Abstract
From his days as a doctoral student, Prabhat Patnaik was convinced that given the structure and spontaneous logic of capitalism, its expansion and relative ‘stability’ could not be understood without incorporating the role of primitive accumulation and imperialism in its development. That quest made clear that without transcending capitalism and the spontaneity that came from its essential structure, it was impossible to ensure a just, egalitarian and sustainable social order. This article draws on a small corpus of his enormous work to highlight a few insights that emerged from his wide-ranging engagement with that critique and search for an alternative.
Keywords
The Nature of Imperialism
Imperialism is a concept that has been used by different writers to signify very different socio-economic formations or versions of capitalism, as well as very different mechanisms supporting capitalist accumulation. These differences are also seen among those sharing a broad progressive position or claiming adherence to Marxism in some form. Is imperialism capitalism itself at a particular stage? Or an expansionism that is driven by the need for markets and critical raw materials to sustain accumulation in the advanced nodes of capitalism, that reorders agrarian modes of production and destroys traditional industry in the less developed regions? Or a search for territory, geographic and economic, that allows for the extraction of surplus to finance capitalist development in the metropolitan centres of a capitalism that in its very nature develops unevenly? Individual authors can explicitly or implicitly use one or more of these aspects of a system to designate it or its actions as imperialist. What is common is that the identified features are used to characterise a developed core and its relationship and even dependence on an underdeveloped periphery.
Marx’s own writings point to very different aspects of the core–periphery relationship and its relevance to capitalist accumulation, as illustrated even by his analysis of capitalist development in the ‘classic case’—Britain. The discussion in Capital, especially the first volume, speaks of the ways in which the process of capital accumulation is fuelled by plunder (primitive accumulation) and is catalysed by the benefits derived from access to the markets, under-priced raw materials and enforced cheap labour in the underdeveloped regions of the world economy, especially the colonies. A corollary is that capitalism is in some sense ‘global’ from the outset, and the underdeveloped regions were essential appendages for the capital accumulation process. It is another matter that Marx’s detailed analyses of the consequences of colonial rule were featured in his (and Friedrich Engels’) writings in the New York Herald Tribune, rather than in Capital, his epic exploration of capitalism and capitalist accumulation.
In work undertaken over decades, Prabhat Patnaik (whom this issue of the IEJ honours) has individually and jointly with Utsa Patnaik drawn attention to two crucial aspects of imperialism. The first aspect is that capitalism is inherently imperialist by nature, requiring an underdeveloped, precapitalist periphery to sustain expanded reproduction. This imperialist character is both central to accumulation, thereby ensuring that the system does not get stuck in a stationary state; and crucial to imparting a degree of stability to the system. As stated in the preface to Capital and Imperialism: ‘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 … its very existence and expansion are conditional upon such interaction’. A corollary is that the interaction between the metropolitan core and the periphery of this interdependent system must, as part of the process of accumulation, reproduce some version of the backward periphery. The second aspect is that there are multiple forms of the relationship of domination of the periphery by the metropolis and the mechanisms of exploitation of and surplus extraction from the periphery. As the geographical, social and historical context changes, so do these forms and mechanisms. But the dependence of the metropolis on the periphery is a constant feature of the system.
However, three features of Marx’s analysis of capitalism, which did recognise the presence and a role for ‘imperialism’ in some form, resulted in an underestimation of the crucial role of the periphery in this system of accumulation.
The first feature was the restriction of his analysis of capital accumulation to a closed capitalist system, even though the logic of such accumulation points to the need for ‘exogenous’ stimuli to prevent the system from either being stuck in a stationary state and or being in steep decline. While it is possible to imagine the system as experiencing business cycles, with periods of decline and periods of recovery, those cycles would tend to occur around a trend that reflects a stationary state.
The second feature was a tendency to suggest that primitive accumulation, involving not just the accumulation of investible capital at one pole and doubly free labour on the other, but of the extraction of unrequited surpluses through unequal exchange or state mediated transfers often ensured through the use of force, is typical of the early phases of capitalism and less true of its later phases. It was suggested that later capitalist phases are dominated by the extraction of relative surplus value, by denying workers of their share of the fruits of technological progress, rather than absolute surplus value.
The third feature was the idea that as capitalism subordinates pre-capitalist regions of the world system, it transforms the mode of production, putting the latter on a trajectory that takes them through the same stages of development seen by the former. In the words of Marx: ‘The country that is more developed industrially only shows, to the less developed, the image of its own future’. This has been interpreted as suggesting that imperialism does not disarticulate and retard development in the regions and countries it subordinates, thereby reproducing backwardness in the periphery, but instead progressively transforms production relations to allow for the development of productive forces.
As compared with this, central to Patnaik’s understanding of the unevenness of capitalist development and the presence and persistence of backwardness in the periphery, is the idea that exogenous stimuli are needed for expanded reproduction of a capitalist economy. Endogenous stimuli cannot generate trend growth because atomistic decision makers in capitalist economies must make ‘guesstimates’ of potential demand when deciding on investment, based on implicit or explicit assumptions of what other capitalists would do, thereby shaping the future trajectory of demand and supply. Such expectations of demand must be partly based on current and or recent experience. That is, capitalists do not decide on investments based on the likely future outcomes of their own actions, or the fact that their investments, through purchases from other capitalists and payments of wages to workers employed by them, would spur demand, including demand for their own output. In such circumstances if endogenous factors were the only stimuli for investment, individual capitalists would find their capacities fully utilised only by accident or in special circumstances. If unutilised capacities rise, investment could fall and growth could slow. That slowdown of growth would be cumulative and so even periods of positive growth, if any do occur, would prove to be ephemeral (Patnaik, 1972).
Patnaik (2013, pp. 12–22) elaborates on what constitutes an exogenous stimulus as follows: ‘Once we reject Say’s Law and recognize that capitalism is prone to deficiency in aggregate demand, we have to accept that sustained growth in this system requires exogenous stimuli. By exogenous stimuli I mean a set of factors which raise aggregate demand but are not themselves dependent upon the fact that growth has been occurring in the system; that is, they operate irrespective of whether or not growth has been occurring in the system. Moreover, they raise aggregate demand by a magnitude that increases with the size of the economy, for instance with the size of the capital stock. They are in other words different from “erratic shocks” on the one hand, and “endogenous stimuli”, such as the multiplier-accelerator mechanism, on the other: the latter can perpetuate or accelerate growth only if it has been occurring anyway’.
The differences between exogenous stimuli and the endogenous stimuli referred to earlier is that while the latter can explain the persistence of growth once it has been triggered, ‘they cannot explain why the system does not remain stuck at a stationary state; and they cannot also explain why, if growth perchance falters for some reason, it should revive again’ (Patnaik, 2013, p. 12). These differences also imply a complex interaction between exogenous and endogenous stimuli.
Identifying Exogenous Stimuli
Defining the required exogenous stimulus as a factor that raises aggregate demand without itself being dependent on growth in the system helps to identify the elements that drive capitalist growth in different periods. Those normally referred to in the literature are external markets, state expenditure, and innovation. Exports are an obvious and important ‘external’ inducement to invest, but their role in explaining capitalist growth is controversial. One way in which exports can drive investment and growth within a given tariff area is when exports to other countries or markets exceed imports from them. But such surpluses are difficult to sustain and not all countries can have surpluses vis-à-vis the rest of the world. Success itself—by raising wages, generating supply bottlenecks in areas like infrastructure, strengthening the domestic currency and leading to losses of trade preferences typically provided only to more backward economies—results in a loss of competitiveness. Historically, individual countries have benefited from net exports for periods of time, and then lost that advantage to new competitors. Growth can occur, but this cannot be a permanent inducement to invest in an individual nation. Nor does it resolve the problem for capitalism as a system.
Luxemburg (1964) had argued that a pre-capitalist periphery, the destruction of which provides markets and, thereby, an external source of demand for the capitalist sector, was a prerequisite for accumulation under capitalism. This view was questioned (Kalecki, 1971) on the grounds that it confused between total exports and net exports. What matters for a bounded capitalist sector, it was argued, is net exports, since a part of the additional demand generated by exports would be neutralised by the inflow of imports that satisfied some fraction of domestic demand, dampening the aggregate demand stimulus because of ‘leakages’ to the international system.
There is, however, a point to what Luxemburg emphasised. The aggregate demand effects of positive net exports are obvious. But even when exports do not exceed imports, the presence of a pre-capitalist sector is an ‘inducement’ to invest. Increases in exports, by triggering investment in individual sectors benefiting from growth in external demand, can spur growth through multiplier effects on consumption and investment. For a number of reasons, such multiplier effects of the investment induced by exports could make exports a stimulus to growth even when trade is balanced. The opening up of external markets can cause a net increase in investment or consumption. This could result partly because the very process of opening up would itself require investment such as in transport facilities; partly because the expansion of export industries and contraction of import-competing industries need not be identically equal; and partly because the opening up may provide access to new commodities that stimulate additional capitalist consumption and do not displace domestic production (Patnaik, 1972).
It should be obvious that conceptually this stimulus to investment and growth under capitalism cannot be equally effective and powerful across time. In fact, Rosa Luxemburg argued that the complete destruction of the available pre-capitalist periphery would in time undermine accumulation in capitalism, leading to its own stagnation. This presumes that the pre-capitalist periphery mainly serves as a market for capitalism, and that it is the only exogenous stimulus driving investment and growth under capitalism. While that is obviously not true, it does point to the fact that any single exogenous stimulus cannot be a continuous and persistent driver of growth. External, export markets can induce investment and drive growth in different regions and periods to different degrees but cannot be the consistent and sole driver of capitalist accumulation.
A second important source of stimulus to capitalist accumulation is State expenditure. Through the direct demand it gives rise to as a result of purchases made, and the indirect demand resulting from the employment and incomes it generates, state expenditure is an obvious inducement for private investment. Such expenditure is essentially autonomous, since it is not itself induced by current and/or past incomes or profits; and can be financed by debt that can be serviced through taxes imposed on the consequent output increases. Therefore, state expenditure, by acting like an internal external market, serves as an exogenous stimulus for capitalist growth. In practice, for much of the recent history of capitalism in both developed and underdeveloped countries, this has been the leading driver of growth. However, state investment can be constrained for extended periods of time depending on particular conjunctures and political economy circumstances, making it a stimulus that is difficult to consistently sustain in many contexts. For example, if inflation results when demand induced by state expenditure runs up against supply bottlenecks (say in agriculture) that are not easily relaxed, this could lead to a reduction in such expenditure and a dampening of the stimulus involved.
A third potential exogenous stimulus is innovation. Kalecki (1962, p. 147) emphasised the role of a continuous stream of innovations, which ‘need not be identified with changes in technology. We can broaden the concept to include such a phenomenon as the opening up of new sources of raw materials, which induces additional investment in the productive and transportation facilities required’. In fact, the emergence of new industries too can have a positive impact on growth and even enable recovery from a crisis. According to Kalecki, (1932, p. 54), ‘the overcoming of the crisis in the USA in 1921 was unquestionably accelerated by developing the production of inexpensive cars, radio sets, electrical household equipment, rayon, etc’. This is because, ‘as in business fluctuations in general, a major role is played here by the time taken to construct industrial plants. While factories that are to produce new articles are under construction, such articles have not yet appeared in the market, whereas investments have already caused an overall increase in employment and an expansion of the domestic market. Hence, for the moment, “old” branches of industry gain from the construction of factories for new articles’.
It is necessary to underline here the reference to a ‘continuous’ stream of inventions or innovations as a requirement for sustained growth. Only then would their impact be the same as a ‘continuous increase in profits’ or a ‘continuous increase in output’. ‘Each new invention, like each increment of profits (or output), makes certain projects ceteris paribus more attractive. Thus, a stream of inventions causes investment over and above the level which would otherwise obtain’ (Kalecki, 1962, p. 147).
This, however, makes innovation a different kind of exogenous stimulus as compared with public expenditure, since the government can for long periods maintain a certain fiscal deficit relative to GDP, or a continuous stimulus, if it chooses to. But there is no guarantee that capitalist evolution will be characterised by a continuous stream of innovations of equal or even substantial significance. In fact, Schumpeter (1961, p. 223), who gave an important role for innovations or ‘new combinations’ in taking capitalism out of its circular flow, saw them as not being ‘evenly distributed through time’ but as appearing, ‘if at all, discontinuously in groups or swarms’, leading to cycles of different durations.
Moreover, invention and innovation are not completely exogenous. With the growing integration of science and production, invention depends on research and development (R&D) spending, which in turn depends on firm growth and profitability. Moreover, inventions can remain in existence for long without being commercialised and exploited. The degree to which that happens, leading to innovation, also depends on economic circumstances. Finally, gross investment is the carrier of innovation or the application of invention in production. So, the greater the inducement to invest, the higher the level of investment and, therefore, faster the pace of innovation. Other, prior stimuli that are more persistent can be more important than innovation as long-term drivers of growth.
This requirement for a persistent or continuous stimulus also makes the pre-capitalist periphery more significant than innovations. So long as the periphery exists and can be broken into and its production systems dismantled to yield new markets and sources of raw materials, it is a source of inducement for capitalist investment. And whatever investment occurs on that account unleashes many rounds of the multiplier process, generating further expansion. Actual exports to the periphery may not be as important as the very existence of such potential markets.
But the pre-capitalist periphery has in practice not just served as the market that provides the inducement to invest. In addition, and possibly even more importantly, it has been the location from which surpluses have been expropriated to finance capital accumulation in the metropolitan centres, often induced by those markets. This occurs not just in the form of the expropriation of surpluses through the use of force in the primitive accumulation epitomised by colonial rule and transfers. Rather, the transfer of surplus continues through unequal exchange in various forms.
Primitive Accumulation in Marx
While this was recognised by Marx, it was not central to his analysis of capitalism in Capital, which rather paid considerable attention to the ability of capitalism to sustain expanded reproduction purely on the basis of equal exchange. In Marx, what makes a commodity-producing system quintessentially capitalist is the generalisation of commodity production in the sense that labour power too is a commodity. Unlike under slavery or feudalism, where the slave owner or feudal lord controls the labourer and has access to his or her labour time because of bondage and coercive power, the capitalist confronts the worker as the owner of labour power with the freedom to work for whomsoever she or he chooses. Since labour power is the capacity to labour, the labourer must also be in a position and willing to alienate this capacity and offer it for sale to the capitalist. For these choices to be made, she or he must be free in a double sense: free to dispose of her/his labour power as a commodity and free of or separated from all commodities that would allow her/him to use and realise the value of her/his own capacity to labour.
Marx did at times present the realisation of this dual freedom as the first step in the development of capitalism through a process of ‘so-called’ primitive accumulation, in which peasants and petty producers are separated through expropriation from possession, control or ownership of the means of production. Such expropriation was defended by bourgeois political economy as being the result of the accumulation of wealth by an elite that was ‘diligent, intelligent and above all frugal’. However, as Marx documented, it was in actual history the result of ‘conquest, enslavement, robbery, murder, in short, force’, which divorced producers from the means of production (Marx, n. d., p. 873). While ‘emancipating’ these producers from serfdom and the fetters of guilds, it also left them with nothing to sell but their labour power.
There were also other forms in which non-market processes were used to accumulate capital as part of the processes of primitive accumulation. ‘The rising bourgeoisie needs the power of the state, and uses it to “regulate” wages, i.e. to force them into the limits suitable for making a profit, to lengthen the working day, and to keep the worker himself at his normal level of dependence. This is an essential part of so-called primitive accumulation’ (Marx, n. d., pp. 899–900). In fact, at the end of the seventeenth century in England, it took the form of a combination of moments that ‘embraces the colonies, the national debt, the modern tax system, and the system of protection’ (Marx n.d., p. 915). Once this ‘first step’ was complete, capital accumulated at one pole confronts the doubly free worker and that is how capital accumulation based on surplus value extraction in production proceeds.
Accompanying and following this process is another transition that Marx presented as reflective of the development of capitalism proper. Since the magnitude of surplus value depends on the total length of the working day and the value of labour power, it can be increased either by lengthening the working day (absolute surplus value) or by reducing the value of labour power (relative surplus value), through productivity increases in the sectors producing the goods entering the worker’s subsistence consumption basket. 1 In either case, since the ratio of surplus value to variable capital (or capital outlaid to cover the value of labour power) rises, so does the ‘rate of exploitation’, s/v, or the ratio of surplus labour to necessary labour or the value of labour power expended. But, in Marx’s view, it is the extraction of relative surplus value through productivity enhancing investments that was characteristic of capitalism in its fully developed form.
Since capital must confront ‘doubly free’ labour in the market for capital accumulation based on relative surplus value extraction to occur, the fact that labour power in that form must emerge through a process of primitive accumulation affects the dynamism of the system in its early stages. When money capital first seeks to realise the circuit M-C-M’, it does not have ready at hand enough ‘doubly free’ workers. It extracts surplus by bringing the existing world of peasants and petty producers operating with pre-existing techniques of production under its sway, or through what Marx identifies as the ‘formal subsumption of labour to capital’ (Marx n. d., p. 645). In those conditions, only absolute surplus value can be extracted, since the technical conditions of production are given.
It is only when workers who have nothing to sell but their labour power confront capital accumulated in the hands of a few, that the conditions where the owners of capital can transform the process of production and enhance surplus value extraction in the form of relative surplus value are created. This is the phase of ‘the real subsumption of labour by capital’. 2 Here again, at many points in his analysis Marx appears to suggest that the extraction of relative surplus value based on the real subsumption of labour by capital inevitably displaces the extraction of absolute surplus value through the formal subsumption of labour by capital. In Marx’s view, the production of surplus value ‘requires a specifically capitalist mode of production, a mode of production which, along with its methods, means and conditions, arises and develops spontaneously on the basis of the formal subsumption of labour under capital. This formal subsumption is then replaced by a real subsumption’ (Marx, n. d., pp. 645–646, emphasis added).
Once the process of primitive accumulation had created the conditions for extraction of surplus value in a system with equivalent exchange, accumulation in its quintessentially capitalist form begins, and crudely coercive primitive accumulation moves into the shadows. And once the force of capitalist accumulation unleashes the productive forces, productivity increases ensure the expansion of surplus product and value, with surplus being extracted in the form of relative surplus value, rather than as absolute surplus value, or largely through an extension of the working day and an increase in the intensity of labour. This at times tends to be interpreted as an almost linear shift from primitive to normal modes of capital accumulation and from absolute to relative surplus value extraction. A corollary is that, from the point of view of the logic of expanded reproduction under capitalism, the use of predatory force and imperialist expansion was an early-stage phenomenon. Vestiges of that may remain and instances of recurrence may abound in later stages, but they are not seen as an essential requirement of capital accumulation.
As Marx noted in his Preface to the first German edition, his intention was to examine the capitalist mode of production and the conditions of production and exchange corresponding to that mode, by analysing the capitalism of England of that time, which was its classic ground. The fact that other countries, including Germany, were not characterised by the dynamism that England displayed did not undermine the generality of that analysis, because: ‘The country that is more developed industrially only shows, to the less developed, the image of its own future’ (Marx, n. d., pp. 90-91. This approach to the analysis of capital accumulation missed out on the tendency of capital accumulation to reproduce backwardness in peripheral regions and underplayed the role of that periphery in sustaining capitalist accumulation.
This kind of reading of the nature of actually existing capitalism was also encouraged by the fact that in Capital as it came to be published, Marx did not undertake an extensive analysis of the role of the state in supporting capitalist accumulation and providing a site for the persisting primitive accumulation of capital. Nor did he analyse the impact that capitalist expansion had on the peripheral countries and the colonies, where its ‘modernising’ influence did not exclude coercive extraction of surplus, subordination of producers operating with primitive techniques, and reproduction of backward relations of production so as to maximise the extraction of absolute surplus value.
The resulting optimism about the transformative potential of capitalism and the increasing assertion of the collective will of the working class possibly explains why Marx: (a) considered primitive accumulation as being confined to the early stages of capitalism, before the capital-wage labour relation is to a substantial extent ‘universalised’; (b) saw a sequential movement away from the formal to the real subsumption of labour by capital and from the extraction of absolute surplus value to the extraction of relative surplus value; and (c) argued that this transition would be hastened by the ability of the working class to both limit the length of the working day and raise the level of wages.
Any reading of world history over the last 150 years would indicate that the first two of these features have not been confined to specific phases of capitalism but have persisted to differing degrees in different contexts across capitalist history. Even to the limited extent that Marx’s analysis was true of the ‘classic ground’ of capitalism he analysed, England, it was by no means overwhelmingly the rule. And even though the expectation that capitalism would not survive through the nineteenth or the first part of the twentieth century has been belied, capitalism’s persistence has not been accompanied by the expected transformations like the end of primitive accumulation, the shift away from absolute surplus value extraction to relative surplus value extraction, and the strengthening of the power of collective labour to win concessions from capital.
It is true that Marx did recognise that capital focused on maximising surplus value and accelerating capital accumulation would continue to seek ways of extracting absolute surplus value and the workers’ effort to limit that might be only partially successful. This is clear from his detailed discussion on the failure of the Factory Acts, the constant struggle to limit the working day, the tendency to increase the intensity of work within a given working day, and the resort to payment of time and piece wages. He therefore recognised that capital is constantly aiming to maximise surplus value through ‘primitive’ means. So, while a ‘merely formal subsumption of labour under capital 3 suffices for the production of absolute surplus value’, the ‘unrestricted prolongation of the working day turned out to be a very characteristic product of large scale industry’ (Marx, n. d., p. 646), even long after relative surplus value extraction had begun. In sum, it is completely possible that the generation of absolute and relative surplus value go hand in hand throughout the capitalist epoch and independent of the level of capitalist development.
This remains true even 150 years after the publication of Capital. The growing presence of casual, temporary and self-employed workers, and the unleashing of competition between the reserve army of cheap labour constantly reproduced in the peripheral countries and workers in the metropolitan centres only aggravate this. They create conditions where workers are forced to self-exploit themselves, thereby creating opportunities for the extraction of absolute surplus value, even when technological advance helps enhance relative surplus value. Moreover, inasmuch as these conditions and the proliferation of finance result in indebtedness that leads to the loss of ownership or control over assets on the part of workers, the middle classes and the peasantry, the expropriation of assets that can be sold or used later in surplus-value generating productive activity becomes the means to extract surplus without the mediation of productive activity in the first instance.
Capitalism as a World System
A corollary of this experiential evidence is that any study of actually existing capitalism must treat it as a world system and not just an English phenomenon. Marx’s discussion of imperialism outside of Capital (in his New York Tribune articles for example) did recognise (a) the role of surplus transfer and market access in the colonies in sustaining capital accumulation in capitalism’s classic ground, well past its early history; and (b) the role of the subordination of the petty peasantry and capture of the state by capital in extracting the surplus that was transferred. Such transfers and market invasion continued to play a role through the twentieth century and do so even today, now under the aegis of finance as well. So, the transformation that Marx took for granted, though visible and significant, has not been taken to completion even in the developed capitalist world, and definitely not in the large, underdeveloped or less developed periphery of capitalism.
It is no doubt true that in the period after the Second World War, unemployment in the developed world was low and welfare state measures were in place. But the benefits of that accrued largely to workers in the advanced nations, and that period was an exception rather than the rule in the history of capitalism. A feature of contemporary capitalism is the large size of the so-called ‘informal sector’ and high proportion of ‘informal employment’, with workers employed in precarious conditions earning low and stagnant wages. This is obvious in the less developed countries where the informal economy accounts for between half and three-quarters of all non-agricultural employment, with poor employment conditions, involving lack of protection when wages are not paid, compulsory overtime, lay-offs without notice or compensation, and the absence of benefits such as pensions and insurance. But with unemployment in the developed countries soaring and remaining high after the 2008 crisis, descriptions of the labour market point to precarious conditions there as well. This has affected youth in particular, as they increasingly experience long or repeated spells of joblessness, suffer from large exposure to temporary and precarious jobs, and are forced to accept reductions in working time.
The dominant conclusion from the 150 years that have passed is the persistence of the extremely intensive exploitation of workers and petty producers, especially in the periphery, through ‘primitive’ forms of subsumption, albeit in changed forms. Related to this is the persistent reliance on various forms of absolute surplus value extraction, especially as the bargaining power of labour is weakened with help from the state. The intensity of these means of exploitation increases when the correlation of power favours capital and both ‘society’ and state do not restrain it. Such exploitation is still intense in the peripheral regions that are being increasingly integrated into global capitalism, even though the specific types of exploitation characteristic of the long period of colonial domination are no longer available to metropolitan capital.
The recognition of the persistence of forms of imperialism has also been coloured by Lenin’s analysis of the monopoly phase of capitalism. Lenin’s discussion of imperialism and inter-imperialist rivalries that gave rise to war focuses on a capitalism that has transcended the phase of free competition, in which the operation of competitive markets and the drive to substitute dead for living labour result in the concentration and centralisation of capital. That takes the system to its monopoly phase, in which monopoly power helps to raise the level of surplus value and constricts markets. This in turn necessitates expansion abroad to sustain accumulation, facilitated by the greater ‘seeing power’ of big capital. From this argument it was just a short step to Lenin’s characterisation of imperialism as the ‘highest’ stage of capitalism, in which the battle for colonial territories intensifies inter-imperialist rivalry. This was a specific use of the term imperialism, which did not in any sense imply a denial of metropolitan influence over the peripheral regions in the century before Lenin wrote. Meanwhile, in this monopoly phase, other forms of primitive accumulation gained in intensity. Thus, ever since the onset of the monopoly phase of capitalism in the quarter century after Capital Volume I was published, the role of the state as the means and site for primitive accumulation has hugely increased.
Decolonisation and After
A major change that occurred in the years following World War II was the wave of decolonisation, driven not least by Britain’s loss of its hegemonic position. The loss of political control over the dominions controlled by the earlier colonial powers had multiple implications. To start with, it meant that the ease with which the imperial powers with subordinate territories could use the colonial periphery, to ensure stability and accumulation in the metropolis, was eroded. It was now far more difficult, if not impossible to find ways to cover deficits of the metropolitan centres with countries and regions from which they imported more than they exported, such as China, through triangular trade. It was also more difficult and costly to access the capital that was, for example, exported along with labour from the metropolis to the regions of recent settlement in North America, Australia and elsewhere. Besides expanding the dynamic poles of capitalism, this capital export had also helped sustain the export of labour from the core metropolitan centre, enabling the system to reduce substantially the unemployment that would otherwise have been the inevitable outcome of capitalist accumulation, as Marx had argued in Capital. The loss of this ‘privilege’ obviously significantly reduced the dynamism of metropolitan capitalism.
Moreover, national governments of newly independent states in the underdeveloped regions intervened to set up protectionist barriers to reduce foreign access to domestic markets, set regulatory ceilings on where, how much and under what conditions foreign capital could enter the country, and intervened to encourage domestic capital and strengthen indigenous capabilities in the pursuit of import-substituting industrialisation strategies, reducing the ability of metropolitan capital to use these countries as markets and as locations from which to extract surpluses as part of a system of accumulation on a world scale.
The debilitating effect these developments could have had was mitigated by two factors. The first was the step up in public expenditure and the launch of the welfare state, first necessitated by the Great Depression and then by need to appease the metropolitan working class especially in the context of the ‘threat’ from socialism and of the Cold War. This triggered a strong version of one of the three exogenous stimuli discussed earlier. The second was the construction of a neo-colonial international order, where international inequality was exploited to rebuild access to markets, intensify debt and foreign investment dependence, and ensure that the prices of commodities imported from the periphery, especially of energy products, remained low. This allowed inflation in the metropolis to be reined in despite large public expenditures and the near full employment that entailed. But as the oil shocks of the 1970s and after made clear, ensuring this subordination was no easy task, requiring periodically direct or proxy military intervention to secure the inequality within global capitalism that was needed to support accumulation and stability at the metropolitan core.
Neocolonialism achieved many objectives. It helped to keep markets partially open. It used the absence of technological capability and a capital goods industry in underdeveloped countries to help transnational firms jump tariff barriers and establish a significant presence in these countries and dominate some markets. It exploited the balance of payments vulnerability of inadequately diversified underdeveloped economies to make them dependent on foreign debt, in effect giving developed countries leverage over policy in the underdeveloped regions.
But at least for a couple of decades after World War II, countries with strong independent governments managed to limit such influence, even if not fully escape it. This was perhaps the weakest phase of imperialist influence, encouraging analyses which suggested that imperialism was dead and that the constraints imposed by the unequal international economic order on the development of capitalism in peripheral countries had weakened or were no more operative.
However, the persistence of domination and subordination was even more starkly illustrated by subsequent developments, even though some processes initially seemed to redress the international balance of economic power. Both the oil shocks of the 1970s, following the nationalisation of oil resources and the formation of OPEC, and the shift of global manufacturing production to a few developing countries that became successful exporters, which reshaped the international division of labour, seemed to give less developed countries a larger share of the world’s surpluses. But in time these advantages were either dissipated, or given the overall deflation in the world economy, the surpluses earned by the developing countries were diverted from productive accumulation to the global financial system controlled in the metropolitan countries.
Optimistic assessments of the immediate post-World War II years were soon proved wrong. Paradoxically, this process started as metropolitan capital experienced a crisis in the late 1960s and 1970s, when the Golden Age characterised by creditable growth, near full employment and low inflation in the core capitalist countries came to an end. The crisis paved the way for a backlash led by Finance Capital against a fiscally proactive and regulation-inclined state, forced a shift to fiscal conservatism in the name of ‘prudence’ and triggered waves of deregulation and liberalisation in both metropolitan and peripheral countries. Prabhat and Utsa Patnaik (2021) argue that this shift initiated an era of income deflation in the peripheral countries. This enlarged the pool of cheap available labour in the peripheral countries and released for export a range of cheap commodities as well as offshored manufactured goods, which underlay the low inflation characteristic of the years of the ‘Great Moderation’ in the West. In addition, easy and cheap money policies, justified on the grounds that inflation was under control, became the principal macroeconomic instrument used to both drive growth and address economic downturns. The speculative lending and investment that this supported allowed growth to ride on financial bubbles, but led to periodic crises in the system, the costs of which were socialised through the intervention by government treasuries and central banks. A whole new framework of unequal exchange was established, in which the state consciously assisted capital behind the smokescreen of liberalisation, inflated financial and corporate profits in the metropolis while keeping inflation low and growth at moderate levels. That framework underpinned the neocolonialism of this phase.
The ability to find new avenues to extract surpluses using new means from the periphery, is among the reasons for the accumulation that occurred in this phase of neoliberal capitalism. Neoliberalism as a policy regime has been the highly effective instrument of imperialism in this Age of Finance. The creative significance of Patnaik’s work lies in recognising the changing nature of imperialist subordination of the periphery by the centre, with neocolonialism partially substituting for colonialism and providing in multiple forms the exogenous stimuli and the resources needed to sustain capitalist accumulation.
Thus, since the inception of capitalism and the rise of late nineteenth century imperialism, the tendency to crises inherent in capitalism was partly counteracted by capitalism’s subordination and exploitation of the underdeveloped and less developed regions of the world. As has been underlined elsewhere, Marx recognised and discussed this, but because of his focus on capitalism as a closed system, he paid less attention to it in Capital. In the period since the Second World War, despite decolonisation, neocolonial relationships ensured that this relationship of subordination with the periphery continued, explaining to a substantial extent the resilience of the capitalist mode. Not surprisingly, increased economic integration of far-flying regions of global capitalism was a part of the restructuring that followed the 1960s crisis.
Significantly, in another illustration of the contradictory character of the capitalist system, the process of integration has also increased the instability of capitalism. The international expansion triggered by the process of resolution of the 1960s crisis saw the increased sourcing of goods and services from and relocation of production to less developed countries with a large and cheap reserve army of unemployed labour. Metropolitan capital became increasingly globalised, as policies that prised open the markets for goods, services, labour and finance were promoted across the world in the name of liberalisation and economic ‘reform’. One consequence of the resulting reordering of global production was an increase in global trade imbalances. With some countries turning out to be the dominant hosts to and exporters of manufacturing and primary commodities, and others their consumers and importers, the global trade balance reflected differential levels of surpluses and deficits. Cross-border flows of finance help to restore some balance. But since flows may not match requirements in all periods, balance of payments problems result in more frequent disruptions of the system of reproduction in individual countries.
On the other hand, global sourcing through purchase and production, by expanding the reserve army of labour available to the now globalised metropolitan capital, directly addressed the issue of any squeeze of profits as a result of wage increases. It also indirectly served the objective of maximising surplus extraction, by keeping wages in the metropolitan countries low, because of competition from labour abroad and the fragmentation of labour markets with precarious employment conditions at home. In addition, since it was the more labour-intensive segments of manufacturing that were relocated abroad, employment growth was limited and unemployment high. Finally, policy measures aimed at rendering labour markets ‘flexible’ were used to prevent existing institutional structures (especially unionisation and labour market regulation) from becoming obstacles to their transformation. A consequence of all these tendencies, Patnaik argues, is an increase in the share of surplus incomes in global product, a corollary of which is a squeeze in mass consumption demand and a tendency towards overproduction, slow growth and recurrent recessions.
As discussed, the crisis in the late 1960s and 1970s necessitated a restructuring of capitalism, and besides the forms it took as discussed above, it included elements to address inflation, the banking crisis it gave rise to, and the deceleration in real economic growth which followed the immediate contractionary response to inflation in the form of expenditure cuts and stringent monetary policy. In the course of that restructuring, two kinds of tendencies were unleashed. One was a radical shift in favour of restricted public expenditure or contractionary fiscal policies in the metropolitan core and the peripheral underdeveloped countries, which depressed mass demand and held down prices of primary commodities (including energy) and kept real wages stagnant. The other was the sourcing from or relocation to low wage locations of manufacturing production that helped keep price increases low in metropolitan markets. These tendencies only increased the vulnerability of the global capitalist system.
Meanwhile, in the less developed countries, the invasion by global finance facilitated by the surfeit of cheap liquidity massively increased instability. The destabilising nature of financial flows became clear with the debt crisis in Latin America in the 1980s and was driven home by the Southeast Asian financial crisis in 1997. From then on, hardly any less developed country has escaped becoming a victim of an external crisis precipitated by footloose finance in search of profit. In the case of Southeast Asia, even countries performing strongly, including so-called ‘miracle’ growth countries like South Korea, experienced major disruptions of economic activity, the effects of which are still visible. The recovery from the crisis did not mean a return to ‘miracle’ status. Instead, it was accompanied by significant acquisition, at deflated prices, of productive assets in these economies by foreign firms. It involved a substantial restructuring of the financial sector. It changed domestic macroeconomic tendencies, with lowered investment rates and capital export becoming prominent features. It altered the nature of engagement with the world system of these economies, and their subordination by imperialism and global finance shows through in multiple ways. As the global system has been continuously flooded by cheap liquidity in the wake of successive crises, such instability and subordination in the less developed regions have been aggravated.
Throughout this latest period as well, the deep underlying reliance of capitalism on the pre-capitalist or non-capitalist institution of the family, persisted. This has served as a central means for the extraction of the unpaid labour of women not only for social reproduction but for some forms of marketed production. Its interplay with the geospatial inequalities that mark contemporary neocolonialism, deserves to be noted, though it is still inadequately studied and understood. In addition, global capitalism has proved adept at creating new forms of ‘economic territory’ that effectively generated new markets. Some that are increasingly significant as arenas for imperialist penetration and competition today are the basic amenities and social services that were earlier seen to be the sole preserve of public provision; and the generation and distribution of knowledge, now privatised and commercialised in the form of intellectual property rights.
There are a number of implications that flow from this changing relationship between the metropolitan core of capitalism and its less developed periphery in which pre-capitalist segments are still predominant. The first is that if imperialism is seen as the mechanism by which the metropolitan centres of capitalism subordinate and exploit the periphery to ensure accumulation and stability at the core, the phenomenon has been an abiding feature of capitalism since its inception. Second, the periphery is not necessarily confined to less developed nation states with their own governments and geographical boundaries but is often present within ‘core’ capitalist nations. Third, mechanisms of exploitation varying from the use of force to plunder or extract absolute surplus value, by getting the working classes and the peasantry to sell their labour power at wages below the cost of reproduction of that labour power, were not confined to the early phases of capitalism alone but proliferated in the peripheral regions within and outside the metropolitan core even in later stages.
Fourth, with the transition of metropolitan capitalism to its monopoly phase, the concentration and centralisation of capital that gave rise to monopoly capital has only intensified. Consequently, the enhanced ‘seeing power’ of big capital and the aggressive non-price competition between monopoly firms and nexus involving big capital, big finance and the state, have resulted in an intensification of exploitation of the periphery even as inter-imperialist rivalry is on the increase. The rise of truly international firms producing globally in integrated global production chains for global markets shows that imperialist exploitation can be internalised within these transnational firms. Finally, as rising global surpluses and constricted mass markets have adverse effects on the potential for physical accumulation, a feature of imperialism noted by Lenin has become dominant. Capital has made ‘clipping coupons’ to rake in financial profits, made up of shares in both relative and absolute surplus value, the principal means of its expanded reproduction.
Footnotes
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The authors received no financial support for the research, authorship and/or publication of this article.