploughs and draught animals, the tribals practised ‘shift and burn’ cultivation on forest land. They also earned income from the sale of wood and forest products to other communities.

From around the 1860s, the British began to monopolise the forests – then two-fifths of the country’s area – by a series of measures which classified most forests as ‘reserved’ or ‘protected’, set up a separate forest administration, placed restrictions on the tribals’ use of the forests and banned shifting cultivation (the typical method of agriculture among tribals, who could not afford ploughs and cattle), and extracted large tax revenues. At the same time, the British plundered the forests for timber and fuel, setting in motion the process of deforestation which continues to date. Attempts by tribals to reassert their rights over the forest were sparking-points for numerous violent tribal revolts against the Raj.

The processes of imperialist penetration and trade in forest products brought to the forest areas non-tribal moneylenders and merchants, who soon alienated tribal lands on a large scale, and thus joined the government as a target of tribal revolt. The debt-ridden tribals were routinely forced to perform veth, or forced labour, on the fields of the usurers. Frequently the same usurer-landowners were also appointed forest contractors (given timber contracts) by the forest officials. In the later years of the Raj, the rich mineral resources of the tribal regions began to be developed, again by the displacement and exclusion of the tribals (even as a few would be hired as coolie labour). In the absence of any other source of livelihood, the tribals, now deemed encroachers in their own land, nevertheless clung on to the forests and forest plots; as such they remained available for exploitation by sundry forest officials, merchants, and usurers.

There are a number of important common property resources (CPRs) apart from the forests: grazing lands, village commons, ponds, tanks, streams and rivers. Before British rule, a large part of the country’s natural resources were under the control of local communities, and were freely available to the rural population. As the British rulers extended State control over these resources, community control and management declined, and a dwindling share of erstwhile common property resources and forests remained available to the villagers. As a result, today, in almost all parts of the country, villagers have a legal right of access only on some specific categories of land and water resources.

The process of extending State control over the common resources, which began with the declaration of ‘reserved’ and ‘protected’ forests in the closing years of the 19th century, has essentially been that of exclusion of villagers’ access to common resources by law. As a result, the systems of community management gradually disintegrated and are now virtually extinct. Today, in almost all parts of the country, the villagers have legal right of access only on some specific categories of land like ‘pasture and grazing lands’ and ‘village forests’, which are under the jurisdiction of the village or village panchayat. All other categories of land not under private ownership like barren and uncultivable land, culturable waste, land put to nonagricultural uses and forests belong to State Revenue department or Forest department. Nevertheless, the rural population, particularly the poor, depend greatly on the goods and services available from these categories of land. Besides, though only those resources are treated as CPRs on which no individual has exclusive property rights, there are systems of customary rights which support traditional practices, such as gleaning or grazing of cattle in the fields after harvest, which represent common rights on private property in certain situations.6

Introduction of modern industry – displacement without re-employment

Machine industry was introduced into India in the 1850s (in cotton and jute textiles), and grew faster from the late 19th century onward. It came, that is to say, after the destruction of much of native industry, but, unlike in Europe, it did not grow out of native industry. Whether the firms were owned by British entrepreneurs or (as in western India) by Indian ones, the machinery for these firms was imported, largely from Britain. As modern industry proceeded, it kept displacing more workers from traditional industry, such as the surviving spinners and handloom weavers who produced cloth for the lower end of the market (the higher end of the market was catered to for a long time by imports). The modern sugar and iron industries similarly ousted traditional producers. In Europe too traditional industry in consumer goods had been ousted by machine industry, which developed through continuous increases in productivity; but in India, thanks to continuous imports of machinery, employment was not created within India itself in a machine-making industry and other heavy industries as could have made up for the loss of employment in consumer goods industries. Thus the net effect on employment was negative.

Given the nature of the transition to modern industry there was a large gap between the technology embodied in the imported machines and the know-how existing in India; indeed, even for running the machinery the mills imported technicians from Lancashire. Since the market was limited for many products, and the minimum size of the firms based on imported technology was large, Indian industry did not pass through a phase dominated by a large number of small firms competing for markets (with the winners growing into monopolies). Instead, a few firms between them could exercise monopoly control at the very outset, and did not face competitive pressure to reduce production costs and prices. As this practice proved profitable, technological dependence was continuously reproduced.

The typical Indian industrial house did not develop through an extended period of unfettered competition through which capital was centralised in the technological leader. Rather, it was born as a monopoly house, closely linked to government policy, contracts, and subsidies, and with ties to feudal sections, for example for the supply of raw materials. The background of the entrepreneurs was finance (including usury) and trade, and they excelled in financial, mercantile and speculative operations (often devoting to them as much attention as to their industrial operations). These firms, known as managing agencies, controlled a number of firms, often in disparate industries. A survey of Indian monopoly houses from the 1930s till the late 1970s remarked that “monopoly capital in India bears a closer family resemblance to pre-industrial monopolies than to contemporary monopoly capitalism in the west”. [7c]

Railways and irrigation: infrastructure for imperialist penetration, not development

In his 1853 article on “The Future Results of British Rule in India”, Marx anticipated that

when you have once introduced machinery into the locomotion of a country, which possesses iron and coals, you are unable to withhold it from its fabrication. You cannot maintain a net of railways over an immense country without introducing all those industrial processes necessary to meet the immediate and current wants of railway locomotion, and out of which there must grow the application of machinery to those branches of industry not immediately connected with the railways. The railway system will therefore become in India truly the forerunner of modern industry…. Modern industry, resulting from the railway system, will dissolve the hereditary divisions of labour, upon which rest the Indian castes, those decisive impediments to Indian progress and Indian power.

Later, however, as he saw the actual process of colonial rule in Asia (in contrast to the history of colonial rule in North America), Marx revised his views: in an 1881 letter he referred to the railways as “useless to the Hindus” (i.e., the Indians), and one of the means for the British to carry on “a bleeding process with a vengeance!” [8c] And Lenin later remarked that imperialism had converted the building of railways, which “seems to be a simple, natural, democratic, cultural and civilizing enterprise”, into “an instrument for oppressing a thousand million people (in the colonies and semicolonies), that is, more than half the population of the globe inhabiting the dependent countries”. [9c]

Indeed only a minute portion of the railway equipment was manufactured in India, and so the entire ‘multiplier’ effect of investment in the railways did not take place in India. On the contrary, the dividends on (inflated) British private investment in the railways were one of the major elements of the drain from India.

Moreover, the route alignments and rate structures of the railways made it cheaper to transport goods from the ports to the interior and back rather than between points in the interior. Thus the railways “increased the relative distances between places in the hinterland, since very often the only connections they now had between themselves passed through the ports. The railway revolution thus turned the third world economies inside out and enormously increased the intensity of dominion of advanced capitalist countries over them.” [10c] They helped convert India into a supplier of raw materials and foodgrains for Europe and its colonies, and open up the country’s market to imported goods. The actual effect of such growth of exchange, in a situation where productive forces and associated purchasing power stagnated, can be glimpsed in the export of, and increased domestic speculation in, foodgrain in the midst of famines:

As argued sarcastically by an administrator from a native state, “…In former famines only disjointed local areas were affected…. Now railways made it possible that we were starved to death as well as our neighbours.” Even an indigenous grain dealer of Calcutta was ready to concede that “…Prices rose throughout India during this famine largely due to operation of railways. In the previous (1878) famine there was little movement of crops due to good harvests in some parts. In this famine bad harvest is also equally spread.” Spread of telegraphs, according to the grain dealer, “…helped merchants in keeping up prices throughout India.” [11c]

When the new rulers finally made investments in irrigation, they did so only in select pockets, on strictly commercial considerations, and in a distorting fashion. Their purpose was to stimulate high-value, intensively cropped, commercial crops in order to increase government revenues. In the United Provinces (U.P.), with the introduction of canal irrigation under British rule, merchants – who, as we noted earlier, had an interest in promoting crops in which they could trade – extended cultivation loans on the condition that the peasants grow sugarcane. The costs of sugarcane cultivation were heavy, and the peasants remained trapped in debt thereafter, often losing their land in the process. Since sugarcane displaced the crops peasants grew for their own consumption, the peasants now had to buy their subsistence needs from the market, and at higher prices (since the crops were now scarcer). Moreover, the pattern of canal development caused environmental damage, rendering large lands infertile. [12c] Thus the development of commercialised, ‘high-value’ agriculture did not result in accumulation within agriculture, but pauperised the poorer peasantry and drained surpluses into the hands of non-agricultural classes.

The process of spread of other cash crops, such as cotton or jute, was linked to a similar pattern of dependence on, and eventual near-bondage to, merchant-moneylenders. While physical coercion was used to impose certain crops such as indigo and poppy on the peasants, in most cases commercialisation was forced upon sections of peasants through the process described above, that is, through seemingly free exchange. At times the forced nature of this commercialisation showed up in the fact that, to the extent the peasant’s position improved (say, when he actually got the benefit of better prices), he would withdraw from the market – i.e., reduce the share of output sold. [13c]

Stunted industrialisation

Because of the pauperisation of the peasantry and the small size of the working class and the middle class – largely as a consequence of British rule – the market for manufactured goods remained very restricted. Given the limited market and the absence of comprehensive tariff protection similar to that enjoyed by Britain before its Industrial Revolution (and for decades thereafter), investors did not find the Indian home market attractive enough to warrant large investments. Rather, speculation, hoarding, usury, and other such unproductive financial activities (for which the colonial economy provided much scope) proved more attractive.

Later, tariff protection was introduced selectively by the colonial rulers when Britain was in decline as an imperialist power, and it wanted to protect its market in India against encroachment from other imperialist powers. Thus the Indian sugar industry was protected in order to shut out sugar imports from the Dutch colony of Java; this led to sudden growth of the Indian sugar industry, which in turn led to a sharp rise in demand for sugar machinery from Britain. (The big bourgeoisie did not miss the significance of this experience of government support, and in post-1947 India the ability to manipulate governmental levers was critical to the fortunes of various business houses.) By the 1930s multinational corporations (a new phenomenon) were setting up plants in India to take advantage of tariff protection and penetrate the Indian market. These were harbingers of a new phase, in which India would shift from colonial rule by one imperialist country to multilateral dependence on several imperialist countries.

Industrial development was stunted, and yet the size of individual firms was relatively large in relation to the market (a scale dictated by the technology imported from advanced capitalist Britain). Industrialisation was thus, inevitably, lumpy and spread unevenly over the country. Till 1914, industry was concentrated in Bombay and Calcutta (apart from Tata Steel in Jamshedpur). While some industry did come up in Ahmedabad, Delhi, Kanpur and some other places in U.P., Coimbatore, Madurai and Madras after World War I, growth remained regionally lopsided. “The situation was also markedly dichotomous – reflecting the disjunction between agriculture and industry. The port-enclave manufacturing centres, like Calcutta, were growing fast even as the hinterland agrarian and traditional industry was deteriorating. On the other hand, regions with relatively prosperous agricultural growth like Punjab had no major industrial centres. [14c] As late as 1948, the three Presidency-states of Bombay, Madras and Calcutta accounted for 77 per cent of the percentage of industrial workers, 77 per cent of industrial production, 82 per cent of engineering and electrical goods production, and 87 per cent of chemical goods production in the country. The corresponding figures for the minerally rich states of Bihar, Orissa, and M.P. were only 10, 10, 10, and 5 per cent, respectively, “showing how little the ‘natural endowments’ of the region mattered in this respect”. [15c]

Distorted and arrested social development

By the late 19th century the minimum capital required to set up a competitive industrial enterprise was substantial, and was only available to sections endowed with considerable capital of their own and the confidence of the financial community. The big industrial entrepreneurs were almost exclusively drawn from a tiny handful of commercial castes/communities – the Gujarati banias, the Marwaris, the Parsis, the Khattris, the Aggarwals, and the Chettiars prominent among them. (Among the Muslims, too, business was dominated by certain trading castes, but they were weaker, and flourished only after the formation of Pakistan.) The big business communities had their roots, and continuing activities, in finance and trade rather than production, and they maintained this separation even after turning to industry. They refrained from carrying out any technological innovation; the more enterprising among them applied their minds to choosing which technology to import.

The education system the British set up in India cannot be criticised for not educating the masses, as it was not intended to do so; it was designed to create a class of Indians who would mediate between the colonial rulers and the ruled, as well as facilitate and reduce the expenses of their rule in India. (Macaulay, then a member of the Governor-General’s council, made this clear in the famous Minute he prepared for Bentinck in 1835: “I feel with them that it is impossible for us, with our limited means, to attempt to educate the body of the people. We must at present do our best to form a class who may be interpreters between us and the millions whom we govern, – a class of persons Indian in blood and colour, but English in tastes, in opinions, in morals and in intellect.”) No doubt, as a by-product of this education system, some independent-minded elements got access to European streams of scientific and analytic thought, but this was rare. The university system brought into being a class of professionals and upper white-collar staff which served the needs of colonial rule. Moreover, not only did the entire urban elite and a section of the middle classes learn English, but the Western education system, combined with the fact of British rule, established the intellectual and cultural domination of Europe over India. The urban elite and broader sections under their influence developed a mentality of subservience to all things European, an overpowering taste for European products, a sense of shame about their Indianness and a yearning for approval by the white man.

Secondary education too was shaped by the goal of entering tertiary education, reinforcing the status of English throughout of the educational system and consigning instruction in the native tongue to a second-class status. The real barrier to the fuller development of the numerous Indian languages was not any dominant Indian language, but the supremacy of English, just as the barrier to the development of the economic life of the various national regions was the imperialist-directed pattern of development.

All sorts of reactionary and obscurantist thought, rather than diminishing, spread under the British umbrella. After the revolt of 1857, it was a matter of conscious British policy to ensure communal division: in the words of the 1879 Army Commission, “Next to the grand counterpoise of a sufficient European force comes the counterpoise of natives against natives.” [16c] Unlike in the capitalist countries, the system of electoral politics was not introduced through a long process of democratic and working-class struggle; on the contrary it was introduced by the British rulers as part of their effort to associate elite sections with their rule, and to set competing communal elites on one another. However, the impact of these manoeuvres was not restricted to elite sections, but had terrible repercussions among the masses. It was in the late 19th century that communal mobilisations and riots among Hindus and Muslims began making a regular appearance, finding their grim climax in the great massacres of Partition.

The caste system, that “decisive impediment to Indian progress and Indian power”, far from being dissolved by the railways and the appearance of modern industry under British rule, survived in a somewhat modified but hardly weakened form. British administration created certain limited opportunities for members of castes lower in the hierarchy, resulting in a scramble among the various castes for these favours. The earlier Brahmin dominance in government posts and social status was challenged to some extent by certain non-Brahmin communities with growing economic and social clout, and important non-Brahmin movements arose in the south. However, while there was a partial reordering of castes within the hierarchy, the institution of hierarchy itself was not threatened, and remained particularly oppressive to those at the bottom of the pile. The British resolutely abstained from interfering with the social prohibitions and economic exclusions suffered by the oppressed castes; indeed, as Ambedkar observed in an address to the All-India Depressed Classes Congress, August 1930:

Before the British you were in the loathsome condition due to your untouchability. Has the British Government done anything to remove your untouchability? Before the British you could not draw water from the village. Has the British Government secured you the right to the well? Before the British you could not enter the temple. Can you enter now? Before the British you were denied entry into the police force. Does the British Government admit you in the force? Before the British you were not allowed to serve in the military. Is that career now open to you? Gentlemen, to none of these questions you can give an affirmative answer. Those who have held so much power over the country for such a long time must have done some good. But there is certainly no fundamental improvement in your position. So far as you are concerned, the British Government has accepted the arrangements as it found them and has preserved them faithfully in the manner of the Chinese tailor who, when given an old coat as a pattern, produced with pride an exact replica, rents, patches and all. Your wrongs have remained as open sores and they have not been righted….[17c]

The abundance of land before British rule allowed some caste mobility, yet even under those conditions certain castes were kept landless; with the destruction of native industry and the enormous pressure on the land under colonial rule, there was even less scope for escape from caste oppression. Only an agrarian revolution, with all its political and social implications, would have created scope for a profound churning of the caste order; and such a revolution would have upturned the native classes on whom British rule itself was based.

Distinct class structure

Thus British rule created a class structure in India distinct from that of capitalist Britain. Parasitic classes – landlords, traders and usurers – maintained sway over the rural areas. There they found ample scope for fattening on parasitic extractions in landownership, usury and trading rather than on expanding productive forces. Their control over multiple markets – land, labour, credit, output – allowed them to increase extractions beyond the limits possible in any single market (for example, an indebted peasant would be compelled not only to pay interest but to sell his produce or his labour power cheaper to his creditor). The vast majority of producers fell in three groups: landless, very small, and small, who were not in a position to take advantage of market stimuli to accumulate. Though the middle and rich peasants were able to respond to market stimuli, they were unable to concentrate land in their hands, as small producers clung to their holdings, however uneconomic, as their only defence against destitution in conditions where employment in industry was stagnant. [18c]

The big bourgeoisie, composed of big industrial and trading concerns with close ties to foreign capital and feudal forces, prospered under British rule. By contrast, a section of small industrialists grew in numbers, generally restricted to businesses such as cotton gins and presses, rice and oil mills, traditional sugar manufacture, and small powerloom or handloom factories. Some enterprising elements of this class ventured into pharmaceuticals, chemicals, and small engineering workshops. Lacking access to finance, linked too to feudal sections, denied any support from the colonial government, too weak to compete with the monopoly power of the big bourgeoisie, and most importantly hobbled by the meagre markets of poverty-stricken India, they were unable to unleash the necessary ever-expanding circuit of accumulation in industry.

Colonial rule in India also led to the development of an industrial proletariat associated with modern industry, thus creating the basis, as in Europe, for political organisation with the ultimate aim of the abolition of private property. However, far from emerging as the great majority of society, the proletariat in India remained a small island in a sea of peasants and petty self-employed. Several obstacles stood in the way of its developing class consciousness. As industrial employment stagnated and capitalist concentration of landholding failed to materialise, the workers retained strong ties to their villages and to the land; these ties proved useful for the industrial employers, as they could escape paying the worker a level of wages that would provide for security after retirement, or for the upkeep of the worker’s family (which would often remain in the village). This set-up allowed for the exploitation of women’s labour in reproduction, even more than in capitalist society. [19c] Further, workers tended to retreat to their villages at the times of strikes and mill closures, thus weakening the fight. Finally, the worker’s ties to the village imbued him with feudal consciousness, including subservience to social ‘superiors’ and fatalism.

The recruitment of workers, especially of the most unskilled manual labour, often took place in gangs and through contractors with feudal ties, which also helped keep them in line. (Large numbers of Indian workers were despatched as indentured labour to Assam, Ceylon, Fiji, South Africa, the West Indies, and Iraq, often in conditions of semi-slavery.) A major division emerged between the organised sector workers (which corresponded roughly to the unionised) and the unorganised sector; this division was greatly strengthened in the post-1947 period, and the second section was effectively kept beyond the pale of union organisation. In this environment, it is not surprising that reactionary influences, both caste and communal, retained their grip on workers to a large extent.

Even after the end of British rule, the Indian big bourgeoisie did not exercise exclusive hegemony over the Indian State. First, they served the interests of imperialism in the new configuration: that is, no longer the interests of a single colonial power but of the multilateral domination of the multinational corporations of all the imperialist countries. Secondly, the big bourgeoisie shared hegemony with a variety of feudal forces, who remained (and remain) prominent in the political life of the country, indeed dominating it at the state level. Formally, intermediaries in agriculture (such as the zamindars) were abolished, ceilings were placed on landholdings and tenants were protected from eviction, but in fact only trivial amounts of land were distributed, and landlords took evasive measures to perpetuate their hold. True, in the changed situation a greater share of the surplus could remain with the producers, and agriculture recovered to some extent from its long decline under British rule. However, as long as industrial employment grew at best slowly, the mass of the workforce remained trapped in agriculture, and thus subject to semi-feudal exploitation; agriculture remained trapped in the pattern of surplus extraction and redeployment set by the class structure that emerged under colonialism. Important quantitative changes took place, such as those termed the Green Revolution, but they proved unable to break this mould.

Industry, on the other hand, has grown within the frame of (i) the restricted scale and skewed nature of domestic demand (concentrated at the top), (ii) domination by domestic monopoly business houses drawing on its control of State policy, and (iii) the worldwide domination of monopoly capital. These conditions have ruled out the possibility of the Indian bourgeoisie carrying out industrialisation of the type that would generate mass employment.

This sketch brings out the distinct historical process which has shaped the socio-economic formation of India today. The various sets of linkages described in the previous chapter, describing classical capitalism, are found here in a broken, distorted form. This helps us understand the nature of the growth taking place today, to which we now turn.

IV. How Distortion, Disarticulation, and Exclusion Are Built into India’s Runaway ‘Growth’

The Indian economy has no doubt been undergoing very rapid GDP growth for the past few years. However, the nature of this growth is such that it accentuates all the existing distortions in India’s pattern of development, to an extreme.

Who can miss the most visible manifestations of these distortions – the grotesque gap between the rich and the poor, the metropolises and the countryside, the performance of the stockmarket and that of agriculture? Where views differ is on what, if anything, needs to be done about these disparities.

An important section of ‘opinion-makers’, well-represented in the media, believe nothing at all need be done: economic growth is generating jobs and prosperity, and poverty is vanishing on its own. All that remains is to do away with the remnants of State intervention in the economy in order to give full latitude to the dynamic private sector. No doubt a section of people suffer in the course of this development, but that is part of the pain that accompanies all progress.

Another influential section is less crass, and more sensitive to the turbulent political realities of India – even as they share certain fundamental premises with the first section. These humanitarians emphasise the need to make development more ‘inclusive’ by sharing some of the revenues of the current boom with the disadvantaged – through the expansion of public employment schemes, child welfare and nutrition schemes, public expenditure on education, health and other services, measures to uplift the socially disadvantaged, and so on. In the last few years the country’s rulers have picked up on these themes and have included higher ‘social sector’ allocations in the Eleventh Plan.

Hardly anyone can argue against larger expenditures on employment schemes, welfare, nutrition, education, and health. If carried out, they would partly reverse the damage done by more than 16 years of fiscal retrenchment and straitjacketing. But this ‘welfarist’ approach essentially views the process of bettering the lives of people as separate from the process of economic ‘growth’; the sphere of distribution divorced from the sphere of production. The only link it makes between the two is that some funds for people’s welfare can be raised thanks to the growth of the economy. The limitations of such a theoretical frame are particularly apparent in a country like ours, where the majority of people are in a pitiable condition. Demanding greater expenditure on people’s basic needs should not divert us from examining the underlying economic processes which generate and reproduce disparities, exclusion, disarticulation and distortion on an ever larger scale. It should not divert us from tracing these processes to basic social relations, in order to change them.

The argument in brief

In the first chapter we argued that we cannot attach much meaning to the phrase ‘economic growth’. Rather, we must investigate the pattern of development to know what it means for people. In order to understand that pattern, we need to approach it historically. Thus we briefly sketched the pattern of capitalist growth in Europe, characterised by a complex of linked developments in the economic and social spheres.

We proceeded to describe the distinct course of colonial development of India: how colonialism used its political hold to drain surplus from India’s economy, and for this purpose ruptured important linkages between (and within) sectors of India’s economy. These were the linkages through which in the ‘normal’ course – that is, the course taken by the original capitalist countries – capital accumulates, expands itself over and over, and transforms every sector of an economy from within. While certain internal linkages were broken, certain external ones were strengthened out of proportion. This prevented accumulation in some sectors, and diverted surplus to others for the purpose of the drain, stunting growth in large sectors and exaggerating it in select sectors. This pattern of development fostered certain native classes whose interests were linked with imperialism, and it is these classes that ascended to power with the departure of the British. Maintaining their grip on political power, these classes perpetuated a pattern of development along the same course, under the tutelage of the ‘developed world’, that is, the imperialist countries.

There have been many obvious changes since the end of British rule, and these changes appear to have accelerated in the last decade; yet the economy is in crucial ways still shaped by the legacy of colonialism and the continuing hold of imperialism. As a result, the spectacular growth celebrated by the rulers is restricted to islands of the economy; the vast mass of people are trapped in miserable economic conditions and face unbearable social oppression.

With this we reach our subject proper, namely, the current pattern of private corporate sector-led growth.

First, we sketch the extremely distorted structure of the economy. The bulk of the workforce is crammed into sectors with very low income; a tiny section of the workforce is in the booming sectors. The links between the different sectors (and within the each sector) are missing or weak, allowing islands to flourish in a sea of backwardness and poverty. The gaps between these sectors and sub-sectors are expanding with the growing capital-intensity of the private corporate sector.

Secondly, we link the current spell of rapid growth in India to certain developments in the world economy and large inflows of speculative capital from the developed countries. That is, the current high ‘growth’ is not essentially an internally generated phenomenon, but an externally induced one. Moreover, the increasing financialisation of capital in the imperialist economies has brought some changes in the operation of imperialism here. Among the by-products of the changes in the world economy is the emergence of Indian firms as ‘multinationals’, powered partly by foreign capital. However, the increased integration of the Indian economy with the highly financialised global economy implies that the impending crisis in the latter, and particularly the long-term downturn in the trajectory of the leading imperialist power, may transmit both shocks and stagnation here.

Thirdly, we sketch the pattern of growth of the private sector in this period of boom. We showed how foreign inflows have generated a boom in credit, which, given the structure of the economy, fueled a consumerist surge concentrated among the better-off; this in turn spurred growth in a range of industries catering to this demand. However, this market necessarily remained narrow. Inevitably, the push for rapid growth on such a narrow base took the form of ‘enclaves’ catering to export or the elite: the software and BPO industries, the SEZs, and ‘infrastructure’ projects fenced off from the requirements of the rest of economy.

Fourthly, we describe a significant element in the economy’s ‘growth’: the large-scale capture of natural resources by the private corporate sector, using the State machinery. As this pattern of resource capture progresses, it results in large-scale destitution of the already depressed sections of the rural population – even as it shows up as growth in GDP.

Fifthly, we illustrate the manner in which various flourishing industries – health care, real estate, organised retail, luxury industries – either caused or required economic exclusion of the working people as an essential part of their growth.

Sixthly, we show how, while neo-liberalism talks of the need for the State to retreat from economic intervention, it actually requires active State intervention in order to transfer surplus to the private corporate sector on a massive scale. Here we talk of various forms of privatisation and the array of subsidies provided to the corporate sector.

Seventhly, as a natural outcome of this pattern of growth, extreme inequalities have developed in Indian society. They have progressed to the point where among ruling class circles, and even within international financial institutions, some have raised the alarm, pointing to the threat of grave social disorder. Yet these alarms have little meaning; the present order is quite incapable of moderating inequalities.

Finally, we discuss the extraordinary growth of the financial sector within a small enclave of the Indian economy – a necessary consequence of integration with global financial markets even as the internal economy remains disarticulated. This integration has yielded foreign investors breathtaking returns; it has also placed the Indian economy on a precipice. The impending troubles of the world economy now will have a more direct impact here. Further, even in the absence of a crash, the demands of foreign speculative capital – such as the introduction of capital account convertibility and the transformation of Mumbai into an international financial centre – require the further subordination of the productive economy of the vast majority to the financial-speculative island.

An alternative path of development must be based on transforming agrarian relations: This would be the prerequisite for accumulation in the vast agrarian sector, and in turn would create scope for generating manifold internal linkages in the economy – between sectors, within sectors. Growth rates would not seem so spectacular, but the growth would be meaningful for the people and be more reliable, because based on an internal dynamic. Moreover, the process of transforming agrarian relations would bring to the fore long-suppressed social forces capable of pursuing a development path in favour of the vast mass of people – whose productive energies too would be progressively unleashed in this course.

The article continues in the following pages:

IV. (1) Missing Links

IV. (2) The External Stimulus and Its Implications

IV. (3) Private Corporate Sector-Led Growth and Exclusion

IV. (4) The Condition of the People

V. Unlocking the Productive Potential of the Entire Labour Force

****************************

References:

1a. Aspects too has been guilty of wasting energy questioning the levels of GDP growth, a red herring, rather than focusing on the nature of the growth.

————–

1b. It was later superseded by quantum mechanics.

2b. See Krishna Bharadwaj, On Some Questions of Method in the Analysis of Social Change, 1980.

3b. As wages sink, not only would capitalists hire more workers, but some workers would no longer find wages attractive compensation for the pain of working, and would voluntarily choose ‘leisure’ over work.

4b. What the government terms the ‘unemployment rate’ in India refers only to open unemployment. A much larger number of persons are under-employed – they do not have enough work, and whatever they occupy themselves with does not generate enough for their subsistence. And a large number of persons suffer disguised unemployment: they are not counted as unemployed because they are not looking for jobs, though they would be looking if they had any hope of getting a job. These two categories are larger than the official figure of unemployed. The total of the three categories – unemployed, underemployed, and disguised unemployed – is larger than the figure of those we can properly consider employed.

5b. We are not describing here Marx’s entire system, merely a few aspects relevant for this article.

6b. Nature is “the primary source of all instruments and subjects of labour”, that which labour works with and upon.

7b. For example, by enacting a minimum wage law which prevents wages from sinking low enough to be attractive to capitalists to start hiring.

——————–

1c. This characterisation of feudalism is based on articles by Maurice Dobb and Rodney Hilton in The Transition from Feudalism to Capitalism, ed. Rodney Hilton, 1976.

2c. The rise of the nation-state, and the development of popular allegiance not to a feudal lord, but to ‘the nation’, over the long term helped to undermine feudalism and to establish bourgeois hegemony over society.

3c. Such establishments first came up on the basis of manual labour, improving handicraft technology with the division of labour (the ‘manufactory’); this paved the way for the emergence of the factory, which replaced the artisan’s tools with the machine.

4c. Capital, vol. I, p. 751.

5c. Utsa Patnaik, “The free lunch: transfers from the tropical colonies and their role in capital formation in Britain during the industrial revolution”, in Jomo K.S., ed. Globalization under Hegemony: The Changing World Economy,2006.

6c. E.J. Hobsbawm, The Age of Revolution, 1789-1848, p. 45.

7c. Maurice Dobb, Studies in the Development of Capitalism, p. 256.

8c. Dobb, pp. 269, 270.

9c. Dobb, p. 269.

10c. Capital, vol. I, p. 788.

11c. Dobb, p. 278.

12c. A section of the ruling class of Japan had witnessed the subjugation of China by western imperialism and apprehended a similar fate for their own country. Violating feudal restrictions, they organized a non-samurai army (including peasants and outcastes) to overthrow the existing rulers in 1868 and bring about Japan’s social and economic modernization. The new regime – the ‘restoration’ of the Meiji Emperor – promptly imported equipment and skilled workers from the Netherlands, England, France, Italy and other European countries, and set about systematically absorbing the imported know-how. Contrary to the pattern in Europe, it gave first priority to the heavy industries, particularly for military reasons, and only once it was firmly established in these did it move on to develop the light industries such as textiles; this was possible only because the State itself built the core industries with its own revenues. Japan was the last country that was able to perform this transformation before the rise of monopoly capital by the end of the 19th century.

13c. Michel Beaud, A History of Capitalism, 1500-2000, p. 97.

14c. Marx, Poverty of Philosophy, ch. 2.

15c. Hobsbawm, op. cit., p. 226.

———————

1d. As in the preceding chapter, the argument in this chapter is drawn from several well-known works. Among them (in chronological order) are R.P. Dutt, India Today, 1946, Paul Baran, The Political Economy of Growth, 1957, A.K. Bagchi, Private Investment in India 1900-1939, 1972, and The Political Economy of Underdevelopment, 1982, and S.K. Ghosh, The Indian Big Bourgeoisie: Its Genesis, Growth and Character, 1985, though their perspectives that differ in many important respects.

2d. Irfan Habib, “Potentialities of Capitalist Development in the Economy of Mughal India”, Enquiry, Winter 1971.

3d. Angus Maddison, Chinese Economic Performance in the Long Run, 1998, cited in Mike Davis, Late Victorian Holocausts: El Nino Famines and the Making of the Third World, 2001, p. 293; and Mike Davis, op cit., p. 294.

4d. Krishna Bharadwaj, op cit, p. 90. (back)

5d. Quoted in Utsa Patnaik, “Commercialization under Colonial Conditions”, The Long Transition: Essays on Political Economy, 1999, p. 260.

6d. National Sample Survey (NSS) Report no. 452, “Common Property Resources in India”.

7d. N.K. Chandra, “Monopoly Capital, Private Corporate Sector and the Indian Economy, 1931-76”, Economic and Political Weekly, Special Number, August 1979.

8d. See S.K. Ghosh, op cit, pp 91-113.

9d. V.I. Lenin, Imperialism, the Highest Stage of Capitalism,Preface to the French and German editions (1921).

10d. Bagchi, 1982, p. 34.

11d. Sunanda Sen, Colonies and the Empire,India 1890-1914, 1992, p. 174.

12d. Elizabeth Whitcombe, Agrarian Conditions in Northern India, Vol. I: The United Provinces under British Rule, 1860-1900, 1971.

13d. Krishna Bharadwaj, “A View on Commercialisation in Indian Agriculture” in Accumulation, Exchange and Development: Essays on the Indian Economy, 1994.

14d. Krishna Bharadwaj, “Regional Differentiation in India: A Note”, EPW, Annual Number, April 1982.

15d. Ibid.

16d. Quoted in Sumit Sarkar, Modern India, 1885-1947, p. 16.

17d. Quoted in R.P. Dutt, op cit, pp. 243-244.

18d. Bharadwaj, “A View on Commercialisation”.

19d. That is, the greater the labour of the wife of a male worker in household activities and child-rearing, the less the capitalist needs to pay the worker. Thus it is ultimately the capitalist who exploits the household labour of the woman. Where the family could be maintained not in an urban setting but in semi-feudal agriculture, the wages paid to the labourer could be even further depressed.

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