imperil ism in ner india

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Towards a Conceptual Framework for Studying the Impact of Imperialism on

Economic Development of North-Eastern Region of India

AmitabhaSinha

Reader

Department of A & A EconomicsTripura University

Introduction

This paper is arranged around two basic articles of faith. First, effect of imperialism can be

studied only as an empirical question and not as an ideological one. Second, such an analysis

can be carried out only with the help of a model. No model, no analysis.

We approach the insights provided by Prof. J.B.Ganguly in his last work An

Economic History of North East India from this methodological stance where one allows the

possibilities of emergence of a coherent picture from the vast mass of often rambling

descriptions. The theoretical insights provided by Prof. Ganguly will guide us in thisendeavour.

The Two Candidate Models:

There are two major approaches to the study of history of economic development in terms of

stylized facts. One is Harrod-Domar (H-D) Approach. The other is the Neoclassical

Approach. Prof. Debraj Ray shows that H-D model is the first endogenous growth model.

The Neoclassical growth model is based on the idea that the propagating factors of the

growth process are exogenous. They are captured in the catch-all term technological

change. Many development economists would prefer the H-D type of model. Endogenous

growth models are theoretically more satisfactory because they capture a fundamental basis

of growth, namely, capital formation. In Neoclassical growth models, growth of capital has

no growth effect on output. It has only level effect. The level of per capita income

increases due to growth of capital. The growth rate is in equilibrium when it is equal to

growth rate of the labour force. This can be rigorously demonstrated assuming constant return

to scale. The assumption of constant return to scale makes the growth process independent of

growth rate of capital. The H-D model does not assume constant return to scale. Thus it can

be write down the following equation:

g = s/v (1)

Here g = growth rate of output, s = average propensity to save and v = capital output ratio

which is the reciprocal of productivity of capital. It is obvious that, given the capital outputratio, a higher propensity to save will lead to higher growth rate. Why this should be so will

ofcourse require a more detailed analysis. For example, it may help in human capital

formation, research and development and/or creation of physical infrastructure. This is the

model we are going to use to analyse the impact of imperialism on the regional economy of

Northeast India.

The Model in Action

Let us try to see how imperialism can impact on the growth rate of the economy. The model

is clear enough on this issue. If imperialism extracts a part of the surplus generated by the

economy for its own use and fails to invest it in the region then it will have a negative impacton the growth rate of economy. There will emerge a gap between potential growth rate of the


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economy and the actual growth rate of the economy. Similarly, if the policies of the

imperialism do not help to reduce the capital output ratio then there will exist a gap between

the potential and the actual.

It is obvious that the H-D equation has to be developed in the matrix form to carry out

multi-sector analysis.

Prof J. b. Gangulys book shows that the economy of Northeastern region had three

major sectors agriculture, including shifting cultivation, handloom and handicrafts and

plantation sector which was mainly export driven consisting of tea, jute and cotton. Let us

denote the growth rates of the three sectors as g1, g2 and g3. Similarly, we can write the

savings rates and capital-output ratio. Thus:

[g1] [v1-1]

[g2] = [s1 s2 s3] [v2-1] (2)

[g3] [v3-1

]

One can develop the model further to study the employment effects. Let us define

employment elasticities of the sectors as:

e1 = gn1 / g1; e2 = gn

2 / g2; e3 = gn3 / g3;

Then [E1] [e1g1]

[E2] = [e2g2] (3)

[E3] [e3g3]

Ofcourse, data availability will determine the degree to which the model can elaborate.

However, the discussion here is successive, not exhaustive.

Counterfactuals and Calibrations:

A model can be tested often by counterfactuals and calibrations. The proposition that all

swans are white is falsified by the finding of Black Swans in Australia. We shall employ

this method here. Calibrations are also useful. The convergence theories have been tested

using calibrations.

Let us consider a few counterfactuals.

Counterfactual 1: Relative backwardness of NER is explained by the imperialist policies of

the pre-independence period. But the whole of India was under Imperialism. Why were the

other states more advanced? There are confounding variables not captured by the

proposition which operates through either s or v. Amartya Sen cites the example of Kerala.

There were also princely states in Kerala. But government policies favoured spread of

education. This gave Kerala an advantage from which it is reaping benefits in terms of better

Human development Index. Prof. Debraj ray will call it the role of history or path

dependence.

Counterfactual 2: It is often argued that the farmers gain through trade in a globalised

environment. Prof. Ganguly gives two examples as opposite experiences. One is from Assam.

Another is from Tripura. Assam became a major exporter of tea during the British period.


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Tripura used to export cotton and jute. During the great depression of 1930s both Assam and

Tripura suffered heavily due to fall in exports. There was a kind of Reciprocal Ratchet Effect

operating here. When the economy improved, the workers did not gain much but the global

economy went into a depression the workers were to suffer the most. The microeconomics

behind the phenomenon is not difficult to understand. Let us write the surplus functions as

follows:

S = e.p.q(l) w.l (4)

Here e = exchange rate

p = domestic price

q = quantity of output

l= labour

The surplus can be manipulated by the imperial administration by manipulating the terms oftrade e and the wage rate, w. Surplus extraction from the economy can be increased by

making terms of trade more unfavourable in terms of manufactured goods. Similarly, the

surplus can be maintained by keeping the wage rate low. Both were attempted by the British

rule , one by controlling foreign trade and the other by bringing labour from depressed areas

of the country like Bihar.

There is another example again given by Prof. J. B. Ganguly from Manipur. On 12 th

December, 1939 a group of women of Manipur demonstrated before the office of the

government against export of rice from Manipur. Many women were lathichargedand jailed

up to 6 months for this. This day is celebrated as Nupi Lan day in Manipur. They argued that

due to export of rice the food security of the state was endangered. The price of rice had also

gone up from Rs.1.25 per mound (37 kg) to Rs.2 or more. Rice could not be imported to

Manipur due to transport cost as easily and at a price as low as local cost of production.

These counterfactuals draw attention to deficiency of the official doctrine of globalisation

that free trade is better than no trade or restricted trade in the case of agricultural products.

In Lieu of Conclusion:

What about calibrations ? We do not attempt these here. But the braod methodology can be

outlined. We have indicated that the employment effect can be measured if we can get

reasonable estimates of employment elasticities, i.e., growth rate of employment divided by

growth rate of output. The question is : Do high employment elasticities in tea gardens, for

example, imply high employment elasticities for local population ? Here the perspective of animperial government may differ from that of a democratic participatory government. There

are some such issues which can be calibrated. But this I keep for further work in this area.

References

Ray, Debraj (1998):Development Economics, OUP, New Delhi.


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imperil ism in ner india

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