Imperialism is not an unfamiliar term, although it is not as widely used now as it was in the past, especially during the freedom movement. In those days imperialism implied the political domination of one country over another. It had the natural corollary that the dominant country would use its authority to exercise economic power over the “colonies”. Imperialism and colonialism were thus complementary terms, implying both political domination and economic exploitation. In India, for instance, the freedom movement was at once the assertion of the right of a people to govern themselves and a protest against the economic “drain” that the country was being subjected to under foreign rule.
In the Marxist tradition, of course, imperialism as expounded by Lenin and Rosa Luxemburg was clearly an economic category. For Lenin, imperialism was a feature of the monopoly phase of capitalism; for Rosa Luxemburg, it was an inevitable component of capitalism at all stages because of capitalism’s built-in propensity to seek newer and newer markets in the quest for profits and accumulation.
Utsa Patnaik and Prabhat Patnaik, in the book under review, offer a new perception, a new theory of imperialism. The book consists of their exposition, an enthusiastic endorsement of it in the foreword by Akeel Bilgrami, the noted professor of philosophy at Columbia University, United States, as well as a critical commentary by David Harvey, a well-known geographer and acknowledged Marxist writer. The economic argument of the authors is that certain commodities under certain circumstances are producible only at an increasing supply price. When this happens, there will be a threat to the value of money.
The actualisation of that threat can be avoided by enforcing an income deflation on the producers of the commodities that experience increasing supply price. The three italicised expressions, “increasing supply price”, “value of money” and “income deflation” constitute the core of the theory. However, a crucial aspect of the theory rests on a geographical aspect that the authors bring in by pointing out that capitalism emerged first in the temperate zone (in Britain and Europe), which is not capable of producing some of the inputs that are essential to sustain capitalism at its core, such as tea, coffee, cane sugar and raw cotton, for which it must depend on the landmass of the tropical zones. It is this geographical asymmetry between core or metropolitan capitalism and the tropical countries on which it has to depend that constitutes the novel feature of the Patnaiks’ theory of imperialism, which also leads to its contestations.
Before we turn to the academic debate let us follow the argument of the authors. Here it is in their own words: “Capitalism cannot do without a whole range of goods produced by peasants located in the tropical and sub-tropical areas that have a fixed landmass—goods that either cannot be produced in temperate lands, or cannot ever be produced in adequate volumes. As the ex ante demand for such goods increases with capital accumulation, it cannot be met by increased exports from this limited landmass without threatening the value of money in the metropolis because of the increased supply price of such output at any given money wage rate. If land augmenting investment and land augmenting technological change could occur in the topical periphery for raising this output, then increasing supply price could be kept in abeyance. But that requires a relationship between the capitalist state (which has to play a crucial role for such change) and the peasantry which… simply cannot exist…. As a result, this ex ante demand for tropical and sub-tropical goods is met by the imposition of income deflation upon the periphery itself, in order to squeeze out large supplies from a given output at the expense of local absorption…. In short, squeezing local absorption in the periphery to meet the demands of capital accumulation in the metropolis is an essential feature of capitalism, and this, far from being obviated by capital accumulation (and the development of capitalism) within the periphery, only makes the problem more serious. Reducing such local absorption through income deflation is the essence of capitalism.”
To give this theoretical argument empirical substance, recall the relationship between British metropolis capitalism and its tropical Indian colony of the pre-Independence period, especially the Indian complaints of the manner of transfer of goods and financial resources from India to Britain that many Indian writers clearly designated as “economic drain”. The authors provide empirical evidence to substantiate their position.
Since the “drain theory” has been adequately established by writers of the past and contemporary scholars as well, it may be granted that the claim of the authors can be conceded as valid for the colonial period. The theory that the authors have put forward is that the income deflation of the tropical countries was not merely a feature of colonialism, but the unavoidable essence of capitalism at all stages, including its specific manifestation as “finance capitalism” from the concluding decades of the 20th century onwards. It is this claim that capitalism as such, and in all its evolutionary stages, has a geographical basis that Harvey challenges, and it may be expected that many more will join in.
The authors reinforce their thesis by linking increasing supply price and income deflation via changes in the value of money. While a general reader may find this connection somewhat difficult to follow, a brief exposition is necessary to get an adequate understanding of the theory they put forward. Consider what capitalists are after. Obviously, they have no special interest in the kind of goods they produce. Their decision on what to produce depends on goods for which there is a market demand. And making a profit by selling what they produce is their objective. The profit they make is the basis of their wealth. Accumulating wealth is the objective of capitalists, and wealth is usually held in some monetary form. However, money will lose its value when prices go up so that when there is such a threat wealth holders must move to some other good whose value is not likely to go down much in the long run. Land, which is limited in supply, is one such item. But for transactions in land, legal processes have to be followed. Hence, gold is the standard good that those who wish to protect their wealth move into when money tends to lose its value because of a general increase in prices. The authors use this observation to put forward their history of capitalist development—the early period when the international monetary system was on the gold standard; the post-Second World War period up to 1971 when the United States dollar was pegged to gold; and the post-1971 period when the U.S. dollar was delinked from gold, but the dollar has continued to be the only global reserve currency because of its general acceptance. An understanding of these changes and their implications is important because an essential feature of capitalism is the increasing wealth of the few and the continuing misery of the many.
The authors insist, too, that the geographical grounding of capitalism continues through the transformations it has been undergoing. They provide evidence from the past as well as the present to substantiate their claim. The per capita availability of foodgrains (net output plus net import) in India, they point out, was 201.1 kilograms in the 1897-1902 period, but came down to 146.7 kg in 1939-1944. They indicate that this was not the result of an increase in population, which happened only after 1921, but the decline in per capita availability of foodgrains could be seen even before 1921. They also draw attention to the fact that between the five years ending in 1901 and the five years ending in 1941, the trend growth rate of foodgrain output was a meagre 0.11 per cent per annum, while the trend growth rate of non-foodgrain output was 10 times higher at 1.31 per cent indicating the use of the landmass for the production of goods meant for export to the metropolis. Looking at it from the other side, the authors show that the combined imports from Asia, the West Indies and Ireland amounted to “half of Britain’s total imports over the entire period of the Industrial Revolution”.
The import dependence of advanced capitalist countries on the ex-colonial countries continues and has, in fact, intensified. One reason for it is that air-freighting now permits imports of highly perishable products. But the more important reason is the insistence that the ex-colonies continue to have a comparative advantage in agricultural production and hence that “free trade” will be to the advantage of both the developed and developing countries. The advanced countries still depend on the less developed ones for many of the essentials of daily life. As the authors picturesquely point out, if imported tea, coffee, cocoa, cane sugar, chocolate, vanilla-flavoured ice cream, fresh vegetables, fruits, flowers and seafood, all disappeared from the supermarket shelves in the advanced countries, they would be left with cereals, dairy and meat products, which are all that they can produce in abundance.
Imperialism has always had capitalism and nationalism as its correlates. The Patnaiks have put forward geography as an additional, and perhaps more basic, correlate. But during the past few decades capitalism has been undergoing a major transformation, moving on from its inter-national and productive phase to a global and financial phase. Does this fact make a difference to the authors’ argument? While they recognise that finance capital is engaged largely “in massive speculation for capital gains rather than being concerned with the promotion of industry”, they do not concede that it makes much of a difference to their theory of imperialism based on the spatial structural relationship of metropolitan capitalism which must “in its spontaneous operation act in ways that tend to immiserate the traditional petty producers of the third world”. Harvey, too, while insisting that “the liberation of finance capital from many constraints after the 1970s… along with the long-standing attempts to reduce barriers to cross border trade both by tariff reductions and lower transport costs, has changed the whole spatial dynamics of capital accumulation” does not seem to think that global financialisation calls for a re-examination of capital accumulation and the quest for wealth. Hence, it is necessary to consider whether the dominance of finance necessitates a more comprehensive understanding of the capitalist system.
If accumulating wealth is the basic objective of capitalism, organising production using wage labour is only one of the ways it can be achieved. What finance does is to open an alternative route to reach the same objective, that is via transaction. It may be recalled that merchants were the earliest accumulators and trade was their route, initially in their own neighbourhood, but soon across territories, near and far, over landmass and crossing oceans too. Merchants were the ones to transcend geographical boundaries in search of new goods for sale wherever people needed them. It is through their initiative that new legal institutions were set up, such as joint stock companies, and the principle of limited liability that capitalist production would subsequently adopt. They laid the foundations of accumulating wealth.
What finance has been doing of late is to revive and stimulate that earlier route to the accumulation of wealth. Wealth now is increasingly tradable claims to wealth rather than physical assets like land and precious metal, and transactions in these claims—“proxy wealth”—are rapidly multiplying, pushing production into a distant second place. If technology assisted production in an earlier accumulating thrust, information and communication technology now is a great facilitator of trade and commerce. Even giant corporations that at one stage were symbols of mass production now find it more profitable to buy up their rivals (mergers and acquisitions) rather than take up investment to increase production. If accumulation is the criterion, it is becoming difficult to decide who the “capitalists” are because transactions in claims to wealth—shares, bonds and the like—are turning out to be the daily concerns of large sections of the population in most parts of the globe. One of the economic aspects that industrial capitalism initiated not only continues, but has become more pronounced under financial capitalism: inequality in incomes and wealth between the minority of the population at the top and the vast majority, with the gap widening every year and in practically all parts of the globe.
If capitalism has been undergoing such a transformation that has led to an overlapping and complex meshing of merchant capitalism, industrial capitalism and financial capitalism with finance dominating, it is important to re-examine the role of geography, especially national geography, in shaping it. The book under review, though quite stimulating in its new treatment of the continuing relationship between metropolitan capitalism and tropical capitalism and its consequences for the masses in all countries, does not consider it important enough for an understanding of the economic domination of some nations over others. However, the thesis of the authors will be contested by scholars in the fields of history, geography, economics, politics, culture, and, of course, Marxian studies.
Promoting such a debate may well be the lasting contribution of the book. The debate has started in the book itself. Bilgrami concludes the foreword saying: “Utsa Patnaik and Prabhat Patnaik have performed the long overdue service of returning the subject of imperialism to its economic roots, and they have done so with a marvellously accessible argument that non-economists may also grasp without strain.” Harvey in his commentary says: “Unfortunately, they [Patnaiks] get their concepts of space, place, environment and geography all wrong. It is crucially important for them and for us to get them right.” The authors welcome Harvey’s commentary, but provide further clarification of their position as also empirical evidence, and contending that on certain crucial aspects Harvey “has little idea of the actual historical facts”. Interested readers may look out for more such comments and responses.