People's Democracy

Decolonisation And Self-Reliance

Prabhat Patnaik

SELF-RELIANCE means economic independence vis a vis imperialism. It does not mean autarky or the absence of trade : China today for instance has a phenomenally high trade-GDP ratio, but it would be difficult to claim that China is not a self-reliant economy. But it does mean having a production structure that makes possible economic independence vis a vis imperialism. And to remain self-reliant over time, this production structure must change in a manner that makes possible the continuation of this economic independence. In the dirigiste, i.e. pre-liberalisation, period, there were three major instances or episodes of change in the production structure, in the quest for self-reliance which marked the attitude of the bourgeois-landlord State in that period.

The first was the thrust towards industrialization, especially the development of basic and capital goods industries during the Second Five Year Plan. India, emerging from long colonial rule, inherited at the time of independence a production structure typical of a colonial economy. It was a largely agrarian economy where industry basically meant textiles, i.e. the processing of agricultural primary commodities like raw jute and raw cotton. There was some production of steel; sugar and cement had come up during the period of “discriminating protection” of the inter-war years; and the war years had seen some expansion of engineering and chemical industries because of the cutting off of imported supplies. But the industrial structure was rudimentary; India was an importer of a whole range of manufactured goods, especially capital goods and technologically-intensive goods. And even the capacity to import these on any larger scale, as would have become necessary with an acceleration of development, was limited by the fact that the main export items, tea, cotton and jute textiles, faced stagnant export prospects.

SOPHISTICATION OF PRODUCTION

A transformation of this production structure towards greater “deepening” could not occur through the spontaneous operation of the market. It became the primary objective of planning, especially of the Second Five Year Plan drawn up under the leadership of Professor P C Mahalanobis. The idea of a planned transformation of the production structure towards basic and capital goods industries and the associated emphasis on the development of a skill base for the economy drew much criticism from imperialist agencies, including the World Bank, and from a host of economists. They even accused Mahalanobis of sheer ignorance which apparently made him overlook the existence of trade possibilities that made such domestic production unnecessary. But the plan strategy was based on a sophisticated and sound argument: an economy’s capacity to participate vigorously in international trade was itself dependent upon the sophistication of its production structure. Making the production structure more sophisticated therefore was not a retreat into autarky but an aid to trade, a means of eventually enlarging trade opportunities.

But while this argument was sound in itself, it was based on a specific assumption, namely that institutional reforms in agriculture will enable the country to enlarge agricultural, especially foodgrain, production, even without much investment being undertaken by the State in this sphere, so that the available investible resources could be devoted with impunity towards building up the industrial base. Land reforms were the main element of these “institutional reforms”. But while land reform legislations were passed they did not succeed in breaking land concentration. What they did was to goad landlords into becoming capitalist landlords, and to permit a stratum of richer tenants to acquire ownership rights over land. Land to the tiller remained a distant dream. As a result, after the available scope for increasing net sown area was exhausted, and the possibilities of multiple cropping, within this pattern of skewed land distribution, in areas to which irrigation could be easily expanded, were used up, the country faced a severe food crisis in the mid-sixties which once again necessitated heavy dependence on imperialism.

‘GREEN REVOLUTION’ & OIL PRODUCTION

The second episode of a change in production structure for self-reliance came as a result of this, in the form of the so-called “Green Revolution”. It consolidated the trend towards the development of capitalism in Indian agriculture; it transformed the Indian countryside in ways which till then had not seemed possible. But it made India “self-sufficient” in foodgrains, in the strictly limited sense that given the existing level of poverty of the masses and the limited purchasing power in their hands, the increasing demand for food that the economy faced was met through the economy’s own internal production.

The oil shocks of the seventies increased India’s import bill, even as the shift of the income distribution at the world level from the advanced capitalist countries to the oil producers of the middle east, which had a larger propensity to import Indian goods and services than the advanced countries, gave a boost to India’s foreign exchange earnings. Even so, the government went for an Extended Financing Facility Loan from the IMF after the second oil-shock, which could have been avoided with greater political will, but which once again threatened to compromise the country’s economic independence vis a vis imperialism. The third episode of change in production structure that occurred in the context of this threat was the development of Bombay High which increased India’s own oil production and provided much-needed respite to the economy.

Each of these episodes of change in the production structure was made possible through the active intervention of the State and of the public sector. The Mahalanobis strategy was carried out through the development of public sector units in the basic and capital goods industries, where the private sector was reluctant to enter because of the long gestation periods, lumpy investments and high risks. It was not just a matter of importing the technology available in the world market to set up public sector units for undertaking production in order to meet the goal of self-reliance. The public sector became the primary instrument for developing the technological ability of the economy. Whether it is fertilisers or heavy electricals or off-shore oil exploration and extraction, the country came to possess the know-how to become technologically self-reliant. And even in the case of the “Green revolution” it was the engagement of the public sector that was crucial: the finance from the nationalised banks, the government extension services, the research conducted in government institutions, and the procurement and support operations at assured prices by government agencies.

VACILLATION ON PUBLIC SECTOR

The advanced capitalist countries tried hard to place hurdles in the path of India’s progress in the realm of technological self-reliance and were even successful in several sectors. In fertilisers, while the country had acquired the ability to produce, and set up indigenously, plants with capacity up to 850 tonnes per day, the World Bank which provided aid for the Thal-Vaishet and Hazira plants insisted upon plant capacities of 1300 tonnes per day. The objective was clearly to induct foreign producers and thwart the domestic public sector unit, since the argument of economies of scale on the basis of which this move was sought to be justified, was completely unfounded. In electricity generation, bilateral “aid” from the advanced countries, tied to the import of foreign plants, and justified in the name of a spurious “rupee constraint” argument (which belongs to the genre of arguments that the British economist Joan Robinson had categorised as the “humbug of finance”), was used to thwart the public sector’s own BHEL. In other words the bourgeois-landlord State that had taken the initiative in setting up the public sector as a bulwark against imperialism and as a means of achieving self-reliance, itself began to vacillate at a certain stage in the face of the imperialist onslaught against the public sector and in the context of the cul de sac into which bourgeois development in the country increasingly began to run. The infamous BHEL-Siemens deal was an early example of how the bourgeois-landlord State was itself jettisoning the interests of the public sector under pressure or blandishments from imperialism.

These vacillations were the prelude to a complete change of strategy, namely the adoption of neo-liberalism, and an abandonment of the objective of self-reliance itself, which neo-liberalism entails. Neo-liberalism must be distinguished from neo-mercantilism. The latter entails that the bourgeoisie, even while encroaching on foreign markets, does not surrender the domestic market, i.e. its own domestic space, to the capitals of other nations. It protects that space through tariff or non-tariff barriers, or through a deliberately undervalued exchange rate, and uses the profits it derives from this home base to launch its struggle for markets abroad. What is sometimes referred to as “export led growth” amounts in reality to a neo-mercantilist strategy of the sort that East Asia had followed successfully for a long time. But a precondition for neo-mercantilism is control over financial flows into and out of the country, for in the absence of such control domestic economic policy gets determined in accordance with the caprices of globalised finance, and the autonomy of the State to pursue any strategy of its choice, let alone a strategy of neo-mercantilism (which requires active State intervention) disappears. Neo-liberalism is the policy pursued in an economy where the State acts in accordance with the interests of globalised finance and multinational capital, with which the upper sections of the domestic bourgeoisie make common cause.

BECOMING “GLOBALISED”

India’s pursuit of neo-liberalism, which entails trade liberalisation to the detriment of domestic producers, especially small producers, which entails the “privatisation” of public enterprises, which entails a curtailment of government welfare and investment expenditure, and which entails the opening up of domestic space to MNCs and international financial interests, is therefore a reflection of the fact that the Indian monopoly bourgeoisie sees its own interests no longer as contrary to the interests of metropolitan capital, but as being congruent to the latter. It has itself now become “globalised”.

The abandonment of the goal of self-reliance of the nation does not mean the re-emergence of certain old empirical manifestations, e.g. it does not mean that the trade deficit is widening, or that the balance of payments have become unsustainable, or that Indian capital is being squeezed out by metropolitan capital; it rather means that the concept of the nation itself has ceased to be meaningful.

An integrated national economy where the different sectors are dependent upon one another and the State attempts in a planned manner to ensure some co-ordinated development of the economy as a whole, albeit within the ambit of a national capitalist order, is replaced by a fractured national economy where certain segments of large capital are having a field day, acquiring assets abroad, and enlarging global operations, while other sections of producers such as the peasants and the petty producers are facing an acute crisis of survival. The fact that the government’s recipe for “developing” agriculture consists of inducting corporate business, including MNCs, into it, only shows the extent to which the goal of self-reliance of the national economy has been abandoned.