¹ A sophisticated interpretation of the development of economic theories in these terms can be found in Rogin, Leo, The Meaning and Validity of Economic Theory: an Historical Appraisal (New York, 1956).Google Scholar

² A very recent statement along the lines described can be found in Maddison, Angus, Class Structure and Economic Growth: India and Pakistan since the Mohuls (London, 1971), particularly pp. 24 ff and 130 ff. The policy implications of Maddison's interesting survey are different, of course, because it is no longer possible for the foreigner to play a role.Google Scholar

³ Obviously, there also developed an eclectic tradition which accepted an initially creative role for British rule but believed that it lasted too long.

⁴ Morris, M. D. and Stein, B., ‘The Economic History of India: A Bibliographic Essay’, Journal of Economic History, XXI, 2 June 1961, pp. 179–207;CrossRefGoogle Scholar and Kumar, Dharma, ‘Economic History of Modern India’, The Indian Economic and Social History Review, IX, 1 03 1972, pp. 63–90.CrossRefGoogle Scholar For a discussion that ranges over most of the issues that have been debated, see Morris, Morris D., Matsui, Toru, Chandra, Bipin and Raychaudhuri, T., Indian Economy in the Nineteenth Century: a Symposium (Delhi, 1969).Google Scholar

⁵ See the discussions in Morris and Stein, op. cit., pp. 201–2;Google Scholar and Kumar, , op. cit., pp. 66–71.Google Scholar

⁶ In both of these cases much lingering disagreement can be attributed to nothing more substantial than the inability of older members of the discipline to learn new tricks.

⁷ See, for example, Samuelson, P. A., ‘Understanding the Marxian Notion of Exploitation: a Summary of the So-called Transformation Problem Between Marxian Values and Competitive Prices’, Journal of Economic Literature, IX, 2 06 1971, 399–431.Google Scholar For an example of how close ‘bourgeois’ economic historians can come to a Marxian formulation, compare North, D. C. and Thomas, R. P., ‘The Rise and Fall of the Manorial System: a Theoretical Model’, The Journal of Economic History, XXXI, 4 12 1971, 777–803,CrossRefGoogle Scholar with Dobb, M., Studies in the Development of Capitalism (London, 1946), ch. II.Google Scholar

⁸ Bhagwati, J. N. and Chakravarty, S., ‘Contributions to Indian Economic Analysis’, in The American Economic Review, LIX, 4, Part 2, 09 1969, ‘Supplement: Surveys of National Economic Policy Issues and Policy Research’, pp. 1–73.Google Scholar

⁹ It would be interesting to ask why so little work in economic history has been done since 1947 in Pakistan or Bangladesh. The answer would take me far from my immediate purpose and so I desist. Let me merely make the point that the tendencies which I describe are most clearly visible in India. My description of these developments is very rough and does not attempt to explain in detail the lag between the appearance of a social issue and the scholarly response to it.

¹⁰ Myrdal, Gunnar, Asian Drama (New York, 1968).Google ScholarNair's, Kusam provocative volume, Blossoms in the Dust (London, 1961) was a strong supporting statement.Google Scholar

¹¹ Narain, Dharm, The Impact of Price Movements on Areas under Selected Crops in India 1900–1939 (Cambridge, 1965);Google Scholar and Krishna, Raj, ‘Farm Supply Response in India–Pakistan: A Case Study of the Panjab Region’, Economic Journal, Vol. 73, 09 1963, 477–87.CrossRefGoogle ScholarMorris, M. D., The Emergence of an Industrial Labor Force in India: A Study of the Bombay Cottonmills, 1854–1947 (Berkeley, 1965);Google ScholarMorris, M. D., ‘Values as an Obstacle to Economic Growth in South Asia: An Historical Survey’, The Journal of Economic History, XXVII, 4, 12 1967, 588–607.CrossRefGoogle Scholar See, also, Kumar, Dharma, Land and Caste in South India: Agricultural Labour in the Madras Presidency during the Nineteenth Century (Cambridge, 1965).CrossRefGoogle Scholar

¹² This does not mean, e.g. that free trade would necessarily vanish as an issue. Rather it would appear at one end of a spectrum of policy choices that a sovereign nation can make.

¹³ This argument is not inconsistent with the line of reasoning suggested by Gerschenkron, Alexander, Economic Backwardness in Historical Perspective (Cambridge, Mass., 1962), chs. 1 and 2.Google Scholar

¹⁴ A comparison of the two bibliographies cited above—Morris and Stein, op. cit., and Dharma Kumar, op. cit.—shows how little change of direction has occurred. But to the extent that there are changes, they are moving along lines that I am suggesting.

¹⁵ Where the new work does not touch the old ground at all—e.g. recent work on national income or agricultural output—controversy is minimized. There is no overt threat to older procedures. But when problems begin to overlap and the new answers begin to disrupt the conventional wisdom, then difficulties surface.

¹⁶ I refer to the controversies between the neo-classical and German Historical tradition; over the standard of life during the Industrial Revolution started by J. H. Clapham and the Hammonds; and what is referred to as the ‘New Economic History’.

¹⁷ Page references to the book will usually be placed in the text with no further identification.

¹⁸ Bagchi, p. 3, shows a much greater difference, but this is because he seems inadvertently to have confused British current and constant prices. See Dean, Phyllis and Cole, W. A., British Economic Growth 1688–1959: Trends and Structure (2nd edition, Cambridge, 1969), pp. 282 and 329–30. But whatever the difference in economic performance, it was enormous.Google Scholar

¹⁹ Although Bagchi stresses the slow growth of manufacturing activity—and one tends to accept the proposition intuitively—he does not offer us direct evidence. In fact, Lidman and Domrese conclude that large-scale manufacturing output in South Asia between 1880–1914 ‘increased at an average rate of between 4 and 5 per cent. This compared well with contemporary Germany (4.2 per cent per annum) but not with contemporary Japan (about 7 per cent).’ Lidman, R. and Domrese, R. I., ‘India’, in Tropical Development 1880–1913. Edited by Arthur Lewis, W. (London, 1970), p. 325.Google ScholarHilgerdt's well-known estimates cover the period 1896–1900 to 1936–38. They show that in the period to 1913 India's large-scale manufacturing output grew a shade faster than the world average and more rapidly than in Germany, United Kingdom, France, Italy, Belgium and Sweden. Only in the United States, Russia, Canada, Japan and Finland did output grow more rapidly. During the period between 1913 and 1936–38, India's average rate of growth of manufacturing output exceeded all the above except the USSR, Japan and Finland. Of eighteen other countries listed for the interwar period, India grew more rapidly than all but Greece and the Union of South Africa. League of Nations, Industrialization and Foreign Trade (1945), pp. 130 ff.Google Scholar The most recent study estimates that between the quinquennia 1900–01 to 1904–05 and 1935–36 to 1939–40 the index of large-scale manufacturing output rose from 100 to 382. Sivasubramonia, S., ‘National Income of India 1900–1901 to 1946–1947’ (Unpublished Ph.D. dissertation, University of Delhi, 1965), p. 350.Google Scholar What is at stake in the notion of ‘stagnation’, then, is not the rate at which the output of large-scale manufacturing units was growing. Without being quite explicit, Bagchi is really focused on diversification of that output and the general rate at which the entire economy was being transformed.

²⁰ Rungta, R. S., Rise of Business Corporations in India, 1851–1900 (Cambridge, 1969).Google Scholar

²¹ It is worth mentioning that despite the great interest in foreign trade, economic historians have given no attention to the details of that activity. The little information that is available outside official and semi-official publications must be credited to the commemorative instincts of individual companies. See the references in Morris and Stein, op. cit., p. 203;Google Scholar and Kumar, , op. cit., pp. 77–8.Google Scholar

²² These paradoxical notes become consistent if one recognizes that Bagchi has a tendency to treat many of the problems that beset the economy on the supply side as mere ‘imperfections’. Unfortunately, such imperfections are characteristic of an underdeveloped economy and it is their elimination that is so costly in resource terms. There is the danger here, as elsewhere in the book, that the author borders on the brink of the fallacy of composition.

²³ It is startling that there has been absolutely no serious analysis of the economic consequences of crop failures and epidemics in South Asia. While the immediate results of such disasters seem obvious, the subsequent effects on prices, per person productivity, distribution of income and demographic behavior may well have been quite different from those invariably implied. The consideration of these issues might well start with an examination of the recent literature on the economic consequences of the Black Death in fourteenth-century Europe.

²⁴ For example, speaking of economic development in South India in the 1930s, Bagchi tells us (p. 210) that industrialists were helped by ‘an abundant supply of cheap labor and—in the case of cotton piecegoods and cotton yarn—a large market near at hand. Another factor which encouraged the growth of industry was the agricultural depression leading to an extreme degree of indebtedness of peasants…’ Agricultural depression and an extreme degree of indebtedness among peasants seem incompatible with large local markets that would be attractive to private entrepreneurs. It is possible to conceive of a model in which such relationships would hold, but the necessary assumptions strike me as very strained. I think that this is one of a number of cases where the author has fallen victim of inappropriate partial equilibrium analysis.

²⁵ This is one of those frequent cases where the attention given to a subject was determined by the political concerns of the period. The effort so expended may or may not say anything about the relevance of the issue to economic development. An obvious instance of exaggerated stress on an issue is the enormous attention paid to the tariff problems of the Bombay cotton mills during the interwar period. In terms of economic development, the great expansion of the cotton textile industry outside Bombay City is a subject much more to the point. Yet it has received only the slightest attention from economic historians. See the amount of space given by Bagchi to the two issues, pp. 237–61.

²⁶ This is more implicit than explicit in the discussion. Like Alfred Marshall's Principles, Dr Bagchi almost always has a footnote or a passing reference that indicates his awareness of an issue, but the emphasis is as I have stated. There are a few scattered bits of evidence which suggest that we ought to give up the banal theme of ‘infinite and increasing misery’ in the countryside and get down to solid detailed analysis of specific localities. (This is not Dr Bagchi's immediate problem.) For example, there is the paradox that follows from George Blyn's conclusion that per capita availability of food grain was declining during the interwar period—the apparent failure of food grain prices to rise relative to non-food grain prices and the tendency for life expectance to begin to rise at the same time. Another problem is posed by data that show that during part of the interwar period wages of skilled and unskilled labor rose more rapidly in rural than in urban areas of Bombay Presidency moffusil while wages of fieldhands did not. This could be interpreted as suggesting a rising amount of rural non-agricultural activity. Sivasubramonian, S., op. cit., pp. 245–6, does not draw this implication, but it is quite consistent with a range of other evidence that is available.Google Scholar

²⁷ Moreover, tariffs would be of no use to those activities dependent on exports. Tariffs could not have aided the jute industry nor would they have been of any assistance to the Bombay cotton mills in capturing the Far Eastern yarn markets in the late nineteenth century, markets which Dr Bagchi sees as of great importance.

²⁸ For example, his theme of discrimination in its straightforward form would only affect the distribution of investment between Europeans and Indians. Discrimination would have affected the level of private investment only if equal access to capital at the same interest rates would have led Indians to invest more—i.e. take more risks—than Europeans would. And Bagchi makes no effort to show us this. In fact, he implies that the Indian business community would not have taken more risks (pp. 425 ff).

²⁹ The potential rate of return to which the entrepreneur responded with investment was determined not by some absolute level of demand, but by a demand schedule. Actual demand varied inversely with price and price, in turn, was determined by costs of production. This point seems to be neglected by Bagchi.

³⁰ One might consider all resources perfectly elastic in some very long-run situation. But such a time period would hardly be relevant for any private investor or, for that matter, for policy-makers in a planned economy. It is possible that some will react by saying that India has raw materials and idle labor and therefore Dr Bagchi is correct. But that is a moral statement. It has no analytic significance, particularly to the economist whose field was founded on the consequences of Original Sin.

³¹ See Robinson, Joan, Economic Philosophy (Garden City, New York, 1964), pp. 121–2.Google Scholar

³² For example, it has been estimated that by 1700 adult male literacy in England and Scotland was probably 40–50 per cent; it was about 20 per cent in France. A century later, at the beginning of the nineteenth century, adult male literacy in England and Wales had risen to about 65 per cent, in Scotland to 88 per cent and in France to about 50 per cent. And by this time both England and France lagged well behind Prussia, Switzerland, Holland, parts of the Austrian Empire and New England. L. Stone, ‘Literacy and Education in England 1640–1900’, Past and Present, No. 42, February 1969, 120 and 126 ff. And Japan's literacy rate at mid-nineteenth century probably was ‘greater than in most currently underdeveloped countries, and greater than in any European country at a comparable stage of development, with the exception of Holland and Prussia. Certainly England and France were far behind’. Rosovsky, Henry, ‘Japan's Transition to Modern Economic Growth, 1868–1885’, in Rosovsky, Henry (editor), Industrialization in Two Systems: Essays in Honor of Alexander Gerschenkron (New York, 1966), pp. 105 ff.Google Scholar Whatever scholars may ultimately settle upon, it is obvious that literacy rates were never close to such levels in South Asia. Economists are now convinced that investment in human capital has played a critical role in determining rates of economic growth. The dynamic growth of literacy in Western Europe from the sixteenth century by contrast with what seems to be the case in South Asia may provide an element of explanation for Habib's statement ‘that while the Indian economy was not closed to innovation and invention, there was no overwhelming enthusiasm for technological change, which…appears so strikingly to mark sixteenth and seventeenth century Europe’. Irfan Habib, ‘The Technology and Economy of Mughal India’ (Mimeo., the Dev Raj Chanana Lectures, Delhi, 1970), p. 51. The long-run handicaps of these structural characteristics would not be easy to overcome. Although Bagchi devotes some attention to technical higher education, he ignores the fundamental social and economic consequences of the insignificant investments in primary education.

³³ The Ford Motor Company's disastrous experience with the Edsel automobile and Dupont's more recent failure with Corfam indicate that even the largest enterprises in the most developed economics cannot reduce all to certainty.

³⁴ Bagchi grievously underestimates this problem and its implications (pp. 19 ff and ch. 6). He also misses the fact that it inhibited European as well as Indian enterprises. (The abortive efforts by Europeans to establish iron and steel plants is evidence of this.) If these difficulties burdened the greatest and most respectable enterprises, we can imagine how awesome were the problems of capital availability which afflicted the smaller businessmen. These could not be resolved by a simple policy change that would create an adequate banking system. Apart from the capital that such a development required, the inability to integrate the hundi into the modern credit system despite many attempts, suggests that there were deeper and more complex difficulties than mere lack of will. One factor was the ambiguity of the rights and obligations which afflicted various instruments of property transfer and indebtedness. This leads me to refer to the total neglect by economic historians of the problem of property rights as they influenced commercial relations. The establishment of property rights has been discussed in relation to land but only with two problems in mind—responsibility for payment of land revenue and the effect on social structure. On the assumption that British notions of private property applied in South Asia, scholars have ignored the effect of this institution on entrepreneurial behavior. The form of private property was introduced but—allowing for narrow areas of specific exception—the content was not. To have imposed substance as well as form would have produced incalculable consequences on the entire structure of family organization throughout the subcontinent. Lacking that, the actual development of property relationships (in the technical sense of the term) has been quite different than in Britain in the nineteenth and twentieth centuries. There is no question that the effect on Indian entrepreneurial behavior—the risks and uncertainties that had to be allowed for and the institutional solutions that were needed to reduce their impact—have been quite different. Seen in these terms, it is probable that foreign businessmen were operating in an environment where (despite superficial similarities) technical differences in the structure of property relations made risks different for them than for the native entrepreneur. For example, true partnerships seem to have been less usable and the modern limited liability technique has often been used instead of Indians, albeit with modifications. Chit funds and deposit schemes apparently have been extensively used as devices to mobilize capital. The managing agency—ostensibly designed to solve British problems of managing capital at a distance—obviously has been employed by Indian businessmen to solve local problems. (It has certainly been more than an instrument by which local entrepreneurs plundered local shareholders!) I am impressed that if we really want to understand some of the fundamental influences on native entrepreneurial responses, we shall have to turn our attention to this broad range of issues about which we know almost nothing.

³⁵ Bagchi never does explain why total British investment in South Asia over the period 1865–1914 was as low as it was. He merely indicates that capital tended to be provided mainly by reinvestment of earnings in the region (pp. 158 ff).

³⁶ The reviewer wishes to acknowledge the generous assistance of the American Council of Learned Societies and the South Asia Program, Institute of Comparative and Foreign Area Studies, University of Washington.