Economics and the Concept of Progress
Prabhat Patnaik
THE mercantilists had defined a nation’s prosperity in terms of the amount of precious metals it possessed and a nation’s progress in terms of the increase in its amount of precious metals. For increasing its amount of precious metals, a nation had to have a favourable balance of trade in goods and services (its exports, that is, had to exceed its imports) which would then need to be settled through imports of precious metals, especially gold, so that the amount of gold in its possession increased.
The mercantilists had been the targets of Adam Smith when he wrote his opus The Wealth of Nations. Smith’s position was that it was not its stock of precious metals that defined a nation’s wealth, as merchant monopoly companies like the East India Company claimed, but the amount of capital stock in its possession. Progress therefore consisted in accumulating larger and larger stocks of capital, for which the most favourable condition was created through the removal of all restrictions imposed by the State on the freedom of functioning of markets and of capital, that is, by ensuring that conditions of laissez faire prevailed in the economy. The stranglehold of monopoly companies like the East India Company on the State had to be removed to make this possible.
What was striking about Smith’s position was that, notwithstanding its revolutionary break with the earlier conception, it still focused on the nation rather than the people; it is the wealth of the nation, seen as an entity standing above the people, that counted as the desideratum. The conception of what should be counted as wealth had changed, from gold and silver to capital stock, but not the entity whose wealth was being talked about.
This idea of a nation that is distinct from the people and stands above them was a feature of bourgeois nationalism that developed in Europe in the wake of the Westphalian peace treaties. While it reached its apogee under European fascism in the 1930s, the idea itself was a common theme running through the entire course of bourgeois thought.
Of course while the nation supposedly stood above the people, “national interest” was necessarily identified with the interests of particular bourgeois segments. The shift from mercantilism to Adam Smith accordingly entailed a shift from apotheosizing the interests of monopoly merchant companies like the East India Company, as being synonymous with “national interest”, to treating the interests of the emerging manufacturing bourgeoisie as the embodiment of “national interest”; promoting the interests of this latter segment of the bourgeoisie now became synonymous with advancing the interests of the nation. But this shift was effected while sticking all the time to a conception of the nation whose interests had to be promoted and which was an entity distinct from and standing above the people.
David Ricardo had exactly the same notion of progress as Adam Smith, namely the accumulation of capital stock within the nation. His fear that there would be a move towards a stationary state where capital accumulation would cease to occur arose precisely from the notion that capital stock constituted the nation’s wealth; cessation of capital accumulation would mean the end of progress. John Stuart Mill was no doubt an exception in this respect, since he professed not to be worried by a stationary state if the workers were better off under it than they had been when the economy was experiencing capital accumulation; that is, unlike his predecessors such as Smith and Ricardo, he placed workers’ well-being above capital accumulation, but this deviation of his from the position of classical political economy could be explained by the fact that he had been moving towards a certain socialist position under the influence of his wife Harriet.
Classical economists like Smith and Ricardo however should not be criticised too strongly for focusing on the magnitude of capital stock (and the amount of output that it produced) as the desideratum, rather than on the well-being of its working population; they had much sympathy for the workers but they believed that workers tended to procreate rapidly if there was an improvement in their material condition of life (an idea that found expression in the Malthusian theory of population). If real wages rose above a subsistence level then population would increase, and so would labour supply, which would then bring real wages back to the subsistence level. It followed that any improvement in their condition of life depended only upon themselves. It is they who had to change their habits and restrain the growth in their numbers even when they faced an improvement in their living condition; only then could they retain whatever improvement occurred in their lives. Since policy could not do anything about this, the focus of policy had to be on an increase in the total capital stock, and hence on an increase in output; this increased the total amount that was available for all, from which the workers could get a larger share if they changed their habits.
The same latitude that one can give to Smith and Ricardo however cannot be given to the so-called “mainstream” bourgeois economics of later vintage. The belief in the Malthusian theory of population had ended long ago; indeed, Marx’s description of this theory as a “libel on the human race” would find general acceptance today, unlike in the late eighteenth and early nineteenth centuries. Even so however “mainstream” bourgeois theory still takes the level of the Gross Domestic Product as the index of prosperity of a “nation” and its rate of growth as the index of its progress. Since “progress” in this sense can be achieved only by the actions of the capitalists, the “nation’s” interest, it would follow, is best served by humoring the capitalists, by providing them with incentives, by promoting their interests, and by treating them as privileged beings. While Smith and Ricardo might have taken this position because they thought (erroneously) that nothing else could be done anyway until the workers changed their habits, for latter-day economists to take the same position represents a pure ideological bias.
The latest example of this bias is the announcement by the CEO of Niti Aayog that India is now the fourth largest economy in the world, having just overtaken Japan in terms of the size of its GDP that has now crossed $4 trillion. The Niti Aayog CEO did not just happen to mention this in passing; he made it a point to mention this as a great achievement, and, not surprisingly, this development has been lauded by members of the Indian big business segment. It is significant however that the fact of India’s having a population that is more than ten times that of Japan was not mentioned by the CEO. His crowing was exactly on a par with Modi’s remark some time ago that India would soon have a GDP of $5 trillion.
But quite apart from the question of the size of the country, which makes all such claims based on comparing the absolute magnitude of our GDP with those of advanced capitalist countries, meaningless, focusing on GDP itself represents a totally false perspective. Not only is it a throwback to an old perspective that had believed in Malthusianism, but is completely out of sync with a democratic society. In a democracy it is the people’s living condition that matters, and progress must be measured entirely in terms of the extent to which these conditions are improving.
This perspective is also at variance with the perspective of our anti-colonial struggle. The concept of a “nation” whose exceeding Japan in its GDP is supposed to be a matter for celebration, is of a “nation” that stands above the people, whose “glorious” achievement is totally unrelated to people’s condition of life; this is completely anathema to the spirit of the anti-colonial struggle that had seen the liberation of the “nation” from imperialist rule as being synonymous with the liberation of the people.
Not only does the condition of the people, however, continue to be almost as miserable after more than three quarters of a century of independence, with India occupying in 2024 the 105th rank in the Global Hunger Index among the 127 countries for whom that index is prepared, but we actually have a government that, instead of being ashamed of this fact, is crowing over the size of our GDP.
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