Perspective

current orthodox economics refers to a The Accumulation Process state of affairs where all prices, including money wages, are rising pari passu, so in the Period of Globalisation that there is no worsening of the condition of the working masses per se and the only sufferers are those with cash balances, Prabhat Patnaik most of whom are likely to be rich. But inflation as we know it in real life, The inflation in food prices of the n preparing this lecture, which is part especially in a country like ours, where early 1970s that arose out of excess of a series being organised in memory the bulk of the workers do not have wages demand for cereals disappeared Iof D D Kosambi in his centenary year, I indexed to prices, is one that hurts the have been tempted strongly to choose a working masses. Keynes (1930) had called in later years not because of any topic that would have been of interest to this latter kind of inflation “profit infla- significant supply augmentation, him. Accordingly I shall devote this lecture tion”, and had recognised it as a phenom- but because it was substituted by to what everyone is concerned about these enon of great importance under capital- 1 an income deflation on the days, namely, the world food crisis. ism. In situations where supply could not be rapidly augmented, it overcame excess working people, including the 1 demand by raising prices relative to peasantry, over large tracts of the Paul Krugman of the Massachusetts Insti- money wages, and thereby bringing world. This income deflation, tute of Technology, whose column appears about a shift of income distribution from brought about by the imposition in several Indian newspapers, had wages to profits (whence the term “profit compared, in his column in The Hindu of inflation”), which, because the capitalists of neoliberal policies, compressed April 22, the present worldwide excess tended to save more out of income demand and kept food and other demand for a number of primary commod- than workers, had the effect of lowering commodity prices in check. But ities, which inter alia underlies the current overall demand. over the longer term, income inflation, with a similar state of excess Now, this demand compressing effect of demand for commodities that had arisen a profit inflation can also be achieved deflation has undermined the in the early 1970s. He argued that while through an income deflation imposed on very viability of peasant the earlier state of excess demand was the working masses. Starting let us say agriculture, adversely affecting overcome through supply adjustment, from a situation where the money wage supply. All this is part of the such as new oil strikes in the North Sea rate is 100 and the price is 100, a reduction and the Gulf of Mexico, and the entry of in the wage rate to 50 with price remain- process of “accumulation through new land into cultivation, the same might ing the same has exactly the same effect of encroachment” which had been a not happen this time around, because the lowering workers’ demand as a rise in central feature of colonialism and scope for supply adjustment was now price to 200 with the money wage rate has re-emerged with a vengeance much more restricted. remaining at the original level. Krugman however is not correct. The What is more, even though income in the era of globalisation. resource crisis of 1972-75 was not univer- deflation and profit inflation have exactly sally overcome through supply adjust- identical effects by way of compressing ment. In the case of the most vital primary the demand of the working masses, commodity, namely, foodgrains, it was finance capital prefers the former to the overcome, not through any appreciable latter since profit inflation entails a decline stepping up of supplies, but through a in the real value (vis-a-vis the world of This is a slightly revised version of the text of severe compression of demand, and the commodities) of financial assets, and may the D D Kosambi Memorial Lecture delivered latter happened through an income in extreme situations make wealth-holders in Pune on May 8, 2008. I wish to thank Govind deflation imposed over much of the turn to holding commodities in lieu of and Kalindi Deshpande, P Venkatramaiah, Akeel Bilgrami, Joseph Stiglitz, world. The regime of “globalisation” financial assets altogether. Income defla- C P Chandrasekhar, Jayati Ghosh, Javeed inter alia was a means of enforcing such tion therefore, even while keeping excess Alam and Utsa Patnaik, for their comments on an income deflation. demand in check, and yet increasing the an earlier draft. It is often not recognised that income share of profits earned in the organised Prabhat Patnaik ([email protected]) deflation plays a role exactly equivalent to sector of the world economy, exactly as a is with the Centre for Economic Studies and that of inflation in compressing demand. profit inflation would have done, has the Planning, School of Social Sciences, Of course, the term “inflation” itself is an added “advantage” of keeping finance Jawaharlal Nehru University, New Delhi. ambiguous one. The notion of inflation in capital happy. Income deflation for the

108 june 28, 2008 EPW Economic & Political Weekly perspective working population of the world, which that the decline in per capita cereal output, interventionist state (except when the includes, apart from the proletariat proper, in a situation of rising world per capita interventionism is exclusively in its own the peasantry, the petty producers, the income, did not generate any specific favour). An essential element of this agricultural workers, and other unorgan- inflationary pressures on cereal prices. opposition has been its preference for ised sector workers, becomes a pervasive The reason it did not is the income defla- “sound finance” (i e, for states always phenomenon in the era of globalisation, tion imposed over much of the world. It is balancing their budgets, or at the most characterised as it is by the rise to this, rather than any supply increase as having a small pre-specified fiscal deficit hege­mony of a new kind of international Krugman suggests, that explains the as a proportion of the GDP). The argument finance capital based on a process of absence of any specific trend inflationary advanced in favour of this preference has globalisation of finance.2 pressures in cereal prices (i e, ignoring always been vacuous, and was pilloried by The fact that the inflation of the early fluctuations) until recently. And this Joan Robinson as the “humbug of finance” 1970s arising out of excess demand for income deflation was imposed over [Robinson 1962]. The preference nonethe- primary commodities disappeared in later much of the world via the phenomenon less has always been there, and has years was because it was substituted by an of globalisation. become binding in the era of globalised income deflation on the working people finance, when states willy-nilly are forced over large tracts of the world, and not 2 to enact “fiscal responsibility” legislation because of any significant supply augmen- Income deflation is not a single process that limits the size of the fiscal deficit tation of non-oil primary commodities, as but the outcome of a number of different relative to GDP. At the same time, this Krugman believes. processes, which deflate not just the move towards “sound finance” is accom- According to the Food and Agriculture money wage rate as in the earlier numeri- panied by a reduction in the tax-GDP ratio, Organisation (FAO), the total world cereal cal example, but more importantly the owing to tariff reduction and to steps output in the triennium 1979-81 was level of employment and income, espe- taken by states competing against one around 1,573 million tonnes for a cially in the non-capitalist, petty produc- another to entice multinational capital population (for the mid-year of the trien- tion sectors. It is income deflation in this to set up production plants in their respec- nium, 1980) of 4,435 million. For the trien- comprehensive sense that eliminates the tive countries. nium, 1999-2001 the cereal output had excess demand that would have arisen in The net result of both these measures is increased to around 2,084 million tonnes its absence, given the fact of sluggish a restriction on the size of government for a population (for the mid-year of the increases in supplies. expenditure, especially welfare expendi- triennium, 2000) of 6,071 million. This ture, transfer payments to the poor, public represents a decline in world per capita Three Processes investment expenditure, and development cereal output from 355 kilogrammes in There are at least three processes contrib- expenditure in rural areas. Since these 1980 to 343 kilogrammes in 2000. Given uting to the phenomenon of income defla- items of expenditure put purchasing the fact that during this period per capita tion, in this comprehensive sense, over power in the hands of the people, income in the world has increased signifi- much of the world in the era of globalisa- especially in rural areas, the impact of cantly, and given the fact that the income tion. The first is the relative reduction their curtailment, exaggerated by the e la st ic it y of de m a nd for ce r ea l s (c o n s u m e d in the scale of government expenditure. multiplier effects which are also to a b ot h d i rec t ly a nd i nd i rec t ly v ia pro ce s sed Globalisation, as mentioned earlier, significant extent felt in the local (rural) food and animal feed) is markedly consists above all in the globalisation of economy, is to curtail employment and posit ive (even i f less t ha n one), a st ag na nt finance. Huge amounts of finance capital impose an income deflation on the rural or declining per capita cereal output are moving around the world at a dizzying working population. should have spelled massive shortages pace in the quest for speculative gains, so The second process is the destruction of leading to a severe inflation in cereal much so that even a fairly conventional domestic productive activities under the prices. Such an inflation, since it would economist like James Tobin had to ask for impact of global competition, from which have occurred in a situation where the a tax on currency transactions in order to they cannot be protected as they used to money wage rates in the manu­facturing slow down this dizzying pace of movement. be in the dirigiste period, because of trade sectors around the world, to which Because economies caught in this vortex liberalisation that is an essential compo- manufactured goods’ prices are linked, of globalised finance can be easily destabi- nent of the neoliberal policies accompany- were not increasing pari passu with cereal lised through sudden flights of finance ing globalisation. The extent of such prices, would have meant a shift in the capital, retaining the “confidence of the destruction gets magnified to the extent terms of trade between cereals investors” becomes a matter of paramount that the country becomes a favourite and manufactured goods in favour of importance for every economy, for which destination for finance, and the inflow the former. their respective states have to show of speculative capital pushes up the But this did not happen. On the contrary, absolute respect to the caprices of exchange rate. cereal prices fell relative to manufactured globalised finance. Even when there is no upward move- goods’ prices by as much as 46 per cent Finance capital in all its incarnations ment of the exchange rate and not even over these two decades.3 This suggests has always been opposed to an any destruction of domestic activity

Economic & Political Weekly EPW june 28, 2008 109 perspective through the inflow of imports, the desire There is also an additional mechanism. With the closing of the “frontier” in the on the part of the getting-rich-quick Even when there is no shift in the terms of “new world”, which Keynes (1919) saw as a elite for metropolitan goods and lifestyles, trade against particular commodities, turning point in the history of capitalism, which are necessarily less employment- there is nonetheless a decline in the terms further increase in supplies of agricultural intensive than the locally available tradi- of trade obtained by the producers of those commodities required essentially the tional goods catering to traditional life- commodities because of the increasing adoption of land-augmenting technologi- styles, results in the domestic production hold of a few giant corporations in the cal progress in densely-populated areas of of the former at the expense of the latter, marketing of those commodities. This too settled peasant agriculture. Capital did and hence to a process of internal has the effect, via a shift in income not directly have access to land in these “de-industrialisation” which entails a net distribution from the lower-rung petty areas; and it could not drive the vast peas- unemployment-engendering structural producers to the higher-rung marketing ant population off the land by force as it change. This too acts as a measure of multi­national corporations of curtailing had done in the temperate regions of white income deflation. the consumption demand of the former, settlement. If supplies had to be aug- The third process through which and hence the level of world aggregate mented, then the requisite land- income deflation is effected is a secular demand, which in turn curtails augmenting technological progress had to shift in the terms of trade themselves inflationary pressures on primary com- be introduced within the framework of against the petty producers of primary modities themselves. peasant agriculture. commodities, and in particular the Globalisation, in other words, unleashes This did happen in the post-decolonisa- peasantry. This may appear paradoxical at massive processes of income deflation tion period through the dirigiste regimes first sight. We had argued earlier that the which, while playing exactly the same role of the third world adopting a number of decline in the terms of trade for cereals as profit-inflation in curbing excess measures to promote multiple cropping between 1980 and 2000 was a conse- demand pressures, keep commodity prices and improve yields. These measures even quence of income deflation; to argue that in check. And this is what we have been culminated in the ushering in of the so- income deflation is a consequence of the witnessing in the entire interregnum called “green revolution” in countries like terms of trade shift seems to contradict between the inflation of the early 1970s India. But with the dirigiste regimes run- the earlier argument and reverse the and the recent revival of inflation. ning into crisis, especially a fiscal crisis, and causation. There is however no contradic- with their supersession by the neo­liberal tion here. A distinction needs to be drawn 3 regimes of the era of globalisation, the scope between an autonomous shift in the terms The question arises: why is the increase in for such supply increases dried up. of trade, which is brought about, say, the demand for primary commodities not It is not in the nature of capitalism to through pricing policy in the capitalist met through an increase in supply? Why is develop peasant agriculture. The fact that manufacturing sector, and an induced it that demand itself has to be compressed, peasant agriculture got a boost during the shift in the terms of trade that arises as a either through a profit-inflation or through dirigiste period was precisely because result of the autonomous shift through an income deflation imposed on the dirigisme, a natural sequel to the national changes in the state of demand and working population? The answer lies inter liberation struggles of the third world, did supply for the primary commodity in alia in the fact that, for agricultural not represent capitalism in its spontane- question. An autonomous shift in the primary commodities at any rate, supply ous development, did not express the terms of trade (through, say, an increase, increase requires the use of additional immanent tendencies of capitalism, but compared to the initial situation, in the land. At a time when capitalism was stood for an intervention in this administered price of manufactured extending into the “new world”, the local spontaneit y “in the interests of the nation”, goods, by monopoly capitalist produ­cers) inhabitants consisting of Amerindians though within clearly bourgeois bounds. is like a tax, much the way that could be driven off the land, and migrants Dirigisme, like its counterpart Keynesian- Preobrazhensky (1926) had visualised it. from the metropolis could settle on this ism in the advanced capitalist countries, The imposition of such a tax may force land and undertake production to satisfy could only be transitional. As the larger primary commodity supplies from the requirements of capital. Supply special conjuncture producing it passed, the petty producers which affects the increases in other words could and did dirigisme gave way to neoliberalism. The prices they get, and hence a further occur to serve the requirements of the immanent tendencies of capitalism adverse movement in their terms of trade capitalist world economy, though this asserted themselves against the earlier (provided that manufactured goods’ process was also accompanied by a paral- regime of interventionism, and trans- prices are not lowered after their initial lel process of an income deflation imposed formed the nature of state intervention autonomous increase, because of the on the pre-capitalist producers of the from one that invoked a notion of “national lowering of primary commodity prices, tropical colonies, through a combination interest”, not identical with the interest of i e, that they are subject to a “ratchet of taxation and import-induced de- finance capital, into one that saw the two effect”). A terms of trade shift therefore industrialisation, to compress their sets of interest as being identical. both causes and is caused by an income demand and squeeze out resources for With this came a basic shift in the fate deflation of petty producers. world capitalism [Bagchi 1982]. of peasant agriculture. The immanent

110 june 28, 2008 EPW Economic & Political Weekly perspective tendency of capitalism is not to promote pictures corresponding to the two phase being an exception because of its peasant agriculture; as Lenin had said in processes can be clearly visualised.4 historical context). his Imperialism (2000, p 89), if capitalism The argument of the preceding section An example can make the point clear. could develop agriculture “which today can then be expressed as follows: taking The capitalist sector can meet, say, its raw everywhere is lagging terribly behind the entire bloc of capital in the world cotton requirements in any one of two industry”, then it would not be capitalism. economy, its accumulation through expan- ways: if the peasant agricultural sector Its immanent tendency on the contrary is sion necessarily has to be complemented increases its supply to match the require- to dispossess peasants of their land and by a process of accumulation through ment of the capitalist sector; or if some other means of production, which in areas encroachment. As capital accumulates in traditional cotton manufacturers are of settled peasant agriculture can only the world economy, it requires, at the base thrown out of their occupation and the occur over a period of time. And the price, certain material elements of means raw cotton they were using becomes avail- squeeze employed on the peasantry by of production and means of subsistence. able to the capitalist sector. Since it is in this immanent tendency of capitalism in The supply of these elements however the nature of capitalism to capture markets the current era is itself ipso facto an does not grow to satisfy, at the base prices, from pre-capitalist producers, its “normal” act of income deflation. It is an income the requirements of capital accumulation. functioning will entail its meeting its raw deflation imposed on the peasantry and is Since any process of price increase above cotton needs through the second route. covered within our general concept, the base price is against the interests of And this very fact will foreclose the first namely, the imposition of an income finance capital, the imbalance between route, which, in any case, it is not in the deflation upon the working population the increases in demand and supply at the nature of capitalism to follow. Accumula- under globalisation. base price, is overcome by compressing tion through encroachment therefore is The income deflation on the working demand not only of the workers directly an intrinsic property of capitalism, which population therefore, and hence the com- employed by this bloc of capital, through is based not on balanced but on uneven pression of the latter’s demand as a means curbs on their money wages, but above all development of the different segments of of squeezing out agricultural primary by forcibly compressing the demand exist- the world economy. commodities (as opposed to increasing the ing outside the domain of this capital, so supplies of these commodities to meet the that the overall supply limitations do not Closing of the Frontier growing demand that would arise in the ab- adversely affect the requirements of This feature of capitalism comes into sence of such compression), is part of the im- capital. Such compression, which means particular prominence in the contempo- manent tendency of capitalism, which also the snatching of resources for the capital- rary epoch because of the closing of the manifests itself in the current epoch. ist sector from the petty production sector “frontier”, so that even such supply adjust- outside of it, constitutes accumulation ments as were possible in the period of 4 through encroachment. availability of “empty spaces” (which were This distinction between supply augmen- Of course if the petty production sector, not actually empty since they were tation and demand compression of the in particular peasant agriculture, could peopled by Amerindians and other local working population, as the two alterna- grow in tandem with the capitalist sector, inhabitants) are no longer possible now. tive means of overcoming the tendency i e, if there could be a balance between the The period of “globalisation” therefore towards ex ante excess demand for growth of the different sectors, then the has two specific features: first it charac- primary commodities that arises in the need for accumulation through encroach- terises a world where supply adjust- process of expanded reproduction of ment would not arise. But the very scope ments, at least of agricultural primary capital can be expressed somewhat differ- of accumulation through encroachment commodities, have limited scope, and ently. Any particular bloc of capital can forecloses this possibility. The capitalist hence accumulation through encroach- grow, conceptually, in two ways. One is sector sells its goods there at the expense ment, entailing compression of demand by reinvesting its surplus value of the traditional producers, and this is of the working people all over the and thereby growing bigger; the other enough to compress demand for the world, must come to the fore. Secondly, is by annexing other blocs of capital, or primary commodities and release them unlike in the colonial period where the by taking over common property, or for the capitalist sector. The capitalist colonial state enforced both deindustria­ the property of non-capitalist petty sector jacks up its price owing to mono­poly lisation and taxation which were major producers, or that of the state. The first pricing; and this is enough to release instruments for compressing demand, of these constitutes “accumulation resources for it through a compression of the imposition of neoliberal policies through expansion”; the second consti- demand of petty producers. In other does this compression even in the absence tutes “accumulation through encroach- words, accumulation through encroach- of any political domination of the colonies, ment”. These terms which we have ment is not the outcome of some conspir- i e, even in a situation of political decoloni- defined with respect to one particular acy; it is simply the outcome of relations sation. We now have accumulation through bloc can also be used for larger blocs, between two sectors of unequal strength; encroachment without colonialism. and even for the entire bloc of capital in and its being there forecloses the possibil- The idea that capital accumulation the world economy. In each case the ity of supply augmentation (the dirigiste required encroachments being made on

Economic & Political Weekly EPW june 28, 2008 111 perspective the pre-capitalist sector was first put variation in the dietary pattern is taking the blame elsewhere, which is why it is forward by Rosa Luxemburg (1963), place, entailing an increased demand for pointing, quite baselessly, to higher t hough t he prec ise det a i ls of her a rg u ment, commodities like meat, the production of Chinese and Indian demand. But even this and the conclusions she drew from it were which requires more foodgrains in the diversion for biofuel, important though it quite different from what has been form of animal feed. This argument is so is, has operated on top of a situation of discussed above. In particular, she saw the totally vacuous that one is even amazed sluggish growth in foodgrains output. We capitalist sector engulfing and replacing that it is at all advanced. No doubt the rich referred earlier to the fact that the growth the pre-capitalist sector and, hence, the in both these countries are diversifying in foodgrain output during the two world moving towards a limit point of their diet and are absorbing, directly and decades of the 1980s and the 1990s, had exclusive presence of the capitalist sector indirectly, more foodgrains per capita. But not kept pace with the world population alone, at which point capital accumula- if we take the per capita foodgrain absorp- growth. In the period after 2000 this has tion will become impossible. But the tion for the population as a whole, both become even more pronounced. During world does not move towards the exclu- directly and indirectly (via processed the 1980-2000 period, nearly half of the sive sway of capitalism. She was right in foods, animal feed, etc), then we find that increase in foodgrain output of the world seeing the encroachments on the in India there is a decline compared to the occurred in India and China, which pre-capitalist sector, essential for the late 1980s [Patnaik 2007]. Even in the case together, however, account for only over a functioning of capitalism, as also of China if we take the per capita absorp- quarter of the actual output. In other compounding the problems of capitalism, tion of cereals for food and feed (the words, the world output growth was but the manner of that compounding is definition of foodgrains is different in sustained by these two countries over different from what she had visualised. China compared to India), then there is a those two decades. But in this century, in T he present in flationar y cr isis is a manifes- steady and sharp decline between 1996 both these countries there has been a tation of this compounding. and 2003, which gets reversed thereafter, virtual stagnation in foodgrain output, but the level in 2005 is still lower than in and hence a decline in per capita output.7 5 1996.6 In fact, in the case of both these (In both countries this began in the The inflationary crisis has been variously countries this phenomenon of non- 1990s itself and things have only become explained. A fairly common explanation increasing foodgrain absorption per worse this century.) It is this stagnation highlights speculative behaviour. Specu- capita, even when both direct and indirect which provides the basic context for the lators, it is argued, are moving to commod- absorption are taken into account, has shortage; the diversion to biofuels only ities, because of the financial crisis which been adduced by many as evidence that worsens things. has made financial assets unattractive, the high growth they have been experi- The third basic argument can be said to and also because of the weakening of the encing has been accompanied not by any provide an explanation for this shortage, dollar, which has denied the wealth- reduction in poverty, but possibly even by and this lies in the fact that resources on holders in the capitalist world for the an increase. the planet are now running short present, a stable medium of holding Since the rate of growth of population compared to “mankind’s” requirements. wealth. While there is much in this in both these economies has been slowing This argument, in other words, provides a argument (though Krugman questions it down, the decline in the per capita nature-based as opposed to a society- on the grounds that there is no evidence of foodgrain absorption entails a decline in based explanation for the shortage. And increased inventory holdings), it cannot the rate of growth in the overall demand therein lies its limitation. While no doubt be a stand-alone explanation of the infla- for foodgrains. In the face of such a virgin land for cultivation can no longer tionary crisis. Wealth-holders will not decline, it follows that if excess demand be made available as easily as it could have move to commodities, which have high pressures have arisen in the world been in an earlier epoch, to say that carrying costs, unless they already have foodgrains economy, then the reason must “mankind” has in some sense reached the inflationary expectations. And for such lie in an even more rapid decline in the limits of agricultural production is a gross expectations to arise, there must already rate of growth of the supply of foodgrains. exaggeration. The decline in inflation in be a tightness in the commodity markets.5 Hence it is not from the side of Indian or the period after the early 1970s was not Speculation can act only on top of a basic Chinese demand but from the side of the because of any new land coming under situation of shortage, which is why the foodgrain supply in the world that we have speculation argument can only point to a to explain the current food scarcity in the compounding factor, not to the basic world economy. explanation for the inflationary situation. The second basic argument that has available at been advanced for the inflation in food Ganapathy Agencies Explanations for Inflation prices points to the diversion of foodgrains 3/4, 2 Link Street, Three basic arguments have been for the production of biofuels. This is no Jaffarkhanpet, Ragavan Colony, advanced. One is by the US administration doubt a perfectly valid argument, and the Chennai - 600 083, to the effect that in rapidly-growing devel- Bush administration having encouraged Tamil Nadu. Ph: 24747538, 24895263 oping economies like China and India, a such diversion, is naturally keen to shift

112 june 28, 2008 EPW Economic & Political Weekly perspective cultivation; it was because of income operation, and even ownership, voluntar- scholar of the Jawaharlal Nehru University, for making these terms of trade figures available to deflation. And such growth in output as ily entered into by the peasantry, can me from his ongoing PhD thesis. occurred was owing to the adoption of transform and modernise peasant agricul- 4 The distinction between “accumulation through expansion” and “accumulation through encroach- land-augmenting technological progress ture, without dispossession and destitu- ment” was introduced in Patnaik (2005). in countries like India and China. The tion of the peasantry. The alternative 5 This argument has greater force in the case of agricultural commodities than perhaps in the technological scope for such progress is social system therefore does not have to case of oil, where the link with the financial far from over. The real problem is that the be one based on petty production, but it markets is more pronounced. At any rate there can be little doubt that speculation in oil futures, agency through which such progress could must be one that ensures a balanced devel- unrelated to any present shortage, is playing a be introduced, namely, the peasantry, is, opment of different sectors through a significant role in the current upsurge in oil prices. because of this very income deflation, no changing but non-exploitative relation- 6 I am grateful to Sriram Natarajan for making his longer in a position to do so. In fact, ship between different classes, and research on China’s foodgrain absorption figures available to me. income deflation has taken its toll on the correspondingly changing forms of 7 The foodgrain output figure for 2007-08 that is peasantry to a point where even simple property relations and of production being quoted in official circles for India is much higher than in the earlier years of this century. reproduction of the peasant economy is organisation. The core of the system has But that is likely to be a deliberate strategy to no longer possible in countries like to be social ownership of the modern defeat inflationary expectations. 8 To attribute the condition of Chinese peasants to India, as is evident from the mass suicides means of production, for that alone, by the march of capital, when China happens to be of the peasants. overcoming the “spontaneity” of capita­ an economy with substantial social ownership of the means of production in a juridical sense, may We have so far seen income deflation as lism, enables society to consciously fashion appear odd at first sight. But under the Chinese a mechanism purely of demand compres- its own destiny. strategy of achieving high growth by adjusting (albeit in an attempted neo-mercantilist fashion) sion. While it does compress demand The social system that the transcend- to the capitalist world economy, there is a replica- immediately, it also has a long run effect ence of capitalism must bring about in tion within the economy of the phenomenon of income deflation with respect to the peasantry on supply. As it undermines the viability other words can only be socialism, not and the unorganised migrant workers, as under of the peasantry, simple reproduction is necessarily in the form it had taken in the capitalism. 9 It may be thought that the rise in foodgrain prices no longer possible and supplies drop. The past (or is taking today in China), but not itself will stimulate the output of peasant agricul- impossibility of simple reproduction of the too far perhaps from the form which Lenin ture and thereby be self-negating. But the intro- duction of a fresh round of land-augmenting peasant economy of course is the means had originally visualised at the time of the technological progress under peasant agriculture through which the peasantry gets dispos- Revolution, when he had set great store by requires much more than high output prices; it requires above all substantial state support which sessed of land and becomes destitute; it is the ‘schmytchka’, or the worker-peasant is not feasible under neoliberalism in normal precisely what capital wants and enforces. alliance, as forming the bedrock of social- circumstances. It represents nothing more than the march ism. At that time mankind had been faced of capital.8 But it is this march of capital with a choice between the barbarism of References that is creating a crisis for mankind. If the war and the alternative of socialism. Bagchi, A K (1982): The Political Economy of Underdevelopment, Cambridge University Press, march of capital had brought misery to Today the choice that is emerging before Cambridge. mankind in the form of world wars in an mankind is between mass hunger, destitu- Ghosh, J and C P Chanrasekhar (2003): Work and Well-being in the Age of Finance, Tulika Books, earlier epoch, it is threatening to bring tion and starvation on the one side and Delhi. misery to mankind in the form of food the alternative of socialism. When a vast Keynes, J M (1919): Economic Consequences of the shortage and starvation in the current segment of the population consisting of Peace, Macmillan, London. – (1930): A Treatise on Money, Vols 2, Macmillan, epoch. What we are seeing today is not petty producers cannot even carry out London. some kind of a natural limit being simple reproduction, and when this fact Lenin (2000): Imperialism the Highest Stage of Capital- ism, Leftword Books, Delhi. reached by mankind, but the limit to in turn jeopardises the subsistence of Luxemburg, R (1963): The Accumulation of Capital, which capitalism has dragged mankind.9 other segments of the working popula- Routledge Paperbacks, London. Patnaik, P (2000): ‘Introduction’ to Lenin (2000). This limit can be transcended, but tion, then clearly the social system which – (2005): ‘The Economics of the New Phase of only when the social system underlying it causes this has run its historical Imperialism’, www.macroscan.com Patnaik, U (1996): ‘Export-Oriented Agriculture and is transcended. course. Between these two alternatives Food Security in Developing Countries and India’, before us, there can scarcely be any Economic & Political Weekly, Nos 35-37, Septem- ber, reprinted in The Long Transition – Essays on 6 doubt over what the choice of D D Political Economy, Tulika, 1999. The tendency of capitalism as a social Kosambi, the most outstanding intellec- – (2003): ‘On the Inverse Relation between Primary Exports and Food Absorption in Developing system is to dispossess the vast mass of the tual figure of post-independence India, Countries under Liberalised Trade Regimes’ in peasantry. The alternative social system would have been. J Ghosh and C P Chandrasekhar (2003), q v. – (2004): ‘The Republic of Hunger’, Safdar that a transcendence of capitalism must Hashmi Memorial Lecture published by Sahmat, Delhi and reprinted in The Republic of Hunger bring about should be one that defends Notes and Other Essays, Three Essays Collective, and promotes the peasantry instead of 1 This lecture relies heavily on the research work Delhi, 2007. of Utsa Patnaik, which can be accessed, for – (2007): ‘Neo-Liberalism and Rural Poverty in making it destitute. This does not neces- instance, in U Patnaik (1996), (2003), (2004) India’, in Economic & Political Weekly, July 28. sarily mean a promotion of petty produc- and (2007). Preobrazhensky, Y (1926): The New Economics, Claren- tion and individual peasant farming. 2 I have discussed the nature of this new kind of don Press, Oxford, 1965. finance capital in Patnaik (2000). Robinson, J (1962): Economic Philosophy, C A Watts, Collective and cooperative forms of 3 I am grateful to Shouvik Chakravarty, research London.

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