Maurice Dobb was a Communist academic who recruited spies for the Soviet Union. In India, he is known as the mentor of Amartya Sen, who was 33 years his junior. The Dobb-Sen thesis 'is a foundational economic model regarding the choice of techniques in developing countries. Developed by Indian economist Amartya Sen under the supervision of Marxist economist Maurice Dobb at the University of Cambridge during the late 1950s, the thesis argues that developing nations should prioritize capital-intensive production methods over labor-intensive ones to maximize long-term economic growth and savings.'[1, 2, 3]
The idea was to freeze real wages & plough back productivity gains into the capital goods sector. The problem here was that real wages would fall if agricultural growth did not keep pace with population growth (which it didn't because of lack of investment in agriculture and the fact that food aid depressed returns for farmers). This would affect morale and work effort. Productivity would stagnate. But this meant that the real rate of return on investment fell or became negative (because of depreciation of assets).
This is not to say that private companies in India didn't adopt capital intensive methods or that it would have been wrong for them to do so. Some already had considerable experience of this and were attracting sufficient finance to expand.
The plain fact is, Capitalists are good at capital-intesive production. Advanced Capitalist countries have a lot of Capitalists. Some such are willing to set up plants in poor countries where labour is cheap and there are semi-literate young people eager to learn accountancy and engineering and other middle management skills. They may also wish to issue shares in their enterprises which can be traded on local Stock Exchanges thus giving a higher rate of return to savers and encouraging the formation of indigenous capital which can be applied in ancilliary industries.
All this was obvious to Indians because there were foreign companies, British, Germany, Japanese, American- even Czech- which had factories in India. Local entrepreneurs, sometimes hiring foreign managers, had similar enterprises including in the Iron & Steel sector. One company led by a Bengali, received a large loan from the World Bank in the early Fifties to expand production of Steel.
Dobb knew that Stalin had sold raw materials so as to bring in American companies, depserate to find new markets during the Great Depression, to build factories in the Soviet Union. But, India could not sell food when its people were starving because it was a Democracy. Moreover, its leaders didn't want to be subservient to foreign Capitalists whose representatives in India would live like 'Laat Sahibs' while employing hundreds and thousands of 'coolies'. Moreover, Nehru & his clique were wary even of the established Indian industrialists who had financed Congress and who owned some of the big newspapers. Thus, Nehru persuaded Congress to pursue a Socialist pattern of Society. Capitalist development was off the table.
It may be that Dobb thought the Soviet Union had mastered techniques of production (assisted by its spies in the West) and that it could do technology transfer. Sadly, though it was prepared to do this for Communist China in the Fifties, it could scarcely do so, on a comparable scale, for a Democratic, Non-Aligned, country. What it could offer was 'Rupee-Rouble' convertibility, on terms favourable to itself, so that India got some turnkey projects- which were actually quite profitable (but not as efficient as the private sector) and the Soviets got some Indian raw materials and manufactured goods in return. This was a cozy enough arrangement but one conducive only to a 'Hindu rate of growth'- i.e. about one percent or two real growth in per capita income. Sadly, because agriculture was neglected so as to invest in shitty capital-intensive turnkey projects, the problem of hunger increased. India lost the ability to feed or defend itself.
What technique should a person or a country choose? The answer is, the one it knows or can master quickly, not the one it doesn't know and is utterly shit at.
Why was this not obvious to Amartya Sen?
In his memoir, he writes
By June 1956, at the end of my first year as a research student, I had a set of chapters that looked as if they could form a dissertation. A substantial number of economists at various universities were working then on different ways of choosing between techniques of production.
This was a matter of 'Operations Research'. Those best at it worked for big Enterprises or the Military Industrial complex. They were mathematicians though some also had a good knowledge of specific commercial specializations like Accountancy (McNamara) or Actuarial Science.
What Sen meant was that some academic Economists were establishing a mathematical formalism for didactic purposes. They weren't actually involved in choosing techniques for any enterprise. Mathematicians, like Kolmogorov, came up with algorithms which could be applied to get better solutions for various O.R problems. Professors of Econ could give lectures on developments in O.R to Engineering graduates who wanted MBAs.
In India, Nehru wanted to preempt the private sector getting World Bank loans, or using their own funds, to expand output of capital intensive goods. Since, 'leapfrogging'- i.e. adopting the newest technique- was most economical, the private sector had the right incentive though, obviously, if might prefer protection from competition and a quiet life as a monopolist.
Public Sector enterprises were constrained in choice of technique by political considerations. Politicians might prefer 'gifts' from foreign countries anxious to get rid of shitty capital goods but those gifts might turn out to be prohibitively expensive in the long run. The other problem was that if the 'Plan' was overambitious and the Government ran out of money, then the project would be left high and dry. It must be said, not all the public sector projects from the Fifties and Sixties turned into money-pits. Some, like the ONGC, diversified out of India and 'scaled up' quite well. Still, overall, the Public Sector was a drag in the Economy.
To be fair, few young academic economists foresaw such problems in the mid-Fifties. Nevertheless, for people from poverty stricken India, it was obvious that techniques applicable in advanced industrial economies were simply out of the question in most parts of the, still quite feudal, Indian hinterland.
Some were particularly focused on maximising the total value of the output produced,
during the War, that was the priority in particular sectors- e.g. production of fighter planes during the Blitz.
whereas others wanted to maximise the surplus that was generated, and there were also some profit maximisers.
Profit is surplus divided by funds applied.
Analysing these – and other – approaches, and taking note of the fact that a higher surplus, when reinvested, could lead to a higher rate of growth and through that to a higher output in the future, the different criteria could be compared through assessing alternative time series of outputs and consumption.
They really couldn't. Still, stupid undergrads could be taught some mathsy shite.
I was sure that the unruly literature on all this could be sorted out and nicely disciplined through comparative evaluation of alternative time series, which turned out to be fun to do.
It was an exercise in futility.
I called it the “time series approach”.
The term had been used since the 1890s.
I was glad to be able to outline an easily discussable general methodology for the various alternative proposals that were being offered.
So, Sen wasn't writing about choice of technique. He was writing about how to teach people how to teach choice of technique.
I presented the general picture in an article that I sent to the Quarterly Journal of Economics (a leading journal in economics – then and now), which was kind enough to take the paper for immediate pub lication. They also accepted a second paper to come out not long after.
More and more Econ Departments were opening up recruiting more and more Professors who would spoon-feed shite to credential craving students.
There were a few related concerns that were dealt with in separate papers, which also found their way to publication. By then, at the end of my first year of research, I started wondering whether I had – in the papers taken together – something like a doctoral dissertation. But I also worried whether this was a delusion of grandeur.
It was the delusion of a 'useful idiot' who didn't know that he was providing a justification for a Stalinist policy which had already failed.
So I asked my teacher Maurice Dobb
not an O.R guy. Patrick Blackett, Nobel laureate in Physics & a great pal of Nehru, was the top OR man in the UK at that time. His influence on the Second Plan & India's food & defence position was deleterious. My point is, Sen was going with the Nehruvian flow- of dung.
to have a quick look and give me his assessment. I had forgotten that for Dobb there was no such thing as having a quick look. At the end of two weeks I received from him an enormous set of helpful comments on how to improve my presentation. But there was also his comforting general conclusion that there was certainly more in my chapters than would be needed for a doctorate.
People who never produced anything got to advise on how Government money should be wasted. Sen could have stayed in Cambridge to tart up the mathematical side of his thesis but Sraffa- another Communist- was prepared to let him go to Calcutta for two years where he would be under the nominal supervision of a family friend. This enabled Sen to take up a teaching appointment at 23 in Jadavpur. He worked hard- sometimes lecturing for 28 hours in a single week- and thus became a polished pedagogue with a knack for holding the interests of his students without taxing their intellects unduly.
In fact, I was learning so much from teaching that I felt convinced I could not really be sure of knowing a subject well until I had tried to teach it to others.
At that time, all analytical econ could be taught through calculus. The Slutsky Income and Substitituon effect in the theory of Demand is just the substitution and scale effect in the theory of Production. What is odd, is that neither feature in Sen's 'choice of technique'.
Consider the following extract from his article on choice of technique for East Asia-
SURPLUS LABOUR AND THE DEGREE OF MECHANIZATION
Surplus labour means less mechanisation is economic. Labour shortage means substitution of machine power for man-power. However, if there are 'non-convexities'- i.e. economies of scope and scale- it will be possible to borror and profitably invest in both capital widening and deepening such that the capital-labour ratio rises even in a country with lots of people coming onto the job market.
THE object of this paper is to see whether we can make some general remarks about the nature and types of techniques of production that are likely to give what might be considered 'desirable' results in the so-called under-developed countries, particularly of East Asia.
With hindsight, we would say 'East Asians are as smart as fuck & happy to work their asses off. They can choose knowledge based techniques of production and rise up the value chain by endogenous change in habitus. Obviously, if they went in for export led growth with foreign fdi, they would be able to borrow at increasingly competitive rates before themselves becoming capital exporters.
South Asia could not do this because of a paternalistic attitude to labour & a populist type of pseudo-Socialist politics. The contrast between the South Asian working class & the East Asian factory worker (leaving aside North Korea) has become quite stark. Thus a textile worker in the informal sector in India earns one third what the Chine textile worker earns. Club goods- like Government schools- are better in China. There can be no question about it. East Asia won. South Asia lost.
Why? South Korea listened to Irma Adelman (Taiwan had its own Chinese American economists (from Cornell) to steer it towards export-led growth). India listened to useless Bengalis & British Marxists.
Before we proceed to examine the relevant economic information, we should perhaps say a few words on the nature of the problem itself.
The problem is one understood by people who produce things. It has nothing to do with a teacher of worthless shite.
Let us assume that the Government intends to make a certain amount of investment and is considering a number of alternative blueprints involving different techniques of production.
The Government hires guys with experience in turning investible funds into merchandisable output. Such people are known as 'business men'. They don't teach worthless shite.
1 Of the alternatives some could possibly be rejected outright. If, for example, technique A leads to a smaller flow of output per year than does technique B, and if both sets of plants have the same gestation lag, the same length of life, and the same requirement of labour and other current inputs per year, then technique A is definitely 'inferior'.
But our people may only have the knowhow to implement A, not B. Also, there may be an embargo on getting B from an advanced country. You have to accept A.
Similarly, if technique A leads to an equal flow of output per year over an equal life after an equal lag, as does technique B, and if it requires more labour, or other current inputs, per year, then again, A is distinctly 'inferior'.
The problem here is 'Knightian Uncertainty'. We don't know all future states of the world and what probability each has. A may be more 'robust'. It is regret minimizing to choose it.
When we find that an enterprise uses an 'inferior' technique but is profitable, chances are that there are qualitiative differences in inputs- including management expertise.
In the same way, if technique A leads to an equal flow of output per year and has the same current input requirement per year, but has a shorter life of plants with the same gestation lag, or a longer lag followed by an equal life, then it is, again, of not much use. We do not need much economics to reject these alternatives
Sadly, you can't reject them if you live in the real world.
Problems of real choice arise when one good thing clashes with another.
That is not a problem. It is the nature of choice. You can't have your cake and eat it too.
The classic case of technological choice is the one where the ratio of the initial investment to the consequent output flow is reduced by raising the ratio of employment flow to investment.
No. This is a story about over-manning. Don't do it. Sadly, the Public Sector may be forced to do so for political reasons. It must be said, private firms in labour surplus countries may also do this for charitable, 'moral economy' or prudential reasons. But they can do things, collectively, to raise the productivity of these 'under-employed' workers.
In a primitive country, creating a labour pool with a habitus suitable for employment on assembly lines, might take time. I believe overmanning also reduces Trade Union militancy because many workers know they have low or zero marginal product.
In practice, 'Duality' is likely to obtain. There is high productivity formal sector and a lower productivity ancilliary sector. But, as in the case of Japan, this can cause structural problems at a later point.
At first sight it looks as if the techniques chosen in economies with surplus labour should be such that
labour actually knows that technique and can perform it as well as the competition. One hundred years ago, English textile workers- including women- were more productive than Japanese or Indians because they had acquired advantages through learning effects & external economies. This didn't meant India or Japan couldn't compete in lower quality segments of the market. It did mean that, to rise up the value chain, they had to change the habitus of workers so as to increase their productivity.
the ratio of output flow to capital investment is maximized
No. It looks like the guy doing the investment should choose the technique which makes him the biggest profit.
(given the life of the plants, the gestation lag, and the requirement of raw materials), even if this involves a larger labour requirement, than some other alternatives.
This could cause a financial loss. If depreciation is not covered, the enterprise goes out of business or requires a subsidy.
Labour is available, and must be fed anyway, so that employment of more labour does not seem to cost anything to the society.
If you get fed anyway, why work?
This is, however, not quite the whole picture. Additional employment tends to produce additional consumption via the creation of additional wages bills. Total consumption may go up in two ways, viz., through an increase in the amount of consumption of the people who are newly employed and through that of the people who were previously supporting these unemployed people and have now more elbow room.
Poverty is reduced when people consume more. Sadly, Socialists don't want poor people to consume more.
It is, thus, possible that while the choice of a more labour intensive technique will add to output, it will add more to consumption, reducing the volume of investible surplus.
How? Profit is calculated after wages, rents, cost of raw materials, depreciation, etc. Investible surplus is retained profit.
Perhaps Sen meant that a command economy would have 'repressed inflation'- i.e. workers would have money wages which they couldn't spend because there was nothing in the shops for them to buy. This is the same as 'forced saving'. Shooting those who protest ensures that the Five Year Plan is over -fulfilled.
If the policy objective is the maximization of the growth rate, we may choose more capital-intensive techniques
No. You may choose capital widening such that capital-intensivity decreases. For example, by putting surplus peasants into uniform and giving them a Kalashnikov, you can conquer territory & gain natural resources & slave labour- including people with scientific or management skills.
than when it is the maximization of immediate output per unit of investment. If our objective is something intermediate between the maximization of immediate output and the maximization of the growth rate,
they are one and the same. I suppose Sen means 'maximization of consumption goods' but, as far as growth is concerned, all goods, consumption or capital or intermediate, count as part of total output.
we might choose techniques that are in between these.
The problem is, you might lose the ability to choose anything at all because people think your objective is stupid.
East Asia chose to go with exporting labour intensive goods before pivoting by the end of the Sixties to investing in state of the art heavy industries with the aim of tapping economies of scale so as to gain global markets. They chose techniques they could profit from and then profited from techniques which changed what they were capable of. Meanwhile India stagnated under a mountain of red tape.
Returning to Sen's Memoir-
In economics, this applies particularly to the classificatory devices to be used in economic epistemology,
Sadly, it is impossible to say what is or isn't Capital or Consumption or Income or Wealth. Suppose you spend a lot of money on dressing like a dandy but, as a result, you get a high paying job, then your tailor's bill is 'investment' not 'consumption'. Equally, if you buy a sewing machine and cloth but are a shit tailor, you have spent money on a hobby- that is 'consumption'- it isn't investment because you did not make a profit from it.
and that particular thought reminded me of my old friend, the grammarian and phonetician Panini from the third century BC whose classificatory analysis had been very influential on my thinking.
Language may have an algorithmic description but language is not reality. One can say 'this sentence is not grammatically well formed' but the sentence would still be meaningful. If the King speaks ungrammatically and the Grammarian objects, it is the Grammarian who loses his job. Economics is about economising on scarce resources. It isn't about classifying stuff and talking ignorant bollocks.
Given my youth and the widespread rumour that I had got the job at Jadavpur University through nepotism rather than merit, there was a predictable – and entirely understandable – storm of protest at my appointment.
Sen, like his supervisor, Amiya Dasgupta, was from East Bengal. Refugees tend to stick together and promote each other.
On top of that there were grounds for political suspicion because of my leftwing convictions – my days of active student politics in Presidency College had been only three years earlier. Among the sharpest attacks was a series of denunciations published in the rightwing magazine Jugabani.
Perhaps this explains Sen's life-long hatred of the Hindu Right.
Amongst other things, I learned from them that, thanks to my appointment, the end of the world had become more imminent.
West Bengal's decline had become more probable. The rising generation would not be able to understand that burning buses won't increase the availability of buses nor will beating and chasing away industrialists cause more industries to come into existence.
One of the attacks, which I have to confess I did enjoy, was illustrated by a skilfully drawn cartoon showing me being snatched from a cradle to be immediately made into a professor, standing in front of a blackboard, chalk in hand.
It was not unusual to have very young Economics lecturers. Jadavpur was strong in engineering and could certainly use a Professor who was up to date on OR.
The chair of the department of history was Professor Sushobhan Sarkar,
who wrote the manifesto for the Communist Party of India
In the faculty we also had a remarkably innovative historian, Ranajit Guha
who was believed to be close to the Kremlin
Ranajitda was previously an active communist, but by the time I met him he had decided that this had been a mistake. He still remained a revolutionary – in a quiet and nonviolent way – working for the neglected underdogs of society, but he had completely lost his faith in communist organisation, particularly Stalinism, which was very much in vogue in Calcutta at that time. Ranajitda was then married to Marta, who was of Polish origin with Jewish ancestry, and together they regularly hosted gatherings of friends.
Sen minimizes the Communist credentials of his associates at that period.
Ranajitda was in the process, at that time, of writing his first book, A Rule of Property for Bengal, which would establish him as a historian of unusual imagination and vision. The book investigates the intellectual background of Lord Cornwallis’s deadly Permanent Settlement of land tenure, imposed on Bengal in 1793, which did incredible harm to the economy.
Cornwallis fixed rents in perpetuity. That meant the landlords and tenants had an incentive to improve the land and thus retain more money in their own pocket rather than hand it over to the State. How could this harm the economy? The answer is, if Bengalis were utterly shit and thus the State needed to wipe their bums, then the State needed to take more and more of the revenue of the State so as to pay for ass wiping.
It was a work of quite profound originality, differing from standard works on British colonial policy in India by
refusing to engage with the historical record which was well known to the lawyers from whom Sen & Guha were descended.
focusing on the role of ideas as opposed to greed and self-interest (which had become the mainstay of critical history at the time).
The idea was simple. If the Brits fix rents, then the landowners and other intermediaries have a strong incentive to support the Brits. A new ruler would raise rents.
The British officers who had a voice in the choice of land rules in Bengal were motivated by
the desire for a quiet life. During the big famine, people in London thought the Brits on the ground in Bengal were making massive profits by controlling the supply of food. That's why the Company took over the Nizamat (administration).
their well-considered views on how to improve Bengal agriculture. The ethics behind the rationale of permanent settlement, and on the reasoned and humane ideas that led to it, were actually different readings of good governance.
Nope. Governance of any sort depends on fiscal solvency. Putting down insurrections costs money. Governance is good enough if Governing can continue in a sedate manner.
What is striking is that, despite their sincere attempts at doing good, the Permanent Settlement agreement produced quite disastrous results.
Not for Sen's class nor for the Brits.
Guha’s focus, unusually in colonial history, was not on imperial exploitation and the dominance of British interests over the concerns of the subjects, but the various wellmeaning thoughts that led to a jumble of proposed arrangements for land settlement in Bengal – and their botched application.
It wasn't botched. It lasted 150 years. No doubt, some stupid people had written stupid articles around that time, but the Settlement wasn't based on stupid ideas. It was a pragmatic business which drew upon the expertise of the indigenous clerical class, some of whom had become 'banyans' or 'vakils' for John Company.
A Rule of Property for Bengal is not, however, the work for which Ranajit Guha is now most famous. That distinction goes to a series of publications under the generic title of Subaltern Studies, the product of a highly influential school of colonial and postcolonial history which he initiated and led. (As I noted in Chapter 4 it had some correspondence with my grandfather Kshiti Mohan’s giving precedence to those poems of Kabir which the poorer followers loved.)
In other words, two upper middle class East Bengalis were patting themselves on the back for taking an interest in the poor. Guha actually fucked off to Blighty and settlled there permanently a decade before Sen.
The school of Subaltern Studies comprehensively disputed elitist interpretations of history.
These cunts considered themselves elite because they were Professors of useless shite. But the new elites in Democratic India- i.e. the politicians & technocrats- had their own historiography focussed on glorifying people of their own caste or creed.
In his introduction to its first volume, published in 1982, Guha is deeply critical of the fact that the historiography of Indian nationalism had been, for a long time, dominated by both colonialist elitism and “bourgeois nationalist” elitism – which Ranajitda did much to dis-establish.
There was a time when the Left ruled the roost in History Departments. But the Left has become history almost everywhere in India. Even West Bengal is now with the BJP
This was a big move to liberate the writing of Indian history – and by implication history everywhere – from a debilitating concentration on elitist perspectives.
It would be fair to say that vernacular language authors and scriptwriters, most of whom had little in the way of formal schooling, completely changed the type of history Indians consider important.
Although Subaltern Studies had not yet been born when I first knew Ranajitda, our daily conversations made it clear that he was already thinking in terms of an antielitist reassessment of history.
Better done from elite campuses in places still ruled by Whites.
Once I had settled into my new job and got to know the new students, I did not of course neglect my old haunt – the coffee house on College Street, opposite Presidency College and not far away from the base of Calcutta University. It was the summer of 1956 and among the vigorous debates going on then were the immediate reactions to Nikita Khrushchev’s revelations about Stalinist practices, in the Twentieth Congress of the Communist Party of the Soviet Union.
Some British Communists, like the great John Maynard Smith broke with the party at that time. Haldane, Smith's mentor, actually moved to India and took up Indian citizenship
The Congress had taken place in February 1956, a few months before I returned to Calcutta, and the implications of what had emerged were sinking in slowly in leftwing political circles there. When I asked one of the old loyalists I knew well what he thought, he told me immediately, “I hate Khrushchev more than any revolting little insect” and refused to have any further discussion. When I ventured that what Khrushchev had reported was shocking but completely unsurprising, I got a blast of political rebuke.
My own awakening to the tyranny of the Soviet system had come a decade earlier
in 1947? Sen would have been 14 years old.
with my reading about the “show trials” and the Stalinist purges,
which killed 'Chatto'- a fellow Bengali
including the treatment of Bukharin, the leading Leninist philosopher of his time, whose writings I knew well. So I did not see a sudden break in what was happening – only a change in what was being officially admitted.
Some British Communists, because of their Intelligence links, knew a lot about Stalinist excesses. They prepared their proteges for the revelations which were in the pipeline.
In October and November 1956, as the shock of the Twentieth Congress was being absorbed by leftwing circles, the Hungarian uprising against Soviet rule occurred and was brutally suppressed by the Soviet Army. The Communist Party of India failed to denounce Soviet authoritarianism in the way various other communist parties (the Italian party in particular) had and it was becoming increasingly clear that the days of a united Leninist Communist movement in the world were coming to an end.
The Italian Communist party did not condemn the invasion of Hungary. Many Italians did leave the party, however.
I was disturbed by the brutality of the Hungarian suppression as well as by the shocking revelations in Khrushchev’s denunciation at the Twentieth Congress. The questions now being raised seemed to me to be issues that should have been addressed much earlier. While I was never in the Communist Party (nor ever tempted to join it), I did think that class based militancy had a very positive role to play in India, plagued as the country had been by longstanding inequalities and inequities.
The Workers & Peasants party had formed a Government in Bengal in 1937. There were plenty of such outfits in India.
In that context, I tried to argue that the ability of a Communist Party to be effective and constructive would be much enhanced if it took on seriously the kind of prodemocracy questions that were at last being aired in the 1950s.
The CPI had given up armed struggle. It participated in all post-Independence elections.
The Communist movement in India did eventually take up the issue of its compatibility with India’s political democracy, and, while the process of response was painfully slow, it was good that the shocks of 1956 and later remained present in the political debates in the coun try.
Sen is delusional. The CPI had no choice but enter electoral politics. Armed struggle was a ticket to jail or the grave. The Moscow-Beijing split caused a split in the CPI. But both sides supported Soviet intervention in Czechoslovakia in '68.
If India abstained from condemning Soviet Invasions of Hungary, Czechoslovakia or Afghanistan, why the fuck would Communist parties do so?
However, unlike the Communist parties in China, Vietnam and Cuba, the Indian party never became powerful enough to be a decisive political force,
it ruled West Bengal for 30 years.
and it split several times, first in 1964.
By 1967, a Communist was able to do quite a bit of land reform in West Bengal because he was Land Revenue Minister.
Perhaps if Sen had remained at Jadavpur he would have joined the CPM and held Ministerial office. It so happened that he got a Prize Fellowship for four years & decided to return to Cambridge. Later he was at the Delhi School of Economics and thus could not personally witness the rise to power of the CPM in Calcutta. Later, like Bhagvati, he fell in love with a colleague at DSE and had to leave the country to get a divorce. In the West, his work would necessarily be didactic and abstract. Thus, unlike a Manmohan, or Minhas, he could not acquire direct knowledge of why and how techniques should be chosen. Chinese Communism had a learning curve. It may be that Communism in Bengal could have improved over time.
