THE
ECONOMIC
A u g u s t S, 1959
WEEKLY
The Concept of Economic Surplus
N a r i n d a r Singh
A C C E P T I N G the o r g a n i c u n i t y
between economic surplus a n d
economic development, t h i s paper
aims at pointing out the p r i m a r y
source of
economic surplus
in a
densely
populated underdeveloped
c o u n t r y l i k e I n d i a , a n d the w a y she
c a n mobilize i t . Secondary sources
o f economic surplus, t h o u g h n o t u n i m p o r t a n t , are n o t considered.
Underemployment: the Source
T h e p r i m a r y source o f economic
surplus i s embodied i n w h a t m a y b e
called disguised u n d e r e m p l o y m e n t
w h i c h is so pronounced in an underdeveloped c o u n t r y . T h e g r o w i n g
body
of
development
literature
either ignores t h i s source altogether
or does n o t w o r k out the technique
of t a p p i n g . Professor P a u l A B a r a n
('Political Economy of Growth',
L o n d o n , 1957: pp 21-49; 164-70), f o r
instance, has w o r k e d o u t t h e concept o f the economic surplus i n i t s
three f o r m s : a c t u a l , p o t e n t i a l a n d
planned. H i s
definition of actual
economic surplus as the "difference
between the society's a c t u a l c u r r e n t
o u t p u t a n d a c t u a l c u r r e n t consumpt i o n " is indisputable. P o t e n t i a l econ o m i c surplus takes note of conspicuous consumption,
unproductive
w o r k e r s , i r r a t i o n a l i t i e s o f the p r o ductive organisation a n d unemploym e n t caused by the deficiency of
effective d e m a n d . C o n t r o l o f i r r a t i o n a l i t i e s , w h i c h even a c a p i t a l i s t
society can a t t e m p t , d u r i n g w a r f o r
example, points out t h e existence of
a p o t e n t i a l economic surplus.
I n the a g r i c u l t u r a l sector o f a n
underdeveloped c o u n t r y , p o t e n t i a l
economic surplus covers l a r g e l y the
conspicuous c o n s u m p t i o n (p 166) of
the landed gentry. Except for a
b r o a d reference to economic waste
embodied i n s m a l l u n i t s i n a g r i culture, i n d u s t r y , t r a d e a n d services
(P 37), he does n o t show a n y i n terest in the immense waste embodied i n the m i l l i o n s o f disguised u n M y t h a n k s are due t o
Professor
J B S H a l d a n e a n d Professor J S
K h a n n a w h o were k i n d enough t o
go t h r o u g h an earlier d r a f t of this
paper a n d m a k e a n u m b e r of suggestions.
M y deepest g r a t i t u d e ,
however, is due to my g o o d teacher
a n d better f r i e n d , Dr K S G i l l . I
alone a m , n a t u r a l l y , responsible f o r
any failings that m a y be found in
t h i s paper.
deremployed. T h i s is l i k e a t t e m p t i n g t o t r i m the branches o f i r r a t i o n a l i t y w h i l e l e a v i n g its t r u n k i n
t a c t . N o doubt i t i s i m p o r t a n t t o
check the s p o n g i n g a w a y o f the
c u r r e n t surplus, b u t i t i s m o r e i m p o r t a n t t o expand the base f r o m
w h i c h the
surplus i t s e l f emerges.
F u r t h e r , this
source of p o t e n t i a l
economic surplus merges i n t o w h a t
B a r a n calls planned economic surplus, since it cannot be
realised
without
comprehensive
economic
planning.
L a c k of Interest
One notices a s i m i l a r l a c k of i n terest in t h i s p o t e n t i a l source of economic surplus in quite a n u m b e r of
other economists. F o r example, i n
his 'Studies in E c o n o m i c Development'
( L o n d o n , 1957) D r A l f r e d
Bonne s u m m a r i l y dismisses ''Unused
Labour as Capital
Substitute i n
Economic D e v e l o p m e n t " in a s m a l l
p a r a g r a p h (p 213) w h e r e i n he s i m p l y
states t h a t a "change in approach
has set i n , in p a r t i c u l a r under the
influence of N u r k s e " . Professor W
A r t h u r L e w i s i s m o r e generous i n
t r e a t i n g the p r o b l e m a t some l e n g t h .
Use of surplus l a b o u r w h i c h c a n be
p a r t i c u l a r l y useful i n c o n s t r u c t i o n
of roads, etc, he says, is held up by
t h e l a c k o f w o r k i n g c a p i t a l ('The
T h e o r y of E c o n o m i c G r o w t h ' , p 218),
or, w h a t has recently come to be
called
the
wage-goods-gap. The
extent o f the
surplus i n
Indian
a g r i c u l t u r e , f o r example, is put at
an
equivalent o f 2 0 m i l l i o n m e n
p e r m a n e n t l y unemployed (p 327)
since 27 are employed on an average per 100 acres of c u l t i v a t e d l a n d ,
w h e n o n l y 14 to 20 are needed f o r
c u l t i v a t i o n . B u t L e w i s does n o t i n dicate h o w t h i s surplus can be removed f r o m agriculture. Inflationfree c a p i t a l f o r m a t i o n , he says (p
219) c a n be realised as a result of
u n p a i d labour. However, it can be
s i g n i f i c a n t o n l y i n countries t h a t
resort to compulsory l a b o u r (p 220).
T h e t e x t b o o k o n P o l i t i c a l Econ o m y issued b y the
Institute of
Economics o f the A c a d e m y o f
Sciences of the U S S R
(London,
1957), w h i l e d e a l i n g w i t h the C h i n ese economic
system, m e r e l y says
that
"China
possesses
immense
h u m a n reserves" (p 801)
without
I n d i c a t i n g the economic m e c h a n i s m
b y w h i c h these h u m a n reserves c a n
1107
be mobilised. To the late Professor
N u r k s e ('Problems o f C a p i t a l F o r m a t i o n I n Underdeveloped Countr i e s ' ) , goes the credit f o r p o i n t i n g
out the concealed s a v i n g p o t e n t i a l
embodied i n the t e e m i n g m i l l i o n s .
B u t h e d i d n o t d i s t i n g u i s h between
the existence o f t h i s p o t e n t i a l i n ,
and its removability from, agriculture.
Though an almost
similar
thesis
h a d been w o r k e d out by
M a u r i c e D o b b i n his D e l h i lectures
('Some Aspects of Economic Development,' D e l h i , 1951: pp 38-46), it
has come to be
associated w i t h
N u r k s e . Dobb, however, (p 46)
suggested i n s t i t u t i o n a l changes p r i m a r i l y t o overcome the bottleneck
of the m a r k e t a b l e surplus, a n d not
d i r e c t l y to remove the
manpower
surplus Itself, thus
assuming t h a t
the l a t t e r was possible w i t h o u t
i n s t i t u t i o n a l changes.
Biological Balance
I n his paper o n " T h e A p p r o a c h
of Operational
Research to P l a n n i n g I n I n d i a " ('Sankhya', December, 1955) Professor P C M a h a l a nobis relegates this p r o b l e m to a
footnote (p 10), T a k i n g note of
the m o v e m e n t o f f a c t o r y w o r k e r s
i n t o the v i l l a g e d u r i n g the peak o f
the a g r i c u l t u r a l
season, he points
out the possible existence of a " B i o l o g i c a l balance between the size of
the a g r i c u l t u r a l population a n d the
volume o f crop p r o d u c t i o n " . T h e
i n t r o d u c t i o n o f l a b o u r s a v i n g devices alone in his v i e w can b r e a k up
this balance. H e t h i n k s t h a t the
existence or
otherwise of a m a n power surplus is an open question.
The w e l l k n o w n U N Publication,
'Processes a n d Problems of I n d u s t r i a l i z a t i o n in Underdeveloped C o u n tries' (1955) a n d the E C A F E B u l l e t i n Special N u m b e r devoted t o
Industrialisation
(December 1958)
also d o n o t t r e a t t h i s p r o b l e m . D r
G y a n C h a n d i n his ' N e w E c o n o m y
of C h i n a ' accords (p 180) m o b i l i s a t i o n o f the ' E n o r m o u s L a b o u r Power
o f the C o u n t r y ' the t e n t h a n d t h e
last place a m o n g
t h e sources of
accumulation. N
V S o v a n i has
devoted some a t t e n t i o n to t h i s p r o b l e m (eg, his " U n d e r e m p l o y m e n t ,
R e m o v a b l e Surplus a n d the Saving
Fund", in ' A r t h a Vijnana,' March
1959, pp 17-29). T h o u g h he recognizes t h a t t h e r e m o v a b i l i t y o f t h i s
surplus is a f u n c t i o n of i n s t i t u t i o n a l
August 8, 1959
THE
ECONOMIC
WEEKLY
August 8, 1959
THE ECONOMIC WEEKLY
reorganisation, he fails to arrive at
t h e obvious conclusion.
So f a r as I am a w a r e , Br K S
G i l l w a s the f i r s t t o s t r o n g l y e m p h a sise t h e immense p o t e n t i a l i t i e s e m bodied i n
m a n p o w e r surplus, a n d
t h e i n s t i t u t i o n a l r e o r g a n i s a t i o n req u i r e d f o r the purpose ( i n his a r t i c l e
on " S u r p l u s M a n p o w e r as Source of
C a p i t a l " in 'The Economic Weekly'
Special N u m b e r , J u l y 1958), Needless to say. the i n c r e d i b l y simple
techniques employed by the Chinese,
p a r t i c u l a r l y i n m o r e recent
years,
to achieve a h i g h r a t e of a c c u m u l a t i o n , have b r o u g h t the p r o b l e m t o
the f o r e f r o n t a n d h a v e opened up
new v i s t a s before the underdeveloped countries.
Potential and Removable Surplus
To b r i n g about w h a t W W R o s t o w
has called a ' t a k e - o f f ' in I n d i a , it
is i m p o r t a n t to devise i n s t i t u t i o n s
w h i c h w i l l help mobilize the v a s t
m a n p o w e r surplus w h i c h exists p r i m a r i l y i n a g r i c u l t u r e a n d the rest
of the r u r a l sector.
T h a t such a
surplus p o t e n t i a l l y exists, it has
been seen above, is g e n e r a l l y accepted.
The i m p o r t a n t
t h i n g is,
however,
to
know
the
f o r m in
w h i c h i t exists a n d the w a y i n w h i c h
it c a n be tapped. N u r k s e ' s popular
thesis is t h a t "disguised unemploym e n t implies to some extent a disguised s a v i n g
p o t e n t i a l as
well".
T h e l a t t e r symbolizes the difference
between the o u t p u t
a n d the cons u m p t i o n of the essential m a n p o w e r
w h i c h is offset by the c o n s u m p t i o n
o f the surplus m a n p o w e r .
T h i s can
be t r a n s f o r m e d i n t o an
effective
saving fund by
t r a n s f e r r i n g the
surplus
m a n p o w e r t o c a p i t a l construction,
p r o v i d e d the
marginal
p r o p e n s i t y to consume of the retained
m a n p o w e r is
zero.
Many
leakages
in t h e
process such as
h i g h e r c o n s u m p t i o n of the r e t a i n e d
manpower,
costs
of t r a n s p o r t i n g
goods t o the t r a n s f e r r e d
workers
a n d increased
c o n s u m p t i o n of the
l a t t e r o w i n g t o h i g h e r incomes a n d
m o r e arduous jobs, a n d the n a t u r a l
g r o w t h i n the n u m b e r s o f the r e t a i n e d m a n p o w e r ( r e s t a r t i n g t h e old
process) h a v e been pointed out by
Nurkse and others.
I t i s i n view
of
these
leakages
that
Nurkse
speaks of his model as b e i n g a case
of a l l or n o t h i n g .
A s t u d y of these
leakages, however
important, can
have relevance
o n l y if the potentially
surplus
manpower is itself
f i r s t r e m o v e d . N u r k s e assumes t h a t
it can be so r e m o v e d . B u t w h e t h e r
the surplus c a n be r e m o v e d in f a c t
depends o n t h e n a t u r e o f idleness
i n a g r i c u l t u r e a n d o t h e r occupations.
T h i s i s b r o u g h t o u t b y the d i s t i n c t i o n between visible
Underemployment
and Invisible Underemploym e n t m a d e b y the
Committee on
Underemployment
of
the
Ninth
Conference o f L a b o u r
Statisticians
(International
Labour
Review,
September 1957).
'Visible Underemployment, which
involves
shorter
than
normal
periods o f w o r k a n d w h i c h i s
c h a r a c t e r i s t i c o f persons i n v o l u n tarily working part-time; and
Invisible Underemployment which
is c h a r a c t e r i s t i c of persons whose
e a r n i n g s are a b n o r m a l l y l o w o r
whose jobs do n o t p e r m i t f u l l use
of t h e i r capacities or s k i l l s (sometimes called disguised u n d e r e m p l o y m e n t ) o r w h o are employed i n
e s t a b l i s h m e n t s o r economic u n i t s
whose p r o d u c t i v i t y i s a b n o r m a l l y
low
(sometimes called p o t e n t i a l
underemployment)".
The f o r m e r covers persons suffering f r o m partial unemployment as
they are n o t h a v i n g a f u l l w o r k i n g
day or a f u l l w o r k i n g week, b u t are
g e t t i n g n o r m a l t i m e rates f o r the
period they are employed.
Such a
s i t u a t i o n is
c h a r a c t e r i s t i c of
advanced p r i v a t e enterprise countries
only.
Indeed, factory
workers in
i n d u s t r i a l pockets i n underdeveloped
countries m a y also be i n v o l v e d in
t h i s s i t u a t i o n , b u t it is n o t t y p i c a l
of such countries.
Invisible
Underemployment
Invisible
underemployment, however, is c h a r a c t e r i s t i c
of persons
w h o are a p p a r e n t l y
working full
t i m e ; t h e y are l o o k i n g a f t e r t h e i r
c a t t l e a n d are m o v i n g f r o m plot t o
plot to t a k e care of the crops, etc.
B u t the L i l l i p u t i a n economic u n i t s
w h i c h employ t h e m depress the p r o ductivity
aspect o f t h e i r
employm e n t , as a g a i n s t the t i m e aspect.
At worst, according to Sovani, "they
m a y be said to be p e r f o r m i n g the
service of a v a i l a b i l i t y
throughout
the y e a r . "
The major
Nurksian
premise t h a t the surplus m a n p o w e r
can be r e m o v e d w i t h o u t a f f e c t i n g
the
current
food
output
seems
untenable
because
the
invisibly
underemployed
" c a n n o t be n e a t l y
d i v i d e d i n t o those w h o are idle a n d
u n p r o d u c t i v e a n d those w h o are e m ployed a n d p r o d u c t i v e because a v a i l able w o r k i s shared b y a l l a n d the
average
productivity of labour is
positive t h o u g h t h e m a r g i n a l p r o d u c t i v i t y m a y b e zero o r even negat i v e " . ( S o v a n i ) . R e m o v a b l e surplus,
1109
in a s t r i c t sense is n o t the same
t h i n g as invisible underemployment.
T h e l a t t e r concept b r i n g s out t h e
f a c t of the superfluity of m a n p o w e r
i n a g r i c u l t u r e . The r e m o v a b i l i t y o f
t h i s surplus is e n t i r e l y a f u n c t i o n of
institutional
reorganisation; better
the
reorganisation,
larger
the
surplus.
Since t h i s invisible underemployment is m o s t pronounced, o w i n g to
the e x t r e m e seasonality of a g r i c u l t u r a l operations, in the slack seasons,
surplus m a n p o w e r can be
w i t h d r a w n o n l y i f the p r a c t i c a l l y
universal
seasonal
underemploym e n t is c o n v e r t e d i n t o
seasonal
unemployment for
some i n t h e i r
c u r r e n t jobs.
Only then will it be
possible to personally I d e n t i f y as to
w h o is necessary a n d w h o is surplus. C o n s o l i d a t i o n of holdings, as
suggested by N u r k s e , as an i n s t i tutional
change, is not sufficient
since it w i l l not reduce the n u m b e r
of
cultivation
u n i t s . B u t the enl a r g e m e n t of these l i m i t s is an essential
p r e c o n d i t i o n f o r a massive
withdrawal of manpower f r o m agriculture.
Simple mechanical devices
can be
i n t r o d u c e d to
offset the
l a b o u r shortage d u r i n g the peak to
b r e a k w h a t M a h a l a n o b i s has called
the b i o l o g i c a l balance between the
level of p r o d u c t i o n a n d the required
manpower.
Magnitude of Surplus
T h i s is n o t to a r g u e t h a t there
is absolutely no m a n p o w e r surplus
w h i c h cannot b e w i t h d r a w n w i t h out such r e o r g a n i s a t i o n .
The fact
t h a t most o f the l a b o u r force f o r
river valley
projects, roads, new
f a c t o r i e s a n d r i c k s h a w - p u l l i n g , etc,
is drawn f r o m
the a d j o i n i n g v i l lages indicates t h a t some r e m o v a b l e
surplus is a l r e a d y there w h i c h is
attracted by rewards (real or i l l u sory) available
outside the v i l l a g e
whose
economy
undergoes
the
necessary r e a d j u s t m e n t as t h i s p r o cess proceeds. B u t the question is
of
magnitudes.
The
currently
available
outlets can exhaust t h e
surplus, r e m o v a b l e under present
conditions, b u t t h e y c e r t a i n l y c a n n o t
solve t h e p r o b l e m of i n v i s i b l e undere m p l o y m e n t w h i c h has first to be
converted into a larger removable
surplus to step up the pace of development.
It must be
remembered
t h a t the m a n p o w e r surplus i n the
present c o n t e x t i s d i f f e r e n t f r o m the
I n d u s t r i a l Reserve A r m y o f M a r x ,
The latter
consists o f
uprooted
workers
a n d can be
occasionally
d r a w n upon
without any institu-
THE
August 8, 1959
t i o n a l reorganisation. T h i s i s not
true of the manpower surplus in a
densely populated
underdeveloped
c o u n t r y . F u r t h e r , as against
the
current w i t h d r a w a l s o f r u r a l popul a t i o n , there is the movement i n t o
the countryside d u r i n g the peak
seasons a n d the n a t u r a l g r o w t h of
the r u r a l population. The current
rate o f w i t h d r a w a l , moreover, can
promise o n l y an
extremely t a r d y
pace of development.
The
Institutions
I t has been argued above t h a t
the enlargement of the c u l t i v a t i o n
units is an essential
precondition
f o r c o n v e r t i n g invisible underempl o y m e n t i n t o removable surplus, I t
can be accomplished in the contemporary Indian environment only by
cooperativising a g r i c u l t u r e .
The
B r i t i s h model, a p a r t f r o m its p o l i t i c a l repercussions, can ensure o n l y
a n e x t r e m e l y slow rate o f g r o w t h .
B u t cooperativisation
cannot succeed i n a v a c u u m . A n integrated
approach t o w a r d s the l a n d question
is a c o n d i t i o n precedent f o r its success. Such a n approach w i l l i n volve:
(a) e l i m i n a t i o n of the i n t e r m e diaries to establish p a r i t y between
the z a m i n d a r i a n d r y o t w a r i areas
(this is exactly w h a t the Z a m i n d a r l
A b o l i t i o n A c t s i n various States
have done);
(b) consolidation of holdings to
m a k e a r a t i o n a l solution possible;
(c) a census of l a n d holdings to
enable a true picture to emerge;
per cent as against 0.4 per cent by
10 pet cent at the b o t t o m , a n d 25
per cent at the top o w n e d 72.5 per
cent as against 2.3 per cent by 25
per cent at the b o t t o m ( M a h a l a nobis: "Science a n d N a t i o n a l P l a n n i n g " — A n n i v e r s a r y Address at the
National
I n s t i t u t e of Sciences of
I n d i a , J a n u a r y 58).
Such a conc e n t r a t i o n vitiates a l l a t t e m p t s a t
cooperativisation, " B o t h these programmes, t h a t o f l a n d r e f o r m a n d
of cooperative development, are t o day l a r g e l y paper programmes. I t
is indeed possible t h a t they m a y be
seriously w h i t t l e d d o w n even before
they are
launched" (D R G a d g i l
" G r a m d a n — I m p l i c a t i o n s a n d Possibilities" in the Indian Journal of
A g r i c u l t u r a l Economics — OctoberDecember 1957, p 2 ) .
Given the need f o r cooperatives
it is i m p o r t a n t t h a t proper steps be
taken towards
t h e i r success. B u t
the cooperatives must be genuine if
t h e y are to unleash productive enthusiasm and release the m a n p o w e r
surplus. Physical p a r t i c i p a t i o n i n
a g r i c u l t u r a l operations should be a
necessary
condition for
membership.
I t should b e f u r t h e r noted t h a t
service cooperatives w h i c h are be-
(d) s t r i c t i m p l e m e n t a t i o n of ceilings a n d floors a n d / o r a s t r i c t defin i t i o n o f personal c u l t i v a t i o n — t o
cover o n l y direct
participation in
m a j o r a g r i c u l t u r a l operations w i t h
the help of f a m i l y labour only, except in the case of disabled persons,
m i n o r s , widows, a n d a r m y other
r a n k s ; and,
(e) step by step cooperativisation.
One cannot w o r k out a l l the det a i l s in a b r i e f paper. W h a t is i m p o r t a n t i s t o note t h a t o n l y a n i n tegrated
a n d comprehensive approach to the l a n d question can enable the
cooperatives to
succeed.
The essential base f o r t h e i r success
is a r e d u c t i o n in the current conc e n t r a t i o n o f l a n d ownership. R o u g h l y , o f a l l the l a n d o w n i n g households in I n d i a in 1953-54, 5 per cent
at the top owned 34.2 per cent of
the t o t a l area, as against 0.2 per
cent by 5 per cent at the b o t t o m ;
10 per cent at the t o p owned 48.8
1110
ECONOMIC
W E E K L Y
i n g stressed so m u c h these days do
not release the m a n p o w e r surplus.
S t i l l , in so f a r as t h e y promote a
cooperative atmosphere a n d encourage more intensive c u l t i v a t i o n , they
are welcome. B u t they m u s t g r o w
i n t o producers' cooperatives to m a k e
the manpower surplus available f o r
c a p i t a l f o r m a t i o n . Such a p r o g r a m m e w i l l also m a k e increased food
supplies possible.
I n fact
much
w o r k needs to be done in such fields
as soil conservation, m i n o r i r r i g a t i o n w o r k s , and afforestation, etc.
T h e g r o w i n g menace of soil erosion
a n d w a t e r l o g g i n g is at present not
being effectively countered f o r w a n t
of a d r i v i n g social force. Cooperat i v i s a t i o n w i l l permit people t o w o r k
on such activities d u r i n g the slack
seasons a n d go back to the fields
d u r i n g busy seasons. C a p i t a l f o r m a t i o n w i t h i n agriculture w i l l thus
t a k e place in a self-financing w a y
a n d w i t h o u t a n y leakages. T h i s is
contingent upon r a t i o n a l i s a t i o n o f
agrarian
relations.
Since
cooperativisation
simultaneously results in more intensive c u l t i v a t i o n
a n d a reduction in the number of
operative units, creation a n d m o b i l i z a t i o n of the economic surplus
can proceed together.