by Utsa Patnaik
8. S. B. Saul, Studies in British Overseas Trade 1870–1914 (Liverpool: Liverpool University Press, 1960).
9. W. Arthur Lewis, The Evolution of the International Economic Order (Princeton: Princeton University Press, 1978).
10. E. J. Hobsbawm, Industry and Empire: From 1750 to the Present Day (Harmondsworth: Penguin, 1972).
11. Utsa Patnaik, “Revisiting the ‘Drain,’ or Transfers from India to Britain in the Context of Global Diffusion of Capitalism,” in Agrarian and Other Histories, Shubhra Chakrabarti and Utsa Patnaik, eds. (Delhi: Tulika, 2017).
12. This argument is set out in detail in Prabhat Patnaik, Accumulation and Stability under Capitalism (Oxford: Clarendon, 1997).
13. Michal Kalecki, Theory of Economic Dynamics (London: Allen and Unwin, 1954); Selected Essays on the Dynamics of the Capitalist Economy 1933–1971 (Cambridge: Cambridge University Press, 1971).
14. Kalecki gives figures to show a constancy in the share of wages in national income in the United Kingdom between 1881–85 and 1924. For the United States, however, no comparable figures exist, though the share of wages in U.S. manufacturing declines between 1879 and 1937. This decline, however, would be moderated if we take labor incomes inclusive of salaries. Kalecki, Selected Essays in the Dynamics of the Capitalist Economy, pp. 66–77.
15. The model that follows is only for illustrative purposes, to show how the existence of price-takers makes multiple NAIRUs possible. The question of why the inflationary process through which the price-takers are squeezed does not threaten the value of money is not addressed here.
16. Raúl Prebisch, The Economic Development of Latin America and Its Principal Problems (New York: United Nations Economic Commission for Latin America, 1950); H. W. Singer, “The Distribution of Gains Between Investing and Borrowing Countries,” American Economic Review 40, no. 2 (May 1950).
5 INCREASING SUPPLY PRICE AND IMPERIALISM
1. David Ricardo, Principles of Political Economy and Taxation (1817), in Works and Correspondence of David Ricardo, vol.1, Piero Sraffa, ed. (Cambridge: Cambridge University Press, 1951).
2. Karl Marx, Theories of Surplus Value, Part II (Moscow: Progress Publishers, 1968).
3. See Iqbal Husain, ed., Karl Marx on India (Delhi: Tulika Books, 2006).
4. A simple model derived from that in chapter 4 illustrates the point. Let the price in the capitalist (manufacturing) sector be p, raw material and labor coefficients per unit of its output a and l, respectively (with raw material produced by peasant agriculture); let its money wage rate of manufacturing workers be such as to give, at the expected price, a desired real wage rate (we abstract for simplicity from any labor productivity increase), which is a function of the unemployment rate. Let w, and l denote, respectively, the money return per unit of labor and the labor input per unit of product in the agricultural sector. The system can be set out as follows:
where α denotes traders’ markup, assumed to be constant, over the unit prime cost of the agricultural product.
w* being the real income (in terms of manufactured good) that peasants try to maintain at the previous period’s price. The expected price of the manufactured good by the workers in the metropolis is given by the formula
which, as mentioned earlier, simply assumes adaptive expectations, namely an extrapolation of the previous period’s inflation rate into the current period.
It is clear that for any given level of unemployment u in the manufacturing sector, and given the set of input coefficients, there would be a steady rate of inflation in this universe, which would be equal for both the sectors. The reason for such a steady rate of inflation is that one group of the working population, namely the agriculturists, acts as “price-takers.” At this steady rate of inflation, corresponding to a given u, there would be a particular level of the terms of trade between manufacturing and agriculture. But as l increases because of “diminishing returns,” the real income of the agriculturists goes down; this happens through the rate of steady inflation at the given rate of unemployment u increasing, while the terms of trade remain unchanged. Now, if la keeps increasing, then we have accelerating inflation even at the given unemployment rate.
5. This argument was initially given in Utsa Patnaik and Prabhat Patnaik, A Theory of Imperialism (New York: Columbia University Press, 2016). The argument made by some critics against that book, namely that it ignored the rate of interest, is obviously beside the point. If money is assumed to earn nothing, then what is said above would hold. Even if money is assumed to earn an implicit rate of return, commodities can also be assumed to earn exactly the same implicit rate of return as they are freely convertible into money. And even if commodities are not assumed to earn such a return while money is, this only raises the threshold, in addition to carrying costs, above which the shift to commodities would occur. Our argument above, however, establishes that with accelerating inflation any such threshold would invariably be crossed, leading to a collapse in the value of money. This collapse therefore has nothing to do with the rate of interest.
6. There have been several important works of late on the question of empire and imperialism, such as Michael Hardt and Antonio Negri, Empire (Cambridge, MA: Harvard University Press, 2000) and John Smith, Imperialism in the Twenty-First Century (New York: Monthly Review Press, 2016). The argument of the present book, however, is completely sui generis in the sense that it focuses on the necessity of imperialism (a point not covered in writings in the Leninist tradition) and hence asserts an element of continuity between colonial times and the present.
6 PERIODS IN CAPITALISM
1. S. B. Saul, Studies in British Overseas Trade 1870–1914 (Liverpool: Liverpool University Press, 1960).
2. Joseph A. Schumpeter, Business Cycles, 2 vols. (New York: McGraw-Hill, 1939).
3. Alvin Hansen, Full Recovery or Stagnation? (London: Norton, 1938).
4. Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York: Monthly Review Press, 1966).
5. Charles Kindleberger, The World in Depression, 1929–1939 (Berkeley: University of California Press, 1973).
6. Harry Magdoff, “Militarism and Imperialism,” Monthly Review 21, no. 9 (February 1970).
7. As Baran and Sweezy point out in Monopoly Capital, state expenditure in other, non-military, sectors is opposed by capitalists, inter alia, because it entails providing competition to the capitalists already engaged in those sectors.
8. Prabhat Patnaik, “On the Economic Crisis of World Capitalism,” in Lenin and Imperialism, Prabhat Patnaik, ed. (Delhi: Orient Longmans, 1986).
9. “Has Capitalism Changed?” was, in fact, the title of an international symposium edited by Shigeto Tsuru (1961) and containing articles by several well-known authors apart from himself, such as John Kenneth Galbraith and Paul M. Sweezy, where the dominant view was that it had. Shigeto Tsuru, ed., Has Capitalism Changed? (Tokyo: Iwanami Shoten, 1961).
10. Michał Kalecki, Selected Essays on the Dynamics of the Capitalist Economy 1933–1971 (Cambridge: Cambridge University Press, 1971).
11. Joseph A. Schumpeter, “John Maynard Keynes,” in Joseph Schunpeter, Ten Great Economists (Chicago: University of Chicago Press, 1952).
12. Nicholas Kaldor, “Inflation and Recession in the World Economy,” Economic Journal 86, no. 344 (December 1976).
13. John Spraos, “The Statistical Debate on the Net Barter Terms of Trade Between Primary Products and Manufactures,” Economic Journal 90, no. 357 (March 1980).
14. Kaldor, “Inflation and Recession in the World Economy.”
15. It may be thought that since the most prominent outbreak of inflation began with the wage explosion in 1968 (Kaldor, “Inflation and Recession in the World Economy”), the inability to impose income deflation on the periphery had little to do with inflation. But the wage explosion itself arose because inflation had already been eroding real wages for some time (see Patnaik, “On the Economic Crisis of World Capitalism”).
16. Prabhat Patnaik, “Neo-l
iberalism and Democracy,” Economic and Political Weekly 49, no. 15 (April 2014).
17. Joan Robinson, Economic Philosophy (London: Watts, 1962).
18. John Maynard Keynes, “National Self-Sufficiency,” Yale Review 22, no. 4 (June 1933).
19. Paul Krugman, “Running Out of Planet to Exploit,” The New York Times, April 21, 2008.
20. The FAO figure for the average output for the triennium in each case is divided by the population for the mid-triennium year.
21. We are grateful to Souvik Chakravarty for giving us this figure based on research for his doctoral dissertation.
22. Joseph Stiglitz, “Inequality is Holding Back the Recovery,” New York Times, January 13, 2013.
7 THE MYTH OF THE AGRICULTURAL REVOLUTION
1. J. D. Chambers and G. E. Mingay, The Agricultural Revolution 1750–1880 (London: Batsford, 1966).
2. Ralph Davis, The Industrial Revolution and British Overseas Trade (Leicester: Leicester University Press, 1979), Table 31.
3. R. D. Lee and Roger S. Schofield, “British Population in the Eighteenth Century,” in The Economic History of Britain Since 1770, vol. 1, Roderick Floud and David MacCloskey, eds. (Cambridge: Cambridge University Press, 1981).
4. Angus Maddison, The World Economy (Paris: OECD Development Centre Studies, 2006).
5. Chambers and Mingay, The Agricultural Revolution 1750–1880.
6. Mark Overton, “Re-establishing the English Agricultural Revolution,” Agricultural History Review 44, no. 1 (1996); M. E. Turner, J. V. Beckett, and B. Afton, Farm Production in England 1700–1914 (Oxford: Oxford University Press, 2001), though Liam Brunt, “Estimating English Wheat Production in the Industrial Revolution,” University of Oxford Discussion Papers in Economic and Social History no. 29 (June 1999), suggests a somewhat higher rise.
7. W. A. Cole, “Factors in Demand 1700–80,” in The Economic History of Britain Since 1770, vol. 1, ed. Floud and MacCloskey.
8. Turner, Beckett and Afton, Farm Production in England 1700–1914.
9. Overton, “Re-establishing the English Agricultural Revolution”; Mark Overton, The Agricultural Revolution in England (Cambridge: Cambridge University Press, 1996).
10. Overton, “Re-establishing the English Agricultural Revolution.” Emphasis added.
11. See Robert C. Allen, “Agricultural Output and Productivity in Europe 1300–1800,” discussion paper no. 98, Department of Economics, University of British Columbia (1998), “Tracking the Agricultural Revolution in England,” Economic History Review 52, no. 2 (May 1999); Gregory Clark, “The Agricultural Revolution and the Industrial Revolution: England 1500–1912,” unpublished paper (2002), http://econ.ucdavis.edu.
12. Calculated from FAO data. See Food Balance Sheets/Supply Utilization Accounts (FBS/SUA); available at faostat3.fao.org/faostat.gateway/go/to/download/F/FO/E.
13. 1 quarter = 28 pounds, 1 bushel = 2 quarter of wheat (corn) = 56 pounds. The bushel is a volume measure and the weight of different crops per bushel will vary, and of wheat will vary depending on moisture content. On average, one bushel (Imperial measure) of wheat with standard moisture content weighs 56 pounds, or 25.45 kg. The conversion from bushels to kilograms above has been made on this basis to allow comparison with present-day grain output and availability. Population for 1701, 1801 and so on is shown against output for 1700, 1800 and so on.
14. E, L Jones, “Agriculture 1700–1780” in R. Floud and D.N. McCloskey, The Economic History of Britain since 1700 Vol.1 1700 to 1860 (Cambridge: Cambridge University Press, 1981).
15. Annual series on Exports and Imports in B. R. Mitchell and Phyllis Deane, Abstract of British Historical Statistics (Cambridge: Cambridge University Press, 1962), up to 1820–29 in thousand quarters; five-year averages from E. J. Hobsbawm, Industry and Empire: From 1750 to the Present Day (Harmondsworth: Penguin, 1972), from 1820–29 to 1885–89. Units of 10,000 cwt were converted to units of thousand quarters and ten-year averages taken to splice the series with the first series; 1 quarter = 28 lb., 4 quarters = 1 cwt = 112 lb.
8 CAPITALISM AND COLONIALISM
1. See, for instance, R. E. Rowthorn and J. R. Wells, De-industrialization and Foreign Trade (Cambridge: Cambridge University Press, 1987).
2. E. J. Hobsbawm, Inudustry and Empire: From 1750 to the Present Day (Harmondsworth: Penguin, 1972).
3. Utsa Patnaik, “Capitalism and the Production of Poverty,” T. G. Narayanan Memorial Lecture, Social Scientist (January–February 2012).
4. Amiya Kumar Bagchi, “Some International Foundations of Capitalist Growth and Underdevelopment,” Economic and Political Weekly 7, nos. 31–33 (August 5, 1972).
5. For statistical evidence on such retrogression in the case of India, see Shireen Moosvi, The Economy of the Mughal Empire c.1595: A Statistical Study (Delhi: Oxford University Press, 2015), in which the author compares the per capita income of India at the end of the sixteenth century with that in 1910 to find that the latter was somewhat lower.
6. W. Arthur Lewis, Growth and Fluctuations 1870–1913 (London: Allen and Unwin, 1978).
7. This argument is set out in greater detail in Utsa Patnaik and Prabhat Patnaik, A Theory of Imperialism (2016).
8. Bipan Chandra, “Reinterpretation of Nineteenth Century Indian Economic History,” Indian Economic and Social History Review 5, no. 1 (March 1968).
9. Paul A. Baran, The Political Economy of Growth (New York: Monthly Review Press, 1957).
10. This proposition is argued in the case of Asia by Tapan Raychaudhuri, “Historical Roots of Mass Poverty in South Asia,” Economic and Political Weekly 20, no. 18 (May 4, 1985).
11. We shall come back to this particular argument of Baran in a later chapter.
12. Shireen Moosvi, The Economy of Mughal India c.1595: A Statistical Study (Delhi: Oxford University Press, 2015).
9 COLONIALISM BEFORE THE FIRST WORLD WAR
1. Dadabhai Naoroji, Poverty and Un-British Rule in India, (London: Swan Sonnenschwein & Co. 1901), reprinted by Publications Division, Government of India, 1969; Romesh Chunder Dutt, Economic History of India Volume 1: Under Early British Rule 1757–1837 (London: Kegan Paul, 1903), and Volume II: In the Victorian Age 1837–1900 (London: Kegan Paul, 1905), reprinted by Publications Division, Government of India, 1970. The literature discussing the drain, whether directly or tangentially, includes A. K. Bagchi, “Some International Foundations of Capitalist Growth and Underdevelopment,” Economic and Political Weekly 7, nos. 31–33 (August 5, 1972), The Presidency Banks and the Indian Economy, 1876–1914 (Delhi: Oxford University Press, 1989), and Perilous Passage: Mankind and the Global Ascendancy of Capital (Delhi: Oxford University Press, 2005); A. K. Banerjee, India’s Balance of Payments: Estimates of Current and Capital Accounts 1921–22 to 1938–39 (Bombay: Asia Publishing House 1963), and Aspects of Indo-British Economic Relations (Bombay: Oxford University Press, 1982); D. Banerjee, Colonialism in Action (Delhi: Orient Longman, 1999); S. Bhattacharya, The Financial Foundations of the British Raj (Delhi: Orient Longman, 1971, reprint 2005); K. N. Chaudhuri, “Foreign Trade and Balance of Payments 1757–1947” in D. Kumar, ed. (with the editorial assistance of Meghnad Desai), The Cambridge Economic History of India, Volume II c.1757-c.1970 (Delhi: Orient Longman, in association with Cambridge University Press, 1984); B. N. Ganguli, Dadabhai Naoroji and the Drain Theory (New York: Asia Publishing House, 1965); S.Habib “Colonial Exploitation and Capital Formation in England in the Early Stages of the Industrial Revolution,” Proceedings of the Indian History Congress, Aligarh (1975); J. M. Keynes, “Review of T. Morrison’s The Economic Transition in India,” The Economic Journal, Volume 22 (1911); Angus Maddison, The World Economy (Paris: OECD Development Centre Studies, 2006); T. Morison, The Economic Transition in India (London: Murray, 1911); A. Mukherjee “The Return of the Colonial in Indian Economic History: The Last Phase of Colonialism in India,” Social Scientist, Volume 36, No. 3-4 (March-April 2008) and “Empire: How Colonialism Made Modern Britain,” Economic and Political Weekly,
Vol. XLV, No.50, December 11, 2010; Y. S. Pandit, India’s Balance of Indebtedness (London: Allen and Unwin, 1937); Utsa Patnaik, “Tribute Transfer and the Balance of Payments” in The Cambridge Economic History of India Volume II, Social Scientist, Vol. 12, No.12 (December 1984), and “The Free Lunch: Transfers from the Tropical Colonies and Their Role in Capital Formation in Britain during the Industrial Revolution,” in K.S.Jomo, ed., Globalization Under Hegemony: The Changing World Economy (Delhi: Oxford University Press, 2006); Sunanda Sen, Colonies and the Empire: India 1890–1914 (Delhi: Orient Longman1992).
2. The exceptions include Paul A. Baran, The Political Economy of Growth (New York: Monthly Review Press, 1957); Maddison, The World Economy; H. Heller, The Birth of Capitalism (London: Pluto Press, 2011); and Branco Milanovic “Ethical Case and Economic Feasibility of Global Transfers” (2007), available at mpra.ub.uni-muenchen.de/2587/1/MPRA-paper-2587.pdf.
3. See Folke Hilgerdt, “The Case for Multilateral Trade,” American Economic Review, Vol. 33, No.1, Part 2 (March 1943), and S.B.Saul, Studies in British Overseas Trade 1870–1914 (Liverpool: Liverpool University Press, 1960).
4. Quoted by B.N.Ganguli, Dadabhai Naoroji and the Drain Theory, 9. (Emphases added.)
5. Both Adam Smith and Karl Marx had stressed that the rent of land arose from the ownership of land in a few hands, which enabled the owner, who did not necessarily have to make any outlay in production at all, to extract surplus for its use from the actual producer. Ricardo, however, inverted this concept and labeled as rent surplus profit over and above average profit obtained in production. For Marx’s critique of Ricardo’s concept, see Karl Marx, Theories of Surplus Value, Part II (Moscow: Progress Publishers, 1968), and Utsa Patnaik “Introduction” to U. Patnaik, ed., The Agrarian Question in Marx and His Successors (Delhi: Leftword Books, 2007).
6. Paul Mantoux, The Industrial Revolution in the Eighteenth Century [1928], translated by Marjorie Vernon (London: Methuen, 1970); R. C. Dutt Economic History of India, Vol. II (1905).