In the years since the Second World War there have been profound changes in the pattern and dynamics of capitalist development in the metropolitan countries of the West, and in its expansion overseas. Changes in the pattern of colonial relationships have followed the response of metropolitan capitalism to the political revolution in colonial countries—the emergence of governments committed to the mobilization and deployment of substantial amounts of their countries’ resources for ‘economic development’; and the rise of indigenous bourgeoisies. These profound changes also reflect substantial alterations in the organizational structure of metropolitan capitalism itself: especially the rise to pre-eminence of huge self-financing industrial corporations with international ramifications and the relative eclipse or
The old type of colonial investment—in plantations, extractive industries, public utilities, transport, trading and financial enterprises—owned exclusively by metropolitan capital, has (with the exception of oil) declined in relative importance. By contrast, there has been a major growth in investment in manufacturing enterprises, often in partnership with local capital. Such ‘manufacturing’ enterprises generally play a role in production complementary to that of industries located in metropolitan countries. The old pattern still predominates in those countries (there are many in Africa for example) whose domestic economy provides little or no surplus to sustain the new pattern of development. It is in countries such as India, possessing a fairly developed economic base, that the new forms of colonial investment are most advanced. Michael Kidron’s detailed studyfootnote1 of the changes which have taken place in foreign investments in India studies the new pattern. It must therefore be welcomed as an important work which can contribute greatly to an understanding of the New Imperialism.
Kidron has described and documented the far-reaching changes in the operation of foreign capital in India, its organizational forms and its relationship with the Indian bourgeoisie. He has provided the first full and coherent account of the decline of the ‘old-type of foreign capital’, and as an analysis of the current patterns of collaboration between Indian and foreign capital. Kidron’s detailed research confirms my own analysis, undertaken two years ago, based on more limited data.footnote2 But this is not the main reason for my enthusiasm. The fact is that Kidron’s work is the first systematic study of its subject. This is perhaps a sad reflection on the state of the Indian Left, considering not only the talent at its disposal but also the flood of data available in recent years, especially through the Reserve Bank of India’s ‘Surveys’ of foreign capital. The only other significant works in the field (neither of which is included in Kidron’s extensive biliography) are by two Russians, Sofia Melman and V. I. Pavlov; both published in English in 1963 by the Communist Party of India.footnote3
Several of the large (and complacent) conclusions drawn by the Russians are not supported by the more detailed examination of the facts undertaken by Kidron. Having examined the post-independence pattern of distribution of foreign investment in India, they conclude rather simply that ‘it is the Government of India that establishes the terms of drawing in foreign capital and directs its utilization.’ They appear to have attached too much weight to the rhetoric of the Government’s policy statements. Such official stipulations as the rule that there should be at least 51 per cent Indian participation in foreign sponsored ventures, lead them to conclude that, ‘As a rule, it is Indian capital that prevails in the new joint company.’ More arduous examination of the facts reveal such conclusions as superficial and false.
In the first part of his book Kidron describes financial and structural changes which led to the decline of ‘old-type foreign capital’, and the transfer of its enterprises to Indian ownership and control. An important factor, he points out, was the increasing marginality of rentier capital (the major source of capital for colonial enterprises) in the Metropolitan economy itself, and its displacement by giant self-financing industrial corporations. An associated factor was the increasing marginality in the world economy of natural raw materials—the major field of operation for the old-type foreign capital. In the Indian context Kidron emphasizes the effects of a decline in flexibility of operations, due to increasing state controls, and the consequent loss of a key factor which enabled old-type foreign capital to retain control of enterprises, as distinct from ownership. But this was a process which was already well advanced in the years before independence. In view of this, Kidron’s occasional extravagances of rhetoric—which speak of ‘circumstances (which by the mid-fifties) favoured the final heave towards full and explicit Indian hegemony in nearly all but the most technologically intensive fields’ so that ‘with Independence the balance of advantage for the Indian investor swung decisively towards “national” capital’, etc.—are somewhat misleading; the more so in view of the increasing influence of the new type of foreign capital and its unequal partnership with Indian business. A further crucial factor has been the leaning of Government policy (in practice) towards the foreign investor despite the initial protests of the Indian capitalist class and its subsequent acquiescence. Kidron’s own stance on the ‘wisdom’ of Indian Government policy is often ambiguous—what the policy itself was, however, is made quite clear. ‘The Congress Government entered Independence confident that its existence alone was sufficient to release the springs of economic growth. . .As a result, little encouragement was given foreign capital.’ Kidron continues: ‘Events quickly conspired to change official attitudes. . .The need for foreign funds seemed obvious. . .Since domestic capital remained shy, Government began to look abroad.’ After mentioning some difficulties about foreign aid, he goes on: ‘But private foreign capital was another matter. Besides its inherent advantages, it seemed easier to attract than public aid. . .and the political concessions required were of a general nature as would appeal to the large foreign sector already in the country and in many respects to domestic capital as well. . .The Government set about attracting it very soon after independence. . .The 1948 Industrial Policy Resolution. . .markted a substantial retreat from previous attitudes towards foreign business.’. . .He continues: ‘The outcry from domestic interests was shrill. . .The situation changed radically on April 6th, 1949 when the Prime Minister presented his long-awaited statement on foreign capital. . .It was now possible for Indian capital to conceive of a state-foreign line-up. . .ficci (The Federation of Indian Chambers of Commerce and Industry) protested at the Government’s ‘open door’ policy. . .The All India Manufacturers’ Organization protested. . .’ There was a change eventually, not in the Government’s attitude towards foreign capital but in that of Indian capital now anxious to cash in on such opportunities as it could win as the Second Five Year Plan got under way. Thus, Kidron notes, ‘by 1954 the industrial economy had begun moving again and set the more alarmist fears at rest. . .By the following year Indian capital had swung round completely. . .
An eloquent comment on the Government of India’s rather half-hearted attempts to implement even its rather limited conditions on foreign capital is provided by the example of its impotent bad temper at the opening ceremony of Lederle Laboratories’ new plant, ‘an occasion ostentatiously boycotted by the Government in protest at the company’s refusal to associate Indian capital with the venture’. It is curious that Kidron relates this rather as an example of half-hearted acceptance by the Government of foreign capital! The Indian Government’s dilemma was made clear by Minister Krishnamachari, who is quoted by Kidron: ‘ “It is not the Government but Indian capital who opposes the participation of foreign capital in Indian enterprise” ’ and, again, ‘ “so far as the Government are concerned, it would welcome foreign capital, but foreign capital would have to make its terms with indigenous capital and enterprise.” ’