THE ECONOMIC WEEKLY August S, 1959

The Concept of Economic Surplus N a r i n d a r Singh

A C C E P T I N G the organic u n i t y between economic surplus a n d

economic development, th i s paper a ims a t p o i n t i n g ou t the p r i m a r y source of economic surplus in a densely populated underdeveloped coun t ry l i k e I n d i a , a n d the w a y she can mobil ize i t . Secondary sources of economic surplus, t h o u g h no t un ­impor t an t , are no t considered.

Underemployment: the Source

The p r i m a r y source of economic surplus i s embodied in w h a t m a y be cal led disguised underemployment w h i c h is so pronounced in an under­developed coun t ry . The g r o w i n g body of development l i t e ra tu re either ignores t h i s source a l together or does no t w o r k out the technique of tapping . Professor P a u l A B a r a n ( 'Po l i t i ca l E c o n o m y o f G r o w t h ' , London , 1957: pp 21-49; 164-70), f o r instance, has w o r k e d out the con­cept o f the economic surplus in i t s three f o r m s : ac tua l , po ten t ia l a n d planned. H i s def in i t ion o f ac tua l economic surplus as the "difference between the society's ac tua l cur ren t ou tpu t a n d ac tua l cur ren t consump­t i o n " is indisputable . Po ten t i a l eco­nomic surplus takes note of cons­picuous consumption, unproduct ive worke r s , i r r a t i ona l i t i e s o f the pro­duct ive o rgan i sa t ion a n d unemploy­m e n t caused by the deficiency of effective demand. C o n t r o l o f i r r a ­t ional i t ies , w h i c h even a capi ta l i s t society can a t tempt , d u r i n g w a r fo r example, points out the existence of a po ten 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 count ry , po ten t i a l economic surplus covers l a rge ly the conspicuous consumpt ion (p 166) of the l anded gen t ry . Except f o r a b road reference to economic waste embodied i n s m a l l un i t s i n a g r i ­cul ture , indus t ry , t rade a n d services (P 37), he does no t show any i n ­terest in the immense waste embo­died in the m i l l i o n s o f disguised un ­

deremployed. T h i s is l i ke a t t empt ­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 whi l e l eav ing i t s t r u n k i n tac t . No doubt i t i s i m p o r t a n t to check the sponging a w a y of the cur ren t surplus, bu t i t i s more i m ­p o r t a n t to expand the base f r o m w h i c h the surplus i t se l f emerges. Fu r the r , th is source of po ten 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 i t cannot be realised w i t h o u t comprehensive economic p l ann ing .

Lack of Interest

One notices a s i m i l a r l ack of i n ­terest in th i s potent ia l source of eco­nomic surplus in qui te a number of o ther economists. F o r example, in his 'Studies in Economic Develop­ment ' (London , 1957) Dr A l f r e d Bonne s u m m a r i l y dismisses ' 'Unused L a b o u r as Capi ta l Subst i tu te in Economic Development" in a s m a l l pa rag raph (p 213) where in he s imp ly states t h a t a "change in approach has set i n , in pa r t i cu l a r under the influence of Nurkse" . Professor W A r t h u r Lewis i s more generous in t r e a t i n g the p rob l em a t some l eng th . Use of surplus labour w h i c h can be p a r t i c u l a r l y useful i n cons t ruc t ion of roads, etc, he says, is held up by the l a c k o f w o r k i n g cap i ta l ( 'The Theo ry of Economic G r o w t h ' , p 218), or, w h a t has recent ly come to be cal led the wage-goods-gap. The extent o f the surplus in I n d i a n agr icu l ture , fo r example, is put at an equivalent o f 20 m i l l i o n m e n pe rmanen t ly unemployed (p 327) since 27 are employed on an aver­age per 100 acres of cu l t iva ted land , w h e n on ly 14 to 20 are needed f o r c u l t i v a t i o n . B u t Lewi s does no t i n ­dicate how th i s surplus can be re­moved f r o m agr icu l ture . I n f l a t i o n -free capi ta l f o r m a t i o n , he says (p 219) can be realised as a result of unpa id labour. However , i t can be s igni f icant on ly i n countries t h a t resort to compulsory labour (p 220).

The t ex tbook on P o l i t i c a l Eco­n o m y issued by the I n s t i t u t e of Economics o f the Academy of Sciences of the USSR (London , 1957), wh i l e deal ing w i t h the C h i n ­ese economic system, mere ly says t h a t "Ch ina possesses immense h u m a n reserves" (p 801) w i t h o u t I n d i c a t i n g the economic mechanism by w h i c h these h u m a n reserves can

be mobil ised. To the late Professor N u r k s e ( 'Problems o f Capi ta l F o r ­m a t i o n In Underdeveloped Count­r ies ' ) , goes the credi t fo r po in t i ng out the concealed sav ing potent ia l embodied in the teeming mi l l i ons . B u t he d i d no t d is t inguish between the existence of th i s potent ia l i n , a n d i t s r e m o v a b i l i t y f r o m , ag r i cu l ­ture. T h o u g h an a lmost s imi l a r thesis h a d been w o r k e d out by Maur i ce Dobb in his D e l h i lectures ('Some Aspects of Economic Deve-lopment , ' De lh i , 1951: pp 38-46), i t has come to be associated w i t h Nurkse . 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 to overcome the bot t leneck of the marke tab le surplus, and not d i r ec t ly 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

In his paper on "The Approach of Operat ional Research to P l an ­n i n g In I n d i a " ( 'Sankhya' , Decem­ber, 1955) Professor P C M a h a l a -nobis relegates th is problem to a footnote (p 10), T a k i n g note of the movement o f f ac to ry worke r s i n to the v i l l age d u r i n g the peak of the ag r i cu l t u r a l season, he points out the possible existence of a " B i o ­logica l balance between the size of the a g r i c u l t u r a l populat ion a n d the volume of crop product ion" . The i n t roduc t ion of labour sav ing devi-ces alone in his v iew can b reak up this balance. He 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 Publ ica t ion , 'Processes a n d Problems of Indus -t r i a l i z a t i o n in Underdeveloped Coun­tr ies ' (1955) a n d the E C A F E Bul le ­t i n Special Number devoted to Indus t r i a l i s a t i on (December 1958) also do no t t r ea t th i s problem. Dr G y a n C h a n d in his 'New Economy of Ch ina ' accords (p 180) mobi l i sa ­t i o n o f the 'Enormous L a b o u r Power of the Coun t ry ' the t en th and the las t place a m o n g the sources of accumula t ion . N V Sovani has devoted some a t t e n t i o n to th i s prob­l em (eg, his "Underemployment , Removable Surplus a n d the Saving Fund" , i n ' A r t h a V i j n a n a , ' M a r c h 1959, pp 17-29). T h o u g h he recog­nizes t h a t the r emovab i l i t y of th 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

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My t h a n k s are due to Professor J B S Ha ldane and Professor J S K h a n n a w h o were k i n d enough t o g o t h r o u g h a n ear l ier d r a f t o f th i s paper a n d m a k e a number of sug­gestions. My deepest g ra t i tude , however, i s due to my good teacher a n d be t te r f r i end , Dr K S G i l l . I alone a m , n a t u r a l l y , responsible f o r a n y fa i l ings t h a t m a y b e f o u n d i n th i s paper.

August 8, 1959 T H E E C O N O M I C W E E K L Y

THE ECONOMIC WEEKLY August 8, 1959

reorgan isa t ion , he fa i l s to a r r i ve a t the obvious conclusion.

So f a r as I am aware , Br K S G i l l was the f i rs t to s t rong ly empha­sise the immense potent ia l i t ies em­bodied in manpower surplus, and the ins t i tu t iona l reorgan isa t ion re­quired for the purpose ( in his ar t ic le on "Surp lus Manpower as Source of C a p i t a l " i n 'The Economic Week ly ' Special Number , Ju ly 1958), Need­less to say. the incred ib ly simple techniques employed by the Chinese, pa r t i cu la r l y in more recent years, to achieve a h i gh ra te of accumula­t i on , have brought the problem to the f o re f ron t and have opened up new vistas before the underdevelop­ed countr ies.

Potential and Removable Surplus

To b r i ng about wha t W W Rostow has cal led a ' take-of f ' in I nd ia , i t is i m p o r t a n t to devise ins t i tu t ions wh ich w i l l help mobi l ize the vast manpower surplus wh ich exists p r i ­ma r i l y in agr icu l tu re and the rest of the ru ra l sector. Tha t such a surplus potent ia l ly exists, i t has been seen above, is general ly ac­cepted. The impo r tan t t h i ng is, however, to know the f o r m in wh ich i t exists and the way in wh i ch it can be tapped. Nurkse 's popular thesis is that "disguised unemploy­ment implies to some extent a dis­guised sav ing potent ia l as we l l " . The la t te r symbolizes the difference between the output and the con­sumpt ion of the essential manpower wh ich is offset by the consumpt ion of the surplus manpower. Th is can be t rans fo rmed in to an effective sav ing f u n d by t r ans fe r r i ng the surplus manpower to cap i ta l con­s t ruc t ion , provided the ma rg i na l propensi ty to consume of the re­ta ined manpower is zero. Many leakages in the process such as h igher consumpt ion of the reta ined manpower, costs of t r anspo r t i ng goods to the t rans fe r red workers and increased consumpt ion of the l a t te r ow ing to h igher incomes and more arduous jobs, and the n a t u r a l g r o w t h in the numbers of the re­ta ined manpower ( res ta r t i ng the old process) have been pointed out by Nurkse and others. I t i s in v iew of these leakages tha t Nurkse speaks of his model as being a case of a l l or no th ing . A s tudy of these leakages, however impo r tan t , can have relevance only i f the poten­t i a l l y surplus manpower is i tse l f f i rs t removed. N u r k s e assumes t h a t i t can be so removed. B u t whether the surplus can be removed in fac t

depends on the na tu re of idleness in agr icu l tu re and other occupations. Th is is b rough t out by the d is t inc­t ion between visible Underemploy­ment and Inv is ib le Underemploy­ment made by the Commit tee on Underemployment o f the N i n t h Conference of Labour Stat is t ic ians ( I n te rna t i ona l Labour Review, September 1957).

'V is ib le Underemployment , wh ich involves shorter t h a n no rma l periods of w o r k and wh i ch is character is t ic of persons i nvo lun ­t a r i l y w o r k i n g pa r t - t ime ; and Inv is ib le Underemployment wh ich is character is t ic of persons whose earn ings are abno rma l l y low or whose jobs do not pe rmi t f u l l use of the i r capacit ies or sk i l ls (some­t imes cal led disguised underemp­loyment ) or who are employed in establ ishments or economic un i ts whose p roduc t i v i t y is abno rma l l y low (sometimes cal led potent ia l underemp loymen t ) " .

The f o rmer covers persons suffer­ing f r o m par t i a l unemployment as they are not h a v i n g a fu l l w o r k i n g day or a fu l l w o r k i n g week, but are ge t t ing no rma l t i m e rates fo r the period they are employed. Such a s i tua t ion is character is t ic of ad­vanced pr ivate enterprise countr ies only. Indeed, fac to ry workers in i ndus t r i a l pockets in underdeveloped countr ies m a y also be invo lved in th is s i tua t ion , but i t is not typ ica l of such countr ies.

Invisible Underemployment

Inv is ib le underemployment , how­ever, is character is t ic of persons who are apparent ly w o r k i n g f u l l t ime ; they are look ing a f ter the i r cat t le and are m o v i n g f r o m plot to plot to take care of the crops, etc. Bu t the L i l l i pu t i an economic uni ts wh i ch employ them depress the pro­duc t i v i t y aspect of the i r employ­ment , as against the t ime aspect. A t wors t , accord ing to Sovani , " they may be said to be pe r fo rm ing the service of ava i l ab i l i t y throughout the year . " The m a j o r N u r k s i a n premise t h a t the surplus manpower can be removed w i t h o u t a f fec t ing the current food output seems untenable because the inv is ib ly underemployed "cannot be neat ly d iv ided in to those who are idle and unproduct ive and those who are em­ployed and product ive because ava i l ­able w o r k is shared by a l l and the average p roduc t i v i t y of labour is posit ive though the m a r g i n a l p ro­duc t i v i t y m a y be zero or even nega­t i ve " . (Sovan i ) . Removable surplus,

in a s t r i c t sense is no t the same t h i n g as invis ib le underemployment . The la t te r concept br ings out the fac t of the superf lu i ty of manpower in agr icu l ture . The removab i l i t y o f th is surplus is ent i re ly a func t ion of i ns t i tu t iona l reorgan isat ion ; bet ter the reorganisat ion, larger the surplus.

Since th is invis ib le underemploy­ment is most pronounced, owing to the ext reme seasonal i ty of agr icu l ­t u ra l operat ions, in the slack sea­sons, surplus manpower can be w i t h d r a w n only i f the pract ica l ly un iversa l seasonal underemploy­ment is converted in to seasonal unemployment for some in the i r cur rent jobs. On ly then w i l l i t be possible to personal ly Ident i fy as to who is necessary and who is sur­plus. Consol idat ion of holdings, as suggested by Nurkse, as an i ns t i ­t u t i ona l change, is not sufficient since i t w i l l not reduce the number of cu l t i va t ion uni ts . Bu t the en­largement of these l im i ts is an es­sent ial precondi t ion fo r a massive w i t h d r a w a l o f manpower f r o m ag r i ­cul ture. Simple mechanical devices can be introduced to offset the labour shortage dur ing the peak to break w h a t Mahalanobis has cal led the bio logical balance between the level of product ion and the required manpower.

Magnitude of Surplus

This is not to a rgue tha t there is absolutely no manpower surplus wh ich cannot be w i t h d r a w n w i t h ­out such reorganisat ion. The fac t tha t most of the labour force f o r r i ver val ley projects, roads, new factor ies and r i ckshaw-pu l l ing , etc, i s d r a w n f r o m the ad jo in ing v i l ­lages indicates tha t some removable surplus is a l ready there wh i ch is a t t rac ted by rewards ( real or i l l u ­sory) ava i lab le outside the v i l lage whose economy undergoes the necessary read justment as th is pro­cess proceeds. B u t the quest ion is o f magni tudes. The cur ren t l y avai lable out lets can exhaust the surplus, removable under present condi t ions, bu t they cer ta in ly cannot solve the prob lem of invis ib le under­employment wh ich has f i rst to be converted in to a la rger removable surplus to step up the pace of deve­lopment. I t mus t be remembered t h a t the manpower surplus in the present context is d i f ferent f r o m the I ndus t r i a l Reserve A r m y o f M a r x , The l a t t e r consists of uprooted workers a n d can be occasional ly d r a w n upon w i thou t any i ns t i t u -

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t iona l reorganisat ion. This i s not t rue of the manpower surplus in a densely populated underdeveloped country . Fur the r , as against the current w i thd rawa l s of r u r a l popu­la t ion , there is the movement in to the countryside d u r i n g the peak seasons and the na tu ra l g r o w t h of the r u r a l populat ion. The current rate of w i t h d r a w a l , moreover, can promise on ly 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 cu l t iva t ion uni ts is an essential precondit ion for conver t ing invis ible underemp­loyment in to removable surplus, I t can be accomplished in the contem­porary I n d i a n envi ronment only by cooperat ivis ing agr icu l ture . The B r i t i s h model, apar t f r o m i ts pol i ­t i ca l repercussions, can ensure only an ext remely slow rate of g r o w t h . B u t cooperat ivisat ion cannot suc­ceed in a vacuum. An integrated approach towards the l a n d question is a condi t ion precedent fo r i ts suc­cess. Such an approach w i l l i n ­volve:

(a) e l imina t ion of the in terme­diaries to establish p a r i t y between the zaminda r i and r y o t w a r i areas ( th is is exact ly wha t the Z a m i n d a r l A b o l i t i o n A c t s in var ious States have done) ;

(b) consol idat ion of holdings to make a r a t i ona l solut ion possible;

(c) a census of l and holdings to enable a true picture to emerge;

(d) s t r i c t implementa t ion of ceil­ings a n d floors and /or a s t r ic t defi­n i t i on o f personal c u l t i v a t i o n — to cover o n l y direct pa r t i c ipa t ion in ma jo r ag r i cu 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, minors , widows, and a r m y other ranks ; and,

(e) step by step cooperat ivisat ion.

One cannot w o r k out a l l the de­ta i l s in a b r ie f paper. W h a t is i m ­po r t an t i s to note t h a t on ly an i n ­tegrated and comprehensive ap­proach to the l a n d question can en­able the cooperatives to succeed. The essential base for their success is a reduct ion in the current con­cent ra t ion of l a n d ownership. Rough­l y , of a l l the l a n d owning 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 top owned 48.8

per cent as against 0.4 per cent by 10 pet cent at the bo t tom, a n d 25 per cent at the top owned 72.5 per cent as against 2.3 per cent by 25 per cent at the bo t tom (Maha l a -nobis: "Science and N a t i o n a l P l an ­n ing"—Annive r sa ry Address a t the N a t i o n a l In s t i t u t e of Sciences of Ind i a , January 58). Such a con­cent ra t ion vi t ia tes a l l a t tempts a t cooperat ivisat ion, " B o t h these pro­grammes, t h a t o f l a n d r e f o r m and of cooperative development, are to ­day la rge ly paper programmes. I t is indeed possible t h a t they may be seriously w h i t t l e d down even before they are launched" (D R Gadg i l "Gramdan—Impl ica t ions and Possi­b i l i t i es" in the I n d i a n Journa l o f A g r i c u l t u r a l Economics — October-December 1957, p 2 ) .

Given the need for cooperatives it is impor t an t t h a t proper steps be t aken towards thei r success. B u t the cooperatives must be genuine if they are to unleash productive en­thusiasm and release the manpower surplus. Physical pa r t i c ipa t ion in ag r i cu l tu ra l operations should be a necessary condi t ion for member­ship.

I t should be fur ther noted t ha t service cooperatives w h i c h are be-

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i n g stressed so m u c h these days do not release the manpower surplus. S t i l l , in so f a r as they promote a cooperative atmosphere a n d encour­age more intensive cu l t iva t ion , they are welcome. B u t they mus t g r o w in to producers' cooperatives to make the manpower surplus avai lable for capi ta l f o r m a t i o n . Such a p r o g r a m ­me w i l l also make increased food supplies possible. In fact much w o r k needs to be done in such fields as soil conservation, minor i r r i g a ­t i o n works , and afforestation, etc. The g r o w i n g menace of soil erosion and water l ogg ing is at present not being effectively countered for w a n t of a d r i v i n g social force. Coopera­t iv i sa t ion w i l l permi t people to w o r k on such act ivi t ies d u r i n g the s lack seasons and go back to the fields d u r i n g busy seasons. Cap i t a l for ­m a t i o n w i t h i n agr icu l ture w i l l thus t ake place in a self-f inancing w a y and w i t h o u t any leakages. Th i s is cont ingent upon r a t iona l i sa t ion of ag ra r i an relat ions. Since co­opera t iv isa t ion simultaneously re­sults in more intensive cu l t i va t i on and a reduct ion in the number of operative uni ts , creat ion and mo­b i l i za t ion of the economic surplus can proceed together.