Prof. Prabhat Patnaik, eminent Marxist economist, taught in CESP/JNU over the last four decades. He has been one of the most outstanding economists in India and a great teacher. He has retired from JNU recently. On the occasion of his farewell, the students of CESP published an interview of Prof. Patnaik, which is reproduced here.
1. Do you think that the experience of the global economic crisis of 2008/2009 raises fundamental questions vis-à-vis mainstream economic theory?
Yes it does. Current mainstream economic theory has never reckoned with the possibility of “involuntary unemployment” a la Keynes, while the chief hallmark of the crisis is the existence of extraordinarily high levels of “involuntary unemployment” all over the advanced capitalist world. If the most palpable economic problem of our time is incapable of being cognized by current mainstream economic theory, then some thing is surely wrong with the subject. Indeed because of this infirmity of current mainstream economic theory, there is even an attempt in the US to argue that the present unemployment is not “involuntary unemployment”, i.e. not caused by inadequate demand, but reflects a skill or regional mismatch. But for this to be true, there must be some trades, some regions that must show excess demand for labour or at least tightness in the labour market. This is not the case. It is necessary therefore to make the current mainstream theory, which is dominated by monetarism, into a sideshow, and to bring what has been sidelined till now to the mainstream.
2. Did Keynes mark a ‘revolutionary’ break in modern economic theory? Do you see the need and possibility of a similar ‘revolution’ today?
As my previous answer suggests, Keynes did mark a “revolutionary break” in economic theory. But of course any science has to be open-ended, where nobody has the last word, not even Keynes. But this does not mean that Keynes has become passé and we need a revolutionary break today of the sort that Keynes had introduced. I think we have to proceed along the route shown by Keynes, and, I would add Marx before that (since Marx in my view anticipated the Keynesian revolution but relegated this aspect of his work to a secondary position). In other words mainstream economic theory had sidestepped Keynes. The need today is to revive Keynes and develop from there.
3. Does more emphasis on ‘heterodoxy’ solve the problem of economic theory? How can one distinguish ‘science’ from ‘ideology’ in economics?
I would distinguish ideology from apologetics. Ideology is the basis of pre-scientific cognition and the post-scientific formulation of an agenda for social change. A science-ideology totality in other words constitutes the thought of any social thinker. What is important however is that different social thinkers, having different such totalities, nonetheless agree on certain scientific propositions, and the reason for this lies of course in the scientific validity of these propositions. Joan Robinson has an extremely interesting essay called “Marx, Marshall and Keynes” in which she argues that each of these authors has a scientific core to his contributions, but with an admixture of ideology. The hallmark of a scientific contribution is that people belonging to different ideologies can nonetheless come to the same scientific truths. The example of Keynes and Kalecki is striking. Kalecki was a Marxist and an engineer by training who, on the basis of his perception of reality, came to the same theoretical positions as Keynes, who started from an entirely different ideological tradition. There can of course be genuine differences about the perception of reality, and hence contending propositions, each claiming scientific validity, but that is the way that science develops. The problem arises when the element of honesty disappears from the perception of reality, i.e. theory becomes apologetics. Apologetics has to be avoided at all costs. Related to it is the issue of closedness. The science-ideology totality I have mentioned above must be informed by an open-endedness, i.e. each such totality must have the capacity to look at itself afresh, to reconstitute itself anew in the light of scientific advances, which can come from science-ideological totalities of other traditions.
4. Should we continue to study the theories of Smith, Ricardo, Marx and Sraffa? What is living and what is dead in “Classical Political Economy”?
Samuelson once sought to show economics as having a linear development, so that Smith, Ricardo, and Marx were the mere precursors (misguided in many respects but with insights nonetheless) of “modern economics”. This obviously is wrong, and Sraffa’s work is precisely what makes this point. We have two entirely different alternative approaches to economics, not a transition from one to the other. For instance we have two very different notions of the price-system. In classical economics the price system, which gets determined only when the wage rate is given, plays the role of allocating the surplus among capitalists; in neo-classical economics there is no notion of a surplus at all and the price system allocates “scarce resources among alternative uses” in accordance with preferences expressed through market demand. Since the classical and neo-classical approaches are two alternative approaches, and one is not the mere rudimentary form of the other, we must study both in order to understand the subject properly. My problem both with classical economics and with neo-classical economics is that they treat capitalism as a closed, self-contained system, while in reality it is impossible to understand capitalism without locating it within the context of colonialism and imperialism. Marx shows an acute awareness of this in his writings on colonialism, but in Capital he takes over a Ricardian universe. The reason for this lies in my view in his belief at the time he was writing Capital in the imminence of a European revolution.
5. You have emphasised in your books on accumulation and stability under capitalism and the value of money, the importance of a theory of imperialism. What is that theory in essence?
Any money-using economy, where money is a store of value and hence a form in which wealth is held, can function only on the basis of a relative stability in the exchange ratio between money and commodities in general. This typically requires that the values of some commodities be fixed in terms of money in any period and be slowly-changing across periods. Marx took the value of commodities in general to be fixed in terms of money in any period (this was the essence of the Labour Theory of value); Keynes took the value of labour-power, i.e. wages, to be fixed in money and slowly-changing across periods. Capitalism must therefore be in a core sense a fix-price system (it is instructive that all theories that see capitalism as entirely flex-price have had difficulty developing a consistent theory of money). But then two questions immediately arise: first, if price is a weapon in the social struggle over distribution, then how can we have fix-price, since the slightest change in the relative bargaining strengths should then give rise either to wage-price spirals or to changes in unemployment to maintain price-stability (as NAIRU theories would suggest)? And secondly, if the system at its core is fix-price, then how does it manage to maintain a reasonable level of activity? The answer to both these questions lies in the fact that capitalism has always functioned, surrounded by and ensconced within pre-capitalist structures which it modifies and adapts to it own needs. The supplanting of producers within these structures and the snatching of their markets provides it with the exogenous stimulus for growth and hence a high level of activity. And the consequent unemployment it generates within these economies ensures that the producers located there who sell primary commodities to capitalism lack adequate bargaining strength and hence have compressible ex ante claims on the capitalist sector’s product. This provides price-stability to the capitalist sector and explains how it can remain fix-price. We therefore have to see capitalism not as a closed, self-contained system but as part of a totality. This is what the theory of imperialism emphasizes. I would say that some of the more recent travails of capitalism arise from the fact that this role which the pre-capitalist environment had traditionally played in the functioning of capitalism, has become less feasible today.
6. How do you see the future of this theory?
What globalization has ensured is that instead of the capitalist-“pre-capitalist” divide being predominantly between countries, it now runs within countries like ours. There is a segment of the economy that is apparently flourishing because of its integration with the capitalist world. And there is another segment of the country consisting of petty producers, craftsmen, fisherfolk, agricultural labourers, and the tribal polulation, that is also integrated into the world economy, but is being squeezed by globalized capital. This segment is the victim of a particularly intensified form of what Marx had called “primitive accumulation of capital”. The kind of stabilizing role for capitalism that the “pre-capitalist” sector traditionally played can now only be played by certain commodity-producers like the oil-exporting countries (which explains the contemporary imperialist aggrandizement against the oil-producing economies); but this new phase of “primitive accumulation” that we see today takes the form of snatching resources, including especially land, from those against whom it is directed. This also constitutes, however, a problem for capitalism for at least three reasons: first, the assault on petty production (of which the peasant suicides in India are a manifestation) deprives it of valuable political support (much the way that capitalism in the 1930s, as Schumpeter had argued, had lost the support of the urban intelligentsia); second, the vastly growing inequalities in income distribution in the world entail a tendency towards under-consumption at the global level which portends a perpetuation of the current crisis; and thirdly, since its capacity to stabilize itself economically by making use of the “pre-capitalist” segment is greatly weakened, the current crisis is not only likely to persist but even get converted into a crisis of inflationary recession. We are in short on the threshold of major economic and political developments, and an enriching of the theory of imperialism will not only be needed for this, but will also happen in response to this need.
7. What do you think has been the strength of the Centre for Economic Studies and Planning as a centre of learning?
I consider JNU as one of the finest achievements of post-independence India, and I see the CESP within it as a specially valuable institution. The strength of CESP in my view lies in the fact that right from the beginning it decided not to pursue only one theoretical tradition as most other institutions do, but to incorporate all major traditions within its curriculum: the classical (including Marxian), neo-classical (including the Walrasian) and the Keynesian traditions. Likewise it decided to give equal emphasis to theoretical, historical as well as statistical modes of analysis, without arbitrarily prioritizing only one of these over the others. As a result, it introduced students to the richness and depth of the subject, instead of inculcating in them a facile superciliousness towards “non-mainstream” traditions and non-theoretical modes of analysis. This approach, together with the fact, as a senior JNU Professor once put it, of having “teachers who want to teach and students who want to study” is what has made CESP such a special place.
8. How can the past and present generations of CESP students carry forward its legacy?
As I mentioned earlier, I believe that we are on the threshold of major political and economic contestations, which will be marked by intense theoretical discussions and major theoretical advances. I would like CESP to be in the forefront of such advances, not just at the national level but in the world as a whole. And I think CESP is uniquely qualified to play this role because, for reasons I just mentioned, it has not got ossified into a supercilious and closed-minded acceptance of what has till now passed as mainstream economics. But, for the CESP to play this role, the CESP fraternity must work with enormous intensity, diligence and broad-mindedness. It is impossible to become a good Marxist without knowing Walrasian economics thoroughly; it is impossible to be a good Walrasian, without knowing Keynesian economics thoroughly; it is impossible to be a good Keynesian without knowing Marxian economics thoroughly; and so on. So, we must continue with our broad and somewhat unique approach to economics. At the same time we must never become victims of the comprador attitude towards the subject that says: “real economics happens and can happen only ‘out there’; our job is merely to learn what is happening ‘out there’ and impart it to our students”. The commoditization of education puts strong pressures on institutions like the CESP to imbibe this comprador attitude. The pressure comes not only from the government that is uncomfortable with any critical thinking on contemporary globalization and its implications for the people; it may also come from students who have to be evaluated by the global market-place. But this pressure has to be resisted if the CESP is to do its social duty of advancing knowledge.