Utsa Patnaik and Prabhat Patnaik - Capital and Imperialism: Theory, History, and the Present

WINNER OF THE PAUL A. BARAN PAUL M. SWEEZY MEMORIAL AWARD

Established in 2014, this award honors the contributions of the founders of the Monthly Review tradition: Paul M. Sweezy, Paul A. Baran, and Harry Magdoff. It supports the publication in English of distinguished monographs focused on the political economy of imperialism. It also applies to writings previously unpublished in English, and includes translations of new work first published in languages other than English. Please visit monthlyreview.org for complete details of the award.

PAST RECIPIENTS

Imperialism in the Twenty-first Century: Globalization, Super-Exploitation, and Capitalisms Final Crisis John Smith

The Age of Monopoly Capital: Selected Correspondence of Paul A. Baran and Paul M. Sweezy, 19491964 Edited and annotated by Nicholas Baran and John Bellamy Foster

Value Chains: The New Economic Imperialism Intan Suwandi

THEORY, HISTORY, AND THE PRESENT

Capital and Imperialism

Utsa Patnaik Prabhat Patnaik

MONTHLY REVIEW PRESS

New York

Copyright 2021 by Utsa Patnaik and Prabhat Patnaik

Published by Monthly Review Press

All Rights Reserved

Library of Congress Cataloging-in-Publication Data available from the publisher

ISBN paper: 978-158367-890-9

ISBN cloth: 978-1-58367-891-6

Typeset in Bulmer Monotype

MONTHLY REVIEW PRESS, NEW YORK

monthlyreview.org

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Contents

For Akeel Bilgrami and C. P. Chandrasekhar

Preface

T he pervasive tendency on the part of practitioners of theoretical economics has been to analyze capitalism as a closed self-contained system. This is logically untenable, and it also gives a misleading picture of its actual history. The purpose of this book is to counter this theoretical perspective. Here we put forward the proposition that not only has capitalism always been historically ensconced within a pre-capitalist setting from which it emerged, with which it interacted, and which it modified for its own purposes, but additionally that its very existence and expansion is conditional upon such interaction.

The first five chapters of the book, which mainly deal with and provide critiques of accepted theory, argue that a closed self-contained capitalism in the metropolis is a logical impossibility. In later chapters we discuss the specific ways in which capitalism has shaped, and continues to shape, its pre-capitalist environment to suit its needs. This provides a reading of the history of capitalism that is very different from the usual reading. This history is captured from our particular theoretical perspective, and is not meant to be an attempt to provide a comprehensive account of the system in all its facets.

This book is the product of a long period of thought and work, in the course of which we have accumulated a large intellectual and personal debt to numerous friends and colleagues. It is not possible to mention all of them, but it would be invidious not to mention some.

For any student of political economy belonging to our generation, the intellectual debt to Irfan Habib and Amiya K. Bagchi is incalculable. In addition, we gratefully acknowledge the interaction and encouragement we received from Akeel Bilgrami, Sayera Habib, Sunanda Sen, Carol Rovane, Radhika Desai, Akbar Noman, C. P. Chandrasekhar, Jayati Ghosh, Indu Chandrasekhar, Praveen Jha, Nishad Patnaik, and Rajendra Prasad. None of them, however, bears any responsibility for the views expressed in this book, which, whatever their worth, are our own.

Finally, we owe a deep debt of gratitude to Michael Yates, Colin Vanderburg, and Erin Clermont for their help in bringing the manuscript to its present shape.

UTSA PATNAIK
PRABHAT PATNAIK

PART 1

CHAPTER 1

A Money-Using Economy

T he conceptual representation of capitalism that is analyzed in economic theory in almost all its major strands has not only been significantly different from the reality of the system but is also logically flawed. Such a claim on our part may appear as hyperbole at first sight, but we make it in all seriousness. And in making it, we do not wish to cast any aspersions on the luminaries of the discipline; we only wish to underscore that economics has been perennially afflicted by a blind spot caused by being developed essentially within a metropolitan location. The purpose of this book is to establish the limited, and hence flawed, nature of this perception that afflicts the subject, and to provide an alternative conceptual representation of capitalism that is both theoretically and empirically better grounded than what economic theory has offered till now.

The conceptual representation in economic theory, from its inception, has basically been of an isolated capitalist economy, where, in its simplest version, only capitalists and workers exist, with the state ensuring that law and order prevails and the rules of the game of the system are followed. When international trade has been introduced into this picture, it has been trade among such isolated capitalist economies, and therefore, though enlarging the unit of analysis, adds little of substance to the basic conclusions. Now, a major logical flaw in this representation is that such an isolated capitalist economy simply cannot be a money-using capitalist economy in any meaningful sense. A money-using capitalist economy, in other words, has requirements that no isolated capitalist economy of the sort highlighted in economic theory can possibly fulfill. Let us examine some of the implications of money-use.

Says Law and the Wealth Demand for Money

Money has long been a medium of circulation. A money-using economy, above all, is one in which a certain amount of money is always kept in the possession of economic agents for managing transactions, meeting what economists call the transaction demand for money.

The money held for transaction purposes can be visualized as follows: Economic agents sell commodities, including in the case of workers their labor-power, obtain money in exchange for the sale, and use this money for buying the commodities they need. Since there is a time-lag in the case of each agent between sale and purchase, money is held by each in the interim period. Aggregated across all economic agents at any point of time, this is the total amount of money-stock held for managing transactions in an economy.

Some money, however, may be held by each economic agent in excess of what the agent would normally hold at any point of time for transaction purposes alone. It represents a command over goods and services that is never actually transformed over any given period into goods and services. It is simply a form in which economic agents hold their wealth.

Economic theory, apart from certain heterodox traditions that we will discuss later, posits that though money is certainly held for transaction purposes, it cannot possibly be held as wealth, since it is a barren asset that earns nothing. Any individual holding wealth in the form of money is certainly not acting in his or her best interests, since if this wealth would have been held in some non-money form, it would have fetched the owner a positive rate of return, which money in itself does not.

But non-heterodox economic theory does not hold this view as a plausible reading of the world. The very foundations of non-heterodox economic theory rest upon the assumption that money is not held as a form of wealth, above and beyond what is needed for transaction purposes. Let us see why.