Some International Foundations of Capitalist Growth and Underdevelopment

Author(s): Amiya Kumar Bagchi

Source: Economic and Political Weekly, Vol. 7, No. 31/33, Special Number (Aug., 1972), pp.
1559-1561+1563+1565-1567+1569-1570
Published by: Economic and Political Weekly
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 Some International Foundations of Capitalist
Growth and Underdevelopment
Amiya Kumar Bagchi

We have long known that capitalism is a world-wide system; we have also known that capitalisnm
released new sources of productivity growth in human society, or that it enabled man to have greater
control over nature.
But at the same time we are living in a world in which the capitalist nations are divided into the
developed few and the underdeveloped many.
Is this simply the reflection of the uneven spread of capitalist growth, so that with time the bene-
fits will spread to all underdeveloped countries?
Or can it be that the process of capitalist growth in the metropolitan countries, apart from itnpos-
ing deadweight losses on the colonial peoples, was essentially a zero-sum game, so that some counztries
had to stay underdeveloped if metropolitan countries had to grow along the capitalist path?

THIS paper started as a book review. countries from that phrase, but he nomic distance" between underdevelop-
But in examining S Kuznets' massive Confines his analysis to countries with ed countries and economically advanc-
evidence on economic development capitalist and semi-capitalist institu- ed countries, must have been about as
in the capitalist world I became tions. Together with some of his other great in 1800 as, say, in 1900.
engrossed with the problem of the recent books and collection of arti-
We have to be on guard against the
degree of endogenousness of capitalist cles,2 this volume concludes the
use of what might be called "implicit
growth. We have long known that most impressive quantitative work done quantification" to cover our ignorance
capitalism is a world-wide system; we on the mechanics of economic develop- about the economic past of the under-
have also known that capitalism releas- ment by any economist of this century. developed countries, even in the case
ed niew sources of productivity growth I shall use some of Kuznets' data and of such a careful quantifier as Kuznets,
in human society, or that it enabled the results of some recent work on for it seriously affects our view of the
man to have greater control over international migration of labour and
causal mechanism behind underdevelop-
nature. But at the same time we are capital to examine how far the ex-
ment. As an example of such implicit
living in a world in which the capita- perience of advanced capitalist coun-
quantification the following passage
list nations are divided into the deve- tries can be recaptured in the under- might be cited ... the shift from
loped few- and the underdeveloped developed coulntries of today and exchange rate to purchasing power
many. Is this simply the reflection of whether the thesis about capitalist conversion (based on the prices of the
the uneven spread of capitalist growth, growth causing underdevelopment in
United States) which as suggested in
so that with time the benefits will the colonial countries has any prima Chapter III would at least double per
spread to all underdeveloped coun- facie validity.
capita product at the low levels, would
tries? Or can it be that the process of Kuznets confines his attention to yield unrealistic results in comparison
capitalist growth in the metropolitan
the modern "economic epoch" which with the per capita product of the pre-
countries, apart from imposing dead- roughly begins with the industrial re- sently developed countries in the nine-
weight losses on the colonial peoples volution in England, and which, ac- teenth century) . . For example, per
was essentially a zero-sum game, so capita GNP of India, set at $ 73 in
cording to him, is distinguished by
that some countries had to stay under- "the extended application of science 1958 and equivalent to $ 81 in 1965
developed if metropolitan countries to problems of economic production".3 prices, would be adjusted to $ 162,
had to grow along the capitalist path? He establishes convincingly that this just about a fifth shor t of per capita
Answering such questions fully is a epoch witnessed an acceleration in GNP of Sweden in 1861-1869." In
gigantic task. But some fragmentary
the rate of economic gr.owth in the order to indicate the supposed absur-
evidence is provided in support of the developed countries of today.4 The dity of such a revision, Kuznets has
view that despite unprecedented pro-
developed capitalist countries in this nothing more to say than "This esti-
ductivity growth in advanced capitalistcontext are the western European mate is highly doubtful, in view of the
countries, sustenance of capitalist countries and their overseas offshoots, greater climatic and other require-
development in the nineteenth century together with Japan. With the excep- ments in Sweden, and its economic
required a continuous transfer of position in the middle nineteenth
tion of the last-mentioned country,
resources from the underdeveloped to none of them had a GNP of less than century."'
the advanced capitalist countries, and $ 800 per capita in 1965. The usable
that exploitation of colonies was not It can be rightly asserted that the
records of all these countries do not duty of making reliable estimates about
an aberration but the precondition of go back to the mid-eighteenth century
the limited spread of capitalist growth. the economic past of the underdevelop-
when "modern economic growth" be- ed countries has been shirked by the
gan, and Kuznets really provides data social scientists of those countries and
I for most of them for the period after in the absence of such estimates, even
Kuznets' latest book is perhaps con- 1860. In no case, except that of a very honest economist from the
sciously titled "Economic Growth of Britain, does the record go beyond advanced capitalist countries has to
Nations";' it records the triumph of 1801. But Kuznets implicitly gene- fall back on impressionistic judgments.
capitalist growth or what Kuznets ralises the British experience to all But the trouble goes deeper than this.
calls "modern economic growth". He the western European countries, and In practically no underdeveloped
does not exclude growth in communistconversely assumes that the "eco- country is there an organisation like

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 Special Number August 1972 ECONOMIC AND POLITICAL WEEKLY

the National Bureau of Economic CHART 1: RELATIONSHIP OF GDP PER CAPITA TO (A) SARE oF AGRICULLT
Research, solely devoted to the collec- LABOUPR FORCE AND (B) SHARE OF AGOICULTUE iN GDP
tion and analysis of economic and
demographic data. Attempts are made
hastily to build up long series of na-
tional income, population, etc, without
m;100 '
an adequate scrutiny of the aggrega-
tive official data. The official data al-
most always underestimate the popula-
tion or national income in pre-colonial 60
SD

or early colonial times and so the de-

gree of initial underdevelopment is
40
overemphasised. To cite only two ex-
amples: M Mukherjee's estimates of
,SS
the rate of growth, in national income
from 1857 to 1900r is seriously bias-
ed upward for reasons that I have
mentioned in an earlier review. And
this is the only estimate Kuznets uses
for long-period changes in the national
income of India. Again, Irfan Habib shaLre lin

has shown in a recent paper that

Kingsley Davis seriously understimat-
ed the population of India in 1800
and thus overestimated the growth of
population in British India from 1800
to 1872.8 It would be hardly an ex-
aggeration to claim that most of the
statements on the measured economic
well-being of underdeveloped coun-
tries at the time of their conquest by
the European countries are based on
thin air.9
Coming back to the growth experi-
ence of the advanced capitalist coun-
tries, it is found that Japan, the only
non-white member of the rich capita-
list nations' club, has been the
champion grow- er of them all, record-
ing a growth in per capita income of
16.4 per cent per decade over the
period 1874-79 to 1963-67., She alone
hlas also experienced almost a steady
acceleration in the rate of growth of
income over this p)eriod: hence the
long-term average is strongly influenced into eight groups in an ascending
by her recent experience. In the case
order according to their per capita
of other developed countries there is
GDPs, and indicated the share of the
evidence of damping of rates of
A-sector in GDP and in the labour
growth (and structLural change) inforce
tlheagainst each group, thus obtain-
interwar period, and acceleration dtur-
ing two sets of cross-section arrays.
inng the period after World War, II.I ohtained Chart I by plotting the
In what follows, I shall confine
mvself mainly to the western Euro-
pean countries and their colonies.
Japan did not enter directly into an
exploitative relationship with a colony
until the tlird quarter of the nine-
teenth century, and her colonialism
merges almost directlv with the
imperialist phase of struggle among
the developed capitalist countries.
Our focus is primarily on the pre-
imperialist phase. Again Japah's
r,elationship with the UtSA in the
period after World War IL presents
shaLre in labour force
150 175
Logarithm of GDP Pelr
Soiace of dlata: S Koizncts "E
certain unique
plot offeatures
GDP per capita against
be studied on their own.
SHARE OF AGRICULTURE
A G B Fisher and Colin Clark esta-
blished between 1935 and 1940 that
in dustrialisation in the advanced
capitalist countries was attended by a
decline in the share of the agricultural
sector (A-sector) in national income
and labour force. Kuznets has grouped
all the developed capitalist countries
and the majority of the underdeveloped
logarithms of GDP per capital (group
averages-the geometric means being
used as the appropriate average)
against the average group shares of
the A-sector in GDP and in the
labour force (arithmnetic means being
the appropriate averages this time)
respectively. As it can be seen, the
inverse relationship between GDP per
capita and share of the A-sector
shows up in the case of 1)oth GDP and
labour force, although they are all
cross-section observations.
However, whereas in the case of the
2 52 2l5
w
the hi
share of the A-sector in GDP, we
obtain almost a regular straight line,
the curve relating GDP per capita to
the share of the A-sector in the labour
force has a much more irregular shape.
In particular, the decline in the share
of the A-sector in labour force is
much slower at lower levels of per
capita GOP than at higher levels
(there is even an upward kink in the
cu rve). If we somehow weighted the
per capita incomes by the sizes of the
respective populations, this difference
would be stronger, since the lirge-
sized underdeveloped countries (such
as erstwhile Pakistan, Indonesia,
India) would crowd together at the
lower end of the income scale. If we
fitted linear regression curves by the
least squares method to the observa-
tions plotted in the Chart, the line for
the GOP will lie lower than that for
the labour force, and the slope of the
GOP curve will be almost certainly
smaller than tht slope of the labour
force curve. One reason for this is
that the productivity of the labour
force in agriculture relatively to its
productivity in the manufacturing
sector is lower in underdeveloped than

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 ECONOMIC AND POLITICAL WEEKLY Special Number August 197
in advanced capitalist countries. (The
highly capital-intensive character of
the technology adopted by the under-
developed countries also contributes to
the divergence of the sectoral shares
of non-agriculture in the GDP and
the labour force.)
While a high rate of economic
growth produces a decline in the share
of the A-sector in the labour force, the
converse is not true in the case of
many underdeveloped countries. There
are forces other than economic growth
tending to shift labour out of agri-
culture in some underdeveloped or
semi-developed countries such as Egypt,
Argentina and Mexico,10 pnd the
change often takes place in favour of
services rather than industry. This
complicates the time-series record and
produces irregularities in the cross-
section relation of the share of agri-
culture to per capita income. On the
whole, the lower relative productivity
of the agricultural labour force tends to
make the relationship between econo-
mic growth and the share of agricul-
ture in the labour force rather weaker
in the underdeveloped countries today
than it seems to have [een in the case
of the advanced capitalist countries.
In fact, the time-series and cross-
section data point to a strong con-
flict between intertemporal changes
across countries in respect of the
relationship of economic growth to
the rate of structtural change. I1 If
the cross-section measure of the r-atio
of percentage change in GDP per
capita to the share of the A-sector in
either GDP or labour force is used to
estimate the decline in the share of
the A-sector in GDP or labour force
in developed countries respectively,
the estimates fall shor-t of the actuals
by large percentages. One explanation
for this conflict would be that if the
rate of growth of output remained
constant while the observed elasticity
of demand for the products of the
sectors remained the same, the elasti-
city of demand for agricultural pro-
ducts would have to decline; for,
otherwise, with a constant weight for
the relatively growing sectors, the rate
of growth of national income itself
would accelerate. (This mav in fact
have happened in some advanced
capitalist countries after World Wai
II.) But this is probably not the only
or even the most important explana-
tion.
When the capitalist nations of
Europe industrialised, they were able
to take over vast empty continents for
the sulpply of raw mater ials and con-
vert hitherto manufacturing nations,
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such as India or China, into markets
for industrial products and supply
bases of agricultural raw materials.
These two types of operations enabled
them to shift labour off the land faster
than in the nations starting their indus-
trialisation programmes today. It is
well known that the mid-nineteenth
century division of labour between
countries was not based on compara-
tive advantage;12 but the forced spe-
cialisation of underdeveloped coun-
tries in the form of a pool of surplus
labour and an extremely unfavourable
relation of earnings in agriculture to
earnings in industry.
Kuznets provides tome further
evidence of the relatively unfavour-
able position of workers in agriculture
in underdeveloped countries. The
price index of the products of the
secondary sector in relation to the
indexes for agricultural products and
services were almost invariably higher
in seven Latin American cities in 1962
than in seven European countries in
1950. Again, in nine out of the 13
developed countries covered in
Kuznets' "Economic Growth of Na-
tions," the relative product per worker
in the primary sector was higher in
the early periods of their modern
economic growth than is suggested by
contemporary cross-section data cover-
ing both developed and underdevelop-
ed lands. Another pointer in the same
direction is that the average levels of
nominal tariffs were generally lower in
the developed capitalist countries at
the beginning of the 20th century than
in major underdeveloped countries in
the 1960s.23
Advocates of what I have called
"efficient neocolonialism"" have argued,
largely on the basis of this eYidence
and the evidence of obviouls bureau-
cratic inefficiency in the administration had come to be concentrated in
of foreign trade controls, that the
developing countries should slash the
rates of tariff protection accorded to
industry, low-er the non-tariff barriers eighteenth century when the plunider
against foreign competition, and rely
essentially on export-led growth.
Such a recommnendation betrays a mis-
taken understanding of the causal
mechanism behind the successes of
the advanced capitalist nations before
the First World War. In the first place, of white settlement.
the European countries and later on
Nor-th America, succeeded in exporting
manufactures on a large scale not only
because of their technological superio-
rity but also because the non-white
colonies and dependencies were pre-
vented from preserving their own
industries or developing any new
industries. In the second place, the
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openness of the world of developed
capitalist countries was - and to a
large extent remains - the openness
of a rich man's club with non-mem-
bers strictly barred by various means.
The freedom of trade among these
countries survived because it was sup-
ported and nourished by the freedom
of movement of capital and labour
among the members. Orthodox eco-
nomists have now come to question
whether exports of commodities and
services were the leading sector in the
nineteenth century that they were
once thought to be. They have dis-
covered not unexpectedly that growth
of trade and income was caused by
something else altogether the effi-
ciency of a capitalist system in the
expropriation of the surplus and its
use for further investment.'5 Thus
accumulation and its distribution
among nations have to he examined
carefully in order to obtain a correct
perspective on nineteenth-century eco-
nomic history.
II
The facts about the nineteenth-
century capital movements and migra-
tion of labour have been known to
or-thodox economists and Marxists
alike for some time. But many
Marxists aftet Marx and most of the
orthodox economists have missed some
of the interconnections in constraining
their 'models' or stories of the growth
of industrial capitalism. Hence it may
not be out of place to summarise these
facts and draw some inferences from
their interconnection.
Great Britain acted as the major
collector of the surplus extracted from
the underdeveloped countries of to-
day. In this respect she was continu-
ing the tradition of the eighteenth
century: the profits of the slave trade
British hands, since British traders
had easily become the most important
slave traders. But unlike in the
from the poorer lands had primarily
aided its own primitive accumulation,
in the nineteenth century much of
the plunder collected by the British
went to aid primitive accumulation in
the rest of Europe and in the colonies
India was the most importalnt single
source of the plunder- for the one and
half centuries after Plassey. lThis
plunder was not carried on under the
competitive rules of the game which
we have consciously or unconsciously
come to associate with the heyday of
capitalism in Europe and North Ameri-
ca. The British exploited India through
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 Special Number August 1972 ECONOMIC AND POLITICAL WEEKLY
an exclusive royal monopoly (the East
India Company), through the inde-
pendent European traders who destroy-
ed the internal trade of the Indians,
through the land revenue system,
through monopolistic control over the
internal trade, through the export-im-
port trade, through administration and
through railways and irrigation
systems. In all these cases violence
and racial discrimination were used
blatantly in order to increase the size
of the surplus. Similarly, in the trade
with China the British and other
colonial powers used actual war and
frequent threats of violence in order
to continually increase their gains.
As yet, complete balance of pay-
ments acounts for India or China in
the nineteenth century are not avail-
able. Hence the precise size of the sur-
plus extracted either through colonial
control or through 'legitimate' trade
cannot be measured. But there are
several point estimates of the econo-
mic 'drain' from India which might be
used as just approximations. j C Sinha
estimated the drain from Bengal over
the period 1757-80 at about E 38
million.'6 East India merchants and
administrators such as Tucker and
Hume put the annual remittable sur-
plus from India in the beginning of the
nineteenth century (c 1813) at between
? 3 and ? 4 million.'7 Robert Knight
in 1868 and Dadabhai Naoroji in 1871
estimated the drain from India at ? 16
million.'8 These figures should be
compared with the sums of Britain's
net exports of capital which have been
estimated by Imlah as ? 67.2 million
during the decade 1820-29 and ?292.2
million during the decade 1860-69.1J
That is, the drain formed more than
50 per cent of the annual exports of
capital in the third decade of the nine-
teenth century and again in the seventh
decade of the same century. Of
course, this proportion must have de-
clined as Britain's credit balances
mounted up, but much of the growth
of these balances was again due to
colonial exploitation rather than com-
petitive enterprise.
In the years immediately after the
Napoleonic wars a large fraction of
British capital export was directed to-
wards other countries in Europe. The
net economic effects of that movement
have been summarised by Jenks as
follows: "The loans to the legitimate
governments certainly stimulated Euro-
pean economic life. They called into
activity local capital, liberated it for
employment more remunerative than
the public debt, and expended in
bonuses behind tariff walls they helped
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to create new textile industries in
Holfand, France, Prussia and Russia.
The exports of British machinery had
not been large. More British foremen
than capital became directly interested.
in factories on the continent. And in
countries where mercantilism was still
the dominant mode of economic
thought, the financial help of govern-
ments facilitated by foreign borrow-
ings was very important. Within two
decades after Waterloo, England was
no longer sending cloth to the Conti-
nent. Her function was to supply yarn
to the weaving and clothing mills of
Belgium and France, Saxony and
Prussia. The investment of her capital
had given wing to the migration of
the industrial arts."20
What was true of England's roie in
the diffusion of industrial capitalism
in Europe in the beginning of the nine-
teenth century wvas even more pro-
nounced in the dissemination of the
"industrial arts" in the countries of
white settlement in the later part of
the century. British capital continued
to finance the migration of European
labour and the growth of industrial
capitalism in the white colonies over-
seas. European labour migrated in
their millions to effect a complete
takeover of the continents of North
America and Australia and a partial
takeover of Latin America and Africa
south of Sahara. The single most im-
portant beneficiary of the movement of
capital and labour was the USA but
all the other white colonies also bene-
fited from that movement.
Kuznets has very well summarised
the relevant facts about human migra-
tion: "The -hulk of total interconti-
nental migration, for which we have
estimates since the 1800s, was from
Europe - over 95 per cent of the
total for 1846-1932; and the bulk of
intercontinental immigration was to
the United States until the very recent
years - almost 58 per cent of the
total for 1821-1932. It is highly signi-
ficant that the populations of Asia and
Africa barely participated in this foow
during the nineteenth and twentieth
centuries and that the preponderant
bulk of emigrants, almost all from
Europe, went to North America (67
per cent for 1821-1932), Australia and
-New Zealand (6 per cent), and two
countries in Latin America (Argentina
and Brazil, with 11 and 7 per cent,
respectively)."'" The absolute magni-
tude of the net migration from Europe
was stupendous: between 1801 and
1901, 27.72 million people emigrated
.and between 1911 and 1940, another
9.96 million moved to other conti-
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nents.2 The rates of growth of popu-
lation in both Europe and the coun-
tries of European settlement were
considerably above the world average.
The countries with high rates of indus-
trial growth also experienced high
rates of, natural population growth,
and/or, of immigration. Again in the
word of Kuznets, "'people of European
stock increased from about 150 million
in 1750 to about 800 million in 1950,
a rise of 433 per cent; whereas the
rest of the world's population grew
from about 580 million to about 1,600
million, or less than 200 per cent. An
alternative calculation shows that the
population of the European countries
that are now fully developed (Ger-
many, France, the United Kingdom ex-
cluding Ireland, the Scandinavian
countries, Belgium, and the Nether-
lands), combined with North America
and Oceania, rose from 59 million in
1750 to about 372 million in 1950, or
over 500 per cent; whereas population
in the rest of the world rose from 669
to 2,137 million, respectively, or slightly
over 200 per cent.'23
FLOW OF CAPITAL
If the major direction of movement
of European population was towards
the colonies of new settlement, the
direction of European (mainly British)
capital was also towards either the
same colonies or towards other Euro-
pean countries. I have already noted
the effect of post-Waterloo British
lending in Europe on the other
European economies. Of the new
British portfolio investment during t
period 1865-1914, 45 per cent flowed
to North America and Australasia,
13 per cent to Europe, and 17 per cent
to South America, mostly to those
with substantial European populations.
Looking at it another 'vay, about 68
per cent of the total flowed to "the
temperate regions of recent (European)
settlement".2' Of the estimated total
of 45 million francs of French foreign
long-term investment in 1914, Europe,
United States, and Canada accounted
for 29.5 billion francs.25 (Between the
two, France and Britain accounted for
most of the European overseas invest-
ment.)
How important were the foreign in-
vestment in the countries of European
settlement and the surpluses extracted
from the underdeveloped countries for
capitalist growth in the nineteenth
century? For answering this question
adequately one needs nothing short of
an intercontinental model of economic
growth. But some first approximations
towards a qualitative answer may be
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 ECONOMIC AND POLITICAL WEEKLY Special Number August 1972
indicated. First, as S B Saul has shown
in his thorough study, the balance of
payments surplus Britain knocked up
with India was extremely important
for meeting her deficit with Europe,
with China and with North America
in different sub-periods of the nine-
teenth cent ury)06 This ability to
balance deficits with one part of the
world against surpluses with other
parts was extremely important for the
stability of the apparently automatic
gold standard. Even more important
from the point of view of capitalist
growth, the mechanism enabled Britain
to smoothly transfer capital resource
from the non-white colonies to the
white ones and support industrial
growth in the latter. The availability of
large amounts of foreign capital in a
country like the United States in the
upward phase of the so-called Kuznets
cycle meant that growth was not
choked off through the lack of real
resources or through a balance of pay-
ments crisis.27
Setting our sights lower, we can
indicate the contribution of foreign
capital inflow to domestic investment
or imports of goods in purely arith-
metical terms. This is done mainly
for the United States, because she be-
came the wealthiest capitalist country
by the end of the nineteenth century
and she received the largest amounts
of capital and labour. Taking a
period from 1969 onwards, foreign
investment accounted for 15.5 per cent
of net capital formation during the
period 1969-76, 10.3 per cent during
the period 1882-93 and 2.5 per cent
during the period 1906-12.28 However,
since the USA was already generating
large volumes of domestic savings by
the 1870s and became a marginal net
creditor by the end of the 1890s, and
since the proportion of foreign capital
inflow to domestic investment was de-
clining over time, the proportion of
foreign capital inflow to domestic in-
vestment during this period would
underestimate the importance of foreign
capital during the century as a whole.
British capital flowed in in massive
quantities to finance the building of
canals, railways and other public uti-
lities in the 1830s, and a second boom
in railway construction occurred in
the 1850s. Almost certainly net for-eign
investment had accounted for more
than 25 per cent of domestic invest-
ment during these earlier periods2' United States upto 1914, and later
Furthermore, "wvlhereas in later periodsstudents have confirmed these findings.
the inflow of foreign capital seemed to
respond to the existing rate of develop-
ment over the lon-g swing, in the
1820s, 1830s and 1840s there is evid-
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ence that on acceleration in the pace
of United States development had to
wait for an external supply of funds
before it could proceed, due to the
fact that the institutions needed to
finance large investment projects did
not exist."30
Williamson uses another measure
for indicating the contribution of
foreign investment at the margin to
the sustenance of economic growth,
by stabilising the balance of payments
and permitting the import of needed
inputs and consumption goods. He
lhas summed the yearly increments in
inflows of for-eign capital and in inm-
ports between the peak and the trough
of the Kuznets cycle. "From 1828 to
1837, 48 per cent of the increase in
import demand over time is satisfied
by the inflow of capital (or reduction
in the rate of capital outflow); 1842-
1858, 22 per cent; 1863-1873, 33 per
cent; 1877-1891, 48 per cent; and
1915-1927. 23 per cent."'' Thus in
this sense, the marginal contribution
of foreign investment remained very
significant indeed for the US economy
right upto the beginning of the
twentieth century.
In the case of the smaller white
colonies, the contribution of foreign
capital inflow to domestic investment
(and imports) was generally much
larger than in the case of the USA.
For example, Australian (net) overseas
borrowing and gross domestic capital
formation over the period 1868-1900
were ? 267.5 million and ? 770.1
million respectively; thus net capital
inflow accounted for about 35 per cent
of gross domestic investment. During
the decade 1881-1890, which was the
period of the greatest rate of invest-
ment, Australian overseas borrowing
(net) at ? 174.1 million formed more
than 50 per cent of the total gross
domestic capital formation of ? 344.9
million.32 Again, according to Pene-
lope Hartland's estimates, the gross in-
flow of capital into Canada accounted
for 26 per cent of gross domestic in-
vestment during the period 1900-5 and
38 per cent during 1906-10.:';
For the period upto 1914 or even
later, it would be hardly an exaggera-
tion to say that capital followed the
white migrants. Kuznets had found
in 1930 evidence of long cycles of
roughly 20 years' duration in the series
of production, imports, etc, in the
Some doubts have been expressed
about the reality of the long cycles in
growth -rates, which may be produced
by the particular smoothing procedure
All use subject to http://about.jstor.org/terms
adopted,34 but long cycles in the raw
data relating to residential construc-
tion, incorporation of business, immig-
ration, and capital have been confirmed
by later observers.:3] Moreover, very
close links have been observed bet-
ween the different parts of the Atlantic
economy. The British and American
economies displayed roughly inverse
patterns in the long cycles of invest-
ment, and British capital moved into
the United States largely to fill the
needs of residential construction and
transport in phases of high rates of
immigration into the USA. Brinley
Thomas has characterised such move-
ments of capital as "population-sensi-
tive" movements.36 The link of
capital movement to white migration
is seen also in operation in South
America, where the waves of foreign
investment closely resembled the waves
of white migration. Both foreign in-
vestment and white investment were
in turn linked to the prospects of
industrialisation. Wendell Gordon in
1950 found the Spearman co-efficient of
rank correlation between per capita
income and the proportion of whites
for all 20 countries of Latin America
to be + 0.6 and for 15 countries ex-
cluding those with Large Negroid
population to be close to + 0.7.
Kuznets interprets this as the failure
of the invading white minority to
"integrate the country in a widely per-
vasive process of economic growth".37
But he does not ask why they failed.
Two major reasons for such failure
seem to be pretty obvious. First, only
those countries with large white popu-
lations attracted large doses of foreign
investment and could develop their
resources. Secondly, the countries
with large non-white populations
suffered a larger dose of exploitation
through all the precapitalist channels
available to the settlers and to the
European business communtiy.
TYING UP OF INVEST1MENT
Of course, it was not simply the
scale of net foreign investment that
mattered. The degree of tying up of
foreign investment to sectors and to
the products of specific countries also
mattered a great deal. The degrees of
political or, external economic control
exercised over the projects financed
with the help of foreign capital also
varied a good deal between countries.
in general, the less industrialised a
country and the lower the proportion
of whites in the population the greater
would be the degree of effective tying
of foreign investment to the exports
of the leading country and the greater
1565
 Special Nunmber August 1972 ECONOMIC AND POLITICAL WEEKLY
also would be the degree of effective
external control exercised over the
projects financed. In the case of the
USA almost from the very beginning
the tying of Britislh investment to
British exports w-as very loose; and
the British investor invested in enter-
prises over which he had practically
no control.38 In the case of Canada,
it- was quite usual for the British only
to finance the investment: the enter-
prises in Canada would buy goods in
the USA for actual construction of
the projects, and the control over the
enterprises might be vested either in
Canadian or in US boards of manage-
ment.:'9 In contrast, borrowings by
Argentina were closely linked to the
import of goods from Britain.', When
we came to Brazil, we find that enter-
prises were often conceived by Britons,
constructed by British contractors with
loans floated in Britain and out of
capital goods imported from Britain,
and often successfully sold to the
Br azilian government when the project
proved abortive. T he British also
acted as a powxerful lobby against
industrialisation upto the very end of
the nineteentl-h century.4' The extremes
in tying of aid to projects and the
metropolitan coLuntry, in the use of the
public purse to subsidise the foreign
private entrepreneur, in external con-
trol over enterprises and governmental
policy are, of course, met in Iindia,
which was an abject dependency of
Britain, almost wholly peopled by non-
white populations.
One result of the exploitation of the
non-wlhite colonies to fuLrnish the
wherewithal for the industrialisation of
the white colonies, and of the effec-
tively ligher cost of non-white colo-
nies of the little foreign investment
that took place was that from the very
beginning of the twentieth century the
white colonies had a far higher pro-
portion of the population engaged in
the non-agricultural sectors than the
non-white countries. T hus from
Kuznets' calculations we find the fol-
lowing picture of the share of the
agricultural sector in the labour force
in the major white colonies and some
large non-white countries:
Thus within the camp of the
advanced capitalist counltries, although
there was some initial division of func-
tions between the manufacturers and
the producers of primary raw materials,
this division did not take an extreme
form: the import of capital and the
ability to pursue industrialising policies
combined to change tlheir econiomic
structures towvards those of industrial-
ised nationls. rThe base for "residen-
1566
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tiary activity" was created through the
rapid growth of incomes in these
countries.
Country Year or -Share of the
Period Labour Force
Engaged in
Agr iculture
USA 1869-79 48.6 (50.0)
USA 1929 19.9 (21.2)
Canada 1911 37.2
Australia 1901 25.1 (33.0)
New Zealand 1896 37.0
Argentina 1895 39.6
Chile 1920 38.9
Colombia 1925 68.5
Mexico 1910 64.7
Egypt 1907 71.2
India 1881 74.4
SO(urce: S Knznets: "Economic
Growth of Nations", Table 38.
F igures within brackets indi-
cate alternative estimates.
Changes in economic structure can-
not thus be regarded as entirely in-
digenous processes. The very processes
that led to rapid industr-ialisation in
these advalnced capitalist countries and
their overseas offshoots led to the
stagnation or worse of the underdeve-
loped countries. Apart from the initial
social revolutions which produced
capitalism in Europe, this parasitic
mode of grov-th in the nineteenth cen-
tury makes capitalist growth non-
replicable in underdeveloped countries
of today.
1II
How does what we have said above
tie up with the coniventional doctrines
on the spread of industriallsation and
the eff ects of foreign investment?
Among the orthodox economists,
Nurkse's and Singer's analysis comes
very close to ours. Nurkse stressed
the importance of the complementarity
in the movements of capital and labour
to the colonies of recent white settle-
ment.42 Commenting oni the benefits
and costs of foreign investment he
said, "Perhaps in the final analysis it
may be said that the ultimate benelits
of the traditional investment-cum-trade
system were not with the investing
countries of Europe but with the
new industrial countries of Nortl
America."4:;
Economists such as Nur kse, Singer
and Myrdal have been awar-e of the
maldistributioni of gains between
foreign investors and the host cyun-
tries of the underdeveloped world, and
stressed that the apparent symmetry
of the competitive mechanism can in- racial affinity of the controlling capita-
crease the degree of inequality. But list cIasses inl Eu1rope to tlhe while
what they seeml tor have misssed is;migranlts
thaut
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the pattern of nineteenth century in-
vestment had as its concomitant the
exploitation of major underdeveloped
countries such as China, lndia indone-
sia and the Latin American republics,
and that the connection between the
two was not accidental but causal.
Furthermore, they did not point out
that the instrumenit of surplus extrac-
tion in the underdeveloped countries
was not just the competitive mechanism
of trade, but various forms of mono-
poly, precapitalist modes of exploita-
tion, political contr ol and plunder.
Because of the failure to distinguish
investment in advanced capitalist coLini-
tries and their overseas offshoots and
investment in underdeveloped countr-ies
as two completely different animals,
the critics within the orthodox camp
have been open to the charge of
underestimating the benefits of foreign
investment in any form. Of course,
the truly orthodox economists cons-
truct ideal models of foreign invest-
ment, ignoring uncertainty and depar-
tures from competition, and catstigate
the critics for being merely xenopho-
bic. In particular-, the division of the
world of capitalism along racial lines
rarely finds a cenlral place in the
orthodox analysis.'4
The institution of slavery - parti-
cularly the enslavement of black Afri-
cans - tied capitalism to racism at the
time of its birthi and its growth
through the mercantilist phase. When
capitalism outgrew racism, racialism
was still a very potent instrument for
dividing the working class at lhome
and in the colonies. Where labour is
supplied under competitive conditions,
capitalists would gain by practising
monopsonistic wage discrimination.45
Where workers are tr-ying to organise
trade unions, capitalists would gain by
weakening their hargaining strength.4"6
Apart fromr. its use againist workers,
racial discrimination can be used to
keep out competing capitalists from
trade, finance and industry. In fact,
in colonial and semi-coloniatl areas, the
solidarity of the white capitalists, ad-
ministrators and politicians against
black businessmen was a very potent
instrument of domination.4
In most cases, the European powers
had succeeded, in the mercantile phase
of capitalism, in destroying the power
of any indigenoLus capitalist class.
Further, the naked exploitation of the
colonial people had already iinpoveris-
hed them considerably by the middle
of the nineteenthi century. Hence
in the new colonies combined
 ECONOMIC AND POLITICAL WEEKLY Special Nuniber Auigust 1972
withl suitable institutional arrangements
to make them much stronger magnets
for the attraction of capital than the
non-white colonies and dependencies.
Ignoring the role of the allocation of
investment in determining growth and
stagnation in the nineteenth centutry is
an omission made by both the defen-
ders and the critics of free enterprise,
who have their sights fixed on the
trade in commodities and services. In
1929, j H Williams had attacked the
tendency of economists to underesti-
mate the importance of the mobility of
capital and labour across frontiers, but
this attack cdid n1ot lead to any major
theoretical reformulation in the ortlho-
dox camp I" When critics such as
Prebisch brought up the question of
the terms of tr ade between manufac-
tures and primary produLcts, it was
easy to show that these terms did not
always move against- primary products
or primary-producing countries. Again,
when tariffs and quota restrictions
wer-e adopted as the major instrument
of industrialisation in underdeveloped
countries, they did not bring about the
expected transformation. For in botl
cases, the role of capital movements
and thle non-competitive control over
the mechanism of foreign trade, finance
and banking had been ignored.
In the nineteenith century, I suspect,
the bUrdens of indebtedness of the
borrowing, u nder developed countries
(which were often fixed in terms of
foreign countries) and the forced ex-
traction of the surplus from them did
far more damage to them in periods
of falling foreign exclhange r ates than
any putative declinie in their termns of
trade.4" Again, it was the control of
the foreigner over the whole apparatus
of trade, foreign exchange dealings,
shipping and finance and his conse-
quent ability to pocket the gains and
pass on the losses to the 'native' rather
than any inherent lonig-term bias of
the international trade mechanism
against primary products that kept the
gains of trade out of the reach of
under developed countries.5"' Certainily,
the fluctuations in the terms of trade
of the primary-producing countries hit
them hard but that was mainly because
of the asymmetry of the distribution of
gains and losses mentioned above, and
because of the fact that they did not
haLve a large manufacturing sector into
blem of reinvestment of capitalist pro-
whiclh resources could be shifted or fits and rentier earnings took on the
which could support a losing agricul-
tur al sector.
Again, there are some major loop-
holes in the naive protectionist case
for industrialisation. First, it ignores
ism arounld 1900 nlot onlly success-
the problemn of actulla capzitall formla-
fully differentiated competitive capital-
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tion for industrialisation. It does not
provide a social process either for an
effective long-term transfer of capital
into the industrialising country or for
an endogenous generation of savings.
Secondly, it takes it for granted that
the experience of the early industrial-
ising countries of Europe is replicable
in the underdeveloped coLuntries of
today.
It is far more difficult to relate our
sketch to the traditional Marxist ana-
lysis, because Marxists have been so
long concerned with the same set of
problems for such a long time, and
there is such a large body of work
already existing. All I shall do is to
try to relate to the great Marxist pro-
blems of realisation of the sul-plus, the
capitalist crises, long-period growth or
stagnation and imperialist struggles.
The period upto the end of the
First World War can be looked upon
as one in which the industrial capita-
lism. of Britain was internationalised:
capital was transferred from under-
developed to European countries and
to their overseas offshoots to fructify
through the capitalist mode of produc-
tion. The pulsations of activity in
Britain and the USA were largely res-
ponses to the pulsations in opportuni-
ties for making profit arising out of
population growth and migration. There
were severe crises during this period
of growth: almost certainly Br itain
had run up against the problem of
disposal of the savings of its capitalists
and rentiers in the 1830s, and the rail-
way boom saved it from chronic de-
pression and political revolution.5' But
the major characteristic of the cen-
tury was not an increasing severity of
capitalist crises in the metropolitan
country, but an alternation - in the
troughs and booms in the metropolis
and the major overseas offshoot, the
USA, with a trend superimposed on
the alternation. The impact of a busi-
ness cycle on technological unemploy-
ment was cushioned in either Europe
or the USA by the possibility of spa-
tial changes in rates of investment. It
was when the USA also attained a
marginal creditor status and Britain's
position changed fr-om being the work-
shop of the world to being increasingly
an industrially unprogressive financier
of the western world52 that the pro-
proportions of a major crisis of
capitalism.
Thus Lenin's designation of a water-
shed between colonialism and imperial-
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ism from modern monopoly capitalism
in advanced capitalist countries but
also served off to mark off a basic
change in the economic relations bet-
ween the two shores of the Atlantic
economy. Before that period, not only
could the slackening of investment op-
portunities on one shore be made up
by the quickening of investment on
the other, the massive migration of
people to other countries also helped
to eqLualise average incomes in differ-
ent capitalist countries, cushion the
impact of cyclical fluctuations in the
metropolis and stave off relative im-
poverishment of workers in western
Europe.53 Of course, the people who
migrated had to be equipped with capi-
tal. T his capital was supplied by the
metropolitan country. The fact that
most of the migration occurred in the
second lhalf of' the nineteenth century
when a major structural change had
already occurred in Britain and the
fact that the migrants were generously
equipped wvith social ovethead capital
built with the supply of Europe go a
long way to explain the phenomenon
of countries like Australia and New
Zealand starting their careers in the
1870s and 1880s with a relatively low
proportion of their population in agri-
culture. Urban growth could take place
because not only were the incomes
from primary production retained in
the colonies but extra incomes were
provided through the inflow of foreign
capital.
The impact of the metropolitan coun-
tries on the underdeveloped ones was,
of course, of an exactly opposite cha-
racter. Incomes were continually dr-ain-
ed away through various char ges;
markets for the relatively crude manu-
factured products of the metropolis
were found by destroying old handi-
crafts. In the absence of the develop-
ment of new manufacturing industries
in their place, there was no feedback
effect benefiting the growth of incomes:
the only benefit came in the late
nineteenth century in the form of ex-
pansion of trade in agricultural pro-
ducts, and as we have seen, the lion's
share of the profits of that trade was
also captured by the traders, shippers
and bankers of the metropolitan coun-
tries. Thus the expansion of the mar-
ket for the manufactured products of
the advanced capitalist countries in
any particular underdeveloped country
could only be a once-for-all affair. It
is in this sense that capitalism need-
ed new non-capitalist countries even
in its expanding phase-not for the
long-term investment of capital, but
for ever-naew markets for its cruder
1567
 ECONOMIC AND POLITICAL WEEKLY Special Number August 1972
products which could be exploited to
supply capital to the overseas offshoots
of westerni Europe. Not only was the
expansion of markets for consumer
goods in non-white colonies a strictly
limited process, by its very nature,
the process could not generate an
ever-expanding stream of demand for
capital goods by the capitalist
countries.
Thus the reasons often cited for the
lack of investment of European capital
in underdeveloped countries in the
nineteenth century, viz, the poverty of
the people and the lack of entrepren-
eurship or capital were themselves the
product of capitalist exploitation in
these countries, and were the neces-
sary conditions for European invest-
ment in the overseas white colonies to
be pQssible at all. (The destruction of
the entrepreneurial strata of the colo-
nies had often the paradoxical result
that there appeared to be a surplus of
capital controlled by rentiers of all
kinds at the very moment that strug-
gling, nascent entrepreneurs were com-
plaining about its shortage.)
Moses Abramovitz has recently an-
nounced the death of the Kuznets
cycle54 after the First World War (or
perhaps the whole of the inter-war
period was occupied by its death-
throes). More than the Kuznets cycle
died with the First World War. It
was the first decisive struggle among
the advanced capitalist powers in the
phase of imperialism. It also marked
a decisive decline in the older, cruder
methods of exploitation of the non-
white countries of the world-not that
they have entirely ceased even now.
The surplus-disposal problem took on
new dimensions with the end of the
possibility of widening of capitalism
among the countries settled by whites.
Apart from actual war, the problem
is being solved through ever-mounting
military expenditures, space research
and moon probes. It is arguable that
the racialism that had helped solve
the dual problems of extraction of the
surplus and its reinvestment in the past
has now b)ecome a hindrance. But, of
course, racialism is also an ideology of
dominance. This ideology still serves
a very important function particularly
since the existence of new socialist
countries acts as a spur to revolution
in the underdeveloped countries.
Even a rudimentary attempt at esta-
blishing the international co-existence
relationship of capitalist growth and
underdevelopment has taken us far
into the realm of hypotheses. Drawing
up a balance-sheet of costs and bene-
fits of that process will take us fur-
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ther. Kuznets has provided some ac-
count of the obvious (mainly private)
costs when he has deducted the costs
of urbanisation from the added in-
comes of the migrants from the farm
to the factory. But obviously the social
costs within the advanced capitalist
countries themselves cannot be totted
up so easily: only now are the ruling
classes of advanced capitalist nations
turning their attention to environmen-
tal control, ecological balance and so
on. The costs imposed on other coun-
tries have not even begun to he count-
ed. They include the costs of impover-
ishment of the surviving generations,
and those of slaughter of whole peo-
ple like the American Indians. They
include the costs of utterly wastef ul
use of the raw materials of the Third
World, and of the permanent impover-
ishment of the soil of these countries
through wholesale deforestation, soil
erosion, and killing off of numerous
species of animals, in the pursuit of
private greed. To this list is now add-
ed the horrors of deliberate ecocide in
Vietnam. -But a proper cost account-
ing needs a theory of political eco-
nomy-spelling out not just the static
alternatives, not even the ones that
are capturable in dynamic models of
a given socio-economic system but the
ones that are thrown up in models of
completely different socio-economic
systems. No catalogue of measurable
facts-even when executed on the lie-
roic scale of a Kuznets-can obviate
the necessity of political economy if
we want to understand the processes
of economic growth.
Notes
I S Kuznets: "Economic GrowNth of
Nations: Total Outpuit and Pro-
dcuction Structure" (The Belkniap
Press of Harvard University Press,
Cambridge, Mass, 1971).
2 S Kuznets: (1) "Econom-ic Change"
(W W Norton, New York, 1953),
(ii) "Six Lectures on Economic
Growth" (New York: The Free Press
of Glencoe, 1959); (iii) "Postwar
Economic Growth: Fotur Lecttires"
(Harvard University Press, Cam-
lridge, Mass, 1964); (iv) 'Economic
Growth and Structure" (Heinemann
Educational Books, London, 1963);
and (v) "Modern Economic Growth:
Rate, Structure, and Spread" (Yale
University Press, New Haven and
London, 1966).
3 "Modern Economic Growth", p 9.
4 "Economic Growth of Nations",
Chapter I.
5 "Economic Growth of Nations", p
181.
6 M Mtukherjee: "National Income
of India: Trends anud Structur-e"
(Calcutta, 1969).
7 Science anid Culture, November
1970.
All use subject to http://about.jstor.org/terms
8 Irfan Habib: "Indian Population,
1800-72: A Note", paper deliver-
ed at the Seminar on the Colonisa-
tion of the Indian Economy held
at Centre of Advanced Study in
History, Aligarh Muislim University,
10-12 March, 1972.
9 There are some important ques-
tions regarding the choice of the
base period, or the data for the
initial conditions of the under-
developed cotntries, which are dis-
cussed in Section II of my "Notes
Towards a Theory of Underdevelop-
ment", Economic antd Political
Weekly, Annual Number, 1971.
10 Cf H A Turner and D A S Jackson:
"On the Determination of the
General Wage Level - A World
Analysis; or 'Unlimited Labour
Forever"', Economic Journal,
LXXX, December 1970.
11 "Economic Growth of Nations", pp
182-98 and 275-88.
12 E A G Robinson: "The Changing
Structure of the British Economy"
Economic Journial, Vol LXIV, Sep-
tember 1954, pp 443-61.
13 I Little, T Scitovsky and M Scott:
"Industry and Trade in Some
Developing Countries" (Oxford
University Press, 1971), Table 5.1.
14 A K Bagchi: "The Theory of Effi-
cient Neocolonialism", Economnic
and Political Weekly, Special
Number, July 1971.
15 C P Kindleberger: "Foreign Trade
and Economic Growth: Lessons
from Britain and France, 1850 to
1913", The Econonmic History Re-
view, Second Series, XIV(2), 1961,
pp 289-305; and I B Kravis:
"Trade as a Hand-maiden of
Growth: Similarities between the
Nineteenth and Twentieth Centu-
ries", Econiomic Journlal, LXXX,
December 1970, pp 850-72.
16 J C Sinha: "Economic Annals of
Bengal" (London, 1927), pp 51-2.
17 G A Prinsep: "Remarks on the
External Commerce and Exchanges
of Bengal, with Appendix of Ac-
counts and Estimates" (1823), re-
printed in K N Chaudhuri (ed):
"The Economic Development of
India under the East India Com-
pany" (Cambridge University Press,
1971), at p 64n.
18 Jarnes Geddes: "Ouir Comnmercial
Exploitation of the Indian Popula-
tion: (I) - Its Statistics", Calcuitta
Review, 1872, No CX, pp 353-5.
19 A H Imlah: "Economic Elements
in the Pax Britannica" (Harvard
University Press, 1958), Table 4.
20 L H Jenks: "The Migration' of
British Capital to 1875" (1927: re-
printed, London, 1963), pp 62-3.
21 S Kuznets: "Modern - Economic
Growth", p 53.
22 Ibid, Table 2.4 (p 52).
23 Ibid, p 36.
24 Matthew Simon: "The Pattern of
New British Portfolio Investment
1865-1914" in J H Adler (ed):
"Capital Movements" (London,
1967), pp 40-41.
25 H Feis: "Europe: The World's
Banker", p 51.
26 5 B Saull: "Studies in British
1569
 Special Number August 1972 ECONOMIC AND POLITICAL WEEKLY

Overseas Trade" (Liverpool Uni- finance emigration, and thus to Ecoitonoic Journal, 1929, reprinted
versity Press, 1960). slow down the tendency of profits in I- S Ellis anid L A Metzler (ed);
27 J G Williamson: "American to fall. Hence in Mills' scheme, "Readings in the Theory of Inter-
Growth and the Balance of Pay- white emigran-ts would have per- national Trade" (Philadelphia,
ments, 1820-1913" (University of fornmed the fuinction that Negro 1949), pp 253-71.
North Carolina Press, Chapel lill, lal)oluIrrs calne to perform in the 49 See, for example, Graham: "Brazil
1964), p 91. USA. See Brinley Thomas: "Mi- and the Onset of Modernisation",
28 Ibid, p 142. grati&oi anii( Econiomiic Growth" Chapter 2.
29 Ibid, pp 99-120 and Jenks: "Mi- Camnbridge University Press, 1954), 50 Ibid, Chapter 3S and( A K Bagehi:
gration of British Capital", Chap- Chapters I and 11 for a siinummaiy of "Private Investmnent in India,
ter III. the relevant literature. 1900-1939" (Camhridge Uniiversity
30 J G Williamsoni: "AAmerican Growth 45 See my 'Notes Towardcs a Theory Press, 1972), Chapter 6.
and the Balance of Payments", p of Underdevelopment", Ecotioti-tc 51 E J H-lobsbawm 1.m: "Industry anid
110. Clndt Plolitic'ol Weeklrl, Annual Num- Empire" (London, 1968), Chapter
31 Ibid, pp 94-5. ber, 1971. 6.
32 N G Butlin: "Investment in Aus- 52 For an account of an early diag-
tralian Ecoinomic Development, 46 Michael Reich has .showln that an nosis of Britain's changecd status
1861-1900" (Camnhridge Uiniversity inclex of the degree of racisin is po- ly an Oxfor-d dloon, Harold Mackin-
sitively associated with variouis mea- der, see Roberit S Kidelskv: "The
Press, 1964), Table 1.
sures of ine(quiality of white in- Gr atnd Alterniatives", Thze Listener,
33 B Thomas: "Thle Historical Record
comnes in the- USA, thius challeng- Vol 79, 29 Fehbruiary 1968, pp
of International Capital Movemenits
ihug the conveYntilonal view that 262-4.
to 1913" in Adler (ed1): Capital
raCial discrimiination favouirs the 53 The role of migration in the inter-
Movemenits, pp 9-10.
white workers anti harmls the white regionial eqtualisation of factor in-
34 R C B3ird, M j Desai, j J Enzler
capitalist. See Reich: "The Econo- comnes is emphasised in J G Wil-
and P Taubman: "Kum1nets Cycles
iicis of Racismi'" in Richar d C Ed- liamson: "Regional Inequality and
in Growth Rates: Their Meaning",
wards, Michael Reich and Thomas the Proce.ss of National Develop-
Inter-national Econon?y Review,
E Weisskopf (ed): "The Capitalist
6(2), Mav 1965. mnent: A Description of the Pat-
Systemr" (Prentia-lHlall, Englewood terns", Economic iDecelopment atnd
35 A full bibliography and summary
Cliffs, N J, 1972).
of the analytical issues are availa- Cuiltural (Chtanige, Vol 13 (1965),
ble in R C Easterlin: "Popuilation, 47 for examplteps of dIiscrinyilation pp1 3-45. Butlil poinits out that
against Chinuese businessmnen by Ausitralia experienced almost conti-
Labour Force, and Long Swings
British bankers, see Compton Mac- rinous expansioni upto 1889-90,
in Economic Growth" (National
kenzie: "Realms of Silver" (Loni- eveni though Britain experieniced
Bureau of Economic Research,
don, 1954), pp 68-69; for a discus- cyclical fluctuatioins, see N C But-
New York, 1968).
sion of racial discrimination as an
36 B Thomas: "The Hlistorichl Record lin: "Investiimernt in Australian Eco-
instrument of dIomination in Indian nonmic IDevelopment, 1861-1900",
of International Capital Movements
industry, set my "Private Invest- pp 10-12.
to 1913".
ment in Iindia 1900-1939", Chapter
37 S Kuznets: "Modern Economic 54 M Abramovitz: "The Passing of
6.
Groxthb", p 456n. the Kuznets Cycle", Economica,
38 L H Jenks: "Migration of British 48 j If Willianms: The Theory of N S XXXV, Novemnher 19682 pp
Capital", Chapter III and p 169. International Trade Reconsidered", 349-67.
39 j \Tirne: "Canaidla's Balanice of
International Indebtedness, 1900-
1913: Ani Indulllctive Study in the ;
Theory of Interniational rrade"
(Harvard University Press, 1924).
40 j II William-fls: "Argentine Inter-
national Trade uinder Incoivertibi@
Paper Money, 1880-1900" (hlarvard d
University Press, 1920).
fZ7enct2yg a A{/pzing I/n! in l/ation j
41 Richard Graham: "Britain and the
Onset of Modernisation in Brazil,
1850-1914" (Cambridge University
Aowerzty 7Az01u5A /f6ninf...
Press, 1968), Clhapter-s 2-5. a
42 R Nurkse: "Initerniational Invest-
ment Today in the Light of
Nineteenth-Centtury Experience",
Economic Journal, LXIV (1954). "We on the Silver Jubilee of India's
43 H W Singer: "The Distribution of
Gains betxveen Inivesting and Bor- Independence rededicate ourseIves to
rowing Counitries", American Eco-
nomic Revietw, May 1950, reprint- Nation's Progress through Banking."
ed in J T The,berge (ecl): "Ecoino- o
mics of Trade and Development"
(New York. 1968), pp 236-48, at
p 247.
44 It is a reflection on the so-called
progress' in econiomic science that
supposedly stouit believers in free
enterprise suich as J S Mill, J E The Lakshmi Commercial Bank L
Cairnes, Henry Sidlgwick and F Y
Edgeworth wer-e far more aware Regd. Office: H-Block
of the role of 'non-comupetitive'
groups in determining the distribu-
Couinaught Circus
tion of incomes than are most or- NEW DELHI.
thodox economists todav. J S Mill,
for instance, had wanted enmigrants
to be prevented from becoming
peasant proprietor s inl order that
cap3italists should he encourlaged to

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