All the propositions of Trade Theory, such as "Free trade is better than no trade", or "Free Trade is better than restricted trade" etc. are propositions which are supposed to hold independently of what the actual post-trade income distribution is going to be. The term "better" in other words is given a specific meaning, namely that the Utility Possibility curve associated with the supposedly "better" option lies outside that associated with the "worse" option, which in turn would happen only if a vector-wise larger bundle of goods becomes available through trade compared to the pre-trade situation. In other words, the proposition that trade would be unambiguously beneficial, i.e. would increase "potential welfare" (Samuelson 1950), can hold only when it enlarges, vector-wise, the bundle of available goods compared to the pre-trade situation. This in turn can only happen when each country produces (in the simple two-good case) both the goods in the pre-trade situation. In other words, "mainstream" trade theory, no matter whether we are looking at the Ricardian or the Heckscher-Ohlin versions of it, necessarily assumes that each country can produce, and does produce, in the pre-trade situation both the commodities in positive amounts.

This however is quite obviously an erroneous presumption. Trade between the metropolitan countries and the tropical colonies was precisely of the sort where the former obtained through trade commodities from the latter which they themselves could not produce, commodities like tea, coffee, rubber, cocoa, sugar, fruits, cotton etc. Indeed Ricardo's famous example of England and Portugal engaging in trade to mutual benefit was a complete fudge, since the presumption that both England and Portugal could produce both the commodities, wine and cloth, was wrong. England could certainly not produce wine, even though Portugal could produce both wine and cloth. Likewise the tropical colonies could produce both types of goods, the range of primary commodities mentioned above, as well as a whole range of manufactured goods, while the metropolis could produce only manufactures. The motives for trade and the implications for trade under these circumstances involving an asymmetry between the trading partners are vastly different from what Trade Theory suggests.

If trade allows a country to get hold of goods that it otherwise could not have access to, then surely the motive for engaging in trade must be very different from what "mainstream" theory suggests. Likewise, once we recognize that certain lands, certain conditions can produce only certain things, and thereby jettison the production functions approach which assumes substitutability in the production of goods, it follows that trade, in any period, would not only necessarily reduce the availability of the exported good in the metropolis, but may also reduce the availability of the exported good in the tropical economy, which completely destroys the conclusions of "mainstream" Trade theory, regarding the beneficial effects of trade for all the economies. This naive (one may even call it ideological) view of trade as being beneficial for all, is sustained once again by a view of the capitalist metropolis as a self-sufficient, self-contained entity, for which engagement in trade is not essential, though it is beneficial.

To sum up, as the three examples cited above show, the view of capitalism as a self-contained entity, makes for poor theory as much as for poor development economics: indeed each of the three examples constitutes a case where ignoring the interactions between the capitalist and pre-capitalist segments impoverishes not only our theoretical understanding of capitalism but also our understanding of the role of, and hence the problems of, the underdeveloped world, the fact that it constitutes a source of labour reserves for the capitalist metropolis, the fact that it is necessary for providing stability to the capitalist system, and the fact that it is the source of otherwise unobtainable raw materials for capitalism (this is by no means an exhaustive list of its uses).

7. Under these conditions, it follows, the dichotomy which lies at the core of the economics discipline, between "economics" and "development economics" must be rejected. The underdeveloped economies are not mere laggards waiting to catch up with the developed countries. Their present predicament is a result not of their pristine pre-capitalist state of being, but of their interaction (no doubt on the basis of their pre-existing structures) with metropolitan capitalism. The developed and the underdeveloped countries, in other words, together constitute the totality of capitalism (which is not the same as saying, as Frank (1975) and others do, that the underdeveloped countries are ipso facto capitalist). This totality must be the domain of analysis of economic theory, in which case there would be no separate "development economics". We could of course still study the specific pre-capitalist institutions existing in these societies, but then this study would only be a part of the analytical totality, integrated into it, rather than constituting a separate domain. Putting it differently, we may study a set of topics which we may still conveniently refer to as "development economics", but we can do this properly only when the current distinction between "economics" and "development economics" has got obliterated by a study of the totality of the capitalist system. The topics we would be studying in such a situation under the rubric "development economics" would then constitute mediations in the analysis of this totality.

Let me give an example. We cannot of course study the Indian economy without studying the prevailing agrarian relations, and in that sense a study of agrarian relations remains an integral part of "development economics". But the precise agrarian relations prevailing have been shaped by the economy's integration into the capitalist system, though these relations differ from country to country, are not reducible merely to some predetermined outcome of this integration, and must in turn throw up contradictions for this process of integration. We may, for the sake of convenience, look at these country differences, these historical specificities, and these contradictions under a separate rubric called "development economics" but this is still, theoretically, an integral part of the totality of "economics", not a separate domain. What I am suggesting in other words is an epistemological integration of the two domains which are currently dichotomized, though functional demarcations may still continue for the sake of convenience.

8. Indeed not resorting to such an epistemological integration would give rise to a highly flawed understanding of important issues. Consider for example the issue of rural poverty. The Bretton Woods institutions would have us believe that the rural poverty ratio has gone down in India in the nineties; and to the extent that it has not, they would attribute the failure to what they call "bad governance". This explanation is in line with the dichotomy we have been discussing, which postulates that the problems of the underdeveloped countries are specific to their own conditions and are in no way caused by integration with metropolitan capitalism.

But even without going into the question of what has happened to the rural poverty ratio in the nineties (which by now has become an ideologically-charged issue), we can safely say that "rural distress" has increased at least in the sense that per capita foodgrain availability in the nineties has declined drastically. Indeed, per capita foodgrain availability which had gone down from around 200 kg. per annum at the beginning of the twentieth century to around 150 kg. by the time of independence, had recovered to around 180 kg. by the end of the eighties (177 kg. in the triennium centred on 1990-91). By 2000-01 however it had gone down to around 150 kg. (After a slight recovery in 2001-02 it again came down in 2002-03 to 150 kg. and even this figure was attained because of a host of drought relief operations)^[5].

The reason for this decline lies not in the decline in per capita foodgrain output during the decade, though that too has happened, but in an even more drastic decline in the purchasing power in the hands of the rural poor. This is confirmed by the burgeoning foodgrain stocks with the government, which, prior to the drought of 2002-03 (that has led to some decumulation of inventories) and the massive food exports (at subsidized prices), had amounted to over 60 million tonnes. Even today the level of stocks with the government is around 30 million tonnes which is at least 10 million tonnes more than the total buffer and operational stocks which are considered necessary^[6].

The reason for this drastic squeeze in rural purchasing power inter alia lies in the sharp fall in the rural development expenditure undertaken by the government, as a proportion of GDP. And the latter in turn is part of the deflationary policy which is forced upon governments all over the world by the emergence of a new form of globally-mobile international finance capital. (The only government that enjoys a degree of immunity from this pressure to deflate the economy is the U.S. whose currency, because it is considered "as good as gold" by wealth-holders in the entire capitalist world, enjoys a special status). In short, India's progressive (though by no means, as yet, total) integration into the vortex of globalized finance has exposed the government to pressures to deflate the economy. (Deflation is the favourite recipe of international finance capital and it is no accident that even in the midst of massive unused foodstocks, unutilized industrial capacity, and burgeoning foreign exchange reserves, all of which characterize the Indian economy today, the most commonly-heard refrain at present is for a curtailment of the fiscal deficit, which would only succeed in exacerbating the demand constraint).

The increase in rural distress of course is more general than the decline in per capita foodgrain availability (the growing incidence of farmers' suicides for instance, though another fall-out of the process of "globalization", has little to do with foodgrain availability). But this decline is one important factor contributing to the growth in rural distress in recent years; and it is the direct outcome of the economy's integration into the sphere of globalized finance. This integration in turn has been forced upon it by the emergence of a new and powerful actor in contemporary capitalism, international finance capital in a new form, whose interests are assiduously promoted by the Bretton Woods institutions^[7]. Thus, an issue, viz. rural distress, that is pervasively considered "internal" to the country, turns out on closer examination, to be an outcome of developments in world capitalism. Unless we are sensitive to these developments, and alter our understanding and teaching of "development economics" to overcome the dichotomy between "economics" and "development economics", we would be unable to make any intervention for the betterment of our people, which after all is the objective behind the study of economics.
 
REFERENCES

1. Frank A.G. (1975) Capitalism and Underdevelopment in Latin America , Penguin.
   Goodwin R.M. (1967) "The Growth Cycle" in C.H.Feinstein ed. Socialism, Capitalism,and Economic Growth , Essays Presented to Maurice Dobb, Cambridge.
2. Kaldor N. (1978) Further Essays on Economic Theory , Duckworth, London .
3. Lewis W.A. (1978) The Evolution of the International Economic Order , Princeton.
4. Marx K. (1977) Capital , Volume I, Vintage Books (Paperback), New York .Patnaik P. (1977) Accumulation and Stability Under Capitalism , Clarendon Press, Oxford .
5. Patnaik P. (2003) The Retreat to Unfreedom , Tulika Books, Delhi .
6. Patnaik U. (2003) "On the Inverse Relation Between Primary Exports and Food Absorption in Developing Countries Under Liberalized Trade Regimes" in Jayati Ghosh and C.P.Chandrasekhar ed. Work and Well-being in the Age of Finance , Tulika, Delhi.
7. Patnaik U. (2003a) "Foodstocks and Hunger", Social Scientist , July-August.
8. Samuelson P.A. (1950) "The Evaluation of Real National Income", Oxford Economic Papers, January.
9. Solow R.M. (1956) "A Contribution to the Theory of Economic Growth", Quarterly Journal of Economics.

[5]These figures are taken from U.Patnaik (2003a).

[6]It is sometimes argued that the reason for the decline in per capita foodgrain consumption is a change in tastes that is occurring all over India with the increase in per capita income. This claim however is without any merit for two reasons: first, evidence from all over the world shows that as incomes increase, while the direct consumption of foodgrains does not increase (and may even decline) the direct-plus-indirect consumption (the latter via animal feed and processed foods) increases as a result of dietary diversification, and there is no reason why India should be an exception to this general rule. Secondly, the decline in per capita foodgrain availability (and hence by implication in per capita foodgrain consumption) has also been accompanied by a decline in per capita calorie intake in rural India during this same period which is as high as 13 percent, and which only confirms the hypothesis of growing rural distress. See U.Patnaik (2003a).

[7]Different aspects of this new form of international finance capital, as well as the implications of its emergence, are discussed in a number of essays of mine collected together in Patnaik (2003).