[OPE-L:7443] Re: The putting-out system/ dadni loans

[Gil Skillman <gskillman@xxxxxxxxxxxxxxxxx>]

Beautiful!  Thanks again for a useful reference.  I would note that the
distinction Alavi draws here between dadni loans in textile
production and the putting-out system corresponds more or less exactly to
Marx's distinction between productive usury and merchant capital
(Resultate, p. 1023), and thus to the distinction I draw in my recent
response to Mike, and for the same reason:  in usury capital, the
capitalist dictates no aspect of the production process; in the putting-out
version of merchant capital, the capitalist dictates it to the extent of
specifying (and supplying) the raw materials that are to be transformed by
the workers.

Gil

> From Hamza Alavi at
> http://ourworld.compuserve.com/homepages/sangat/Colonial.htm
>
>
> The rapid export-led growth of Indian textile production was brought about
> by new weavers entering the trade rather than by changes in technology.
> New entrants needed funds for working capital and to buy the necessary
> equipment. A system of cash advances, called dadni loans, developed
> whereby prospective buyers of cloth would advance the money, in return for
> which, in a sellers market, the lender/buyer would pre-empt delivery of
> the finished goods from the
> weaver. Some scholars have mistakenly taken that system of dadni loans to
> be analogous to the English 'putting out system' which was a precursor of
> the industrial revolution in England. (e.g. Habib, 1969:67-68). Habib and
> other Indian scholars have argued that India was itself on the threshold
> of an industrial capitalist revolution that was thwarted by the impact of
> colonial rule. (cf. Bipan Chandra et. al., 1969 and Habib, 1969) That
> seems to be a mistaken view.
>
> There is an important difference between the Indian system of dadni loans
> and the English putting out system. In the case of dadni loans, the weaver
> was given the loan by the prospective buyer of his product which thereby
> bound him to deliver the finished goods to that buyer. But, given the
> money, the weaver was left to his own devices to procure his raw materials
> and work on them. The buyer-moneylender, the dadni-merchant, did not
> handle the raw materials or equipment and was not involved in the process
> of production in any way. By contrast, in the 'putting out system' the
> entrepreneur took the raw materials
> round to the weavers, from door to door, and collected the finished cloth.
> He soon realised that instead of going from door to door, he could
> simplify his task by bringing all his weavers under one roof. That gave
> rise to the factory system which, in turn, led to mechanisation and a
> transition to the Industrial Revolution. That dynamic was absent given the
> financial organisation of production in India.
>
> After its conquests in India, after 1757, the East India Company,
> operating through its agents called goomasthas, transformed the system of
> dadni loans in a manner that was designed to subordinate the weaver
> totally to the Company's agents. Their object was to pre-empt the weaver's
> services at low prices, as against other competitors, including other
> European operators who were thus elbowed out. The Company developed a
> practice of forcing advances on unwilling weavers. A historian writes that
> before domination by the Company 'They (the weavers) used to manufacture
> their goods freely and without oppression, restrictions, limitations and
> prohibitions. There was no attempt to restrict their goods to the one
> market of the East India Company.' (Sinha, 1961:
> 159). Then it all changed.