With the end of World War I, the basis of a new world war was laid. World War I resolved no contradictions: only, for the time being, Germany ceased to be a rival of imperialist Britain and France. But other old contradictions became intensified and new ones emerged. The birth of the Soviet Union and the failure of all the aggressive campaigns launched by the imperialist powers to overthrow the new regime meant that a considerable part of the world dropped out of the capitalist-imperialist system. The Russian Revolution was followed by an upsurge of revolutionary struggles in different countries of Europe. Revolutions actually broke out in Hungary and Bavaria but met with defeat. There were revolutionary uprisings in some other countries. Land was seized by the peasants and factories by the workers in Italy. Italy was on the verge of a proletarian revolution when, in 1922, the fascists under the leadership of Benito Mussolini captured power. It was a regime of naked terror over the working people in the interest of big capital. The tide of revolutionary struggle retreated from about 1922, though there were fitful struggles in some country or another during the rest of the twenties.
The inter-imperialist contradictions became acute. Britain emerged out of the war much weaker than before. The old imperialist power, already past its prime, could hardly rival the U.S.A., the young imperialist power, whose star was in the ascendant. At the end of the war Britain changed from a creditor to a debtor country -- heavily indebted to the U.S.A. It was squeezed out of its informal empire in Latin America by its trans-Atlantic rival, and much of its interests in Canada and Australia was taken over by U.S. capital. There was a clash between the two for markets, including the Indian market. To protect its imperial market in India and other parts of the empire, Britain imposed imperial preference, while U.S. capital was clamouring for an open door. Rivalry in other spheres too (for instance, building naval power to command the seas) was acute. Naval disarmament conferences and pacts like the Kellogg Pact (1928) between the leading capitalist powers proved to be of little worth. They all prated about peace while preparing for war.
With the rise of fascism in Germany and the beginnings of Japan's wars of aggression, Britain's contradictions with the U.S.A. were overshadowed by the clash of interests between Britain, the U.S.A. and France on the one hand and Germany, Japan and Italy on the other. We shall return to it later.
After a brief post-war boom in some capitalist countries there was economic stagnation in the entire capitalist world, followed by a devastating crisis with its attendant mass unemployment and ruin, lasting for about four years from 1929 to 1933. Only the Soviet Union was free from the horrors of this crisis. When the industrial and agricultural production in the capitalist world sank to very low levels, it was only the much-maligned Soviet Union that made spectacular economic advances at a rate never before attained anywhere in the world. The Soviet people had embarked on the uncharted path of building socialism -- a task which, if successful, would have changed the course of history.
The economic crisis of 1929-33 in the capitalist world brought in its train bankruptcy of tens of thousands of joint-stock companies, closure of factories, unemployment and ruin of tens of millions of people. It intensified the struggle between rival capitalist groups for foreign markets, trade war, currency war, dumping and the like. The imperialists tried to stave off the effects of the crisis not only at the expense of their own workers, peasants and other toiling people but also at the expense of the toiling people of the colonies. As we shall see, the fall in the prices of agricultural products by almost a half as a result of the crisis hit the already-impoverished Indian peasant very severely.
The political and economic crisis in the capitalist world gave rise to two contradictory trends -- trends towards revolution on the one hand and fascism and imperialist war on the other to avert revolution.
After the national uprising in Ireland and the defeat of the revolutions in Hungary, Bavaria and Austria in the early twenties, revolutions again broke out in the 1930s in Viet Nam (then a part of French Indo-China), Latin American and other countries. The Chinese revolution suffered initial defeat in 1927 but soon gathered strength and, under the leadership of Mao Tsetung, established extensive liberated areas in North and North-west China by 1939.
On the other hand, the seeds of war were sown by the Versailles treaty, which Germany, vanquished in World War I, was forced to sign with the Allied and Associated Powers in June 1919. The victor powers, chiefly Britain and France, sought to cripple Germany economically and militarily and to improve their own material prospects at the expense of Germany. They took away the German colonies, not to grant them freedom but to share them out among themselves under the League of Nations mandates. Several German-speaking areas were separated from her and attached to neighbouring countries, and Germany was split into two by a `corridor', which was given to Poland. Huge war reparations were demanded of her which she was not capable of paying. Stringent terms were imposed on her so that militarily she would remain weak and defenceless. Naturally, the Germans wanted nothing better than to tear up the Versailles Treaty. For several years after the end of the war Germany struggled to overcome her economic hardships, which were accentuated by the huge indemnities she was made to pay. The German working class was a quite powerful, but divided, force owing allegiance to two parties -- the Communists and the Socialists. Before 1930 Hitler and his National Socialist Party were far from strong. But with the onset of the severe economic crisis in 1930, Hitler, who harped on the injustice of the Versailles Treaty and spouted venom against the Jews and Communism, went from strength to strength. Big industrialists and landlords rallied to his support. Fascism triumphed in Germany in 1933. Ruthless suppression of the working class and domination of Europe and ultimately of the world were its twin aims. Payment of war indemnities had already stopped: Hitler tore up the Versailles Treaty and started making feverish war preparations.
The monopoly bourgeoisie destroyed all vestiges of bourgeois democracy in Italy, Germany, Spain and some countries of Central Europe to maintain their rule and fulfil their imperialist aims. They launched war against their own people before they went to war against other peoples.
Japan invaded and occupied Manchuria in 1931, and in 1937 invaded North and Central China. By 1938 she reached Canton in the South. Italy conquered Ethiopia in 1935, and in 1936 Germany and Italy supported General Franco's war against Republican Spain, intervened militarily and entrenched themselves respectively in North and South Spain. Germany and Japan entered into an Anti-Comintern Agreement in 1935 : Italy signed it in 1937. Early in 1938 Germany annexed Austria and, then in the autumn of that year, the Sudetan region of Czechoslovakia. German troops marched in and the whole of Czechoslovakia was occupied in March 1939. These aggressive wars in the three continents brought within their ambit about 50 crores of people, and were a prelude to World War II.
These aggressions and conquests could not take place without the silent connivance of the ruling classes of Britain and France, especially Britain. These aggressions by Japan, Italy and Germany constituted a challenge to the imperial interests of Britain, France and the U.S.A., but they, though more powerful, avoided confrontation with the aggressive powers. They rejected the Soviet Union's repeated appeals for building collective security, for pursuing a policy of collective resistance to the aggressors. Instead, Britain, France and the U.S.A. followed a policy of non-intervention, a policy of appeasement of the aggressors, even at risk to their own strategic interests. By their policies, Britain, France and the U.S.A. wanted to induce the fascist aggressors to advance towards the east and launch war against the Soviet Union. They hoped to embroil these powers in a war with the Soviet Union and to step in and share the spoils when both would be exhausted. When this hope withered away with the conclusion of a non-aggression pact between Germany and the Soviet Union in August 1939, and when Germany invaded Poland, they revised their policy. Then Britain and France marched against Germany as anti-fascist crusaders. World War II began early in September 1939 -- vaster, more prolonged and much more costly in men and materials than World War I. Imperialist war was the inevitable consequence of the rivalry between the colonial powers to exploit and oppress the people and dominate the world. It is inseparable from the capitalist system. So long as the capitalist system prevails, there is no escape from war between classes and between nations.
The world crisis of 1929-33, instead of giving rise to antagonistic contradictions between imperialist capital and Indian big capital, as V. I. Pavlov and others have argued, helped to bring them closer than before. It was not merely fear of the people but objective economic conditions that were driving them nearer to each other during the thirties, despite some contradictions.
While the economic crisis hit hard the Indian people -- the peasantry, the workers, the urban petty bourgeoisie and the small bourgeoisie which had no foreign links -- it contributed in certain ways to the further growth and development of the big bourgeoisie. The thirties were a period of unprecedented growth and expansion of Indian big comprador capital. Due to the catastrophic fall in the prices of agricultural products -- about 50 per cent on an average -- the peasantry was ruined. The rise in taxes, such as those on salt and kerosene, added to their woes. The value of India's exports of merchandise (other than precious metals) fell from Rs 381 crore in 1928-9 to Rs 181 crore in 1931-2. The decline in the value of imports was no less steep: it fell by almost a half over the same years. By curtailing imports of consumer goods, the depression afforded virtual protection to indigenous industry. Amiya Kumar Bagchi notes that "aggregate private investment in real terms during some years of the depression was higher than during the middle years of the twenties."(1) While the proportion of consumer goods to total imports decreased, imports of machinery and industrial raw materials increased. This trend continued throughout the thirties, and the beneficiaries were the Indian big bourgeois, who, depending on imported capital goods and industrial raw materials, manufactured mainly consumer goods.
Besides, to make up the loss in customs duties due to decline in external trade, tariff was substantially raised in 1930 and 1931 for revenue purposes. Since 1922, the rate of import duty was 15 per cent, except on cotton piecegoods, on which it was 11 per cent. In February 1930 the import duty on cotton textiles was raised to 15 per cent. In 1931 the general tariff rate, including that on cotton textiles, was first increased to 20 per cent; but a preference of 5 per cent was granted to British low quality cotton imports.
Moreover, protection was granted to several industries like cotton textiles, sugar, paper, iron and steel in the thirties. Traditional imports from Britain and British colonies were being displaced by non-British imports. While protection was granted to certain Indian industries, differential duties were fixed for British and other foreign goods. British industries like cotton textiles could not compete with those of other countries like Japan. To salvage as much of the Indian market as possible for several British industries, the principle of imperial preference was introduced in 1927 and continued afterwards.
During the depression years the Indian bourgeoisie came to enjoy two other important advantages - the fall in the level of wages of workers and in the prices of raw materials. The Bombay millowners introduced the policies of rationalization and substantial wage-cuts in 1929 and, aided by the colonial state machinery, fought and overcame the workers' resistance.
All these factors contributed to a spurt in industrial development. Assuming industrial output in 1925-6 as 100, it rose to 100.7 in 1930, 132.4 in 1934 and 166.8 in 1938.(2) According to Rajat Kanta Ray, the industrial workforce grew annually at 1 per cent between 1921 and 1931 but the rate of growth quadrupled between 1932 and 1937.(3)
While the old, or relatively old, big bourgeois groups like the Tatas, Birlas, Sri Rams, Singhanias, and Walchands vastly expanded their industrial activities, there were several new entrants into industry who had previously been banians, brokers and big speculators, like the Goenkas, Dalmia Jains, Thapars, Chettiars, and Naidus. Many of the new entrants like the Goenkas and Chettiars were diversifying from trading and indigenous banking into cotton textiles and other industries. Speaking of the Madras Presidency, Raman Mahadevan observes: "The late twenties and thirties marked a turning point with regard to investment of South Indian capital in industry. The Depression by sharply turning the terms of trade between agriculture and industry in favour of the latter, brought about a significant shift of capital from agriculture and money-lending to industry.... Particularly significant in the context was the phenomenal growth of the textile industry centred around the Coimbatore region."(4)
Even during the depression years profits were quite handsome. For instance, Sir Shri Ram's Delhi Cloth Mills paid a dividend of 135 per cent in 1930-31.(5) This might be exceptional in the textile industry, but sugar earned huge fortunes for the big bourgeois -- the Birlas, Shri Rams, Dalmias, Thapars, Walchands, Soorajmull-Nagarmulls and several others. George Schuster, then Finance Member of the Viceroy's Executive Council, observed that the sugar industry earned a profit of 400 per cent in 1933.(6) This, again, might be exceptional but the rates of profit were very high.
Paper mills had been owned and controlled mainly by British managing agencies like Heilgers, Balmer Lawrie and Andrew Yule. But from about 1936 the Birlas, Thapars and Dalmias entered the paper industry and set up large mills.
Between 1931 and 1939 the Birlas, Dalmias, Mafatlals, Shri Rams, Walchands and so on had a meteoric rise.(7)
England was forced to go off the gold standard on 21 September 1931 when the second Round Table Conference was sitting in London. The Government of India, without reference to the British cabinet, announced that the rupee was delinked from gold as well as sterling in order to minimize the impact of Britain's economic crisis on the Indian economy. But Secretary of State Samuel Hoare instructed New Delhi to issue an ordinance linking the rupee back to sterling. Kanji Dwarkadas(8) writes: "I was in Simla all that fortnight of this crisis in constant contact with Sir C.P. Ramaswamy Aiyer, the Acting Member for Law, and Sir Ibrahim Rahimtoola, President of the Indian Legislative Assembly. Lord Willingdon [the Viceroy] and all the members of his Executive Council protested against Sir Samuel Hoare's cable and offered to resign in a body.... Hoare got hold of Ghanshyamdas Birla, who was in London for the Round Table Conference...and between them, they managed to get a press interview from Gandhiji on this rupee-pound crisis. Reuters circulated Gandhiji's interview that nothing hasty should be done at this crisis and the status quo [that is, the sterling-rupee link] should be maintained!" According to Dwarkadas, in his subsequent cable to Willingdon, Hoare referred to Gandhi's advice, refused to accept the offer of resignation from the Viceroy and his Executive Councillors, called upon them to maintain the status quo by relinking the rupee to the pound as before.(9) So the Viceroy, to quote R.J. Moore,"vainly resisted to a point just short of resignation the Cabinet's decision to keep the rupee tied to the pound, regardless of the price of gold".(10) And the rupee remained tied to the fluctuating pound at the old rate of one rupee to 1s. 6d. to serve imperialist interests.
G.D. Birla claimed that he had objected to relinking the rupee to sterling.(11) It was not unusual for men like Birla to take a public stance which was quite contrary to their private stand on an issue. They were ever eager to serve the raj in order to serve themselves.
The fact is, while as a result of such a step the Indian people were further impoverished, some big compradors like the Birlas, besides the imperialists, were the beneficiaries. Because of the severe economic crisis, the peasants and other toiling people, whose only savings consisted in gold and silver trinkets, were forced to bring them to the market. The buying-up and export of this `distress gold' earned high profits for big Indian bullion merchants like the Birlas and saved the British raj from a worse financial crisis. The huge gold drain from India went to meet the payment of `home charges' and to service the so-called `national debts' -- that is, as tribute to the colonial masters.
Speaking in the House of Commons on 29 February 1932, Samuel Hoare said: "More gold has been exported since last September or rather gold has been exported from India since last September at a higher rate than it has even been exported from the gold fields of South Africa."(12) R.J. Moore has observed that "Suspicion was rife that Britain had manipulated the rupee in order to snatch the vast private hoards of Indian gold.... The monetary experts on the Indian Council of the Secretary of State, Sir Henry Strakosch and Sir Reginald Mant, reported in February 1932: `[Britain] has been able to use the gold for the discharge of its foreign obligations and to that extent to avoid impairment of its exchange with gold standard countries'."(13) Referring to the gold drain from India, R. Palme Dutt, who cited the London Economist's estimates of the huge size of the drain between 1931 and 1937, observed: "Once again, in a new form, as in the days of the Industrial Revolution, the measure of recovery of British capitalism in 1933-37 was built up on the spoliation of India."(14)
Who were the Indian accomplices of British finance capital in this massive spoliation of India? The bullion trade of the whole of India passed through Bombay, and the firm of Sir Chunilal B. Mehta, cousin of Sir Purshotamdas and "the king of the bullion trade in Bombay", (15) along with four others, served as "the sole links between the London bullion merchants and the `orthodox' bullion merchants of Bombay".(16) Among the leading brokers in the Bombay Bullion Exchange were the G.D. Birla Brothers.(17)
When Gandhi, Patel and other top Congress leaders were in prison in 1932, the Bombay Congress Bulletin, issued by the Emergency Council, Bombay Provincial Congress Committee, branded Purshotamdas Thakurdas and Birla as traitors. It stated:
"SIXTY MILLION POUNDS WORTH OF INDIAN GOLD(18) was exported from this country to England during the last year. IT HAS BEEN A VERITABLE WINDFALL TO BRITAIN.... By helping to send Indian gold to England at a time like the present when India is fighting a desperate fight for liberty and life, the Indian Bullion merchant has literally supplied our enemies with valuable ammunition at our own expense to be used against us. By helping in the dangerous flight of gold from this country, the Indian traitors dealing in bullion have deliberately impoverished us to enrich the enemy, have helped to lower the already low credit of India in the economic world, have contrived to increase India's dependence on the worst enemy, on the murderous parasite which is living on her vitals.... Sir Purshotamdas and Mr Birla have made lakhs recently from this immoral traffic.... Meanwhile, we shall fight both the enemy and the traitor."(19)
But their fight against the traitors had to be abandoned almost as soon as it began. When the news of their demonstrations in front of Sir Purshotamdas's palatial residence in Bombay reached Vallabhbhai Patel in prison, he immediately sent instructions to withdraw the Congress pickets. Patel was quite right in claiming that Sir Purshotamdas was "more our man than anyone else's".(20)
With the help of the big compradors the British imperialists were able to shift some of the burden of their financial crisis on to the shoulders of the Indian people.
Britain's share in India's imports had been sharply declining since the end of World War I.(21) Britain's imperial market in India was increasingly threatened by other imperialist powers. As noted before, British goods were being replaced in the Indian market by foreign goods to a great extent and the competition between British and Indian goods was far less than that between British and foreign goods.
With the onset of the world crisis, the Federation of British Industries (FBI) "pointed to the increased importance of Empire for the British economy and prescribed imperial economic co-operation as the only possible way for the crisis-ridden and increasingly non-competitive British economy".(22) As the FBI noted: "Great Britain has the possibility of creating (with her empire) an economic group of unlimited possibilities"; without it, her competitive position would be "extremely disadvantageous."(23)
The Indian big bourgeois were no less eager to respond. In October 1931, when the Round Table Conference was in session, G. D. Birla told Edward Benthall, who represented expatriate British capitalists at the conference, that "henceforward, he desired to work in collaboration and to drop all his hostility".(24) On both sides there was a desire "to get together", "a more co-operative attitude".
While protective tariff was raised in the interest of Indian industries and, mainly, at the expense of non-British foreign goods, the principle of granting imperial preference was adopted as a tonic to the ailing British industries. The Ottawa Conference was held in 1932 to decide upon preferential rates of imports from empire countries. To quote Kate Mitchell, "In this way the tariff system of the early twenties, originally proclaimed as a means for accelerating Indian industrialization, was transformed into a system which assisted British industry to compete in the Indian market, while giving India in return the privilege of favoured rates for the sale of her raw materials and semi-manufactures in the British market..."(25) This imposition of imperial preference was designed to tie India and other British colonies and dominions closer to Britain and perpetuate the same old colonial economy.
Ottawa arrested the decline of British exports to India only temporarily.(26) Even with imperial preference, British goods could hardly compete with the goods from other imperialist countries as well as with certain Indian products like cotton textiles of certain varieties, that had the advantage of cheap labour. The main factor contributing to the decline of British exports not only to India but to the world as a whole(27) was the weakness of British industry compared to the rising industries of Japan, the U.S.A., Germany etc.
Was the attitude of the Indian big bourgeoisie towards Ottawa one of hostility, as is usually represented?
On behalf of the Committee of the FICCI, its president Walchand Hirachand in a representation in April 1932 to the Secretary of State for India, the President of the Imperial Economic Conference, Ottawa, and others, objected to the composition of the Indian delegation nominated by the Government of India without reference to the FICCI. He complained that "The Government had so far failed to acquaint the Indian community with the potentialities of the Ottawa Conference by not taking them into their confidence with regard to Government's attitude on these questions". He stated that "it should be left to the future popular Government of the country, that would be constituted by the new Government of India Act, to shape their policy regarding inter-imperial trade relations, including the application of reciprocal preferential tariff agreement..."(28) The main objection taken by the different Indian Chambers of Commerce was to the personnel of the Indian delegation which consisted of the nominees of the Government.(29)
It is interesting that contrary to the FICCI president's formal representation, the letters of the Secretary of the FICCI, dated 8 and 9 April 1932, to the Commerce Department, Government of India, showed eagerness of the apex body of Indian trade and industry to send its representatives to attend the conference. In those letters the FICCI Secretary asked "whether the Government of India intended to offer facilities of that nature [facilities just to attend the Conference and obtain relevant Conference papers] to such observers as might be deputed by the Federation at their own cost, and whether the Government of India proposed to invite the Federation to appoint representatives to attend the Conference". In his reply, dated 31 May 1932, the Government of India's Commerce Secretary, Drake, curtly informed the FICCI Secretary that no such facilities would be offered.(30)
According to G.K. Lieten, a majority of the members of the Indian Merchants Chamber of Bombay lent their support to the Ottawa agreement.(31) How did the most `radical' among the Indian bourgeois, Birla, react to the proposal for the Ottawa Conference? In reply to the Secretary of State's letter of 28 February 1932,(32) G.D. Birla informed him on 14 March 1932 that "Sir Purshotamdas would be delighted to accept the invitation [to attend the Ottawa Conference on behalf of "the Indian trade and commerce"] when it is extended to him" and that "The committee of the Federation will not be averse to this proposition". He assured him that they realized the importance of this Conference and "you may rely on our support in the right direction".(33)
Contrary to the expectations of the Birlas and Thakurdases and to Hoare's advice, the Viceroy nominated the delegation excluding Thakurdas and his ilk. The objection of several Northern and Western Chambers of Commerce was actually to the composition of the delegation, not to the conference itself. It may be pointed out that Sir R.K. Shanmukhan Chetty, who was a leading member of the Indian Chamber of Commerce, Coimbatore and a member of the Committee of the FICCI, and became the first Finance Minister of India after the transfer of power, was included in the delegation to Ottawa, which concluded the Ottawa agreement.
On 25 November 1932 when Thakurdas, who participated in the Third Round Table Conference in London, informed Birla that Samuel Hoare "complained to me about your taking a leading part in the agitation against the Ottawa bill",(34) Birla immediately sent Thakurdas a wire asking Thakurdas to inform Hoare that he had "done nothing to embarrass or organize any opposition" and to "assure him" that "he will not only find me never embarrassing but really helpful if only there was more trust which is hopelessly lacking [in] India..."(35)
Thakurdas, whom Birla wanted to represent India at Ottawa, was quite categorical about granting preference even to Lancashire goods. Earlier, in March 1930, Thakurdas had assured the raj that he would vote preferences. He promised the Indian Cotton Enquiry Committee, Manchester, that he would do all he could to further its interests and "strengthen the relationship between India and Lancashire". (36) He denied that there was "any incompatibility of interest between England and India".(37).
As A.D.D. Gordon observed, "Thus any condemnation was only show, and designed to cover from public view a secret process which involved short-circuiting the imperial chain of influence."(38)
The year 1933, according to H. Venkatasubbiah, "saw a reconciliation between the two" -- the government and the business magnates. "Both seemed keen to `normalize' relations. Representatives of industry joined those of Government in the negotiations for concluding a trade agreement between India and Japan," and Joseph Bhore, India government's Commerce Member, "came in praise" for this trade agreement at the 1934 annual meeting of the FICCI.(39) Though resented by the Ahmedabad mill-owners, the Lancashire-Bombay agreement (or Lees-Mody Pact) granting Lancashire goods further preference "than that unanimously recommended by the Tariff Board", (40) was concluded in 1933. B. Chatterjee writes that "the Lancashire men thought that they could see signs of a change of heart. [Raymond] Streat [of the Manchester Chamber of Commerce] cited as evidence Birla's talks with Lord Derby in the summer of 1934 when he had made `vague suggestions' of a more co-operative attitude.... Even Kasturbhai Lalbhai [the leading mill magnate of Ahmedabad] spoke of the desirability of a period of soft pedalling so far as political agitation was concerned, and went out of his way to indicate that...he and his group were prepared to consider economic co-operation with the U.K. in general, provided that they should be admitted into the councils at which policy should be hammered out'."(41)
An FICCI memorandum of January 1936 contended that the Ottawa agreement hampered the trade relations with a number of foreign countries, suggested that it should be terminated and fresh negotiations should be started with the U.K. as well as other countries for trade treaties in consultation with representatives of commerce, agriculture and industry in India.(42) In March 1936 the Central Legislative Assembly recommended that "the Ottawa Agreement be terminated without delay".(43)
But it would be wrong to regard such opposition to the Ottawa agreement or the Indo-British Agreement of 1935 as reflecting the Indian big bourgeoisie's antagonism towards imperialist capital. What it sought was not the termination of the phase of its co-operation with British capital but a better bargain within its framework. Seeking to remove all misgivings about "the attitude of the Federation on the question of co-operation with Government", Padampat Singhania, presiding over the annual session of the FICCI in 1936, emphasized "the importance of rapport between the Federation and the Government" and stated that the Committee of the FICCI "would always be willing to co-operate with the Government of India in negotiating trade treaties either with the U.K., the Dominions or India's foreign customers on a genuinely reciprocal basis..."(44)
To quote B. Chatterji, "denunciations did not mean the end of the principle of economic co-operation. Among the Indian commercial classes, as the Viceroy gloomily observed, there was `a conviction that if India denounced the agreement, the U.K. would, for political as well as economic reasons, hurry forward with offers of an agreement much more favourable to India'."(45)
During the thirties both the Indian big bourgeosie and British capital felt the need for a joint front against foreign trespassers into this British colony as well as indigenous rivals. A process of greater integration between the two started taking place. The growth of British expatriate managing agencies was sluggish in the thirties and whatever fresh British capital was forthcoming could not fulfil their needs. During the inter-war period, especially in the thirties, a new relationship developed between the British managing agencies and Indian big capital. The banians and brokers of British firms, whose industrial career had just begun or was about to begin -- the Birlas, Goenkas, Bangurs, Jatias, Jalans, Bajorias, etc. -- increasingly invested in the companies controlled by British capital. They were allowed seats on the boards of the companies in which they invested but no share of control. Control remained firmly in the hands of the British managing agencies. "From the First World War onwards", writes Tomlinson, "British-controlled firms, starved of capital from London, were forming alliances with Indian businessmen..."(46) This process was going on not only in Calcutta but in Bombay and other places, too. A fusion of European and Indian big capital was taking place and large chunks of Indian big capital, subordinated to foreign capital, played the role of a junior partner.(47)
Besides, in the thirties and the early forties, British and Indian managing agencies combined and merged their cement units in a monopolistic organization like the Associated Cement Companies (ACC) as well as set up cartel-like organizations like the Indian Sugar Syndicate and a joint syndicate of ACC and the Dalmia Jain group-controlled cement companies. They also joined hands to establish the Employers' Federation of India in 1933. The 1930s was a period of getting closer together as partners for the joint exploitation of India.
Two significant processes were at work at this time. First, the character of British investment in India began to change in the late twenties and in the thirties. Previously the typical foreign investment was small, made by individuals and directed by expatriates through managing agency firms. But these firms -- Andrew Yule, Bird-Heilgers, Jardine Skinner, Ralli Bros, Killick Nixon, Brady and Co., British India Corporation and others -- had served their main age-old purpose: that of mediating between metropolitan capital and the Indian market and sources of raw materials. Though they controlled some manufacturing units like jute mills, cotton mills and engineering units, mining companies and tea plantations, they were chiefly exporters of jute, jute goods, tea, raw cotton, shellac, etc. and importers of manufactured goods like cotton textiles and yarn, paper, various other consumer goods and machinery.
A change had come over metropolitan capital itself during the inter-war period. Till World War I, Britain's staple industries were cotton textiles, coal, ship-building and iron and steel. Even before the War these British industries, except ship-building, were losing their competitive strength. The supremacy of the first great industrial power of the world was challenged by the U.S.A., Germany, France and Belgium. By the early 1890s, Britain was surpassed by the U.S.A. and Germany in the production of steel, `the crucial commodity of industrialization'. British industries like cotton textiles relied for their market mainly on the colonies.
British capital had lagged behind the new industrial powers in the formation of monopolies and cartels and the adoption of mass production methods. But during the inter-war period there was increasing concentration and centralization of capital and, as a result, monopoly capitalism developed in Britain. It was the period which saw the rise of giant monopoly firms like Imperial Chemical Industries, Unilever, Guest, Keen and Nettlefold and G.E.C. As Eric Hobsbawm observes, "in 1914 Britain was perhaps the least concentrated of the great industrial economies, and in 1939 one of the most". And while the old industries declined, the new growth industries like electricals, automobiles, aircraft, rayon and silk prospered from about 1924.
Taking advantage of the protection afforded to industries in India, new giant corporations set up their branches and subsidiaries here. As Hobsbawm puts it, "gradually the sun of the old-fashioned rentier was setting" and the sun of the giant transnational was rising.(48) The days of the old expatriate managing agencies were numbered. British and other foreign transnationals like ICI, Unilever, Philips, Union Carbide, Metal Box, Guest, Keen and Nettlefold, Dunlop, British Oxygen, Glaxo and Swedish Match established their manufacturing units in India to dominate its industry. By 1947,according to Tomlinson,"about half of British private capital holdings in India was direct foreign investment (DFI) in the subsidiaries of British-based companies.... direct investment (which can be associated with the activities of multinational enterprises, or MNEs) was mostly in the `new' industries of chemicals, processed foods, pharmaceuticals, paints and varnishes, and so on." On account of changes in the structure of the British capital and employment markets, the British expatriate sector in India found it difficult to raise new capital and recruit suitable personnel from Britain during the late twenties and thirties, and could hardly respond to the new opportunities that were opening up. It was the "subsidiary companies of British multinational firms, which became the dynamic sector of foreign business enterprise from the 1930s onwards".(49)
Another event of far-reaching importance was taking place. As Britain was no longer the leading capitalist country of the world, the inter-war period marked the beginning of the transition from India's unilateral dependence on Britain to its multilateral dependence on several advanced capitalist countries led by the U.S.A. The process had started: from a monopoly possession of Britain, India was changing into a happy hunting ground of the monopolists of different imperialist countries.(50) It was the humble beginning of a process that was to culminate in every major industrial unit set up in India after the transfer of power in 1947 becoming dependent on the technology and capital from imperialist countries.
The establishment of branches by foreign transnationals -- the `India Ltd.s'-- was viewed with suspicion by a section of Indian business magnates during the late thirties. But what they were opposed to was not "the increasing influx into India of foreign-controlled industrial establishments", but the setting-up of fully-owned subsidiaries of the powerful transnationals. Already, in 1929, the Tatas had joined a Morgan subsidiary to set up a company to control its three big hydro-electric companies. In the late thirties Walchand Hirachand was inviting U.S. transnationals to build automobile and aircraft factories in India with him as a collaborator, and the Birlas were exploring chances of collaboration with U.S. (and later, British) automobile giants to set up an automobile plant in India. They knew, as everybody else should know, that advanced technology and capital goods embodying it are the key to power -- the key which the transnationals possessed and they did not (and do not even today). What they wanted was a stake in the luscious enterprises of the multinationals.(51) Truly, "the 1930s saw the start of a new era, an era which contained the origins of many of the prominent features of post-independence [sic!] India".(52)
In the late twenties and in the thirties the Indian business magnates resented the raj's monetary policy -- pegging the rupee to sterling at the fixed ratio of 1s. 6d, and currency restriction. But, as Markovits observes, "As far as commercial policy is concerned... in the 1930s the strengthening of India's imperial connection proved largely beneficial to its traders and industrialists" and that the positive aspects of the raj's commercial and financial policies -- positive from the point of view of the business magnates -- "tended to overshadow the negative aspects of the currency restriction and financial stringency".(53) And during this period there was closer interweaving of Indian big capital with foreign, especially British, capital than before. Coming events were casting their shadows before.
1. Amiya Kumar Bagchi, Private Investments in India, 89.
2. B.R. Tomlinson, The Political Economy of the Raj, 32.
3. Rajat Kanta Ray, Industrialization in India, 246. For some detail about the spectacular rise in the output of cotton piecegoods, sugar, pig iron, steel ingots, paper and cement between 1932-3 and 1938-9, see P. A. Wadia and K.T. Merchant, Our Economic Problem, 423.
4. Raman Mahadevan, "The Politics of Business Interest Groups" (mimeo), 14.
5. Arun Joshi, Lala Shri Ram, 227.
6. Khushwant Singh and Arun Joshi, Shri Ram, 206.
7. See Claude Markovits, Indian Business and National Politics, Appendix I, 190-3.
8. Once Treasurer and then Secretary of Annie Besant's All-India Home Rule League, who had personal contacts with Gandhi, Patel and other Congress leaders.
9. Kanji Dwarkadas, India's Fight for Freedom 1913-1937: An Eyewitness Story, 398-9.
10. R.J. Moore, Endgames of Empire, 53.
11. Birla, The Path to Prosperity, 268,272-307.
12. IAR 1932, I, 397. See also Subhas Chandra Bose, The Indian Struggle, 257 and fn.1.
13. R.J. Moore, The Crisis of Indian Unity, 268.
14. R. Palme Dutt, India Today, 133; see also 215.
15. Markovits, op cit. 111, fn.47.
16. A.D.D. Gordon, Businessmen and Politics, 70.
17. Ibid, 80.
18. Capitals and italics in the original.
19. Bombay Congress Bulletin, No. 247 of 17 Oct. 1932, PT Papers, File 101; see also Bombay Congress Bulletin, No. 241 of 10 Oct. 1932, ibid.
20. Frank Moraes, Sir Purshotamdas Thakurdas, 202: emphasis added.
21. See Tomlinson, op cit., 47.
22. B. Chatterji,"Business and Politics in the 1930s", in C. Baker et al (eds.), Power, Profit and Politics, 544.
23. FBI, Industry and the Nation (1931); cited in ibid, 544, fn. 57.
24. See ibid, 541, fn.49; Markovits, op cit., 81.
25. Kate Mitchell, Industrialization of the Western Pacific (1942), 285; quoted in Wadia and Merchant, op cit., 397.
26. Bagchi, op cit. 91, fn.56.
27. See Tomlinson, op cit., 46-7.
28. IAR, 1932, I, 428.
29. Ibid, 61; see also PT Papers, File 42, Part VI.
30. IAR, 1932, I, 428-9.
31. G.K. Lieten, Colonialism, Class and Nation, 235.
32. G.D. Birla, Bapu : A Unique Association, I, 174-5.
33. Ibid, 178-82, esp. 181 -- emphasis added.
34. PT Papers, File 132.
35. Ibid -- emphasis added.
36. PT Papers, File 142 -- emphasis added.
37. Enclosure to letter from the Oriental News Agency, London, to Thakurdas, 28 July 1933, Ibid, File 142 -- emphasis added.
38. Gordon, op cit., 195.
39. H. Venkatasubbiah, Enterprise and Economic Change: 50 Years of FICCI, 35.
40. Ibid, 38.
41. Chatterji op cit., 559. He cites Raymond Streat, "Co-operation between the U.K. and India: Indian Businessmen and Congress Party: The Future of Ottawa: Reactions of Economic Co-operation on Political Outlook.... Possibilities and Probabilities", 16 Jan. 1936. L/E/9/1038.
42. FICCI, Silver Jubilee Souvenir 1927-51, 82.
43. Ibid.
44. FICCI, Proceedings of the 1936 Annual Meeting, cited in Venkatasubbiah, op cit., 36.
45. Chatterji, op cit., 557. He quotes from Viceroy to Secretary of State, private telegram, 11 April 1936.
46. Tomlinson, op cit., 53-4.
47. See Suniti Kumar Ghosh, The Indian Big Bourgeosie, 210-11.
48. Eric Hobsbawm, Industry and Empire, 214, 223, 259.
49. B.R. Tomlinson, "British Business in India, 1860-1970", 101, 109-11.
50. See Vol. I of this book, 63-4.
51. Ibid, 64-5.
52. B.R. Tomlinson, "Foreign Private Investment in India 1920-1950", Modern Asian Studies, Vol. 12, Part 4, Oct. 1978, 671.
53. Markovits, op cit., 55,56.