In the Indian Economy, capital investment has been taking place for a long time in the form of developmental projects such as dams in agriculture, factories that can produce machines in industry, schools and hospitals, roads and railways in service sector.
All of them displaced and destroyed the lives of native people without reintegrating them into the new economy. This is reflected in the widespread protests that the initiation of any such project evokes. The huge capital investment even until now could not solve the problems of the Indian Economy such as poverty and unemployment.
During 1950s, Nobel Laureate Arthur Lewis, the first economist who tried to understand this complex problem of transition, categorised countries like India as a combination of traditional and modern economies.1 He viewed traditional economy as one where changes do not take place whereas modern economy experiences changes and continuous growth through more and more capital investment. Through the growth of the modern sector, it was argued, the traditional sector gradually gets marginalized and disappears. This conception became popular as Dual Economy models, based on which lots of research was done to understand the problems of developing economies.
These two terms, traditional and modern, coined by Lewis, are largely descriptive categories with not much analytical content. During early 80s, another Nobel laureate, Joseph Stiglitz 2 attempted to give content to these terms along with a framework to understand the problems of transition.3 He argued that development, i.e., social transformation, is possible only through a technological solution available with developed countries and hence globalization and capital investment is the only route for developing countries. He viewed that each country is a mix of tradition (superstition dominated unchanging system ) and modern (science based system initiating changes) with differing proportions and hence each can choose its own method of globalization with different set of developmental policies. Further, individuals in the system must own these policies to make them successful. Our leadership at the centre as well as the state strongly believed in this process of globalization where capital is free to move into any country to play a dominant role in the developing countries.
R. S. Rao has an alternative approach which was first articulated while reviewing the seminar volume brought out by Centre for Economic and Social Studies, CESS, which used a dual economy description of Andhra Pradesh. He proposed that the Andhra economy can be better be described as semi-feudal, semi-colonial society. There is some misconception in the sense that semi-feudal semi-colonial economy, agriculture is semi-feudal and industry is semi-colonial, both together, generating the system. In fact, semi-feudal semi-colonial is a single phrase describing a long standing well-knit alliance, getting reflected in all walks of life in the society, through which both the landed gentry and capitalist class (in its imperialist phase) get the advantage. Depending on the classification – either as dual economy or semi-feudal semi-colonial economy, the solution to the problems of transition differ. For example, in the former, land reforms become a welfare measure for the poor people which remained unimplementable until now for various reasons and in the latter, land reform measures become a particular solution that helps in transformation of the society.
Rao’s model in this framework focuses not on what is, but what it is becoming, that is the study of dynamics of the society rather than studying the statics of the system. Based on classical political economy in which analysis is based on class contradictions, transition in developing countries is visualized as a transformation from feudalism to capitalism in the present context. The Indian economy represents incomplete transition in this scheme of analysis.
To understand the idea of a semi-feudal semi-colonial society more clearly, one must get an idea of–
1.1 Nature of Capital:
Capital passes through three phases, acquiring three different forms, namely, productive capital by which surplus generation takes place through labour, either in the factory or by rich peasants. Trading capital is the second phase where surplus value generation is through trading and finally finance capital, commonly referred to as imperialist phase, is one where capital, in search of opportunities, enters the countries like India.
Closer to reality, focusing on the Indian experience in the last 60 years, in the initial years after the national leader believe that nation can develop through developmental projects, an aspect which became part of the country’s five year plans. In that perspective, construction of factories that can construct other machines will automatically lead to industrial growth, agriculture can develop through large dams, green revolution and HYV crops, good roads, communication, transport facilities, new schools and hospitals in service sector can bring in the much anticipated development. World Bank, Asian Development Bank, private capitalists and such donor agencies are ready to provide any help in the form of finances, technology, knowledge and also lend a helping hand in constructing the factories as well as providing expert advice.
The basis for this perspective in capital investment can bring in development. The belief is that if we can initiative/imitate the same developmental projects that brought development to countries like America and England, our country will also develop. Ideologically, developmental projects are themselves viewed as development. Development becomes only a technological solution that can be borrowed and adopted in the system forgetting the fact that developmental projects are a solution for the particular needs of the society bringing in changes in knowledge, its application in the society and cultural environment, otherwise known as productive force, property relations and superstructure.Developmental projects equated with development occupied the centre stage and possessing developmental projects at any cost become the objective of our leadership.
Capitalism, re-organising the society through capital investment, in general is said to be progressive in the sense that it releases the productive force and holds sway over all the previous modes. However, capitalism in its imperialist phase, crosses its national frontiers and exports capital to a country which is pre-capitalist and introduces capital labour relations as far as possible. To facilitate its functioning, it forms an alliance with pre-capitalist leadership.
Some aspects of concern of such an alliance can be summarized as follows:
1. Colonial developing countries enter in the capitalist phase, not with changes in mode of production, but through changes in product-mix. As imperialism did not enter through changes in either labour utilization or instruments of production as happened in the first and second phases, peculiar “inversions” take place in the society. What all happened in the original capitalist countries will not happen here but its inverse happens. The continuing agitations against developmental projects in Orissa, Singur in West Bengal, Bhatta Parsaul in Uttar Pradesh and Somepet in Andhra Pradesh amply illustrate this point.
2. When imperialism brings in capital into the underdeveloped countries, like India, it has taken under its control not only agriculture but the entire economy, forming an alliance with local feudal economy for this purpose, without eliminating them. This unity permits the growth of productive forces along with corresponding changes in production relations in some spheres with co-existence of multiple modes of production. But changes in the superstructure are rare to happen. Conversely, superstructure in pre-capitalist feudal society influences the superstructure in capitalist countries, as witnessed by the surge of religious movements across the world. The growth of capital thus is not accompanied by a capitalist superstructure, but the presence of a pre-capitalist superstructure which is not conducive to the growth of capitalism as it is likely to modify the capital.
Capital takes help of the pre-capitalist institutions like religion, caste, region, hierarchy, which modify the nature of capital. For example, bonus given to the worker in a factory is termed puja bonus or diwali bonus, capitalist institutions like super-speciality hospitals, factories have a small temple in side, modern schools performing saraswati puja and ganesh puja. , Typical example is Tirupati, a temple town in Andhra Pradesh where one can explicitly experience an efficient capitalist organization throughout.
3. Imperialism, through its functioning, also gives rise to multiple identity movements across the world, forcing the class struggle component to the back stage.
4. With the advent of such capitalism (in its imperialist phase) what should have been fissionable material becomes material of fusion with feudal elements, incorporating themselves within the capital framework, forestalling the transformation. The capital loses its progressive character, resulting in a society where capital exists but not capitalist relations, which is termed as capital without capitalism. The alliance between the two forces is strong enough that it requires great effort to break them and create a new India.
1.2. Character of the native society:
Marxian theory attempts to capture the motion of the society at three different levels of abstraction. The first level of abstraction is time dependent but not time specific or space specific, seen to be at the domain of philosophy, explains the long term movements of the society. The second level of abstraction is space specific abstraction, often reduced to the level of political economy. The third level of abstraction is time specific and space specific which is reduced to the level of class struggles. The beauty of Rao’s model is that he transported this idea of three levels of abstraction on to the objective reality, saying that unless the objective reality has three dimensions, the theory/model that reflects it cannot possess three levels of abstraction. These three dimensions correspond to the Marxian concept of productive forces, property relations and superstructure.
Further, if we assume that the objective reality is evolving and development is viewed as long term qualitative change, is a movement from one system to another, resulting in change in structures. Unless we have the knowledge about the two systems – original and emerging, the developmental processes along with developmental policies required for such changes become unclear.
In order to understand development and problems of social transformation, objective reality, in this case human society, is modeled as a fluid flux of three inter-related parts, productive forces, property relations and superstructure, and motion of the object is defined as changing relations between the constituent parts. The institutions and rules governing the relations between the parts in a particular context provides a structure to the social system at that specific point of time.
The changes in the society can be quantitative within the structure and can also be qualitative necessitating a change of the structure, generating an objective reality with a new set of parts and a new set of relations among the constituent parts of the society. Further, following the primary axiom of Marx that matter exists only in motion, evolution of one system into a new system is due to the resolution of internal crisis making the transformation a self corrective endogenous process. The path of evolution need not be non-singular (unique, deterministic and predictable). Rao’s model proposes the path to have singularity in the sense it is not linear but discrete and different. The human society is viewed as a collective of human beings in relation with each other in different domains, who can think and resolve the crisis within, to generate motion in the society. Thus, human society becomes an ensemble of changing social relations and the motive force for change in the society is the human being itself.
Human beings, for their survival need food for consumption. Both present as well as future needs involve production of various goods. Production and enhanced production is possible only with an access to the fundamental resources of production, namely natural resources, labour and land and derived natural resources capital in the form of finances, instruments of production and knowledge.
Based on the idea of scarcity, perceived or otherwise, of these resources, attempt was made to classify the evolving society into three economic systems which are totally different in character and functioning, but each evolved from the earlier system.
In a particular context, human being feels/experiences that one of the three resources is posing hurdles to increase production in which the object space (a space in which a reflection of object space gets formed) becomes larger than the object world. This particular resource is viewed as a scarce resource. The scarcity gets transformed as a scarcity of the system in that context. As if to safeguard the society from the effects of the scarce resource, the collective develops necessary institutional arrangements and norms generating a context in which the individual in the collective can function, meaning the scarcity becomes the organising principle for the society and acts as an ontological frame, facilitating the individual with epistemological conditioning in the acquisition of knowledge.
The passage of society from one scarce system to another scarce system can be defined as development. The three economic systems are termed as labour scarce system, land scarce system and capital scarce system, which are distinctly different systems. The characterization of these systems and essential conditions for an operator to bring in such a transformation are discussed in section II of this paper.
The section articulates the need for simultaneous switch over one scarcity to another. In case the simultaneous switchover does not take place, separating in time, the construction and destruction aspects of the change, as happens in countries like India where the change is exogenously introduced, creation also leads to destruction by which earlier system gets strengthened and motion of the society gets truncated. For example, if the change is through a large dam, an instrument of capital scarce economy, is juxtaposed on land scarce economy, displacement and destruction without integration becomes the major problematic. Further, the higher returns to land encourage non cultivating people to treat land as an asset, thereby reinforcing pre-capitalist forms of organization.
The present Indian economic system poses a complex problem of social transformation. India is a combination of not two different economic systems but in fact a combination of multiple economic systems with multiple scarcities existing together, of course in different proportions. For example, states like Orissa have a larger proportion of labour scarce system in tribal areas of Koraput, Kalahandi districts where hill cultivation is dominant; land scarce system in Sambalpur district with canal irrigation and market production is prevalent in Cuttack and coastal districts. In such a situation, development is not a single stage phenomenon but relates to multiple stages and transitions therefrom.
1.3 Can such capital transform?
In a semi-feudal semi-colonial economy, the alliance between local land owning class and the imperialist capital results in not eliminating the land owning class as is expected, generating a new land owning class who safeguard their interests in land and also invest in urban activities such as hotels, cinemas, schools, hospitals, real estate, construction activities associated with a much faster growth coupled with high level of uncertainty. They make the markets such as labour and land inactive leading to a crisis in the economy.
Some land owning communities are there in the village, who are neither prepared to sell the land nor to cultivate, but give the land on tenancy to other cultivators. In this process, they keep their relations live in the village which provides them decision making power and controlling authority over other relations in the village. The decision making power gets reflected in their power to decide the tenancy relations such as the tenant, form of tenancy, rates, crops to be cultivated etc. they are named as non-cultivating peasant households (NCPH in short). Unlike a capitalist economy where land becomes a commodity sold and purchased depending on the market signals and the money can be invested elsewhere to get profits, land in the semi-feudal semi-colonial economy is seen as a source of power with an authority to control the relations in the village.
Such NCPH land owners remain outside the agricultural activities but dictate relations in the village, the consequence of which is non-investment in agriculture, generating a crisis in it. Capital investment in such an economy, without commensurate employment generation, does not move labour from agriculture to non-agricultural activities.
Instead, the expanding presence of NCPH strengthens the tenancy based relations within the village. Development in this form, by focusing on projects rather that people and their needs and capacities, generates “surplus people” in large numbers, thus reinforcing semi-feudal semi-colonial relations. The economy gets transformed into small farmer/poor peasant, middle peasant economy. Section III provides empirical evidence of the generation and expansion of NCPH in the Indian context.
More capital investment, either by the state, MNCs or private capital, more will be the generation of NCPH and more severe will the crisis be. This dependency relation between the imperialist capital and land-owning class is such that severing this alliance as it expected for future progress becomes not possible.
continued in Part 2…
references of this part –
1) Lewis, W.A (1954): “Economic Development with Unlimited Supplies of labour”, The Manchester School, Vol 22, No 2, pp139‐91.
2 ) Vice President of World Bank which provides the required capital as loans to developing countries and later resigned due to differences of opinion
3) Stiglitz (1998): “Towards a new Paradigm for Development, Strategies, Policies and Process”, 9th Raul Prebisch lecture, delivered at the Palais des Nations, Geneva.