Prabhat Patnaik on the 'Nehru-Mahalanobis' strategy

Prabhat Patnaik has explained that the 'Nehru-Mahalanobis' strategy assumed a bleak export outlook and thus required investment in heavy industry 'bottlenecks' in line with the 'turnpike theorem'.

Obviously, this was quite mad. Trade was booming in the Fifties and Sixties. India had cheap labour and its people wanted the sorts of things other people wanted- cheap clothes, nice food, bicycles and so forth. India needed to mass produce these items both for its own people as well as to export to other poor countries as well as working class people in countries recovering from the War.

Clearly India could not invest in capital goods- machines to make machines- because it was technologically backward. Far better to import capital goods to  make 'wage goods' which could then be exported so as to buy better capital goods and perhaps invest in domestic R&D.

The other reason to take this route was so as to give farmers an incentive to grow more food and rationalise production so as to have nice shiny things rather than just struggle along in hand to mouth manner. Indeed, they would have been forced to do so because their captive labour pools would increasingly run away to the bright lights of the big city where they could get jobs in factories making stuff they could actually afford to buy.

Patnaik accepts that India could have gone for export led growth just like Japan and Taiwan and so on. However he says that Mahalanobis was actually being very clever because by refusing to let India turn into a country selling labour intensive products- the mark of a poor country- he was ensuring it would sell capital intensive products, like wot them rich countries do. This is a very brilliant strategy. A guy currently flipping burgers in McDonalds should immediately quit and buy a yacht with a nice helipad and then start up his own hedge fund coz that's what rich dudes do.

Patnaik also says that Mahalanobis wasn't ignoring agriculture at all. The farmers were welcome to increase output without any incentive or increase in inputs whatsoever. Anyway, the best way to raise output would be land reform because taking land away from guys who know how to grow stuff and giving it to guys who don't is a genius idea. Obviously the plants or crops or whatever will feel sympathy for the neophyte and start growing like crazy. Also they will harvest themselves and then roll down to the market. What's more, the land will start to reproduce to keep pace with all the additional babies the new landing owning class will start having.

Why did India not have 'the committed cadre' of Communist China? The answer is that the Chinese Communist cadre had gotten very good at shooting people because they had conquered the country as part of the Red Army. Indian cadres, by contrast, hadn't conquered anything. They would have been quickly beaten to death if they had tried to take land away from 'kulaks' who had served in the Army and had a strong martial tradition. These dominant castes were perfectly happy to boost output, if they received necessary inputs and if they could buy cool stuff with their agricultural earnings. Without such inputs or the incentive of getting cool stuff, they preferred a traditional mode of life- i.e. they were just as autarkic as Mahalanobis's model.

The Indian farmer could be drawn into a national division of labour only if coerced or if he got to buy cool stuff. If he couldn't buy nice shiny things, he used his food surplus to buy local services of a positional type. If there was a drought and there was no food surplus, the service castes were welcome to run to the cities and starve there in the queue for the soup kitchen.

The Indian farmer wasn't the only one to pursue an autarkic policy. Indian economists and public intellectuals followed suit. They stopped bothering with the Indian reality and just babbled anything that came into their heads. Some of the smarter ones migrated in order to get paid in hard currency for their babbling. Others just stuck to their posts babbling deafly  for all they were worth.

Actually, the first group wasn't providing 'food and clothing for all'. AID was filling the gap. Had there been no Green Revolution, you would still have an autarkic agricultural sector producing solely for itself and gaining some cash wages or rents from other sectors of the economy. The mining and mineral based sector would need to export to fund itself.  'Universal Intermediaries' would be of poor quality.

Consider a country like Iraq. Did its agricultural sector increase production so as to meet the increased demand for food once the oil started flowing? Of course not. On the other hand, a lot of blood did eventually flow. Had India had a 'resource curse'- instead of imbecilic mathematical economists who did the paperwork to get 'free money' from America- our land too would be dyed Red in the best approved Communist tradition.