Interview of Prof. Utsa Patnaik

Prof. Utsa Patnaik, eminent Marxist economist, retired from CESP/JNU recently. She has inspired generations of students and researchers through her teaching and research spanning four decades. On the occasion of her farewell, students of CESP published an interview of Prof. Patnaik, which is reproduced here.

Generations of students at the Centre for Economic Studies and Planning have attended your lectures on the “Political Economy of Development”. Why do you think it is important for students of economics to study political economy?

I myself decided to study economics rather than literature or history after leaving school, solely because I had already read parts of Karl Marx’s Capital, and had read V I Lenin on philosophy which whetted my appetite for a rigorous training. I found that the theoretical framework of Marxism in particular dialectical and historical materialism, helped me best to understand the world around me; further this framework was reflexive in permitting its own critique. My critical adherence to Marxism has been life long and has determined the perspective and choice of questions in my own doctoral research, in every course I have ever taught including ‘Political Economy of Development’ and in every piece of research work I have ever undertaken.

‘Political economy’ is inseparable from both economic theory and from economic history. If you recollect my course was designed to look at the historical trajectory of transition to industrialization in agriculture-predominant societies, taking the cases of Britain and Japan as the first industrializing nations in Europe and Asia . I started however by defining certain essential theoretical concepts in the classical tradition, namely economic surplus and its forms in different societies, and laid special stress on exploring the neglected question of colonial exploitation. Thereby the course evolved over time into a radical critique of received theories including of classical economists like David Ricardo. I believe the specific problems of transition in contemporary societies including in India can best be analyzed by contrasting the very different conditions under which their transition is taking place, to that of the early industrializing nations which had forcible access to external resources and markets, and could ‘export unemployment’ to use Keynes’s term. Solving the unemployment problem domestically is the major challenge for us and this demands a growth strategy which is not solely market-driven but is geared to our specific problems.

Why should students of “Development Economics” study economic history?

Not only students of ‘development economics’ but all economists should study economic history.

There is a methodological problem in economics and in the social sciences generally, that the truth of theoretical propositions, or even the empirical behaviour of consumption, income distribution and so on, cannot be established though controlled experiment which is the method of verification of hypotheses available to the sciences. Mathematical simulations alone are not the answer since the realism of assumed values cannot be established. Economic history is therefore the only ‘laboratory’ of the social sciences. Those who do not study economic history always lack insight into economic processes, and are extremely prone to produce fallacious theories and to draw incorrect inferences with regard to contemporary developments, because they are quite innocent of any knowledge of how economic policies or exogenous shocks have impacted in the past to produce certain definite outcomes. In my view a person cannot be a truly competent economist without studying economic history – it is a necessary condition, though of course not a sufficient one.

As a major contributor to the ‘Mode of Production’ debate on Indian agriculture in the 1970s, how do you assess the debate’s impact on the understanding of Indian agriculture and policy formulation?

The debate was basically between those who argued for the essentially non-changing nature of agrarian relations and the persistence of usury and ‘semi-feudalism’ as dominant features, and those who linked the observed ongoing changes in agrarian relations in a capitalist direction, to public policies like land reforms and the radically changed, expansionary macroeconomic scenario after Independence. With the latter perspective which I articulated and with which some though not all participants agreed, it was possible also later to analyze the retrogression of agriculture and the revival of rentierism and usury, when the expansionary policies changed to public expenditure contraction and income-deflating measures under neo-liberal reforms. Policy formulation has not been influenced since those who formulate policy generally do not read such debates.

You have been a consistent critic of the post-1991 economic policies of the Indian Government, particularly in regard to agriculture. What is the essence of your critique?

As indicated above, the critique follows from a study of economic history and in particular the specific character of public policies implemented by the state which in turn reflects the ruling hegemonic set of ideas. A study of the conditions leading to the 1920s-1930s Great Depression tells us that financial interests which dominated public policy then, consistently favoured and implemented public expenditure deflation and ‘balanced budgets’ as a misconceived solution to external imbalance, which in fact worsened the situation and led the world capitalist system into a deflationary spiral of contracting output and trade, inflicting the misery of unemployment and hunger on millions of people. A ‘converse fallacy of accident’ underlay the theories of finance, for a specific premise of full employment was adopted and then a general inference was improperly drawn that public expenditure cuts were appropriate even when unemployment actually prevailed namely even when the premise was not true.

In India after Independence owing to the progressive pressures released by the national movement, the state followed strongly expansionary policies and directly invested in development while protecting vulnerable petty producers from the world market. It was recognized that improvement in the material well-being of the people required such positive intervention. While poverty was not reduced significantly except in one or two states, neither did poverty and inequality grow significantly.

With the world re-ascendancy of financial interests however there was a complete reversal of these earlier policies. The deliberate imposition of public expenditure deflation and free trade since 1991, in the light of historical experience, was bound to affect mass welfare adversely by raising unemployment, lowering incomes and exposing petty producers to global price volatility. ‘Development’ has been re-defined to mean an enclave development benefiting a minority of the population fast enriching itself, whose needs are increasingly serviced by the majority.

I have argued that there is an anti-humanist rationale to the income-deflating policies which have been deliberately followed: in a world of limited land and energy resources as open frontiers disappear, mass demand deflation releases more energy and other primary resources for the use of the well-to-do, the global and local rich, at the expense of the already poor. We find that just as was the case in trade liberalized India before Independence, food grains output and availability per head has gone down since 1991 with the current level falling below that of even the least-developed countries. Poverty, properly measured by keeping the standard of measurement invariant, has risen quite sharply over the period of neo-liberal economic reforms.

Why are 60 million tons of foodgrains rotting in FCI godowns today even as crores of Indians go hungry?

As explained in the previous answer India has seen contraction of aggregate demand under neo-liberal policies, operating through several routes: directly as public expenditure was reduced thus raising unemployment, and also as with falling public investment the growth rate in agriculture slowed markedly thus lowering farmer incomes. There was also significant pricing out of poor consumers from the public distribution system as targeting was introduced, and pauperization of cash crop producers facing price declines with freer trade. There was an earlier episode of build-up of massive food stocks to 64 million tonnes, by 2002-03.

Unsold stocks can build up when output is expanding faster than demand, but they can also build up when demand is falling faster than output. Since per capita output has been falling, the answer to stocks build-up lies in an even faster rate of fall of per head demand. The immediate episode of cumulative addition to stocks, which started from 2007 is the result of a new round of demand deflation - in a combination of reduced real earnings among small producers in the export sector which has been hit by global recession, erosion of real wages and real incomes especially in the unorganized sector through high food price inflation, and declining farmer incomes in a drought year 2009-10. The year 2008 saw the largest private grain exports ever and very large addition to stocks reducing domestic supply/demand to below the level in even the least developed countries.

The government economists however have always interpreted stocks build up as ‘too much output’ and not as ‘too little demand’. So they do not take adequate steps for reviving mass demand, do not restrict grain exports in time, and refuse to remove the artificial barriers to distribution entailed in targeting the population with their wrong poverty estimates. They are paving the way for a revival of right wing political forces capitalizing on distress.

What are the problems with the official poverty estimation methodologies?

There is only one basic and serious problem with official estimation which gives rise to all other problems, namely the standard against which poverty is being measured is not kept constant over time or space. So successive poverty estimates cannot be compared, no valid inference can be drawn regarding the direction of change and official claims of poverty reduction are not true. Take an example: we are told that the percentage of failed students in a school has declined sharply from 30 to 10 between 1973 and 2005, so we infer that academic performance has ‘improved’ for we take it for granted that the pass mark must be unchanged to allow such a comparison. But then we find out that in fact the pass mark has been steadily lowered over time, from say 50 out of 100 in 1973 to 25 out of 100 in 2005. By the latter date, say two-fifths of students could not reach the original 50 percent pass mark and this figure exceeds the school’s failure percentage in 1973. It is clear the inference of academic ‘improvement’ is not true, rather the opposite inference of worsening is true.

Similarly in official poverty estimates a certain standard was set in the initial year that those persons were to be considered ‘non-poor’ who through their MPCE (monthly per capita expenditure) on all goods and services, could obtain at least 2400 (kilo)calories energy per day in rural and 2100 calories in urban areas, and these MPCEs were the ‘poverty lines’. But for all later years the standard was steadily lowered as a consequence of changing the definition of poverty line so as to de-link it from the requirement of the initial standard being satisfied. Just as the definition of a student ‘passing the examination’ in 2005 is changed from one who has at least 50 marks to one who has at least 25 marks, the definition of a rural/urban person who is ‘non-poor’ is effectively changed from one who could afford at least 2400/2100 calories to one who can afford 1820/ 1795 calories. It is obvious that comparison over time is not valid. All that the Tendulkar committee has done is to raise as it were the ‘pass mark’ from 25 to 30 (from 1820 calories to 1930 calories, and for rural areas alone). The basic methodological error remains since lowering the ‘pass mark’ from this new level (lowering the calorie intake at the official poverty line) will continue in future estimates.

A further complication is that the standard has not been lowered uniformly but at different rates in different states introducing non-comparability of states at any given point of time. Suppose between 1973 and 2005 the pass mark in Economics is lowered from 50 to 20 but the pass mark in History is lowered from 50 to 40. The percentage of official ‘failures’ in History by 2005 is much higher than in Economics and it is inferred that economics students have performed better. But in fact the true failure rate (students unable to reach 50 marks in 2005) is found to be higher in Economics than in History. Similarly the ranking of the states by official poverty levels does not reflect the actual ranking since for example in Andhra Pradesh with 11 percent rural officially ‘poor’ the nutritional standard at the official state poverty line is 1600 calories per day compared to 2010 calories per day at the much higher official poverty line in Orissa which gives 47 percent officially ‘poor’. The true ranking is the opposite, with AP showing a higher percentage of persons unable to reach any given nutrition standard, than Orissa.

There is a serious question of ethics among academics and those in public life raised by the poverty estimation issue. A school’s funding may depend on academic performance and its teachers may wish to claim improvement, but to do so by lowering the pass mark means that its teachers are intellectually dishonest and do not deserve to teach anyone. The state and its functionaries may wish to claim improvement in the poverty situation to justify current public policies, but to do so by changing the definition such that the standard against which poverty is measured is continuously lowered, and to continue with this method without any reference to the criticisms raised and even after the problem of non-comparability has been pointed out, is intellectual dishonesty amounting to apologetics.

When you look back at the last four decades of your teaching and supervising students at CESP, how do you view the role and legacy of the Centre?

Our initial aim when the Centre was founded has perhaps not been fully realized but progress in achieving the aim has been significant. The aim was to imbue students with a sense of the excitement of the discipline which deals with the most basic questions that a society faces. Rigour in theoretical analysis and meticulous empirical work were stressed. The colonized mind persists long after formal political Independence and to impart a sense of analytic distance from hegemonic and not always correct theories, we sought to teach the historical and societal context of the formation of these theories. There was a strong focus on the analysis of the Indian economy looked at in the context of global changes. Above all we asked students to think for themselves. As our students have become teachers they have tried to pass on these values. I believe the Centre has contributed to the evolution of a rigorous, critical and progressive intellectual atmosphere in this University and the academic world at large. But as always there is a great deal of scope for improvement.

What is your message to the researchers in the field of economics today?

Being asked to give a ‘message’ gives one a feeling of imminent departure for the next world. As I hope to be around for quite some time I would be happy to discuss specific issues with researchers.