Indian Development

Indian economist Prabhat Patnaik currently serves as the Vice-Chairman of the Kerala State Planning Board. Patnaik is a Marxist thinker and professor of economics at Jawaharlal Nehru University, New Delhi. He is the author of several books such as Retreat to Unfreedom: Essays on the Emerging World Order, Whatever Happened to Imperialism and Other Essays, and Accumulation and Stability under Capitalism. He has edited the books Lenin and Imperialism: An Appraisal of Theories and Contemporary Reality and Macroeconomics. This interview was conducted at Columbia University in New York City, where Patnaik was visiting to give a series of lectures.

CP: You’ve frequently noted the important role that India’s public sector played in its post-independence development. However, under the current era of neoliberal globalization, the public sector has willfully undermined itself in favor of international capital. What lies ahead for India in the light of this reversal?

PP: This undermining involves a transformation in the role of the state. The post-colonial state attempted a relatively autonomous trajectory of capitalist development in opposition to metropolitan capital, through import-substitution policies, protectionism, and the setting up of industries by the state. After colonial rule and the free-market policies that went along with it, there was an implicit social contract forged during the freedom struggle on matters relating to economic development. The state had to ensure a degree of equity as well as self-reliance, for which the public sector was a crucial instrument. It was a bulwark against metropolitan capital. At the same time the public sector did not prevent the growth of the domestic private sector: it went into areas where the domestic private sector was either unwilling to go or incapable of going.

This trajectory of development created a tension vis-a-vis imperialism. But now, the domestic bourgeoisie has lost its appetite for the pursuit of such an autonomous trajectory of development. They see themselves going global. Correspondingly, the state is now under pressure from collaborationist forces among the domestic bourgeoisie, and of course from international capital, to go back on its earlier policies. The state has abandoned its earlier role. Now it too is becoming collaborationist; and we see a corresponding decline in the public sector.

Today, this decline of the public sector is sought to be justified by arguments about its inefficiency. These arguments are generally incorrect and ideological. But even this so-called inefficiency is often the result of a deliberate effort to undermine the proper functioning of the public sector so that is can be privatized.

In fact, the dynamism of the dirigiste regime came from public expenditure. In (British) India, for example, per capita food grain absorption at the beginning of the 20th century was 200 kilograms per annum. By 1947, it had fallen to 150 kg/annum. By 1990 (through state-led development schemes) it had risen to 180 kg/annum for the country as a whole. Since then, it has again come down. Why? Because economic growth has led to an exacerbation of inequities. The prosperity of some has been dependent on the poverty of others. There has also been a drastic curtailment of rural expenditure and a general withdrawal of state support. State credits to agriculture have declined, so that the private moneylender is squarely back in business.

Under the globalization of finance, the autonomy of nation-states gets undermined. Demand management policies, policies for increasing employment, typically undertaken by nation-states, can no longer be pursued. This cannot however be a permanent state of affairs. To confront globalized finance, you need a global state, which, of course, is not on the cards at present. Since we have to continue to live with nation-states, to regain their autonomy, these nation-states must, therefore, de-link themselves from globalized finance, which requires a political movement. This is happening in Latin America. A certain autonomy of the state to make decisions on its own terms is necessary; the degree of delinking this will need will vary across states and will depend on the specific situation of each state.

CP: You’ve noted that pre-WW1 India had more experience with neoliberalism than any other country before or since. The experience of harsh laissez-faire policies adopted under colonial rule radicalized the peasantry in the immediate post-colonial era. Given the demands of neoliberal globalization in the current era, the peasantry is under attack. Why hasn’t it again become radicalized?

PP: In a way, the farmer suicides are also a form of protest. But why does it take that form? Some of the peasant protests against the Special Economic Zones (SEZs) have been visible, but they aren’t as significant. Instead of an explosion of protest, you are seeing, in the form of suicides, an implosion of protest. The reason perhaps lies in the fact that an important historical feature of peasant protest in India has been the role of the middle class in initiating and supporting such protest; but now the middle class is a beneficiary of neoliberalism (the situation is different in Latin America in this respect). Neo-liberalism has not yet hurt the literati: the academics, the journalists, the writers.

In the 1930s, radicalization of the peasantry, for which the Depression had created the pre-condition, occurred under the middle class leadership provided by the Congress. Today, the middle class is detached from peasant distress. The absence of leadership, of a voice, is thus important. In the 1970s, when you had an explosion of radicalization, the salariat was being squeezed. For the middle class, there was a compulsion to make “common cause with the other classes.” Today this condition is missing.

CP: You have noted that the success of the Indian Left has led to its marginalization. You added further that if the Left weren’t so successful in India, there would be a Latin America-type situation. Can you go into further detail about this? And in the light of this, what are the limits to the Indian Left’s success, given that so much of its influence is wielded through the government and not through social movements (as is the case in Latin America).

PP: What you have described, about the Indian Left wielding influence through the government and not through social movements, is not a fair reflection of the ground reality. It is true that at the current moment, the Left has electoral success in certain states which is the main source of its political influence. But, this influence is the product of decades of work on the ground. The Left in West Bengal and Kerala, for example, has an incredible history of work in social causes. The Left’s work in famine relief in Bengal in 1943, in providing relief in the refugee camps of West Bengal after partition, are memorable, which strengthened its ties with the people. In the late 40s and the early 1950s, and again in the 1970s, right until the end of the Emergency in 1977, the Left faced massive repression. It survived all that because of its links to the people and the movements it had led, and also because of the tremendous amount of social work that it had done.

The Left in India is too weak in terms of power right now. But it is still sufficiently powerful to make a difference to government policy. It has been able to keep out some of the most pernicious features of neoliberalism in India, such as financial market liberalization, denationalization of the banking sector, and capital account convertibility. These are some of the features that are most damaging, the harbingers of precipitous crisis; and these have been prevented. On the other hand, this also means that there is a degree of neoliberal stability (which explains India’s growth without a lot of economic bumps) that has prevented the radicalization of the middle class that we spoke of earlier. There is substantial opposition to neo-liberal policies, which explains the gradualism with which they have been introduced; but this gradualism has also kept at bay the sort of crises that lead to their wholesale rejection.

CP: You’ve said that development strategies should be formulated through political engagement. However, with the growing role international NGOs are playing in service provision and shaping the development discourse in many developing countries, there has been an effective depoliticization of development, as these international organizations are seen as ‘above the political fray’ (even though their funding makes them inherently politicized). What does it mean to bring political engagement back into development strategy and how can this be achieved in light of the NGOization of development?

PP: This is a very important question and goes beyond the mere NGOization of development. The depoliticization of development is a strategy of imperialism. It assiduously promotes the perception that politics is above development. But, politics is about choice. Democracy is about choice and this depoliticization thus amounts to a destruction of democracy.

[Interviewer’s note: Prabhat Patnaik suggested I read a recent piece he wrote on this topic. The following are excerpts from this piece, entitled “The Destruction of Politics,” available at]

“…Politics is about alternative perceptions, alternative world-views, alternative class positions, contending for hegemony. To say that development should be kept above politics amounts to saying that there is a “true” concept of “development,” the one, needless to say, that is currently enjoying hegemony, which should not be challenged by anyone….It amounts to an imposition not just of a particular economic regime but also of a particular conceptual regime. It amounts to the promotion of a conceptual dictatorship.”

CP: You’ve used the term “accumulation through encroachment” to describe the process where certain blocs of capital grow by displacing other blocs of capital, pre-capitalist modes of production, state sectors or through sheer appropriation of resources not formerly recognized as private. David Harvey has put forth a similar idea: “accumulation through dispossession.” How do these ideas relate to the current Indian economy and the issue of land and laborers in India today?

PP: Accumulation through encroachment, which characterizes contemporary globalization, is of enormous importance in India today. The current agrarian crisis is being used to induce corporate takeover of agriculture; the enlargement of capital somewhere is associated with dispossession somewhere else. Capitalism entails the accumulation of capital. This process may mean, and normally does as Marx showed, the building up of additional wealth. But Marx also spoke of the process of primitive accumulation of capital, and of centralization of capital where “one capitalist kills many”. These latter phenomena constitute what I call accumulation through encroachment. Accumulation through encroachment doesn’t create jobs, it destroys them.  Since such accumulation  occurs through the dis-accumulation of, or expropriation of, other economic agents within the economy, it is associated with a reduction, not an enlargement, of employment.

CP: How does this relate to India’s Special Economic Zones?

PP: The SEZs are ways of cashing in on real estate speculation. Only about 20% of the land in the SEZs is occupied by productive enterprise. Even otherwise, SEZs are objectionable because they discriminate against those producing units which are outside of the SEZs.

 It is important to note that land encroachment is the single most important issue in Indian economic life today.

It is often argued that modern factories require land; so a degree of displacement of people from land is inevitable. But, quite apart from the fact that not all the displacement is for building industrial units (much of it is for speculation) what this argument ignores is that those displaced have nowhere to go. The supposedly high growth being experienced by the economy today is hardly accompanied by much job creation since productivity growth is rapid. The displaced therefore have little prospects of employment. Questions are often raised about whether India’s current growth is sustainable. A very important reason for the unsustainability of the current situation in my view is the opposition to accumulation through encroachment that is bound to be generated.

Chhandasi Pandya is a New York-based writer. She can be reached at [email protected]

Leave a comment