The Union Budget 2018-19 in 5 charts

The Union Budget is a key document which informs the public about the Government’s socio-economic plans and priorities. It is important to critically evaluate this document because of our collective ‘failure to provide for full employment’ and the ‘arbitrary and inequitable distribution of wealth and incomes’; Keynes wrote this in 1936 and it continues to remain the same. Moreover, it is our collective right and responsibility to decide how the government should obtain its revenue and how it must be spent. No formula or algorithm exists for this. As Piketty wrote in his Capital in the Twenty-First Century, ‘Taxation is not a technical matter. It is preeminently a political and philosophical issue, perhaps the most important of all political issues. Without taxes, society has no common destiny, and collective action is impossible.

This blog post aims to outline the priorities of the current central government by examining the expenditure on physical and social infrastructure and the nature of taxes. This is done in 5 charts.

(1) Physical Infrastructure

Defence is significantly more important than roads, housing, food, and farmers’ welfare.


Capital Expenditure of Select Central Ministries (in Rs. Crore)
Source: Expenditure Budget Vol. 1, 2016-17, Statement 2, pp 4-9
All values are rounded off to the nearest crore.


(2) Social Infrastructure

Physical infrastructure creation is more important than social infrastructure creation.

Have the negative effects of physical infrastructure creation been accounted for?


 Total Allocations of Select Ministries (Rs. 112753 Crore)
Source: BS, p 36, Annex No. III-A to Part A
RE refers to revised estimates which include supplementary demands for funds made by the ministries during the financial year.
BE refers to budget estimates.


(3) Direct & Indirect Taxes

Our taxation policy is regressive due to the high proportion of indirect taxes.


Select Direct and Indirect Taxes (in Rs. Crore)
Source: Receipts Budget, 2018-2019, pp. 2-4


(4) Corporate Tax Concessions

Our tax concessions could approximately fund 75% of the social infrastructure spending estimate.



(5) Corporate Tax Structure

Our corporate taxes are regressive.


Effective tax rate paid by sample companies across range of PBT (FY 2016-17)
Source: Statement of Revenue Impact of Tax Incentives under the Central Tax System: Financial Years 2014-15 and 2015-16, p 30 of the Receipts Budget, 2016-2017, Annex-15.
1 Values rounded off to the nearest integer; hence the total adds up to 101 and not 100. Financial year 2012-13. The number of companies whose PBT is zero is 17,912 and their share in total income is around 9 per cent.


Concluding comments

Our government prioritises defence over agriculture. Our government prioritises physical infrastructure over social infrastructure and does not take into account ecological damage and the displacement caused due to physical infrastructure creation. And our taxation policy is regressive. We must use our collective rights and responsibilities to decide how the government should obtain its revenue and how it must be spent.

I thank Rahul Lahoti for inviting me to be a part of the panel which discussed the Union Budget at Azim Premji University-Undergraduate Campus on 14th February 2018, from which this post originated.

150th Anniversary of Capital: Reading Francis Wheen’s Biography of Capital (Part I)

wheen-capitalAlthough I had read the three volumes of Capital, three parts of Theories of Surplus-Value, and Grundrisse over the course of my PhD research, all of them merit rereading and I ought to read Marx’s other works. Hence, given that 2017 marks the 150th anniversary of Capital, Volume 1 (first published in 1867), I decided to commemorate it by reading a work of Marx I hadn’t read – Wage-Labour and Capital – and a short biography of Capital by Francis Wheen (2006). I shall present my commentary in two parts as it is too lengthy for one post. Part I is a commentary on Wheen 2006, and part II is on Wage-Labour and Capital.

Despite writing about Steuart, Smith, Ricardo, Sismondi, Malthus, Keynes, Sraffa, Krishna Bharadwaj and many others in several posts, I have dealt with Marx’s ideas exclusively only in one: ‘Is Marx (Ir)relevant?’. In the next year, I hope to write more on Marx’s economics. 

Wheen’s biography of Capital is just about 125 pages. Marx’s Das Capital: A Biography is a three chaptered book dealing with the gestation, birth, and afterlife of Das Capital.

Marx, the studious worker 

According to Wheen, ‘Marx’s character was a curious hybrid of ferocious self-confidence and anguished self-doubt’ (p. 3).  It was ‘only after many years of spadework in philosophy and literature’ that Marx turned to the study of political economy (p. 7). At the age of seventeen, Marx precociously wrote in a schoolboy essay: “Our relations in society have to some extent already begun to be established before we are in a position to determine them” (p. 8). [Wheen’s excerpts from Marx which I quote are in “double quotes” and those by Wheen are in ‘single quotes’.]

The reader gets to appreciate Marx’s style of studying from Wheen’s scattered references across the book. Marx had the habit of noting down extracts from all the books he read while at the university. And he read widely. As Wheen writes, ‘This is the same eclectic, omnivorous and often tangential style of research which gave Das Capital its extraordinary breadth of reference’ (pp. 10-11). His use of dialectic is influenced by his early study of Hegel’s (1770–1831) ‘pursuit of contradictions’. He had taken the idea that ‘people create the constitution’ from Ludwig Feuerbach (1804–1872), the German philosopher; Feuerbach had argued that ‘thought arises from being, and not being from thought’ (p. 13). Therefore, humans have to assert themselves as subjects and not as mere objects of capitalism. And to thoroughly engage with the land question, Marx thought it ‘essential to study Russian land-owning relationships from primary sources’ (p. 37). Marx’s data sources included ‘newspapers, parliamentary commissions, factory inspectors and copies of Hansard’ (p. 51); Hansard contains ‘edited verbatim report of proceedings of both the House of Commons and the House of Lords’. Marx’s data on child labourers were taken from English match factory records. [On the importance of using a wider set of data, see English for Economists: Sowvendra’s ‘The Adivasi Will Not Dance’.]

Already well versed in German Philosophy and French politics, Marx set out to educate himself in British economics. As he went along, he kept taking copious notes. These notes, which formed the early rough draft of Das Capital, are commonly known as the Paris manuscripts, published as Economic and Philosophic Manuscripts of 1844 (available for under Rs. 200 from Aakar Books and freely available at

Marx worked extremely hard. He spent most of 1850-1 in the British Museum reading past issues of The Economist and books on economics. He sat in the Museum’s reading room from 9 AM to 7 PM. In the winter of 1857-8, he used to sit in his study until about 4 AM. When he realised that his ‘rudimentary arithmetic’ would prove inadequate in his economic studies, he undertook a ‘quick revision course in algebra’ (p. 27). Marx felt that his study of algebra was necessary “for the benefit of the public”. His ‘nocturnal scribblings’, as Wheen describes them, running to more than 800 pages were published in German in 1953 entitled Grundrisse der Kritik der Politischen Oekonomie (popularly known today as simply Grundrisse). And the notes he took in 1862 and 1863 filled more than 1500 pages (p. 32); this was posthumously published as Theories of Surplus-value.

Marx’s intellectual corpus in political economy 

Here is a succinct timeline of Marx’s key works in political economy. At the same time, this is also a timeline of how Marx’s thinking evolved to culminate in Capital.

1844: Paris Manuscripts/Economic and Philosophic Manuscripts of 1844 {notes; posthumously published}

1847: Wage-Labour and Capital {lectures; published as a set of articles in 1849}

1848: Communist Manifesto (political pamphlet; with Engels)

1857-8: Grundrisse {notes; posthumously published}

1859: A Contribution to the Critique of Political Economy {Marx’s first book}

1862-3: Theories of Surplus-Value {notes; posthumously published}

1865: Value, Price and Profit {speech; posthumously published}

1867: Capital, vol. 1 {Marx’s second book} (second edition in 1873)

The first manuscript in Economic and Philosophic Manuscripts of 1844 begins with the following sentences: “Wages are determined by the fierce struggle between capitalist and worker. The capitalist inevitable wins. The capitalist can live longer without the worker than the worker can without him” (p. 14). This struggle is also found in Adam Smith’s Wealth of Nations. In capitalism, Marx writes that, productivity rises by transforming the worker’s “lifetime into working time, and … [by dragging] his wife and child beneath the juggernaut of capital” (p. 15).

Marx’s ‘first small book’ is A Contribution to the Critique of Political Economy. It was first published in 1859 (in German). [I took the phrase “the first small book” from Maurice Dobb’s introduction to the 1979 English translation brought out by Progress Publishers.] Marx had earlier intended to call Das Capital ‘A Contribution to the Critique of Political Economy, Volume II’ (p. 33). It was Engels who compiled, edited, and published volumes II and III of Capital in 1885 and 1905 respectively; see Regina Roth’s work which argues that these interventions were often significant. The Theories of Surplus-Value, sometimes called volume IV of Capital, was published by Karl Kautsky in 1905.

 Capital: key ideas

In capitalism, commodity carries a specific meaning. Even today, a commodity, at the first sight, appears to be a ‘trivial thing’ (p. 42). Fetishism is the ‘belief that commodities have some mystical intrinsic value’ (p. 43). Instead, the value of commodities, for Marx, owes to the value labour provides. The wages of the workers are determined by subsistence wages, a social and cultural variable unlike in neoclassical (more accurately, marginalist) economics where it is determined by the marginal product of labour (and is a labour clearing wage, that is, there is full employment of labour). Subsistence wages includes ‘education and training’ (p. 49). As Wheen writes, ‘Marx has no illusions about the supposedly sacred symmetry of the law of supply and demand’ (p. 55) which is central to marginalist economics. Indeed, as Wheen notes, ‘The only difference from previous epochs is the guile with which the robbery is concealed from the victims’ (p. 50).

The relation between technological progress and better living standards or higher wages is not as straightforward as in the marginalist growth models of Solow and Romer. In contrast to these models, Marx concludes that greater the productivity, greater is the labour unemployment (p. 56). Thus, Marx writes, “It follows therefore that in proportion as capital accumulates, the situation of the worker, be his payment high or low, must grow worse” (p. 57). For Marx, poverty “is about the crushing of the human spirit” (p. 58). In an article published in the New York Review of Books, Jeff Madrick observes: “people of all racial and ethnic groups are losing confidence in the core American principle that hard work is a means to upward mobility.” And as Wheen notes, ‘The average British employee now puts in 80,224 hours over his or her working life, as against 69,000 hours in 1981. … many people have no time for anything beyond labour and sleep’ (p. 59). The effects of technological progress or rising productivity has been very uneven.

What causes crises in capitalism? According to Marx, “The last cause of all real crises always remains the poverty and restricted consumption of the masses” relative to private investment (p. 61). This key idea resurfaced with vigour in the twentieth century in the seminal works of Michal Kalecki and John Maynard Keynes.

Capital’s afterlife 

In the Preface to Capital, Marx writes, “I assume, of course, a reader who is willing to learn something new and therefore to think for himself” (pp. 82-3). Undoubtedly, since its first publication, Capital has enabled many individuals to know the capitalist order better. George Bernard Shaw articulates this view clearly: ‘Das Kapital achieved the greatest feat of which a book is capable – that of changing the minds of the people who read it’ (p. 90). However, the initial reception to its publication was ‘muted’. Wheen thinks that it was ‘sheer incomprehension’ and not ‘political enmity’ which explains the ‘muted reaction’ to the publication of Capital.

As Sir John MacDonnell wrote in the Fortnightly Review (March 1875): ‘People may do him the honour of abusing him; read him they do not! (p. 87). Resorting to an ‘authority’ for support without proper reasoning is always troubling. Wheen notes how during the 1917 Russian revolution, the ‘architects … all cited Marx, and Das Kapital in particular, as the divine authority for the correctness of their views’ (p. 98).

Unfortunately, mainstream economics still views income distribution as a harmonious process. That income distribution is a process characterised by conflict and power relations has been ignored, and perhaps even intentionally supressed. These ideas continue to be studied and researched by ‘heterodox’ economists working in the Classical, Marxian, and Keynesian traditions. And one must not confuse ‘new political economy’ with the political economy found in the works of Smith, Ricardo, and Marx. It is interesting to note that before the 2007 Global Financial Crisis, economists looked down upon ‘political economy’ but after the crisis, the number of mainstream economists who started doing ‘political economy’ rapidly increased.


Marx’s Capital remains one of the most insightful studies on capitalism. With all the strides in technological progress with respect to global value chains, transnational corporations, industry automation, etc., reading Marx’s Capital enables the reader to see the cells of the capitalist order – impoverished workers.

Let me end this post with Marx’s favourite motto (p. 101): ‘de omnibus dubitandum’ (‘everything should be doubted’).


I acknowledge Prasanth Radhakrishnan for his helpful comments. 

On free individual choice and collective inaction

PIC-blog post-collective inactionThe logic of contemporary economies is built on our belief in the virtues of ‘free’ individual choice. Adherents of this view, which include (most) governments, corporations and many individuals, believe that regulating individual choice is bad for the economy. However, among this syndicate, some do recognise the pitfalls of employing this principle in the development and growth of institutions relating to education and health. In economic parlance, the ‘failure’ of individual choice in yielding a socially beneficial outcome is termed a market failure – suggesting that markets, in general, do not fail. It is important to state the logic of individual choice explicitly owing to its enthralling grip over contemporary political and economic imagination. John Maynard Keynes in his 1926 critical essay ‘The End of Laissez-Faire’ makes explicit this logic: ‘by the working of natural laws individuals pursuing their own interests with enlightenment, in condition of freedom, always tend to promote the general interest at the same time!

How did private vice transform into private interest (and choice)? And how is it that private choice is at the core of today’s economics and politics? Albert Hirschman’s The Passions and Interests:Political Arguments for Capitalism Before its Triumph (1977) provides us with one compelling historical account. The idea that free individual choice results in socially beneficial outcomes is now commonplace. This was not always the case. In fact, Montesquieu, the French philosopher, wrote about the socially beneficial outcomes from pursuing honour which ‘brings life to all the parts of the body politic’ and ‘it turns out that everyone contributes to the general welfare while thinking that he works for his own interests.’ By the seventeenth century, it was recognised that the ‘disruptive passions of men’ could not be restrained by moral philosophers and their religious counterparts although attempts to convert the disruptive passions into ‘constructive’ passions were already underway. For instance, anticipating Adam Smith, Pascal, another French philosopher, writes that man ‘has managed to tease out of concupiscence an admirable arrangement’ and ‘so beautiful an order.’ Subsequently, the idea of ‘countervailing passions’ started gaining currency in political thought. However, as Hirschman also notes, what forces actually ensure that groups (of individuals) with conflicting passions/interests result in a gain for all? If the contemporary politics of climate change is taken as an example, the outcome runs contrary to such an expectation.

Today, the widespread belief especially among policy makers is that unregulated individual choices – whether as a consumer or a producer – will ensure that the fruits of economic growth trickle down to the poorest person. However as Keynes warned us very persuasively in The General Theory of Employment, Interest and Money (1936), this belief is flawed and we need government intervention so as to eliminate labour unemployment. Clearly, the pursuit of individual gains has not brought social gains. Mainstream economics accommodates this big flaw in marginalist economics under the label of externalities. Unintended consequences of economic actions may be positive or negative for the society. In the determination of output and employment, Keynes pointed out that the tendency towards full employment (a more modest claim than public interest or social welfare) is a fluke in liberal capitalism. To put it differently, unemployment of labour is the expected consequence in liberal capitalism.Both theoretically and empirically, all evidence points to one inescapable fact: liberal capitalism does not result in the full employment of labour. Another charge by Keynes against this view is that it commits the fallacy of composition: what is good for an individual may not be good for the society. For example, while saving is good for an individual, if all individuals in a society save, who will consume the output?

Amitav Ghosh in The Great Derangement: Climate Change and the Unthinkable (2016), his recent* work of non-fiction, forcefully argues that the paralysis of climate change politics lies in our idea of individual freedom; our ‘calculus of liberty’ has no place for nature and natural systems. How then can our idea of freedom – a product of Enlightenment thinking – and its close relative, democracy, ever effectively address our environmental issues? A solution to our environmental problems warrants collective and concerted action. This is consistently absent in current politics, which has been reduced to individual morals and choices. Indeed, the onus of resisting environmental degradation has been passed on to the individual by appealing to her morals. As Ghosh puts it in his The Great Derangement, ‘This then is the paradox and the price of conceiving of fiction and politics in terms of individual moral adventures: it negates possibility itself.’ Both fiction and politics, at their core, are, or rather, ought to be about possibilities –possibilities for the individual as well as the society as a whole.

The idea that free pursuit of individual interest yields a socially beneficial outcome is a flawed piece of political and economic imagination. Unfortunately, this principle does not function in today’s capitalist societies and the belief that it does is a dangerous one to safeguard. The idea that free individual choices yield socially beneficial outcomes must therefore be challenged in all possible spaces committed to documenting and exploring socioeconomic possibilities, particularly in humanities, journalism, literature, and the social sciences.

*I thank Vivek Nenmini for pointing out an error. Earlier, I had written that The Great Derangement is Ghosh’s first work of non-fiction.

Bernard Mandeville and his Unorthodox Economics

mandevilleI first came across Bernard Mandeville (1670-1733) while reading Keynes’s General Theory as a student at the University of Hyderabad. Mandeville’s Fable of the Bess: or, Private Vices, Publick Benefits was published in two parts in different times. This work has its origins in an earlier work of his: The Crumbling Hive: or Knaves Turn’s Honest (1705). I recently read the Fable of the Bees edition published by Oxford University Press in 1924 with a commentary by F. B Kaye; interestingly, this work is an expanded version of Kaye’s PhD dissertation submitted at Yale University in 1917. On looking up the Yale University Library Catalogue, I found out his complete name and the years he lived – Frederick Benjamin Kaye (1892-1930).

Mandeville was born into a family of city governors, physicians, scholars, and naval officers. He studied medicine and philosophy. The other notable ‘physician-economists’, as Peter Groenewegen, the emeritus historian of economic thought at University of Sydney, labels them, are William Petty and François Quesnay (for a short account of the ‘natural’ origins of economics, read this). Mandeville also published a book entitled A Treatise of the Hypochondriack and Hysterick Passions (1711). Kaye informs us that his books sold very well.

The Root of evil Avarice,

That damn’d ill-natur’d baneful Vice,

Was Slave to Prodigality,

That Noble Sin; whilst Luxury.

Employ’d a Million of the Poor,

And odious Pride a Million more

Envy it self, and Vanity

Were Ministers of Industry;

Their darling Folly, Fickleness

In Diet, Furniture, and Dress,

That strange, ridic’lous Vice, was made

The very Wheel, that turn’d the Trade.

(p. 25; or see the online source)

In the above passage, Mandeville is arguing that prodigality, considered a virtue, is actually a public vice and luxury, considered a vice, is a public virtue. The importance of consumption in the growth of the economy is also to be found in Sismondi, Malthus, Marx, and Keynes. As Kaye puts it, this is Mandeville’s thesis: “vice is the foundation of national prosperity and happiness” (p. xlvii). In other words, public benefits are a consequence of private vices – ‘pride’ and ‘luxury’.

According to Mandeville, all actions were influenced in part by selfishness. If all people behaved selflessly, Mandeville argued that trade and crafts would be abandoned.

As Pride and Luxury decrease,

So by degrees they leave the Seas.

Not Merchants now, but Companies

Remove whole Manufactories.

All Arts and Crafts neglected lie;

Content, the Bane of Industry.

(p. 34; or see the online source)

How can vice become a virtue? This is the paradox, much like Keynes’s paradox of thrift where increase in saving, while good for the individual, is bad for the economy as a whole.

THUS every Part was full of Vice,

Yet the whole Mass a Paradise;

(p. 24; or see the online source)

Mandeville thus argues that private vices have public benefits. What is ‘good’ or ‘virtuous’ for an individual need not be beneficial to the public or society. In the General Theory, Keynes approvingly cites Mandeville’s The Fable of the Bees before articulating his fundamental point: “capital is not a self-subsistent entity existing apart from consumption” (p. 106). And, again on p. 371, he places Mandeville among “the brave army of heretics” alongside Malthus, Gesell and Hobson (see Keynes’s short commentary on Mandeville on pp. 359-362 in ch. 23).

It must be noted that Mandeville favoured virtuous vice and not vicious vice (such as crime and theft). Moreover, his thesis is not that all private vices have public benefits. The Fable of The Bees, Kayes cautions us, ought not to be taken literally. As Kaye elaborates, “it is not ascetic virtues, such as hoarding frugality, which make a nation prosperous” (p. lxviii).

Let me now summarise Mandeville’s position on luxury spending. First, he disagreed with the extant view that frugality is a virtue. Second, he disagreed with the dominant view that luxury is bad for the economy. We must also remember the context in which he is writing – luxury was condemned by Christianity. Indeed, Mandeville was challenging the extant religious and economic orthodoxy with his arguments favouring luxury.

Mandeville argued for freer trade both domestically and internationally (pp. xcviii ff.). His argument was anticipated by mercantilists such as Charles D’Avenant, Dudley North, and Josiah Child. According to Kaye, it is in Mandeville’s work that “individualism became an economic philosophy” (p. ciii). In fact, F. A. Hayek labels Mandeville “an advocate of laissez-faire as Adam Smith” (p. 135) in his 1966 lecture at the British Academy (published in 1967; this lecture is publicly available). And, as is to be expected, he thinks that Keynes’s enthusiastic approval of Mandeville is unfounded (p. 133). Moreover, Hayek finds Mandeville’s “understanding of human nature” noteworthy but not his economics – of division of labour and luxury consumption (pp. 125-6). Karl Marx notes that Smith’s ideas on division of labour were strongly influenced by Mandeville’s work but that there is no mention of Mandeville in the Wealth of Nations. However, Smith discusses Mandeville’s views on vice and virtue in his Theory of Moral Sentiments.

Perhaps, it is befitting to conclude this essay by summarising Marx’s views regarding Mandeville. After all, Marx is one of the greatest unorthodox economist whose political economy is of enduring value.

Originally, Political Economy was studied by philosophers like Hobbes, Locke, Hume; by businessmen and statesmen, like Thomas More, Temple, Sully, De Witt, North, Law, Vanderlint, Cantillon, Franklin; and especially, and with the greatest success, by medical men like Petty, Barbon, Mandeville, Quesnay.

(Capital, vol. 1, Ch. 25: The General Law of Capitalist Accumulation)

Marx describes Mandeville as “an honest, clear-headed man” in volume 1 of Capital and writes in part 1 of Theories of Surplus-Value that “Only Mandeville was of course infinitely bolder and more honest than the philistine apologists of bourgeois society.”