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Post by sol_drethedon on Fri Dec 27, 2013 7:38 pm

The Dominance of Finance Capital in Production.

As we have already noted, the colony was established as an outlet for exports of finance capital, with a view to producing those elements of capital that went to cheapen both the constant and variable parts of the total capital at home. This was important for the rate of profit of the monopoly and other enterprises. But the exports of capital created activities in the colony that produced surplus value. In order to control and to advance this production, the state became a necessity. But while the state itself played the role of producer, the main participants for whose purpose the state acted were the financial oligarchy, and here the role of finance capital was crucial to the whole production process. The dominance of finance capital in production was assured partly through state capital, which formed part of finance capital and partly through the financial system based on credit institutions.

(a) State Capital
In a colony like Uganda with backward conditions of production, the state was a vital 'economic power itself' on behalf of the financial oligarchy which ruled. Through the medium of state capital, realized in taxes, levies and other forms of state appropriation, the state controlled the conditions of labor of the peasant by providing the general condition of production, which it alone could provide. It assured the general research and technical infrastructural investment. In this role state capital became part and parcel of finance capital. Marx demonstrated in capital how state capital, in 'so far as governments employ productive wage labor, performed the function of 'industrial capitalists' . In this way, its products entered the metamorphosis of capital and their circuits. In the era of monopolies, the function of industrial capitalists is a function of the financial oligarchy and finance capital. In Uganda, the productive activities of the colonial state comprised provision of transport (rail, roads), production in the mines and also productive activities in the agricultural, forestry and veterinary spheres, which took at times the appearance of research and development, and/or support services.

Our interest lies in the manner in which finance capital in the form of state capital, assured the general conditions of production for the provision of raw materials for the monopolies. Once the problem is posed in this way it becomes easier to understand how utterly important to the whole process of peasant production was state capital. We can immediately see why the imperialist state placed such emphasis on scientific research in the colonies. In 'Circular A' dated 11th June 1919, addressed to all the colonial governors, the secretary for the colonies pointed out that the close of the 'prolonged struggle of the last four years' following the end of the war which had left behind a 'depletion of raw materials' and 'vast financial responsibilities'. it was evidently 'more than ever necessary that the economic resources of the empire in general were be developed to the utmost. For this reason he wished to suggest that the time was particularly opportune for a review of activities carried on by or on behalf of your government in scientific research and economic exploration', in order to widen the scope of the work already in progress. The circular continued:

"It is becoming more and more clear that there is scarcely any industry which can develop or even maintain its production without the aid of scientific research, and that it is sound policy that research should be liberally provided for in the budgets of the firms engaged, although it is frequently necessary that those firms should combine to finance a central research association... But the usual method in the colonies is for research to be carried on by the scientific departments of the Government, and financed out of the ordinary revenue and out of taxes on particular industries." [Emphasis added]

The governors were then asked to consider any important industries in the colony 'on whose behalf no research work is at present carried on', and to assess 'whether this state of affairs does not call for action on the part of the Colonial Government'.

"It would particularly direct your attention to those raw materials required for imperial trade or defense which are produced within the empire either in adequate quantities , or not at all, such as flax, hemp, medium cotton, the lightened timbers, ores of aluminum and copper phosphate rock, potash and mineral oil... The Commercial and Industrial Policy after the war drew special attention to this question of raw materials in paragraph 122 of their final report (cd.9035).Much of the existing deficiencies can be supplied by the tropical colonies and protectorates if the great potential resources are adequately developed and one of the more sure and speedy agents in such development is undoubtedly scientific investigation. The war has furnished striking instances of the correctness of this view. Aluminium is essential to a number of British industries and the position would be serious if alternative sources of supply had not been found within the Empire ...If these enterprises are successful the position of the British industries in question will be greatly strengthened. [Emphasis added]

This circular is quoted in extenso to show the importance of the state that was becoming a permanent feature of the colony, and the extent to which capital was to be involved in the reproduction of finance capital in both Uganda and Britain. The emphasis in the circular on state initiative on scientific research in the colonies is understandable because the nature of the activities in agriculture, mining, resource preservation, and transport, were such that they could not be undertaken by a single capitalist or monopoly. This was due to the undeveloped nature of the economy. In such a situation the state became the only agency for carrying out such basic investments and here, Marx had observed, to the extent that the state carried out productive activities it acted as an 'industrial capital'. But for whom? For the industrial monopolies or what the circular calls British industries' and the 'Empire'.

Here in Uganda the state had already undertaken such activities. The involvement went back to the very early days of cash-crop production. This was noted by the colonial economists, although its significance was little understood by them. In 1908, a specialist cotton superintendent for Uganda had been appointed after discussions with the colonial office and the Imperial Institute. Two years later a department of agriculture was established to 'supervise native cultivation' . By 1914, the department consisted of a director, six agricultural officers and one ploughing instructor, in addition to veterinary staff and two scientific specialists. Wrigley has observed: 'With this the quality of Uganda's cotton crop was reasonably assured, and the quantity began to increase phenomenally.' By the 1930's, with the exhortation of the colonial office contained in 'CIrcular A', the activity of the colonial state in productive activities increased tremendously in the field of agriculture, in what Ehrlich refers to as the 'rise of scientific agriculture'

"The new technology made numerous significant contributions towards the ultimate improvement of agriculture in Uganda, where much knowledge of the basic environmental knowledge essential to progressive agriculture was lacking and where techniques and equipment were often crude, inadequate, or veven harmful."

The colonial state's provision of transportation facilities such as roads and rail services further helped to increase the growth in cotton and coffee production. By 1932, 1800 miles of good roads had been opened up in addition to the Uganda railway. Furthermore, a sum of 3.5million British Pounds was advanced to Britain to extend to extend the railway construction from Nakuru to Kampala, after the under-secretary for the colonies had visited East Africa in 1924. After his visit he had concluded that 'further economic development of production in East Africa is dependent on early provision of transport facilities and in particular on a new railway construction.'

The above evidence should go to dispell illusions that agricultural production was controlled by merchant ginners. Mamdani goes one step further when in his typical neo-Marxist fashion he states:

"Circulating unproductive capital [sic!] dominates production. The commercial capital that dominates production is that capital whose operations are based on export-import. The primacy of commercial capital - the decisive role of the trader and the merchant - within the territory economy reflects the primacy of metropolitan capital at the level of the colonial system."

Elsewhere we are reminded that by 1938 Indian capital had secured control over both wholesale and the ginning industry and had secured a monopoly over the territorially based surplus- a gift of the colonial state.' We have already argued that this kind of understanding of the question shows a complete ignorance of the mechanisms of monopoly capital and the operations of finance capital. No 'commercial capital' can have hegemony or 'primacy' over finance capital, and any talk of primacy of metropolitan capital' means nothing in such a formulation. Moreover it shows little conception of the colonial state as an instrument, in the ultimat, of the financial oligarchy. The control of finance capital over production in Uganda was total, even the so-called merchant/commercial capital was no more than credit facilities opened up by finance capital in Uganda to facilitate the processing, transportation and marketing of the crops, as we shall see in the next section.

To conclude this section, reference should be made to the sources for state capital expenditure on the activities discussed here, derived greatly from its monopoly over ground rent. Apart from the 20,000 British Pounds a year provided by the British treasury in 'Circular A' for the fiscal year 1919/20 'to be expended in stimulating scientific research with a view of developing the economic resources of the colonies and protectorates', it was directed that future capital to be found locally. Accordingly, in Uganda the Cotton Tax Ordinance, No. 28 of 1919, reduced the rate to 3 rupee cents per pound, and in 1927 a sliding scale was introduced which varied the rates from a minimum of 2 rupee cents per pound in 1927 to 6 cents per pound in 1928 and 1929. Further alterations were made in the sliding rates in 1931, 1932 and 1933. IN 1945 another sliding scale was instituted, related to the duty payable on ginned cotton exported to the f.o.b value per pound of lint exported, resulting in considerable revenues to the colonial state:1925 - 216,993 British Pounds, 1931 - 1,538British Pounds, 1944 - 114,891British Pounds, and 1945 - 539,753British Pounds

Also in 1945, a law was passed imposing an export duty on native grown coffee(Ordinance 20 of 1945). Rates of duty were based on f.o.b price Mombasa, varying from 1 to 6 British Pounds per ton in respect to Uganda native coffee, and for Bwamba robusta clean coffee from 36 to 60 British Pounds and over per ton. In respect of arabica coffee the rates varied from 2/10 - 7/10 British Pounds per ton for a price range of 65 - 114 British Pounds and over.

In addition to these taxes stabilization funds were built up, as we shall see in the next section, some of which were converted to state capital for development purposes. This, as we noted earlier was also the result of the financial oligarchy's monopoly exercised over ground rent, since the landlord class no longer existed in real fact, and because of its total control of the land space and its resources through the colonial state.

The 1946 Worthington Development Plan for Uganda (revised by Harris) pointed to the increased need for better implements and research to ensure yields adequate yields. Methods of correct spacing, mulching and the use of manures, although known were not sufficiently used. The plan pointed out that, 'If proved and simple agricultural methods were adopted universally it is certain that yields of all crops would increase by more than 25%. The report recommended an increase in the number of technical staff, for the purpose, and made provision for the same. Furthermore, the report of the agricultural productivity committee of the development council pointed to the need for the introduction of 'know-how' into the farming system which would lead to 'increased efficiency of farm management, better returns of cash and food from land, and the maintenance of improvement of the soil's fertility.' It again drew attention for the need for government involvement:

"While we consider that some research on particular cash crops . . . should be financed by the the industries concerned, we are of the opinion that the greater part of research, not only of a basic nature but also applied, must in peasant farming system which exists in Uganda be the responsibility of the government. A total of 311,500British Pounds capital expenditure and 395,150British Pounds recurrent expenditure were recommended for this purpose for the period of 1955-60.

Needless to add, private finance capital also carried out its own research in crop production, as for instance the BCGA research station at Namulonge which was built by the British East African Cooperation BEAC in 1950. But this was in close coordination with state activity. Earlier, under an arrangement between the government and the BCGA, the government contributed 1,000British Pounds per year for a period of three years beginning 1st April 1907, as part of the cost of experimental work at the station, on the understanding that the BCGA also spent a similar sum towards the project. Through the agency of the BEAC this joint project was successfully carried out, until later when the government itself took over the research activity. Thus to a large extent state capital played a dominant role in the control of the peasants' conditions of production, ant it is only from this viewpoint that Wrigley's conclusion is correct: 'Peasant production was possible only because the peasant was surrounded by a network of supervisory, manufacturing and distributive agencies.' And, he should have added, this was enabled to a great extent by the involvement of state capital, which formed part and parcel of financial capital. Thus, in the 5 year capital development plan 1955-60, of the 30,000/- expected to be spent, over one-third went to the provision of general technical preconditions of production, thus indicating the significant role that state capital played in the production process in the economy, a fact that became even more important under neocolonialism.

This type of investment paid off handsomely in enabling the peasant to produce better and more crops at virtually no cost to the monopolies. Thus although the colonial state received 1million British Pounds from the colonial department and welfare funds from 1945-60, this only supplemented peasants' enforced savings which were capitalized for this purpose by the state. A former colonial agricultural officer in Uganda, Masefield, has concluded with validity:

"It must, however, be concluded that, on the whole, Uganda received less from Colonial Welfare and Development funds for agricultural purposes than the average for British Colonial territories of her size and population. This was because her agriculture at this point was regarded as more than usually prosperous for a tropical country and she was thus considered to be less in need of help. It may be for the same reason that Uganda, unlike many other tropical countries received little or no help for her agriculture from international sources during this period. Neither FAO, the World Bank, nor (except for some research grants) philanthropic foundations came into the picture;nor did United States money until in 1953 the Mutual Security Administration allotted 100,000British Pounds to Uganda for African credit purposes, of which only 30% was to be used for agriculture."

As a result of these peasant financed investments, he concludes, 'a wholly new system of seed replacement' was adopted during these years, in the areas growing BP 52 and S 47 cotton seed:

"Already between 1947 and 1950, the parity to variety in Buganda was reported to have been raised from 75% to 90%. These new waves of seed were derived from the multi-line strains bred at Namulonge, and were estimated to give an annual increment of yield of 2.5 to 3.0%. At the same time the average ginning outrun went up between 1945 to 1960 from 30 to 33%. The planting of S47 seed in 1951 over the whole of the Northern and Eastern Province except Busoga was held largely responsible for a 60% increase in yield in that year."

He goes on to say that the effect of dressing seed with a copper bactericide for five years in certain areas had reduced the incidence of black-arm disease from 53 to 4. 'And finally, spraying with insecticide, earlier planting,and somehow closer spacing all helped to raise potential yields.' All these were the result of scientific research, for which state capital was vital.

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