THE ECONOMIC WEEKLY ANNUAL January, 1957

Socialistic P a t t e r n of Society and the Second

Five Year P l a n
A K Dasgupta
"Socialist pattern of society" , according to the planning Commission, means ."that the basic criterion for
determining the lines of advance must not be private profit but social gain, and that the pattern of development
and the structure of socio-economic relations should be so planned that they result not only in appreciable in
creases in national income and employment but also in greater equality in incomes and wealth".
Let us then judge the socialistic implication of our Second Five Year Plan by this criterion, How gradual
is the transformation of the .structure to be along socialistic lines?
The prognosis indicated here will perhaps be unpalatable to those who have some kind of an implicit faith
in the realisation of a socialistic pattern of society through the operation of our present Plan. Yet the broad
facts are there to show that whatever the Plan may achieve—and its achievements are not to be inconsiderable
otherwise—it has very little of socialistic content in it. This is not. so much a commentary on the Plan as a
reminder of the fact that there are conflicting values in a society which it is hard to reconcile.
LET us not forget t h a t socialism is one of those t h i n g s w h i c h the Con- the highest profit. A n d in so far
a technical t e r m , w h i c h , in its gress is wedded to as an essential as there arises a conflict between
economic aspect, signifies a structure p a r t of their p r o g r a m m e . The first p r i v a t e profit a n d public benefit,
o f society i n w h i c h factors o f pro- step towards l a n d r e f o r m is the the l a t t e r is sacrificed. Socialism
duction other t h a n labour are social- a b o l i t i o n of the Z a m i n d a r i system aims at establishing the supremacy
ised. Public ownership of the mate- B u t it is o n l y the first step and does of public benefit as against private
r i a l means of production is the basic not by itself b r i n g in socialism. profit.
condition of socialism, the condi- Suppose, as has been the case at
t i o n t h a t distinguishes i t a n d puts places, t h a t the Z a m i n d a r s are given Public Ownership is its Essence
i t i n contrast w i t h c a p i t a l i s m . This a reasonable compensation a n d the Socialism, then, is a theory of
reminder is called for in view of the lands t h a t are released are sold out economic policy which recognises
loose m a n n e r in w h i c h people t a l k to the tillers of the soil w i t h a public ownership of the m a t e r i a l
of socialism these days. The w i d e l y ceiling fixed on i n d i v i d u a l holding, means of production and is desig-
quoted statement " W e are a l l so the new owners being p e r m i t t e d to ned w i t h a view to m i n i m i s i n g
cialists n o w " is true only if the cultivate the l a n d on their o w n . The inequality of incomes in a society
t e r m 'socialism' is loosely applied, as procedure does indeed accord w i t h a n d t o c o n t r o l l i n g and directing
it is so often done, to cover any the s t a n d a r d sense of social justice. the employment of resources so as
scheme of social r e f o r m . Y e t it is not socialism. Reduction to secure the m a x i m u m of social
of inequality of incomes- avowedly benefit.
Equality and Socialism one of the m a j o r aims of l a n d re- Now, w h i l e this is the character
One suspects t h a t it is this loose f o r m of whatever v a r i e t y it m a y be of an overall socialised economy,
use of the t e r m of w h i c h advantage is a necessary condition but not there is n o t h i n g to prevent us f r o m
was t a k e n by the A v a d i Congress a sufficient condition of s o c i a l i s m . seeking to realise it by stages. A
when it enunciated the doctrine of W h a t , then, are the ingredients socialised i n d u s t r y is surely com-
socialistic pattern of society. of socialism? W h a t conditions are patible w i t h an otherwise capitalist
Nobody k n e w w h a t precisely was to be fulfilled if a society is to economy. Indeed there are few
the. connotation of the doctrine. The assume a 'socialist pattern'? countries today where they do not
framers of the doctrine had appa- S t a r t i n g f r o m the premise of pub- have a socialised sector, even
r e n t l y a vague feeling in their lic ownership of m a t e r i a l means t h o u g h the general structure of the
minds t h a t they were out to secure of production, one can answer the economy is capitalistic. Pure
a better s t a n d a r d of l i v i n g for the question by j u s t r e f e r r i n g back to c a p i t a l i s m is as much a figment of
masses by p r o v i d i n g more employ- the objectives t h a t socialist policy the i m a g i n a t i o n as pure socialism.
ment, w i d e r social service schemes seeks to a t t a i n . By its v e r y defini- B e a r i n g this in m i n d , one can per-
and so o n . Indeed, w h e n pressed t i o n socialism implies l i q u i d a t i o n haps give concreteness to the con-
f o r a precise definition, our P r i m e of profit-earners. Since one of the cept of a socialist p a t t e r n of
M i n i s t e r , t h a n w h o m nobody could m a j o r causes of inequality of i n - society' by , i n t e r p r e t i n g it as a
be supposed to k n o w better, disposed comes in a society is the existence p a t t e r n t h a t aims at a g r a d u a l i n -
i t o f b y j u s t equating i t w i t h wel- of p r o f i t as a share of n a t i o n a l corporation i n t o the economic sys-
fare state. A n d n o w when 'socialis- income t h a t capitalism permits t e m the basic ingredients of socia-
tic p a t t e r n of society' is t r a n s f o r m - p r i v a t e entrepreneurs to enjoy, l i q u i - l i s m . A p p a r e n t l y it is in this sense
ed Into 'socialism' by the Indore d a t i o n of profit-earners is a step t h a t the P l a n n i n g Commission takes
Congress, we are t o l d t h a t our so- towards a reduction of inequality. the concept. This is what the Com-
c i a l i s m Is n o t to be of the Western To this is to be added the possibi- mission says w h i l e l a y i n g d o w n the
v a r i e t y , t h a t the sort o f socialism l i t y t h a t public ownership o f pro- objectives of the Second F i v e Year
t h a t the Congress has in m i n d is ductive resources creates the sub- P l a n :
more a k i n t o S a r v o d a y a . s t i t u t i o n of public good f o r p r i v a t e "The Public Sector has to expand
These i n t e r p r e t a t i o n s are a n y t h i n g profit. Under capitalism, since the rapidly. I t has not only t o i n i t i -
b u t precise a n d do l i t t l e to show resources are at the disposal of ate developments w h i c h the p r i -
where we s t a n d . T a k e , f o r example, p r i v a t e entrepreneurs, production vate sector is either u n w i l l i n g or
takes place a l o n g lines t h a t y i e l d unable t o u n d e r t a k e ; i t has t o
the case o f l a n d r e f o r m w h i c h i s
91
January, 1957
play the d o m i n a n t role in shap-
i n g the entire p a t t e r n of invest-
ments in the economy, whether
it makes the investments directly
or whether these are made by the
private sector''.
Emphasis on Gradualness
The phrase "socialist p a t t e r n of
society", according to the P l a n n i n g
Commission, means " t h a t the basic
c r i t e r i o n f o r d e t e r m i n i n g the lines
of advance must not be private
profit but social gain, and t h a t the
p a t t e r n of development and the
structure of socio-economic relations
should be so planned t h a t they re-
sult n o t only in appreciable increa-
ses in n a t i o n a l income a n d employ-
m e n t but also in greater equality in
incomes a n d w e a l t h " . There is a
n o t i o n of experimentalism in the
Planning Commission's approach.
B u t even this can be said to point
to an emphasis on gradualness.
I f this i n t e r p r e t a t i o n o f the P l a n -
ning Commission's approach is
correct, then the Commission has
the support of h i g h a u t h o r i t y . Pro-
fessor Pigou's concluding r e m a r k s
in his Socialism vs C a p i t a l i s m for
example, lends support to j u s t this
concept of a g r a d u a l realisation
' of the principles of socialism.
A f t e r e x a m i n i n g the m e r i t s of socia-
l i s m vis-a-vis capitalism as a system
of economic organisation, Professor
Pigou asks w h a t he w o u l d himself
do if he were given the ' p o w e r to
direct his country's destiny", a n d the
answer t h a t we get is that he
" w o u l d accept, for the time being
the general structure of c a p i t a l i s m ;
but he would modify it gradually"'
M o r e and more; industries of a
basic character would, in his regime,
be socialised and in c o n t r o l l i n g a n d
developing the socialised industries
his g o v e r n m e n t w o u l d " 'plan' an
appropriate allocation for a large
p a r t of the country's annual invest-
m e n t i n new c a p i t a l " . A n d when
his t e r m of office w o u l d be over,
he w o u l d , in his 'political testament',
ask his successor also "to follow
the p a t h of gradualness to mould,
a n d t r a n s f o r m , not v i o l e n t l y to up-
r o o t " . T h i s is a counsel of caution
a n d expediency, if not of perfection,
a n d the P l a n n i n g Commission i n
setting out its objectives, has chosen
a line v e r y m u c h s i m i l a r to this.
P l a n Judged b y this C r i t e r i o n
L e t us then judge the socialistic
i m p l i c a t i o n of our Second F i v e Year
Plan by this criterion. H o w gra-
d u a l is the t r a n s f o r m a t i o n of the
structure to be along socialistic
lines? W h a t role is to be assigned
THE ECONOMIC W E E K L Y A N N U A L
to the p r i v a t e sector? W h a t steps desirable; i t cannot stimulate i n -
are contemplated in the P l a n f o r vestment in a line w h i c h is desira-
the public sector u l t i m a t e l y to ble. The same consideration
supersede the p r i v a t e sector? H o w applies to the other measures of
is the p r i v a t e sector to be c o n t r o l - c o n t r o l . Obviously the achievement
led w i t h a v i e w to the achievement o f the specific targets w i l l require
of 'social ends', whatever these ends the w i l l i n g cooperation of the p r i -
m a y be? H o w substantial is the vate sector.
reduction in inequality expected to Taxation in the Scheme
be, in respect of income a n d wealth? Measures f o r the reduction in
To answer these, we have to t u r n the inequality of incomes and
to the operational side of the P l a n . w e a l t h consist w i t h i n the structure
contemplated 'in the Plan, m a i n l y
The t o t a l i n v e s t m e n t contempla-
of t a x a t i o n . W h e r e public invest-
ted in the P l a n is Rs 7100 crores,
ment t o w a r d s rendering collective
of w h i c h Rs 4800 crores is to be
benefit in the f o r m of social services
in the public sector a n d Rs 2300
is s m a l l , as it is in the Plan, a n d
crores is to be in the p r i v a t e sector.*
where special incentives are to be
As compared to the F i r s t F i v e Year
provided for investment in the
P l a n , investment i n the public
private sector, it is m a i n l y t h r o u g h
sector is to increase by about 100%,
the i n s t r u m e n t of progressive t a x a -
if Rs 1000 crores of current invest-
t i o n t h a t reductions i n inequality
ment is taken out f r o m the t o t a l
are to be effected. Prescription of
Rs 4800 crores. On this basis, the
a ceiling on income on the lines
r a t i o of public investment to p r i -
recommended by the Taxation
vate investment w i l l be increased
E n q u i r y Commission is o n l y noted
f r o m 50:50, as it was in the F i r s t
in the P l a n ; it is not to be given
Five Year P l a n to 62:38 over the
effect to, at a n y rate in the near
next P l a n period. The p r o p o r t i o n
future. H o w far inequality w i l l be
is thus to be perceptibly altered
reduced in the process of implemen-
in f a v o u r of the public sector. Yet,
t a t i o n of the P l a n is yet to be seen.
considering the fact t h a t this pro-
B u t the prospects, as judged by the
p o r t i o n refers only to new invest-
place of t a x a t i o n in the scheme of
ments a n d does n o t t a k e account
finance, do not seem to be encour-
of the e x i s t i n g capital, the p r i v a t e
aging. Even if the uncovered gap
sector is s t i l l to p l a y a d o m i n a n t
of Rs 400 crores is left out to be
role in the economy. E x i s t i n g in-
u l t i m a t e l y filled in by additional
dustries are not to be nationalised.
taxes, the P l a n proposes to finance
On the other hand, considerable
f i f t y percent of the public invest-
expansion is contemplated in the
m e n t by loans a n d deficit, neither
p r i v a t e sector even in respect of
of w h i c h can be said to c o n f o r m to
basic industries. T a k i n g i n t o ac-
the canons of socialism. Deficit
count the fact t h a t almost the
finance, i f i t does anything, will
entire investment in consumers'
raise prices a n d one should not
goods industries is left to the p r i -
expect t h a t i t w i l l operate i n f a v o u r
vate sector, one w o u l d say t h a t
of the r e l a t i v e l y poor, unless ade-
socialisation of capital is s t i l l a f a r
quate controls are exercised. On
cry. I f socialism, i s your goal, y o u
the other hand, savings w i l l a d d t o
do not proceed by p e r m i t t i n g the
the volume o f bondholding, a n d i t
p r i v a t e sector not o n l y to persist
is u n l i k e l y , in spite of the s m a l l
but also to expand!
savings campaign, t h a t the d i s t r i -
It is difficult to define 'social bution of new securities w i l l be
ends'. Philosophical doubts on this unfavourable to the richer section.
question w i l l a l w a y s r e m a i n . B u t
the affairs of the world cannot T h e prognosis indicated here w i l l
w a i t , a n d we do have at least a perhaps be unpalatable to those
r o u g h n o t i o n of w h a t these ends w h o have some k i n d o f a n implicit
are. I t i s w i t h reference t o these f a i t h in the realisation of a socia-
b r o a d ends t h a t the specific targets listic p a t t e r n of society t h r o u g h the
of the P l a n have been defined. The operation of our present P l a n . Y e t
machinery f o r c o n t r o l l i n g the p r i - the b r o a d facts are there to show
vate sector so as to achieve these t h a t w h a t e v e r the P l a n m a y achieve
targets, however, is bound to be of —and i t s achievements are n o t to
l i m i t e d effectiveness. C a p i t a l issue be inconsiderable o t h e r w i s e — i t has
c o n t r o l , f o r example, can r e s t r i c t v e r y l i t t l e o f socialistic content i n
investment in a line w h i c h is u n - i t . T h i s is n o t so m u c h a commen-
t a r y on the P l a n as a r e m i n d e r of
' T h e figures are based on the the f a c t t h a t there are c o n f l i c t i n g
published Report. N o account i s values in a society w h i c h It is h a r d
here t a k e n o f l a t e r revisions, to reconcile.
92