Capital and Imperialism: Theory, History, and the Present

by Utsa Patnaik

  No doubt the very burgeoning of finance, or what some have called the “financialization” of economies (parallel to the industrialization that had occurred earlier), becomes a source of demand. The superstructure of finance that is erected over the economy itself boosts aggregate demand. But this is not a market on tap. The demand generated by the financial superstructure is similar to the demand generated by the incomes derived from what Baran and Sweezy had called the “costs of circulation.” But this does not provide an exogenous stimulus of the sort that pre-capitalist markets earlier and state expenditure in the postwar period had done. The primary exogenous stimulus, if one may call it that, in a neoliberal regime is provided by the formation of occasional “bubbles” in asset prices. Yet this stimulus, too, is not available on tap. “Bubbles” cannot be made to order, which is a major reason why the world capitalist economy continues to languish in a prolonged period of crisis and stagnation.

  The Period of Protracted Crisis

  The fact that the neoliberal regime under globalization cannot call on any other exogenous stimulus, such as colonial markets or state expenditure, and that “bubbles,” which alone can revive a neoliberal economy, cannot be made to order, is only one of the factors behind the present protracted crisis. This factor is superimposed upon a deeper structural crisis of capitalism that globalization engenders.

  World capitalism had for a long time been marked by a segmentation between two regions. Labor from the periphery was not allowed to move freely to the metropolis (it still is not), whereas capital from the metropolis, though juridically free to move to the periphery, did not actually do so. It moved only to sectors like plantations and mines and the sectors of trade and services that were associated with the export of primary commodities. But it did not locate manufacturing plants in the periphery, to take advantage of lower wages and produce for the metropolitan market. This segmentation was the cause of real wages in the periphery languishing at some subsistence level while wages in the metropolis kept rising as labor productivity there increased.

  The current globalization has brought that segmentation to an end. While labor is still not free to migrate from the periphery to the metropolis (and its desperate and limited defiance of this restraint has given rise to the recent refugee crisis in Europe), capital has shown greater willingness to locate plants in the low-wage economies of the periphery for producing goods that would meet demands in the metropolis. The workers in the metropolis, therefore, now have to compete with the workers in the periphery, because of which, even though their real wages do not fall to the level of real wages in the periphery, they do not rise, either. In fact, Joseph Stiglitz suggests that the real wage rate of a male American worker in 2011 was no higher than in 1968.22

  At the same time, despite this relocation of activities, the labor reserves in the periphery do not get exhausted. The rate of growth of employment, even in those economies of the periphery that have grown rapidly (if measured carefully to take account of disguised unemployment), has fallen short of the natural rate of growth of the workforce, let alone providing employment to the displaced petty producers who throng the labor market because of the income deflation to which they are subjected. The real wages in the periphery, therefore, do not rise despite this relocation and even the high growth rates generated on account of it. It follows that the vector of real wages in the world economy today has been more or less stagnant.

  At the same time, the vector of labor productivities, if we take careful account of disguised unemployment, has been rising, which means that the vector of surpluses as a proportion of output has been rising. Since the propensity to consume out of surplus is lower than out of wages, and since this propensity is no higher in economies where the surplus is rising faster than in economies where it is rising more slowly (if anything, faster-growing economies have a larger share of surplus being saved), this implies that there is an ex ante tendency toward overproduction in the world economy. The structural crisis of world capitalism arises from this ex ante tendency.

  This ex ante tendency did not manifest itself sooner because of the operation of “bubbles” in the U.S. economy, first the “dot-com bubble,” which was followed by the “housing bubble.” But with the collapse of the housing bubble, we not only have a persistence of crisis for this reason but also the surfacing of an underlying structural crisis arising from the ex ante tendency toward overproduction unleashed by globalization.

  Concluding Observations

  World capitalism today is characterized not only by the absence of an exogenous stimulus but also by an ex ante tendency toward overproduction. It is this that makes the current crisis both protracted as well as unprecedented, since it is reflective of capitalism having reached a sort of cul-de-sac. Even if it overcomes the current crisis temporarily through the formation of a new “bubble,” its collapse will only bring the system back to a crisis. Protectionism, such as what U.S. president Donald Trump was attempting, amounts in effect under these circumstances (that is, in the absence of any significant expansion of state expenditure financed either by a fiscal deficit or by taxes on capitalists) to an export of unemployment to other countries. It can work only if the other countries do not retaliate. If they do, then it gives rise to a competitive “beggar-thy-neighbor” policy that only worsens the crisis by creating further uncertainties and reducing investments further.

  Expanding the world market requires a coordinated fiscal stimulus by several major countries acting together, or if each country delinks from globalization by imposing capital controls and then uses its nation-state’s newfound freedom from thralldom to finance capital to enlarge state expenditure. Either scenario entails a confrontation with finance capital. It is difficult to visualize the world economy overcoming its current protracted crisis without shaking off the hegemony of finance capital.

  CHAPTER 7

  The Myth of the Agricultural Revolution

  Almost every book on the Industrial Revolution in Britain in the eighteenth century contains a mandatory chapter titled “The Agricultural Revolution.” Other chapters are variously headed “The Transport Revolution,” “The Commercial Revolution,” and so on. That an agricultural revolution took place in the eighteenth century as a precondition to the transition to factory production in the last quarter of the century is widely accepted. We argue here that this was scarcely the case, and that the role usually attributed to the agricultural revolution not only is a gross exaggeration but also has the effect of obscuring the actual role played by colonialism.

  The Demands of Capitalist Industry upon Agriculture

  It is clear that any process of transition to capitalist manufacturing requires the formation of a proletariat for which there must be a separation of the small producers from their means of production—that is, the creation of “free” workers through the proletarianization of peasants and other petty producers. Such a process of transition also requires, if we abstract for the time being from the role of colonialism, speeding up the rate of growth of agricultural output, particularly grain production, to meet the demands of capitalist industry. In the absence of such a speeding up, there would be untoward inflation and a squeezing of the living standards of the population, which, apart from the social consequences, would also adversely affect the market for capitalist industry.

  The demands of capitalist industry for agricultural goods arise for several reasons. First, as the workforce shifts out of the primary sector and is increasingly employed in manufacturing and its ancillary activities, the requirement of commodified wage goods, in particular basic food staples, to feed this population rises. Second, the requirements of feed grains for livestock rises fast since in the preindustrial and early industrial era most transportation and traction depended on horse and oxen power. The land has to provide not only increasing food for humans but also more energy in the form of feed for animals. (Fossil fuels as the source of energy started to become important only when the first phase of the Industrial Re
volution was over.) Third, as per capita incomes rise, the demand for consuming animal products also rises and requires more output of feed grains. Finally, the raw materials needed by manufacturing have to be met by the primary sector as well.

  It is usually taken for granted that the agricultural revolution met all these demands in England over the period 1750 to 1820. However, this claim overlooks some basic facts. First, in the case of England the main raw material of the fastest-growing industry of the Industrial Revolution, raw cotton, was entirely imported, as cotton could not be grown in cold temperate climatic conditions. Second, the output of the basic staple food, corn or wheat, clearly could not have grown at the required rate for providing an elastic supply of bread. Indeed, the main issue on which prolonged agitations took place from the 1790s onward was the rise in the price of bread. Few issues in history relating to political economy have been more discussed and documented than the five decades of agitation over the price of bread in England and the demand for free imports of cheaper corn from the Continent, misnamed as the free trade agitation. It is misnamed because the demand was not for generalized free trade but only for freedom to import cheaper corn and other foods as well as raw materials while the same period saw the imposition of high tariffs on Asian textiles.

  Yet the obvious inference has escaped many economic historians, namely that if the “agricultural revolution” could not even meet the basic wage-good requirement of the transition to the factory system, then it could hardly have been much of a revolution. To blame the landlords, as is commonly done, for the food shortage, while simultaneously adhering to the idea that an agricultural revolution had indeed occurred, simply will not do. For the whole point of an agricultural revolution is that the capitalist transformation of agriculture leads to a sufficiently large rise in productivity so that the per capita supply of wage-goods rises adequately to meet the increasing demand. The capitalist tenant farmers are supposed to have achieved a large enough rise of productivity, despite the payment of rent to landlords.

  This rise of productivity did not happen; instead, rapid food price inflation took place. This was because, as we shall see, per capita grain production, far from rising, fell after the middle of the century and right up to 1820. Neither land nor labor productivity rose appreciably in England, despite all the enclosures, the transition to larger farm size, to capitalist tenant farming, etc. Even the early eighteenth-century level of per capita grain output, achieved on the basis of the earlier agrarian relations of production, could not be maintained. The result was that though the GDP rose rapidly as did per capita income, there was an erosion of the real incomes of the laboring classes, because of the high rate of food price inflation.

  The Industrial Revolution spans a period over much of which Britain was embroiled in the long Napoleonic Wars that lasted from 1793 to 1815. Any involvement in war entails a diversion of resources to war-related industries (shipping, armaments) and induces a war boom that tends to translate into an inflationary shortage of food grains, even when per capita food-grain output is maintained; if per capita output is not maintained, the inflation is steeper. The British case was no exception to this. The country had already become food-deficit by the 1770s, with cereal output per head of population showing a steady decline. Wheat imports, though positive, were restricted by the Corn Laws, which served landlord interests and kept food prices even higher than they would otherwise have been. The war boom from 1793 meant rapid food price inflation from an already high base, and near-starvation for the laboring poor in years of bad harvests of the 1790s.1

  It is not surprising that the cry for bread and the agitation for free imports of cheaper food grains from abroad became the single most important political economy issue for five decades, from the 1790s to 1846. The landlords put up an obdurate resistance until the mid-nineteenth century, but tariffs finally had to go. The Corn Laws were repealed thirty long years after David Ricardo penned his book An Essay on the Influence of a Low Price of Corn on the Profits of Stock.

  This prolonged agitation was, at the same time, a telling indicator of the failure of Britain’s agriculture in meeting the wage goods needs of capitalist industrialization despite all the enclosures and supposed improvements in the eighteenth century, a failure that intensified in the course of the early nineteenth century. The rising industry of cotton textiles, which was the very embodiment of technical change and the factory system, used raw materials that were entirely imported, as Britain could produce neither raw cotton nor vegetable dyes like indigo. By 1825, the retained imports of all primary products, expressed as a percentage of total domestic primary sector output, had reached 65 percent and this rose to 104 percent by 1855. Britain, in other words, was importing more primary products than it itself produced by that date.2

  Indeed, it is prima facie surprising that an increasingly food-deficit country, with two decades of drain on its resources on account of war-related expenditures, could make the transition, precisely in this period of wartime strains, to the factory system, by investing in a rapidly expanding new industry that produced a consumption good and which, moreover, was based entirely on imported raw materials. Normally, consumption-goods production suffers in wartime, whereas in Britain, it was the fastest-growing industry. How did Britain pay for rising imports of foodstuffs, raw cotton, dyestuffs, and other raw materials, pursue a war (which required increased imports of naval materials like bar iron, timber, hemp, pitch, and tar) and still face no external payments imbalances?

  Further, in this period before steam power was harnessed, the main energy source for the expanding transport system was horsepower, for the haulage of barges on canals, for haulage in collieries, for civilian transport, and so on, and horses meant increased animal feed grain consumption. British agriculture was unable to provide that increase except at the expense of a further decline in per capita food grains for human consumption, which was nearly 20 percent lower by 1800 compared to 1750.

  Growth of Grain Production Relative to Population in the Eighteenth Century

  The variable that is crucial as an indicator of welfare and a measure of the success of agricultural revolution is the growth of the basic food staple crop in relation to population growth. The older Brownlee series of population for England and Wales was revised by Lee and Schofield, and the latter series and the index derived from it are shown for 1700 to 1800 as the A index column in Table 7.1.3 Maddison presents some more recent estimates on population for scattered years starting 1700 and ending 1870 from which we calculated the growth rate between 1700 and 1801 and interpolated the intermediate year values on the assumption of steady growth.4 The Index B column for England and Wales (E+W) has been derived from this series in Table 7.1. The main difference between the two series is the somewhat higher population in the latter series, especially in the earlier years, which reduces the growth rate slightly compared to the first series. The Maddison series for Britain, namely England, Wales, and Scotland (E+W+S), was derived in the same manner by us and is shown as the Index C column.

  From Chambers and Mingay, we derive the rise in cereals output in physical terms over the eighteenth century from their discussion that the area under wheat rose by a quarter and yield rose by about one-tenth while the rise in the non-wheat cereals was somewhat faster.5 This broad picture is confirmed by later research, although some research shows a somewhat higher rise.6 This gives an increase of 37.5 percent for wheat and 43 percent for all cereals over the period 1700 to 1800. The increase by 43 percent is distributed over the decades of the century in the same proportion as total agricultural output value is distributed in Cole.7 This is a better procedure than to distribute the increase assuming a constant growth rate. This exercise gives us the index of per capita cereal output shown in the first column of Table 7.2.

  We can check that per capita cereal output declined for every population index by varying degrees; the largest decline was by 17.4 percent using the Lee and Schofield index, with the Maddison indices giv
ing around 13 percent decline. The Lee and Schofield population series is the only complete one, and the Maddison population figures are only for individual years at the beginning and end of the century, with values we interpolate by assuming a constant growth rate of population, which was not actually the case. The per capita cereal output, Index A in Table 7.2, using the Lee and Schofield series, should be regarded as the better approximation to the actual trends. This shows that per capita output rose slowly up to the mid-eighteenth century (and this is consistent with the small net export of corn that existed up to 1770). After 1750, however, per capita cereal output starts declining, and despite slight recovery by 1780, the decline resumes in the last two decades coinciding with war, first in North America and then in Europe.

  TABLE 7.1: Population in million of England and Wales (E+W) and Britain (E+W+S), Constant Prices GDP and Agricultural Output Value in £ million, 1701–1801

  Note: Agricultural output and GDP in million of pounds, population in millions.

  Sources: W. A. Cole and Phyllis Deane, British Economic Growth 1688–1959: Trends and Structure (Cambridge: Cambridge University Press,1969); R. D. Lee and R. S. Schofield, "British Population in the Eighteenth Century," in R. Floud and D. McCloskey, eds., The Economic History of Britain Since 1700 (Cambridge: Cambridge University Press, 1981); Angus Maddison, The World Economy (Paris: OECD Development Centre Studies, 2006).

  TABLE 7.2: Estimated Index of Total Cereals Output in Vol. Units; and Indices of Per Capita Cereals Output, 1701–1801 for Britain

  Sources: See Table 7.1.

  It should be noted that a 17.4 percent decline is quite substantial for per capita cereals output, given that the initial level of availability was low. This is confirmed when we study wheat or corn, the major food staple of the population. We rely on the absolute estimates of wheat area, yield, and output given by Turner, Beckett and Afton for 1750 to 1850, reproduced here in Table 7.3.8 This table also incorporates the rise by 25 percent in area, and of yield by 10 percent that Chambers and Mingay mention over the entire century, to derive the 1700 figure of output. This gives a total rise of output from 33.41 to 45.95 million bushels or by 37.5 percent, whereas population increased by 73.2 percent on the Lee and Schofield figures and by 64.7 percent on the Maddison figures.