[OPE-L:7662] Book reviews of Meghnad Desai and Amiya Bagchi

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Sat Sep 14 2002 - 15:33:47 EDT

EPW Book Review
September 07, 2002

Hello Marxism, Goodbye Leninism

Marx's Revenge by Meghnad Desai; Verso, London, 2002; pp 372,  19.
Pulapre Balakrishnan

This book has many strands, rather like plots within plots, 
reminiscent of an age of fictional innocence, perhaps sometime before 
Derrida. Arguably, it has only one message, however. The two 
principal strands are the history of economic thought and the history 
of capitalism, or of alleged efforts to supplant it - as the Soviet 
Union was constructed by its apologists - which in reality were no 
more than an alternative form of capitalism. Of Marx's vision of 
"...a society fully self-conscious of its workings, and able to 
direct them, where individuals are not alienated from their work, or 
from themselves, but fully participate in their self-emancipation, 
and realise the full potential of the species-being that they are - 
in other words, Socialism beyond Capitalism" (p 317) we have not seen 
anything yet! Though the strands are various, the message that the 
author conveys is singular. It is that capitalism has triumphed in 
the 20th century, an outcome that was far from assured at the 
beginning of this period when Europe at least had seen the twin 
development of a militant workers' movement and an internal crisis of 

Capitalism has triumphed in two ways. First, it has overcome the most 
trying crisis in its history - the Depression (the commonly used 
prefix 'Great' has a medieval-European air about it, suggesting 
something god-given - as the plague was believed to have been - or at 
least beyond human comprehension. After Keynes, it cannot be said 
that we do not understand this outcome.) Secondly, capitalism has 
outlived any intellectual challenge from socialism as historically 
practised. This is entirely due to the collapse in 1989 of the Soviet 
Union, which in its time had been seen by both sides as a living 
challenge to capitalism as epitomised by the US. This collapse itself 
was inevitable from a Marxian (though not necessarily from a Marxist, 
as defined by those who had acted in Marx's name) perspective, for 
Marx had visualised Socialism Beyond Capitalism not Socialism Outside 
Capitalism. Socialism Outside Capitalism, which is what the Soviet 
leadership had attempted, was at best chancy and almost always an 
impossible project for, by definition, the forces of production would 
not have developed as much as needed to sustain socialism, and as 
they would have developed if capitalism had been allowed to mature. 
And, to engage in exegesis, this triumphant capitalism is 
metaphorically Marx's revenge against statist socialism which had 
existed from the Soviet Union to Kampuchea, for not only had he 
explicitly envisioned a society where the state would literally 
wither away, but, more to the point, nowhere had he suggested it wise 
for a bunch of adventurers to capture state power and unleash an 
experiment in his name. This would not even have been worth 
mentioning had not murder and despotism been justified as necessary 
for the eventual attainment of socialism as envisioned by Marx. Not 
even Stalin, who had tyrannised the Soviet Union and Poland for over 
25 years, had considered it wise to act without the shield of a sham 
called 'theory' by his camp followers, one ostensibly derived from 

Now, finally, since the last decade of the twentieth century, after a 
long interregnum of national capitalisms in the west and their 
'socialist' counterparts in Eastern Europe, we're back to the sort of 
capitalism that Marx would have approved of, capitalism without 
borders or global capitalism from which the world had departed after 
the first world war, only to invite in the form of the Depression the 
gravest economic crisis ever encountered. Indeed globalisation is to 
be welcomed, for capitalism is thus far unrivalled in its ability to 
develop the forces of production - 'productivity' in contemporary 
parlance - and the only kind of socialism worth having - the sort 
that Marx had had in mind - is Socialism Beyond Capitalism, one that 
follows mature capitalism. From this perspective the world is a 
promising place again, now that the Leninists have exterminated 
themselves and the 'little Englanders' have been dragooned into the 
whirligig of a truly global capitalism.

But what we may ask are the promises of a swift transition to 
socialism now that authentic capitalism is here? None whatsoever! And 
this ought not to dismay true devotees of Marx, for Marx had not seen 
himself as a soothsayer but a radical observer of capitalism. So 
sorry, the master has not left you a timetable. Hence Desai's parting 
line that while Marx has had his sweet revenge on the barbarians who 
had murdered in his name, we do not know whether he will ever get his 
true reward, which is Socialism Beyond Capitalism.

Surprisingly in a book on the career of Marxism, the author devotes a 
considerable amount of space to the development of economic theory 
and economic history in the west. This of course is done to provide 
an account of the rise, through the last quarter of the 20th century, 
of the idea of the superiority of the market in the popular mind. 
Appropriately, a great deal of space is devoted to the decline of 
Keynesianism. Desai is of course right in identifying the seventies 
as a tight spot for Keynesian policy-makers in a Britain riven by 
inflation and slow growth, and is quick to point to the oil-shock as 
only one of the factors contributing to the malaise. Not only was the 
oil shock unexpected, it was a possibility not accounted for in the 
theory. With hindsight, we can now see how the oil shock had brought 
stagflation, but at that time it had introduced a phenomenon that 
Keynesian theory had not envisaged, and, worse still, Keynesian 
policy tools were incapable of dealing with. The magnitude of the 
terms-of-trade shock may be gauged from the estimate that the 
oil-shock amounted to an outflow the equivalent of 5 per cent of GDP 
of the oil-importing countries. This much is well accepted by now. 
However, Desai adds fresh insight by pointing out a problem for 
Keynesian policy in liberal democracies with strong unions in that at 
low levels of unemployment expansionary policy generates inflation 
via a tight labour market. The point is that inflation is not always 
the mere increase in the price level that it is in both Keynesian and 
in monetarist theory but inflation can redistribute as well, as it 
did in UK during what was seen as the crisis of Keynesian economics 
by most - recall Hicks's book titled thus - but was really a crisis 
of capitalism, exactly as Marx had prophesied. Only the young British 
Marxists Glyn and Sutcliffe, demonstrating a rare prescience, could 
actually point to the profit squeeze at that time.

Where Desai goes overboard though is to privilege Lucasian 
macroeconomics in bringing Keynesianism to its knees. While the truth 
is more like that too much had been pinned on the universal efficacy 
of Keynesian policy whereas it was now seen to be failing in the face 
of an increasingly complex world, a feature of which was a powerful 
financial sector committed to the free movement of capital and low 
inflation, economic activity be damned. On the other hand, we are 
presented with a story that the demise of Keynesian theory was 
inevitable following the irresistible rise of conservative economic 
theory from von Hayek to Robert Lucas. Surprisingly for an economist 
of such self-assurance, Desai appears breathless in the face of 
Lucas's arguments. It is right of course to say that if one first 
insists on a seamless web between micro and macroeconomics, and then 
asserts that markets clear at the micro level, we can no longer make 
sense of a macroeconomic disequilibrium, which is what involuntary 
unemployment is. However, if you start out by insisting that all 
markets clear there is nothing left to be discussed. This dogmatic 
insistence on market clearing is in fact an example, provided by 
Desai himself in a different context, of the strange practice of 
economists to insist that what does not make sense in their theory - 
such as the emergence of involuntary unemployment - cannot exist in 
practice. Of course, there is a well developed microeconomic theory, 
of Walrasian general equilibrium. However is this model all that is 
cranked-up to be, one might ask? Not even the fluid imagery of 
tatonement - translated, alas, into 'groping' by the less refined 
Anglo-Saxons - can guarantee the absence of 'false trade' or exchange 
at non-equilibrium prices, the possibility of which must be 
acknowledged, for the adjustment to equilibrium must take place in 
real time after all. Now the outcome of market-clearing requires an 
auctioneer who - having collected all information on supply and 
demand schedules - announces the equilibrium prices in the town hall. 
This crude instrumentality intrudes into an otherwise fantastic world 
and renders the promised invisible-hand naked after all.

Moreover the Walrasian model has no use for money other than as a 
numeraire commodity as there is no future, or even when there is one 
as in Arrow-Debreu, there is neither saving nor accumulation. 
Introducing money and uncertainty into the model opens up the problem 
of proving the existence of an equilibrium, as clearly observed by 
Frank Hahn. When agents are allowed to hold expectations, multiple 
equilibria emerge merrily out of the woodwork. Lucas is able to 
overcome this by assuming so-called 'rational' expectations which 
ensure that all agents hold the same model. But this is not enough 
for him to generate policy ineffectiveness. This requires the further 
assumption of all agents holding a model in which policy is neutral. 
How is this rationalised? By assuming that markets clear continuously 
and instantaneously. Now the only hope left for the wretched 
Keynesian policy-maker is to fool the suppliers of labour - each 
always on their supply curve, for remember that we must have 
'microfoundations' and there cannot be involuntary unemployment by 
assumption - into believing, via generalised inflation, that the real 
wage has increased. If there are no distributional consequences of 
inflation, then why is inflation bad as held by the Chicago School. 
It is bad, for when not anticipated it generates cyclical growth. 
Why, armed with 'rational expectations', do agents predict inflation 
wrongly? Because, there is an informational asymmetry between the 
government and private agents as far as policy matters go; in this 
case on the growth of the money supply which the government alone 
controls and which alone causes inflation. If the potential supplier 
of labour cannot predict the inflation rate s/he cannot disentangle 
the change in the real wage from the change in the monetary one. But 
why don't private agents detect changes in the general price level 
when they do detect the change in the contemporaneous change in their 
own price? Because they live on islands and go out by boats to trade 
with other islanders only once in a day. By now the parable begins to 
appear as a fantasy and one begins to appreciate the agony of the 
graduate student who upon hearing of Robert Lucas's allegedly 
giant-killing idea asked "But why don't they read the newspapers?". 
One also appreciates Joan Robinson's suggestion that once you've put 
the rabbit into the top-hat in full view of the audience, there's not 
much point to pulling it out a little later, in full view at that. I 
say this despite my unalloyed admiration for the Lucas Critique as a 
piece of induction. Of course, this insight into the impossibility of 
econometric policy evaluation is a separate issue, not model specific 
in the way that the policy ineffectiveness result is dependent on a 
Walrasian model being the true representation of the world and of all 
agents having learnt this by the time the Keynesian policy-maker is 
actually attempting to crank up the economy. It is indeed somewhat of 
a puzzle that so distinguished an economist as Desai has stopped 
short of providing an evaluation of Lucas's work while crediting him 
with demolishing Keynesian economics. After all, he is himself the 
author of a timely econometric study of the central propositions of 
the new classical macroeconomics, Testing Monetarism, a book that we 
had all read avidly when it was published two decades ago. Either, 
this is yet another manifestation of the closed shop among economists 
called 'theory uber alles', or in a temporary exit from a robust 
British empiricism, Desai, true to his roots among the thought elites 
of India, displays a partiality to (the) 'cunning (of) reason', no 
matter how absurd the argument!

The other weakness in the argument advanced by Desai is a somewhat 
sanguine approach to the current global order. As I have mentioned, 
Desai sees this as the sort of capitalism that Marx had in mind, one 
without borders so to speak. Is this a true representation of the 
current state of the world? Clearly not! In fact, it is far from the 
truth, for labour is not free to move internationally. Such a regime 
privileges capital; indeed at long last it has been freed from labour 
as observed by Ampalavaner Sivanandan and quoted approvingly by 
Desai. Marxian class struggle is now muted, for capital can find 
reserve armies of the unemployed all over the globe never fearing 
challenge. Now western advice that the developing countries must 
permit capital convertibility and encourage foreign direct investment 
is entirely governed by self-interest rather than dispassionate 
economics as it is inevitably made out to be, even when it has 
benefits for the recipients among the developing countries. Bill 
Clinton travelled the world speaking on behalf of American capital; 
however, development advice emanating from the west is largely silent 
on migration despite its hugely beneficial effects in theory and for 
the west in particular historically. In an unusual departure though, 
the World Bank has proved to be the sole spokesperson for immigration 
by the world's poor to its more developed regions. In 'kaliyuga' the 
world is rendered topsy turvy! But, back to the truism that a world 
economic order without mobility of labour is not global capitalism by 
any stretch of the imagination. Capitalism with unfree workers - 
except in Communist Poland, of course - was very likely the dream of 
Reagan and Thatcher. It certainly was not Marx's.

Even as I point to these lacunae, I am reminded of Arunava Sen 
remarking how we are prone to mistaking the pail of water for the 
ocean from which it has been drawn. Marx's Revenge ranges over many 
more issues than the ones that I have flagged here. Mine are at best 
minor quibbles with the work of a master economist. Meghnad Desai has 
written us a grand book, and aired for us an even grander thesis. 
Here, laid out with aplomb, are, probably for the first time, the 
greatest debates in economic theory, subsequently evaluated in 
relation to the sweep of human history. Nuggets float towards you in 
the midst of all this, such as the insights that over the long haul 
capitalism increases inequality but undoubtedly raises the standard 
of living; that foreign direct investment can empower women, indeed 
that the women's movement has largely taken place outside the 
standard political framework of Left and Right; that Japan's economic 
success conclusively proves brutal repression is not necessary for a 
poor country to industrialise. And crucially for India, where all 
parties but the BJP claim to be socialist, that Socialism Within 
Capitalism - the only kind of socialism left for our consideration 
once one discounts Cuba and North Korea - is entirely dependent of 
the success of capitalism, for re-distribution and public goods are 
not independent of the resource base of the economy. Therefore, 
politicians who bludgeon incentives in the belief that they are 
advancing socialism can end up killing the goose that lays the golden 
egg. I hope that this brilliant book will be read widely in India 
which is seldom outside the author's ken, and expect that it will 
please its readers as much as it did me.

Published by Verso for New Left Books, in the spirit of global 
capitalism, the book is typeset in Cochin by SetSystems of Saffron 
Walden and printed by Biddles of King's Lynn, England. It is a 
sensualist's delight. A visually Bonapartist Marx on a dust jacket in 
burnished Bennetton colours, a pleasing font and the near-flawless 
proofing are each a reminder that 'leftwing' need not mean 'drab'. I 
was reminded of watching Germaine Greer remark "I'm a Socialist, and 
I like good clothes!".

EPW Book Review
September 07, 2002

Insights on Indian Economic History

Capital and Labour Redefined: India and the Third World by Amiya 
Kumar Bagchi; Tulika, New Delhi, 2002; pp 336, Rs 575 (hardback).
Achin Vanaik

Amiya Kumar Bagchi is one of our finest economic historians. As such 
he has always been immune to the sterile models of neoclassical 
economics dominant within the academic discipline, which today have 
reached their conservative apogee in neo-liberalism's worship of the 
market mechanism. Neo-liberalism does not just have the abstract 
perfectly competitive market as its ideal-type methodological 
starting point but makes it the end point as well. So it is not a 
question of constant development and readjustment of the perfectly 
competitive market model - a moving from the abstract to the concrete 
- in order to understand better a complex reality, but the other way 
around. It is the real world in which the economic, the cultural, the 
technological, the social and the political are all historically 
intertwined that must somehow be reshaped through neo-liberal 
measures/reform so that it can more closely approximate to the 
perfectly competitive market model!

Of course, this then becomes bad contemporary practice, not least 
because it is so contemptuous of history. The chief merit of this 
book - a collection of Bagchi's essays, written or delivered, over 
the last few decades - is that it gives the reader a real insight 
into what good economic history of modern India is all about. Bagchi 
does write about contemporary India. Out of a total of 12 chapters, 
there are two about, respectively, India at the turn of the new 
millennium, and third world workers facing today's neo-liberal 
onslaught. There is another chapter on 'Predatory Commercialisation 
and Communalism in India'. But 'his period' is really colonial India 
from the mid-late19th century onwards. And his central matrix of 
investigation is, as the title of his book indicates, the nature of 
Indian capital and labour in relation to the colonial state, and to 
each other.

Bagchi's guiding principle, though he never uses exactly this phrase, 
is the 'uneven and combined' character of Indian capitalism. There is 
the inescapable combination of the old and the new, of pre-capitalist 
and capitalist forms of accumulation, e g, merchants and 
industrialists; and of the labour process or what Marx called the 
formal and real subsumption of labour to capital. There is the 
unavoidable combination of culture and caste with class, politics 
with economics. The book is divided into three sections with an 
introductory chapter. It is the first two sections that are the best. 
The first section explores in four chapters the emergence of an 
Indian capitalist class and of Indian enterprises under the impact of 
colonialism which also shaped the transition from merchants to 

Collaboration and conflict characterised the relationship between 
aspiring capitalists and British paramountcy while the differential 
geographical and social impact of British rule, and the extent to 
which merchants-traders retained independence of operation from the 
state helped determine who would prosper and who decline. Bagchi is 
firm, however, that overall, colonialism hampered the growth of 
productive forces in India, and he shows this through a comprehensive 
sectoral examination of indigo, sugar and cotton textile production. 
He concludes "Colonialism created an absence - the absence of 
thrustful industrial and agricultural investment in the domestic 
economy which is a precondition for the growth of a self-confident 
capitalist class".

In an argument very reminiscent of the famous Anderson-Nairn thesis 
concerning the unfinished bourgeois revolution in England, a backward 
capitalist class logically has its counterpart in a backward working 
class. For Bagchi, the "predator-prey relationship" of businessmen 
and primary producers is detrimental to both because it militates 
against the pursuit of a high productivity-high wage economy. 
Bagchi's survey of Indian labour under colonialism takes both a macro 
and micro view. He looks at the impact of caste, at the occupational 
structure in the "melting pot" of Calcutta, and by way of a long 
review of Dipesh Chakrabarty's Rethinking Working Class History: 
Bengal 1890-1940, at working class consciousness. Here there is 
clearly a basic difference. Bagchi believes Chakrabarty, for all his 
insights, is too dismissive of class and the economic struggle for 
survival as a foundational point for the development of a class 
consciousness of some strength. Chakrabarty, he feels, exaggerates 
instead the weight of the worker's 'pre-capitalist identities' and 
'primordial loyalties'. Moreover, there is too much reliance in 
Chakrabarty's text on official sources for seeking to uncover the 
consciousness of workers, when these sources are themselves deceptive 
filters obscuring the real understandings and consciousness of 
workers through "layers of transcription, translation and distortion 
at several stages".

If in the third section there is too simplistic an analysis of 
communalism in one chapter (much too strongly pivoted on the 
dilemmas, and therefore receptivity, created by economic and social 
deprivation) this is made up for in the last chapter where Bagchi, 
who correctly recognises the nature of Hinduism as a "congeries of 
belief systems", writes with great acumen about the Hindu 
bourgeoisie. While under colonial and post-colonial rule, the state 
has been religiously non-denominational, the "Hindu bourgeoisie with 
few exceptions has been intensely religious". They have gone along 
with secularism but with no serious commitment to it. They could, and 
did, adapt comfortably to Hindutva when times changed. We can see 
this fairly clearly today.

All in all, this is a very welcome collection which will please those 
who have long been admirers of Bagchi's work, and enlighten those who 
might be reading him for the first time.


Macroeconomic Indicators (07/09/02)

Trends in Index Numbers of Wholesale Prices in India (Base: 
1993-94=100): Annual Averages


Of Surviving Change

Hello Marxism, Goodbye Leninism

Insights on Indian Economic History

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