the logic behind freebies

Price-makers, for their existence, need the price-takers to take the prices they make. Hence, to preserve themselves, the price-makers must also preserve the price-takers. This is the positive side of the contradiction. It explains several policies pursued by the ruling class aimed at protecting the price-takers, namely, the farmers, agricultural labourers, artisans, handicraftsmen and small industry men. Such for instance are the policies to perpetuate small-scale farming by legislating ceilings on agricultural holdings: to protect artisans by make-believe support and assistance; and to promote small industry by supply of bank credit. What the ruling class will not do is to give these producers an assured price for their product or an assured wage for their labour.

In order to escape exploitation and privation, the price-takers must abolish themselves as a class. This they do, not by abolishing the price-makers, their opposite, but by invading the camp of price-makers and merging themselves into them. This is the negative side of the contradiction.

The process is already on. Farmers, agricultural labourers, artisans, handicraftsmen, small industry and businessmen, price-takers all, are leaving their trades behind and seeking wage-employment in the organized sector; in other words, they're joining the camp of price-makers. They have nothing to lose except their petty property in land and means of production. and they have a job to win, a job with an assured income on the first of every month, whether it rains or not, whether they produce or not, whether what they produce, sells or not. With progressive exploitation of the price-takers by the price-makers, the gap between the two will widen, and the migration will accelerate until the class of price-makers reaches a critical level. The inherent contradiction in everybody trying to be a price-maker will then come to surface and the whole system will fall to the ground. I should be modest and not prophesy what will take its place.

v.m.dandekar wrote that around 1974. i'd originally read the essay in a collection called 'social inequality in india' (rawat publications). there seem to be some minor changes between the essay in the book and the essay i've quoted here- but the chief argument remains the same: the organized sector, the price-makers, in india exploits the unorganized sector, the price-takers.

dandekar's essay, in my view, reflects a growing realization, in the 70s, among participants in policy making, those who make it and discuss it, that the indian welfare state isn't working. its institutions worked for only a few and weren't capable of delivering to a vast majority of indians such basic public services as education, health and other entitlements which promised relief from hunger and deprivation. it's not the institutions were inherently incapable, just that they tended to serve a few at the cost of the many. the 70s, one should remember, also mark the beginning of populist politics- half-hearted attempts to make up for this serious structural bias.

in the essay, dandekar tries to use the marxian method to identify social classes in india: he finds that of 180 million workers in india, only 47.5 million may be said to have entered into production relations of the capitalist economy. the rest, around 130 millions, are workers whose gainful activity is conducted within the framework of households, in other words, whose relations of production are pre-capitalist. these were mostly cultivators, landless labourers, artisans and handicraftsmen etc.,

he further divides the 47.5 million who have stepped into a capitalist economy into three broad segments: those who work for the state, others who work for the bourgeoisie and independent workers. the independent workers, who numbered around 16 million, were neither employers nor employees and hence neither the bourgeoisie nor the proletariat. they worked in diverse occupations- as tailors, bricklayers, vehicle operators and labourers to waiters, washermen, hair-dressers, shopkeepers, salesmen etc.,

so, who were the bourgeoisie and the proletariat? of the remaining 31 million, around 2.2 million could be called the bourgeoisie because they were employers who ran their own businesses and employed others. and the remaining 29 million were all employees, with further classes (blue collar and white collar) between them. but broadly speaking, in 1971, these were the proletariat of india, according to dandekar.

of these 29 (or 29.5 million, to be precise) million, 12.5 million were employed in the public sector (by the state), 6.8 million were employed in establishments employing ten or more workers. these sections together constituted the organized sector. the rest, 10.2 million, were employed in the private unorganized sector (in establishments employing less than 10 people each).

summing up, the organized sector in india in the early 70s employed around 19.3 million workers and these folks, along with the big bourgeoisie exploited the rest of the workers (130+16+10+others= 160 million).

how? in a tightly controlled economy, the organized public and private sector enjoyed monopolistic clout. and people employed in the organized sector too enjoyed better bargaining clout than workers employed in the rest of the economy. so monopoly capital combined with monopoly labour and passed a large share of costs to the unorganized sector, broadly. how did dandekar reach such a conclusion?

My contention is that the large wage-differentials presently obtaining in different sectors of the economy are the result of the fact that the appropriation of the surplus-value generated in each enterprise is left to the bargaining between the management, private or public, and the workers in each enterprise. When this is done, the workers in the capitalistically more highly developed sectors are able to secure higher wages; firstly because in these sectors, there is employed more fixed capital per employee and consequently is created larger surplus value per employee which, though it is due to past labour embodied in the means of production, is treated as available for splitting between the bourgeoisie and the workers; secondly because the workers in these sectors are better organized, and hence possess superior bargaining power, which power improves with every increase in wages they secure; and thirdly because the bourgeoisie in the private sector, or the state in the public sector, enjoy greater monopoly power and hence are able to pass at least part of the costs to the less developed sectors of the economy. This is the central proposition of my analysis and, in my view, this constitutes exploitation of the less organized sector by the more organized sector in which process the capital and labour combine.

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how has the picture changed in the last forty years? the first class of workers (mostly cultivators, landless labourers, artisans and handicraftsmen etc.,), those whose gainful activity is conducted within the framework of households, in other words, whose relations of production are pre-capitalist, number around 270-300 million*, approximately, (130 million in the 70s) now. are relations in this sector still largely pre-capitalist? we do see wage labour, production for the market and profit, but most of the gainful activity is still tied within the confines of the household and the use of technology is still limited. and the question is unimportant in the sense that most of this sector still consists of price-takers anyway, if you follow dandekar's formulation. remember, the key parameter that should be employed to determine whether workers, in any sector, belong to either the super-class of price-takers or price-makers should be the capital employed, on an average, per worker in that sector.

now, who has definitely stepped into a capitalist economy following dandekar's formulation again? the rest (those who work for the state, others who work for the bourgeoisie and independent workers)- around 130-150 million (47.5 million in the 70s). of these, 17-18 million work for the state (central, state governments and psus), or the organized public sector, and 9-10 million for the organized private sector (the big bourgeoisie). 26-27 million in all. of the remaining 100-120 million workers, around 25-30 million work in the unorganized private sector (in establishments employing less than 10 people each) and the rest, 70-95 million, are independent workers (tailors, bricklayers, vehicle operators and labourers to waiters, washermen, hair-dressers, shopkeepers, salesmen etc.,).

the organized sector in india, in terms of numbers employed, as you can see, hasn't expanded at the same rate as the rest of the indian economy. the price-makers are still a very small part of the indian economy. only around 27 million people?

the indian economy has changed a lot since the 70s: it has grown a lot, liberalized. do the price-makers still call the shots? does organized capital still combine with organized labour to exploit the unorganized sector? my answer is yes.

we no longer live in a explicitly controlled license-permit raj, but the regulations are smarter now. in sectors where big public and private sector companies enjoyed monopolistic clout earlier, we've oligopolies now, like in the telecom sector. liberalization has meant that big companies now employ much more capital, thanks to easier technology imports, per employee than ever before. so they need fewer people now, and hence the stagnation in employment in the organized sector.

but does organized labour still enjoy superior bargaining power? yes again, in my view. because more capital goes into training the kind of workers technology-intensive big companies need now. they're always in short supply- and the new workers are so in demand that many of them work for more than one company now, as consultants etc.,

the organized sector employed 10% of all workers in india in the 70s- it has shrunk now to 7% or so. that doesn't mean the class of price-makers has actually shrunk- the key yardstick for measuring whether a worker belongs to the class of price-makers or price-takers is to measure the kind of capital that is invested in him, his merit- those who work in capital-intensive large organized sector jobs are obviously price-makers. but those among the independent workers and small entrepreneurs- like chartered accountants, doctors, engineers and architects, fashion designers, software and technology consultants, media professionals and a whole host of new classes of independent workers who have emerged in the last forty years are also price-makers (but not the older classes of independent workers like the tailors, bricklayers, vehicle operators and labourers to waiters, washermen, hair-dressers, shopkeepers, salesmen etc.,) because a lot of capital has gone into training them.

in the past, i've tried to point out in a number of posts on how and why public policy, rooted in brahminized universalistic dogma, works against the marginalized in india. against those who aren't 'upper caste, hindu, male' (because that's what the price-makers essentially are).

i like dandekar's essay because it makes the same point, but in the language of the dogmatic. since the 70s, as i said earlier, policy makers in india have tried to hide the systematic bias in state policies by cooking up elaborate schemes to deal with poverty- the demand for a universal dole would be a great way to call their bluff. would they still go on building iits and calling them national assets when the dole shall start challenging their priorities, when the marginalized can see where the money's coming from?

* these figures are guesstimates, the earlier figures are based on figures from the essay in the book.