Conflict, Demand and Economic Development

Essays in Honour of Amit Bhaduri

Deepankar Basu, Debarshi Das, Deepankar Basu, Debarshi Das

• Publisher: Routledge India
• Year: 2020
• Print ISBN:
  9780367775599
• eBook ISBN:
  9781000246100
• Topic: Economics
• Subtopic: Government & Business
• Index: Economics

This book presents a comprehensive overview of three key areas: heterodox macroeconomics, development economics and classical political economy. It offers an alternative macroeconomic framework to analyse policies with an emphasis on issues of equity and justice.

With contributions by leading economists from across the world, it examines the growth and distribution of income; trade and finance in developing countries; classical political economy and Marxist theory; dualism in the US economy; economic crisis; and agrarian economy in poor countries. It explores themes such as the effect of an exogenous shock to wage share; Harrodian instability and Steindlian solutions; economics and politics of social democracy; the role of power in the macroeconomy; economic development through the promotion of domestic value chains; and reflections on primitive accumulation. Going beyond the neo-classical tradition, the volume opens up a new vista of economics by discussing unexplored questions. It provides a refreshing treatment of time-tested ideas as well as discussions of recent developments and current research.

A major intervention in heterodox macroeconomics and a tribute to macroeconomist Amit Bhaduri, this book will be useful to scholars and researchers of economics, political economy, development studies, sociology, political science, public administration, economic theory, economic history, economic geography and critical studies, as well as professionals, economists and policymakers.

1
Introduction

Deepankar Basu and Debarshi Das

We have both had the good fortune to be students of Amit Bhaduri. As students in the mid-1990s in the Centre for Economic Studies and Planning (CESP), Jawaharlal Nehru University, New Delhi, India, we took courses on macroeconomics and nonlinear dynamical systems with him. As we worked on our own research projects during and after our PhDs, we gradually came to appreciate the enormous contribution Amit has made, through his teaching and research, to the development of contemporary heterodox economics. This festschrift is a celebration of his varied contributions as a heterodox economist and as a critical, progressive voice. In this introductory chapter, we first present a short biographical sketch of Amit and then discuss the contents of the other chapters comprising this volume. We end with a brief discussion of some issues at the frontier of contemporary heterodox economics research.

Amit Bhaduri: a biographical note

Born in 1940, Amit Bhaduri’s formative years were spent in the newly independent country of India. The left movement which was surging through Bengal in the 1940s and 1950s left a lasting impression on him. He nearly got thrown out of his high school in Calcutta for taking part in street protests against a tram fare hike. Unlike middle-class Indians who took up safe careers in medicine or engineering, Amit did not veer towards the natural sciences. The zeitgeist of the era pulled him towards economics. He had the first taste of the subject during his college years at Presidency College (later Presidency University) in Calcutta (later renamed as Kolkata).

He obtained his bachelor’s degree in economics from Calcutta (1960), and then Cambridge (1963). The unstructured teaching at Cambridge first baffled him, but later he learned to enjoy the style. After a brief one-year stint at MIT – the macroeconomic wave lengths did not match – he returned to Cambridge to finish his PhD, rather quickly, in 1967. The dissertation was on the time structure of capital related to capital theory, which, at that time, was a rage on both sides of the pond. Amit’s first published paper came out in 1966 – a full year before he completed his PhD (Bhaduri, 1966).

During this time – that is, the late 1960s and early 1970s – his academic preoccupations centred around capital theory. It was also during this time that he was introduced by Joan Robinson to Michał Kalecki’s seminal contributions. This was to leave a profound impact on his research. In his own words, “I saw immediately the connection between Marx, Keynes and Kalecki.” In 1968 he would publish his second paper, on project evaluation, which was influenced by a paper of Kalecki and Rakowski published four years earlier (Bhaduri, 1968).

But this was to change soon. Another vista of his contributions would open up, urged by the social upheavals of the time. Soon after his PhD viva voce, he returned to India. Short stints at the Agro-economic Research Centre, Delhi (a non-teaching job), Delhi School of Economics (a teaching job), and Sri Lanka (as advisor to the first Left Front government) followed. During his stay in Sri Lanka, Amit was involved in constructing an input–output model, incorporating a multipurpose irrigation dam. The shifting times did not let his curious soul stay at one place. The turbulent condition in India, and practically all over the world, including Vietnam, soon dragged him out of Sri Lanka. He resigned from his post in Sri Lanka and returned to India, without a job but with a burning desire to understand its villages. His dissatisfaction also had to do with the inability of conventional left parties to respond adequately to the profound changes taking place in society.

Like other parts of the country, rural India was also going through a period of turmoil. In 1967, petty peasants and sharecroppers in the northern fringe area of Naxalbari, West Bengal, India, rose in revolt against local landholders. Although radical workers of the Communist Party of India (Marxist), or CPI(M), had been working in the area, the party did not approve of the radicalism. The state government of West Bengal was being run by a coalition in which the CPI(M) was a major ally. The peasants of Naxalbari briefly took over the land they cultivated, from landlords, and chased away police forces. In the infamous retaliatory crackdown, the state police shot dead a number of sharecroppers, including women. The Naxalbari revolt split the party two years later. The movement sparked by the Naxalbari revolt spread through large swathes of the Indian countryside.

“In those days my interest in politics was far greater than in economics”, Amit recollects. Not surprisingly, he landed in West Bengal, from Sri Lanka, in 1971. For months, he roamed the villages of Bengal taking sporadic notes. What he saw and heard would go on to influence much of his later work. These include, in published form, “A Study in Agricultural Backwardness under Semi-Feudalism” (1973), “On the Formation of Usurious Interest Rates in Backward Agriculture” (1977), “Class Relations and the Pattern of Accumulation in an Agrarian Economy” (1981) and Economic Structure of Backward Agriculture (1983a, a book).

This is an impressive body of work. The initial puzzle that animated it was this: neither capitalist nor feudal production relations could be clearly discerned in the villages Amit had travelled through. Moreover, it appeared that the momentum of transition from feudalism to capitalism was missing. To be sure, the putative transition is a long-run phenomenon and can be scarcely discerned within a brief time frame. Nonetheless, bereft of any logic of accumulation, even the long-run transformation seemed untenable. Amit’s task was to understand this absence of accumulation. His groundbreaking paper of 1973 did precisely that. The logic is compelling in its simplicity. Landlords earn interest income on consumption loans advanced to sharecroppers, who have leased in land from the same landlords and pay them rent. Since interest income is important, the landlord would not have any incentive to invest in land. Thus, agrarian accumulation gets botched.

The idea that credit and land markets in the rural economy could be linked and that this yields unusual outcomes was not novel. The literature on ‘interlocking’ in the Indian economic lore dealt with it. Krishna Bharadwaj, among others, contributed to the chiselling of this idea. However, Amit’s contribution in this respect was salient mainly for two reasons. First, the paper formalised the argument of interlocking in a precise and clear way. It was told with an admirable degree of economy and clarity. This simplicity of exposition has been Amit’s forte. Second, it touched the political nerve of the time. That nerve was the stagnancy of productive forces and the fettering of productive forces by production relations. It was suggested that the tension of this dialectic led to political upheavals in the countryside. The established left parties were not responding adequately to this fluid situation. The significance of the 1973 paper, and the related work that followed, was felt both in terms of formal economics and contemporary politics.

The paper left a deep impact on both mainstream development economics as well as the political economy literature in India. Many papers on sharecropping followed in response to Amit’s 1973 paper. Criticisms came its way too, including, for example, the claim that the equilibrium outcome was not dynamically stable – although Amit himself had delineated the conditions under which the stagnancy envisaged in the paper could disappear. The debate on the ‘Mode of Production’ in Indian agriculture, which predated the 1973 paper, was also enriched by its insights. The ‘semi-feudalism thesis’, which Amit proposed, had many backers. However, as Alice Thorner concluded, it was eventually the ‘gradual development of capitalism’ thesis which prevailed when the debate wound up in the late 1970s.

In “On the Formation of Usurious Interest Rates in Backward Agriculture” (1977), Amit made another notable contribution to the understanding of rural economy: what determines the rate of interest charged by moneylenders in the rural credit markets? Amit also worked in the field of economic history in “The Evolution of Land Relations in Eastern India under British Rule” (1976). The paper was an attempt to understand the zamindari system of land tenancy, which was instituted in eastern India during British rule. It seemed to lack all momentum, and was contrary to what the British Raj had planned when they crafted the tenurial system of zamindari.

The early 1970s brought two other major changes in his life. He married an old friend, who was in the Indian Foreign Service. To be with her, Amit sojourned to Vienna, where he worked briefly for the United Nations Industrial Development Organization (UNIDO). But in 1972 he left his job at UNIDO, returned to India and joined as a fellow in the newly started – by his former colleague from Delhi School of Economics, Professor K. N. Raj – Centre for Development Studies in Kerala. Soon he shifted to the Centre for Economic Studies and Planning (CESP) in the recently founded Jawaharlal Nehru University (JNU) at New Delhi. The Centre started teaching a master’s course in economics as he joined with a handful of colleagues – he was a founding faculty member. As Amit describes, “my unambiguous acceptance of an academic career began then”. This appointment, with an intermission, lasted till he retired in 2001. He was conferred the position of emeritus professor in the same department. In January 2020, he resigned from the position of emeritus professor in protest against the throttling of dissent by the JNU administration.

After getting recruited to teach macroeconomics at JNU, he had to acquaint himself with different strands of the literature. This engagement resulted in a rich body of work, including “On the Analogy between Quantity- and Price-Traverse” (1975), “Accumulation and Exploitation: An Analysis in the Tradition of Marx, Sraffa and Kalecki” (1980) co-authored with Joan Robinson, “Multimarket Classification of Unemployment: A Sceptical Note” (1983b) and “The Rise of Monetarism as a Social Doctrine” (1985) with Joseph Steindl. A number of agriculture-related interventions also saw the light of day. These include the book Economic Structure of Backward Agriculture (1983a) as well the articles “Cropsharing as a Labour Process, Size of Farm and Supervision Cost” (1983c), and “Persistence and Polarisation: A Study in the Dynamics of Agrarian Contradiction” (1986) co-authored with Hussain Zillur Rahman and Ann-Lisbet Arn.

In 1982, Amit resigned from JNU and travelled to Mexico with his wife who was posted there. He taught at El Collegio de Mexico and later at Stanford University. During this time his already-growing interest in macroeconomics found a notable outlet. In 1986 he published a textbook on macroeconomics, entitled Macroeconomics: the Dynamics of Commodity Production (1986). The book was a marked departure from the usual treatment of the subject one finds in college- or university-level textbooks. The connections and differences between monetarist, Keynesian and Kaleckian macroeconomics are explained with the simplicity in which Amit excels. Karl Marx’s contributions, in particular how his ideas of money and profit affected latter-day thinking, were noted. Rather than a drab, mechanical rendering of the subject, the book was a celebration of various schools of thought. One would be hard-pressed to find the word ‘capitalism’ in a standard book of macroeconomics. And here is Amit, in the very Introduction: “Most of the material covered here grew out of my attempts to teach a useful course on the macroeconomics of capitalism in various universities in India, Europe and Mexico.” The book was translated into Spanish and several other European languages. It became a bestseller in Latin America. It was well received in Europe as well. But not so much in the USA and UK, where neoliberal ideas were ruling academia by then.

After less than a year’s stint at Stanford, Amit returned to Central Europe, via Mexico, in 1986. He taught for three years in Europe (1986–1989), first at the University of Linz in Austria, and then at the University of Vienna. Two more papers on macroeconomics came out during this period. The first was on chaotic macroeconomic dynamics, “The Complex Dynamics of the Simple Ricardian System” (1987) with Donald J. Harris. The other was on the prospects of getting trapped by external debt, “Dependent and Self-reliant Growth with Foreign Borrowing” (1987). During this period a few of his co-authored works were published in Spanish-language academic journals as well.

Amit’s collaborative work with Stephen Marglin at WIDER (World Institute of Development Economic Research, Helsinki) on characterizing the postwar ‘golden age of capitalism’ was first conceived during this period. It finally led to the paper “Unemployment and the Real Wage: the Economic Basis for Contesting Political Ideologies” (1990), and this must be mentioned at some length. This is one of the most influential papers in the field of heterodox macroeconomics published in the last several decades. How does the tilt of wage-profit distribution affect output and employment in a capitalist economy? The paper sought to answer this question in a static Keynesian framework. There is no clear answer, it turned out. It all depends on parametric values, but this ambiguity is not necessarily a bad thing. The paper provided an overarching framework in which underconsumptionist ideas (wage-led output growth) and nonunderconsumptionist ideas (profit-led output growth) could be accommodated as sub-cases. The analysis highlighted links between contesting political ideologies and macroeconomic theory within the Keynesian framework.

A plethora of academic research in the neo-Kaleckian and Keynesian tradition, both theoretical and empirical, has been spawned in the wake of Bhaduri and Marglin (1990). Later, in 2008, Amit would follow it up in “On the Dynamics of Profit-led and Wage-led Growth” (2008), and “Wage- and Profit-led Regimes under Modern Finance: An Exploration” (2017) with Srinivas Raghavendra.

In the late 1980s Amit was mostly in Europe, teaching and touring Eastern Europe to deliver invited lectures. He returned to Calcutta, with the idea of starting a cooperative among rural, small handloom workers, with his own savings. To make ends meet, he took up the job of Professor of Economics at the Indian Institute of Management, Calcutta. The cooperative experiment was not doing particularly badly, but he lost interest in running a cooperative full time. He went back to Germany where his wife was posted, and where the Berlin Wall was about to fall. During this period, he taught at the University of Bremen, the Norwegian University of Science and Technology, University of Bologna and was also a fellow for a year at the Institute of Advanced Studies in Berlin. The mid-1990s brought him back to JNU, New Delhi, once more at the invitation of the then vice-chancellor. He continued as Professor of Economics at CESP, JNU, till he took premature retirement in 2001.

The 1990s was also the time when quite a few of his books were published. Unconventional Economics Essays (1993) and On the Border of Economic Theory and History (2...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Contents
• List of figures
• List of tables
• List of contributors
• Foreword
• 1 Introduction
• Part I Post-Keynesian macroeconomics: growth and distribution
• Part II Classical political economy: conflict and exploitation
• Part III Duality and underdevelopment
• Index