Indigenous Capital in Kenya 951-45-7299-8

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INDIGENOUS CAPITAL IN KENYA the 'Indian' dimension of debate

Michael Cowen Scott MacWilliam

INTERKONT BOOKS 8 Institute of Development Studies University of Helsinki 1996

After a decade in abeyance, debate about Kenya has returned to the forefront of one of the hotly disputed issues of contemporary African and development studies. The Kenya debate of the 1970s was about the significance of indigenous African capitalists and capitalism in Kenya. Now, the debate has been reignited by the claim that there are no African capitalists in Kenya and that the real indigenous bourgeoisie of Kenya is Asian. Michael Cowen and Scott MacWilliam refute the argument that indigenous African capital is of little consequence in, and for, the development of capitalism in Kenya. In returning to the question of whether the development of indigenous capitalism is possible in Kenya, the authors set the debate more widely. They trace one origin of twentieth century dispute about the authentic status of an indigenous bourgeoisie back to India of the 1920s. Communist party debate about capitalism and imperialism in India raised questions which have reappeared in the Kenya debate. A case study of the history of Afrikaner capital in South Africa is also used to show how aspirant capitalists organised to find the means of competing with established big business. Nation, race and ethnicity, the authors argue, do not explain business attitudes and attributes but are sources of identity for particular layers of capital to secure means of accumulation. Kenya, of the Moi regime at the end of the century, is no exception to the general logic and history of indigenous capitalism.

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CONTENTS Preface ..................................................

1. Return to the Kenya debate ............................ Development Doctrine ................................. National and indigenous bourgeoisie ....................

2. Comintern, India and after: Roy, Poulantzas and the indigenous bourgeoisie ............................... Lenin and Roy ................ ........................ The Decolonisation thesis .............................. Economic history of Indian industrial capitalism ........ Comintern debate reiterated: Poulantzas ................. Lacunae of debate .....................................

3. "National' and internal capital: South Africa and the Poulantzians ..........................................

5

9 15 18 23 24 29 37 65 74

Afrikaner capital ...................................... African business .............. ........................ The layering of capital .................................

81 86 94 99

4. Kenya Asian capital and the Kenya Debate .............

103 108 120

5. African capital in Kenya ...............................

138 139 142 156 164 175 190

6. Conclusion ............................................

210

Overview of Kenya Asian politics ....................... Kenya Asian capital and the state .......................

Overview of the 'national' of the African bourgeoisie ..... Genesis of the African layer of capital ................... State, patrimonalism and capital ........................ Change in regime and the new layer of capital .......... The banking phenomenon .............................. Accumulation under the Moi regime ....................

Bibliography ............................................

Index ...................................................

223 237

PREFACE

This short book is not intended to be a history of capitalism in Kenya. It is merely a contribution towards what has become known as the Kenya debate about the logical status and historical experience of indigenous capital in Kenya. Our immediate motive for returning to the Kenya debate stemmed from David Himbara's Kenyan Capitalists, the State and Development. Himbara made the startling claim, in 1994, that there are no Kenyan African capitalists in Kenya. By default, according to Himbara, the only significant class of capital, and authentic bourgeoisie, is that of Kenya Asian capital. While we are critical of this latest attempt to traduce the significance of the development of indigenous African capital, we are grateful to David Himbara for removing the racial screen which has hidden the Asian experience in Kenya from the view of history. In view of Himbara' s rediscovery of the significance of Kenya Asian capital for the development of capitalism in Kenya, we have taken a wider view of the debate by moving back towards India itself. It was here, during the 1920s, that the concepts of the 'national' and 'indigenous' bourgeoisie were developed on grounds of political strategy for the official communist movement. These concepts, which reappeared in the Kenya debate, were used to address the economic potential of indigenous capital in India. It is particularly striking, seventy years after the first Comintem debates, that Himbara has replicated the official Comintem line which condemned the theses of M.N. Roy, the then Indian heterodox marxist. Roy pleaded the case for understanding the new position of Indian business in manufacturing industry. Comintem, on the other hand, deemed that indigenous capital in India would suffer the doomed fate which Himbara has ascribed to the history of indigenous African accumulation in Kenya.

PREFACE / 6

From India and Cornintern, our argument is developed through an examination of the condition of Afrikaner capital in South Africa. During the 1970s as the Kenya debate commenced, another form of indigenous capital came into view within the same conceptual rubric which had set the frame of reference for the Comintern debates over the status of indigenous and ,..national' capital in India. Afrikaner capital had advanced, especially from the 1930s, through effective organisation for both accumulation and the forms of political representation which culminated in 1948 with the earlier "new' South Africa. The case whereby an indigenous, albeit white, bourgeoisie was formed in Africa, and in relation to dominant anglophone capital, seemed to offer a possible template for the evaluation of the genesis of African layers of capital in Kenya. Like Indian big business, which developed large-scale industry at the turn of the century,.. Afrikaner business had found a major place in South African commerce and industry by moving out of its earlier confinement to agriculture and small enterprise. This was what African business in Kenya hoped, and was expected, to do during the second half of the century. However, the relative unimportance of African business in large-scale manufacturing industry should not be equated with the absence of African capitalists in Kenya. As Rajnarayan Chandavarkar has pointed out recently, in his much acclaimed Origins of Industrial Capitalism in India, the ,.. emphasis which contemporaries and later historians often placed on the reluctance of investors to bear risks and pioneer industrialization was_ to confuse the causes of the problem with 1 its symptoms'. As we will show, the 'problem' of Indian business in India before the second world war was especially germane to the more recent problem, if it be that, of African business in Kenya. After 1989, following the demise of official communism and apartheid, it may seem perverse to return to the Comintern debates, and the related Africa. Readers questions of indigenous capital of India and white South i who recoil from the perverse of history or simply fnd 'all that ' only so

1

Chandavarkar, Origins of Industrial Capitalism (1994), p. 70.

PREFACE / 7

much old hat may therefore wish to skip chapters 2 and 3. We can merely iterate that the historical differences between the interplay of race and capital in India and South Africa only confirms what was common about the twentieth-century intent of aspirant capitalists to find their place in the world of capitalism. The differences have no little bearing on the meaning of the contemporary course of capitalist development for the Kenya case. The South African case, in particular, has helped us appreciate what is so faulty about the concept of 'fractions' of capital. We have taken this opportunity to provisionally propose a different conception of the historical layering of capital. The basic idea is set out at the end of chapter 3 and followed through during the course of the account of layers of capital in Kenya. During the course of writing the last draft of the text, we became aware of Colin Leys' return to the Kenya debate. Many of the issues which have been raised here are also to be coincidentally found in his Rise and Fall of Development Theory and offer one more pertinent reason for a further contribution to the renewed debate. 2 This book first appeared as a paper delivered to the Development Studies Research Unit in the School of Social Sciences and Asian Languages at Curtin University, Perth. It was later revised for the September 1995 Sydney conference of the African Studies Association of Australasia and the Pacific. During this period Michael Cowen was a visiting fellow to the School where Scott MacWilliam is employed. The book was completed while Cowen was on leave from London Guildhall University at the Institute of Development Studies of the University of Helsinki. We are grateful to colleagues in Perth and Helsinki for creating the welcoming and congenial environment necessary to produce this kind of work and for taking part in seminars devoted to the substance of our argument. Juhani Koponen read an earlier draft of the text. Thanks are 2 Leys, Rise and Fall of Development Theory (1996). See, in particular, the essays: 'Learning from the Kenya Debate' and 'African Capitalists and D velopment' (also as the introduction to Berman and Leys, African Capitalists (1994).

PREFACE / 8

due to Anu Rakkola and Riika Saar and, at Hakapaino, Jouni Torppa and Maija Raisanen for gelting the text into print. Kirsi Tossavainen assisted with the index. We are especially indebted to John McGuire who introduced us to much of the Indian literature and produced an extensive commentary on what has become chapter 2. Without his generous help, it is unlikely that we would have been able to provide the proper 'Indian' dimension to the Kenya debate.

1

RETURN TO THE KENYA DEBATE

Academic debates, Gavin Kitching remarked a decade ago, generally 'tend to end in a whimper rather than a bang'. He then went on to argue that 'the Kenya debate is already marked by that mutual weariness and exasperation which usually precedes a general withdrawal from the 1 fray'. The debate, which seemed to have ended by the early 1980s, was summarised by Martin Godfrey. His survey began with the question: Is Kenya to be characterised as a successful capitalist economy, with an emerging and increasingly vigorous national bourgeoisie, or as a classic case of dependent peripheral capitalism, with all that implies in terms of 2 a distorted development process and limited industrialization prospects?

Kitching suggested that the debate had dribbled away in exasperation and boredom because there had been a shift 'from disputation about facts and data, to a much more open-ended and inconclusive discussion of the relative significance and importance of different facts'. That the debate had become indeterminate, 'a dialogue of the deaf', derived in tum from the lack of explicit focus on the political. Unless the 'political and its implications' were made explicit, no set of criteria could be established 3 to provide the requisite significance of the 'facts' which were in dispute.

1 2 3

Kitching, Kenya Debate (1985), pp. 115,116. Godfrey, African Capitalism or Simple Dependency? (1982), p. 265. Kitching, Kenya Debate, pp. 116,117.

KENYA

DEBATE / 10

While the debate may well have dribbled away more than a decade ago, it has now reappeared with a bang rather than a whimper. David Himbara, in his recently published doctoral dissertation Kenyan Capitalists, the State, and Development4, set out to provide 'a test of the two arguments' of the Kenya debate. The test served as a positivist means of assessing the significance of the facts established during the prior course of the Kenya debate. Himbara's thesis has become significant for generating the proposition that the 'vigorous' bourgeoisie in Kenya is of Asiari rather than of African origin. A less noticed return to the Kenya debate has come through an argument within the pages of African Affairs, where Penelope Hetherington attempted to politically explicate the earlier debate. Hetherington subsequently faced the wrath of David Anderson's historiographical intervention. 5 Anderson argued that the simple propositions of the debate had been superceeded by facts of ethnicity and other sources of difference which fall under the ambit of social history. Kenyan historians, Anderson claimed, had earlier done much 'to advance the study of themes of ethnicity, authority, social differentiation and ecology that are now so dominant in the social history literature'. 6 Such social difference and the 'diversity of approach' in method, Anderson implored, could not be captured by the ideological positions of orthodox marxism and underdevelopment theory, the positions which established the original terms of debate. Furthermore, Anderson implied that the earlier debate, addressing the condition Hetherington called the 'crisis of capitalism' in Kenya, has been 'lost' because it lacked political pertinence due to a focus upon Kenya from a Kenya-centric vantagepoint. Thus, the 'new social history discourse' of the late 1980s, and Anderson expressly pointed to the historical work of John Lonsdale, has made contemporary debate significant in so far as it 'now stresses the historical and contemporary 4 Himbara, Kenyan Capitalists, State and Development (1994a); also see Himbara, Role of Indigenous Entrepreneurs and the State (1992); Myths and realities of Kenyan capitalism (1993); Domestic capitalists and the state in Kenya (1994c); Failed Africanization of commerce and industry (1994b). Hetherington, Crisis of capitalism (1993); Anderson, Comment (1993). 5 6 Anderson, Comment, p. 287.

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11

importance of Kenya's crisis of political accountability'. 7 Whatever may be said about the significance of historical discourse for the crisis of accountability of the Moi regime, Hetherington's own stress upon the crisis of capitalism cannot be so readily refuted by an appeal to the postmodem inclination of the 'new' social history. It is not just that the particular, contemporary crisis of accountability is enveloped by the crises of capitalist development in Kenya. Capitalism in Kenya has developed through forms of political representation which make race and ethnicity the sources of access to state power. These forms determine, through state authority, the means by which primary accumulation may proceed. Racial and ethnic exclusion may not determine the capacities for capital accumulation but inclusion determines the sources by which wealth is garnered to make accumulation possible. This is the general significance of the Kenya case. It is therefore to be expected that questions of national, ethnic and racial authority, so generally prevalent during the 1980s and 1990s, should enter the Kenya arena. It is a]so unsurprising that such questions would be highlighted either to contest both sides of the debate, thereby confirming its end in historiography, or, as Himbara has inclined, to make each position become part of each other and thereby shift the debate onto different ideological terrain. In either case, we contend, the result is the same. There has been a return to the Kenya debate because of the complaint that the factors of difference, namely of nation, race and tribe, were absent from the original terms of the debate. That debate, it is claimed, was limited to the elements of state and class. The question now is whether the renewed emphasis on the factors of difference is capable of attesting to the original question about the development of capitalism in Kenya. The original question, and principle of the debate, stemmed from the belief that since capital in Kenya was not rooted in any indigenous trajectory of accumulation it had no potential for either the authentic development of capitalism in Kenya or 'the development of Kenya'. The

7

ibid., p. 289.

KENYA

DEBATE / 12

belief prevailed in the 1960s and 1970s and predated Colin Leys' 1975 Underdevelopment in Kenya. 8 Without having indigenous roots, the post-colonial ruling class merely pretended that it was of capital. Adherents of underdevelopment theory supposed that to make true or real development possible, by ushering an era of socialism into Kenya, it was only necessary that the pretence of capital in Kenya be exposed. Socialism meant the state-national programme of development for cases of underdevelopment deemed to have undergone the transformation away from any pretence to capitalism. Cases varied from revolution in Cuba to declaration in Tanzania. The official declaration of socialism in Tanzania, especially, was used as the template for the antithesis of false or corrupt capitalist development in contiguous Kenya. When Leys made his renowned shift of position in 1978, by moving from the underdevelopment to the marxist side of the debate, he made it clear that it was 'very difficult to believe' that the socialist -'alternative holds out the possibility of more rapid expansion of production at lower 9 social cost than the historical path so far actually pursued in Kenya'. Godfrey, in reply, reaffirmed the original question by reviewing the pattern of evidence for, and prospects of, accumulation in agriculture, tourism and manufacturing. He suggested that: the existing pattern is no longer likely to expand productive forces particularly fast - so that an alternative pattern would not have to be particularly dynamic to be preferable on growth grounds alone. As for costs in terms of the current living standards of the masses, data are poor but they suggest that these costs have not been negligible.

Godfrey concluded: Everything rests, then, on the nature of the 'historically possible alternative'. In view of its importance, this question has been amazingly

8 Leys, Underdevelopment in Kenya (1975). 9 Leys, What does dependency explain? (1980), p. 112 (quoted by Godfrey, Kenya p. 289); also see Leys, Capital accumulation, class formation and dependency (1978); Accumulation, class formation and dependency (1982).

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13

little explored. The most we have attempted in this respect is to mark out the limits of the 'nyayo' populism of the current regime of President Moi. This is a start, but it leaves a lot of political questions unanswered. 10

Godfrey's overview of the debate speculated that the 'alternative pattern' for Kenya might be a 'Kenyan populist nationalism' along the line of the first steps the Moi presidency took when declaring official nyayo (literally footsteps) policy after the 1978 succession to the Kenyatta regime. Populism also was the peg upon which Kitching hung his general survey of underdevelopment. In the survey, and by implication, he used the case of Tanzania as a counterpoise to his previous analysis of. the historical development of an officially unfettered capitalism in 11 Kenya. An economic programme of populist nationalism, Godfrey had speculated, 'would presumably involve some form of "redistribution with growth", widening the internal mass market (and therefore restoring dynamism) by investment and other policies which benefit those at the bottom of the income scale rather than (and perhaps at the expense of) those at the top'. 12 In other words, Godfrey hoped that the Moi regime might implement the reforms proposed in the well-known 1972 !LO report and by successive sources of opposition, both domestic and international. By way of comparison, Godfrey outlined the policies which the Moi regime instead had enunciated. These included minimal attempts at land reform, as well as the possibility of a land tax, the abolition of fees and dues for schooling, directives to accelerate 'Kenyanisation' of personnel while increasing wage employment as a condition for money-wage restraint, and 'a drive against corruption, smuggling, inefficiency and drunkenness, purging the police, military and diplomatic services and drastically reducing the numbers of beer halls'. 13 10 Godfrey, Kenya, p. 288. 11 Kitching, Development and Underdevelopment in Historical Perspective (1982); Kitching, Class and Economic Change in Kenya (1980). 12 Godfrey, Kenya, p. 287. 13 ibid., p. 287; also see Haugerud, The Culture of Pol'itics in Kenya (1995), eh. 3 and Ogot, Politics of Populism (1995).

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14

We now generally know, well over a decade later, that there was no momentum behind reform. Indeed, as is indicated below, the thrust of policy since the early 1980s has not only been reversed but all Moi might have intended to counter has been grossly amplified during the course of the regime. Yet, Godfrey was not amiss when he declared that: 'All in all, the new regime seems quite distinct from the old in its explicitly 14 populist appeal'. The problem is that 'the appeal to populism' as the critical conceptual alternative to the direction followed by the Kenyatta regime is misplaced because of its intrinsic ambiguity. The first source of ambiguity forms much of the substance of our account of the layering of capital in Kenya. The 'populist appeal' follows from the intention to dislodge a specific association between economic and political power which was concentrated in the state form of the Kenyatta regime. In as much as Moi made the appeal to the poor as part of the political condition by which the Kikuyu bourgeoisie was to be isolated from its tribal constituency, the same condition was to enable state power to be deployed to extend the economic basis of indigenous capitalism beyond its apparent confines in the Central Province. In particular, the ethnic affiliations of Moi's constituency, whether 'the' Kalenjin or Masai or any other ethnic bloc, with state power were to become so dominant that the period of the Moi regime appears as an attempt to replicate the same association between economic and political power which had earlier founded the impression of identity between an indigenous and the Kikuyu bourgeoisie. According to this interpretation, therefore, 'populist nationalism' was the means by which indigenous capitalism was widened beyond the confines of one ethnic bloc of people. Secondly, the appeal to populism is framed as if it is a singular appeal to the poor. For instance, Godfrey wrote that 'its appeal is certainly to the poor - the least progressive smallholder, the landless, the pastoralist, 15 the slumdweller, the unemployed - '. We neither doubt that Moi intended to appeal to the poor nor object to whom Godfrey has cast as 14 15

Godfrey, Kenya, p. 288. ibid., p. 288.

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'the poor'. It remains a moot point whether the populism, an ideology being of either the defence of small-scale property and/ or of the people against the state, was of the people. 16 Rather, we doubt whether populism is the only frame of reference which captures the appeal to the poor. Given that populist nationalism is a variant of the state socialism which was labelled as the alternative to the development of capitalism in Kenya, we should be aware of one far more powerful tradition which lies behind the longstanding call for reform in Kenya. DEVELOPMENT DOCTRINE

It is the official problem of poverty as much as the political appeal to the poor which, as much in modern European as African history, has had a common frame of reference. We refer to the radical tradition of positivism. In the face of mass poverty and unemployment, positivist doctrine came to be framed as the means to secure social order during the course of capitalist development. During the nineteenth-century, and especially after it had been inflected in socialist doctrine in Europe and elsewhere during the nineteenth century, positivism was the belief that the problem of poverty could be resolved through the agency of state intervention for the purpose of establishing a moralised capitalism. Social order, which came to be identified with national identity, was the major criterion for the moral purpose of positivism. Socialist positivism was directed towards fully-blown programmes for socialisation of the economy, including nationalisation of the means of production, only after there was disillusion with the capacities of capitalists to make decisions in accord with what was deemed to be moral purpose. It follows that if nationalisation of the means of production and distribution, including policy to prevent the emergence of indigenous capitalists, was one historically possible culmination of positivism then it is also the case that positivism could be assimilated into other doctrines 16 For other speculation on the Moi regim and the use of 'populism', see Cowen, Change in state power (1986); Traditions of populism (1984).

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of development. As is the case nowadays, the progressive liberal doctrine of a positively-directed capitalism is one such doctrine. 17 Less noticed in the various comments on Himbara, which are still mainly informal and ad hoe, is the positivist belief in state development for a morally effective and successful economy. This belief accompanies his positivist method to establish the overwhelming significance of the Kenyan Indian bourgeoisie. 'The fate of Kenya hangs on the rise', Himbara concluded, of the 'historically important social agency' of 'a national interventionist state that conceives and implements a consistent 18 programme of development' . Himbara' s appeal is to little other than the positive doctrine of development originally associated with positivism. The association between positivism and national development is the reason why Himbara's thesis has captured both local and international attention. Himbara's argument stands in an already frequently explicated positivist tradition. The tradition most recently runs from opposition tendencies in Kenya to the full gamut of policy advice associated with the 1972 ILO report and the radical stream of international agency directed towards finding moral purpose in the development of capitalism in Kenya. Moreover, Himbara' s thesis is a development of the underdevelopment theory which stood on one side of the original Kenya debate. Social agency has always been the problem for proponents of a positive capitalism. The agency of national development is doubly problematic in the case of Kenya. In this case, putative social agents for the trusteeship of development, such as state officials and 'the technocrats', also own private property and seek to extend the basis of property. Set against his critical view of the straddling capacities of agents who couple propensities for private business with jobs in public service, Himbara's hope is that 'presumably a larger pool of Kenyan public technocrats and "detribalised" national visionaries is coming 19 on-strearn'. We do not contest this presumption but the evidence is still 17 18 19

For the foregoing, see Cowen and Sh nton, Doctrines of Development (1996). Himbara, Kenyan Capitalists, p. 163. ibid., p. 31.

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hard to find. Godfrey had speculated that the limits to populist nationalism would be set by 'the petty bourgeoisie - the ambitious smallholder with several acres under crops and/ or some livestock, the small businessman on his way up, the middle-level civil servant or schoolteacher, the small urban landlord'. While Moi's regime 'depends in it retaining the support of the petty bourgeoisie', Godfrey suggested, 'measures which go further and actually challenge the basis of the market system and/ or benefits which the petty bourgeoisie, the new regime's constituency, is able to extract 20 from that system look unlikely.' Exactly the same point was made about the constituency of the Kenyatta regime. Apollo Njonjo had gone as far as to argue that poor smallholders, owning 'patches of land', shared a commonalty of private property with the emerging African bourgeoisie at the onset of the post-colonial period. 21 This claim is redundant for our argument in so far as it is not contentious that the 'petty bourgeo�sie' were committed to the extension of private property. The commonalty of private property served to signal the political assent for the means by which subsistence was partly reproduced by intermediate strata at the same time as capital was reproduced by an indigenous bourgeoisie.

No Kenya African capitalists? More significant for the original argument of the debate, and for our purpose here, is that by the time the debate had ebbed away it was difficult to find an underdevelopmentalist adherent who had not recognised the historical presence of an indigenous African bourgeoisie in Kenya. Two examples can be given. Stephen Langdon, a leading early proponent of the application of dependency theory to Kenya was forced to acknowledge that 'an emerging African bourgeoisie', and the 'dominance of such a class in Kenya, its elements linked together in a powerful and cohesive way (not least by ethnic solidarity) became the most important reality in the ongoing process of the country'. Likewise, 20 21

Godfrey, Kenya, p. 288. Njonjo, Kenyan peasantry (1981).

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18

even Godfrey admitted that the 'number of Kenyan capitalists is increasing and they are continually moving into new sectors of activity'. 22 No longer would it be possible to reduce the indigenous bourgeoisie to that of a petty bourgeoisie. Nor did it seem possible to envisage that little less than a decade later, in 1994, we would be able to find research showing 'that black Kenyan capitalists, who constituted the central focus of much of the existing 23 literature, were almost nonexistent-'. Such is Himbara's thesis. It just goes to show that academic debate moves by way of the maxim of one step forward, two steps backwards. NATIONAL AND

INDIGENOUS

BOURGEOISIE

Himbara's test of capitalist development in Kenya drew, in effect, from the propositions which were contained within Godfrey's summary of the Kenya debate. The former reformulated them by generating two hypotheses, about the elements' of the Kenya capitalist class and state'. Having drawn state and class into the two, Himbara reinterpreted the first proposition, representing the view of 'orthodox Marxism and neoliberalism alike', in terms of the two elements of class and state. The propositions, after Himbara's reformulation can be set out in two parts, (a) and (b): 1

1

Proposition l(a): The 'relative success [of capitalism] in Kenya was due to the presence of competent indigenous entrepreneurs who pioneered and continually transformed Kenya's commerce and industry'.

Proposition l(b): 'Kenyan developmental success was attributable to the existence of an exceptionally strong African bourgeoisie, especially among the Kikuyu' who 'were responsible for the effectiveness of the postcolonial Kenyan state'. 22 23

Langdon, Multinational Corporations (1981), p. 23; Godfrey, Kenya, p. 289. Himbara, Kenyan Capitalists, p. 5.

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Likewise, as if also starting from Godfrey, and deriving from 'dependency theory', Himbara set out the second proposition in two parts: Proposition 2(a): That it was 'the small scale of the African bourgeoisie' which should be stressed in analysis and debate. Proposition 2(b): That the Kenyan state was dependent on 'foreign . I' . 24 capita When set out in this form, it is clear that Himbara accepts l(a) and both 2(a) and 2(b). He thoroughly rejects the claim made by l(b). Given the emphatic rejection of the second part of this first proposition, it also becomes clear that the intent of the thesis, which is not explicated by Himbara, is to search for the means of bringing the concept of a national bourgeoisie into the Kenya debate. Godfrey's first proposition had referred to 'an emerging and increasingly vigorous national bourgeoisie'. The difference between national and indigenous is highly significant and is no mere academic quibble with words. The first source of significance is conceptual. A 'national' qualifier for a bourgeoisie arises from the political determination to find a national source of development. That source is able to confront the external condition and domination of imperial agency over a given process of immanent development. Secondly, the 'national' is significant because it puts emphasis upon the racial and ethnic domain of capitalist development within the territory of the national. The second meaning of 'national' may not exclude the first. The intention may well be to make the ethnic domain become part of the first search, for a national bourgeoisie. However the return to the Kenya debate arises from the endeavour to attach racial and ethnic weight to the economic process of capitalist development within Kenya. For Himbara, it not the 'African' but the 'Kenyan Asian' bourgeoisie

24

ibid., p. 4.

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which makes it possible to confirm proposition l(a). Kenya's relative economic success was due to the capacities of immigrants from the Indian subcontinent who entered into both import-export and internal trade within Kenya at the beginning of the colonial period. Kenyan Indians were the 'competent, indigenous entrepreneurs' who were able, from the 1920s, to begin transforming money-capital garnered from local merchant enterprise into the capital of industrial enterprise for production in the colony and nation. In spite of colonial government assistance for African business from the late 1940s and the much expanded post-colonial state sponsorship of Africans in trade and industry after 1963, Himbara argues that it was the presence of the Kenyan Asian bourgeoisie which made industrial development possible. Kenyan Asian enterprise not only served as the template for accumulation by the later layer of African-owned indigenous enterprise but also made it possible for indigenous capital to compete relatively successfully with the subsidiaries of multinationals in industrial production. Therefore it is the 'Indian factor', as it used to be called, which is the reason for the significance of capitalist development in Kenya. According to Himbara, it is only by way of an unwarranted racial sleight of hand that it is possible to dismiss the Kenyan Asian experience in Kenya and thereby construct, by ignoring this experience, a racially distorted account of indigenous capitalism in Kenya. If Himbara is right about the extent of racial blindness during the course of the Kenya debate then he maybe right, but for the wrong reason. The 1970s debate began with the specific question about whether the incumbent class which directed post-colonial state power was ·a comprador bourgeoisie. Comprador in being 'auxiliary', as Leys had suggested, to international capitat the external agency of old and new imperial state power, especially Britain and the United States, and international agencies of development. While the history of the indigenous bourgeoisie incorporated its own experience of nationalism against colonial power, it could not be supposed, according to the history of the concept, that it constituted a 'national bourgeoisie'. The question of the indigenous bourgeoisie which entered the Kenya debate had to be one which focused upon an African bourgeoisie. At the start of his 1987 essay on The role of a national bourgeoisie in the current phase of capitalist development, Kitching claimed that a history of

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current phase of capitalist development, Kitching claimed that a history of the concept of the 'national bourgeoisie' would be a fruitless 'exercise 25 in sterile and formal taxonomy' . Appropriately enough, and in view of his earlier homily on the significance of the political for the Kenya debate, Kitching also pointed to the third Communist International, the Comintem, as the starting point for the history of the concept of the national bourgeoisie. In rejecting the import of this history, Kitching implied that the Comintern debates, especially between 1920 and 1928, were redundant because the priinary current concern, he suggested, is to ask what the national bourgeoisie 'do' rather than 'who or what the "�ational bourgeoisie" are.' However, even a cursory look at the Comintem record for this period cannot but show that the primary point of debate was as much about what the national bourgeoisie 'do' as to whom they might be. The Comintem debate was about the kind of propositions which were contained within the Godfrey summary, and attendant Himbara reformulation, of the Kenya debate. Moreover, the debate was thoroughly political. 26 Disputation started from, and continued to involve, a strategic conception about whether it was possible for communist parties to make alliances with local classes of capital in purported national struggles against colonial rule and imperialism. Last, but not least given the 'Indian factor' in Kenya, an important focus of debate was on India itself.

25 Kitching, National bourgeoisie (1987), p. 27. 26 The political nature of the Kenya debate ha been r �empha i d recently by Colin Leys, in his Learning from the Kenya debate (1994).

2 COMINTERN, INDIA AND AFTER: ROY, POULANTZAS AND THE INTERNAL BOURGEOISIE

A major focus of Comintem debate during the 1920s was on 'backward, semi-colonial, or colonial societies' a group of countries which both differed from 'the very backward, primitive societies' of sub-Saharan Africa and elsewhere and 'societies of medium capitalist development'. 1 If this is the taxonomy which is now deemed to be both fruitless and offensive, then at the time there was much dispute when it came to locating a particular country within the classificatory scheme to determine which political strategy might be adopted towards the 'colonial bourgeoisie' in question. Was India, for instance, to be regarded as a moderately 'backward society' or one of 'medium' capitalist development? This was the kind of question emphasised at the 1920 second congress of Comintern and which came to a heated climax in 1928 during the well-known sixth congress. In 1920, Lenin presented theses on the 'national and colonial question' and faced the critically-argued counter theses offered by the relatively young Indian marxist, M.N. Roy. The disputed issue continued to be debat d and still informs debate about the history of capitalist developm nt in India. J

1

See, for instance, McKenzie, Comintern (1964), pp. 70-1.

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Lenin's theses in 1920 stemmed from the argument which he made, for instance, in his 1914 Right of Nations to Self-Determination. The premises of the 1920 theses were that a categorical distinction had to be made between oppressed and oppressing conntries and that it was the right of the oppressed conntry to be nationally independent of colonial and/or imperial rule. However, 'a clear distinction' also had to be made between 'the interests of oppressed classes, of working and exploited people, and the general concept of national interest as a whole which implies the 2 interests of the ruling class'. Since it was the bourgeoisie of the oppressed nation 'which naturally assumes the leadership, at the start of every national movement', Lenin argued that nationalist movements 3 in colonies were bound to have 'a bourgeois character'. Yet, the political force of 'bourgeois nationalism' was fonnded upon a phenomenon which extended far beyond the immediate economic interest of indigenous traders and manufacturers who found that their capacities for profit-making and capital accumulation were throttled by the dominant presence of colonial agency. The phenomenon was the preponderance of the peasantry in colonial and semi-colonial countries, the very factor which was used, in the taxonomy, to differentiate such countries from the group containing those of medium capitalist development. When referring to China in 1912, and following the bourgeois revolution in the name of Sun Yat-sen, Lenin claimed: 'The chief representative, or the chief social bulwark, of this Asian bourgeoisie that is still capable of supporting a historically progressive cause, is the 4 peasant' . And when, as at the 1920 Comintern congress, Lenin put emphasis upon peasants 'as a group characteristic of bourgeois-capitalist Lenin, National and colonial questions (1966), p. 144. (quoted in Gupta, Comintem, India (1980), p. 17 and Chandra, Nationalism and Colonialism (1979), p. 306; also, Degras The Communist International. Volume 1 (1956), p. 140). 3 Lenin, Right of nations (1964), p. 409 (quoted in Gupta, Comintern, India, p. 8); Degras, Communist International. Volume 1, p. 139). Lenin, Democracy and narodism (1968), p. 165 (quoted in Gupta, Comintern, India, 4 p. 10). 2

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relations' , he meant that in so far as the historic m1ss1on of the bourgeoisie was to free land and trade from feudal and mercantile relations of production and distribution, the class of capital gave vent to the struggle of peasants in their endeavour to fight for the redistribution of landed estates. Since it was a presumption that feudal as well as mercantile-type production and trade relations were buttressed by the rule and political direction of imperial agency, the struggle against unfree land and trade would also be directed against colonial rule. Full political independence and agrarian reform lay at the heart of bourgeois democracy, the stage of revolutionary action which logically preceded that of socialist revolution. The achievement of this democratic form provided the requisite strategy for the cases of medium and advanced capitalist development in the course of historical progress. Indeed, bourgeois democracy was regarded by Comintem as the requisite political strategy for communists to pursue in colonial and semi-colonial countries. It was on the basis of bourgeois democracy that an alliance with the indigenous bourgeoisie might be struck to further the development of a proletariat. In turn, by virtue of their preponderant number as well as organised industrial and political strength, the proletariat would provide conditions for socialist revolution. Bourgeois democracy involved the cancellation of external public debts, the regulation of labour working conditions and the state provision of social insurance. However such democracy did not necessarily entail, as Kermit Mckenzie has pointed out for the Comintern programme endorsed by the 1920 congress, the nationalisation of commercial and industrial 6 enterprises owned by the indigenous bourgeoisie. Lenin's theses on the national and colonial question were also the 7 premise for his 'new economic policy' in the Soviet Union. It is not surprising, therefore, to find the ideal of a national bourgeoisie directed 1

5 Degras, Communist International, Volume 1, p. 139 (also quoted from a different source in Gupta, Comintern, India, p. 33). Mckenzie, Comintern, p. 257. 6 7 McKenzie (Comintern, p. 44) makes play of this parall 1 1 as he do s for the turn to the 'left' in 1928 when Stalin embarked on the first fiv -year plan. However, Gupta (Comintern, India) objects to finding this kind of coincidence.

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at a class which was to be employed by the communist party as the means to develop productive force. By acknowledging that capacity for directing industrial production at the level of the enterprise resided in the minds of entrepreneurs, it was hoped entrepreneurial capacity could be socialised by being exercised according to the aim of national development rather than the hitherto regarded sectional interest of private accumulation. Where a bourgeoisie stood for its own 'bourgeois nationalism' and its own 'national exclusiveness', Lenin had earlier insisted, then 'we stand against' it. But, in so far as 'the bourgeoisie of the oppressed nation fights the oppressor, we are always, in every case, and more strongly than anyone else, in favour, for we are the staunchest 8 and the most consistent enemies of oppression'. In any case, Lenin indicated that the commitment to agrarian reform in preponderantly peasant countries should be the benchmark for adjudicating the possibility for alliance with the indigenous bourgeoisie. Notwithstanding the historical fact that the bourgeoisie founded the leadership of national movements, worldwide revolutionary convulsions after the first world war, and especially those in Asia, made it clear that the bourgeoisie was no longer the ,.motive force' of bourgeois democratic revolution. Instead of alliance with the bourgeoisie, Lenin told his critics, 9 'I lay greater stress on the alliance with the peasantry'. Bourgeois democracy, therefore, was the strategic arena in which the communist party, in the name of the fledgling proletariat, struggled against the bourgeoisie for hegemony over the peasantry. Roy's fundamental objection to Lenin's theses was that the doctrine of bourgeois democracy did not fit India. Rather, if Comintern doctrine of the 1920s is taken into account, India could and should be regarded as a case of medium capitalist development. However much the peasantry formed the majority of the population in India, for Roy industrial development had accelerated to such an extent during the first Lenin, National determination, pp. 411-12 (quoted in Gupta, Comintern, India, p. 9). 8 Quoted from a Russian language source by Gupta, Comintern, India, p. 19. It should 9 be pointed out that, for the case of India and despite his bias against Roy's theses, Gupta's detailed account of the Comintem debates is invaluable.

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world war that the proletariat was developed enough to fulfil the conditions for socialist revolution. Despite its formal status as a British colony, bourgeois democracy was redundant as a revolutionary strategy for India. During the course of the supplementary theses which he had submitted to the Colonial Commission, and which fed into the 1920 congress, Roy argued, contra Lenin, that there was no common basis for com.munists and the indigenous bourgeoisie to establish the strategic arena in which both could contend for hegemony over the peasantry 10 and command over the national struggle for independence. When independence was about to come to India in 1947, and when Roy was about to forgo marxism by turning towards a philosophy of radical 11 humanism , he stuck fast to his original thesis. National government, for India, was government by, of and for the 'nationalist' bourgeoisie who, as he had predicted back in 1920, had long betrayed any commitment to the cause of bourgeois democracy and whose political purpose was to find the basis of 'compromise' with imperialism. 12 'The masses of India', Roy wrote in 1920, 'are not imbued with the national spirit. They are interested solely in questions of [a] social and economic nature'. Further, 'a revolutionary movement in India in so far as the wide masses are concerned has nothing in common with the national 13 liberation movement'. After repeating his claim that India was a colony 'with a fairly strong indigenous bourgeoisie', Roy fleshed out his theses at the fourth Comintern congress in 1922 where he is reported to have said: Bourgeois-nationalist movements in the colonies were objectively revolutionary, but if they were directed only against the foreign bourgeoisie

10 Gupta, Comintern, India, pp. 22-4,35; also see Haithcox, Communism and Nationalism (1971), pp. 11-15; and more generally for the Lenin-Roy debate, D'Encaus e and Schram, Marxism and Asia (1969), pp. 150-1,159-67,190-2. 11 For one account of Roy's political odyssey, see Dalton, Roy and radical humanism (1970). 12 For instance, see Roy, National Government, (1946)(1944]. 13 Quoted in translation from a Russian l nguage our e by Gupta, Comintern, India, p. 23; also, Chandra, Nationalism and Colonialism, p. 316.

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and not against native feudalism they represented not a class struggle, but 14 capitalist competition.

The 'new bourgeoisie', Roy explained more precisely in his own words, leads the struggle of a weak, undeveloped and suppressed bourgeoisie against a strong and developed bourgeoisie. Instead of being a class struggle, it is an internecine struggle, so to say, and as such contains the . 15 e I ements of compromise.

Roy's thesis was that in so far as the indigenous or new or colonial bourgeoisie attempted to create a new form of property in struggle against feudal property relations, then it was "the vanguard of the revolution'. But when political opposition of the bourgeoisie, in the name of national liberation, was directed against the capitals of European-owned enterprises in India, then the struggle was over shares of the surplus value which accrued to capital as a whole. Political struggle within the confines of national liberation, and when directed by the premise of 'bourgeois nationalism', was enveloped within a racial dimension. But the conditions for such struggle through the Indian National Congress, had been created by the 'real 16 phenomenon' of industrial development in India. Moreover, Roy argued, from the early twentieth-century there had been a British imperial intent to industrialise India. This intent led to the further consequence, whether intended or not, of industrialisation 'which will 17 provide the Indian bourgeoisie the coveted place in the sun' . The consequence of intended industrialisation led Roy to expand his renowned decolonisation thesis which was formally proposed in 1924 at the fifth Comintern congress, held after Lenin's death.

14 Summary in Degras, Communist International. Volume 1, p. 382. 15 Reported in Protokoll des vierten Kongresses der Kommunistischen Internationale [minutes of the fourth Comintern congress], C.H. Nachf, Hamburg, 1923, p. 594 (quoted in translation by Gupta, Comintern, India, p. 53). 16 Gupta, Comintern, India, p. 35. 17 Roy, Future of Indian Politics, (1971)(1926], p. 71.

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DECOLONISATION THESIS

The decolonisation of India, Roy proposed, followed logically from British-intended industrial development because the new bourgeoisie in India, with its infant industry enterprises, ranging from steel to glass, would demand fiscal autonomy and administrative reforms for India. Fiscal autonomy would include further measures for industrial protection against international competition, especially from Japan, as w 11 as the redirection of Indian government expenditure towards the infrastructure for industrial production. Administrative reform would include measures to promote and accelerate Indianisation of the public service so that administrative decisions would be deliberately biased towards the interest of Indian-owned enterprises for Indian-directed 18 national industrial development. Only full political independence, Roy predicted, would satisfy the bourgeois demands for fiscal autonomy and administrative reform. This is why decolonisation was the logical result of the British intent to industrialise India. While it did not follow that there was an inevitable historical process through which political independence would be freely and voluntarily bequeathed to India, it was likely, Roy forecast, that a deformed bourgeois democracy would arrive in India by way of a compromise between imperial agency and the momentum of bourgeois nationalism in India. Roy's link between industrial development and decolonisation was predicated upon his supposition that 'Indian capitalism is so much inter-linked with and dependent upon British imperialism, that a serious political conflict leading to a revolutionary situation has become practically impossible'. Indian capital was enveloped within imperialism on the fallowing ground: It was found out that the pre-war policy of forcing the colonies to remain in a state of industrial backwardness could no longer b maintain d. Consequently it was decided that an industrialised India would be of much more value to British imperialism than the agrarian India of the past.

18

ibid., p. 9ff.

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Roy ,continued: The capitalist development of India is thus taking place not in antagonism to British imperialism, but with the sanction and to the interest of British imperialism. This process of industrialisation renders the Indian 19 bourgeoisie a protege of British imperialism.

Such., it should be noted ., is one origin of what came to be known as the comprador bourgeoisie. However, as later happened in the Kenya debate and largely due to the influence of underdevelopment theory in academic dispute, the political and economic status of the indigenous bourgeoisie became inverted in debate. For Roy, it was recognition of the relative economic strength of the indigenous bourgeoisie, through industrial development, which made it 'nationalist'. Political compromise with imperialism was made possible because the Indian capitalist class was relatively well established in industrial production. On the other side of the debate, represented by the Communist Party of the Soviet Union (CPSU) majority on the executive committee of Comintern after 1925, the initial reaction against Roy was to contend whether industrialisation had happened in India and whether, after 1918, there was a British intent to industrialise India. Much was made of data showing the relative paucity of an industrial labour force in India of the early 1920s, of the absence of a developed capital goods industry and of the difference between industrialisation and industrial development. Indeed, Eugen Varga, the Hungarian economist on the Comintem official staff, even argued that industrial development in India led to the importation of machine goods which accelerated the destruction of small-scale production. By pushing unemployed artisans onto the land, early twentieth-century industrial development only abetted and aided the intent to make the economy of India more agrarian than previously. The orthodox Comintern view was that regardless of the present extent of industrial development it was impossible to envisage a colonial case in which imp rial agency had an intent to industrialise an

19

Roy, Who will lead? (1925), pp. 64-5 (quoted in Gupta, Comintern, India, pp. 75-6).

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economy. Political independence, therefore, was the condition for industrialisation. An indigenous or colonial bourgeoisie became 'national' on the ground that it possessed state power to make real industrial development happen. Debate on the issue of the link between industrialisation and decolonisation became heated at the 1928 sixth congress. While he was not present at the congress, Roy submitted a lengthy document, 'On the Indian Question in the Sixth World Congress', after the debates and barely a year before he was expelled from Comintem. Roy replied to the accusation, in the adopted Colonial Theses of the sixth congress, that his thesis was 'the chatter of the imperialists and their lackeys about the policy of decolonisation being carried through by the imperialist powers', about cooperation in "free development of the colonies" and 21 was 'nothing but an imperialist lie'. Thus, the decolonisation thesis loomed large over the debate since it appeared to be supported by some delegates of the Communist Parties of India (CPI) and Great Britain (CPGB). At issue was the question of the possibility of colonial industriali­ sation. Saumyendranath Tagore, for instance, had submitted a 1926 report to Comintem claiming that modern industry in India was 22 developing rapidly. Despite much criticism from within Comintern, including from Bukharin, at the 1928 congress the industrialisation thesis was backed up by CPGB delegates. Andrew Rothstein, to take another example, pointed out that the British 'bourgeoisie' objectively carries out a process of industrialisation, which does not adapt these colonies, to the requirements of the home countries of the imperialists but on the contrary, as we see most classically in the case of Great Britain, transform[s] them into serious competitors in the first place and finally into sources of 23 stagnation, of degeneration, of parasitism, for the metropolitan countries.

20 21 22 23

For detail, see Gupta, Comintern, India, pp. 81-6. Adhikari, 'Introduction', Documents (1982), p. 417. Haithcox, Communism and Nationali m, p. 111. Inprecor 8(72) 17 October 1928, p. 1320 (quot d by upta, Comintern, India, p. 127).

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Robin Page Arnot also argued that the development of 'light' industry, such as t xtiles, would lead to the development of capital-goods industries. Arnot repeated Rothstein's contention by asserting that when 'capitalism' stimulated 'in the colonies the creation of its future rivar, it 24 did so 'involuntarily'. Above all, the majority of the British delegation clung to Rothstein's thesis that it was wrong to describe India, where larg numbers of industrial workers organised strikes, as if it were part of the group of countries consisting of 'rural continents' and 'agrarian 25 hinterlands' for the British empire. Otto Kuusinen, a Finnish Communist Party leader who spoke for Comintern orthodoxy on the colonial question, led the charge against the decolonisation thesis. He refused to budge from the view that colonies 'are always transformed into an agrarian hinterland for the industrial city, an agrarian appendage to the vastly bloated body of the 26 capitalist big industries' in the imperial 'motherlands'. To 'recognise the "decolonization" and industrialisation of the colonies', Kuusinen said, 'would mean giving up Lenin's thesis concerning the nature of colonial exploitation'. Whereas 'there is a certain industrial development going on in the colonies', Kuusinen continued, 'this industrial development does not yet signify industrialisation'. It was imperial intent to confine industries to 'the development of small manufacturing industries engaged in the conversion of agricultural produce'. British rule in India stymied the development of capital-goods industries and supported 'the survivals of feudalism in the village'. Therefore, 'imperialism does in fact restrict the industrialisation of the colonies' and 'prevent the full development of the productive forces': Under these circumstances the class interests of the colonial bourgeoisie demand the industrialisation of the country - I underline the word class interest as different from certain private and group interests - and in o far as th bourgeoisie represents its class interest in this r spect, in a much as it stands for the economic indep nd nc of th c untr , f r its liberation 24 25 26

Inprecor, 8(76) 30 Octob r 1928, p. 1421 (quoted by upta, omintern, India, p. 128). Degras, ommunist Jnternationnl. Volume 2, (1960), p. 52 . Quoted in Haithcox, Communism and Nationalism, pp. 117-8.

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from the imperialist yoke, then it plays a certain progressive role, while imperialism plays a substantially reactionary role. And, then, Kuusinen made the basic distinction between the ideal of a national and comprador bourgeoisie, when he attacked Roy's theses: The idea, which has been stated repeatedly in these theses, that the bourgeoisie of the colonial countries capitulates before the imperialist bourgeoisie is unintelligible for those comrades who are of the opinion that the entire national bourgeoisie of the colonial countries, like India, Egypt, etc., simply take an anti-national, compradore position. 27 This was the distinction between the national and comprador bourgeoisie which reappeared, via l 960s underdevelopment and dependency 28 theorising , to form the basis of the Kenya debate. We can now see why such confusion has arisen through the way in which the propositions of the two sides of the debate have come to cross-over into each other. When Kuusinen attacked Roy's thesis as the basis for postulating the identity of the comprador bourgeoisie, he did so by reducing the economic of the industrialisation thesis to the political of the decolonisation thesis. Kuusinen latched onto the political ground of the argument, by supposing Roy's decolonisation thesis led to the political inference that the indigenous, 'colonial' bourgeoisie in India would necessarily betray the national revolutionary movement. Yet, Kuusinen 27 'Theses of the Agitprop of the ECCI', Inprecor 8(80) 16 November 1928, pp. 1517-18 and 8(81) 21 November 1928, p. 1525 (quoted by Gupta, Comintern, India, pp. 144,148-9). 28 For a different interpretation of Roy, see Blomstrom and Hettne, Development Theory (1984), pp. 126-7. For Blomstrom and Hettne, Roy 'viewed India as a nation in chains, with a distorted "natural" development. To Roy, the cause was "colonial capitalism", as he called it'. In quoting from Roy's 1921 India in Transition, the whole thrust of Roy's th s s about the change in post-1914 capitalism and imperial policy is missed. Roy's theses w r about the change from 'colonial capitalism' for the period under review. In any case, when Blomstrom and Hettne associate Roy with Dadabhai Naoroji, the late nin t nth-c ntury progenitor of economic nationalism for India, they also mistakenly attribut a nationalist position to Roy. It is, therefore, not 'justified to claim that M.N. Roy i Andr Gunder Frank's predecessor'. As we show b low, Naoroji al o has been a dated, mor plausibly, with the economic nationalism of Indian big business during the 1920s and 1930s.

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agreed with Roy's theses on the same political ground - that the 'national bourgeoisie' sought 'understandings' with British rule in the questions of the struggle against the revolutionary proletarian movement and 29 against the agrarian revolution'. For Roy, the 'understandings' stemmed from the logic of an Indian class of capital engaged in manufacturing production in India; for the Comintem orthodoxy, the extent to which an indigenous bourgeoisie was deemed to be national or comprador was a matter of political conjuncture. Both J.P. Haithcox and S.D. Gupta have pointed out the decolonisation thesis contained an economic ground - the recognition of the extent of industrial development in India - and a political ground which did not simply imply, as Kuusinen had argued, that there would either be a voluntary withdrawal of British political rule from India or that the national bourgeoisie were locked into compromise over a negotiated withdrawal. 30 In fact, the majority CPGB camp diverged from Roy both in putting primacy upon the national struggle for political independence and in the way which they interpreted the economic ground of the decolonisation thesis. Whereas Roy had interpreted industrialisation to be deliberate British intent for colonial India, the CPGB delegation emphasised the 'objective' or 'involuntary' process of industrial development. When intention was given stress, as by the British CPGB delegate Cox, it was along the Kuusinen line - namely that imperial intent was to stymie indigenous capitalist enterprise in manufacturing. And, given the imperial intent, it was likely that the indigenous bourgeoisie would become 'national' as it entered the national struggle, alongside 'the masses' for independence, to secure its place in the process 31 of industrialisation. Thus, in the Colonial Theses adopted by the sixth congress, the 'Indian bourgeoisie' was deemed to vacillate between two positions. The first was a national position of 'class consolidation' which, in replacing 'the

29 'Theses of Agitprop', 21 Novemb r 192 , p. 1525 (qu t d by Gupta, Comintern, India, p. 149). 30 Haithcox, Communism and Nationalism, p. 113; Gupta, Comintern, .India, p. 123. 31 Inprecor 8(74), 25 October 1928, p. 1365 (quoted by Gupta, Comintern, India, p. 129).

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former division into religious sects and castes', also 'confronted British imperialism with a united front'. The second position, as in 1919-22, was one of 'betrayal' of the 'cause of national revolution' due chiefly to 'the f ar of the growing wave of peasant uprisings, and of the strikes against native mployers'. A political distinction of class consolidation and betrayal was also associat d with the economic position of a 'commercial' or 'compradore' bourgeoisie. The economic position 'directly' served 'the interests of imperialist capital' and the remaining portions of the native bourgeoisie, especially the portions reflectmg the interests of native industry, support the national movement and represent a special vacillating compromising tendency which may be 32 designated as national reformism.

In treating the class of industrial capital as a class which vacillated between the two positions, it might seem that there was a dynamic of 'contradiction' which made it possible to establish a united front, especially from 'above', for the national cause of independence. This was because, so the Comintern theses postulated, the position of 'betrayal', associated with limited historical periods, weakened the economic basis of the class in relation to British imperial intent and, therefore, forced the Indian bourgeoisie to adopt the national position of a united front against imperialism. However, under Joseph Stalin's tutelage in 1928, no such offer of a united front within India could be accepted by Comintem. The Colonial Theses postulated that 'alliance' with the Soviet Union 'and the revolutionary proletariat opens for the masses of China, India, and all other colonial and semi-colonial countries the prospect of independent economic and cultural development, avoiding the stage of capitalist domination or even the development of capitalist relations in g n-ral'. 33 As such, only 'temporary coop ration' was to be afford d toward both 'national r formism' of the bourg oisie and th radical anti-imp rialism 32 Degras, Communist International. Volw11, 2, pp. 531,53 . 33 ibid, p. 533; Adhikari, Documenfs, p. 417. In the CPI version, 'capitalist d minati n' app ars a 'd minati n of the capitalist ystem'.

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of the 'petty-bourgeois groups and parties' which were assembled around the new middl class of the sa ariat, 'the intelligentsia, the students and others'. Intermediate strata also vacillated between repres nting the 'general objective interests of the entire national bourgeoisie' and those of the proletariat. Given that a year earlier, at the fifth congress, Comintem had still considered 'that at c rtain stages it is legitimate, wholly admissible, and unavoidable, to conclude blocs and alliances with the national-colonial 34 bourgeoisie' , Roy was stung by the extent of the about-tum. As Gupta has shown, the irony was that while by 1929 Roy's opponents had adopted his earlier position of implacable opposition to national reformism, in 1938 Roy turned towards Lenin' s earlier concept of bourgeois democracy by arguing for 'a programme of national democratic revolution, a programme which would reflect the interests 35 of all the oppressed and exploited classes'. Stalin had used Roy's decolonisation thesis against himself and Roy was rueful about it. Whatever the historical irony of the period, the salient point here is about Roy's argument that the 'facts' of real industrialisation made the bourgeoisie 'national'. It was 'national' both because its economic basis was relatively strong and because the identity of 'the national' drove a wedge between its own class interest and that of the class of labour within India. Roy had not argued that the indigenous bourgeoisie was a 'protege of imperialism' because there was no 'true' basis for capitalist development in colonial and semi-colonial countries. This, instead, was the premise from which underdevelopment theory brought the economic to bear upon the political for post-colonial Kenya and started the debate. The argument proposed by Roy's opponents came to have direct parallels with underdevelopment theory in the late twentieth century. Paradoxically, however, when the indigenous bourgeoisie is deemed to be the comprador class in Kenya, the case is one in which the orthodox Cornintern line has been simply inverted. The indigenous bourg oisie in 34 Degras, Communist International. Volume 2, p. 394. 35 Gupta, Roy's critique of Comintern (1994), p. 11 (qu tin (1938), p. 8).

from Roy, Our Differences

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Kenya is the emperor without economic clothes and whose weak basis of capitalist development has only to be revealed for its relative political strength in state power to b dismantled. A similar inversion has happened in recent disputes about the extent of twentieth-century industrialisation in India. ECONOMIC HISTORY OF INDLAN INDUSTRIAL CAPITALISM

A body of Indian economic history of twentieth-century industrialisation in India can be read as academic commentaries on the Comintern debate. The name of Roy might not be mentioned but his presence is evident. For example, parts of Chandavarkar's introduction to his Origins of Industrial Capitalism in India are strikingly reminiscent of Roy's 1928 justification of the decolonisation thesis. Roy had urged that in 'the examination' of the imperial economic experience during twentieth­ century India 'one should not squabble over the exact number of [the] proletariat and blast furnaces in India. What is to be established is the general tendency'. In relation to its population, India might still remain 'overwhelmingly an agricultural country' yet the data of industrial growth shows the 'tendency to foment industrial development', with an 'uneven tempo' and 'along a zigzag line'. In short, Roy concluded, 'facts' 36 showed 'that "the theory of agrarisation" is utterly wrong'. Chandavarkar, in 1994, made the same points. 'Those who expected large-scale industry to form the lead sector of the economy soon discovered, although sometimes painfully, that it simply failed to lead'. Yet, Chandavarkar continued, 'the "industrial sector" had acquired, by the early twentieth century, a significance out of proportion to its weak and indecisive effects on the Indian economy as a whole'. Although less than 10 per cent of India's workforce was employed in manufacturing industry in the 1920s and 1930s, four million workers w r mploy d 36

Roy, On the Indian question (1982)(1928], pp. 634,660-1.

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in factories, mines and railways in 1931. Also, during the first half of the century, from 190 to 1951, the urban population nearly doubled as a proportion of the total population. 'Between 1914 and 1947', Chandavarkar concluded, 'large-scale n1anufacturing formed the fastest-growing constituent of the secondary sector'. Chandavarkar immediately linked his point, that the 'political and social significance of the industrial sector was considerably greater than these stark figures suggest', to the British imperial intent to industrialise India: In the immediate aftermath of the First World War, the British were only too aware of the value of developing a substantial industrial infrastructure in India. It could transform India, in keeping with changing imperatives, from simply an oriental barrack into an ordinance base as well. It might help to restrict the dumping of foreign manufactures even as Britain's industrial decline was becoming apparent. It could assuage Indian capitalists who might otherwise turn their pockets and minds to Congress. It would provide emgloyment and ostensibly inject some d ynamism into the Indian economy. These were the intentions which Roy had spelt out by giving special focus, in impressive empirical detail, to the tendency of what he called the 'new economic policy' of imperialism to compensate for relative industrial decline within Britain itself. The fundamental 'inner change in the position of British imperialism', Roy argued, was the post-war 38 change in the 'internal condition of British capitalism'. Industrial development in India was necessary to compensate for the relative loss of India as an export market; for India's export surplus to appear in third countries whose securities were purchased by Indian investors; for British industrial 'under-production' which prevented the export of money-surplus to India for investment in industrial production. 39 Therefore, Roy concluded, either Britain had to industrialise India or lose

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Chandavarkar, Industrial Capitalism, p. 3.

Roy, On the Indian question., pp. 663,634. ibid., p. 635ff.

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it 'into the orbit of [a] rival imperialist power', implicitly Japan. Since 40 the British bourgeoisie were not 'stupid', they 'have made the choice' - to promote the industrial development of India. For reasons which will become clearer be]ow, whatever the intent to industrialise India after the first world war, there was no British imperial capacity for industrial development according to a systematic industrial policy of development. However, the change in imperial intent, which preceded 1918, made the development of Indian industrial capital possible. 'It is simply ignoring facts', Roy contended in 1928 against his Comintern opponents, 'to maintain that the Indian bourgeoisie is as economically suppressed and politically oppressed as twenty years 41 ago'. Again, we can find echoes of Roy's contention in recent Indian economic history. Clive Dewey, for example, has argued that the turn of century viceroyalty of Lord Curzon was one changing point of an intent to reject laissez faire. Curzon publically called the theory 'absurd' and its practice 'additionally absurd in a country like India' where the government was so involved in building infrastructure, controlled 'the sale of opium and 42 salt', ran 'giant factories' and was 'the largest employer of labour'. Days were long past, Curzon reflected, 'when Government can disassociate itself' from encouraging business. Rajat Ray has pointed to the change in British policy after 1914: The subtle but increasing shift from the commercial to the financial (and strategic) aspects of British imperial interests in India in the inter-war period produced a profound uncertainty on the part of policy- makers with regard to the role of the government in the economy. That uncertainty was enhanced by the fact that an increasingly substantial part of government 43 came to be Indianized during the period.

40 ibid., p. 656. 41 ibid., p. 633. 42 Lord Curzon in India, (ed.) Sir T. Raleigh, London: Macmillan, 1906, pp. 158-9 (quoted in Dewey, New industrial policy (1979), p. 223). 43 Ray, Industrialization (1979), p. 239.

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Chandavarkar, in concluding his 1985 survey of industrialisation in India, repeated that 'the balance of political power and the composition of economic interests within the metropolitan ruling classes was subject to change'. The colonial state subordinated 'particular, even powerful metropolitan interests to the claims of specific Indian groups'. Intention, Chandavarkar concluded, has been 'difficult to prove' but imperial impact was governed 'by the changing political priorities of the colonial 44 state' within 'the interests of Britain's global imperial system'. Likewise, B.R. Tomlinson, in his contribution to the New Cambridge History of India, has argued that '"modern" financial and business institutions' were created in the period between 1919 and 1939, 'especially from 1929 to 1936'. These were the years which immediately followed Roy's affirmation of the decolonisation thesis. This also was the period in which Indian modern but indigenous economic business came to establish a predominance over the older European colonial firms. And, this period, Tomlinson continued, was one 'when the 45 absolute wealth of the economy was probably not increasing' . In other words, and bearing in mind Himbara's propositions for Kenya as outlined in chapter one, we should note that a relative change in the predominance of one class of capital, in so far as one has different historical origins or racial attributes from another, is not necessarily associated with the 'relative success' of the economic change over time. Amiya Bagchi, to take another tack of argument, has argued that the difference between Indian and British capitalist classes in India was predominantly racial. The difference, according to Bagchi, was not to be deduced from 'Indian value systems' or other cultural attributes, such as caste, which put a primacy upon ethnicity or nationality as the source of explanation of why one group of entrepreneurs is judged to be more successful than another in the same arena of industrial production and capital accumulation. British industrial enterprise in India, Bagchi suggested, did not dominate industrial production because it was of 'British' nationality and/ or culture but b cause a racial badge of identity 44 45

Chandavarkar, Industrialization before 1947 (1985), p. 668. Tomlinson, Economy of Modern India (1993), p. 147.

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gave 'white' or 'European' firms a collective advantage over Indian­ owned enterprise. As such, it could be argued that the official bias towards European companies was predicated on the ground of race and that racial identity was one possible means of competition between European and Indian companies in trade and production. European 46 companies, as Bagchi puts it, simply got a better deal' . I

Capital and race Much disputation has followed from Bagchi's thesis of racial bias. Thus, from the end of the nineteenth-century to the 1930s, the better deal for European companies did not derive from any overarching industrial policy of the late-imperial state in India for the simple reason that, whatever the intent, there was no such policy in practice. Indeed, as Bagchi and others have concurred, European companies did not benefit from protection measures which were adopted during this period. If there were beneficiaries of protection against industrial competition, especially from continental Europe, Japan and China exports to India, then they were primarily the Tata Iron and Steel Company (TISCO) and, to a lesser extent, the other Indian-owned firms which dominated the large-scale cotton and textile industries of Bombay. The competitive advantage of European companies in manufacturing derived from awards of contracts, especially for infrastructure projects and the supply of materials; the control exercised over shipping, export/import and wholesale trade; and the access to finance afforded to such companies by European owned and/ or controlled banks in India. Thus, as in western India, where Indians had been involved in ocean shipping and maintained a hold over the export trade, then they were far more likely to be able to make the transition to large-seal manufacturing industry, including the newer and relatively risky industries, such as iron and steel and glass manufacture, in north rn 47 India, before and during the first world war. Bagchi, European and Indian e11treprene11rslzip (1970) p. 225. ibid., p. 241; al o see Bagchi, Private Investment (1 72), e p. part 2, eh. 9; Bagchi, Colonialism (1990), p. 46. 46 47

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More generally, and particularly before the first world war, the slow Indian entry into industry is explicable by an absence of the large-scale trading and financial organisations available to European-owned companies. Bagchi provides an analysis of estimates of racial ownership of 'the most important industrial concerns' at the onset of the war. Indian companies were absent from machinery, engineering and railway workshops. They were however prevalent and dominated, as mentioned above, iron and steel, cotton ginning, spinning and weaving, flour 48 milling and played ·a large part in the printing industry. During the war, C.A. Innis, the Director of Industries in Madras, explained why there was a racial pattern of industrial ownership: The 'Competent' businessmen in the [Madras] Presidency are mostly Europeans, and the majority of them seem to find trade and commerce sufficiently profitable to render it unnecessary for them to embark upon the more uncertain fields of new industries. Indians are more enterprising and are continually starting new industries in a small way. Innis continued: But most of these ventures seem to fail sooner or later and as far as I can judge from the information on record in my office, bad management is 49 often the cause of failure. 'Management', here, appeared as some abstracted criterion for actual competence in business. It was set against the real Indian commitment to 'enterprise' as an appraisal of the extent to which there was intent to engage in business. Bagchi concluded: Lack of experience and bad management could not survive competition unless it was backed by a large amount of capital; and for large amounts of capital to be available for new enterprises from Indian sources in the

48 Bagchi, European and Indian entrepreneurship, table 1, pp. 248-249. 49 Minutes of Evidence taken before the lndian Industrial Commission. Volume 3 (UK Parl. Papers, XIX, 1919, p. 149 (quoted by Bagchi, European and Indian entrepreneurship, p. 250).

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areas dominated by Europeans, new conditions such as the eruption of big Indian trading and the existence of some degree of tariff protection had 50 to emerge.

Barely two decades later, the picture had changed dramatically. By 1937, 60 per cent of workers in large-scale industry were employed by Indian-owned companies; by 1944, 80 per cent were so employed. Ray's estimates of the racial composition of capital indicates that the proportion of European share capital in all companies declined from 65 per cent in 1919 to less than one-half in 1929; by 1947 it had declined to a quarter. 51 Before showing why the picture changed, we should point to one source of possible misunderstanding over the position of 'European companies' in India. European companies in India, as Tomlinson and others have emphasised, were colonial firms whose common ground of interest was aligned as much, if not more so, with Indian owned­ business rather than simply towards a more general imperial interest which flowed outwards from London. While Bagchi is right to put stress upon the meaning of racial difference for economic privilege in business, he misconstrues the limits of the difference in the relation between business and imperial policy of the British Raj. On the grounds of industrial protection, government spending on, and for industry, and exchange-rate policy, European colonial firms became as much estranged from colonial policies as Indian companies. For instance, Sir James Mackay, later Lord Inchcape who built up the Inchcape business empire and took control of the Peninsular and Orient Line, railed in 1910 against starting 'Government factories with the idea of educating the natives and passing on these factories to native capitalists' . 52 Inchape, probably reflecting the then dominant trand of European big business opinion, married racial bias with fer ent antagonism against Curzon's 'n w industrial policy'. Y t, barely twenty 50 Bagchi, European and Indian entr prene11rsliip, pp. 250-251. 51 Tomlinson, Economy of Modern India, p. 143; 1 ay, l11dustrinlizntion, table 14, p. 52. 52 Sir James Mackay minute, 2 April 1910, !lldin Office Revenue Department Papers No. 2645 of 1909 (quoted in Dewey, New industrial policy, p. 225).

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years later, Sir Edward Benthall, head of Birds-Heilger, a foremost business group in Calcutta and one of the largest European colonial firms in India, privately proposed 'direct commercial deals between Britons and Indians, Indianization of European firms, and support for constitutional advance' to preserve the presence of European firms in India. Benthall was no maverick since Earl Winterton later reported that all 'the more progressive and intelligent British Directors' of enterprises 'asserted both in public and private, that support for eventual Indian self-government was necessary for British financial and economic interests in India' . 53 Both conflict and collaboration between supposedly different racial blocs of capital should be evaluated from the standpoint of this rapid change in outlook, itself due to the extent of the relative enlargement of Indian capital during the 1920s. Colonial firms, especially in turn of century Calcutta, were dependent upon the links which they had created with Indian business. While colonial firms were able to maintain a competitive ascendency before the first world war, especially in cotton, jute and food processing,, their competitive advantage was lost as Indian-owned companies, with mainly passive government support, moved into both the 'unorganised' arena ,, linking agricultural production to trade, and the strategic 54 industrial nexus of the economy. Racial tension accompanied the movement of Indian capital between trade and manufacturing production but it did not necessarily divide companies, in competition, according to racial blocs of capital. This was particularly so for jute milling in Bengal where racial tension over business was most acute and for which Omkar Goswani has provided a fine case study. Race had entered into the trade relation between Indian traders, such as G.D. Birla, who supplied the raw material to mills, and European mill owners. As Indian trading companies used their wartime windfall profits from trade and 53

E.C. Benthall, Diary, 24 January 1928, B nthall MSS XII; Earl Winterton, Order of the Day, 1953, p. 191 (qu t din Chatterji, Business nnd Politics, pp. 540,542; also, Tomlinson, Colonial Firms (1981), pp. 464ff. 54 Tomlinson, Economy of Modern India, pp. 117-9.

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speculation in raw jute to start jute mills in 1922, they immediately met aggravated racial tension which sprung from the miUocracy's cartel, the Indian Jute Manufacturers Association (IJMA). However, whatever the extent, for example, to which Birla's political mindedness as an Indian captain of industry was fired by racial abuse, early competition between the older and new mill owners was not exclusively a matter of race. Goswani has provided the detail for why 'the factors which promoted Indo-European conflict also increased tensions between the European managing agencies' of the mills.ss The main factor was that Indian companies started mills at the same time that some European companies a�so used their wartime windfall profits, net profit having ranged from 150 to 200 per cent on paid-up capital, to enlarge capacity. Due to a secular downturn in the demand for jute products during the 1920s, especially gunny bags in North America, IJMA attempted to reinforce its discipline over mill throughput. While Indian companies were publically blamed for exceeding capacity restrictions, the real culprits were the higher capitalised mills, of whatever racial complexion, which sought to recoup their investment costs by ignoring IJMA regulation. During the 1930s, when the output-restricting cartel broke-up in a period of cut throat competition, profitability was only restored when European and Indian companies collaborated through the agency of provincial government ministers, most of whom were implicated in the industry, to secure statutory regulation. Companies then colluded to force down the producer price of the raw material input. As Goswani concluded, 'oligopsony, insofar as it transmitted down via the trading sector to the peasantry' played its part in destroying 'the basis of economic sustenance' for the very small farm producer. This process of oligopsonistic collusion transcended the earlier racial difference between 56 Indian trading and European manufacturing companies. In the different production environment of coal mining, sin1ilar ethnic and racial forces were at play in Bengal. Bengali ntr preneurs, during the first quarter of the twentieth c ntury, moved into the hitherto 55 56

Goswani, Collaboration and conflict (1982), p. 149. ibid., p. 178.

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European dominated industry but during the mid-1920s downturn for second-class coal, they were increasingly displaced by Mawari, Gujurati, Punjabi and other 'immigrant trading communities'. 57 Before 1939, according to Colin Simmons, 'indigenous entrepreneurship was typically confined to small-scale individual or family proprietorships' mining second class (i.e, high ash, low volatile) coal from very shallow depths' 58; larger mines, which accounted for two-thirds of total output in the mid-1920s and produced the higher class of coal, proved to be more able to survive in production during periods of depression. In facing the threats of exit from the industry, indigenous colliery owners faced difficulties in raising bank loans. However, Simmons has shown that Indian colliery owners found it just as difficult to raise loans from the indigenous banks and concluded that 'it was the high fatality rate among the small collieries, and the limited collateral they were able to offer that were the principal reasons why both the European and the indigenous money markets were reluctant to pump even short-term funds into the industry'. Racial bias was more evident in railway policies, both in the allocation of wagons to collieries and the purchase of coal from indigenous collieries. 59 The problem ., nevertheless, as in the cotton textile industry, was the extent of competition between hundreds of collieries, each of which faced low barriers of entry to the industry but few of which, unlike the case of jute, were able to engage in organised collusion to increase their marketed share of output. Indian capitalist enterprise was far more able to assert its place in the local networks of trade, which linked small-farm production to petty-trading and usury, and which were later integrated into manufacturing plants which, as in the jute case, were the preserve of European colonial firms. Tomlinson has suggested the following:

57 58 59

Simmons, Indigenous enterprise in coal mining (1976), pp. 195-6. ibid., p. 200. ibid., pp. 210, 212-5.

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The fact that British firm tended to have good institutional links to overseas m rkets, but poor connections to up-country sources of supply and demand, while Indian firms generally knew more about the internal conomy than they did about foreign trade, accounts for the decentralised natur of so n1uch of the marketing of imported and exportable goods in the late nineteenth century.

And, he concluded:

Before 1914 the colonial firms were strong enough to prevent local entrepreneurs creating autonomous marketing networks from the bottom up, but were too weak to impose their own from the top down. The result was an uneasy compromise between suppliers and produce:rs at all levels of the supra-local economy. In the inter-war years this position was modified by the creation of new Indian business empires by dynamic and aggressive entrepreneurs whose activities were based on a closer 60 integration between the rural and urban sectors.

Indigenous enterprise also proved be more able to establish modern large-scale manufacturing enterprises, such as iron and steel and other capital goods, when effective competition was absent. Last, but not least, colonial firms were the foremost victims of the movement of international firms, including British multinationals, into new industrial sectors, such as electrical engineering, processed food and pharma­ 61 ceuticals, of the economy during the interwar period. As such, the older colonial firms were squeezed between the newer layers of Indian and international capital. Following from the possible misconstrual of an identity of purpose between colonial European companies in India and the British imperial interest of India, we also underscore Chandavarkar's argument that the transition of Indian capital from trade to industry was as much about a defensive reaction to xclusion from arenas of trade as a pro r s iv onslaught on th imperially established bastions of European indu trial enterprise in India. The argument is that Indian indu tri 1 d el pment 60 61

Tomlinson, Economy of Modem lndin, p. 146. ibid., p. 143.

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was the result of 'narrowing options before the capitalist class'. Thus, by way of a pertinent example, Bhatia merchants, from Gujurat and Kutch, played a large part in Bombay's export trade and later its mill industry. They crossed the seas to trade in the Persian Gulf, East Africa and the Far East but were 'forbidden by religion to journey to Europe and America' 63 which entailed a higher capital outlay as well as greater risk.

Or, to take another example, if Parsi merchants seemed to be proficient at making the transition from trade to industry at the turn of the century, if not before, their proficiency was not so much to be explained by 'their specific communal characteristics'. Rather, they were forced to accept greater risk in manufacturing industry because of 'their narrowing 64 options' elsewhere in business. Before 1833, there were more Parsi merchants than European agencies involved in the China opium trade but as they were excluded from the trade during the 1840s, they turned to cotton trading and banking. As European agencies came to then dominate the cotton trade, Indian merchants defensively turned to cotton spinning and invested in mill production. It was likewise in the first decades of the twentieth century. As exports from Indian-owned cotton mills came under pressure from mainly Japanese competition, Bombay mills turned towards the domestic market. In turn, by the 1920s, the competitive threat, for some yarns, 65 was posed by imports, again mainly from Japan. There was a further round of competitive adaptation by moving into different branches and areas, relatively less production in Bombay and more in Ahmedabad, where wage costs were lower and labour resistance to enforced productivity change less than in the older established area of textile 66 production. Such change, as Chandavarkar emphasises, was neith r the Chandavarkar, Industrial Capitalism, p. 46. ibid., p. 56 (quotin from S.M. dwarde ( d.) Gnz tteer of Bombay CihJ and Island. Volume 1, Bombay, 1909, p. 169). 64 ibid., pp. 58-9. 65 ibid., pp. 60-6. 62 63

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result of directed development, structural transformation of the Indian economy nor 'the outcome of a logical progression from trade to industry'. Change in the textile industry happened by way of response to the 'structural constraints within which the industry developed'. And, millowners did not 'reflect an entrepreneurial culture, specific to Indian capitalists ' but managerial practices reflected the constraints within which the industry developed. 67 Like Bagchi, Chandavarkar suggests that constraints over the mobilisation of capital for manufacturing industry 'arose less from an inherent aversion to risk than to the effects of the subordination of indigenous capital under the impact of colonialism'. 68 However, especially by the decade of Comintem debate, and as will become clearer below, the series of defensive reactions, after the century or more of subordination, had widened the spread of Indian business in manufacturing. Then, as we have seen above, it was the very spread of an Indian presence in large-scale manufacturing which acted to displace the constraints of race and imperial agency in the course of industrial development. Bagchi, Aditya and Mridula Mukherjee and Bipan Chandra, in addition to Ray and Tomlinson, have all explained why the period from the late-1920s to the mid-1930s provided a vent of opportunity for the rapid emergence of Indian-owned capital in manufacturing. Firstly, economic facts included international depression which led to the 'considerable' withdrawal of capital from India to Britain; Indian-owned companies, especially in textiles, turned from export to the home market behind tariff walls; the proportion of manufactures in total exports fell; internal trade in cotton, sugar, iron and steel and cement manufacture increased by two to three times faster than international trade in the , 69 same commo d.1hes. 67 ibid., pp. 241,240. 68 ibid., p. 66. 69 Bagchi, European and Indian entrepreneurship, pp. 242-244; Bagchi, Private Investment, eh. 14; Mukherjee and Mukherjee, Imperialism and capitalism (1990), p. 79. Tomlinson, especially in Colonial firms, dismisses Ray's argument that European colonial firms increasingly suffered from a lower desire, and propensity, to invest during and after the period under review.

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Secondly, this was the period when Indian trading and industrial business came to organise its political means for class representation on an all-India, national basis. Business adopted, to quote Mukherjee and Mukherjee, the ideology of an 'industrial national bourgeoisie'. National demands of 'Indian capitalism', Ray observed, 'were not radically new and had been formulated', in the nineteenth century, by Dadabhai Naoroji, Ramesh Dutt and M.G. Ranade, generally in the name of economic nationalis�. A.O. Gordon, in making exactly the same point, claimed that the 'essential element' of the late nineteenth-century doctrine 'was its interpretation of India's failure to industrialise in terms of "manipulation" by Lancashire., City and Anglo-Indian business 70 interests' . Although Naoroji, in his UnBritish Rule in India, had cast the Indian peasantry as the victim of the 'drain' of money from India, it is hardly ironic that it should be Indian big business which came to find the cause for political intervention in the name of reversing the drain 71 by changing, if not undoing, the economic basis of British rule in India. It is suffice, here, to note three important historical markers of political intervention: the formation of the Federation of Indian Chambers of Commerce and Industry (FICCI) in 1927; the Congress Working Committee 1937 resolution, which proposed a 'scheme of national reconstruction and social planning' and led to the establishment of the National Planning Committee in 1938; and, then, the Bombay Plan of 1942. 72 All indicated the extent to which the bourgeoisie became national 70 Mukherjee and Mukherjee, Imperialism and capitalism, p. 83; Ray, Industrialization, p. 305; Gordon, Businessmen an.d Politics (1978), p. 199. 71 See note 28 above and Roy, National Government. Interestingly enough, Roy, especially in his later post-marxist period, came to regard the agrarian problem of an impoverished peasantry as the economic problem for India. If this was one sense in which Roy was the intellectual scion of Naoroji, then it was not quite what Blomstrom and Hettne might have meant when they cast Gunder Frank as a latterday dependista who follows after Roy. 72 See, for example, Mukhetje and Mukherjee, Imperialism and capitalism, pp. 84-86; Chandra, Indian capitalist class (1992), pp. 57-8,65 (al o reproduced in Chandra, Nationalism and ColoniaUsm); Chatterjee, Development planning (1994), pp. 52-3. For issues surrounding the formation of Freer, largely in respons to th European dominated Associated Chambers of Commerce (A ham) form d in 1921, and its subsequent course, see Chatterji, Business and Politics and Ray, Industrialization, ch.6.

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in its endeavour to, first, protest against what it took to be anti-industrial bias of Raj policy and, then, promote and support the framework of state planning for industrialisation. In conjunction with what has been called the 'vast majority of the professional intelligentsia of India', and however much this intelligentsia and the socialist wing of Congress might have intended private capital to be confined to consumer and intermediate good industries, the bourgeoisie acted to secure the basis for Indian­ owned large-scale industry.

Intentional industrial development? Roy was probably mistaken in his assertions, as part of the industrialisation thesis, that there was a systematic application of British imperial policy for industrial development. Certainly, the Report of the Indian Industrial Commission 1916-18 concluded, as Tomlinson summa­ rised it, that 'the government (should) play an active part in the industrial development of the country, to make India more self-sufficient in the wide range of industrial goods'. Yet, the government could not find the wherewithal to fund the Commission's proposals to enhance technical education, provide scientific services and channel finance for manufacturing industry. Political reforms of the 1919 Government Act, Tomlinson emphasised, 'devolved industrial policy to the provincial governments who were given neither the resources nor the incentive to 73 pursue such an ambitious programme'. As Dewey pointed out, central government eschewed any planning approach for industrial development while many prewar and wartime reforms, including the administrative promotion of pioneer industries in Madras, were 74 unravelled in the name of postwar fiscal maxims of 'sound finance'. Tariff reform, monetary and exchange rate policies did little to secure either the market conditions or finance which the assorted ranks of industry demanded of government. 'There was no attempt', Dewey

73 Tomlinson, Economy of Modern India, p. 132. As for other matters in this s ction, we owe the point to John McGuire. 74 Dewey, New industrial policy, pp. 231,237-8.

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reflected, 'to adjust the tax structure in ways favourable to industry; no attempt to control interest rates or capital issues; and persistent refusal to ease credit through moderate inflation, or encourage exports through 75 devaluation'. On the contrary, as Sir Homi Mody, Chairman of the Bombay Millowners Association, made clear in 1931, the government's economic policies 'reflected "their utter irresponsibility", and would 76 "leave them without a friend in the country"'. Mody typified the moderate wing of business organisation on two counts. First, he stood with what Gordon called the 'industrialists' against the more radical 'marketeers', of merchant capitalists and new ranks of business which had emerged after the first world war to play an agitational role in the swadeshi movement. Second, Mody was moderate relative to more astringent industrialists, such as G.D. Birla, who had been radicalised by the more racially based business environment of Calcutta. During the 1920s, through protest against economic policy, industrialists moved closer to the marketeers while the different regional and sectoral aspects of industrial interest, although differing on political strategy, also entered into dialogue to create a framework for national appoachement. Concerted industrial protest against policy, as Gordon has detailed, started from the 1922 campaign to reverse the 1921 revaluation of the rupee-sterling rate. The industrial claim was that the higher rate of 1/6 represented a 12.5 per cent premium for imports against Indian industry. A true Indian national industrial rate, at 1 / 4, so the argument went, would also benefit workers, peasants and commercial interests whose ability to spend had been curtailed by the need to repay debt at the 77 higher rate. This highly organised campaign, involving much press expenditure, was then followed by similar campaigns to remove the cotton excise tax and secure industrial protection. 'Bombay doctrine' became the summary name for expressing the common industrial basis of the campaigns.

75 76 77

ibid., p. 238. Quoted by Chandavarkar, Industrial Capitalism, p. 261. Gordon, Businessmen and Politics, pp. 179-181.

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Insofar as the City of London and Lancashire financial and cotton interests were held to be responsible for the sway of an imperial over a due Indian national policy, the campaigns of the 1920s also served to bring a reappraisal of official provincial and central government policy within India. 'As the 1920s drew on, Gordon commented, 'the Government of India began privately to give increasing support to the "Bombay point of view'', and clashes with the India Office became 78 frequent' . B. Chatterji, in his overlapping account of Indian business and politics during the 1930s, also summarised the effect of the campaigns. By the early 1930s, Indian capitalists, requiring state subsidy a!ld support for industry, especially by keeping labour upsurge under control, stood half-way between the Raj and Congress:

For although the Indian capitalists had gained in political strength with the strengthening of the national movement they were not quite confident of their ability to control the state apparatus; they were afraid that an all-out political struggle might reduce their chances of establishing their hegemony and were in favour of a gradual transfer of power by the B nhs .. h79 Gradual transfer of power included fiscal and monetary autonomy. Chatterji concluded that the British imperial concession of autonomy during the period was 'a technique to gather support, rather than a 80 milestone to decolonization'. Nevertheless, what might seem a historiographical critique of the decolonization thesis only reinforces Roy's reflection at the end of the 1920s that industrialists were ready for compromise. If the British colonial government was incapable of acting for them, then the Indian captains of industry would make sure that a 'national' government would do so for them. Thus, while more mistaken on the ground of the industrialisation thesis, Roy was on safer ground for the decolonisation thesis.

78 79 80

ibid., p. 181. Chattetji, Business and politics (1981), p. 561. ibid., p. 573.

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Tariff r form was specially revealing. During the early 1920s, tariff reform became a pressing issue and, throughout the decade, both general and specific tariffs were raised. However, tariff reform, with few exc ptions and despite much official rhetoric on the matter, was designed more to raise government revenue than to serve the cause of directed industrial development. When the 1921-2 Indian Fiscal Commission argued that 'high taxes on income' were 'undoubtedly a handicap to industrial development', the corollary was that any increase in taxation would 'have to take the form of indirect taxation' and this meant, the Report continued, 'that import duties must continue to be 81 high'. This is exactly what happened during the 1920s and 1930s. Dharrna Kumar's analysis of the distribution of general government revenues and expenditures for the first half of the century shows that the proportion of revenue from customs duties increased from less than 10 per cent in 1900 to 30 per cent in 1921-2 and 36 per cent for 1930-1. Contrawise, the proportion of revenue accounted for by land taxation fell by one-half. Yet, apart from an exceptional increase in 1927-8, the proportion of gross public investment in 'economic overheads', including infrastructure and irrigation, was less than 20 per cent in 82 1930-1, the same proportion as at the turn of the century. Neil Charlesworth has also shown that general government borrowing failed to rise to compensate for a stagnant and reduced tax base of the economy when total tax revenue, after the mid-1920s, declined as a proportion of national income. Provincial government borrowing, in particular, was tightly restrained, leading Charlesworth to conclude that 'the consequence was undoubtedly to undermine the "new industrial policy"'. 83 During the 1920s, to quote Tomlinson, the emasculated remains of the new industrial policy, coupled to revenue tariffs, amended stores purchase rules, and discriminating protection did not represent, together or separately, a major new economic strategy. State factories and industrial intelligence had a minimal impact; educational 81 82 83

Quoted by Charlesworth, Government finance (1985), p. 546. Kumar, Fiscal system (1983), tables 12.7,12.9, pp. 929,93 . Charlesworth, Government finance, pp. 527,530,547.

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r form was neglect d; stores purchase rules aff cted a very limited range of ent rprise; revenue tariffs were imposed to meet fiscal, not developm ntal, criteria; protective tariffs were subject to stringent tests and stiff conditions. 84 Imp rial government in India, a Tomlinson put it, was generally about administrative order and, during the decade of Comintern debate, administ red order subsumed the developmental order of directed 85 industrial policy. Furthermore, the body of economic history which gives a more specific focus to the question of the national bourgeoisie broadly shares the view that finance for industrialisation came from Indian sources, independently of European companies and external flows of finance which, for this period at any rate, were relatively minimal. 86 It was 'not true', Bagchi commented, 'that when a company was registered in 87 London, the capital came predominantly from residents of Britain'. Also, there was another Indian factor at work. As the corporate form of big business in India, and, then of Indian owned-capital, the rnanaging-agency co1npany was the entity in which the transition fro1n trade and usury to large-scale manufacture occurred during the first decades of the twentieth-century. The management-agency was Indian in the sense of being a phenomenal form of capital accumulation which was predominantly indigenous to India. While the origin of the managing agency system is murky before the 1870s, the system had then become 'the most generally 88 accepted way of running business corporations in India'. D.H. Buchanan and Blair Kling suggested that the system originated in banking and insurance colonial business practices in India. S. H. Rungta 84 Tomlinson, Economy of Modern India, p. 135. 85 ibid., p. 148. 86 Chandra, Indian capitalist class, p. 9; Mukherj e and Mukh tjee, Imperialism and capitalism, p. 86; Bagchi, European and Indian e11trepreneurs, p. 33. 87 Bagchi, European and Indian entrcpre11eurs, pp. 238. 88 See, for example, Kling, Origin (1966), pp. 37-40; Rungta, B11si11ess Corporations (1970), pp. 220-228; Buchanan, Cnpitalisti 11terpri.e 1984(1934], pp. 159-165; Chandavarkar, Industrial Capitalism, p. 68.

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disputes the origin in banking but concurs that its origin probably lay in the managing system of life insurance agencies. All agree that this was the system adopted by European colonial firms which managed industrial enterprises. Relatively few European managing-agencies which dominated industrial production were able to manage cotton and jute textiles, coal mines and tea estates without the system. And, the industrial managing-agency was Indian in that this form of corporate organisation was either taken over or replicated to make the transformation into big Indian trading and industrial capital. Formally, the managing-agency system was built around an agency contracted to manage a company. The managing-agency, as Satya Datta has pointed out, was the 'basic decision-making unit in Indian industry'. Managing agents were not merely promoters and financiers of companies. They were also described as the real entrepreneurs in India', the institutions which interlocked finance and industry as the 'supreme arbiters' of industry. 89 As such, the managing-agency system was more than a merchant banking system. The agency was not merely the means by which money-capital was raised for a particular company and the supply of finance regulated across the range of companies which the agency was contracted to manage. Rather, the system was the means by which an agency secured real control of the investment and production of industrial companies without the need to invest in the managed company . 90 'Managing agents', Chandavarkar explained, 'secured and retained a controlling stake in the business they had promoted and then contracted to manage for lengthy tenures extending to three or four decades': .1

Although the managing-agency system was repeatedly pilloried for its speculative tendencies and potential for malpractice, the importanc of its financial and promotional role prompted one of the first official historians of the [textile] industry to claim that the expansion of th mill indu try in Bombay has been due in great m asure to the enterprise and financial Datta, Capital Accumulation (1986), pp. 7,4 ,44 (qu ting from A. Mehta, Who Owns Industry, Hyderabad: Chetna Prakash n, 1950, p. 04). 90 Rungta, Business Corporations, p. 230. 89

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resourc so f th M anagmg . A gents. 91

The same point applied to TISCO, usually regarded as an exemplary case of indigenous capital which set out the course for twentieth-century industrialisation in India. Indeed, Bagchi has described its importance thus: Th enterprise of the Tata Iron and Steel Company constitutes the single most important instance of pioneering by private enterprise in India during the twentieth century. The r pr s ntatives of both the British government and the nationalists used su£erlatives in describing the achievements of ... TISCO in the field of steel.

Called a 'veritable romance' by one of the earlier economic historians of 93 Indian industrialisation , the history of the large-scale Indian iron and steel industry, entirely confined to TISCO until 1936, was largely coterminous with that of the Tata managing agency in the first decades of the century. Essentially, Tata was no different from any other agency. Its commission came from a percentage of net profits, after depreciation and amortisation charges, of each company which it managed, later ranging from cotton and oil mills, cement, and chemicals to 94 hydroelectricity, aviation and industrial banking. If Tata was excep91 Chandavarkar, Industrial Capitalism, p. 68 (quoting S.M. Rutnagar (ed) Bombay Industries: the cotton mills - a review of the progress of the textile industry in Bombay from 1850 to 1926 and the present constitution, management and financial position of spinning and weaving factories, Bombay, 1927, p. 49). Buchanan (Capitalistic Enterprise, p. 168) like Rungta (Business Corporations, p. 233) followed Rutnagar's description of managing agencies as 'a gigantic system of swindling'. Buchanan pointed out that when 'administered with real business capacity and animated of loyalty, centralized control has been of great benefit'. Equally, a 'central system may afford great opportunities for the juggling of accounts and orders, unfair purchasing of raw mat rials and equipment, crooked share dealing, the subjugation in num rous ways of om company's interest to another', 92 Bagchi, Private Investment, p. 291. The literature on TISCO is voluminous. Jn additi n t Bagchi, Private l11vestme11t, pp. 291331, see surveys by Ray, Industrialisation, pp. 74-93, Tomlin n, Eco11oniy of Modern India, and Datta, Capital Accumulation, w II a , minimally, 8.-hl, Making (1995); n, House of Tata (1975); Johnson, Steel Industry (1966); M rri , Growth of large-. cale indu. try (1983). 93 Gadgil, Industrial Evolution (1971)(1924], p. 281.

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tional, this was because, firstly, it was one of the agencies which persistently strove for centralised control, in varying degrees of oligopoly, over an industry in question. Secondly� Tata was probably the fastest growing of all the agencies. In 1911 Tata controlled six industrial companies, by far the largest number of any agency. By 1931, the number of companies it controlled had doubled. 95 Thirdly, as we note below, Tata was a relatively successful agency in marrying speculative propen?ities for financial manipulation with technical expertise in production. Monopoly, rapid growth and the marriage between speculative and technical propensities were the attributes of TISCO. Between 1920 and 1929, the decade which was significant for Roy and the Comintem 94 Sen, Tata, pp. 76., 162; Datta, Capital Accumulation, pp. 45-6. Sen's data (appendix E, p. 162) showed the extent of centralisation in the Bombay cotton textile industry. Of 31 managing agencies controlling 73 mills in 1927, 18 agencies managed only one mill; two managing agencies, the Currimbhoy Ebrahim and E.D. Sassoon companies, controlled 23 mills. Tata managed 4 mills. Datta (p. 44) quoted from Mehta (Who Owns Industn;, p. 104) to give a picture of all-India centralisation of control over industry in 1939: Ten captains of industry held 300 of the 1000 directorships which were held by 70 directors while 850 directors held 2000 directorships to control SOO industrial companies. Although there is no necessary inconsistency between the impression of this picture and Chandavarkar's emphasis upon the highly competitive structure of the Bombay textile industry, there is some confusion over the operation of the agency system. Both Sen and Datta, for TISCO and more generally, argue that the agency's commission was based on net profit. Rungta(Business Corporations, p. 237-8) gives the 1877 example of Greaves Cotton and Company which operated a profit percentage commission for the textile industry. His point is that J.N. Tata 'revolutionised the whole concept of management' and applied profit percentage to Tata agency companies. But, 'there were only a few others who took up the new system'. Tomlinson (Economy of Modern India, p. 113) follows Chandavarkar (Industrial Capitalism, p. 243) and Buchanan (Capitalistic Enterprise, p. 166) in insisting that agencies in the Bombay m industry sought a percentage on production and not net profit. Buchanan suggests that the poundage system was generally abandon d by the 1930 in favour of a return to profit perc ntage. Agencies which us d th p undag syst m attempt d to ma imi e pr duction ven when stocks were high and rising. Aggravat d ov rpr du ti n only amplified any given state of cyclical dis quilibrium in th i1 du try and this wa on xplanation for the relative decline of th Bombay industry during th arly d ades of the century. 95 Datta, Capital Accumulation, p. 40; Sen, Tnfn, p. 162.

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debate, TISCO more than trebled the production of pig iron and more than doubled the output of finished iron and steel. Exports of pig iron from India, nearly all from the TISCO plant, rose from a mere fifty thousand to over one-half million tons during the decade since the company had become 'a large-scale producer of the cheapest pig iron in the world under the protection of a colonial government'. By 1935, 96 TISCO supplied 60 per cent of the all-India market for iron and steel. Despite near financial collapse at the beginning of the 1920s, depression at both beginning and end, and seething labour unrest for most of the period, especially in 1928, TISCO also epitomised what Roy had in mind when he argued for the industrialisation thesis. J.N. Tata, a scion of a wealthy Parsi merchant family in Bombay, had built-up the Tata Sons and Company agency mainly on the basis of profits derived from the nineteenth-century cotton and opium trade with China. When Tata established and extended its company textile mills in central India, the agency introduced 'modern techniques and machinery' and applied 'modern methods of industrial management'. It was likewise for iron and steel. Tata 'was one of the largest iron and steel importers and dealers in India', Tomlinson noted, 'and had offices in potential export markets in China and Japan'. When the Jameshedpur iron and steel plant, in Bihar, was founded in 1907, with the first steel produced in 1913, both the market and production techniques had been 'thoroughly researched and planned'. Instead of hiring consultants, skilled personnet largely hired after working for the US Steel Corporation, were employed to manage the production departments of 97 the enterprise. However, it is important to stress that, through the managing-agency system, control over investment and production policy lay in the hands of Tata as Indian capitalist enterprise. Government 'protection' certainly played a part in the explanation for the establishment and survival of TISCO. But given th incapacity to mount a systematic industrial policy, the only direct subsidy to the 96 Bahl, Making, pp. 174-5,183. 97 Tomlinson, Economy of Modern India, p. 129; Datta, Capital Accumulation, pp. 40A8; Bahl, Making, p. 166; Morris, Large-scale industry, pp. 558-9.

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company was Rs105m in money over 1924-5. 98 Originally, over 1906-7, Tata had hoped to raise venture capital for the enterprise from London but none was forthcoming. 'London investors', M.D. Morris suggested, 'were not prepared to risk their capital in ventures controlled by Indian entrepreneurs even with the reputation of the Tatas'. When Tata therefore then turn d to the limited Bombay money market, twenty three million rupees was rais d from eight thousand shareholders, including millowners and maharajahs, in a matter of weeks. Although the shareholding was highly concentrated, with four shareholders controlling 64 per cent of all investment in 1911, the rush to buy shares, it has also been suggested, owed much to the swadeshi movement which had acted for mass participation in the relatively successful boycott of imported, especially British, goods. 99 While the Tatas capitalised on the swadeshi movement, the government did not demur. As Roy might have suspected, the British imperial intention was to give passive support to a capital goods industrial venture which substituted for the rapidly rising imports of steel, largely from Belgium and Germany, which were then allegedly dumped on the pre-war Indian market. 10° Furthermore, the war gave 'natural' protection to the company which geared up to meet both import-substituting supply and export demand in the Middle East and East Africa where Tata supplied munitions and rails at prices 40 per cent of what pre-war steel supply would have cost had it been available. 101 Passive protection also was given to the company during its severe financial crisis of the early 1920s. Tata's managing-agency commission from TISCO slumped from one million rupees in 1919 to a mere RsS0,000 in 1922. As well, Tata directors were accused of trading in the shares of 2 the companies which they managed. 10 Although the Secretary of State for India, in London, thought it 'unfortunate' that the 'first application

98 99 100 101 102

Bahl, Making, p. 171. Morris, Large- cale indu try, pp. 590-1 (data from J hn Bahl, Making, pp. 70-1. Wagle, Imperial preference, p. 122. S n, Tata, p. 78; Gadgil, Industrial Evolution, p. 254.

n, Ste l industn;, pp. 246-7).

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of the new policy of protecting nasc nt industries' should be for a 'financially rotten' firm, the government of India took little action to discipline Tata and afforded industrial protection for TISCO during 3 1924. 10 Contrawise, during the frequent bouts of labour action during the 1920s, mainly to preserve jobs and wages in the face of company attempts to increase labour productivity without money wage compensation, government both allowed a company militia and its own force to police the labour force for the company. 104 Above all, it was the state sponsored railway demand for rails and equipment which, until 105 1934 at any rate, ensured TISCO's prime market for steel , its survival a!ld continuing growth as the emblematic case of large-scale indigenous industrial development in India. Contra Kuusinen, and the Comintem orthodoxy, the evidence from the economic history of the period does not suggest that imperial intent was to confine Indian business to relatively small manufacturing industries. As we saw earlier, Indian capital, through the managing­ agency system, was increasingly allowed to take-over cotton textile and jute mills which, before the period of debate, were under control of the European colonial companies. While the government of India no longer signalled an intent to preserve the place of European colonial capital in manufacturing industry, it was conscious of the need to preserve TISCO. The Viceroy wrote to the Secretary of State towards the end of 1924: The management and the Tata name are largely discredited now by reason of the low price of the shares and the various crises of which mention has been made in the press, but it is the great manufacturing industry of India. It was stimulated and encouraged by the Goverrunent during the War, it became a source of pride to the Indians and its complete failure would be regarded as a disastrous to India's prestige in the financial and . 106 manu factunng wor ld 103 Quoted in Bahl, Making, p. 170; for detail on protection for Tata, s e Wagle, Imperial preference. 104 ibid., pp. 170, 175, 399-400. 105 Datta, Capital Accumulation, pp. 8-9;Bagchi, Privnte Investment, eh. 9, sp. pp. 314321. 106 Quoted in Bahl, Making, pp. 170-1.

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The government of India might not hav had th same view of any other one Indian manufacturing enterprise, especially in the highly comp titive t xtil industry, and even attempted to promote a comp titi- alternative to TISCO in 925, fearing that Tatas might sell out to th US Ste 1 Corporation. However, while Roy may have overplay d the xt nt to which there was British imperial capacity for a syste1natic industrial policy, there is little doubt that the place of Indian big business in manufacturing had been secured during the decade of debate. Alongside th ex mplary cas of Tata, as very large-scale Indian-owned industrial enterprise, stood a plethora of factories and mills, especially in the textile industry, which were 'very often badly designed and badly managed'. 107 The up-country diffusion of mills, from Bombay at the turn of the century, were 'often equipped with second-hand plant and frequently with machinery scrapped by older mills which ·were either going bankrupt or were sufficiently successful and progressive to be retooling'. 108 Chandavarkar has stressed that there was no teleological process through which economic efficiency was consciously improved to reach the nirvana of large-scale enterprise. A teleological perspective, with its focus upon large-scale industry, has 'concentrated attention on what are readily perceived as the successes of industrializatjon and this has led to the neglect of failures'. Business failure, he insists, 'frequently occurred as a consequence of the very constraints vvhich also inhibited the firms that succeeded and which established the limits within which all were forced to work'. In giving emphasis to the evidence, from coal mining, jute mills and Madra cotton mills, that 'whereas most early Indian ventures failed, European initiatives succeeded', Chandavarkar followed Bagchi's racial contention that European colonial firms were rnor able to mobilise money-capital 109 for 1n . d ustry. 107 Bagchi, Private lnvestrnent, p. 252 (quoted by Chandavarkar, l11dustrialization before 1947, p. 654). 108 handavarkar, Ind11str ializatio11 before 1947, . 654. 109 ibid., p. 644.

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An av rsion t the tel ology of capitat howev r, al o results in the risk of throwing th twentieth-century 'baby' of Indian capitalist nterprise out of the bath of general industrial competition. Although th y may have di agre d about the cau es of colonial-firm failure, we have noted that both Ray and Tomlinson have shown the extent to which th on traints and limits of capital accumulation had generally shifted, by th 1920s, in favour f Indian-own d enterprise. If it was the extent of competition in th cotton and jute textil industries which led to business failure in the period under review, then, equally, it was the entry of new firm , mainly Indian, which had extended the limits of competition and raised the constraints faced by each firm within the industry. Chandavarkar, in debunking t e view that Indian capitalist enterprise was uncommitted to any vision of technological advance, also made no bones about the aim of what was established capitalist enterprise. The aim of Indian owners and managers 'was simple: to maximise profits within the existing economic context, and in this aim 0 they clearly succeeded in the short-term'. 11 Above all, and whatever the problem of intent, it was in the longer term that Chandavarkar confirmed Roy's thesis that Indian capital was moving into the central place of immanent industrial development. Yet, despite this broad area of agreement about the place of Indian business in industrial development, even including some support for Bagchi's contentious contention that it was the 'collective monopoly' of European Companies which had 'prevented indigenous investment in industry' 11\ there is sharp dispute over the extent to which the Indian capitalist class is deemed to be a national bourgeoisie. The Mukherjees pivoted their account of why 'it was by no means impossible for an independent national bourgeoisie to develop in India' by attaching Bagchi's work to Roy's industrialisation thesis. Th y d ni d that th Indian class of capital ught 'int rnati nal collaborati n ith pit li ts of all countries' and argu d that 'whil th Indic.: n capitali t lass' strategy wa d finit ly nti- ialist an bourge i , it was not 110 ibid., p. 654. 111 Mukherjee and Mukherjee, Imp rinlism nnd capitnlis111, fn. 19, p. 109.

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. 112 pro-imperialist' Likewise, Chandra' s purpose in his economic history is to bury the Roy thesis. Although the Indian bourgeoisie was never at the head of a mass struggle for 'national liberation', Chandra wrote, 'it always stayed in the camp of anti-imperialism'. 113 What we find, therefore, is that a broadly common economic history has been used to contend different positions in the Cornintem debate and that the positions have crossed over into each other. Roy had made the decolonisation thesis the political aspect of the industrialisation thesis to explain compromise or collaboration between indigenous capital and imperialism. However, Bagchi, especially during the course of his more recent work, has put coHaboration at the centre of argument for why the economic performance of Indian-owned and controlled industrial enterprise has continued to be been relatively poor. Thus, whereas Roy adduced collaboration during the colonial period to be the political factor which is contested by the latterday academics, Bagch· has elongated collaboration into the post-colonial period as the economic factor which explains why domestic industry has been both relatively inefficient and dependent upon international capital: The strengthening of domestic industry by public sector operations has been increasingly subverted by the internationalisation of domestic capitat and the continued obstruction of capitalist growth by the prevalence of landlordism, and speculative motivations of domestic capital, often in 114 . ,. wit. h t'h e state apparatus. associat10n

If this is the kind of appraisal, much inflected by the contours of underdevelopment theorising, targeted as Royist, then it is a far cry from the conclusion reached by Roy and his latter day critics of the 'national independence' of the indigenous bourgeoisie. It is striking, even from our abbreviated account of the Cornintern debate, that the thesis which Bagchi has advanced belongs more to the orthodoxy of Comintem than the Roy camp. Consequently the problem ·n accow1ting for the 'national' 112 ibid, pp. 83,89. 1 ]3 Chandra, Indian capitali t clas , p. 77.

1114 Bagchi, Public sector industry (1994), p. 427.

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of the bourgeoisie goes far beyond the now seemingly archaic and quixotic formulations of 1920s Stalinist policy toward colonial questions. COMINTERN DEBATE REITERATED: POULANTZAS

From the late 1960s, Nicos Poulantzas sought to bring the questions of the Comintem debate to Europe. In first reacting against the Comintem orthodoxy which he regarded as having fundamentally failed to prevent the emergence of fascism in Italy and Germany in the late 1920s, Poulantzas attempted to find a different strategic explanation, and therefore political basis, for possibilities of national struggle against the contemporary threats of fascism and United States imperialism in and towards Europe. As Bob Jessop has commented, Poulantzas' critique of Comintem was directed at its economism, 'which allegedly reduced the nature of the state to reflections of the economic base and/ or suggested that the political class struggle followed the course of economic development'. Jessop also points out that Poulantzas, in arguments derived from Sartre and Althusser, stressed the way in which 'the complex internal organisation of different social structures' are determined differentially 'by external factors' and why the political of the state is relatively autonomous of, and only so determined in the last instance by, the economic of productive forces. After he had turned more closely towards Marx, Poulantzas arrived at his account of state power 'as a form-determined condensation of the balance of forces in class 115 struggle'. In order to deal with the contemporary question of class forces in Western Europe, and France in particular, Poulantzas generated the concept of an internal or interior bourgeoisie. The interior bourgeoisie stood for, and as, a 'fraction' of capital which was potentially different, according to international relations of production, from the external or

115 Jessop, Poulantzas (1965), p. 324.

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international capital of the predominantly US multinationals which i sought to dominate and monopolise production in Europe. Wh le the internal bourgeoisie was interior to Europe, in that it had its own history of accumulation in Europe and its own form of expansion abroad, the political orientation of the class was complex. How the class stood politically in relation to the threat of a different 'fraction' of capital, that of US multinationals in Europe, was determined by how the different forms of capital were condensed with other classes in the power bloc of 6 the state. 11 In other· words, while US capital might be equally present in say France and Britain, the different forms in which its presence was mediated by the internal bourgeoisie in the power bloc of the state might result in different strategic appraisals of the possibility for alliance with the internal class of capital to confront the common imperial threat of United States capital. Insofar as Poulantzas concluded that the internal bourgeoisie was so compromised generally by the tendential internationalisation of capital that it could play no progressive role in the European anti-imperial struggle of the 1960-1970s, this did not diminish his attempt find the general basis for locating the internal of the bourgeoisie within the external world of international capital. However much Poulantzas might have wanted to estrange the Comintem tradition from the appraisal of the bourgeoisie in question, his own purpose in searching for the political conception of the strategic paralleled the older Comintem experience. It should not be surprising to find, therefore, that Poulantzas' conclusions replicated the Comintem's framework of analysis. Poulantzas generated the concept of an internal bourgeoisie precisely because he regarded the national/ comprador distinction as one which belonged to the colonial and semi-colonial question. Nevertheless, he failed to notice that in the course of the Comintem debate, this distinction followed from the appraisal of what an indigenous bourgeoisie might both 'be' and 'do' in relation to imperialism. The internal bourgeoisie, for Poulantzas, was neither comprador nor national. It was not cornprador because this 116 Poulantzas, Classes in contemporary cnpitnlism (1975), pp. 71-2; J ssop, Poulantzas, pp. 171-2.

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bourgeoisie had its own base of accumulation and was not subordinated - whether on economic, political and ideological grounds - to that of international capital. Equally, the internal bourgeoisie was not national becaus it was so dependent upon the international circulation of capital that it could not play the leading role in the struggle against imperialism. Poulantzas, Jessop wrote, 'derived specific political and ideological positions' of the internal bourgeoisie 'from their specific economic interrelations with US monopoly capital and argued that they cannot be 117 reliable allies in anti-imperialist struggles' . When he turned, in the mid-1970s, towards the conditions for class struggle against the dictatorships of Greece, Spain and Portugal, Poulantzas made the concept of the interior bourgeoisie more specific. Given the 'peripheral' location of these countries in Europe, he felt more comfortable about identifying one fraction of capital as comprador. The comprador bourgeoisie can be defined, Poulantzas wrote, as that fraction whose interests are entirely subordinated to those of foreign capital, and which functions as a kind of staging-post and direct intermediary for the implantation and reproduction of foreign capital in the countries concerned.

Economic activity of the comprador bourgeoisie 'often assumes a speculative character, being concentrated in the financial, banking and commercial sectors' but is not confined to the sphere of commercial capital and may include industrial enterprise 'wholly dependent on and 118 subordinated to foreign capital' . Poulantzas then reworked the concept of an interior bourgeoisie by postulating the class position of a domestic bourgeoisie which, since 'concentrated chiefly in the industrial sector', is interested in an industrial development less p laris d t ward the exploitation of th country by foreign capital, and in a tat int r ntion

117 Jessop, Poulantzas, p. 174. 118 Poulantzas, Crisis of the Dictatorships (1976), p. 42.

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which would guarante it its protected markets at home, while also making it mor comp titive vis-a-vis foreign capital.

To e pand the home market, the domestic bourgeoisie presses for state aid to get 'a certain increase in the purchasing power and consumption of the masses'; state aid is also demanded 'to help it develop its exports'. However, the most 'significant' of the 'contradictions' between the domestic bourgeoisie and 'foreign capital' arises because the domestic bourgeoisie is cheated in its share of the cake, as far as the exploitation of the masses is concerned; the lion's share of the surplus-value goes to foreign capital and its tf?lents the comprador bourgeoisie, at the domestic bourgeoisie's expense.

Of particular significance here are the phrases which Poulantzas uses to express 'contradiction' which are strikingly similar to those employed in the 1920s by Roy when he emphasised the common relations of production of capital which established the general appropriation of surplus-value. As far as Roy was concerned, it was the 'national' division of the common cake of surplus value which made the indigenous bourgeoisie in India 'national'. Thus, Roy's political and ideological ground for constructing a national bourgeoisie became Poulantzas' economic ground for establishing why the internal class of capital cannot be inferred to be 'comprador'. Jessop has claimed that Poulantzas inverted the relation between the economic and the political when he moved from metropolitan to peripheral Europe. Whereas Poulantzas had formerly derived the political weakness of the internal bourgeoisie from its dependence upon international capital, he latterly 'inferred the existence of a specific or at least tendential economic fraction from the temporary merg nee of an anti-dictatorial alliance with th popular mass s and am r p rrnan nt strategic orientation towards th EEC'. 120 In oth r word , J sop' claim 119 ibid., p. 43. 120 Jessop, Poulantza

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is that Poulantzas inverted the relation between the economic and the political as part of his premise of strategic calculation to establish class position. While this may be so, it is clear that Poulantzas also derived the thesis of the non-national bourgeoisie on the ground of economic dependency. For Poulantzas, the domestic bourgeoisie is not a 'genuine national 121 bourgeoisie' because its historical development has coincided with the contemporary period of the internationalisation of capital. Through industrialisation, the 'nuclei of an autochthonic bourgeoisie' develops but does so 'under the 'aegis of foreign capital'. The domestic bourgeoisie i� dependent upon international capital for technology and other means to increase labour productivity, marketing and acting through a 'complex network of subcontraction for foreign capital'. And, it is on this economic ground that Poulantzas attempts to explain the relative political and ideological weakness of the domestic bourgeoisie which is not able to 'wield long-term political hegemony over the other fractions of the 122 bourgeoisie and the dominant classes, i.e. over the power bloc' . Opposition of the domestic bourgeoisie to the dictatorships, especially in Greece, Poulantzas wrote, was always weak and vacillating, and if it should ultimately prove able to recapture the leadership of the democratisation process, this would in no way mean that a genuine process of national independence had been set 123 under way.

However, and again in words reminiscent of the Comintern theses on the revolutionary stage of bourgeois democracy, Poulantzas argued that the 'policy' of the domestic bourgeoisie was different from that of the comprador fraction of capital which supported the dictatorships. The domestic bourgeoisie accepted trade unionism and, through their struggle against the compradors, 'sought to win the support of th popular masses and the working class' in the domestics' own cause of 121 Poulantzas, Crisis of the Dictatorships, p. 51. 122 ibid., pp. 43-4. 123 ibid., p. 51.

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agrarian reform and 'endogenous industrialization'. Poulantzas appealed to his readership to recognise that the question for Communist parties is not about 'whether a tacf cal alliance, with the domestic bourgeoisie 'should be made, but rather on whether it could be made'. He concluded that for this peripheral European conjuncture, it could so 1 be made. 25 Given his premise of strategic calculation to define class position, and the logic which is so involved in the political-economic inversion, Poulantzas ends up by reiterating the orthodox 1928 Cornintern thesis. Thus, he repeats the conclusion that the national bourgeoisie vacillated between the causes of national independence and imperialism. Poulantzas' reiteration of the Comintern thesis made a 'tendential' distinction between the class positions of the comprador and national bourgeoisie. He argued that the distinction is neither spatially defined by reference to its 'enclosure' within national territory nor 'a statistical and empirical distinction' which is then fixed in time. One fraction of capital may be tied to foreign capital but then, by becoming relatively autonomous, enter 'the ranks of the domestic bourgeoisie' and visa . . . 'for a process o f constant versa. 126 H owever, m stressing th• e necessity reclassification', Poulantzas effectively returned to the warp and weave of the Comintem classifications of the fit between class position and the position which a bourgeoisie was deemed to occupy in relation to imperialism. It also should be noted that the reiteration, involving a reworking of the concept of a national as domestic bourgeoisie, is consistent with the latterday critics of Roy who argue that the independent class position of the Indian bourgeoisie in relation to imperialism should be neither over- nor under-estimated. The Mukherjees, Chandra and Gupta all claimed that it was Roy and his adherents' dismissal of the 'national' bourgeoisie, as a class with the potential to be incorporated in the progressive cause of national independence, which made it turn towards 124 ibid., pp. 55-56. 125 ibid., pp. 59-60. 126 ibid., p. 45.

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the right wing of Congr ss. By dismissing the bourgeoisie as a class which had a r al inter st in national independence, the communist mov m nt in India allowed political space to be opened up in the national movement. This, so the argument runs, mistakenly explains why th national bourgeoisie found it relatively easy to gain hegemony o er the petit bourgeoisie and other intermediate classes. The argument is mi tak n because, as we have mentioned, it was Comintem opponents of Roy, and not Roy himself during 1928-9, who eschewed class alliance 127 and the cause of the united front for national independence. Moreover, there are variations on the theme of the intermediate class position of the indigenous bourgeoisie. It is regarded as being intermediate in both developing from an autochthonic source of accumulation and as part of international circuits of capital. Chandra, by way of example, claims that the development of indigenous capitalist enterprise was an independent phenomenon within 'the economy of India' whose dependent development was predicated by its subordinate 128 enclosure within the world of capitalism. Roy, himself, pointed out in 1944 that India was about to become politically independent in a period of 'economic -interdependence' and asked: 'Will it be possible to fit a national-capitalist state in that picture? And will capitalism be able to 129 operate as a progressive and liberating force in that context?'. Returning to the Kenya debate, it was Kitching who followed Nicola Swainson by arguing that 'a ''national bourgeoisie" is that class or part of that class which, in the pursuit of its own interests, uses state power in a manner which speeds up the process of building the forces of production locally'. However, after having associated the criteria for assessing the historical development of a national bourgeoisie with criteria for establishing the basis of inner-directed or endogenou industrialisat�on, Kitching then postulated that 'coexistenc - of

127 Mukherjee and Mukh rj e, l111perialis111 and Indian npitnlism, pp. 7- ; h ndr,, Indian capitalist class, pp. 73-4,78; upta, Comintern, l11din, p. 150; upta, Roy's ritique of Com intern. 128 Chandra, Indian capitalist class, p. 60. 129 Roy, National Government, p. 5.

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"genuine" development on th periphery with the continued hegemony of international capital-' must be counted as a real possibility. Although industrialisation may happen through a 'national' bourgeoisie 'in alliance with international capital or in competition with it, in the current phase of world capitalist development, a "national bourgeoisie" is not a class that endeavours to exert total control over domestic industrial production or to pursue capital accumulation purely by exploitation of its own working class and peasantry.

In short, Kitching suggested that the possibility of 'a genuinely transformatory capitalist development', which 'massively' raises average productivity and real wages, 'may be possible without the need of a national bourgeoisie'. 130 Having ruled out the state socialist alternative to capitalist development in Kenya, the question then becomes one of fulfilling the pre-requisites for capitalism without a definitive class of capital and, indeed ,, capitalists whose orientation is defined according to their position in relation to state power. An overriding attention to the status of the 'national' of a class, by locating its presence, or absence, in relation to the international misses the other domain of what national 'doing' might mean. After all, the status of a national bourgeoisie for Kenya arises out of the contest for domestic, local sources of accumulation. As we indicated in chapter 1, when the domestic space of capital accumulation is so enclosed by the identity of the ethnic, "being' national has conveyed a different meaning from what is intended by pursuing capital accumulation according to control over 'domestic' industrial production. We return to this issue in chapters 4 and 5, but it is clear that the two-sided meaning of the national should be borne in mind when the question of the status of a bourgeoisie is addressed in relation to the international. The recurrent question of debate, before and after Comintem, has been whether the conditions for socialist revolution entailed that former colonial countries had to be developed by intent, b coming cas s of 130 Kitching, National bourgeoisie, pp. 50-1.

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medium and advanced capitalist developm nt, or wheth r it was possibl for uch r volution to er ate its own condition of d velopment. In ariably, the id al of capitali t d velopment involves a conception of capitalism, to develop producti forces, but does not include a historically given class of capitalists who are regarded as being dysfunctional for capitalism as the means of national development. Kitching mad the ideal clear when he set out two ideological prerequisites for 'genuine' capitalist development. The first, involving the 'creation of an indigenous technical cadre' to manage the incorporation of technology in local production processes, required the state to substitute for, or vitally compliment, private capitalists in industrial production. Furthermore, the second condition required 'the creation and 'a "social discipline" within peripheral capitalist economies that is conducive to effective extraction of surplus value and rapid accumulation' by all capital, involved ideology which has been 1 historically associated with the hegemony of a bourgeoisie. 13 ow, such prerequisites of capitalist development arise out of two prior pr mises. Firstly, and as occurred during the course of the Comintern debates, the ideal course of capitalist development is unequivocally associated with manufacturing industry by treating the category of industrial capital as if it were equivalent to the activities of manufacturing. It is presupposed that activity outside manufacturing belongs either to the non-capitalist epoch of feudalism and/ or pre-capitalist economy or the sphere of non-productive capital. Secondly ,, while the task of imposing 'social discipline' is historically associated, as in the case of Kitching, with 'bourgeois ideology', the implication is that the task can be carried out without th compass of the gi en bourgeoisie in question. Such presuppositions wer built into the Comintern d bates and they continue to account for mu h th t i n1i in from mor rec nt disputes.

131 ibid., p. 51.

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LACUNAE OF DEBATE

Agriculture While the agrarian question loomed large in the Comintem debates, it was submerged, in the case of India at any rate, by the focus on the industrialisation thesis. Indeed, in following Lenin's theses at the beginning of the decade, Kuusinen and others, who spoke for the orthodox Comintern line at the 1928 congress, continued to emphasise the peasantry as the· significant social force for the bourgeois democratic stage of revolution. Much was made of the economic differentiation of the peasantry, namely its classification as rich, middle and poor peasant farms, and the differential relation of these groups towards both feudal landlords and the emergent bourgeoisie. However much this focus appeared to fit the cases of India and China, the focus upon the potential of the bourgeoisie as a source of political agency for agrarian reform eclipsed attention which could have been paid to the economic position of the indigenous bourgeoisie in agriculture. Ray has noted, in passing for the India case, that both Birla and Walchand Hirachand, the railway contractor during the first world war who had moved into aircraft, auto and machine tools manufacture by the end of the second world war, had taken agricultural enterprise seriously. Their agricultural experimental schemes of the 1930s, involving an apparent mission, on the part of Walchand, to industrialise agriculture and, for Birla, to improve small-scale agriculture, came to naught. Yet, when Walchand turned to cane production and sugar manufacture after industrial protection was afforded to the industry in 1933, the enterprise, in contrast to the experimental schemes, proved 'so profitable that he turned a construction company within his group into a sugar company in the same year'. Ray also commented: The plain fact of the situation was that industrial investment was a lot more profitable than capitalist farming in the thirties. There was no point, given the structure of returns from different sectors of th con01ny, m 132 blaming capitalists for negl cting agricultur for industry. 132 Ray, Industrialization, pp. 281-2,288,289.

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Blame for the neglect of agricultur was her attributed t British officials who cont nd d, in Ray' word , 'that heavy indu try was a wrong strategy for India and that the available investment hould go into 3 agricultur '. 13 Y t, th c mpl x r ason for why the particular historical c ndition for capitalist agriculture are not profitable relative to industry, and oth r ources of accumulation, is no reason for supposing that agricultural production is g nerally extrinsic, as it might have b en for th India case, to the chas aft r money-profit. Neglect arises as much from the absences of historical reflection as from the attributes of policy. In short, th apparent neglect of the question of capitalist agriculture is a significant factor in understanding why the colonial question of the national bourgeoisie should have been so closely tied to that of industrialisation. Thus, Himbara's stark claim that 'black Kenyan capitalists', who constituted the central focus of much of the existing literature of the Kenya debate, 'were almost nonexistent', was a reflex of earlier constructions of the significance of indigenous capitalism. Whether consciously or not, an unremitting focus on large-scale manufacturing industry follows the contours of traditional theorising about the bourgeoisie in its colonial and semi-colonial integument. For the case of Kenya, where large-scale agriculture in the colonial period was neither of feudal relations of production nor a simple overhang of pre-capitalist economy, the genesis of the indigenous bourgeoisie can not be accounted for simply by describing its place within the development of manufacturing industry. As we will continue to stress below, the original source of capacity for indigenous African accumulation lay directly in agriculture. Furthermore, in Kenya as well as elsewhere in Africa, the political and ideological significance of the concept of an indig nou bourgeoisie lay in its aspiration to command the means of produ tion in large-scale agriculture.

133 ibid., p. 288.

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Trusteeship The second lacuna of debate follows from the first. The magnitude of industrial development is certainly one domain in which to establish the extent of a bourgeoisie's presence during the course of capitalist development. However, as Kitching sought to indicate, the extent to which a 'national' bourgeoisie might develop or not is based upon a far wider domain of social endeavour. Whether it is conceptualised as 'national' or not, the very idea of a bourgeoisie has always embraced the agency of social order. To be 'bourgeois' is to be, and act, through sources of activity which are both expected to engender economic efficiency and social order in the course of capitalist development. One example, that of the 'German bourgeoisie', probably the most problematic instance of the class in Europe, makes this point perfectly clear. In his exemplary historical overview of the problem, David Blackbourn has described the distinction between the Besitz- and Bildungsburgertum, the 'propertied' and 'educated bourgeoisie'. This nineteen-century distinction followed an earlier one, between the Stadtburger, the urban middle class which included businessmen, and the Weltburgertum, the cosmopolitan bourgeoisie who were defined by their place in the higher ranks of state service rather than according to relations of production. 134 Although the propertied bourgeoisie, increasingly orientated towards industrial production after mid-century, were amply distinguished from the state salariat and members of 'free professions', such as law and medicine, both shared the same social values. They believed that the values of hard work, achievement and competition that they represented were those of, and for, German society as a whole. In promoting the value of voluntary associations, for example, the bourgeoisie acted consciously to define their class existence as being separate from both the aristocracy and 'lower' ur�an classes, including 'what they called the "proletariat", and expressed fear of the 135 threat it posed to the social order'. The shared values and 134 Blackbourn, German bourgeoisie (1991), pp. 7,2. 135 ibid., p. 16.

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self-conscious defining actions deemed capitalists and members of the higher ranked salariat and professionals to be of the bourgeoisie. To confine the appraisal of the bourgeoisie to a ranking of capitalists, and then to reduce this ranking to that of industrial capitalists, is to miss the most significant characteristic of the trajectory of indigenous accumulation. In Kenya, the bourgeoisie emerged as the self-conscious athomi, literally the educated who, due to racial prohibition and exclusion, were confined to the lower ranks of the state salariat. By virtue of straddling, social distinction between the educated and propertied could not acquire social significance, either in the colonial period, when p_roperty was confined to relatively small-scale property, or in the immediate post-colonial period, when the higher salariat shot into the orbit of large-scale proprietorship. The kind of thesis which Himbara has proposed is to be questioned on two counts. Himbara has effectively marked out a racial demarcation between a successful Besitz- bourgeoisie which is engaged in industrial development, and a failed Bi/dungs- bourgeoisie, of the state salariat, which has rendered the state incapable of national development and made it dependent on 'foreign capital'. One is deemed to be the authentic, 'genuine' indigenous bourgeoisie of Asian capital; the other is the 'corrupt', comprador class of educated Africans who have failed to make the transition to industrial capital because they straddled between state service and property. By the same token, in commanding state power as both Besitz- and Bildungs- bourgeoisie, the African comprador class, of wealth rather than capital, has prevented the emergence of a genuine national bourgeoisie by confining the agency of Kenya Asian capital to large-scale trade and industry. Through the account of the trajectory of Kenya Asian capital in chapter 4, contra Himbara, we show that there was no aspiration to be 'national' on the part of big Asian business and that its truncated political role after political independence followed precisely from its command over internal sources of accumulation from trade and industry. There is also a reluctance, in much of the Indian economic history writing, to thrust a 'national' industrialising n1antle upon big business. For example, Bagchi suggested that 'the views' of Indian industrial capitalists, 'did not advance beyond' the 'mercantilist platitudes' associated with the demands for industrial protection and the lower

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136

rupee rate. Chandavarkar goes further in his scathing attack on any interpretation which is founded upon a unilineat evolutionary scheme for the development of large-scale industry by aspirant industrial capitalists. The strong implication here is that entrepreneurs did not make investment decisions upon some conception of a mission to industrialise India. As we mentioned above, Chandavarkar's view is of capitalists making decisions upon the basis of short-term profitability, responding to immediate constraints of barriers against trade, market conditions and labour militancy. 137 Since Chandavarkar also terms short-term response as 'strategy', it is possible that the strategy of organising business, whether or not as a source of political agency, for state support for industrial investment is compatible with the premise that investment decisions are founded according to profit expectations. However, this view is clearly counter to that advanced by Ray, for example, who makes much play of the national motivation of Indian big business, or its leading captains of industry at any rate, to industrialise India. Thus, when Ray explained why Marwaris, such as Birla and Sarupchand Hukumchand, displaced Bengalis in the large-scale jute trade of Calcutta at the turn of the century and were the first Indians to start mills after the first world war, he linked the idea of a 'superior "resource group'", defined according to the network of credit and information relations extant within a 'merchant community', to that of nationalism: Although more orthodox in their outlook on life than the highly politicized professional and service classes, the merchant communities in their own way were quite as deeply imbued with the spirit of nationalism3 and this 1 8 was an important influence on their entrepreneurial behaviour.

Ray has gone as far as to claim that ther was 'an aggressi willingness to sustain losses for th sake of national enterpri '. Among other 136 Bagchi, Private lnvestnr nt, p. 426 (qu t d by Ray, Industrialization, p. 287). 137 Chandavarkar, Industrialisation before 1947, p. pp. 27-37. 138 Ray, Industrialization, pp. 286,287.

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examples, Ray ugg sted that 'in th matter of the flotation of Hind Motors and Pr mi r Automobiles, Birla and Walchand wer not motivated by profit incentives, but by much larger con id rations, since neither technological nor market factors envisag d any visions of profitable car manufactur ' in the then 'foreseeable future'. Larger con ideration included the appeal of Mohandas Gandhi's 'concept of truste ship of wealth by capitalists on b half of th p ople'; the maxim of Sir Purshotamdas Thakurdas that, without nationalism, the rationale of big business was 'reduc d to mere xploitation of th masses'; and a 'morbid pr occupation with the development of the industrial resources 139 of India in order to r move the poverty and social misery' of India. We should be sceptical of the significance which Ray has attached to industrial trusteeship upon the Besitz- bourgeoisie of pre-1947 India for the simple reason that his claim makes no distinction between the intentions of incipient industrialists and their preoccupations during, and after, the process of establishing their large-scale enterprises. However, we repeat that there need be no essential compatibility between the design of development, according to industrial trusteeship, and the course of industrial development which is interpreted according to the precepts and criteria of capital accumulation. Our argument, for the Kenya case, where the 'larger considerations' were played out through the philanthropy of successful Kenya Asian business towards the poor, is merely that, during the process of industrial development, there was no singular Asian conception of an industrialising mission. Further, there was no express need to tie this mission to that of national development. In the Kenya case, the mission for national development was thrust upon the aspirant African bourgeoisie; Kenya A ian capitalists were expected, and probably hoped, to get on with the busines of manufacturing industry. In chapter 5, we will how the African indig nous class f capit 1 aspired to be the 'national' on account of both it a pirati n t command state power and its position in agriculture. Th 'nati n lit ' f th 139 ibid., pp. 287,296,301.

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indigenous bourgeoisie was of race because the colonial demarcation of land had created the racial difference between large-scale European agriculture and small-scale African agriculture. In the attempt to command the land of the white highlands, the first layer of indigenous capital, so closely associated with the Kikuyu, acquired its ethnic badge of identity. The formation of Asian capital through the transition from trade to manufacturing industry could be no simple template for the formation of African capital because the latter occurred through the state and in the name of national development. It was likewise when a different ethnic bloc, that of the Kalenjin-Masai alliance, also attempted to find its place in the sun as another layer of indigenous accumulation. In the face of conditions given by prior periods of capitalist development, the state itself became the direct source of indigenous accumulation. In ensuring that the state could become such a source, as Himbara has toiled to show, the Moi regime has denuded the state of its function over a broad area of intervention in the economy and made it dependent on international agencies of aid and development for both the formulation and execution of economic policy. 'National development', therefore, becomes a mere phrase for the political assertion of state authority in Kenya.

3

'NATIONAL' AND INTERNAL CAPITAL: SOUTH AFRICA AND THE POULANTZIANS

Colonial Kenya 1 it can be argued 1 was constructed through settlement and official practice, by way of a triangulation of forces emanating from India and South Africa. Firstly India 1 in one part of the official mind, was the origin of traders as well as labour to build the railway to 1 Uganda , and the template for the regulation of commerce. South Africa was one source for white settlement on the land as well as the origin of much official practice towards racial prohibition, labour legislation and the regulation of large-scale agriculture. Secondly, the lacunae of the Comintern debates, and especially that of the origins of indigenous capital through its location in large-scale agriculture, were filled in the South African case of Afrikaner capital. Thirdly, Poulantzas' theorising on the contradictions between different fractions of capital has weighed heavily, and perhaps most so, in the historical account of national capital in South Africa. Here, according to the influential 'Poulantzian' view, it was large-scale agriculture which served as the basis for the de elopment of 'national capital'. During the 1970s, as a coeval counterpart to th un oldin of th Kenya d bat Rob rt Davies, David Kaplan, Mik Morris and Dan I

1

See Rothchild, Racial BargnininK (1973), p. 40.

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O'M ara s tout a Poulantzian view of the 'uneven development of the different capitalist fractions' in South African. 'As an imperialist social formation', they wrote, 'South Africa was characterised by the co-existence of imperial or foreign capital and indigenous, national capital'. Furthermore, they argued: The conflict between these fractions evolved around the desired trajectory of capitalist development - crudely whether South Africa was to remain an economic chattel of irnperialism or to generate its own national capitalist development.

Davies et al answered the question by claiming that the 'early assumption of hegemony by national capital is the 'rmique' feature of the South African State' and, then, concluded: Precisely by creating the conditions for the transformation of the economy to its present high level of industrialisation, national capital paved the way for the collapse of the very distinction between imperialist and national capitals as it had existed in the earlier period.2

The period in question was between 1924, the beginning of the Pact period of government when the state set about the intent to industrialise through industrial protection and state industrial corporations, and 1948, when the reconstituted National Party won the white electoral vote to command state power on its own. Also during this period, there was an acceleration in the initial metamorphosis of national capital, a change in the ethnic composition of the politically dominant bourgeoisie in South Africa. Very broadly, it was between 1924 and 1948 that an Afrikaner 2 Davies, Kaplan, Morris, O'Meara, Class struggle and periodisation (1976), pp. 5,29. 'The analysis', the authors prefaced, 'draws heavily on the theoretical work of icos Poulantzas'. Kaplan later referr d to 'the Poulantzian schem w used'. O'M ara was critical of the 'verificationist analysis' which the S uth African Comm uni t Party followed by applying Poulantza ' th ory ff scism t unju tifiably x lain 'fa ci m' in South Africa. However, O'M ara did n t dis nt fr m th more gen ral cheme in his hi tory of the development of Afrikaans capit l. Kaplan, Relations of production (1980), p. 135; 'Meara, Volkskapitalisme (1983), pp. 9, 1 1.

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b urg oisie de eloped through a politically driv n conomic mov m nt, first t repre ent the nationality of capital again tan 'imp rialist inter st' and later, pecially aft r 1960, to rve t ward th 'interpenetrations' f diff r nt fraction f capita] in South Africa. In oth r words, it was pr ci ely because of the emergence of a particular indigenous bour oi ie, in and of S uth Africa, that national capital wa to xi t without being subsumed by the international capital, of finance and pr duction, which prep nd rat d ov r mining and which, by 1948, wa well establi h d in large-s ale manufacturing industry. How ver, lar e- cale agricultur , a cording to thi s view, was independ nt of 'for ign ownership and control'. As uch, agriculture was the main source of n1oney capital for the financial in titution which members of an aspirant Afrikaner capitalist clas established in their endeavour to find what one of their number, M.S. Louw in 1939 called 'the legitimate 3 har in th comm rce and industry' of South Africa. At the very am time that Davies et al advanced their argument, Manfred Bienefeld and Duncan Innis produced an implied critique of the oulantzian theses. Later, Innis and Martin Plaut explicitly reinforced the critique. A debate, akin to the contemporaneous one for Kenya, was set in ni.otion . .t South Africa, Bienefeld and Innis had argued, 'remains a periph ral economy in spite of its considerable growth and its ub tantial capacity to attract foreign investment'. They defined a peripheral economy as 'one which doe not constitute the ba e of operations of a significant concentration of internationally active capitar. A corollary of the peripheral status of 'capitalist underdeveloped economies', Bienef ld and Innis also argued, was that such economi 'app ar to be gen rally unable to mobilise local resources to satisfy need '. Two implications followed. The first was that sin e internationally footloos firms could withdraw inv . tm nt 'r adily', the threat of an inv stm nt strik weakened both 'the pot ntial pow r of the tate vi -a-vis int rnational capital' and that of 'lab ur in it tru gl Quoted in O'M ar,, Volksknpitnlis11H·, p. 112. Bienefeld and [nnis, apitnl n c1111111/ntio11 (1976); Innis , 1 d Plt1 1t, 4 the state, (1978); Kaplan, R..elntions of prod11clio11 rin I r •join :I 'r b Innis. 3

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5 with capital' . The second implication established what was dependent about 'national capital' in a peripheral economy such as South Africa. Bienefeld and Innis rejected 'the distinction betvveen national and foreign capital based on the passport, residence, birthplace or other attributes of the owners'. Rather, the distinction betvveen national and international capital should be made 'according to the nature of the investment opportunities required to induce investment'. Since it is the need for international purchasing power which is at a premium to bring investment and intermediate goods into the economy, 'local' capitalist interests would be loathe to exchange international for national purchasing power and 'would invest their resources in South Africa only to the extent that they would thus obtain additional international purchasing power'. Therefore, local capitalist enterprises are put

on the same footing as purely international interests and the potential difference between them is reduced to the fact that these so-called locally based interests may be in a better position to identify and to take advantage of additional opportunities to earn hard international currency - or to obtain international purchasing power.

By way of historical example, Bienefeld and Innis pointed to the spurt of industrialisation during the second world war when the gross value of industrial output more than doubled. This was the period when 'national capital' suddenly gained access to export markets. It was also the period of upsurge, according to Bienefeld and Innis as if to anticipate O'Meara's impressive history of Afrikaner capital, which 'provided �e economic basis for the capture of State power in 1948 by the most nationally oriented fraction of the community - those united under the ideological banner of Afrikaner nationalism' . 6 However, regardless of the political effects set in train, South Africa continued to be a dependent, peripheral economy because minerals and agriculture continued, after the industrial upsurge, to be the primary means by which international

5 6

Bienefeld and Innis, Capital accum11lntion, pp. 31,33-4. ibid., pp. 31,42,47.

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purchasing power was commanded in export markets. National capitat Bienefeld and Innis contended, is the converse of the ability to get international purchasing power directly. It is merely the means to share indirectly with international capital the benefits of access to international markets and finance. Both the state corporations, such a Escom (the Electricity Supply Commission) and Iscor (the Iron and Steel Corporation), and the 'nationalist' finance-industrial houses, whethe of Anglophone or Afrikaner ownership, sought to internationalise their operations in various forms of affiliation with international firms. Likewise, Nancy Clark has also criticised Davies et al_ for disregarding the extent to which 'state corporations were 'not antagonistic to foreign capital' and that it was therefore misleading to describe them as the 'cornerstone' of early 'national capitalist 7 development'. Whereas Davies et al posited the eclipse of the national/international capital distinction after the development of national capital, and Afrikaner big business in particular, adherents of the dependency thesis argue that no such fundamental distinction could be made at the onset, and during the course of, any historical process of indigenous capitalist development in South Africa. If 'national capital' is distinctive and not the mere chimera of social and political phenomena, then its real force arises by way of the state. The 'social-political bases of capital', Bienefeld and Innis also supposed, 'continue to be national in character' in order to guarantee legal and constitutional conditions for the reproduction of capital. However, the state in the periphery is subordinate in so far as 'capital which has become international in terms of its purchasing power must reconcile 8 this at the political level through some form of imperialism'. Equally, such was the predicament of being subordinate to 'imperialism' which Afrikaner capital attempted to challenge. Ultimat ly, therefore, the Bienefeld-Innis critique of th South African Poulantzians i that whatever the subjectiv intent to challenge the 'monopoly capital' of 7

ibid., p. 49; Clark, State corporalio11s (1987), pp. 100, 99; , lso

8

Bienefeld and Innis, Capital accu111ulation, p. 38.

Industry and Class (1984).

e

hri tie, Electricity,

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imperialism, national capital has been inherently subsumed within the international arena of capital. AFRIKANER CAPITAL

O'Meara' s history of the formation of Afrikaner capital makes the challenge against imperialism emphatic. The very ground upon which there was an intent to 'develop an explicitly Afrikaner capital', through the economic movement which intended 'to help the Afrikaner become an entrepreneur, an employer and an owner of capital', was founded upon Dr Malan's question of 'nationalism or imperialism'. "When the first prime minister of the first 'new South Africa' of 1948 coined the phrase he made precise what O'Meara has explained: All the obstacles to economic advance and the severe pressures induced by the structure of South African capitalism were experienced as discrimination against Afrikaners on behalf of the monopolies and 9 'imperialism'.

L.J. Du Plessis, 'political commissar' of a maJor Broederbond faction, refused to contemplate any form of 'economic collaboration' with 'cooperative Imperialism'. He wrote in 1933: 'In place of the old political 10 subjugation we now enter a period of economic dependence'. The regeneration of Afrikaner nationalism from 1934 to 1948 associated the anglophone capital of South Africa with that of imperialism. The economic movement to secure the 'legitimate place' of Afrikaner-owned and controlled enterprise in finance, trade and industry had to be two-pronged. One, earlier prong of the movement arose directly from the relatively prosperous and 'well-educated' Afrikaners who owned large farms in the Cape Province. The second came from the petit-bourgeoisie and

9 10

O'Meara, Votksknpitalisme, pp. 88,134,35,55. ibid., p. 65 (guoting from Koers, Augu t 1933).

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intermediate strata of th northern provinc s, sp cially the Transvaal, who had found d th Broederbond. When the two prongs came together during the late 1930s in th common struggle against th subordination of Afrikaner economic interests, th re was an immediate clash of view as t the best means of advancing enterprise. At issue was the question of wheth r large-scale corporate enterprise which dominated all Afrikan r classes, including whit labour, was to be replicated as Afrikan r-owned but profit-motivated big business or whether Afrikaner money capital was to be co-operatively organised around schemes of mall-property owners who secured subsistence independently of 'imperial' control. As was to be expected, the latter vision of a 'peoples' capitalism was subsumed by the emergence of Afrikaner big business. However, and a major point of O'Meara's history, the vision was an integral part of the economic mobilisation which accompanied the political struggle to win state power in 1948 and thereby establish the hegemony of Afrikaner capital over the conditions to secure the general 11 reproduction of capital in South Africa. Trusteeship was at stake. Firstly, O'Meara paid attention to the way in which the intent to develop Afrikaner business was predicated upon the poor white problem of poverty and unemployment. As agriculture in the northern Provinces was increasingly concentrated in large farms, therefore forcing small-farm proprietors off the land, and as black unskilled and semi-skilled labour was to be increasingly employed in mining and large-scale manufacturing, thereby displacing white labour employment, the poor white problem became a focus of development effort. The loss of white productive force, it was presumed, would threaten the economic potential of an Afrikaner nation. While such fear may not have been absent from the minds of the aspirant Cape Afrikaner capitalists, the burden of trusteeship for r solving the poor white problem was a central aspect of the s cond prong of the economic movement. If Christian nationalism, with its strong social po iti i t overtones, was the ideological c ment of the national m v n1 nt, th n

11

ibid., chs. 7-9.

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it put a primacy on due service, including that of profit-motivated 12 'entrepreneurs', to the Afrikaner nation. Secondly, and here O'Meara has been subject to critique, trusteeship for the Afrikaner poor overlapped with the conviction that Afrikaners had both the right and duty to assume the role of trusteeship for black Africans in South Africa. For instance, Deborah Posel has complained that O'Meara discounted the significance of a grand design for apartheid before 1948. Whereas O'Meara attached significance to 'practical' apartheid, involving different measures of racial exclusion and separation, he dismissed the idea of 'total' apartheid, involving full separate development and including the exclusion of black labour from white enterprise, as idle, 'ivory tower' and academic speculation. Posel has argued that while the Afrikaner national vision of separate development was neither unique nor new to South Africa, its post-second world war integument involved a systematic idea of trusteeship. She referred, for instance, to the idea that by 'acting on behalf of the white race', the 'Afrikaner volk simultaneously fulfilled its 'natural role as 'trustee' (voog) of the African peoples, by undertaking to protect their distinct ethnic and cultural identities'. For example, when one of the proponents of total apartheid, Professor G.A. Cronje attempted to rebut the meaning of practical apartheid, he did so in a book entitled Voogdyskap en Apartheid (Trusteeship and Apartheid). 13 Yet, despite her intention to critique O'Meara, Posel shares his interpretation of the significance of practical apartheid for the Afrikaner economic movement. The Afrikaanse Handelsinstituut (AHI) was launched in 1942 by the Broederbond to mobilise support for both big and small Afrikaner business. Both Posel and O'Meara explain that the AHI's rejection of total apartheid was predicated upon one of the main struts of post-1948 apartheid policy. As a result of the post-1939 spurt of industrialisation, white large-farm agriculture faced the cons quenc s of the mo ement of black labour power fron1. cow1tryside to town. It was not merely that 12 13

ibid., pp. 99,104,106,109,219,221,248. Posel, Apartheid before 1948 (1987), pp. 125-6,135.

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labour shortage drove up real labour costs for farms but that any proportionate increase in money wages that was higher than farm money revenues reduced the profitability of large-farm agriculture. And, as O'Meara has spelt out in much detail, it was the profits from agriculture which provided the saving funds for the institutions of the Afrikaner . 14 economic movement. The finance house was the medium used by Afrikaner capital to further accumulation in commerce and industry. In 1918, W.A. Hofrneyer and other Cape farmers founded both Suid-Afrikaanse Nasionale Trust Maatskaapy (South African National Trust Company - Santam) andl its wholly owned subsidiary life assurance company, Sanlam, which served as the major vehicle for assembling finance for Afrikaner investment in commerce and industry. By 1981, it should be noted, Sanlam controlled more than £19bn of assets, 'or an equivalent of two-thirds the value of foreign investment in South Africa'. After Anglo-American, of the famed 'hoggenheimer-imperial' nexus, Sanlam was the second largest corporate entity in South Africa. Volkskas, the Afrikaner-owned bank set up by the Broederbond in 1934 and, as such, one fact which made Sanlam seek co-operation with the other prong of the economic movement, and Rembrandt, formed in 1940 also as part of the movement, were among 15 the eight largest South African companies in 1981. By this reckoning, there is little question that a half-century after the start of its endeavour, Afrikaner capital truly found its place in the sun and the procedural strategy of accumulation was ultimately successful. An initial strategy of accumulation which rested on assembling farmers' savings out of revenues and profits and then using blocs of finance to invest in commercial and industrial companies was extended to the second prong of the movement. As O'Meara points out, the growth of Sanlam assets was relatively slow until the late 1930s when the tvvo prongs joined to deepen Afrikaner economic movement. Savings of th Afrikaner salariat, professionals., workers and petty traders also w r

14 15

ibid., pp. 129-130, O'M ara, Volkskapitnlisme, pp. 176-7,236. Ibid.., pp. 98,102,199,204-5; Davies and O'Me rn, State of analysis (1984), p. 68.

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mobilised according to the original Sanlam principle. Volkskas followed suit. As Grietjie Verhoef also explained, Volkskas was founded as a 'people's savings bank on a cooperative basis': The reason for this strategy was that a financial institution was needed to help individuals, especially Afrikaners, who would not be accommodated at the existing banks or financial institutions. The underlying philosophy for a cooperative people's bank was that an institution of that nature, functioning countrywide, would be invaluable to the resolution of the poor white problem, since cooperative institutions would help people to stand on their own legs and help themselves.

Volkskas, whose original board consisted 'mainly of university professors, teachers and prominent Afrikaner cultural leaders, all closely associated with the Afrikaner Broederbond', was originally an instrument of trusteeship. The bank, Verhoef tells us, 'would foster a sense of responsibility and self-respect.' Its founder, J.J. Bosman, declared that the bank was to be 'born out of the people to serve the people'. 16 As long as it remained as a cooperative savings bank, and mainly confined itself to banking in the countryside, Volkskas did not pose a threat to the 'big two' anglo-controlled banks, Barclays and Standard who ran a virtual duopoly in the South African banking industry. Yet, it was clear from the outset that the bank was intended to develop into a fully fledged commercial bank, competing strongly for deposits with the anglophone banks. And what was intended actually did happen. Volkskas' growth, especially after 1939, was phenomenal. Between 1939 and 1950, the number of branches rose from 14 to 76, deposits and savings accounts increased from less than one-half to nearly twenty million pounds and paid-up capital grew from £20,000 to £1.Sm. Deposits, in particular, had increased annually by nearly 150 per cent between 1939 and 1947, and then, after 1948, also multiplied as National Party-controlled Union and local governrn nt authorities, plus parastatals such as Escom, Iscor and Sasol, transf rred many of their 16

G. Verhoef, Afrikaner nationalism (1992), pp. 117-118.

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17

accounts to the bank. As early as 1941, therefore, the big two banks objected to Volkskas joining the bank clearing house and it was only in 1947 that the Afrikaner-owned bank was permitted to join the banking cartel, 'thereby giving the other commercial banks influence over its actions'. Although Barclays prevented the Afrikaner bank from becoming 'the South African National Commercial Bank' in 1950, and despite the generally hostile competitive temper towards it, Volkskas 18 continued to grow during the following two decades. Moreover, growth was accompanied by the bank's development of its mission as a people's cooperative bank into the kind of credit mobilier, 'universal bank' which had been inspired by the nineteenth century Saint 19 Simonians in France and elsewhere. By taking over Trans-Oranje Finance and Investment, a hire-purchase company, and having been centrally involved in the setting-up of Nasionale Bouvereniging (National Building Society) in 1959, engineering a merger with the Saambou Building Society in 1969 and founding its own merchant bank, Volkskas was provided with 'an arm outside commercial banking, which improved its competitiveness in commercial banking'. In other words, by getting access to deposits outside the heavily regulated commercial bank sector, Volkskas 'hurt the commercial banks'. Whereas Volkskas accounted for a mere three per cent of all commercial banks assets in 1947, at the onset of the Afrikaner 'new' South Africa, one-fifth of such assets were controlled by the bank in 1977. Furthermore Volkskas bought General Mining in 1971, as well as diversifying into agricultural and manufacturing industrial enterprise. By the early 1970s, the bank had become an institution of finance capital which had developed, but far outstripped, the original mission: 'Volkskas leaned over towards the German/European comprehensive type of banking institution that holds a substantial amount of industrial and venture capital type of investments, moving away from the 17 O'Meara, Volkskapitalisme, tab! 10, p. 201; Verhoef, Afrikaner nationalism, pp. 121,130,148; Kobach, Political Capital {1990), pp. 105-6. 18 Verhoef, Afrikaner nationalism, pp. 123,124. 19 See Cowen and Shenton, Doctrines of Development, eh. 7.

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traditional English type of banking'. 20 Having promoted Afrikaner business across a range of industries and sectors, Volkskas during the 1980s returned to its former role as a commercial bank, but now devoid of any express Afrikaner complexion in its competitive capacity for drawing in deposits and advancing loans. Significantly, Volkskas faced its strongest competitive threat from another Afrikaner-owned and rapidly growing bank. Trust Bank was founded by Cape Afrikaner big business in 1955 to circumvent regulation over structures of commercial banks' interest rates and liquidity ratios. In 1985 this bank, which first engineered financial innovations in the South African retail banking sector, overtook Volkskas in terms of size of assets and loan advances. Despite its name, Trust Bank did not inherit the kind of mission which had inspired the establishment of Volkskas. Rather, as Verhoef has also explained, Volkskas started off within the conservative mould typical of Afrikaner society, whereas Trust Bank stepped into the progressive era of young Afrikaner business concerns, wanting to compete effectively without being too exposed to the British banks or to strict commercial banking rules and . 21 requirements.

Volkskas was 'conservative' in a more precise banking sense in so far as its ratio of paid-up capital to advances, and deposits, had been significantly higher than that of the older-established angle commercial banks. Notwithstanding its appeal to 'our people' for support, the first Afrikaner big bank had to offer more security, in the form of its capit�l base, to attract deposits away from the established banks. 22 When we turn, in chapter 5, to the 1980s phenomenon of indigenous banking in Kenya, the significance of a capital premium for newly-established banks will become clearer. Trust Bank, on the other hand, was deemed to be 'progressive' because it used financial innovations to attract deposits and advance loans, 20 21 22

Verhoef, Afrikaner nationalism., pp. 125-7,131. ibid., p. 149. ibid., pp. 132-3.

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mainly short to medium term, to finance both business and rapidly growing household needs, including those of post-1950s young and upwardly mobile Afrikaner professionals. Having induced clients to open current accounts by advancing credit without conventional collateral and after it built up its current account business, Trust Bank registered in 1982 as a commercial bank. As Verhoef commented, 'the unorthodox partner in banking was brought within the establishment of banking'. By then, significantly, Trust Bank had been taken over by Sanlam in 1977 to become the commercial banking arm of the first and largest finance house of Afrikaner capital. Indeed, when Sanlam rescued Trust Bank from its liquidity crisis in 1977 it relinquished its 17 per cent share of equity in Volkskas. Like Sanlam and Trust Bank itself, Volkskas had no further 'need to appeal' to Afrikaner nationalism once it had become part of the 23 big banks which competed for market share in South Africa. O'Meara' s evidence indicates that of the various vehicles used to assemble savings, only 'large undertakings, only those undertakings with access to relatively large amounts of capital, and which could invest it 24 productively, would succeed'. Sanlam and Volkskas were such undertakings. Whatever might have been the dependence of Sanlam, for instance, upon raising premiums from South Africa anglophones, O'Meara insists that the rate at which savings could be mobilised depended upon the economic performance of agriculture. In turn, the fluctuations of costs, revenues and output determined the extent of profitability of large-scale agriculture. 25 Therefore, it was essential for the development of non-agricultural enterprise after the post-1939 industrial spurt that a cap be put on increases in black labour wages. Urban influx control was designed to lock up black populations in the countryside. Controls over the movement of population and labour, especially through influx control, were the means to create a surfeit of labour pow r which would act to av1ngs dampen down increases in labour costs. Contrawi , to maxirni 23 24 25

ibid., pp. 138,149,150. O'Meara, Volkskapitalisme, p. 146. ibid., pp. 115-6,155-6,181-4.

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from Afrikaner workers, especially those employed in anglophone business, it was essential to raise the real wages of white workers, relati e to both black workers' wages and business profits. Such, O'Meara argues, was the restricted domain of the controlled economy 26 which accompanied the idea of practical apartheid. There was another strut of practical apartheid which has often been forgotten but which is given emphasis by O'Meara and which is significant for the Kenya case. Before the AHI and its associated bodies had set out to plan controls over the movement of black labour, they activated the means to exclude South African Indian trade and commerce from the arena of white consumption. During the 1940s, Indian traders were seen as the main competitive threat to the expansion of Afrikaner-owned commerce. The 1947 boycott movement and post-1948 apartheid legislation, especially the 1950 Group Areas Act, had a severe 27 impact upon Indian business. Even by 1948/9, Afrikaner traders accounted for one quarter of the 'commercial sector'. -'It was at the expense of other (Indian) petty traders', O'Meara wrote, -'that an 28 Afrikaner petty trading class was created'. However much the world of small trade was different from that of big business, the relatively marked extent of Afrikaner advance in trade crucially assisted the process of capital accumulation by Afrikaner big business in the vital period of the decade or so after 1948. AFRICAN

BUSINESS

What the Afrikaner economic movement had done to Indians was not to be allowed to happen to itself. Whether according to the criterion of 29 trusteeship for the bildungs- , or business for the besitz- bourgeoisie in 26 ibid., pp. 146,154-6,158-61,172,231-2. 27 ibid., pp. 168-70,217,218. 28 ibid., p. 220. 29 or a sociological ace unt of the ph nom non, s e Nyquist, African Middle Class Elite (1983). This is an early 1980s case study of the abaphakamileyo, the 'high ones', in the eastern Cape town of Grahamstown.

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South Africa, the limit of the national was set by the exclusion of black business and any aspirant African capitalist class from the polity and economy of a 'new' white South Africa. 'At the entrance to the world of trade', Leo Kuper wrote, 'stood the European gatekeeper, the urban local authority 1 granting or withholding licences, and the image of an African trading bourgeoisie was as remote from European policy as from traditional African life'. 30 While it is to be expected that much more academic work will be directed towards the trajectories of indigenous African capitalism in the latest 'new South Africa', two points can be made here. Firstly, as Alan Cobley's valuable account of pre-1950 African business has shown, there was no linear trajectory of African business development. The demand for freehold land titles, as opposed to landholding registered in the name of the community, was one important impetus behind the founding of the first African National Congress, the South African Native National Congress in 1912. Attempts to fend off controls over trade licences in urban and peri-urban areas were a persistent· focus of Indian and African business organisation before the second world war. Most significantly, the aspiration to advance African business, especially within the incubus of ANC, was strongest in the mid-1920s. Even the largest African trade union, the Industrial Commercial Workers Union 'regularly declared its intention of investing in rural and in commercial and industrial cooperative movements in the manner', so it was claimed, 'of a "true" trade union movement. 31 The ANC, during 1927, put forward a 13-point commercial and industrial programme for the advance of African business. The major points of the programme included the commitment to 'promote and organise business in the name and on behalf of the National congress'; to 'organ1se all bu iness men into an association for mutual assistance'; to make financial provision for such busin ss; and to nsure 'that busin s ar conduct d on modern methods'. Two y ars later, th vent nth annual convention 30 31

Kuper, African Bourgeoisie (1965), p. 263 (quot d in Cobley, Class (1990), p. 144). Cobley, Class, pp. 156-7,158.

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of Congress resolved the following: The encouragem nt of industrial and commercial organisations, and syndicat s must also be put into operation immediately. Our people must understand that w cannot hold our own without having business of our 32 wn.

It was a decade later, as we have seen, that Afrikaner business came to be politically organised with such effect. By then, and during the 1940s, th political capacity of the ANC to give effect to the intention to promote African business enterpr·se had waned. Together with the growing intensification of state control over the minimal extent of African business, the emergence of a new cadre of leadership effectively marginalised the presence of the earlier African business interest within the ANC itself. An overarching category of 'the black petty bourgeoisie' does not capture the differentiation at work within 'the community' of African business. A question of scale, as was noted earlier in the case of India and will be shown again in chapter five for Kenya, should not belie the tendency behind the phenomenon in question. However tenuous the aspiration might have been to promote African big business, the intent was present in South Africa of the 1920s and 1930s. Cobley has documented the case, for instance, of T.D. Mweli Skota who, in association with South African Asian business interests, promoted the African and Indian Trading Association Limited in 1927. He did so while serving as the ANC secretary-general. The idea of the company was to promote agribusiness, whereby African tenant farmers on company­ controlled land would produce foodstuffs for sale in company-owned outlets. During the 1930s, among other ventures, there were proposals to establish clothing, boot and shoe factories, to build housing for rent and to enter the newspaper and printing industry. While none of these ventures succeeded, the impression is that much effort was expended in the attempt to make the transition from petty and small trading into 32

quoted in ibid., p. 161.

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33

larger-scale business. Furthermore, the intention to promote African business was part and parcel of business organisations which confronted racial restrictions over commercial activity. From the 1925 founding of the Bantu Traders Association to that of the 1955 African Chamber of Commerce, 'in which the increasingly powerful lobby of African fixed traders and professional businessmen was mobilised in its own right', the expression of an African business interest waxed and waned but was never 34 extinguished. From the late 1960s, African-owned business, both in protected black areas and the bantustans, started to give effect to a more coherent economic movement of its own. Although, as mentioned, the National African Federated Chambers of Commerce (NAFCOC) had been formed in the mid-1950s, it started to act effectively when the claim for a legitimate place in commerce and industry was met by the miP.imal openings for black-owned business which the state made after Afrikaner capital had become an integral part of South African big business. NAFCOC both acted against racial prohibition and, as Roger Southall wrote in 1980, 'in conscious emulation of the Afrikaner bourgeoisie, its intent is to mobilise black capital for the advancement of African entrepreneurs by appeal to racial sentiment'. Southall continued, whilst operating within the framework of Separate Development, NAFCOC is attempting to establish the interests of its membership by appealing for concessions from Government on the basis of a claim to urban leadership and the supposed stability to be derived from the expansion of an African 35 middle class.

If such was the issue opened up in the Comintern debates of the 1920s, it is hardly surprising that we should find familiar theses cropping up in the dying days of both the old apartheid regim and of Comintern's successors during the 1980s. While our first point, that African busin ss development did not 33 34 35

ibid., pp. 153-6. ibid., pp. 145-150,151. Southall, African capitalism (1980), p. 49.

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follow a linear trajectory, is about the formation of the latest layer of domestic capital, our second is political. Our second point arises out of the later political significance of the African middle class in relation to the mass movement of the African National Congress and its alliance with the South African Communist Party. For instance, Richard Lewin raised the issue when he wrote in 1988 that although the bourgeoisie might want reform rather than socialist revolution, this does not imply that those sections of the bourgeoisie who favour bourgeois democracy cannot become allies of the working class and the mass of the people during the bourgeois democratic phase of the struggle.

Lewin then referred directly to Dr Sam Montsuenyane, the president of NAFCOC since 1968 and erstwhile doyen of the aspirant African capitalist class. Montsuenyane had visited the ANC in Zambia during 1968 and then commented: Black business was perceived as having a definite role in the liberation struggle of the black people for the very reason that its development up to now has been subject to the very constraints which hamper the black community generally.

While the working class should be at the head of the bourgeois democratic revolution, Lewin argued, the 'question is not so much the extent of the alliance but the form the alliance takes'. 36 Davies and O'Meara, the Poulantzians of old, not only shared this view but reiterated, as if subconsciously, the even older vintage of accusation against the Roy line of debate. They argued that essentially, the political task posed anew at the present conjuncture is for the working class to win the oppressed petty bourgeoisie into its own side on its own terms, rather than have its struggles and particular interests subordinated to a petty bourgeoisie-led struggle for non-racial capitalism.

36

Lewin, Class struggle, popular democratic struggle (1988), p. 22.

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Davies and O'Meara pointed to the 'vacillating character of the petty 37 bourgeoisie' and warned of the impending danger of nationalism which might block the possibility for socialism in South Africa. The vital difference from of old, and despite O'Meara's own earlier careful distinction between the Afrikaner petty- and bourgeoisie, was that the 'vacillating' and African was not a bourgeoisie but 'the petty bourgeoisie'. Debate, to repeat, moves forward and then further backward. THE

LAYERING OF CAPITAL

Davies et al used the Poulantzian definition of fractions of capital as the conceptual basis for their assertion that classes in a capitalist economy and society are 'not reproduced in a unity, but are fractured and divided'. More than one dominant class exists and the co-existence of dominant classes, so they claimed, is dependent upon 'the articulation' of capitalism with other modes of production. They continued, 'fractions' of capital 'rest on their differing roles in the expanded reproduction of capital'. 38 There is a problem of logic and history in the concept of fractions of capital. We mentioned that the merit of O'Meara' s history of Afrikaner capital was he clearly showed the creation of this capitalist class followed from an intent to find a 'legitimate' place in commerce and industry. The trajectory of class formation over time was significant in explaining why an Afrikaner bourgeoisie came to represent the political hegemony of capital as a whole in the particular case of South Africa. To define Afrikaner capital according to the fractioning of capital assumes that this particular fraction is both part of th expanded reproduction of capital and has a definitive role within the sch n1. of expanded reproduction. However, there is a marked ambiguity about 37 Davies and O'Meara, State of analysis, pp. 66,74; al o, Davi s and O'Meara, Total strategy (1985). 38 Davies, Kaplan, Morris, O'Meara, Class struggle and periodisation, p. 5.

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the relation of the class according to its role in the scheme of reproduction. Ambiguity arises because of 'the tendential' within Poulantzas's own analytical framework. As we mentioned, Poulantzas referred to the tendency for the position of a class, in his case whether the class was 'national' or 'comprador', to change over time. However, this diachronic tendency sits uneasily within the vertically-structured determination of fixed class positions. We are presented with a logical impression of capital-in-general which is vertically sliced into fractions of capital and the class, as a number of fractions, appears to be defined synchronically with respect to how the reproduction of capital is determined over time. In other words, we do not know whether the fraction is formed as a result of its own history of development or whether it is merely constituted by a role which arises from the general change in conditions for capitalist development. In the South African case, and according to Davies et al, the origin of Afrikaner capital lay in a competitive stage of large-scale, capitalist production in agriculture. The different fractions of Anglophone, foreign or imperialist capital invested in mining belonged to the monopoly stage of capitalism. If Afrikaner capital was a fraction, or had the potential to be so, of capital-in-general, then its position derived from its historically given existence as a capitalist class in agriculture. By the same logic any suggestion that this class belonged to a non-capitalist mode of production or constituted a petit-bourgeoisie would be unjustified. Alternatively, it is the place of agriculture, and the attendant supposition that agriculture is inherently 'competitive', in contradistinction to the 'monopoly' attribute of mining, which defines the role of the class fraction within the scheme of reproduction. We know, from O'Meara's history, that the Afrikaner class was formed by virtue of the capacity which agriculture realised to provide money-capital for accumulation in finance, and then large-scale manufacturing industry. But we also know that the later role of the class, in exercising hegemony over all capitals in South Africa, derived from the intent to refuse any historically allotted role in the expanded reproduction of capital. There is an inherent confusion, due to the vertically-constructed scheme of fractioning capitals, between the capacity for a class to accumulate capital and its intent to do so. Only by reading history backwards, by assuming that since the Afrikaner

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bourgeoisie had developed as a dominant capitalist class in mining and manufacturing, it had therefore assumed a change in role, is the fractioning procedure accommodated within the formal conception of the reproduction of capital in general. Like the South African case, fractions have been used to designate the difference between capitals, indigenous as well as international, for the 39 Kenya terms of the debate. Fractioning, we readily admit, was probably mistaken and we therefore here use the idea of a layer of capital to account for the development of internal capital in Kenya. Unlike the fractioning procedure, the concept of a layer of capital is governed by tl�e horizontal-like impression of diachronic change. Different layers of capital may co-exist, whether in conflict or not, during the course of any given historical period because their derivation arises from different historical grounds of class formation. There is no inbuilt supposition of a stage of capitalism, nor the degree of competition which might be associated with such a stage, to structurally determine the formation of a particular layer of capital. Nor do we suppose that the sectoral location of a capitalist layer, in manufacturing as opposed to agriculture, fixes class position in a vertically structured way. Rather, emphasis is given to how the formation of one particular layer is distinct from any other historically given layer of capital in Kenya. The development of indigenous capitalism has occurred through the layering of capital. In the same way that European-owned capital was both the source of impediment and opportunity for Kenya Asian capital accumulation, indigenous, African-owned capital emerged through its own procedures of accumulation. These procedures were as much governed by the historical presence of other layers of capital as by the intent of aspirant African capitalists to find their 'legitimate place' in commerce and industry. While the existenc of historically-giv n lay rs of capital may determine the capacities for accumulation by n wer layers of capital, no one layer of capital n d b r due d to anoth r, ither in 39 See Currie and Ray, State and class (1984). For a critique of the use of fractions in th Kenya a , alb it with a different purpose in mind than that intended here, see Godfrey, Kenya to 1990 (1986), pp. 28-29.

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time or space. Bearing in mind the history of Indian and South African classes of capital, and to anticipate the following account of Asian and African capital .in Kenya, we also should reiterate that the rhythm and timing of the emergence of a layer of capital determines how and whether a class of capital comes to occupy a dominant position within the development of capitalism at a particular place and/ or time. In the Kenya case, unlike India and South Africa where class organisations of the indigenous bourgeoisie had been cemented before 1947 and 1948 respectively, the aspirant class of African capitalists still had to find effective political means of advancing their economic interests when political independence arrived in 1963. Therefore, as much as the different international conjunctures of trade and money capital flows may determine the position of indigenous capital within different cases of capitalist development, it is the internal conjuncture of the economic and the political which explains why the development of a layer of capital may be thwarted. This, indeed, is why a layer of capital often appears absent from sight. However, any such apparent absence, from one or other form of activity, should not lead us to deduce that an 'authentic' trajectory of indigenous accumulation is missing for the case in question.

4

KENYA ASIAN CAPITAL AND THE KENYA DEBATE

1

Kenya Asian capital, Himbara claims, was the beneficiary of the intent of the colonial government to promote trade and, from the second world war, industrial development in Kenya. However, colonial authority had no general intention of stymieing business. On the contrary, post-war colonial government was biased towards the development of African business. In spite of this bias, and the far more intensive post-colonial state effort to promote African business ,, an African bourgeoisie failed to de elop. While the genuine indigenous bourgeoisie in Kenya was therefore Asian, the hold over state power by the failed African 'wealthy', the compradors incapable of true industrial development, prevented Kenya from becoming a successful case of national development. Despite all his claims about the significance of Kenya Asian capital in the industrial development of Kenya, Himbara does not anywhere pursue the question of the political relation between the Asian class of capital and the state for either the colonial or post-colonial period. or 1 During the late-1960s exodus of Asians from K nya to Britain, 'K n an A i n' wa used as a racially derogatory epithet since it implied that Asians \ re n t 'Briti h' but Kenyan and, therefore, should not be ntitled to freedom of ntry into Britain. o such connotation is implied here. We use 'Kenyan Asian' to indicat , n n m-r( i, l grounds, that the formation of Asian capital in Kenya was of K nyn rather than fr m the Indian th 1947 partition subcontinent. 'Asian' rather than 'Indian' hns be n stand.ird u , -' sin of the Indian subcontinent.

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for that matter is there any reference to the relation between the class representation of Asian capitalists and that of the emergent African bourgeoisie during the colonial perii.od. There is no attempt to explain why the united African-Asian front of the post-war period, with all the potential for creating the ideal national bourgeoisie which Himbara so clearly envisages, disappeared from sight when it became clear that it was to be the indigenous African bourgeoisie which would command post-colonial state power. The absence of any account of the politics of Indian capital is strange for two reasons. The first is that, for Swainson, who bears the burden of Himbara' s critique, accumulation cannot be reduced to an account of the activity of companies or the relative economic weight of a particular 'fraction' or layer of capital. At the outset of her most substantial work, The Development of Corporate Capitalism in Kenya, Swainson indicated that her purpose was to examine patterns of corporate accumulation and 'the political conditions which underlie particular periods of capitalist 2 development'. In examining the post-colonial period, Swainson' s theses of what became the first propositions of the debate were not about the 'relative development success', of indigenous capitalists and capitalism. The propositions were directed at an explanation for 'the hegemony of 3 indigenous (ie. African) capitalism' , the hegemony which combined and made possible 'two contradicto:ry trends' of 'nationalism and internationalism' . 4 In other words, Swainson was aware that the question of the indigenous bourgeoisie was not simply an empirical referent of the extent of industrial development and/ or a claim about the imagined ideal of national development. Secondly, even when Swainson did describe African indigenous capital as 'a rising national bourgeoisie' or an 'embryonic national 5 bourgeoisie' , her attempt was to ask what might be the economic,

2 Swainson, Corporate Capitalism (1980), p. 1. Emphasis in the original. 3 Swainson, State and economy (1978), p. 380; s e also Swainson, Corporate Capitalism, pp. 16,186-193. ibid., p. 17. Emphasis in the original. 4 Swainson, Rise of a national bourgeoisie (1977), pp. 39-55. 5

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political and id ological conditions necessary for the establishment of a bourgeoisi . Whil Himbara ti d these conditions together to explain why th African wealthy do not exist as a bourgeoisie, he has not equally done so in establishing the class existence of the only 'genuine indigenous bourgeoisie' in Kenya. In criticising Swainson for overestima­ ting the extent of the development of African capital, Himbara was able to use accounts of the political and ideological conditions for the presence of this class. Yet, in the argument against those who allegedly underestimate the Kenya Asian class of capital, especially in the post-colonial period, Himbara's silence about the relation of the class to the state is thunderous. Himbara's later silence stands in marked contrast to his earlier recognition of the importance of the colonial government for Kenya Asian capital. Whether at the end of the nineteenth century or the beginning of the next, the colonial state apparatus facilitated the expansion of Asian capitalists. Thus, Himbara commented: In the aftermath of the [Imperial British East Africa Company's] collapse in 1895, formal colonial rule was proclaimed. Together with the railway built to link the coast and the hinterland, the embryonic state apparatus then in place provided both protection and physical infrastructures that enabled coastal merchants and new Indian migrants to spread merchant 6 activities throughout East Africa.

Later, during and after the second world war, Himbara's thesis is that industrialisation occurred under the aegis of British colonial authority when government policy was to stimulate import substituting manufacturing in the colony. Himbara charts the rise of the Ministry of Commerce and Industry in the late colonial period, and approvingly cites the encouragement given to local industrialists, including Asians, 7 to establish and xtend manufacturing nterprise in Kenya. Subsequently, Himbara contends, the post-colonial state b cam a fetter upon developm nt in K nya. Y t, in pite of th 'di integration' 6 7

Himbara, Kenyan Capitalists, pp. 35-36. ibid., pp. 41-4.

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of the state apparatus, including the manifold instances of the more recent 'fall' and 'almost total collapse and disparagement of national 8 institutions', manufacturing continued to expand. Himbara is able to conclude, therefore, that the acceleration of the degree of domination over manufacturing by Kenya Asian capital during the post-colonial period has happened without the exercise of any political power on the part of Asian big business. It has also happened without, and even arguably against, th� exercise of state power to promote industrialisation through internal capital accumulation. Political conditions are absent from Himbara's account of the significance of Kenya Asian post-colonial domination over manufacturing because his method is to deploy subjective factors as the determining factors (which distinguish) the Indians from businessmen in other Kenyan communities'. Subjective factors include 'commercial skills', 'sheer determination and hard work', 'vision', 'patience', 'general efficiency and competitive edge' and 'the role of family units and collective organizations in providing mechanisms to engender discipline 9 and cohesion' . By emphasising these subjective factors, Himbara can claim that the relative success of Asian business stretches continuously over the colonial and post-colonial periods as a whole. In ignoring the constant necessity of state power to ensure the conditions for accumulation, Himbara also is able to return to the old historical argument, that in as much as the state in Kenya was ever 10 'developmental', this was because it suited 'external interests'. Such was the interest of the British colonial administration during and after the second world war when the expansion of manufacturing was given priority, or as much priority as European-owned estate agriculture. 11 1

8 ibid., p. 115. 9 ihid., p. 35. 10 This 'original' argument was made by Woolf, Britain nnd K nya (1974), eh. 1. Richard Woolf's account covers th years when, according to Himbara, Kenya Indians were establishing themselv s as lhe indigenous class of pital. It is ther for of interest to note that Woolf pays 'minimal attention' to th Asi n pr nc 'b_ cttse of its tangential relation to the focus of our investigation' (p. xv), ie. the 'dev lopm nt' of Kenya. 11 Himbara, Kenyan Capitalists, pp. 43-4.

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After indep ndence, however, Himbara's argument is that the state ceased to be developmental in that its inherited apparatus was destroyed by the passage of political power into the hands of the African 'wealthy'. By default, th only prospect for national development lay with the Kenya Asian layer of internal capital even if, by implication, political power has not so far been central to its commercial and industrial success. There is little doubt that it is a daunting task to provide an account of the ties of political representation of Kenya Asian business. The most reputable descriptions of the politics of independent Kenya, including those by Cherry Gertzel, Yash Ghai and Patrick McAuslan, Donald Rothchild and David Goldsworthy, do little to lift the veil on the question of Asian business representation in the post-colonial state. 12 However, from the absence of empirical material it simply cannot be inferred that there was no such representation. And, if there is no account because there is no such phenomenon, the absence has to be explained rather than ignored. Our tentative presumption, which can only be a pointer for further work to unravel this issue, is that the class of Kenya Asian capital has been represented in state power for most of the century but that its representation has always been mediated through the exercise of state authority., firstly by Europeans and subsequently Africans. To this extent, there is continuity between governments as well as regimes of the colonial and post-colonial periods. More significantly, our presumption may explain why the Kenya Asian class of capital cannot be construed either to be an indigenous or a national bourgeoisie. 1l2 Gertzel, Politics of Independent Kenya (1974), does not have an entry for either Asians or Indians in the index. Goldsworthy, Tom Mboya (1982), makes little mention with th important exception discussed below, while Ghai and McAuslan, Public Law and Political Change (1970), confines discussion of the Indian community to pre-independ nc matt rs. Rothchild, Racial Bargaining (1973), mainly focuses upon the post-colonial hift in po er and how th attitudes held by Africans and non-Africans, Europe ns nd sians, aff et d and buttressed changes in state practices. Even L ys, in Underdevelopment in Kenya, did not make the class politically present ither b for or.: ft rind p nd nc , d pit pronouncing that Asians, by the arly 1950s, 'had pr due d a rn r hant apitali t le whi h was poised to become an indigenous ind u trial b urg i i f the classic typ ' (p. 3 �-

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To understand the early 'national' aspiration of the Kenya Asian bourgeoisie, it is important to recall that at least as early as the end of nineteenth century, some Indians at home and in East Africa hoped to include Kenya within an Indian Empire. In words akin to the 1910 description of East Africa by the British Special Commissioner for Uganda, Sir Harry Johnston, as I the America of the Hindu', A.M. Jeevanjee, an Indian leader in Kenya, advocated 'the annexation of this African territory to the Indian Empire, with provincial Government under the Indian Viceroy'. Were Kenya to be 'opened to us', Jeevanjee 13 continued, 'in a very few years it will be a second India'. Jeevanjee denied he had ever claimed paramount power for Indians in East Africa but Robert Gregory recounts that 'in the same statement, however, Jeevanjee admitted that he 'would go even so far as to advocate the annexation of this African territory to the Indian Empire. It had been an Asiatic kingdom in ancient time,' he argued, and 'it will be more beneficial to Great Britain if it is placed directly under the control of the Indian Government instead of the Colonial Office, with provincial government under the Indian Viceroy. If this is done, East Africa will assuredly become a Second India in no time.' Thereafter, colonial Kenya government 'Indian policy' was directed towards thwarting the ambition to incorporate Kenya within the vision of an Indian empire. And, contrawise, British colonial officials, from 1909 onwards, sought to use the Kenya Asian imperial ambition as a counter-weight to European 14 settler demands for greater economic and political power. Nevertheless, until the second world war at any rate, all forms of colonial nationalism, including that of Kenyan Asians, had to be blocked. It was necessary to refuse to recognise the force of Asian nationalism, both in spite and because of India Office pressure upon the Colonial Office, in order to 15 mark out a distinct Indian interest in Kenya. 13 See, for example, Ogot, Kenya under the British (1974), p. 256, Gregory, India and East Africa (1971), p. 91: 14 Singh, Asian protest movements (1972), p. 164. 15 Mangat, Immigrant co,nmunities (1976), pp. 467-488.

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Dana Seidenberg has noted that tthe relative significance of Asians in 16 the anti-colonial movement waxed and waned. Probably the first effective political organisation, the Indian Association, was founded in 1900, a decade before African political organisations appeared. The driving force behind the Indian Association was the demand for landed estates, a demand which had been earlier succoured, for example, by the 'development' role which Harry Johnston had thrust upon Asian 17 immigrants. Gregory has emphasised the extent to which East Africa, and Kenya in particular, was posited as the receptacle for the relative surplus population of the sub-continent. 'From the overcrowded provinces of India especially', wrote Lord Lugard in 1893, 'colonists might be drawn and this could effect a relief to congested districts'. He continued: 'It is not as imported coolie labour that I advocate the 18 introduction of the Indian, but as a colonist and settler'. Any such aim, to equate the Indian colony of Kenya as a colonisation project for Indians, ran counter to the claim of a British colony of landed estates for British settlers. As early as 1902, Sir Charles Elliot, the governor who acceded to the creation of the white highlands, refused to consider Asian land claims 19 and later deprecated the 'grant of land to Indians in the highlands'. Percy Girouard, governor from 1909 to 1912, confirmed the change in policy, and included a ban on further Asian settlement at Kibos, but was

16 Seidenberg, Uhuru (1983), chs. 2-6. A particularly notable omission from Himbara's work is any reference to Seidenberg. This book is the most substantial account of post-second world war Asian politics in Kenya; also see Mangat, Immigrant Communities, pp. 484-488 and Gregory, Quest (1993b), chs. 4, 6-8. 17 See, for example, Soff, British colonial attitudes (1972), p. 579. Harry Johnston had proclaimed in 1893 that Africa 'must be ruled by whites, developed by Indians, and worked by blacks'. (also quoted by Soff, p. 574 (quoting P. Mason, The Birth of a Dile111111n, London: OUP, 1958, p. 214). 18 F.D. Lugard, The Rise of our East African Empire. Vo/11me 1, London: Blackwood, 1893, pp. 488-9 (quoted in Gregory, India and East· Africa, pp. 49-50). 19 ibid., p. 577 (quoting from Sir harle Elliot, TI, Enst African Protectorate, London: Arnold, 1905, p. 179).

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willing to accede to Asian claims along the coast, where a European 20 landed interest was minimal. Gregory is right to point out that 'Asian agriculture was far more extensive in Kenya than has been assumed'.21 He has provided details of Kenya Asian involvement in large-farm sugar and sisal estates as well as small-scale farming in South Kavirondo district where, as late as 1937, 30 Asian dairies operated in Kisii alone, 22 before Afr"can business pressure forced their closure. However, it was the land of the white highlands which came to represent, as later for African political movements, what was expressly anti-colonial, and thereby "national', about the thrust of protest against exclusion from the major form of economic activity in colonial Kenya. The July 1923 Devonshire declaration, the doctrine which effectively subordinated Indian interests to those of the 'paramountcy' of the African "community', put paid to any lingering hopes that Kenya in its entirety might become an Indian colony. Although as late as March 1923, East Africa was still considered to be the place of 'natural resort' for India's unemployed artisan and clerical classes, the Devonshire white paper reiterated the denial of Asian access to the white highlands, maintained racial restrictions - from the electoral roll for Legco to the holding of firearms - and gave vent to immigration control from the sub-continent. A significant role,. during the ensuing wave of protest against the white paper, was played by the likes of Sirs Fazulbhoy Currimbhoy and Purshotamdas Thakurdas, the Indian captains of commerce and industry whom we met in chapter 2 above. Thereafter, as Gregory has shown, the focus of Kenya Asian political activity was to be less of India and more in Kenya, to struggle for the same political, 23 social and economic rights which Europeans had gained in the colony. Whatever the 'national aspiration' of the Kenya Asian bourgeoisie might have been in the very early years of colonial rule, the substantial

20 ibid., p. 582. 21 Gr gory, South Asians in East Africa (1993a), pp. 250-1. 22 ibid., pp. 251-2, als s e S ff, Indian influence (1968) and Spencer, Indian traders in the reserves (1981). 23 Gregory, India and ast Africa, pp. 223-252.

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economic position occupied by K nya Asians in trade proved to be a source of weakness in anti-colonial political action. Asian traders were politically vulnerabl becaus much of their trade pivoted upon the exchange of African-produced agricultural output for consumption goods. As such, 'Indians' were deemed to be responsible for the relative price movements which increasingly determined the living conditions of the majority of Africans. Affiliation between trade and race precluded Kenya Asians from leading popular protest against colonial authority. Whatever the degree to which Kenya Asians, like Africans, were affronted by the panoply of European privilege in Kenya, protest against colonial authority was instead led by those who represented the ambitions of another layer of internal capital - the indigenous African bourgeoisie. While Kenya Asians played a part protesting against racial blockage, and even at times appeared in the front line of protest, they could never head the anti-colonial movements which successfully drew the majority of the population of rural households into the 'nationalist' ranks. Strategically more significant than the political role of Asian capital were the Kenya Asian artisans and skilled workers who founded the first trade unions in Kenya. Between 1931 and 1962, the enumerated number of Asians increased from 43,000 to 176,000. Over the next seven years, the period of self-government, independence and the Kenyatta government's initial Africanisation decrees, the Asian population declined to just under 140,000. It was estimated at the end of the Kenyatta period in 1978 that the Kenya Asian population had been 24 reduced by a half, to seventy five thousand. Most of the Asian population after the war were born in Kenya since the colonial government, like its post-colonial successors, severely limited immigration from the subcontinent. In so far as th nun1.ber f Asians in wage-work in the colony during the 1931-48 interc n al period ians were increased from tw nty to thirty thou and, Kenya predominantly traders, clerks and arti �an . Between 19 1 and 1948, the number ngag d in mm r , finan and i1 sur, n - ( x luding I rks) 24 Seidenberg, Ulwru n11d !lie Kc11yn f11di(l11 · (1983), c1 p ndix, p. 17 ; R th hild, Racial Bargaining, table 2.1, p. 32; Tc nd n nd R phc -1, Enst Afri n11 Asi1111. (l 78)[1973), p. 22.

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had doubled. And, by 1948, the number of professional and clerical workers employed in both the public and private sectors had increased to just under eight thousand. Together with artisans, employed in metal working, wood and furniture, building and the transport sector, clerks, draughtsmen and typists made up the majority of the wage-working 25 population over the period. This preponderance of Asians in clerical and artisanal work, which continued until 1963, and if not 1968 at the onset of the major exodus from Kenya, must be borne in mind when the Asian presence in Kenya is often equated, as nowadays, with that of traders, professionals, managers and industrialists. Asian artisans and workers played an especially important role, particularly after the second world war and until the early 1950s, in widening the direction of industrial militancy toward the newer African urban working class. Such was the case of Makhan Singh and other Kenya Asians who forged ties with African labour leaders to bring 26 militancy into the post-war anti-colonial political movement. At the same time, if separately, there was joint Asian-African pressure for political reforms of the legislature, voting rights and the removal of racial restrictions on urban residence. Asian press owners, particularly, printed anti-colonial stories in their own papers, and also provided assistance 27 for fledgling African newspaper proprietors. It was the Mau Mau revolt which put an end to the most important period of Asian influence in the anti-colonial movement. Initially., even after the state of emergency was declared in October 1952, there continued to be an especially prominent Asian presence in the African nationalist movement. Support flowed from Asians to the underground organisation of Mau Mau in Nairobi as well as to the fighters in the 25 Seidenberg, Uhuru and the Kenya Indians, appendix, pp. 172-173. It is difficult to precisely compare changes betw n the two censuses becaus th residual, 'oth r' category of occupations contain d over on quart r of the t tal in 1931 but had been reduced to n m r 209 p opl in 1948. We susp t that th 'other' referred to selfmploy d trad rs wh wer th n classified as prof sion l in th le ter year. 26 Singh, History of Trade Unio11 Mnvc11w11J (19 9), hs. 13-19; Gr gory, Tndia and East Africa, pp. 454,507; regory, Q11est, eh . -7. 27 Seidenberg, Uhuru nnd U,c Kenyn l11dia11s, eh. 4.

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forests. However1 as the colonial administration circumscribed and/ or jailed the leading Asian anti-colonialists, including Singh and Pio Gama 29 Pinto , the Asian contribution to the anti-colonial movement was s verely curtailed. Threat ned by a growing wave of violence, some directed specifically at Asians in towns and small rural centres, influential Asians began to side overtly with the colonial authorities. In doing so, another parallel was drawn between South Africa and Kenya. In 1955 N.S. Mangat, 1 ading conservative and president of the Kenya Indlian Congress, raised the prospect of African racism following a change in political power. He d dared that the 'Africans will not stop at the mere consummation of their national aspirations. There is a grave danger, indeed it is a certainty that a black Malanism, may come in East Africa' . 30 Not content simply to voice disapproval, or attempt to sit on the fence, leading figures of the Kenya Indian Congress demanded that Asians be recruited as combatants for the military machinery directed against Mau Mau. In 1956, the leadership of the Congress, the most important Asian political organisation, expressed a preference for colonial rule over independence under African leadership. 31 While other Asians remained as anti-colonial critics, the political balance had tilted at exactly the most significant moment, when the transition away from colonial rule began to be apparent. This was the period of political recomposition when, with the lifting of restrictions against Kikuyu participation in official politics, cross-ethnic alliances were renewed and/ or struck for this first time to create the national coalitions which paved the way for political independence.

28 Madatally Manji has recounted how his elder brother, Has anally, who long liv d in Karatina in Nyeri district operating a trading and transport busin , was 'in the front line' during th M.au Mau r volt. He act d as a couri rand supplier of food tuffs for for st fighters and their famili s. Manji, Biscuit Bnron (1995), p. 24. 29 See Anon., Pio Gamn Pinto (1966). 30 Rothchild, Racial Bargaining, p. 125 (qu tin N .. Mc. ngnt, pre id nt Kenyan Indian Congress, to presidents of all-Indian orgc. nis, tion, in Kcnyu, 22 M, y 1955. mbalal Pat l papers). 31 Seidenberg, Ulrnru and the Kenya Indians, pp. 140-141. :y

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Given that Asian political leadership was divided into pro- and anti-majority rule blocs, it could not play a concerted, public role in b coming part of the coalitions which were to emerge as the principal parti s of the Kenya African National Union (KANU) and Kenya African Democratic Union (KADU). Indeed a new outbreak of well-publicized violent attacks against Asians in 1959 and 1960, after the State of 32 Em rg ncy ended officially in November 1959 , only heightened insecurity and sharpened the conservative-liberal divide among Asians. A separate Kenya Freedom Party (KFP), to accommodate the liberal view of impending majority rule, was formed to rebuild an alliance with the African nationalists of KANU. The formation of a new party, which publically demonstrated the extent of division within the ranks of Asian political leadership as a whole, prevented a coherent strategy from being realised. 33 Such a strategy might have given the Kenya Asian bourgeoisie a vehicle to share political power with its increasingly prominent indigenous African counterpart. Instead, it was the African bourgeoisie which, in dominating the political head of KANU, came to hold the apex of the first post-colonial regime without having to confront an organised Asian bloc holding any measure of popular authority. Notwithstanding the failure to openly build a political alliance, Asian commercial and industrial interests played a vital part in KANU's 1963 electoral victory. Asian financial contributions flowed into KANU coffers at the moment when the party faced its greatest challenge. As Goldsworthy has elaborated: Around March-April (1963), with its mind wonderfully concentrated by the forthcoming election, KANU underwent a transformation. The weakened and demoralized party of late 1962 could hardly be recognized in the well-financed; professionalized, even dynamic nationalist party which fought the elections of 18-26 May. Indeed, th lection campaign marked KANU's highest point qua party, with Kenyatta functioning as an authoritativ party 1 ad r and with n effectiv true p rating between the factions once th nominati ns had b n ttl d. And th mor c nfident 32 33

ibid., p. 162. ibid., eh. 6; Rothchild, Racial Bargaining, eh. 4, pp. 111-115.

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KANU became, th more (its party opponents) began to take on the 34 appearance of disgressions [sic] from the main nationalist stream.

Goldsworthy noted the importance of contributions from international organisations, as well as Asian business, to KANU for the revitalization of the party on the very eve of the 1963 elections. Contributions flowed in the form of 'plenty of insurance money', Goldsworthy pointed out, 'from Nairobi's Asian traders, scores of whom had received an ostensibly non-intimidatory letter of solicitation signed by Kenyatta and Mboya.' It was likewise during the Kenyatta period of government after 1963 when Kenya Asian business proved to be the largest financial contributor to grandiose harambee schemes, such as the Gatundu Self-Help and Forces Memorial hospitals, the shells within which funds could be amassed and distributed to a plethora of local harambee projects. Such was the distributive system within which the Kenyatta regime functioned to bind political factions to the personal authority of the state pres1.d ency. 3s Nevertheless, the business propensity to extract a price for covert political support was limited by the extent to which a Kenyan Asian leadership was able form a cohesive front. When the KFP folded in 1963, with most of its membership joining KANU at the onset of independence, a section of its leadership was still questioning the party's strategy of supporting a government of the African majority. One KPF leader remarked: 'While being fully desirous of wanting development in the country there is no need to offer ourselves as a sacrifice to the future happiness of the indigenous people.' Contrawise, Dharam and Yash Chai, then leading lights of the progressive intelligentsia, claimed in 1965: 'One thing is certain: if the Asians can integrate effectively at the political level, then many of their social and economic problems will be dealt with more sympathetically and successfully'. 36 An abiding 34 See Goldsworthy, in Tom Mboya, p. 214, fn.20. 35 Bhatt, Asians in Kenya (1976) p. 367; Balachandran, Embnttled Community (1981), p. 322. For an elaboration of the harambee system, Cow n and Shenton, Doctrines of Development, pp. 311-317.

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problem of integration, as the Ghai brothers were well aware, was race. Throughout the twentieth century, Asians have born the burden of racial antagonism in Kenya. Paul Theroux summed it up in 1967, at the onset of the Asian exodus: 'In East Africa, nearly everyone hates the Asian'. The British, Theroux continued, started the hate and their legacy was 'passed to the Africans' whose insult 'against the Asians now approaches the proportions of a fashion'. 37 Theroux, to take earlier examples from his 'little chamber of horrors', might have looked at the likes of Lord Cranworth, who when reminiscing about his Kenya days, spelt out a catalogue of 'Indian' crimes and whose tone was scarcely a word away from the kind of anti-semitism which made it easy for Asians to be cast as 'the Jews of East Africa'. 38 Or, what might have been said and written of African traders from the 1930s and after was officially observed of Asians in Kenya during the first decade of the century. R.R. Dundas, Machakos district commissioner, castigated Asian shopkeepers and traders, the dukawallahs in the district, as follows: Not one of them show, or appear capable of, the smallest enterprise or initiative, not one of them are capable of striking out a line of their own or getting out of the groove in which they are confined like a flock of . 39 sheep rn a pen.

Thereafter, as Ian Spencer has shown in detail, the general administrative complaint was to mix the attributes of race with the confines of economic competition. While the enterprise of each Asian trading business may have been undercapitalised, as Spencer also commented, it was the competitive thrust of competition between traders which played such a 36 Seidenberg, Uhuru and the Kenyan Indians, p. 164 (quoting from Jagdish Sondhi to Chanan Singh, 1962, Chanan Singh Papers, E.S. Bird Library, Syracuse); Chai and Chai, Asians in East Africa (1965), p. 45. 37 P. Theroux, 'Hating the Asians', Transition 33, 1967, pp. 46-51 (quoted by Don Nanjira, Aliens in East Africa (1976), pp. 161-3; also by Bhatt, Histon; of Asians, p. 365). 38 Lord Cranworth, A Colony in the Making, or Sport nnd Profit in East Africa, London: Macmillan, 1912, pp. 62-4 (quoted by S ff, Briti h colonial attitudes, p.583). 39 Kenya National Archive : P / P /1/3/2, Machako district Political Record Book, 1900-1910 (quoted by Spene r, Indian traders in the reserves, p. 332).

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rol in the spontaneou xpansion of African comm rcial agricultural production during the 1910 and 1920s. Y t, colonial official all g d that Asian traders induc d trade by off ring gift of salt or sugar to African consumers; encouraged barter rath r than money-n1ediated trade; cheated in produce-buying through using false weights and measures; forced small-farm producers into debt; bought small-farm output at prices irrespective of quality and thereby 40 dro down the general quality and average price of farm output. It wa on th s grounds, more often than not coloured by race, that officials 41 sought to promote, from the 1920s, African trading in the 'reserves". If African trade proved, by the 1930s, to be equally undercapitalised and over-competitive, thereby only replicating the earlier official charges against Asian traders, official support for African trade only amplified the racial basis of competition between Kenyan Asian and African traders. In any case, Theroux could have found his point immediately proven by the then vice president, Daniel Arap Moi,, who, when addressing a political rally during October 1967, warned Africans to be 'beware of bad Asians' and advised African businessmen to protect themselves from unscrupulous Asian businessmen who would have to change their ways 42 or 'otherwise they can pack up their bags and go'. When Theroux pointed to one facet of why racial abuse against Asians was so socially acceptable, namely that 'it is sometimes exploited and encouraged by expatriates and competing businessmen who see this as a chance to boost sales and, in addition, prove their solidarity with African nationalism in 43 Kenya', he hit the nail on the head. Yet, like Asian political involvement itself the intensity and direction of racial abuse waxed and waned. Kenya Asian capital survived racial onslaughts because, like indigenous big business in India during the interwar p ri d, it wa need d by successive governments in Kenya. For in tan , in 196 , m t 40 41 42 43

Sp ncer, lndin11 trnders i11 Ilic reserves, pp. 30-3 3. jbid., p. 335. Daily Nation 31 Octob "r 1967 (quolcd by 13h tt, History cf sinn., p. 69). Quoted from Theroux in D n N, njirn, l\lie11s i11 -nst Aji·i n, p. 16 .

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ranks of skilled public sector workers, the salariat, shopkeepers and smaller enterprise owners found that they faced little choice but to emigrate and/ or close down their enterprises. They feared both impending Africanisation in Kenya and the probable closure of immigration to Britain. Asian owners of larger-scale enterprise did not face the same pressures. Thus, when official harassment of Asian business threatened economic disruption and recession in Kenya during 44 early 1969, 'the purge of Indian shopkeepers came to a sudden end'. As Yash Tandon and Adam Raphael pointed out, the victims of the 1967-8 pressures were 'the poor Asians'. And, in 1978, Tandon and Raphael were able to suggest that in 'many respects, the Asians have 45 never had it so good in East Africa'. Whereas Lord Hailey, in his 1938 African Survey, had forecast that 'a gradual increase in the number of educated Africans is bound to result 46 in increasing competition with Indians' , and the envisaged 'replacement' of Asians in business, the historical process of replacement has occurred as much through collaboration as in racially-based competition. As Roy pointed out for early twentieth-century indigenous industrialisation in India, the process of replacing Asian by African business has not been irreversibly linear, but of 'uneven tempo' and 'along a zigzag line'. Tandon and Raphael reflected in 1978: In the main, the new mood of black entrepreneurial confidence and the continuing need for expatriate skills has engendered if not complete trust and amity between the host and minority communities, then at least a profitable working relationship based on mutual advantage and understanding - to a degree which would have been unthinkable in the 47 ethnic ferment of the independence struggle.

This 'profitable working advantage' has worked to no better 'mutual 44 45 46 British 47

Bhatt, HistonJ of Asians, p. 370. Tandon and Raphael, East Africa's Asians, pp. 17,22. Lord Hailey, An African Survey, Land n, OUP, 1938, pp. 336-41 (quoted in Soff,

colonial attitudes, p. 590). Tandon and Rapha I, Eat Africa's Asians, p. 22.

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advantage' than the post-1978 economic alliance which president Moi has struck with newer echelons of post-independence Kenya Asian capital. Moi, as a 1987 report put it, 'who had previously attacked Asians as the source of all evil and corruption in Kenya', now had 'performed a complete about-turn. In a humiliation of African pride unthinkable in 8 th Kenyatta years', Moi now 'accused Africans of the same sins,4 • Since the accusation was directed against Kikuyu business, Kenya Asian capital has been, in part, a beneficiary of the Moi regime's strategy to displace Kikuyu-owned business from its early place of privilege within the internal arena of indigenous capital accumulation. While Kenya Asian business might have been appreciated, especially during the 1980s, as a counterweight to the older established layer of indigenous African capital, associated with Kikuyu big business, a measure of wariness is also necessary. As we have shown, unfair competition had long been a charge of African-owned business against Kenya Asians. By bringing some Kenya Asians enterprises directly into the business interests associated with the Kalenjin-Masai bourgeoisie, thus playing a part in engendering the assertion of the newer layer of capital, the charge reappeared. 'Nationwide', it was also reported in 1986, 'there is far more ill feeling towards the Asians', more than in 1982, during the abortive coup, when Asians, their enterprises and houses were to be a very public target of the widespread violence which swept 49 through urban centres, including Nairobi. The response of a new generation of Kenya Asian business to regime-created opportunities for investment, bears more than a passing resemblance to how the older generation, of the 1940s, responded when the colonial government created the opportunity for indu trial development. Perhaps more politically involve� than in pre ious decades of the 1950s to the 1970s, but always seemingly m asured and not univocally sure in intent, some K nya Asians hav b n able to arv 48

Africa Confidential, 28(13) 1 7. 49 Africa Confidential 27(8) 9 April 19 6; 28(1 3) 24 Jun 1987. During 1986 resentment over Kenya Asian purchases f land and property was especially strong in Meru.

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out new strategic niches of accumulation. As such, the zig-zag of historical replacement and displacement, of one layer of capital by another, embraces new generations of the old, now irrespectively less of race, to contest what history has immediately given, far more with respect to the 'tribe', for another assertion of a new layer of capital. KENYA ASIAN CAPITAL AND THE STATE

Although Asian political organisations were marginalised for much of the 1950s and early 1960s, late-colonial government reforms played a major role in permitting the expansion of manufacturing which had, in part, been developed by Kenya Asian capital. However, and contrary to Himbara' s suggestion, there was no general intent of the colonial government to pursue an industrial policy for Kenya. Support for manufacturing industry derived from other official concerns, especially towards agriculture. Indeed, the support which the colonial administration gave to manufacturing predated the well-known phase of the second world war-time stimulated movement toward import substitution. Thus, to take one example from many, in 1936 the Department of Agriculture gave active support to Premchand 51 Raichand , a Kenya Asian company formed in 1929 to locally manufacture and export tanning agents from wattle bark, when the company faced the threat of competition from the international Foresta} company. In this case, the colonial administration feared that Foresta} would act to reduce the demand for wattle products after Premchand Raichand had stimulated wattle bark production by smallholding 52 producers in the Central Province. The general point, therefore, is that support for manufacturing was indirect in that it derived from the prior policy to expand the commercial

50 See 51 For of business 52 See

note 114, eh. 5 below. an excellent account of this company, at the core of one of the few case studies organisation in Kenya, e Zarwan, Indian Businessmen in Kenya (1977). Cowen, Capital and Household Production (1979).

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producti n of hous hold-produced crops. Internal manufacturing b nefitt d both fr m the export-led rol played by the expansion of commercial pr duction of smallholder production and by its role in producing, through import-substitution, consumption and intermediate go ds for whi h ff ctiv d 1nand was mad possible by the incr ase in r al incom s · alis d from th sal of agricultural products. From th lat 1940s, th colonial administration began a move which increa ed in significance aft r independ nc . The administration turned toward an expansion of smallholder agriculture in order to both satisfy British post-war economic n ds and conform to a particular doctrine of development. Th doctrine asserted that employability in Kenya could b t b achieved on the basis of household rather than direct wage-labour production. By now it is well understood that the late colonial and early post-colonial excision of European settlers did not imply re ult in the change of own rship of largeholdings in the hitherto racial preserve of the white highlands. The movement of relatively small frican indigenous capital from the crowded and heavily populated, as well as often less productive 'native reserves', occurred in parallel with a major xpansion of smallholder agricultural production for international and domestic markets. Agrarian de elopment followed the lifting of racial restrictions over arable agriculture, including those which confined commercial production to crops such as wattle. State-organised schemes resulted in smallholders becoming the largest producers of a wide range of crops, including coffee and tea, Kenya's principal agricultural exports. While the increase in commercial production was most marked in central Kenya, including the eastern Rift Valley, where smallhold r predominance was boosted by important land settlement cheme utilising former settler estates, output growth also occurr d in w t rn . 53 an d eastern provmces. a mad Iner ased household production of marketed produ possible through a tat supervised cherne whi h join d int rnational 53 Se , for xam pi , Change, pp. 317-325.

r -', rn,

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money capital to family labour power on the smallholdings of household producers. A major feature of the late colonial state agrarian scheme was that all layers of merchant capital, whether European, Asian or African, were prevented from trading in smallholder produce. State marketing boards, cooperatives and other agencies were constructed to secure household production in the same way that European estate farmers had organised cooperatives, with colonial government support, to prevent Kenya Asians from trading in large-scale farm output. The difference, post-war and in the transition to political independence, was that there was an anti-business rather than anti-Asian bias behind the official intent to eliminate merchant capital from the processing and marketing of agricultural output. 54 However, if the earlier pre-war commitment to manufacturing had been reinforced by the exclusion of Asian traders from the trade in estate-produced commodities, then the post-war expansion in manufacturing by Asian enterprise also was probably accelerated by the exclusion of private business from trade in the state-administered schemes of household-produced commodities. Although completely absent from Himbara's account of the trajectory of Kenya Asian capital in manufacturing, the continuing, post-colonial expansion of smallholder production was coupled with a major increase in the internal consumption of manufactured output from Kenya-based factories. While he puts more emphasis upon the growth of African buying power 'in major urban areas', following increases in wages and sa]aries, especially during the 1960s, John Zarwan has established the connection which Himbara has missed by referring to the Oshwal business network, which included Premchand Raichand, after independence: Those Indians who remained in Kenya and who were established in the economically expanding areas around Nairobi and in Central Province, i.e. Oshwals, were thus in a position to benefit from accelerating economic growth. Oshwals invested heavily in industry (agricultural processing, 54 For further detail, including further r-f r nc s, see Cow n, Commodity production in Central Province (1981); British state nnd agrnrinn accumulntion (1982); Commercialization of food production (1983).

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textiles, metalware, plastics) and, to a lesser extent, agricultural land.

Zarwan concluded: While Indians played a major role in the growth of the Kenya economy, 55 it was that growth which enabled Indians to expand.

It has been estimated that 70 per cent of manufacturing output growth, over the 1964-84 period, came from the increase in internal demand within the economy and one-third of this increase was attributed to the three sectors of food, tobacco and beverages. Only five per cent of output growth came from exports. The remaining quarter of output growth was explained by import-substituting industrialisation. Overall, industrial production has expanded by meeting the growth in domestic demand, growth which derived, in large measure, from the expansion of 56 smallholding production. As early as 1962, the proportion of Kenya Asian-owned factories producing the range of basic consumption goods - from processed foodstuffs to consumer durables - was substantial. Hirnbara cited a contemporary study of nearly 60 manufacturing enterprises with over fifty employees to show that pre-Independence almost 70 per cent of the enterprises were owned by Kenya Asians; Europeans, inter-racial partnerships and international firms accounted for one-quarter, five and 57 three per cent respectively. Himbara's own research, based upon the Kenya Association of Manufacturers' files examined between 1989 and 1991, reinforced the point that Asian manufacturing firms were major beneficiaries of this particular consequence of the agrarian doctrine of development. 58 Given that the basis of the agrarian doctrine had been established during a period when Asian politics were so fragmented and marginalised, it seems likely that the weak Asian repres ntation in the

55 56 57 58

Zarwan, Indian Businessmen i11 Kenya, pp. 124-5. Sharpley and L wis, Kenya's Industrialisation (1988), pp. 17,19-20,4. Himbara, Kenya Capitalists, p. 44. ibid., table 2.2, p. 46.

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executive and legislative forums of late-colonial government played little part in constructing policy established on non-manufacturing grounds. Equally, it is probably unlikely that the government acted to encourage manufacturing at the behest of other forms of class organisation. However, we do not know the extent to which Kenyan Asian capital acted politically to further the expansion of the internal market or whether Asian business was simply in the position to capitalise upon 59 an unintended consequence of policy. The weight which Himbara attaches to the subjective factors of Kenya Asian business implies the latter but there is no body of evidence which can establish whether during the late colonial period the class interest of the Kenya Asian bourgeoisie was of a material interest or consequence. While we do not doubt Himbara's implicit proposition that after 1963 a different industrial policy might have generated a different course of industrial development, we nevertheless note the following. Firstly, manufacturing continued to expand, although at differing rates over the next three decades. The rate of increase of manufacturing peaked in the 1970s, during the last years of the Kenyatta regime. As Godfrey has estimated, whereas the growth of manufacturing output between 1972 59 See Tignor, Race, nationality, and industrialization (1993). Tignor concludes that post-war industrial plans were state-centred, but tended to favour British international firms. While Asian capital did not have any substantial capacity to exert leverage as a class, nevertheless particular Asians were able to carve out niches within the arena encompassed by state plans, regulations and inducements. Madata11y Manji, who built up what was to become one of the largest biscuit and confectionery manufacturing enterprise in eastern and southern Africa, has reflected on his industrial experience during the late 1940s when the colonial government refused to provide protection against imports of confectioneries from Europe and South Africa. 'It was as if the government', Manji wrote, 'was determined to completely strangle our biscuit business. It seemed to have no interest whatsoever in promoting local industry'. Wh reas the colonial government favoured 'white-owned businesses', he continu d, and 'we had to encounter all forms of discrimination and harassment by officials who c uld not understand why Asian types like us would want t get involv d in a European business such as the making of macaroni', the post-colonial government took a different and far more 'amenable' stance: 'Th kind f prot ction that w c uld not get from the colonial administration was now a matt r f gov rnment policy'. Manji, Biscuit Baron, pp. 86,89,107,110,114.

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and 1978, 'still based on the "soft option" of protected import substitution', was more than twice the rate of growth of the economy as a whol , at an annual rate of 11 per cent, the average rate fell to seven per cent between 1978 and 1983, 'with particularly slow growth from 60 1982 onwards'. Yet, between 1980 and 1992, when the rate of 'disintegration' of the state apparatus was supposedly most rapid, the volume of gross manufacturing output increased by nearly 70 per cent; from 1989 to 1993, the quantum index of manufacturing production increased by 13 per cent. 61 While 15 and 40 percent of Himbara's sample of one hundred firms, drawn from the approximately six hundred manufacturing firms belonging to the KAM, were established during the 1960s and 1970s, nearly one-quarter started during the 1980s. The overwhelming majority of the most recently formed were Kenya Asian-owned. Zarwan's maxim still applied: While Kenya Asian capital contributed to growth, it was growth which enabled Kenya Asian investment in manufacturing. 62 Secondly, this last period of growth in industrial production and renewed Kenya Asian capital investment in manufacturing was one in which there was a marked disinvestment of capital in manufacturing by international firms in Kenya. Previously, after the second world war, and into the 1970s, there had been a major expansion of international investment, particularly in manufacturing. As Swainson noted, after 1945 there was a rapid inflow of international capital into largeholding agriculture and manufacturing so that, by the mid-1950s, 'foreign firms were manufacturing a wide variety of industrial products including shoes and leather, cement, paints, metal containers, vehicle parts, fruit, 63 soft drinks, bicycle tyres and tobacco'. While most of the major foreign investments between 1945 and 1963 were made by British firms, important US, Canadian, Danish and Dutch firms also established 60 Godfrey, Kenya to 1990, p. 69. 61 Calculat d from D aubin, lnternafionality of Economic Survey 1994, table 11.2, p. 154. 62 Himbara, Kenyan Capitalists, figur 2.J, p. 46. 63 Swainson, Corporate Capitalism, p. 130.

apitnl, t bl

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manufacturing operations. After Independence, as African capital accumulation in large-scale agriculture proceeded apace, as -we show in the next chapter, international firms increased their presence in manufacturing, especially to compete with Kenyan Asian enterprise for the rapidly growing domestic market. Jan Jorgensen has estimated, for 1967, that wholly or majority-owned international firms accounted for 70 per cent of total 64 value added in the large-scale manufacturing sector. And, Langdon concluded that the 'overall dimensions of [multinational corporation] investment were substantial by the early 1970s'. From rough 'estimates provided by foreign embassies in Kenya', he suggested that the book value of such investment represented, by 1972, over one-fifth of the country's gross national product. Net private long-term capital inflows averaged well over 10 per cent of total annual capital formation for the period between 1967 and 1972. Of sixty subsidiaries of international firms operating in 1971/72 which were surveyed by Langdon, nearly one-half 65 of capital was invested in the manufacturing sector. Above all, the estimated $3bn invested by international firms between 1965 and 1978 enabled government borrowing at favourable rates, especially on eurocurrency markets, to finance the budget deficit and thereby maintain state spending on public infrastructure and services. 66 Increased investment was accompanied by a change in its origin. Swainson emphasised the shift in the origin of overseas investment thus: The major influx of large foreign firms after 1963 has been derived from non-British sources, while the existing British firms have expanded by takeover of existing enterprises. It is fair to estimate from the available figures that Britain was still the largest single investor in Kenya during the 67 mid- and late 1970s. 64 Jorgens n, Multinational corporations (1975), p. 163. 65 Langdon, Multinational corporations, p. 31.; Langdon, The multinational corporation in the Kenya political economy (1978), pp. 136-140,141. 66 Africa Confidential, 29(14) 15 July 1988; also ee Coughlin, Moving to the next phase? (1990), p. 247. 67 Swainson, 'Corporate Capitalism', p.215. Emphasis added.

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Yet, despite the continuing predominance of British levels of investment, United States corporate inv stment in manufacturing probably rose faster, after 1972, than investment in manufacturing from any other 68 country. Kenya has been significant for direct investment from India. The second venture of outward investment from India was in 1965, when a relatively small firm invested in a textile mill. By the end of the 1960s, the largest single Indian operation overseas was a woollen textile plant operated in Kenya. Sanjaya Lall's 1981 data showed that Kenya accounted for more than one-quarter of 'actual Indian equity' invested overseas. Only Malaysia then accounted for more, higher-value, joint ventures of Indian firms overseas. 69 During the 1970s, substantial investment in manufacturing was made by the largest Indian conglomerates. For example, Orient Paper and Industries, part of the Birla group of companies, set up a paper mill in 1975 and, by 1981, accounted for nearly one-half of the paper and packaging market in Kenya. 'Orient's entry into Kenya', Lall commented, 'was in response to a global tender issued by the Kenyan government and the W odd Bank, and did not build upon export contracts or respond to a high level of 70 protection' . In other words, like other multinationals, Indian firms entered manufacturing in Kenya according to profitability criteria. When profitability in Kenya declined relative to elsewhere, investment from India, nnlike that of Kenyan Asian capital, ceased. During the 1980s, and especially in the early 1990s, international firms began to divest themselves of Kenyan assets. Since expected payback periods of multinational investment in Kenya fell from an average of 11 years before 1978 to five years during the 1980s, investment projects which would have been undertaken earlier were now r j et d on grounds of profitability. 71 As Desaubin has put it, 'a number of 68 ibid., p. 215. 69 Lall, New Multinationals (1983), p. 22; t bi 2.3, pp. 26-7. 70 ibid., table 2.9, pp. 42-3; p. 72. 71 Mukonoweshuro, Authoritarinn ren tio11 lo cco110111i crises (1 9 ), pp. 56-57; oughlin, Toward the Next Phase (1991), p. 372 (quoted 1n D saubin, ltlternationnlity of Capital, p. 185); Godfrey, Kenya to 1990, p. 40: Africa Confidential, 29(14) 15 July 1988.

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internationally oriented Asian capitals' disinvested from manufacturing in Kenya. 72 Disinvestment by British multinationals in Africa is explained, as in Paul Bennell's r cent survey of the phenomenon, by Structural Adjustment policy. During 1992, for instance, the British high commissioner in Nairobi intervened on behalf of a number of 'British multinationals, including Barclays and Standard and Brooke Bond Tea Company'. The complaint was that profit and dividend repatriation had been delayed for up to two years because of foreign exchange shortage. 'There is not much sign of disinvestments from Kenya', the high commissioner diplomatically stated, 'but there is no doubt that new 73 investment is being discouraged by current blames'. Such 'blames' included 'excessive bureaucratic controls' and 'corruption', the very ills which Structural Adjustment policy was meant to eradicate. However, a key factor in the Kenya case is that however much British multinationals may have wanted to disinvest, according to international profitability criteria, they have been only been able to do so when their subsidiaries can be sold renumeratively. 74 Some Kenya Asian capitals have been both willing and able to buy manufacturing assets from international firms in the same way that Kenya Asian business bought out assets from the relatively few Kenya European enterprises when they disinvested, especially from the tourist industry, in earlier periods. 75 A related point applies to the denationalisation of state enterprises, a programme which the Moi regime has been reluctant to undertake during the 1990s but which forms a major aspect of Structural Adjustment policy. We return to this point in chapter 5, but here we should note Godfrey's 1986 forecast that Kenya Asian capital 'may be 76 the main customers for privatising parastatals' . Once state subsidies are

72 73 74 65-66; 75 76

Desaubin, Internationality of Capital, p. 185. IPS, 29 F bruary 1992. Benn ll, British Manufacturing Investment (1994); Himbara, Kenyan Capitalists, pp. Desaubin, Internationality of Capital, p. 185. Godfrey, Kenya to 1990, p. 42. ibid., p. 42.

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no longer advanced to parastatals, which were stablished during the period of import substituting industrialisation, then they might become ripe for takeover, so the argument runs,· by the dominant private companies in the manufacturing sector. A rider to this argument is whether private companies, without state subsidy, expect to be afforded the tariff protection which all companies, whether private or parastatal, were hitherto afforded. Thirdly, and following from the above, the question arises as to why Kenya Asian capital has been able to survive in production during a period of disinvestment by multinationals and European colonial firms. Kenya Asian firms in manufacturing benefitted from the system of tariffs which were adopted, so the evidence suggests, for state revenue purposes and which continued well into the 1980s to attract much 77 criticism for imposing market distortions upon the economy as a whole. Much of the criticism accepts that there is a difference between the interest of individual firms within an industry and that of a given industry as a whole. Peter Coughlin, for example, has shown how the steel industry was started by Kenya Asian business according to infant industry precepts which were adopted by the colonial government and continued, thereafter, for revenue rather than industrial purposes. Although there has been capital-deepening within the industry, as production developed from simpler wire products to sheet galvanizing, drilling, rolling and then steel pipe manufacture, the industry as a whole has been deemed to be inefficient because rates of capacity utilisation are so relatively low. Yet, rates of effective protection have been such that steel manufacturing continues to be relatively profitable as 78 enterprise for the Kenyan Asian layer of capital. Doubtless, the same evidence can be provided for other industries where capital investment has been permitted according to infant industry precepts. Another argument is that Moi, as Karuti Kanyinga tells us, had established, by 1983, "an institutional bas to support his patron-di nt networks', a base which was 'supported by new ourc of "patronage 77 78

See Sharpley and L wis, Industrialisation. Coughlin, Steel IndustnJ (1991a), p. 254.

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capital"': Asians necessarily became a major source since Moi had an antagonistic relation to the Kikuyu private bourgeoisie. He courted Asian businessmen, especially those who had already achieved entrepreneurial success independent of patronage and in spite of competition and outright harassment from state-supported Kiambu businessmen during the Kenyatta era. He gave several political and economic concessions to Asians, of course at the expense of the Kikuyu bourgeois class.

'Asians', Kanyinga continued, in 'fronting for Kalenjin interests, bought several formerly Kikuyu-owned economic institutions which suffered economic difficulties during the 1980s'. Assets, such as land, were 'given to politicians who in turn sold them at inflated prices either to state 79 corporations or to Asian and European businessmen'. An even more vital concession, as another report alleged, was the tendency of the Moi government to turn 'a blind eye to blatant infringements by an Asian community with which it enjoys close relations'. In holding currency reserves abroad, Kenya Asian enterprises were able to take advantage of, if not contribute to, fluctuations in both foreign exchange and interest rates. Through depositing short-term funds locally and borrowing from abroad, or visa versa, speculative propensities made money work for buying up assets, including the subsidiaries of multinationals ., and 80 generally have expanded local opportunities for investrnent. Making money work as money-capital for investment has been a longstanding propensity of Kenya Asian business, featuring strongly in Zarwan's account of the Oshwal business network. Successful business, Zarwan reported, always kept its capital working. Money-capital was put at work through credit within the business organisation of the joint 79 Kanyinga, Changing development space (1995), p. 81. The foremost exampl was Madhu Paper Int rnational which wa pl, d in receivership m n d pit th fa t that th Kikuyu owner in 1986 and then sold to Kenya Asian bu in had made some d bt r payment 't th tat bank'. 80 Africa Confidential, 28(13) 24 Jun 1987. It was estimated in 1987 that Keny< A ian h ld £2.Sbn abr ad, quival nt to five times Kenya's official foreign exchange res rv

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family partnership. Family affiliation, through marriage and household formation, created both the need for new enterprises to keep family m mbers in business and the capacity to pool resources for new investment. Separate enterprises, formed through the process of family fusion and fission, were linked through the joint family partnership. Credit was thereby advanced according to the trust and control which stemmed from the personal contacts of the joint family partnership. Although Kenyan Asians 'came without capital', Zarwan wrote, they 81 'were able to create it on a significant scale in the aggregate'. Business organisation, and not simply business attitude, was the key for the relative success of the Oshwal business from the 1930s. Mutual aid and trust, the key to the credit relation, inhered within the business organisation. Premchand Raichand was a prime example of a business group, consisting of family-owned companies which were affiliated to each other as part of the same holding company through which joint ownership and management were exercised. Chandaria, on the other hand, was originally part of the Prernchand Raichand group which, from the 1950s, sought affiliation with companies outside the Oshwal network, and, then, brought professional managers on board to develop into an 82 international firm from its Kenya manufacturing base. Zarwan noticed that the Chandaria company 'closely parallels that of the Indian managing agency system' 83, the system which, as we saw in chapter 2, was so effective for levering Indian capital into large-scale industrial production. Although the managing agency system appeared in Kenya, it did not simply derive directly from India but emerged out of the business group which was as much part of the Kenya Asian business experience as any pre-history of capitalist development in India. Both the business group and managing agency, Zarwan also indicated, were 'two devices' to hide ownership and control, shifting th burden of tax and other payments: 81 82 83

Zarwan, Indian Businessmen, pp. 214-221; 222. ibid., pp. 232-235. ibid., p. 236.

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The structure of the companies was intentionally complex. Holding companies, trusts and intentionally unprofitable enterprises were all used to hide and redistribute pr fits. Directorships and shares were reshuffled 84 as responsibilities changed, new partners brought in or bought out.

Such was, and is, the 'multi-business' of Kenya Asian capital. During the next chapter, we will show why African capital, through equally multiplex, has developed through a different form of multi-business. However, the insertion of a later generation of Kenya Asian business enterprise into the new layer of African capitalist enterprise has happened, in part, because both layers of capital share the concept of multi-business. Fourthly, last, but not least for the explanation of the survival of Asian business in and of Kenya, is the fundamental point that Kenyan Asian enterprise has developed through the squashed balloon syndrome. We have also shown, in chapter 2, how Chandavarkar referred to the defensive mechanisms which determined the transition from trade to industry during the course of early indigenous industrial capitalism in India. Here, we emphasise how Kenyan Asian capital, like other layers of internal capital in Kenya, has been similarly formed. Himbara has acknowledged but did not develop the point that whenever policy has been enacted according to a simple racial premise to exclude Asian business from a branch, sector or location of the economy, the effect has been to accelerate accumulation of Kenya Asian capital within trade and ss 1n . d ustry. When the colonial government acted in support of European landed settlement to exclude Asians from land ownership and agricultural marketing in the white highlands, Kenya Asian capital proliferated in large-scale import trade, trade in the 'native reserves' and then made the transition to manufacturing industry within the constraints impos d upon what Zarwan called the 'middleman minority'. Effectively

84 85

ibid., p. 204. Hirnbara, Kenyan Capitalists, pp. 38-43,59-66.

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disenfranchised politically and socially segregated, Kenya Asians 'were fore d into a mercantile niche and filled the "gap" between the lower 86 class African majority and their colonial overlords' . Yet, merchant capital was transformed into industrial capital within the constraints which narrowed options for investment in commerce. During the 1930s, the prolif ration of small African business, and the capacity of Local Native Councils to license trade within the 'reserves', as the example of Kisii showed, curtailed the extent to which Kenyan Asian traders were able to expand trade from their given base in business. In the 1950s, likewise, after the spending effects of both the post-war commodity boom and Mau Mau, largely due to the civilian and military infrastructure required to confront the revolt, many Kenya Asian businesses, with 'excess capital' were ,,unable to expand commercially'. As such, they took 87 the opportunities which had been created for industrial expansion. One result of the Kenyatta government's 1968 citizen trading laws, thereby enforcing the Asian exodus of small traders, artisans and clerks from the country, was to accelerate the movement of Kenya Asian capital into manufacturing. However it was by no means the case that the consequence of policy was entirely unintended. Goverrnent plans and ministers such as Torn Mboya, who was responsible as any for the 1968 policy, spoke of manufacturing as being the proper place for Asian business. Trade, and especially small-scale trade in particular, it was 88 argued, should be reserved for Africans. Similarly, following the political reaction which set in against the post-independence national expansion of indigenous African capital, and that which was commonly deemed to be 'of the Kikuyu', the Kenyatta regime was forced to restrain the presence of Kikuyu business to limited 86 Zarwan, Indian Businessmen in Kenya, p. 251. 87 ibid., p. 221. 88 Se , for instance, Kenya, Development Pinn 1965-69 (1 6 ), p. 270: ain t discrimination, 'While the Governm nt will r spect th on titutional saf uar_d the present concentrati n of the trading activiti s in th h, nd of n n-Africans must be reduced by actively promoting r pid ntry of Africans into commer e. There are enough openings for the tal nt of non-African busin m n in s tor other than commerce, and their contribution to Kenya's development may ind- d b mor ential in those sectors'.

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provinces of the cormtry. It became cl ar, despite the 1968 national African policy, that, from th late-1960s, the pref rred internal layer of capital outsid th Kikuyu heartlands was Kenyan Asian capital. Commerce in central Kisumu or Mombasa, for instance, remained mainly as a Kenyan Asian business affair. As well as the general fear of economic dislocation which caused the campaign against Indian business to b sudd nly called off in March 1969, another contributory factor may have been an upsurge in political tension involving the Kenya Peoples Union (KPU) and its banning as a opposition party to the regime. Fearing retribution for the killing of demonstrators, which followed the Kisumu hospital incident, the exodus of Kikuyu traders from Kisumu only reinforced Asian trading dominance in the town. 89 Furthermore, and as we will show below, the Moi regime's bias against Kikuyu capital and toward the new layer of African capital has further underpinned the 90 position of Kenya Asian capital in manufacturing. For all the foregoing, it should not be imagined that there is a homogeneous historic entity of Kenyan Asian business. Zarwan made much play of the historical fact that Oshwals, including Premchand Raichand, were relatively late arrivals from India. Finding that existing major trading places were occupied by earlier generations of immigrants, they occupied trading space which had been created in the Central Province, where, at the time of their arrival during the late 1920s, agricultural producers had entered a rapid phase of commercialisation. 91 In thereby capitalising profit from wattle and other commodities, they were strategically placed to take wider-based opportunities which arose during and after the second world war. Nor did all Kenya Asian big

89 For an effective summary of, and analysis of the prelude to, the 1969 e ents, see Mueller, Government and Opposition (1984). 90 Se Himbara, Kenyan Capitalists, p. 45. Himbara noted, on th ba is of KAM m mb r ampl-d, the t the proportion of manufacturing firms stablished by A ian during th 1980 r h rply, to 85 p r cent of the total. Furthermore, Asian firms w r pr dominant (86 p r nt) in th manufacturing concerns which employ d m r than 100 work rs, r1 w II c in th firms valu d at ov r KshlO0m. 91 Zarwan, Indian Businessmen, p. 256.

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business survive the decades after independence. Premchand Raichand ceased as a business group during the 1970s. A different generation of Kenya Asian business, which has been able to capitalise on international disinvestment and bias against Kikuyu capital, may well fit into the pattern of trajectories which carry business from one to another area and sector of investment activity. We suspect, however, that this new generation of business also has its own historical trajectory within Kenya and abroad.

Layers of capital In summary, therefore, Himbara's thesis about the predominance of Kenyan Asian capital in manufacturing should not be confined and solely attributed to the subjective factors of capacities for entrepreneurship. Political calculation, whether by design or not, had the effect of permitting the extension of Asian business in Kenya. And, political calculation in tum derived from the economic interest of non-Asian, African layers of indigenous capital. In other words, Himbara's conclusion, that there are no African capitalists in Kenya, makes it impossible to account for the very factor which has to be fully explained - the extension of a Kenya Asian layer of capital as an internal bourgeoisie and the absence of a national bourgeoisie in post-colonial Kenya. Himbara's primary claim, to recapitulate, is that Kenyan Asian capital is the only indigenous layer of capital. The implication here is that either the African wealthy are not a bourgeoisie and/ or that there is no national bourgeoisie in Kenya at all. If both these assertions are to be valid, then it has to be explained why Kenyan Asians formed the basis of the only indigenous bourgeoisie in Kenya and why Kenyan Asians were never able to be and do what was required of a national bourgeoisie in Kenya. The question of the absence of a national bourgeoisie has been understood. Coughlin, after Peter Anyang' Nyongo, has stressed that 'since the domestic large industrial bourgeoisie hardly exists and is mostly non-African, it cannot be a dominant political force': Hence, assorted pressures from an array of influential groups -- merchants, farmers, industrialists, bureaucrats, and foreign interests -- work upon the

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government, each with some success. This and the partial dichotomy between the owners of manufacturing enterprises and the political circles largely xplain why it has been so difficult for the government to delineate and consistently implement a strategy to accelerate development of a 92 national industrial base with strong inter-industry linkages.

Unlike Hirnbara, however, Coughlin sees the question as 'an historical problem', due to historical fact that while they have been on the 'periphery of Kenya's political system', some Kenya Asian business has been able to accommodate the dominant political force of aspirant Afncan . . 193 capita . In this chapter we have tried to show what were the economic and political limits of Kenyan Asians in becoming the basis for a national bourgeoisie. Our next chapter argues that it was precisely the opposite, namely that aspirant African capitalists in Kenya were able to define the limits of politics, which explains why Kenyan Asian capital is not the only internal layer of capital in Kenya. Both the Kenyatta and Moi regimes have secured, albeit in different ways, conditions for the commercial and industrial advance of Kenya Asian capital. Although the role played by the Kenyatta regime in advancing the specific position of African, particularly Kikuyu, capital in agriculture and subsequently into manufacturing is widely acknowledged, and will be made emphatic below, it also should be recognised that the regime's exercise of state power secured general conditions which facilitated the accumulation of capital. From cementing conditions of private property to extending the basis of an industrial labour force and securing the provision of social infrastructure for private investment, the post-colonial regime acted to renew the hegemony of capital. 94 Hegemony also meant the capacity to tie together 92 Coughlin, Moving to the next phase?, p. 250. 93 ibid; also see Anyang' Nyongo, Possibilities (1988), p. 41. 94 See, for example, Kenyatta Harambee! (1964); Suffering Without Bitterness (1968); J. Kenyatta, Challenge of Uhuru (1971). In his numerous public speeches, published above, K nya's first post-independence president constantly repeated how he conceiv d the r girn 's rol in securing general conditions for the r production of capital.

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international and internal circuits of capital in such a manner that far more than simply African, primarily Kikuyu, capital flourished. As Desaubin ha not d of the immediate post-colonial period: On th one hand, the material premises for the post-colonial expansion of manufacturing d pended upon the operations of international and Asian firms. But on th other hand, the apex of state power under Kenyatta was occupied by an in.digenous class of capital, whose interests lay predominantly in merchant and agrarian forms of accumulation. The mat rial base of the politically dominant class, therefore, was largely detach d from the manufacturing base of the economy.

'But despite the separation of state power from the class power of [the] industrialists', Desaubin continued, 'the politically hegemonic class under Kenyatta acted to secure the conditions required for the expanded . . l' . 9s repro d uchon o f capita Moi's regime replicated that which the Kenyatta regime originated. In arranging space for the new Kalenjin-Masai bourgeoisie as the Kenyatta regime had done for the earlier layers of indigenous capitat the Moi regime had to act on the same basis of hegemony for all capital. However much the Mai regime disorganised the state apparatus and infrastructure for production, and whatever the degree to which it has periodically given vent to the emotive forces of populist, racist and tribal reaction against the given historical development of capitalism, the regime aspires to act for and of capital.

95

Desaubin, Internationalily of npitnl, p. 13 .

5

AFRICAN CAPITAL IN KENYA Unsurprisingly, the paucity of historical material on the 'national' and political of Kenya Asians is overwhelmed by the rich body of history 1 on the origins and course of African nationalism and politics in Kenya. Furthermore, the place which the indigenous class of capital occupied in the genesis of African national movements of Kenya has been well documented and there is no need to rehearse the historical detail here. As far as central Kenya is concerned, there was a marked continuum from the pre-first world war East African Association (EAA) to the inter-war Kikuyu Central Association (KCA) and then from the post-second world war Kenya African Union to the post-Mau Mau revolt and emergency Kenya African National Union which was the majority party constituting the first post-colonial government in 1963. The continuum was of a political leadership which might have changed from one generation to another, and through the half-century of colonial experience, but whose economic aspiration remained constant. The unequivocal aspiration was to command property on the basis of universal human subjectivity without the constraint of race, tribe or any other source of cultural association, such as 'community', which had been ascribed by the colonial regime. To this extent, the aspiration was of an indigenous bourgeoisie of the character which Roy indicated in India. The trajectory of the leadership

Rosberg and Nottingham, Myth of "Ma11 Mau" (1966); rtz 1, Independent Kenya Barkan and Okumu Politics and Public Policy (1970); Ogot, Politics nnd Nationalism Muriuki, History of /.he Kik11y11 (1974); auch and Martin, L' Heritage de Kenyatta Schatzberg Political Economy of Kenya (1 7); B urmaud, Histoire Politique du Kenya Berman and L n d I , Unlinppy Vn//ey (1 2); got and hi ng', Decolonisation and independence (1995).

1 (1970); (1972); (1985); (1988);

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of the national 1novement was determined by the aspiration to find a place in the common sun of property ownership. The question is whether the aspiration to property was motivated by the dictates of capitalist accun1ulation and whether this aspiration could be realised according to the criteria for the development of capitalism. In answering this question, which bears heavily upon the Himbara thesis, we should bring the Indian dimension of the debate into play. Unlike the case of India, the question whether the leadership of the African national movement constituted a 'national' bourgeoisie was not tied to the industrialisation thesis. OVERVIEW OF THE 'NATIONAL' OF THE AFRICAN BOURGEOISIE

The assertion that Kenya Asian capital forms the unique basis of the indigenous bourgeoisie is merely contained within the limits of the positive proof that because the location of African capitalists in manufacturing industry could not be registered, in the decades after political independence, it follows that there has been no basis for the development of an indigenous African class of capital in Kenya. However, the class location of the indigenous African class of capital did not derive from its position in manufacturing industry. Instead agriculture was the starting point. A number of implications follow from this counter-thesis to the simple, positivist assertion that 'there are no African capitalists in Kenya'. The original Indian controversy over the national bourgeoisie had been framed according to the debate over the strategic calculation about the relation between the indigenous class of capital of manufacturing industry and the peasantry. Any such calculation with regard to Kenya was redundant. There was no political force of n1ediation between the class of capital and the peasantry in the Kenya case. No political arena of contention for hegemony over the peasantry wc1s possible during the colonial period for the simple re8son Hrnt the clt1ss aspiration of the indigenous bourgeoisie arose directly over the question of landed property. On the surface, and in differing degrees, all African landholders faced the same point of contention, namely exclusion from

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some of the most fertile lands in the colony. As such, the class which aspir d to accumulate landed property could act to represent an African interest s king the removal of racial constraints over access to land and jobs. The indigenous African class of capital was formed upon the basis of straddling between salaried employment and the intent to establish enterprise in agriculture and trade. Much confusion has been generated by the concept of straddling. J.-F. Bayart, for instance, has claimed that the 'specific nature of the dominant class in post-colonial sub-Saharan Africa does not lie in the straddling between positions of power and positions of accumulation' because 'corruption' is not historically unique to Africa. Corruption, it should be pointed out, was not the basis of the straddling concept. When Bayart suggests that it is the 'profitable nature of these 'straddling' procedures, where, in South-east Asia, a productive 2 conception of a prebendary economy prevails' ,he more accurately pinpoints what was the content of straddling in Kenya. It was precisely the revenue element of the wage-form of salaried employment, the government stipend, which made investment in private enterprise 3 possible. Benedict Anderson was generally right to claim that subaltern, indigenous ranks of the colonial administration, who circulated throughout the colonial territory in question, were able to imagine the 4 territory as nation. Whereas Anderson's argument was premised upon salaried employment in the public service of teaching, office and artisan work, there ,-vas constant tension, in colonial Kenya, between salaried employment and simultaneous engagement in private enterprise. 2 Bayart, Finishing with the Idea of the Third World (1991), p. 58. Bayart, of course, objects to 'the notion of the bourgeoisie, employed ad nauseam to identify the emergent dominant class in Third World countries' due to the 'absenc of the "pluriscular'' experience of conflict and also of an alliance and compromis with a real feudal aristocracy, from which the bourgeoisi merged in the W t b f r ecuring its dominance'. By this reckoning, the noti n of a bourgeoisi in North Arn rica, ustralia or even South Africa would also doubtless b 'inappropria '. See Cowen and Kinyanjui, Problems of Capital and Class (1977). 3 Anderson, Imagined Communities (1983), eh. 7. 4

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Engagement in ent rprise restricted the focus of political organisation, if not also 'national' vision its lf, to the territory of tribe which was nclosed by the 'native' reserve. In th Kenya case of straddling, equal weight has to be put on private enterprise in accounting not only for the formation of an indig nous bourgeoisie but also for why the class stood at the head of national political movements. However, an unr mitting focus upon ethnic territory should not eclipse what was mbedded in the 'national' of the bourgeoisie. John Lonsdale, for instance, has recently inverted economic interest and political accountability in explicitly reducing Anderson's thesis to the imagined community of tribe when he accounted, in effect, for what was possible to express the Bildungs- about the formation of the bourgeoisie in central 5 Kenya. Any such inversion is un,-varranted because it was the very aspiration of the 'national', in confronting colonial authority to force the removal of racial and ethnic restraint over accumulation, that accounted for why private enterprise came to be restricted to its association with tribe and ethnic territory. Indeed, whereas the first national movement of the EAA aspired to be extra-Kenyan, its successors, such as the KCA, the Kavirondo Welfare and Taxpayers Association and other 'tribal' political organisations were intra-Kenyan. For these later associations the ascribed province of the native reserve, the trust land territory or, in later parlance, the 'African Land Unit', was the unit of territory in which African wage-labour employing farms and small businesses were established. In default of the possibility of colony-wide territory for the acquisition of land and the general accumulation of property, the so-called tribal associations were exclusively led and supported by the first class of straddlers between employment and business. Thus, for instance, the athomi in central Kenya, literally 'the educated', who were both Bildun s- and Besitz-, used inventions of community and tradition as well a modem forums for political action to succour the xt nsion of privat nt rpri and indigenous African busin s within ach tribal t rri tor .

5

See, for instance Lonsdal , Morn/ e

0J10111y

of Mn11 Mnu (l 92).

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Over the mainstay of the colonial period as a whole, from the late 1910s to the late 1950s, when enterprise was confined to the reserves of smallholding agriculture, there was . a marked oscillation between the local and 'national' scope of political organisation and representation. When KAU emerged as the pan-class, pan-ethnic African national movement after the second world war it was framed according to the original, national vision of the very indigenous bourgeoisie who formed and maintained the official leadership. KAU was regarded as being so subversive of colonial authority because the KCA and parallel ethnic political organisations were at its head in articulating the 'national' vision. In the attempt to secure a constitutional settlement for an African majority government and to find a national frame of reference for indigenous African enterprise, including the dissolution of racial preserves over land and business, the official leadership of KAU faced the rebuff which marked out its own conditions for revolt in central Kenya. It faced both the official colonial refusal to remove barriers against non-European land ownership in the white highlands and also revolt from below. A decade later when KANU was again assembled out of the old parallel organisations, with the same class at its head, the original vision of the national came to the fore. Thus, there was no simple linear trajectory of either economic interest or political representation from the local of tribal community to the provincial and, then, the national arena of political association. Such is what both colonial authority, and by the strange inversions of paradox, its latterday critics prescribe as the ideal and natural course of social and political action. However oscillation between the tribal and the national has reappeared with a vengeance in the post-colonial period by the superimposition of one tragedy upon another rather than by the repetition of tragedy by farce. GENESIS OF THE AFRICAN LAYER OF CAPITAL

We presumed above that there is no need here to lay out the well-known detail of the genesis of African nationalism in Kenya. Despite the force of Himbara' s thesis, we make the same presumption about the genesis

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of indigenous African business in the mainstay of the colonial period and into the 1970s of the Kenyatta regime. Whatever the force of criticism with regard to the location of a bourgeoisie in manufacturing industry, there is a body of original material assembled by Kitching, Leys (post-1975), Marris and Somerset, Njonjo, and Swainson which makes it possible to outline the following course of development of African-owned big business. 6 Gen rally, the outline is not a matter of whether or not African business exists but the question of trajectory and scale involved in the transition from small farm, property and trade to what might be recognisably involved in capitalist enterprise. In making the claim that Kenyan Asian capital has always been the indigenous bourgeoisie in Kenya, Himbara is logically forced to argue that the pre-colonial origins of African business have been overstated and exaggerated. 7 If there is an unsubstantiated, exaggerated claim here, it is instead Himbara's overstatement of the nineteenth century extent of Indian commerce in the east African 'hinterland'. Himbara dates the presence of Indian traders from the 1840s, the period in which Indian traders established themselves on the offshore island of Zanzibar. He then, without source or substantiation for the intervening half-century, rapidly but correctly connects the movement of Indian traders to a presence on the mainland with the 1890s establishment of the British protectorate and later railway construction to the Uganda hinterland. We do not dispute that there may have been Indian, as opposed to Swahili or 'Arab', traders who operated in central 'Kenya' during the latter half of the nineteenth century. However, whatever the extent of 'non-African' trade during this period, there is a body of evidence to indicate that even before as well as contiguous with the Indian advance into the interior of East Africa, circuits of trade and agricultural production made some central Kenya Africans wealthy through the

In addition to above references, see Marris and Somers t, African Bu. irzessmen 6 (1971); Njonjo, Africanisation of the 'White Highlands' (1978). Njonjo's th sis remains as the seminal tudy of th an of indig nou capital into largeholding agriculture aft r Jndependenc '. 7 Himbara, Kenyan Capitalists, p. 21.

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primary accumulation of wealth. Chad s Ambler recently has substantiated earlier, provisional work on th qu stion of primary accumulation. Since land was available to be colonised, the organisation of labour effort was the key factor in explaining the accumulation of wealth. Relative prosperity and security depended upon access to, and control over, labour and was reflected in 8 the popular aphorism 'andu ni indo' or 'people are wealth'. Rich men, and women, were therefore those who could command the labour resources necessary to open new fields for cultivation, watch ever large herds, protect their settlements, and engage in trading and raiding. Arnble:r has reinforced the analysis of the period, to explain how the intersection between circuits of trade and production pivoted upon marriage. Livestock, garnered through trade and raiding, enabled a person to command more 'wives'. HousEholds of wives reproduced the sons and daughters who provided labour effort which, through more production and trade, led to further rounds of concentrating wealth in the hands of a relatively small number of primary accumulators. Further, Ambler has extended Godfrey Muriuki' s emphasis, for both the Kikuyu and the Kamba, upon the role which the trade in ivory, with the 'non-African' traders, played in assembling the first sufficient livestock to generate the much more significant internal trade in foodstuffs, largely with the Masai, to generate the material basis for more wives, labour effort and food output. Ambler has explicated the connection between armed force and the capacity to secure internal trade routes for the primary accumulators. Securing trade routes meant that non-African traders would be largely confined to the ivory trade until the late nineteenth century. Throughout central Kenya, the first British-appointed 'chiefs' were invariably primary accumulators of the late-pre-colonial period. Machakos, for instance as the administrative station for Kamba country, was thus named 'after the broker Masaku 9 who had dominated trade in the area during th 1880s'. J.S. Mangat has emphasised that Indian trad _ rs largely r mained at th coast until the 8 9

Ambler, Kenyan Com1111n1ities (1988), h. 1, esp. pp. 25-30. ibid., p. 106.

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late nineteenth century. This was xactly th p riod wh n trading enterpris of the indig nous primary accumulators was most threatened 0 by th inception of col nial rul . In short Br · tish colonial rule broke the stranglehold of indigenous dominance over trad in the interior and, as Himbar acknow 1 dges, allowed Indian traders to move into th space created for th circulation of internationally produced commodities. Pre-colonial primary accumulation was inherently unstable and in itself did not 1 ad to the indigenous development of capitalism. Given the m ans by which labour effort vvas pivoted upon marriage, and the system of partible inheritance among male siblings, wealth was divided among inherit es of any relatively wealthy individual. Alongside this levelling mechanism went the opportunity to colonise land as an alternative to becoming a labour-t nant or wage-worker on the landholding of a primitive accumulator. Colonial rule both closed the land frontier, in favour of European landed settlement, and enabled education to be provided as the means by which sons and daughters of the primitive accumulators were qualified for the salaried, skilled jobs in the subaltern ranks of the administration and on the European-owned 11 agricultural estates. Land inherited by sons and daughters of fathers who had been primary accumulators was now put at work within 'the native reserve' to reform the older ties between production and trade.

Multi-business and agriculture

Primary accumulation and then straddling ensured that indigenous accumulation was first embedded in agriculture. During the interwar, colonial period of the commercialisation of African agricultural activity, straddlers developed small farms which were not the smallholdings of rural-rural and/ or rural urban labour migrants who circulated between wage work and landholdings in the reserves. Inno ating in n

10 Mangat, Immigrant communities (1976), pp. 467-46 . 11 See Kitching, Class and Economic lu111ge, chs. , ; Al- , f r the m t su in t overview of the issue h r , B rry, No 011diti II is Ptn11a11e11! (]9 ), pp. 7 - ; f r a i, mb,, Private lm1ded property summary of, and ref rences to, of hang in lr11 cl poli y, s · (1989).

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agricultural activities, mploying wage-labour and directing production for al , the relatively small farms were small by scale with respect to European- wned estates. However, the farms were not small according t th criterion of the smallholding as a land unit which acted, in part, to r pr duce the means of subsistence of labour-based migrants. Contrary to the smallholding, and th cheme of smallholdings, which was developed by the colonial admini tra tion to secure means of ubsistence, small farms of straddl rs serv d as part of the essential basis for the desire to accumulate land and assets. The official scheme of smallholdings was interposed between the mass of land units serving for subsistence and the small farms of straddlers serving to reproduce privat means of production. From the late 1910s, the small farm was a part of the process of straddling which involved not merely wage employment but also non-agricultural trading enterprise. In setting up, for instance, shop and/ or tea-room/hotel, mill, or wagon transport enterprise, individual African-owned business was multiplex. Chandavarkar, for India, had claimed that the only factor differentiating large- from small-scale industry was size. For the preponderant Indian-owned enterprise in the interwar textile industry, large business organisation, and strategy, was 12 small business writ large. For Kenya, similarly, larger indigenous African business organisation seems to have kept the organisational form of its earlier twentieth century origins. Four decades after the first origins of 'modern' African business, Peter Marris and Anthony Somerset provided an account of the multiplex condition: When a businessman has spare resources to invest, he prefers to start another small concern, which he can staff with a manager whose qualifications and expectations do not threaten him, than to expand his present business beyond the critical limit of dir et sup rvision. The proliferation of small business interests arises from an inability to delegate authority, which is partly inexperience, partly lack of uitable candidat s, but partly t o a failur of n rv . 12

Chandavarkar, lnd11strializntio11 in /11dfrl b fore 1947, p. 63 .

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mer t continu d:

Busine men dare n t risk ntrusting manag ment to a responsible e1nplo e, b c u they lack confidenc in uch a relationship between Africans. They ace pt the profes i nal integrity of an Asian accountant or Europ an rnana r, but care ly among t themselv s. And so they shy aw from pr viding opportunities for Africans to prove themselves. 13

Furthermore, and unlik Za wan' s account of K nya Asian business rgani ation, African multi-business was not formed through the affiliation of family enterprises. Marris and Somerset, in their 1966 study f n arly 90 African business enterpri es, found that 'though family ties were common enough in both parhlerships and employment, they were not dominant, and they intruded least into the more sophisticated businesses'. Pur ly fan1ily partnerships accounted for only 15 per cent of all business ownership; the 'commonest ties between business as ociates w re not family, but having worked or been at school 14 together'. Absence of mutual aid or trust, based on family affiliation, what was so present in Zarwan's account of Kenya Asian business organisation, could be a factor at work to differentiate African from Asian business. Himbara, in his account of African business failure, may well have been able to capitalise upon the Marris-Somerset thesis about business attitude. Yet, it is the business organisation, in relation to the history of accumulation, which matters and we do not know whether the absence of mutual aid, within the business organisation, is the cause or effect of relative business failure. In any case, we know from Zarwan's account of the Oshwals that the difference between Premchand Raichand, the business group which ultimately dissolved, and Chandaria · s that the Chandarias eschewed family affiliation as a condition for b coming a managerially-driven international firm. It was th multiplicity of mainly singl -own r bu ine �, and its insertion into the productiv activity of ag i ultur , \ hi h n1 d indigenou African enterprise ph no 1 nally diff r 'nt fr n1 b th 13 14

Marris and om rs ibid., pp. 139-40.

•l,

/\Ji·ica11 /311::;i11e::;�111c11, PI . l 5.

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European-owned agricultural estate and Kenyan Asian enterprise. If individual Kenya Asian capital was involved in a multiplicity of enterprise, as multi-business, then it was also, via the dictate of policy for the mainstay of the colonial period, barred from large-scale highlands agriculture - the p·rincipal arena of production. Also, as we earlier mentioned in chapter 4, agriculture was largely a subsidiary preoccupation for the development of Kenya Asian business. The overwhelming pattern of non-company, European owner estate agriculture was based upon the model of a single owner-occupied farm which served to reproduce what was assumed to be a European standard of subsistence. Although some better-known European landed settlers, from Ewart Grogan to Michael Blundell, also came to involve themselves in non-agricultural business, the exception only proved the rule because these early and late exemplars of Kenyan European enterprise aspired in their different ways to assert a national interest of Kenya. The multiplex condition of African business, from its base in agricultural production, made it the indigenous source of internal capital in Kenya. Following the full removal of racial discrimination over both African business and employment, from 1960 onwards, the scale of straddling was enlarged. Senior ranks of the administration and military and, then later, African directors of subsidiaries of international firms in Kenya moved to acquire and operate large farms in the old racial preserve of the white highlands. Professionals, such as lawyers and doctors followed in their wake. To this extent, the multiplex condition of African business was succoured by both international firm and state agency which opened up the economic space for the ownership of multiple enterprises. There is little doubt that African privately-owned agricultural estates, either being acquired through the purchase of single owner-occupied European farms or through the acquisition of shareholdings of company farms, came to occupy a much expanded, and possibly even pr dominant, 15 position in large-farm production by the early 1970 . While there were differences between district in th pattern of

15

See Njonjo, Africanisation.

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takeover of former settler-owned land in the white highlands, of the mainly Central and Rift Valley provinces, betw en 1962 and 1974, three factors of settl ment were particularly pronounced. Firstly, indigenous African nterpris was th major beneficiary of the European owner-occupiers who were moved off the land. In Kiambu and Nakuru Districts, the centre of the most rapid excision of the former owner-occupiers, the African advance was particularly speedy after 1967. Although initially limited, African largeholding owners, by 1974, had acquired nearly one-half and 60 per cent out of two hundred thousand and one million acres in Kiambu and Nakuru respectively. Secondly, although there had been some anticipation that Kenyan Asian capital would make a major entry into agriculture once the European landowners were removed, this did not occur. Thus, in both Kiambu and Nakuru districts, Kenya Asian large-holding ownership 16 totalled less than twenty thousand acres in 1967. Kenya Asians, who had purchased coffee estates after 1960, found themselves under pressure to sell. 'Kenyatta began to take up the coffee estates in the highlands', Gregory tells us, 'and their cashew plantations along the coast'. At Kibos, 'cane growers sold their farms to big sugar companies'. While some Kenyan Asians knew that they had no alternative to sell land, especially coffee estates at a fraction of their market price, to Kikuyu business, others 'sold on the assumption that because of the government's attitude more profits were likely to be made from manufacturing'. 17 Thirdly, international firms, some formed in association with existing Kenya Europeans, were the major non-African purchasers of large landholdings. Such firms had begun a major move into Kenyan agriculture before 1959 and accelerated their acquisition of land during the interregnum before Kenyan African capital tightened its grip upon state power in 1967. As Apollo Njonjo noted, between D c mb r 1963 and April 1967, close to one million acres, or 15 per cent of the forn1er white highlands had been purchased by 1,335 n n-citiz n ·ndividuals and companies. District figures confirm the ext nt f n n-African land 16 17

Njonjo, Africanization, tab) � 8.2, 8.6, pp. 476, 484. Gregory, South Asians in nst Africa, p. 262.

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purchases during this p riod. In Nakuru District, for instance, European and Asian landowners purchased 122 farms covering 120,000 acres of land during 1964 while African farmers bought less than half this acreage o r th same y ar; nearly 40 per cent of the acreage owned by non-Africans in Kiambu in August 1974 had been purchased in the 18 period aft r 1962. Further, and desp·te the continuing 'monopoly' of the old European large-farm co-operatives and parastatals, African private companies were especially numerous in the space where agricultural production was 19 linked to dealing in agricultural products and inputs. If there is doubt about the substantial presence of African business in the large-farm sector, then what has to be queried is not its extent but the economic performance of the African owned large-farm sector during the decades after independence. Doubt about large-farm performance is usually attributed to the question of management. However this question only masks what is so heterogeneous about large-farm agriculture under the multiplex condition of African business. For instance, there is a world of difference between the large-farm operated as a single adjunct activity to that of a professional involved in employment elsewhere and that of professionally managed farms which are operated as company enterprise and, normally, as part of a multiplicity of companies under the control of a single firm. In any case, unlike the non-company European-owned estate of the colonial period, the African-owned large-farm is not restricted as the means of reproducing subsistence for its owner. As part of the multiplex of enterprise, the farm is an element in a bloc of property which serves as the means to reproduce capital. Ninety per cent of the 90 or so African-owned businesses in the Marris-Somerset 1966 study had 'other economic interests, either farm or business,' in addition to the enterprise for which they obtained a loan from ICDC, the parastatal Industrial and Commercial Development Corporation. 'Of all the interests which can distract a manager from the 18 19

Njonjo, Africanization, pp. 471-472. Swainson, Corporate Cap;talism, tab! 35, p. 198.

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supervision of his business', Marris and Somerset wrote, 'farming is the most compelling' and 'land still the goal towards which every endeavour leads at last'. 20 Marris and Somerset noticed that 'the most progressive of the industr"al bus· essmen' were least likely to own any land at all and had deliberately repudiated agriculture. From the studies of jua kali, relatively small-scale manufacturing, artisans are likely to be divorced, whether by intent or not, from an interest in agriculture, but the picture for larger-scale African-owned enterprise remains unclear. Indeed, the extent to which the multiplex condition of African business has contributed towards large-scale manufacturing failure has neither been proven nor predicted, from what Marris and Somerset found in 1966, to be a cause of faltering African-owned large-scale industrial progress. We do know, however, that post-independence African big business, especially that created through straddling procedures, continues to make 21 landholding and agriculture a central aspect of accumulation strategies. Therefore, the extent to which the large-farm is deemed to be productive and/ or profitable must be appraised according to the criterion involved in the multiplex condition of African business.

Non-agricultural business The expansion of scale, which so epitomised the advance of African business in agriculture, occurred also in African non-agricultural enterprise. Swainson's account of the genesis of African capitalism goes 20 Marris and Somerset, African Businessmen, pp. 116-7. 21 See, for example, Langdon, Multinational Corporations, p. 26; Swainson, Corporate Capitalism, p. 185; Leonard, African Successes, pp. 76-99. Langdon cited the 1973 case of Maina Wanjigi, assistant minister of agriculture, formerly executive director of the Industrial and Commercial Development Corporation, a k y tate development finance institution for Kenyanization and indig nizati n. W njigi h d interests in concrete manufacturing, printing, commercial, con truction and trnn p rt firms, as well as farming, involvement with Asians in metal working , nd ittin n th b ard of an international paint firm. This example, Langd n on lud d, ' uld b r pr du ed', and 'often in mor substantial prop rtion ', f r 'm� ny th r ny, 1 [ fri , n] p liticians and administrators.' Leonard's later case studies only affirn d th- b v for th 1980s.

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back to the wholesale distribution of th products of international firms. Although not fully Africanised until 1974, firms such as East African Breweries, East African Tobacco Company, Fitzgerald Baynes (later Schw ppes), Unga Flour Company and the Shell Oil Company had operated er dit schemes, from the l 950s, to guarantee bank finance for traders operating on narrow cash-flow margins. These schemes also encouraged the expansion of African retail trade, often at the expense of Kenya Asian business, and the system led to the emergence of one or several powerful African traders in each district, who would have accumulated enough money capital to contemplate the expansion of non-trading business. Substantial growth in the activity of African merchant capital happened before 1963 and was one instance of the tendency to create a mutuality of interest between international firms, which generally wanted to expand the sphere of African commodity production and develop markets for their products, and African capital which was excluded from direct participation in the agrarian schemes 22 of smallholding production. By the late 1970s, African business had moved into FIRE, namely finance, insurance and real estate, large-scale and import-export trading, transport and a plethora of other activities in what is normally called the 'commercial sector' of the economy. Either by acquiring the total and/ or partial shareholding of existing companies or by forming new companies, especially banks, African-owned business became identified with what is associated with rentier activity of speculative rather than productive enterprise. As such, and according to the same standpoint of criticism which has been directed against the investment of indigenous African capital in agriculture, investment activity of the African layer of capital has been deemed to be dysfunctional for the development of the economy. This presupposition, especially when combined with Himbara' s thesis, suggests that there are no Kenyan African capitalists because th phenomenon of African indigenous capitalism has been confined to activities outsid the productiv cor of th conomy. Here 22

Swainson, Corporate Cnpitn/is,n, pp. 1 2-5.

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is on important reason for why th xp nenc of manufacturing has acquired significance. There i consid rable confusion betw n appra1s1ng the status of indigenous African accumulati n within th traj ctory of the transition from agriculture to manufacturing and establishing the place of African-owned business within the economy of Kenya. Confusion arises from th way in which th theoretical logic of ideal development is pre upposed within the mpirical history of business. The theoretical conception of an ideal transition from agriculture and/ or trade to manufacturing arises from a progressive developmental model of a national economy in which a tate agency is able to discipline the application of money-capital to production. This presupposition, which has recently been generated from cases of successful industrialisation in East Asia, stands as some implicit ideal standard for then registering the extent to which the historical experience of a given layer of capital measures up to an ideal of national development. 23 The upshot is that the cart of history is put before a logical horse of development. It may well be possible to empirically establish the extent to which African-owned enterprise has been established in different sectors of the economy and to periodise the change over time. Swainson's evidence for the mid-1970s which showed that African capital had been established in some industries of large-scale manufacturing is not contested by Himbara's data for this or the later period of the 1980s. Swainson emphasised that the 'primary sources of [indigenous African] accumulation of capital in the post-colonial period have been real estate, 24 farming, transportation and commerce'. But she also noted that: The African capitalist class up until the 1970s was predicated upon agricultural production and their involvement in industry was limited. rom the mid-1970s, however, there has been a marked tendency for (African) capital to move into industrial concerns wh re th rat of profit 23 For this argum nt, s e Amsden, A in's Next in11t (1 89). Ali msd n was l o one of the first to examine postwar indu tri. lisation in K �ny,. c, msden, l11ternntional Firms (1971). 24

Swainson,

Corporate Capitn!ism,

p. 185.

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is higher than in trade, with greater possibilities for establishing a dominant position over th e mar k et. 2s . . All Himbara does is to confirm that African-owned enterprise, as a whole, continu d to be on the verge of manufacturing as a whole. Over th ntir period 1964-1990, just six per cent of the 100 manufacturing firms in his sample wer K nyan African owned. However while none of the firms established in the 1960s were owned by Kenyan Africans, during the 1970s and 1980s eight and five per cent respectively were so 26 owned. No evidence, either way, has been produced to establish the extent of such enterprise in tourism and other sectors of the economy, for which there also is a dispute as to whether these activities belong to the productive core of the economy. In any case, as we argued above regarding the relation between the state and Kenyan Asian capital invested in manufacturing, it is the relation between different sectors and agencies of economic action that determine the trajectories of accumulation and the course of capitalist development. Given the multiplex condition of the indigenous African layer of capital, an empirical account of economic performance in any one sector does not tell us about company performance as a whole since capital moves within the same holding company but between different enterprises, to and from different sectors, of the company. Thus, by way of example, agricultural loans advanced to large-farm operations may well have been deployed in non-agricultural enterprises and visa versa. 27 The same may apply for development and commercial bank loans to manufacturing enterprises. Relatively very large default rates on loans cannot simply be used to infer that business has failed according to the pay-back condition of farms in the agricultural sector or factories in manufacturing. It may well be the case that farm and factory operations 25 ibid., p. 211. 26 Himbara, Kenyan apitalists, pp. 46-47. 27 See, for example, Kenya, Development Plan 1989-1993 (n.d.), p. 124. The plan stated that 'alth u h omm rcial b nk er dit out tanding to th agricultural sector appears to have increased, th r has been n id rable diversion f such funds to non­ agricultural activities.'

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are inefficient according to the criterion that sufficient profits have not been realised, over any given period, to meet loan interest charges. Equally, the implied interest charges may have been invested in non-agricultural enterprise. This applies especially for those activities, such as FIRE, where any given sum of money-capital turns over more rapidly within any given period of time and, therefore, accelerates the rate at which money-capital is accumulated according to the profitability criterion of the holding company as a whole. Furthermore, the degree to which enterprise is established in any one sector does not give a historical account of the gap between the aspiration to establish business and the given fact the business failed in that sector. The transhistorical explanation for failure, namely that African-owned business has failed because Kenya Africans have not shown the same capacities for, and commitment, to big business as Kenya Asians is inherently tautological. That is, big African business fails because it is not small-scale while Kenya Asian capital has developed because it is large-scale. Thus, by and large, Himbara only reiterates the prescriptive accounts of African business which go far beyond his own thesis. As such, Himbara replicates the trope that the African bourgeoisie is no class of capital but a petit-bourgeoisie. By extending the account of the interwar period of straddling into the postcolonial period, the impression is conveyed that the 'small' is the limit, and true limit, of African business for the twentieth-century at any rate. While smallholding agriculture continues to be the model for true agrarian development, jua kali is the place for African enterprise within the ideal of African development. Scale is not merely an economic attribute of enterprise at the firm level. As we argued above, African business was politically organised during the colonial period to search for the 'freedom of property' whereby the restricted small scale of accumulation would be freed from racial and political constraints. This economic aspiration was coupled with the political determination to find wider social space in which, at the inception of the post-colonial period, the econon1ic interest of the African indigenous layer of capital would transcend the provincial confines of tribal and ethnic space. The scale of accu111ulation was enlarged as a political arena in which capital was meant to be free to move and be tested only according to the capacity to accumulate capital.

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Politically contested provinces, such as the Rift Valley province in particular, became the arena in which the enlarged scale of African business was identified as Kikuyu business. And, as we shall show below, the indigenous African layer of capital, by virtue of its command over state power, was enlarged and then became commonly represented as Kikuyu capital. STATE, PATRIMONALISM AND CAPITAL

Right from the beginning of African land resettlement in the white highlands, from 1960 onwards, the occupation of land in the Rift Valley province by those of Kikuyu origin was hotly contested by the political leadership of enlarged ethnic groupings from west of the Rift Valley who formed KADU. In so far as a substantial proportion of smallholdings, created out of the division of former European-owned estates; and large-farms acquired intact by Africans, were occupied by 'the Kikuyu', the basis for conflict on the grounds of ethnic affiliation was given political effect by what seemed to be the extension of central Kenya social space into the Rift Valley. 28 Central Kenya, especially Kiambu, was the space in which indigenous African business had been most developed and where the enlargement of capital, from its roots in the small farms and enterprises, was happening most rapidly. The KAND post-colonial government of the Kenyatta period came to concentrate economic and political power at the apex of state power. However, concentrated power of this kind was no simple form of either patrimonial or even neo-patrimonial regime. A body of academic analysis of the regime has arrived at the exaggerated claims that the Kenyatta regime was founded upon a form of Caesarism. The description supposedly justifies various nomenclature, of th 'patriact' or 'the family', as the basis of describing what the concentration of political and 28 Wasserman, Politics of Decolonization (1976), esp. h. 6; L ys, Politics in Kenya (1971), pp. 307-337; Leo, Land and Class in Ke11ya (1984); Ngunyi, Resuscitating the majimbo project (1996), pp. 187-194; Ochieng', Structural and political changes (1995).

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29

economic power might mean. We do not deny the assertion that there was a family compact at the heart of the regime which reigned across gov rnrnent m·nistries. The compact simultaneously acted to further private businesses from a base occupied in directing the local subsidiaries of international firms ranging from British American 30 Tobacco to Lonrho. Nor do we doubt that the president's political home in Kiambu district was the centre of a nexus of power through which the administration could strategically act to manipulate and cajole the political basis of state spending for local private economic benefit and privilege. However, we contest the presumption that there was no strategic conception of a class which could act systematically to enlarge its scale of accumulation upon the basis of state power. Neo-patrirnonial effects may have been at play without the singularly essential form of patrimonalism at work in the post-colonial conjuncture of Kenya. In other words, we have no problem with Christopher Clapham's original view of neo-patrirnonalism as the ideal type of state organisation in which officials 'hold positions in bureaucratic organisations with powers which are formally defined', according to rational-legal forms of authority, 'but exercise those powers, so far as they can, as a form not of public service but of private authority'. We object, however, to reducing the explanation for this type of official action to Clapham 1 s claim about 'loyalty to one's kin group' as 'the primary social value' in 31 'plural' and/ or third world societies. A neo-patrimonial effect of action may be consistent with a different explanation for why it is prevalent in Kenya. 32 As much through Tom Mboya, a 'Luo' , as any source of 'Kikuyu' agency, the Kenyatta regime acted early upon two fronts to secure state power. The regime acted politically to thwart the actual 'petit-bourgeois' 29 Much of this argument is summari d in J.-F. M dard, Historical trajectories (1991), pp. 185-212; for 'patriact', ee Bourmaud, Histoire Politique (19 ), pp. 153-60; for 'family', see Widner, Rise of a Party-State (1992), p. 76. 30 See, for Lonrho, Bower, Tiny Rowland (1994). 31 Clapham, Third World Politics (1985), pp. 48-9. 32 Goldsworthy, Ethnicity and leadership in Africa (1982), pp. 107-126.

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ongms of political movements which proffered the alternative to capitalist development in Kenya. Represented first by the post-Mau Mau, and largely Kikuyu-based Kenya Land and Freedom Army, and then by Oginga Odinga and his associates who ended up, with some Kikuyu support, in the Kenya Peoples' Union, the post-colonial government faced down the vision of a socialism which veered between a distributive society of small-property owners, amounting to a version of 'popular capitalism' and a system of state socialism, in which all means of production would be nationalised. Secondly, the regime acted on an economic front to systematically expand and protect internal sources of accumulation which would otherwise have been occupied by international firms and the Kenya Asian layer of internal capital. Njonjo, Swainson and Leys have documented the set of instruments which were employed to create the economic space for indigenous African capital. Once African capital had a firm grip on the post-colonial state, land controls, inherited from the colonial period of regulation, were used to restrain non-Africans from extending their landholdings by buying former European owner­ occupied farms. International firms which owned tea and coffee plantations were prevented from expanding acreages under production. The state agricultural finance and marketing apparatuses which had been established at the behest of European large-scale farmers during the colonial period were regenerated to serve the purpose of African enterprise in agricultural production. More significantly, the apparatus of controls which had been associated initially with British war-time planning and control, and then extended into the period after 1945, was redeployed to keep international capital at bay. Foreign exchange controls, capital issues regulation and industrial licensing, for instance, were utilised in the process of bargaining with international firms which sought to expand investment in Kenya. The 1968 Trade Licensing Act, which did so much to prompt the Asian exodus the mentioned in chapter 4, was likewise designed to promote African trading business through state regulation. Himbara repeats much of the evidence of the extent to which the Industry and Commerce Development Corporation, founded in 1954 as the Industrial Development Corporation by the colonial government, was substantially enlarged and augmented. As we show below, other development banks

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were formed to finance existing and new enterprise owned by Kenya citizens as well as directed towards the development of indigenous African enterprise in trade and industry. Thus, contra Himbara, the instruments of the high age of development were deployed most effectively to develop African business in the post-colonial period for a purpose which had not been intended in the 'developmental age' of the 1940s and 1950s. However much it may be argued that the space so created by regulation was not used efficiently, and that the real beneficiary of the development apparatus was established Kenya Asian capital, the more significant phenomenon is that space was effectively created for African business to enlarge its scale of accumulation as the indigenous layer of capital. State control and regulation, we emphasise, did not entail nationalisation of either Kenya-Asian owned enterprises or subsidiaries of international firms operating in Kenya. Rather, the more obvious intent of the Kenyatta regime was to permit the continued presence of Kenya Asian and international owned capital in Kenya as the base from which a new set of straddling procedures would be established. In a speech to Nairobi businessmen in September 1964, Kenyatta outlined the course of his government: We are determined that the development of African business and industry should be carried out without damaging the existing fabric of the economi' 3 ationalization will not serve to advance the call of [African] socialism.

Instead, the acquisition of equity by development banks across a range of companies and parastatal businesses played a substantial role in investment for nearly all sectors of the economy, as well as intending to extend the economic space available for occupation by African 34 enterprise. When they acted as directors and rentiers of Kenya Asian, 33 Quoted from East African Journal 1(7) 1964, pp. 17-19, by Vinnai, Role of Development Finance Company of Kenya (1973), p. 1. 34 See, for example, Swainson, Corpornte Capitalism, pp. 1 9-191; Langdon, Multinational Corporations, pp. 23-29,36-43; Grosh, Public E11terprise in Kenya, (1991); also, references to development banks and parastatals b low.

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international and para tatal companies, Africans could deploy their r v nu from incom and ace ss to technical expertise for investment in their wholly owned enterpri es which were established and/or xpanded as part of the trajectory of indigenous capital accumulation. When the Kenya nationality of business was asserted against the int rnational and/or imperial force of economic power, the Kenyatta regime act d internally to create spac for indigenous accumulation. But there was no external relation of the national to international business which marked the same period of nationalisation, especially in the vital decade or so after the lat 1960s, for most other countries of eastern and central Africa. Indeed, if there was a national distinctiveness about the indigenous bourgeoisie in Kenya it was the result of its singular intention to act differently in the post-colonial course of capitalist development. 35 This is why from the outset of post-colonial government, the national' of the indig nous bourgeoisie was a chimera. In creating the space for internal accumulation but then occupying it by capital stemming from the new period of straddling procedures which governed the formation of big African business,. the Kenyatta regime faced its own African reaction against the neo-patrimonial effects of concentrated economic and political power. It was not so much 'the family' as 'Kiambu' which came to represent the complex of concentrated power for the older as well as the much expanded younger ranks of a property-owning salariat. By the early 1970s, following the beginning of what '\!Vas to become a long continuing downturn in real wages, straddling had a different content. Whereas the original procedure of straddling was directed as profitable opportunities to use employment­ derived revenue to invest in business for accumulation, the different procedure was to search for busines to compliment the wage in an endeavour to maintain a constant means of household subsistence. Earlier straddling, or accumulation straddling, enclosed the space for profitable enterprise which was the purpos of procedures of later subsistence straddling. When straddling became an economic imperativ 1

35

Se Chege, Swapping development c,frntegies (1994), p. 248.

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for subsistence it created t nsion within the gen ral procedure by which the indigenous layer of capital developed in Kenya. As highly competitive entities of enterprise, including tho e of full-time smaller scale trading, developed during the 1960s and 1970s it was larger blocs of indig nous enterprise, as much as Kenya Asian capital, which came to be the target of resentment and political hostility. Indeed, the hostility against the indigenous layer of capital was engendered as much within the Kikuyu country of the Central Province as by the extra-Kikuyu array of tribal forces of hostility against 'Kikuyu' domination over business and government. The formation and later course of the Gikuyu Embu Meru Association (Gema) was emblematic of the economic and political tension which had been created by the concentrated complex of power at the apex of the Kenyatta regime. So redolent of the official colonial category of KEM, the Kikuyu, Ernbu and Meru who had been labelled as the problem of Mau Mau, Gema was formed during early 1971 on two grounds. The first followed the political events of 1969, including the assassination of Tom Mboya, banning of the KPU and a widespread oathing campaign in central Kenya which was coordinated by some prominent regime figures. The association was to provide protection, or a political prophylactic, against the possible eventuality that ethnic hostility, especially of "the Luo', might lead to the exclusion of a dominant Kikuyu interest in the state and business. Gema sought public support on the basis that it was the respectable alternative to the widely condemned oathing associated with Mau Mau and the immediate reaction to the 1969 events. Second, and more significantly for our purpose here, Gema' s immediate origin lay outside Kiambu, in Murang'a and Nyeri districts especially, where a bourgeois-petit bourgeois alliance searched for th 36 means to promote Kikuyu business. In other words, Gema wa originally independent, so its sponsors pr sum d, of the trajector of accumulation represented in their minds by 'Kiambu'. Ind d n t on of the initial Gema headquart r offic -b ar r , all f wh rn w r

36

Swainson, Indigenous capitalism in postcolo11inl

e11yn (1

7), pp. 155-5 .

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members of parliament, represented a Kiambu District electorate. Although a number w re senior regim figures, including cabinet ministers, none was of 'the family'. The first chairman was Murang'a MP and cabinet minister, Dr Julius Kiano; the organizing secretary was 37 Ny ri MP and staunch regime critic, Waruru Kanja. Only after the 1972-1973 tak over of Gema by a Kikuyu faction headed by the leading Kiambu businessman and later MP, Njenga Karume, was the association given its main economic and political objectives by the cutting edge of Kikuyu capital. The immediate and intended political objective, which was to organise a cohesive faction within KANU to contest the 1974 elections, met with considerable success. Also, Gema officials started to develop ties with the Luo Union and the New Akamba Union, offering access to sources of credit then held by Gema members 38 who occupied key state posts. No less successful, even if far less intended, was the political campaign coordinated by major Gema office-bearers to turn the tide of popular protest against the March 1975 assassination of the 'populist' politician, J.M. Kariuki. At this critical juncture, Gema served to reassemble the hegemony of the Kenyatta regime by contesting the renewed demand for a popular capitalism 39 whose bedrock would be the small, relatively poor property owners. The Kiambu takeover of Gema also provided the association with a sharper economic objective. In 1973 Gema Holdings was launched as a 40 vehicle for popular capitalism. It was at this point, more than a decade 37 The principal source for this account of Gema is the records of the Registrar of Societies: file numbers 9,738, 10,049, 10,114, 10,202, 10,208, 10,672, 10,746. Widner, in Rise of a Party-State, discusses Gema at length, but from a vantagepoint at some distance from the argument developed here. Widner (p. 76) mentioned Kiano as a 'key member of the "family" faction of KANU's conservative wing, 1965-1978'. While not disputing Kiano's 'conservatism', as 'Mr Murang'a', from an electorate north of the Chania River, Kiano was clearly not of the Kiambu 'family'. It is unclear wheth r Widner used the Registrar of Societies' files for her account of Gema. 38 The Standard, 23 April 1974; personal interview, 15 September 1975; Widner, Rise of a Party-State, pp. 92-93. 39 See MacWilliam, Rights and politics (1985), pp. 74-84; Widner, Rise of a Parh;-State, eh. 3. 40 Swainson, Indigenous capitalism in postcolonia/ Kenya, pp. 156-58.

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after political indep ndence, that relatively large Kikuyu business, alr ady established in agriculture, real estate, wholesal and distributive trades, had begun mov s into manufacturing. Gema, originally formed as them ans by which individual Kikuyu subscriptions of money, from farming, trading and wage-employment, might be assembled to create th means for protecting and advancing Kikuyu enterprise, was now to b come the vehicle through which larger blocks of finance were c ntralised to make the effective transition to large-scale manufacturing. In other words, Gema Holdings was created precisely to advance the place of Kikuyu capital in the economy. The company mounted an extensive share selling campaign, particularly in Nairobi, Central Province and Rift Valley towns. It is difficult to estimate the extent to which the campaign was successful but there is little doubt about the intention to mount an economic organisation to advance the cause of moving African capital into manufacturing industry. From 1975, with the Gema organisation incorporated into the concentrated complex of power at the apex of the regime, and led by those who represented Kikuyu big business, the firm moved to takeover 'several large industrial enterprises, in that year acquiring one of the largest brick and tile manufacturing plants in Kenya, formerly owned 41 by an American multinational'. By the following year, over one million Kenya pounds had been raised by selling shares. Whereas Afrikaner capital, as we showed in chapter 3, had envisaged and created their associated financial vehicles to find a 'legitimate place' in the economy before it entered into the definitive command of state power in ,.the new South Africa' of 1948, the corresponding edge of African capital in Kenya started the same moves long after it commanded state power. Further, the Gema-centred Kikuyu business inter sts began their attempts to find an effective form of ec nomic organisation when international conditions were propelling a fast-changing tide into the Kenya economy. It was also the period when the antagonists to the 'Kiambu' domination' of th tate w r about to

41

Swainson, Corporate Capitalism, p. 206.

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find an effective form of opposition. In South Africa, of the 1930s and 1940s, big Afrikaner business secured its hold of the economic organisation against the countervailing tendency of popular capitalism. Kikuyu big business, in Kenya of the 1970s, faced a different set of historical conjunctures. Since big business command over Gema, including that over its vital economic function, was enveloped in the early 1970s reaction to the prevailing economic-political complex of state power, its economic endeavour was thwarted by the political reaction to what the Association had come to represent. In 1976, Gema influentials were behind the abortive attempt to change the Kenya constitution, a ploy envisaged as the means to prevent the then vice-president, Moi, from succeeding Kenyatta. Moi had done much, it should be noted, to assemble a political base for northern Kikuyu dissent against the terms of southern, Kiambu, dominance. Charles Njonjo, renowned Attorney General and 'European-like' epitome of the bourgeoisie from Kiambu district who later could not decide whether to be king or kingmaker, played kingrnakcr to support Mai and abort a seemingly prescient Gema endeavour. 42 Thus, Moi succeeded to the presidency after Kenyatta's death in 1978 and a change in regime, for both accumulation and state, was set in motion. CHANGE IN REGIME AND THE NEW LAYER OF CAPITAL Little was more to symbolise the Mai regime's exclusion of Kikuyu business and influence from state power than the banning of Gema, and other 'tribal associations', in 1980. Gema's formal banning had been preceded by a series of direct, frontal attacks on the association, as well as on Gema Holdings. In 1978, the Registrar of Companies office, which operated within the Attorney General's D partm nt, took gal action 42

For this aspect of Moi'

pr -succ

ion

trategy,

Throup,

destruction, p. 53; For Charles Njonj , se M de rd, Charle Njonjo (1987).

Construction and

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against the company's officials for not submitting annual returns since its establishment in 1973. The counter-attack was made in the name of a generalis d tightening of control over public companies, supposedly in th interest of investors. The company and its nine directors incurred substantial fin s, and th political purpose of the attack on Gema was mad apparent. With national elections in the offing, it was clear that in 1979 Gema would not rec ive the state support, so important for its succ ss, that had been received at the previous 1974 poll. 43 Although African capital had begun to make the transition, during the early 1970s, from trade and agriculture into large-scale manufacturing, the political base of the Kenyatta regime was weakened by the contest between Kikuyu capital and popular capitalism. Moi' s succession only accelerated the political rupture between big Kikuyu business and state power. However, the political shift against 'the Kikuyu' was preceded by an even more important change in economic conditions, which made it especially difficult for the new regime to tie together different circuits of capital and sustain accumulation. The change began to threaten the previously established connections between household production of marketed output and the consumption of purchased goods, including those produced by international and internal manufacturing firms in Kenya. During the 1980s and early 1990s the connections were weakened further, with the Moi regime increasingly unable to join the national goal of self-sufficiency with household 44 demands for increased levels of consumption. Expanded household commodity production had been developed through agrarian schemes which were financed by international agencies of finance and aid. From the Commonwealth Development Corporation 43 Throup, Construction and destruction, p. 60, also indicat s why Gem 's demi 'exemplifies' the new regime's undermining of the old regime' in titution . 'The Kikuyu capitalists', Throup noted, 'were able to afeguard th ir inter sts in th re on titut d Agricultural and Industrial Holdings Ltd'. For coverage of the ema trial, and its imp Ii ati n ", e The Weekly R view 2 F bruary 1979. 44 Cowen, Change in state power; Ma William, · - aubin and imm , Domestic Food Production (1995).

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to the World Bank, such agencies developed the basis of schemes which served to reproduce subsistence of producers as well as markets for international and internal layers of capital. Reproduction of subsistence by household production was as much a welfare condition, 'working for 45 the dole' , as the means of valorising production according to international exchange values. In so far as the export of commodities earned sufficient revenues for both producers and the parastatal enterprises which managed the schemes, then the international welfare and valorisation conditions for aid and finance could be met. The extension of agrarian schemes from central Kenya to other regions, and to more 'marginal' agricultural zones, together with the replication of schemes in the urban setting of small-scale manufacturing enterprise, was predicated upon further access, on the part of the state, to 46 international aid and finance. International aid and finance was also a substitute for Kenya general government expenditure on welfare. The contradiction, however, was that national goals of self-sufficiency were joined to increased levels of household consumption through access to overseas sources of funds. Without such access, the demands for central government expenditure would have required an extent of taxation which inhibited the rate of accumulation by internal capital and, in particular, indigenous owned-enterprise. Overseas funds for schemes of production enclosed land for household producers and therefore fettered indigenous accumulation. But the same aid and finance relieved constraints over disposable incomes which taxation would have imposed and therefore acted to induce investment by indigenous enterprise. While the Kenyatta regime had acted to secure international funds according to the same conditions by which it made international and Kenya Asian capital perrnissable in Kenya, the Moi regime has acted with a marked degree of ambiguity. As it became more difficult to tie 45 See, albeit for the diff rent cas of Papua N w Guin a, MacWilliam, "Just like working for the dole" (1996). 46 See, for instance, Hunt, Impending Crisis in Kenya (1984), pp. 282-287; Livingstone, Rural Development (1986), eh. 10.

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together int mal and international circuit of capital, mounting current account deficits and an explosion of external debt payments aggravated the ext rnal condition of conditionality which Structural Adjustment brought in its wake. From the early 1980s to the present, Moi has continually attacked the basis of conditionality as an external, foreign force of neo-colonial intrusion which undermines the autonomy of the Kenya state and the goal of national efficiency. Thus, in following a pattern which had been evident for years, during March 1993, the president accused the International Monetary Fund and World Bank of 'forcing dictatorial and suicidal' reforms on the economy and was reported as saying: 'As a sovereign state, Kenya will no longer accept any form of economic arm-twisting from any quarter'. Since Moi' s comments were prompted by the government's decision to re-establish foreign exchange controls over tea, coffee and tourism foreign exchange earnings, this reversal of economic reforms brought the following retort from 'one of Kenya's biggest aid donors': 'Maybe it's time for us to wash our hands of the place'. A month later, Moi acceded to World Bank demands to continue reforms, including an immediate reversal of the 47 decision to abandon the most significant foreign exchange reforms. A year later, when reiterating the rhetoric to a Nairobi meeting of the African Development Bank, celebrating its thirtieth anniversary, Moi stunned delegates by telling them that 'Westerners think all Africans are thieves"'. The president pronounced: 'After eliminating communism, the West turned to Africa with brutal and ruthless conditions attached to aid. They even forgot that some of us helped them to fight communism'. Conditionality, Moi continued, would easily lead to rioting and then asked: 'Who wants to invest in a country wreaked by riots?'. Yet barely a fortnight later, the IMF was reported to hav praised the Kenya government for deciding to continue conomic r forms and for accepting its obligations under Article VIII of the original Br tt n W d agreement, thereby undertaking 'to refrain from imposin re trictions on the making of payments and transfers for urr nt int rn f nal 11

47

Financial Ti mes 23 March 1993; JPS 27 A priJ 1994.

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transactions' and from engaging m discriminatory currency arrangements without IMF approval. 48 When th regime increased the authoritarian basis of its own dictatorial fore in clamping down on dissent, itself partly a result of the exclusion of Kikuyu capital from state power, the Moi regime's reaction towards the political dimension of external conditionality was both equally furious and acquiescent. Multiparty politics, and the ensuing December 1992 elections, were imposed upon the regime by a conjuncture of internal opposition and 'external' compulsion. During 1991, following public calls for political liberalisation from the United States' State Department, it was reported that the Kenya 'government has expressed great concern and utter dismay at the open involvement of U.S. diplomats who have masterminded and abetted the supposed opposition movement in Kenya'. Philip Leakey, minister for the environment and natural resources and brother of Richard, who later entered opposition politics, accused the United States of 'having a hand' in the then ethnic clashes in the Rift Valley: 'You look everywhere in the world where the Americans have been involved in, be it Latin America, Asia, Africa or even the Middle East, there has always been chaos'. After the election, a State Department spokesman called upon 49 president Moi to 'confirm his acceptance of the rule of law'. United States pressure, with varying support from the foreign offices of other donor agencies, has continued. The reaction from the president has been equally adamant. Thus, during 1994, Moi claimed that the United States government, and its allies, were forcing political pluralism upon Africa as part of the 'wider scheme of recolonizing the continent by making sure that their stooges won national elections'. Until 'African society becomes cohesive', the president continued, 'political pluralism 50 will only lead to chaos and anarchy'. In acquiescing formally to the 48 Africa Confidential 35(14), 15 July 1994; UPI, 12 May 1994; Xinhua, 26 May 1994; PRNewswire, 13 July 1994. 49 Reut r, 16 Novemb r 1991; Xinhua 17 Mar h 1992; UPI, 4 January 1993. For similar reports, s R. Bonner, 'A Rep rter at larg : African d mocracy, The New Yorker, September 1990, pp. 93-105. 50 IPS, 2 September 1994; Xinhua, 28 July 1995.

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call for reform, the president has been able to use 'external' pressure to further the regime's national claim upon real state force to assert the primacy of internal state order. 51 A coupling of economic and political conditions of Structural Adjustment made it formally more difficult for a new layer of aspirant capitalists, associated with the Kalenjin-Masai influentials, to enter the arena of big business. As we explain in more detail below, the layer depended upon the very institutions and instruments of the state which Structural Adjustment policy sought to dismantle. However while attempting to resist the imposition of conditionality, the post-Kenyatta state continues to be dependent upon access to international aid and finance. Indeed, given the above, its need for overseas funds has increased rather than diminished with time. Therefore, there is tension between the regime's pledges to act against the intrusion of international agency and its concurrent attempts to maximise access to a relatively diminishing amount of aid and finance available to fulfil the welfare and valorisation conditions of household production. During the most recent past of the mid 1990s, this tension has created political conflict. While 52 the Kamatusa business 'barons' , namely Nicholas Biwott, William Ole Ntimama and Mark arap Too, have urged resistance to conditionality and called for a turn to East Asia for aid and finance, the governmental 'technocrats', including the minister of finance and governor of the Central Bank of Kenya, have done their utmost to prevent the 'disaster' which they reckon would follow from the refusal to reform. 53 A similar cause of tension was at work within the ambit of trade and monetary policy in so far as support for the internal accumulation of

There were also spats with the German, British and governm nts, during 1994-5, over the linkage between human rights abuse and conomic aid. In July 1995, the British minister for overseas aid incurred Moi's wrath by sugg sting that th K nya government should keep its political 'house in order' as a condition for further Briti h aid. 51 Haugerud, Culture of Politics (1995), esp. eh. 2. 52 Kamatusa is the acronym for the Kal njin-Masai-Turkana-Samburu ethnic grouping. 'Kamatusa', like that of Gema, express s the wid ning f thnic affiliation which is associated with an elite-driven political project. 53 Africa Confidential 35(14), 15 July 1994; 36(17) 25 Augu t 1995.

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capital might threaten the mission of the regime to dismantle the means by which Kikuyu business had come to occupy a privileged position in the economy. Initially, the Moi regime acted as if it was giving emphasis to a new national direction for accumulation. For manufacturing, and particularly during the early to mid-1980s, the Moi regime maintained support for expanded domestic production of consumer goods, with tariffs on final consumer goods higher than those on intermediate and 4 capital goods.s Later, policy started to shift from import substitution to export-oriented manufacturing aimed particularly at markets in east, central and even southern Africa.ss The shift in tariff policy, which followed international and domestic pressure to reduce tariffs on imports, threatened small internal manufacturers, many of them African-owned and which had been established during the Kenyatta period of the l 970s. Similar implications followed during the early 1990s. By commanding a sizable proportion of the country's foreign exchange, through the renowned Goldenberg scandal56, and printing money for the express electoral purpose of keeping power after the 1992 multiparty election, the Moi regime created a sudden burst of liquidity in the economy. In taking corrective action, in part because of IMF pressure, against the explosion in liquidity, through jacking up the short term structure of interest rates, exchange-rate appreciation markedly reduced the competitiveness of smaller manufacturing enterprises. During 1994, and after the general policy of industrial liberalisation, while Kenya Industrial Estates (KIE), one of the development agencies for indigenous manufacturing enterprise, reported that 70 per cent of its clients were 'doing well', other 'industry sources' contended 'that nearly 50 per cent have collapsed already or on the verge of doing so'. It was also reported that manufacturing commitment was undermined by 'governmental corruption' and 'an element of political favouritism in the granting of 54 Desaubin, Internationality of Capital, p. 147; also, Sharpl y and Lewis, Industrialisation; Maxon and Ndege, Economics (1995) esp. pp. 169-79. 55 Desaubin, Internationality of Capital, chs. 3-4. 56

See note 88 below.

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loans, and hence the half-hearted attempt to make the enterprises really via . ble., 57 Desp·te the twists and turns of macroeconomic policy, the shift from import substitution to exports of manufactured goods was made more necessary, in part, by one of the Moi regime's 'achievements', checking growth in real wages while private non-agricultural and public 58 employment increased substantially, until the early 1990s. Although real wages throughout the private and public sectors had started to decline from the early 1970s, an acceleration in the secular trend of real 59 wage decline has been pronounced during the Mai years. As the share of profits has been maintained and increased relative to wages during 60 the same years , the resulting potential for induced investment in

57 IPS, 21 September 1994. 58 Kenya, Development and Unemployment in Kenya (Ndegwa Report) (1991), table 3.1, p. 36. 59 ibid., p. 36; MacWilliam, Desaubin, Timms, Domestic Food Production, figure 6, p. 41; Sharpley and Lewis, 'Manufacturing sector to the mid-1980s' (1990), pp. 220-221. Sharpley and Lewis, having used two different measures to deflate money wages, concluded that average real earnings were 20 per cent lower in 1984 than in 1964. Average real wages in manufacturing declined proportionately more than average earnings between 1970 and 1976 and then rose slowly until 1984. However, the Ndegwa report shows that 'private manufacturing wages' were 50 per cent lower in 1989 than 1971 and that it was the rate of decline in the wage index which moderated after 1976. In any case, it was the wage share of the value of manufacturing output which has declined markedly during the Moi years. The ratio of total money wage earnings in manufacturing to the current value of total manufacturing output declined year-on-year from nearly 70 per cent in 1981 to 30 per cent in 1994. Kenya, Economic Survey, table 11.1, pp. 148,145,140,118,133,144, 1983,1985,1987,1989✓ 1992, 1995. 60 Kenya, Economic Survey, table 2.8, pp. 24,22,26,26, 1985, 1989, 1991, 1994. The ratio of the general 'operating surplus' to national income (GNP) remained relatively constant, at 43 per cent, for the economy as a whole during the 1981-1993 p riod. The same ratio for operating plus rental surplus increased, from 47 per cent for th 1981-89 period to 50 per cent for the latter years of the period a a whol . We do not have data for the profit share of the valu of manufacturing output. However, given the marked decline in the wage/output ratio and th r p rt d tr nd for th ratio of 'intermediate consumption' to the gross val�1 of output hav in re,s d by far less than the decline in the wage share of output, w can only conclu e th t the profit share of output in manufacturing increased by mor than what i indicated for the ec nomy as a whole.

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manufacturing has acted to counteract the reduction in effective demand which followed the linked reduction in rural household incomes dependent upon urban-rural remittances. Structural Adjustment policy only reinforced the movements of a trend that were apparent before the regime was forced into IMF and World Bank borrowing to compensate for current account deficits. Thus, it takes only a minimal reading of economic trends during the Moi period to explain why early hopes in the regime's populist nationalism were so misplaced and why, despite the president's efforts to appear as the representative of the mass of the population against the wealthy, the regime has acted to deepen the potential for accumulation by internal layers of capital. In so far as the regime acted systematically to block any attempt to reassemble the political basis for what it had identified as Kikuyu economic privilege, it acted against the cutting edge of indigenous capital accumulation. Yet, whatever the extent to which Kikuyu business has been disabled by breaking its connection to the state, it is well able to survive as one layer of capital whose historical formation had predated the Kenyatta period. Therefore, the potential for internal capital accumulation has not been destroyed during the Moi period. Moreover, as much as by default as much as any design, the Kenyan Asian layer of internal capital appeared as one beneficiary of international and domestic pressures upon economic policy. Given the regime's popular nationalist stance, as well as its particular bias towards succouring the expansion of African business for the new layer of capital associated with the Kamatusa bourgeoisie, the underpinning of Kenya Asian manufacturing capital has become as much a matter of convenient economic necessity as much as a recantation of any official hostility against the' Asians'. For, as had been the case in the late 1960s and noted in chapter 4, dormant popular hostility against Kenya Asians could be easily awakened, a fact demonstrated during the August 1982 attempted coup. Thus, the regime which restrained wages and aided profitability could also make Indian commercial figures the target of attack at moments when it was necessary to deflect criticism. During 1986, when faced with rumours of another coup and widespread opposition, the regime attempted to strengthen its electoral and parliamentary position with a further burst of populist aggression, attacking in succession European, Asian and

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61 . 1 u yu b us1nessmen. K.k By lumping together 'colonialism' and'tribalism' and then associating Kikuyu with Kenya Asian and Kenya European business, Moi sought to dislodge the first indigenous layer of capital from state power. Through the perpetual implication that Kikuyu business derived from the state in the same way that non-African business was a creation of colonial government, Moi treated the political struggle against Kikuyu domination as if it were a form of colonial domination. This is the reason why the undercurrent of underdevelopment theory present in Himbara's propositions about the development of capitalism is consistent with the latest kind of presidential view regarding the status of African capitalists in Kenya. To officially assert that each internal layer of capital has no means of development other than through the state is to suppose that by eliminating the presence of the historically given layer of capital from the state is the means of diminishing its presence in the economy at large. During the first years of Moi's presidency, it could be said that 'the ethnic balance' in Moi's 1979 cabinet 'remains as much in favour of the 62 Kikuyu as before'. But, after the 1982 coup attempt, Moi sought to accelerate what Kanyinga has called his 'recycling strategy' of using particular politicians to denounce others only to be themselves denounced. The president reconstructed a Luhya coalition to replace the non-Gema politicos,. including Charles Njonjo and Mwai Kibaki, whom he previously used to contest Gema, and who he now accused of 63 'selfishness' and 'advancing foreign interests'. Kalenjins became predominant in the upper echelons of the military, civil service and parastatals. After the 1992 elections, virtually the entire cabinet consisted of Moi's Kalenjin-dominated coalition; a single Kikuyu cabinet minister . d 64 remame

61 Mukonoweshuro, Authoritarian reaction, pp. 51-58; Ogot, Politics of populi m (1995). also, Africa Confidential, 27(8), 9 April 1986; 28(13), 24 June 1987. 62 Khapoya, Kenya under Moi (1980), p. 27. 63 Kanyinga, Changing development space, p. 77; al s Ngunyi, 111terpreting political liberalisation (1993). 64 Africa Confidential 31 (21), 26 October 1990; 31(24), 7 December 1990; 34(2), 22 January 1993; 36(9), 28 April 1995.

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David Throup had earlier painted a compelling picture of how president Moi, since 1979, set about the ambition 'to institutionalise Kalenjin capitalism through politic-al power and state patronage'. 65 Likewis , J. - F. Medard has described, following Throup, how 'Moi con istently sought' to eliminate the Kikuyu from their predominant political and economic positions and to replace them with his own men. He continued playing Kenyatta's game of faction politics, but he played it in such a way as to