[OPE-L:7443] Re: The putting-out system/ dadni loans

From: Gil Skillman (gskillman@mail.wesleyan.edu)
Date: Mon Jul 22 2002 - 18:03:59 EDT

Beautiful!  Thanks again for a useful reference.  I would note that the 
distinction Alavi draws here between dadni loans in textile
production and the putting-out system corresponds more or less exactly to 
Marx's distinction between productive usury and merchant capital 
(Resultate, p. 1023), and thus to the distinction I draw in my recent 
response to Mike, and for the same reason:  in usury capital, the 
capitalist dictates no aspect of the production process; in the putting-out 
version of merchant capital, the capitalist dictates it to the extent of 
specifying (and supplying) the raw materials that are to be transformed by 
the workers.


> From Hamza Alavi at 
> http://ourworld.compuserve.com/homepages/sangat/Colonial.htm
>The rapid export-led growth of Indian textile production was brought about 
>by new weavers entering the trade rather than by changes in technology. 
>New entrants needed funds for working capital and to buy the necessary 
>equipment. A system of cash advances, called dadni loans, developed 
>whereby prospective buyers of cloth would advance the money, in return for 
>which, in a sellers market, the lender/buyer would pre-empt delivery of 
>the finished goods from the
>weaver. Some scholars have mistakenly taken that system of dadni loans to 
>be analogous to the English 'putting out system' which was a precursor of 
>the industrial revolution in England. (e.g. Habib, 1969:67-68). Habib and 
>other Indian scholars have argued that India was itself on the threshold 
>of an industrial capitalist revolution that was thwarted by the impact of 
>colonial rule. (cf. Bipan Chandra et. al., 1969 and Habib, 1969) That 
>seems to be a mistaken view.
>There is an important difference between the Indian system of dadni loans 
>and the English putting out system. In the case of dadni loans, the weaver 
>was given the loan by the prospective buyer of his product which thereby 
>bound him to deliver the finished goods to that buyer. But, given the 
>money, the weaver was left to his own devices to procure his raw materials 
>and work on them. The buyer-moneylender, the dadni-merchant, did not 
>handle the raw materials or equipment and was not involved in the process 
>of production in any way. By contrast, in the 'putting out system' the 
>entrepreneur took the raw materials
>round to the weavers, from door to door, and collected the finished cloth. 
>He soon realised that instead of going from door to door, he could 
>simplify his task by bringing all his weavers under one roof. That gave 
>rise to the factory system which, in turn, led to mechanisation and a 
>transition to the Industrial Revolution. That dynamic was absent given the 
>financial organisation of production in India.
>After its conquests in India, after 1757, the East India Company, 
>operating through its agents called goomasthas, transformed the system of 
>dadni loans in a manner that was designed to subordinate the weaver 
>totally to the Company's agents. Their object was to pre-empt the weaver's 
>services at low prices, as against other competitors, including other 
>European operators who were thus elbowed out. The Company developed a 
>practice of forcing advances on unwilling weavers. A historian writes that 
>before domination by the Company 'They (the weavers) used to manufacture 
>their goods freely and without oppression, restrictions, limitations and 
>prohibitions. There was no attempt to restrict their goods to the one 
>market of the East India Company.' (Sinha, 1961:
>159). Then it all changed.

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