Agriculture, Underdevelopment, and Imperialism
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A view has gained currency of late that ‘imperialism’, in the sense of a ‘world system of colonial oppression and financial strangulation of the overwhelming majority of the population of the world by a handful of “advanced countries”’ (Lenin 1977, p. 637), is no longer a useful category in the era of globalisation. The notion of imperialism, it is argued, has necessarily a ‘spatial’ dimension, captured for instance in Lenin’s reference to ‘a handful of advanced countries’ in the above remark; but, with ‘economic superpowers’ now emerging from within the ranks of the Third World, that spatial dichotomy has ceased to be relevant, which makes the concept of imperialism itself irrelevant.
On the one hand the monopoly capitalists in the emerging Third-World countries have been integrated into international finance capital; and on the other hand the oppression and dispossession of the non-monopoly segments of the population, not just the workers, is not confined to Third-World peasants and craftsmen, but extends also to vast sections of the population in the advanced countries, who are pushed into penury for instance by financial crises. Hence the tendency is towards a homogenisation of the two segments of the globe, the advanced and the backward countries, which undermines the meaningfulness of the concept of imperialism.
The purpose of the present essay is to critique this view and establish the abiding relevance of the concept of imperialism. It argues that capitalism simply cannot exist as an isolated self-contained system; that it can do so only within a pre-capitalist setting, by exercising domination over its pre-capitalist surroundings (which no longer therefore retain their original pristine form); that this domination necessarily has a ‘spatial’ dimension, in the sense that whether or not capitalism in the metropolis also dominates its own internal pre-capitalist or small producers, it cannot do without dominating such producers located in a particular ‘outlying’ geographical region; and that no difference is made to this phenomenon of domination, and hence to the phenomenon of imperialism, by the fact that capitalism and capitalists (including monopoly capitalists integrated with international finance capital) emerge powerfully within this region too.
Modern industrial capitalism in Western Europe was associated from the very beginning with the processing of raw materials that were not produced, and indeed were not producible, in Western Europe itself. Cotton, whose processing into cloth pioneered the industrial revolution, was not producible in Britain, the pioneer industrial capitalist country. It had to be imported from the tropical and sub-tropical colonies. Likewise a variety of consumer goods, from fresh fruits to tea and coffee, which entered into the daily budgets of the bulk of the population in the capitalist metropolis, were simply not producible in the metropolis itself and had to be imported from distant tropical and subtropical lands, where again their cultivation had to be either introduced or augmented for meeting metropolitan needs. Indeed the economic historian Phyllis Deane (1980) sees the industrial revolution as following from, and being conditional upon, the development of a certain pattern of world-wide trade. This pattern however was imposed upon the rest of the world, especially upon the tropical and subtropical lands, characterised by pre-capitalist production, by the emerging metropolitan capitalism itself.
Dependence of Metropolitan Capitalism
This dependence of metropolitan capitalism upon the pre-capitalist producers of the tropical and subtropical lands for supplying it with a range of raw materials and consumer goods has not changed to this day; indeed it cannot change, given the fact that these goods are simply not producible in the temperate regions where metropolitan capitalism is predominantly located.
This fact, however, is so thoroughly obscured by the extreme smallness of the weight of such primary commodities in the total gross value of output in the advanced capitalist countries that it is scarcely ever taken into account, even by radical authors. But this smallness is a result of the specific valuation process. Such valuation itself in other words expresses a relationship of domination. It expresses the domination characterising the metropolis’s relationship with the ‘outlying regions’: with its pre-capitalist and small producers, and also with its low-paid plantation workers, who produce the primary commodities needed in the metropolis. It is ironic that this fact of domination, which underlies the low value of these commodities, is sought to be denied on the basis of such low value itself (I emphasis the social basis of this valuation process in Patnaik 1997).
To borrow Harry Magdoff’s argument (2000), one cannot make steel without using iron ore, no matter how much is paid for the latter. If iron ore is obtained gratis by snatching it from regions where it was earlier used, and hence its value has zero weight in the gross value of steel produced, then this fact, far from expressing the absence of domination, expresses rather the extreme severity of it. Relative value comparisons therefore are irrelevant to the argument about the absolute necessity of a whole range of products of the ‘outlying regions’ for metropolitan capitalism.
As accumulation occurs, the need for such products increases, for any given output-mix in metropolitan capitalism; and as the output-mix in the latter changes owing to product innovation, newer goods from the ‘outlying regions’ begin to be demanded (which also happens because of process innovation). Metropolitan capitalism must not only have these goods supplied from the ‘outlying regions’, but have them supplied at prices that do not increase at a rate which can threaten the value of money in metropolitan capitalism. It is not enough in other words that the ‘outlying regions’ should just be opened up for trade and made to supply these goods to the metropolis, which per se is just a once-for-all process. It has to be continuously ensured that their supply price does not rise to threaten the value of money, since any such threat can have a seriously destabilising effect upon the capitalist system, which is quintessentially a money-using system. (The threat to the value of money in the metropolis posed by increasing supply price of primary commodities is independent incidentally of the weight of their value in the gross value of metropolitan output.)
Primary Commodities, Land, and Investment
The fear of such an increase in the supply price of primary commodities (and hence in their terms of trade vis-à-vis manufactured goods) haunted David Ricardo, who saw the accumulation process under capitalism grinding to a halt, and the arrival of a ‘stationary state’, as a consequence of it. What Ricardo had failed to appreciate, however (because, being a believer in Say’s Law, he never saw money as a form in which wealth could be held under capitalism), is that long before the arrival of the stationary state, money as a form of holding wealth would have been subverted by the rising supply price of primary commodities, disrupting the functioning of the capitalist system. (I use the term ‘money’ throughout this essay to refer only to currency and bank deposits irrespective of whether ‘money’ in this sense has a commodity link.)
The danger of such disruption was recognised by John Maynard Keynes, who even paid an oblique tribute to Lenin while doing so. In his opus The Economic Consequences of the Peace, Keynes wrote (1919, p. 112): ‘Lenin is said to have declared that the surest way of destroying the Capitalist System is to debauch the currency… Lenin was certainly right.’
And yet, in addition to the money prices of primary commodities produced in tropical and subtropical regions rising to ‘debauch’ the currencies of metropolitan capitalist countries, even the terms of trade between manufacturing and primary commodities have not moved secularly in favour of the latter as visualised by Ricardo. Indeed, on the contrary, barring war years, when in any case the capitalist state intervenes so heavily in the functioning of markets and in wealth-holders’ choice of assets that the danger of a spontaneous subversion of the money-form loses all relevance, the secular movement of the terms of trade between primary commodities and manufacturing has been against the former.
This is not because the output of these commodities has increased in keeping with the requirements of the capitalist metropolis, and done so at decreasing unit costs, or at the very least non-increasing unit costs, for given money wages (or unit money incomes of producers). In other words, the decline in terms of trade for tropical primary commodities is not because Ricardo’s prognostication of a limited land mass constraining the output increase of agricultural products has been proved wrong. On the contrary, not only has the tropical land mass that can sustain such production remained fixed in size, but land-augmenting technological progress and land-augmenting investment, like in irrigation (which makes multiple cropping possible), has been quite conspicuous by its absence under the regime of metropolitan domination. In the entire history of the British Empire, for instance, there was hardly any significant investment in irrigation undertaken in any part of the empire, other than in the Canal Colonies of the Punjab (Bagchi 1982).
This is hardly surprising. Such land-augmenting investment and technological progress necessarily require a substantial spending effort by the state; but prior to the Keynesian revolution in economics the very idea of the state moving away from the tenets of ‘sound finance’ (i.e. of balancing the budget), let alone playing a proactive role in undertaking investment, was considered anathema. Even after Keynes had advanced the argument in the midst of the Great Depression that government expenditure financed by borrowing was not to be shunned, it took several years, indeed until after the Second World War, before significant public investment became acceptable as practical policy in the metropolis itself; in the colonies of course such acceptability had to await decolonisation.
The question therefore arises: since the size of the tropical land mass, on which alone can several of the commodities required by metropolitan capitalism be produced, is given, and since land-augmenting investment and technological progress in the tropics were conspicuous by their absence during the entire period before decolonisation, how was the rising requirement of metropolitan capitalism for such commodities met, even as the terms of trade moved adversely for them?
The simple answer to this question is that even though the output of tropical primary commodities as a whole did not increase, there was a compression of their use within the regions where they are produced, to make more of them available to the metropolis. The mechanism of such compression was, to borrow Utsa Patnaik’s argument (1999, p. 354), an ‘income deflation’. Income deflation, imposed on these ‘outlying regions’, made available to the metropolis the commodities that it needed. This happened either directly, through a shift of such commodities from local absorption to meeting the needs of the metropolis, or indirectly, through a shift of land use from crops whose absorption declined because of income deflation to those which the metropolis needed.
What is true of commodities produced on the tropical land mass, which has a more or less fixed size, is also true more generally of exhaustible resources. They too will be generally subject to increasing supply price (for given money wages). This poses a threat to the value of money in the metropolis as accumulation increases the demand for such commodities. One way of warding off this threat, even as accumulation proceeds, is to impose an income deflation in the ‘outlying regions’ so that more of such commodities become available for metropolitan needs by squeezing their absorption outside the metropolis. Income deflation imposed on the ‘outlying regions’ in short is one of the means of ensuring that the value of money remains intact in the face of capital accumulation. The imposition of such income deflation is a major characteristic of imperialism.
Colonial Extraction from Pre-capitalist Economies
The two chief means through which income deflation was imposed in the colonial period were the system of colonial taxation, which led to a ‘drain of surplus’ from the colony to the metropolis, and the displacement of local crafts through competition from metropolitan capitalist products, which was called ‘de-industrialisation’ in Indian nationalist writings. How these two mechanisms worked can be clarified through a simple example.
Consider a pre-capitalist economy, where 100 peasants produce 200 units of food, of which they consume 100 and give the rest to the overlord as revenue. The overlord in turn supplies this to 100 artisans, who give in exchange 100 units of artisan products. The overlord, we assume for simplicity, consumes no food, and the peasants and artisans, who have identical value productivity, consume only food. Now, suppose the capitalist sector encroaches upon this economy, removes the overlord, imposes taxes worth 100 upon the peasants, and takes the proceeds for its own use.
For accounting purposes it can show its imports of 100 as being balanced by an export of ‘administrative services’ to the pre-capitalist sector, that is, as payment for ruling the latter; and this would also figure as an expenditure item in the government budget in the pre-capitalist economy. Both the government budget and the trade account will then actually appear to be balanced, while in fact the capitalist sector is appropriating the surplus from the pre-capitalist sector. The consequence will be the displacement of the artisans, who would now be unemployed, and the use of the 100 food, which they were consuming earlier, by the capitalist sector. The latter in this way has got its requirement of food (or other raw materials for the production of which the land earlier devoted to food production can now be used), without there being additional output in the pre-capitalist sector, and hence any scope for the phenomenon of ‘increasing supply price’ to manifest itself and threaten the role of money.
The second mechanism, ‘de-industrialisation’, operates as follows. In the above example, even if there are no taxes, that is, the overlords are not replaced and continue to obtain the same income as they were doing before, but are induced to consume imported goods from the capitalist sector in lieu of domestic artisan products, even then while trade will be actually balanced, with 100 of food being exported against 100 of imported manufactured goods from the capitalist sector, domestic employment (of artisans) will have fallen by 100, and so will domestic output by 100. In other words, even with balanced trade (i.e. no appropriation of surplus from the pre-capitalist sector by the capitalist sector), the pre-capitalist sector’s industrial sector will have shrunk by 100 (whence the term ‘de-industrialisation’). This will have entailed an income deflation in the pre-capitalist sector, and the export of primary commodities to the capitalist sector (in this example food, but in actual fact all sorts of products which the tropical land mass devoted to food production can otherwise produce). The two forms of income deflation we have discussed so far are additive in their effects.
A hallmark of income deflation is that even as it restricts demand in the ‘outlying regions’ for the commodities produced there, it ipso facto also restricts their production, not just of the commodities it does not require (in the above example, artisan products) but even of commodities it does take away (in the above example, food). Land-augmenting investment and technological progress, the scope for which is, as we have seen, in any case limited in the regime of ‘sound finance’, even becomes unnecessary, as the capitalist metropolis can meet its requirements of such commodities through income deflation. And since such income deflation squeezes the peasantry and petty producers in the Third World (the squeeze on the petty producers in turn increasing the demand for land for leasing in, and hence the magnitude of land rents, to the detriment of the peasants), whatever incentive there may have been for such producers for raising output is snuffed out. The result is absolute impoverishment of the Third-World population, uneven development between the two segments of the world economy, and stagnation or even decline of output in the Third World, all of which were visible during the colonial period.
The Third-World states that came up after decolonisation not only broke with this pattern of income deflation, but even undertook land-augmenting investment and technological progress, and a number of measures supporting the peasants and petty producers, in their respective economies, all of which broke with the stagnation in their traditional sectors. While this meant that the requirements of metropolitan capitalism could be met through a rise in the output of these commodities, which did not even necessarily entail increasing supply price (at given money wages) because of the land-augmenting investment and technological progress being undertaken by the post-colonial Third-World states, the absence of income deflation left open the scope for a rise in commodity prices and hence an undermining of the value of money in the metropolis. This is exactly what happened at the beginning of the 1970s when world commodity prices rose sharply.
This increase is often interpreted incorrectly. The interpretation goes as follows: the persistent US current account deficit, on account inter alia of its maintaining a string of military bases all around the globe, meant, under the Bretton Woods system where the US dollar was ordained to be ‘as good as gold’, that other countries were forced to hold on to the dollars pouring out of the US. This outpouring became a torrent during the Vietnam War, and France under President De Gaulle became unwilling to hold dollars any more. It demanded gold instead, which forced the suspension of the dollar–gold link and the subsequent collapse of the Bretton Woods system. This collapse created panic among speculators who, suddenly denied a secure monetary form of holding wealth, moved to commodities, causing the worldwide commodity price explosion. This interpretation in short sees the price explosion only as a temporary panic reaction.
A more plausible explanation however is as follows. In the context of the generally high levels of aggregate demand maintained through state intervention in metropolitan capitalist economies, including above all through high US military spending, escalating expenditure on the Vietnam War gave rise to a state of excess demand, especially for primary commodities; since the scope for imposing income deflation on the ‘outlying regions’ did not exist as in colonial times, this pushed up their prices, which the speculative factors underscored by the first interpretation further aggravated. The commodity price explosion in short was the inevitable denouement that capitalism, enfeebled by decolonisation which robbed it of its traditional weapon of income deflation against Third-World producers, faced in the post-war period. Post-war capitalism, though it kept up its level of aggregate demand through Keynesian demand management, did not have any means of keeping down raw material prices in the face of growing demands for such raw materials arising from accumulation, and hence warding off threats to the value of money. This fact was exposed in the early 1970s.
France’s move to gold instead of US dollars then becomes explicable not as an act of intransigence on the part of President de Gaulle but simply as an expression of the ‘debauching of the currency’ that Keynes had talked about. And the weakness of the Bretton Woods system, in comparison with the Gold Standard, is then seen to consist in the fact that the latter was based on a colonial system which made possible the imposition of income deflation on the ‘outlying regions’, while the former was crippled by the fact of decolonisation, and hence a loosening of the bonds of imperialism.
The experience of the early 1970s incidentally clarifies an important point. Strictly speaking, wealth-holders would shift from holding money to holding commodities as wealth-form only when the expected price appreciation of commodities exceeds the sum of the carrying cost and the risk-premium on commodities. (The risk arises because nobody can be certain about the degree of price appreciation, and because commodities are illiquid compared with money.) But a general belief among wealth-holders which has persisted for millennia is that the price of gold will never fall permanently compared with commodity prices, while currencies can be permanently devalued in terms of commodities. And gold itself has a relatively small carrying cost. Hence if wealth-holders expect a permanent rise in the money price of commodities (as they would in conditions of increasing supply price, with given money wages), then they will shift from money to gold. And an increase in the money price of gold because of such a shift would further strengthen expectations about a rise in commodity prices in general.
It follows that if there are some people who are either cavalier about risk-taking or have absolutely certain expectations that commodity prices are going to appreciate, then they will trigger an inflation whose very persistence will make others less scared of the risk of holding commodities or gold, and hence more willing to desert money as a wealth-form. Since such people will generally exist, one can say that metropolitan capitalist economies are always haunted by the fear of a ‘debauchment’ of currency; and the larger the edifice of money-denoted financial assets they have built up, the greater this fear is (which is why ‘inflation-targeting’ becomes an obsession in the current era of financialisation).
Money and the US Dollar
The undermining of the value of money which arises from developments in commodity markets expresses itself as a shift from money to gold. The fact that historically there have been very few episodes of currencies being destabilised because people actually hold vast amounts of commodities is therefore not surprising. First of all, any shift to commodities is countered by appropriate income deflation so that inflation and any associated shift to commodities are not actually allowed to persist. Secondly, the shift to commodities expresses itself as a shift to gold. Episodes of shifting from currencies to gold are plentiful, and the early 1970 provide one example; a good deal of Marx’s writing on money is in fact concerned with such shifts.
The ‘debauchment’ of the US dollar, the leading currency of the capitalist world, in the early 1970s gave rise to a drive to re-establish an international regime akin to what prevailed in colonial times, which would re-open the scope for income deflation, and this brought forth the regime of globalisation under which we live today. Globalisation in other words represents a rolling back of the post-colonial situation where the peasants and petty producers of the ‘outlying regions’ obtained some reprieve from income deflation.
To say this is not to suggest some ‘conspiracy theory’. Capitalism being a spontaneous system as opposed to a planned one, the ushering in of globalisation, and with it of an income-deflationary regime, was not some calculated measure. It arose through the functioning of the system itself: the inflationary episode of the early 1970s gave rise to a recession during which commodity prices, other than that of oil (which increased because of the Organization of Petroleum Exporting Countries), came down. But the recession contributed to the process of globalisation of finance (and the coming into being of an entity that has, appropriately, been called ‘international finance capital’), which was under way in any case during the period of Keynesian demand management. International finance capital is the key entity behind the contemporary phenomenon of globalisation (Patnaik 2010).
It follows from this that the view that imperialism as a phenomenon persisted only before globalisation came into being, and has lost its relevance under globalisation, is the very opposite of the truth. In fact postwar decolonisation meant some loosening of imperialism, and the contemporary globalisation has actually strengthened its hold.
How little this fact is understood can be illustrated with reference to an argument advanced by no less distinguished an economist than Paul Krugman. Krugman, who is a regular columnist of The New York Times, had argued in his column of 21 April 2008 that the state of excess demand in the markets of primary commodities in the early 1970s was overcome through supply adjustment, such as new oil-strikes in the North Sea and the Gulf of Mexico, and the entry of new land into cultivation. This however is not correct.
The resource crisis of 1972–75 was hardly overcome through supply adjustment. In the case of the most vital primary commodity, namely food grains, it was overcome not through any appreciable stepping up of supplies, but through a severe compression of demand, and the latter happened through a fresh round of income deflation imposed over much of the world. The regime of ‘globalisation’ inter alia was a means of enforcing such an income deflation.
According to the Food and Agriculture Organization (FAO), the total world cereal output in the triennium 1979–81 was around 1573 million tonnes for a population (for the middle year of the triennium, 1980) of 4435 million. For the triennium 1999–2001 the cereal output increased to around 2084 million tonnes for a population (for the middle year of the triennium, 2000) of 6071 million. This represents a decline in world per capita cereal output from 355 kg in 1980 to 343 kg in 2000 (FAO 2015). Given the fact that during this period per capita income in the world increased significantly, and given the fact that the income elasticity of demand for cereals (consumed both directly and indirectly via processed food and animal feed) is markedly positive (even if less than one), a stagnant or declining per capita cereal output should have spelled massive shortages, leading to a severe inflation in cereal prices. Such an inflation, since it would have occurred in a situation where the money wage rates in the manufacturing sectors around the world, to which manufactured goods’ prices are linked, were not increasing pari passu with cereal prices, would have meant a shift in the terms of trade between cereals and manufactured goods in favour of the former.
Third World, Globalisation, and Finance Capitalism
But this did not happen. On the contrary, cereal prices fell in relation to manufactured goods prices by as much as 46% over these two decades (Chakraborty 2011)! This suggests that the decline in per capita cereal output, in a situation of rising world per capita income, did not generate any specific inflationary pressures on cereal prices. The reason for this was the income deflation imposed over much of the world. It is this, rather than any supply increase, as Krugman (2008) suggests, that explains the absence of any specific trend-inflationary pressures in cereal prices (i.e. ignoring fluctuations) until recently. And this income deflation was imposed over much of the Third World via the phenomenon of globalisation.
There are at least three processes through which income deflation occurs over much of the Third World in the era of globalisation (Patnaik 2008). The first is the relative reduction in the scale of government expenditure. Because economies caught in the vortex of globalised finance can be easily destabilised through sudden flights of finance capital, retaining the ‘confidence of the investors’ becomes a matter of paramount importance for every economy, for which their respective states have to show absolute respect to the caprices of globalised finance.
Finance capital in all its incarnations has always been opposed to an interventionist state (except when the interventionism is exclusively in its own favour). An essential element of this opposition has been its preference for ‘sound finance’ (i.e. for states always balancing their budgets, or at the most having a small pre-specified fiscal deficit as a proportion of the gross domestic product, or GDP). The argument advanced in favour of this preference has always been vacuous, and was pilloried by Professor Joan Robinson of Cambridge as the ‘humbug of finance’ (Robinson 1962). The preference nonetheless has always been there, and has become binding in the era of globalised finance, when states willy-nilly are forced to enact ‘fiscal responsibility’ legislation that limits the size of the fiscal deficit in relation to GDP. At the same time, this move towards ‘sound finance’ is accompanied by a reduction in the tax–GDP ratio, owing to tariff reduction and to steps taken by states competing against one another to entice multinational capital to set up production plants in their respective countries.
The net result of both these measures is a restriction on the size of government expenditure, especially welfare expenditure, transfer payments to the poor, public investment expenditure, and development expenditure in rural areas. Since these items of expenditure put purchasing power in the hands of the people, especially in rural areas, the impact of their curtailment, exaggerated by the multiplier effects which are also to a significant extent felt in the local (rural) economy, is to curtail employment and impose an income deflation on the rural working population.
The second process is the destruction of domestic productive activities under the impact of global competition, from which they cannot be protected as they used to be in the dirigiste period, because of trade liberalisation, which is an essential component of the neo-liberal policies accompanying globalisation. The extent of such destruction is magnified to the extent that the country becomes a favourite destination for finance, and the inflow of speculative capital pushes up the exchange rate.
Even when there is no upward movement of the exchange rate and not even any destruction of domestic activity through the inflow of imports, the desire on the part of the getting-rich-quick elite for metropolitan goods and lifestyles, which are necessarily less employment-intensive than the locally available traditional goods catering to traditional lifestyles, results in the domestic production of the former at the expense of the latter, and hence to a process of internal ‘de-industrialisation’ which entails a net-unemployment-engendering structural change. This too acts as a measure of income deflation.
The third process through which income deflation is effected is a secular shift in income distribution against the producers of primary commodities because of the increasing hold of a few giant corporations in the marketing of those commodities. This has the effect of curtailing the consumption demand of the lower-rung petty producers owing to the income shift towards the higher-rung marketing multinational corporations. Globalisation thus unleashes income deflation, which curbs excess demand pressures and keeps commodity prices in check, and hence the value of money intact, exactly as happened in the colonial period.
The preservation of the value of money in the metropolis however requires something more in addition to income deflation in the ‘outlying regions’ which ensures the availability of supplies to the former without an increase in supply price of commodities at given money wages (or money incomes of producers) in the latter. This additional requirement is that the money wage itself should not go up in the ‘outlying regions’. In other words, apart from reduced absorption of commodities in the ‘outlying regions’ it also requires that the wage-unit in the latter should remain stable. And this is ensured by the existence there of substantial labour reserves.
The Reserve Army in the Periphery
The fact that capitalism requires a reserve army of labour was emphasised by Marx. This is both to keep the level of real wages restricted for any given level of productivity, so that the rate of surplus value remains positive at all times, and also to instil work-discipline among the workers by threatening them with the ‘sack’. The role that custom backed by force plays under feudalism in enforcing work-discipline is played under capitalism by the threat of dismissal and hence unemployment. And this threat remains real precisely because unemployment remains a real phenomenon.
But in addition to the reasons mentioned by Marx there is a further overriding need for labour reserves, which arises from the system’s need to have a group of ‘price-takers’ who supply it with essential inputs but who cannot enforce money wage claims (or money income claims) even to maintain their ex ante income share. There is in other words the need for labour reserves for maintaining the value of money itself, and these labour reserves have to be quite substantial, so substantial that the workers located in their midst cannot even maintain their real wages in the face of a rise in prices, let alone push for an autonomous rise in their money wages (this argument is discussed at greater length in Patnaik 1997). The maintenance of such labour reserves has typically been in the ‘outlying regions’, where they surround petty producers producing for the metropolis (who therefore are forced to act as ‘price-takers’) and have been created and preserved by metropolitan capital.
The domination by metropolitan capital of its surroundings where petty producers are located and are drawn into producing for the capitalist metropolis, and where a substantial reserve army is maintained and income deflation is imposed to preserve the value of money and the entire edifice of finance erected upon it, is thus essential for its very existence. To what extent this domination, which is the essence of imperialism, is adequate to serve its requirements in the present era is a separate problem; indeed it is possible to argue alongside Rosa Luxemburg (though for reasons different from those that she cited) that with the development of capitalism it becomes increasingly difficult for such domination to act successfully as a stabilising factor for the system (Luxemburg 1963), but that is not the same as saying that the system ceases to have any need for such domination. Imperialism is as necessary today as it ever was; indeed, if anything, it is even more necessary today than ever before, because the edifice of finance that capitalism has today is far larger than anything it has ever had. Once this fact is accepted, then profound implications follow from it for the nature, strategy, and tactics of the revolutionary struggle that has to be engaged in for transcending this system.
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