The modern economics (Western Economics) we teach in Indian universities has more than 200 years of history and it started with the publication of Wealth of Nations by Adam Smith in 1776. Since Independence, the Indian economic planners wanted to ensure a social system based on the concept of social justice, equity and liberty but by teaching, learning and following the economic theory and policy practised by the modern capitalist world we never ensured an ideal socio-economic order even theoretically. The most interesting aspect of the entire theoretical developments in economics was to accredit and support the development stage of western capitalist economies. The historical context in which major schools of thought in economics like Mercantilism, Classical Economics, Keynesianism, Monetarism and Supply Side Economics emerged; its policy directions were based on the development experiences of western capitalist economies and crisis in capitalism.
It can be argued that globalisation is free flow of technology, free flow of capital, free flow of human resources, goods and services among countries. This is a dominant socio-economic and political philosophy of the 21st century. Globalisation is not a new phenomenon, but extension of the policy of colonisation, which started with Industrial Revolution in England. The two World Wars were the result of competition for world hegemony, required for continuation of Industrial Revolution in the west and to reiterate the supremacy of Anglo-Saxon establishments. Colonialism is essentially an economic phenomenon and has outlived its formal political end. Economics and politics being closely inter-related, economic globalisation will also lead to political globalisation with consequent loss of national sovereignty.
Industrial Revolution started in England about the time when the East India Company gained its first foothold in India as a territorial power. The British and Indian people had roughly similar per capita levels of industrialisation at the on set of the Industrial Revolution (1750). India’s level was only one hundredth of the UK by 1900. This benefit didn’t percolate to the bulk of the British people. It led to decimination of British peasantry and de-industrialisation of India. Industrial Revolution in Britain should not be treated as a mere economic phenomenon powered by technical knowledge. It should be treated as the result of colonisation. The Great Britain was the predominant colonial country with a colonial possession of an area nearly hundred times of its own area. Economy of such huge colonial empire with total control over territory and population has not been properly analysed by the Anglo-Saxon School of economic thoughts. There are two types of colonisation. One is colonies of exploitation for example India, Sri Lanka, etc and second is colonies of settlement for example New Zealand, Australia, Zimbabwe, North America, South Africa, etc. But Germany is another country which industrialised rapidly without formal colonies. They found market in less developed European countries (Eastern Europe). It was also the main reason for the two World Wars. Even Japan, which was a major country participated in the Second World War was motivated by its economic interest of dominance of British colonies in Asia.
One point to be noted is that the British economists of the 19th century consistently avoided a historical approach to economics, as that would have exposed British Industrial Revolution in its true colours. Any debate on this direction was stopped as encouraging obscurantism and anti-progress by the new managers of the economy armed with their one-dimensional Anglo-American economic theories. One dangerous practice was that the solution to global economic crisis and depression in advanced capitalism was sought to be applied for economic development of newly independent countries. Keynesian revolution succeeded the Industrial Revolution as an adhoc theory of countering the industrial depression in Britain during the thirties, just before the Second World War and became the all-encompassing theory of development.
Dennis Robertson at the out set of his Cambridge lecturers, delivered between 1945-46 to 1956-57, warned the under graduate students about the controversial nature of Keynes’s General Theory and to supplement its readings by critical writings on the same. Laws of economics are relative and valid for particular situations in the economic history of a nation. To the British economists, the economic forces generated by the Industrial Revolution in that country was universal and economic laws were accordingly formulated. What was good for Britain was good for the entire world, irrespective of differences in socio-economic conditions. But great personalities like Arnold Toynbee argued against this dominant view and the need for region specific models of development. His dream of this way of study never materialised because of his premature death and lack of followers. Adam Smith advocated free trade at a time when British manufacturing industries, particularly the textile mills had increased their capacity through various practical innovations.
Trying to universalise economic laws has been one of the greatest disservices to the science of economics. The attempt by the third world countries to formulate their development plans on the basis of these economic laws has created serious imbalances in their economy and has kept them perpetually indebted, leading to erosion of their economic independence.
We must initiate a serious debate on western economic theories (theories developed to suit the development stage of western capitalist’ economies) and the need for promoting native development models suited to its stage of economic development considering the historical, cultural, socio-economic and political dimensions.
(The writer is a Lecturer of Economics in College of Engineering, Thiruvananthapuram and can be contacted at [email protected])