The Political Economy of Underdevelopment

S. B. D. de Silva

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136856365
• Edition: 1
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

First published in 1982, this reissue deals with the theory of underdevelopment, as Dr. de Silva attempts a synthesis between the internal and external aspects of underdevelopment and, in the Marxist tradition, focuses on the impact of the external on the internal as the dominant reality.

Viewing underdevelopment as a problem in the non-transformation to capitalism, this analysis is in terms of the character of the dominant capital and of the dominant classes. Underdevelopment thus encompasses the 'traditional' peasant economy and also the export sector where the 'modernizing' influence of colonialism was felt. The book finally considers how the contemporary internationalization of capital affected the economies of the Third World.

1 Economic Underdevelopment: A Politico-Historical Perspective

The underdeveloped countries before coming into contact with Western society were not technologically static. Their progress is apparent from the interest which was shown in Asia by the early Europeans who came as merchants, not as explorers or settlers. The Chinese had begun using gunpowder in the tenth century, a knowledge of which spread to Korea, Japan and Java. They had also invented the printing process. Artillery as good as that in the West was made in Asia long before the arrival of the Portuguese. In the Mogul empire, engineering works were found by Francis Bernier to be of astonishing size by the standards of the time, (1) as were the stone and metal structures of the Mauryan period to which Professor Basham has referred. The Iron Pillar of Mecharauli, near Delhi, ‘could not have been produced by the best European iron founders until one hundred years ago’. (2) In Sri Lanka, (3)

remarkable levels of development in the arts, religion, technology and civil organisation [were] first achieved more than a thousand years ago…. This ancient culture was built on rice production which flourished in the unfriendly environment of the Dry Zone by means of complex, ingenious and extensive irrigation works.

In the manufacture of consumer articles, especially cotton and silk textiles, some of the non-European countries until comparatively recently held a technological lead. The nearness of Italy to the Orient enabled ‘skills for the development of the silk industry [to] spread to Italy long before they came to other parts of Europe’. (4) The textile industry in England, which led the industrial revolution, was adversely affected by imports from Asia. To safeguard the English woollen and silk industries, an Act of Parliament in 1700 prohibited the import of ‘dyed, printed or stained’ cloths and silks. Similar measures were taken by France and Spain. From the sixteenth to the eighteenth centuries the chief obstacle to Europe’s trade with the East was the lack of European goods which could have been offered in exchange; and throughout the seventeenth century Britain’s trade balance with India was generally unfavourable. Attempts were made to export paintings and objets d’art. The Amsterdam Company tried to sell engravings of Madonnas to the Chinese and then, equally unsuccessfully, prints with an erotic appeal and ‘less decent pictures’. (5)

But from the eleventh to the fifteenth centuries the European countries forged ahead in the manufacture of firearms and in the art of metallurgy. The inter-European wars of this period led to further progress. In Holland an industry sprang up for the manufacture of cannon, and in the early seventeenth century Sweden vastly upgraded its armaments industry. Thus by the fifteenth century, the European countries had enhanced their overall technological lead, and this was evident both in the manufacture of cannon and in the technology of naval warfare, navigation and shipping. In the first half of the sixteenth century the Portuguese demonstrated the pre-eminence of Europe when they asserted their supremacy in the Indian Ocean and later annihilated the Turkish fleet at Lepanto in 1571. While generally the state of technology and economic organization in the Western societies even at this time was superior to that in the non-Western countries, as is seen from the success of the Western world in subjugating them, the productivity gap had not assumed an explosive potential.

The technological disparity between what later became the developed and the underdeveloped countries is very hard to explain, as are also the broad economic changes associated with technological advance. Europe’s superiority at this stage represented an unbalanced technological maturation in certain specific areas, essentially in weapons, which later had its impact on other areas of the economy. The interrelations between war and industry are too complex to admit of easy generalization. J.U.Nef regarded warfare not as an independent or primary factor in economic growth but as the product of a great number of other factors, ‘making it easy for some states and difficult for others to wage war or to abstain from waging it’. (6) In England during the sixteenth and early seventeenth centuries, there were several industries whose development had no relation to military needs – e.g. salt and alum, coal mining, printing, glass and paper making, soap boiling, brewing and sugar refining. While one should be hesitant to regard warfare as a unique source of technological and social change, there were specific situations in which advances in military technology had an economic and social impact. For instance, the introduction of the stirrup in the eighth century – a simple technical innovation – touched off a change both in the conduct of war and in the organization of society. (7) The technological disparity between the European and the non-European societies prior to the Industrial Revolution had, however, a great deal to do with the socio-political structures in the European and the non-European societies. The technological advances in European societies were predicated on the disruption of feudal institutions and the emergence of a class structure that was favourable to capital accumulation and investment. (8)

By 1900 European affairs were coming more and more under the control of new social groups that had a flair for organisation rather than splendour, for efficiency rather than gallantry. And such groups could count on an increasingly numerous class of craftsmen with a taste for mechanics and metallurgy.

The changes in the socio-political structure provided an appropriate framework for technical progress and were themselves influenced by the latter. Changes of an analogous nature did not occur in the non-European societies for reasons which need examination.

Nevertheless, a society that may have lagged behind during a period contains within itself the possibility of a surge forward later; belatedness and unevenness of development are an inevitable element in the progress of different societies. Adequate historical evidence exists of such belated development – e.g. Russia during the time of Peter the Great, and post-Meiji Japan. This is to say, there are times when the pace of history is quickened. It was this telescoping of development which was the basis of the law of combined development which Trotsky sought to incorporate in his theory of history. But the impact of colonialism was that it completely forestalled such a possibility, and instead conserved and ossified in the metropolitan interests social institutions, structures and classes which were hostile to progressive change.

The overseas economic expansion of Europe forced the underdeveloped countries out of their comparative isolation, linking them to the world economy of the nineteenth century. A system of production was developed in mines and on plantations, which in some respects differed from traditional forms of activity. It involved the use of wage labour and production for distant markets. The financial and management practices of the new enterprises were highly rationalized and subjected to more searching accounting devices. A large export-import sector required the development of railways, docks and warehouses. Along with this infrastructure were introduced the organization, habits and practices of a modern commercial society, including new legal concepts to regulate the property relations appertaining to such a society.

The ‘opening up’ of these countries led to a relatively spectacular increase in output and income. ‘For at least two or three decades, but frequently for longer periods … the rate of expansion in their export production was far in excess of any possible natural population growth.’ (9) The proportion of capital investment to national income, which is usually accorded a central place in the formal mechanism of growth, would have been high over several years. In the conditions of their time, the scale of investments bore the character of a ‘big push’. In Assam an estimated Rs 10 million was invested annually for the last two decades of the nineteenth century, or about 15-20 per cent of the national income in this period. (10) The rate of return on these investments was also high, though not wholly reflected in the profits of the plantation and mining companies. A portion of the wealth generated was dispersed among numerous commercial enterprises and intermediaries. In the chapter on plantation agency houses I shall point to these ramifications.

A correlative to the terms of admission of the underdeveloped countries into the world economy was the division of activities between them and the advanced countries. Referring to India, Vera Anstey wrote: the economic changes under British rule ‘brought about a peculiar interdependence between India and the West whereby India tended to produce and export in the main raw materials and foodstuffs, and to import iron and steel goods, machinery and miscellaneous manufactures of the most varied description’. (11) The underdeveloped countries were a hinterland to the industrialized nations of the West – in J.S. Mill’s oft-quoted dictum, places ‘where England finds it convenient to carry on the production of sugar, coffee and a few other tropical commodities’. (12) They were drawn into the world economy as appendages of the metropolitan countries rather than as partners. An improvement occurred in aggregate output and income in these countries alongside a relative deterioration on a world scale. Also, the overwhelming mass of the people, even those employed in plantations and mines (the ‘advanced’ sector of the economy), were at a bare subsistence level.

In distinguishing between ‘underdeveloped’ natural resources and ‘backward’ people, Myint considered the latter as essentially a problem of distribution of economic activity and incomes. While acknowledging the existence of resource underdevelopment, he considered economic backwardness as the central problem. ‘The natural resources have … been as fully and rapidly developed as market conditions permitted while the inhabitants have been left out, being either unable or unwilling or both to participate fully in the process.’ He thus advocated ‘a clean break with the “underdevelopment” approach [and a need] to recognise the problem of “backwardness” as a major problem in its own right which may occur even when there is no important underdevelopment of resources’. (13) This hypothesis has considerable merit in the case of the settler colonies which I will discuss in later chapters. These colonies tended to develop along the lines of the metropolitan societies, from whose control the settler investors became increasingly detached. The settler investors developed as a bourgeoisie in its own right; free from the control of merchant capital, it tended to replicate the investment patterns of the metropolis, developing secondary production for domestic and regional markets. All the same, while the resources of these territories became relatively developed, a monopoly of political power by the settlers led to a total repression of the indigenous people. Their condition of poverty was thus essentially the result of the ‘disequalizing forces’ to which Myint referred. On the other hand, in the nonsettler colonies, where the European nationals lived as expatriates, investing only in trade and primary production for export markets, productivity and per capita incomes were low even in the predominantly European sector of the economy. Investment and production activities were metropolitan oriented. Merchant capital dominated, mediating between the production structures of the metropolis and the colony. The development of the forces of production was feeble.

Such a pattern of development had its origin in the opening up process of these countries. This process, unlike the classical vision of countries with different factor endowments trading with one another under conditions of competition, was brought about by the metropolitan powers through physical force and monopolistic privileges. The case of China was referred to by Harold Isaacs: (14)

Treaties were exacted by foreigners at the cannon’s mouth … coastal and river ports [were] opened to trade, … the Chinese tariff [was limited] to a nominal 5 per cent … territorial footholds and concessions [were granted] whence later came the different ‘spheres of influence’, and … the system of extra territoriality which exempted foreigners from the jurisdiction of Chinese taxes.

In other underdeveloped countries, India, Sri Lanka, Malaysia, for example, where subjugation preceded foreign enterprise (trade followed the flag), the basis of absorption into the world economy and its results were no different. In virtually every colonial territory a certain number had to be killed before the survivors would accept the new prospects. This might even be said to introduce a new concept into the study of political economy – the indispensable minimum of murder. (15) The opening up process also led, especially in the nonsettler colonies, to the compartmentalization of investment and trade flows according to the respective metropolitan nodes to which the various countries of Asia, Africa and Latin America were attached. The division of labour, based on an agriculture-industry dichotomy, while being optimal from the . standpoint of each metropolitan country was sub-optimal from that of its constituent but subordinate units.

The role of the colonial state in the opening up process was unique both in its scope and its character. In the developed countries, the supremacy of new classes, and the replacement of old forms of production by the new were achieved basically within a framework of market competition whereby the survival of the productive system became contingent on its renewed vitality, at a higher plane of technique and productivity. The superiority of capitalism over the precapitalist forms of production enabled it to secure the latter’s productive resources. In this way the factory triumphed over the small artisan just as a system of capitalized agriculture superseded peasant farming. There was at the time a disintegration of the feudal mode of production, brought about by a stagnation in productivity and later by the desertion of the manors as the lords’ exactions on the peasantry increased. Feudalism as a system of production was thus ceasing to be viable and had entered a stage of internal crisis when the forces of capitalism were beginning to overwhelm it. The decline of the precapitalist forms of production furnished a growing labour supply to the capitalist sectors. Furthermore, though the capitalist state resorted to extra-economic pressures to exclude competitors and secure markets and raw material sources, and never wholly renounced its support of private business, by the mid-nineteenth century such intervention had become greatly reduced in scope. Technological processes from this time onwards conferred on the already developed countries a self-reinforcing advantage. The strength of external economies, the lumpiness of capital investment and relations of direct (non- market) interdependence ruled out, in the case of the late developers, a gradual progression from simple techniques and small workshops to complex technology. The economic hegemony of the metropolitan powers and the structuring of world markets in their favour imbued existing production and trading patterns with an automaticity which was devoid of any conscious element.

Though, as Marx pointed out, in the metropolitan countries themselves the use of state power underlay ‘the transformation of the feudal mode of production into the capitalist mode’, shortening the transition of one mode to the other, to see such intervention in its perspective it must be contrasted with that in the colonial economies. State intervention in the colonies was immeasurably greater in scale and more blatant in character, and it was predominantly on behalf of the metropolitan investors. An informal relationship often existed between investors and the Colonial Office in London; the votaries of free enterprise, sometimes directly and at other times through their organizations, made use of the machinery of government to influence economic trends in the colonies. In taxation and trade a double standard prevailed at home and in the colonies. The revenue measures in Sri Lanka, said Sir John Elphinstone in 1865, were maintained, ‘in the face of an Imperial policy of an entirely opposite character’. ‘A large proportion of the Revenue of Ceylon is drawn from sources condemned and disused by the Home Government.’ (16) In chapter 13 I shall discuss the framework and mechanisms of metropolitan intervention and control.

In colonial situations where the government was the direct agency for the diversion of resources – labour and land – from traditional activities, this function was due partly to the character of the new forms of production – which did not grow out of or replace the old, inheriting by virtue of a technological superiority the productive forces of the latter. In a detailed discussion of this in chapters 11 and 12, I shall show the backward nature of the plantations in terms of their technology as well as their social relations of production; and in chapter 10 it will be explained that the plantations had no inherent superiority over smallholdings. Governmental intervention was also aimed at checking the growth of forms of production that would compete with the parent economy.

State intervention in colonial societies was basically due to the ...