Figure 4 shows how rice prices moved during the period of the famine. They started to rise as soon as the cyclone hit. They rose during the year with the speed of the rise being related to government action on price controls, imports, grain purchases etc. as detailed in Appendix 2. They did not fall until the new crop was harvested in December 1943.Even then the prices remained firm, well above the 1942 level, and supplies remained tight in spite of the excellent harvest.

Figure 5 shows how prices would have moved had there been normal storage, assuming that there was perfect information, and assuming, contrary to Sen, that there was indeed a major crop failure. Speculators would have bought up the available crop the moment the news of the cyclone became known. They would then have released stocks throughout the season, reducing the supply slightly towards the end of the season so that the increased price covered the storage cost. The price would have fallen when the new crop arrived. The 1944 price would have been no higher than the 1943 price because supplies were good. In drawing these curves it seemed reasonable to ignore the fact that a monopolist would have had a somewhat different optimum supply when demand was not of constant elasticity.

Sen states that there was no shortage in supply and this implies prices like those in Figure 6, had there been normal storage. He states, though, that there was not normal storage,but something called speculation which put up prices without reducing supply (He explicitly rejects change in carryover; neither he nor anyone else has suggested that speculators destroyed their stocks or exported them; he ridicules the idea that there was a reduced crop.) This is not the speculation discussed in economic theory. If Sen's speculation is to be in any way compatible with economic theory, it implies that speculators released only small quantities at one period of the year, and released large quantities at others. This would, however, have brought about a price curve like that of Figure 7. Prices would have been high when releases were low and would have been rock bottom when the remaining stocks were released at the end of the year. The price curve actually observed was completely different to this. First, it rose throughout the year,rather than falling, as Sen's theory implies. Second, it was above the normal price throughout the year.

In addition it may be noted that this strategy would not have increased total revenue,given that there were constant elasticity demand curves. In fact the speculators made vast fortunes out of their speculation. Some increased revenue could have been obtained had there been a monopolist facing some linear demand curves, but there has been no suggestion that this was the case.

If enormous stocks had been carried forward into 1944, which Sen explicitly denies,prices would have collapsed then, especially as there had been a record crop. In fact,supplies remained tight and prices firm in 1944.

These models have assumed a constant market demand. This is not in accordance with normal economic theory. Nor, in my opinion, is it compatible with Sen's emphasis on lack of purchasing power as a cause of the famine, though he makes no mention, explicit or implicit, of such a fall in aggregate demand in the Bengal famine. It seems to me that demand must have fallen as people came to the end of their limited resources, and that it is impossible to talk of starvation being caused by limited purchasing power without taking this into account. It might be expected that aggregate demand would fall as the very poor finished their resources and died. It would fall as the less poor came to the end of their resources, having sold off their clothes, their doors, the roofs over their heads. It would fall as the landed peasants exhausted the money from mortgaging their land. This shift in aggregate demand would have pushed down prices in the second half of 1943.This would have happened even if constant supplies had been released over the year, but under the Sen hypothesis which implies larger supplies then, it would have meant that prices fell to zero and stayed there. Figure 8 shows the price changes implied.

Sen's hypothesis of limited purchasing power is also contradicted by the evidence of the enormous amount that was in fact spent on rice in 1943 and the enormous profits made.


Explanations for the observed price shifts

As has been emphasised previously, it is not the purpose of this monograph to do anything but disprove Sen's explanation of the Bengal famine. It is not necessary, or indeed desirable, that I should present an alternative explanation. However, in this section I present some hypotheses that would explain the price shifts actually observed. None of them are compatible with Sen's hypotheses. I make no attempt to assess the relative importance of the hypotheses; this would be impossible, as they all work in the same direction, and there is no way of knowing which were important and which are merely theoretical possibilities. Many of the hypotheses refer to clearly-documented policies and facts, on Government propaganda and purchasing policies for example. Others, on shifts in demand and expectations, are largely speculative - and one could not imagine shifts in demand curves being closely monitored in any famine.

The hypotheses are not mutually dependent, except only that they all rely on the assumption that there was a shortage in supply, which Sen denies.

Factors Affecting Supply

The most obvious explanation for the rise in price throughout the season is that most of the crop was put on the market in the earlier part of the year, and that supplies became shorter throughout the year, pushing up prices. This was taken for granted by most observers at the time.

Government Action

One reason for this uneven release of rice onto the market was government action of the following kinds

  1. Government put pressure on the trade to disgorge their stocks, so they released more than they would have wished at the beginning of the season.
  2. Government propaganda encouraged private people to release their stocks in the national interest.
  3. Government propaganda falsely said that there was no real shortage. Even if this was only half believed, it would have led speculators and hoarders to release more at the beginning of the season.
  4. Government purchased and distributed large quantities at the beginning of the season.
  5. After the excellent December 1944 crop was harvested, and the famine was over,government publicised the fact that there were plentiful supplies, in order to drive down prices. It was reported at the time that this had the opposite effect. The population had learnt in 1943 that government's assurances on this were false, and were alarmed by them, rather than being reassured.
  6. Government imposed price control, encouraging people to buy, and consume, more grain at the beginning of the year.

These aspects of Government policy would have had favourable effects if they had increased imports to make up the shortfall later in the year.

Action by Speculators

Speculators could be expected to plan for a slight fall in supplies over the year, so that prices would rise enough to cover their storage costs (including interest and risk).However, they assumed, not unreasonably, that Government would be importing large quantities of food as soon as possible. It would pay them, therefore, to release the bulk of their stocks early in the year. Since these imports did not materialise, total supplies fell through the year. Had speculators realised that very little was to be imported, they would have released less at the beginning of the year, and would have made higher profits).

Shifting expectations would cause a shift in supply functions. In normal years, supply is largely a one-off decision made after harvest and modified by assessments of changes in import and export possibilities, which, in normal years again, are marginal. In 1943,though, speculators reacted to changes in information throughout the season. The most obvious was the realisation that there were not to be major imports. Others, like price control, imports from neighbouring provinces etc., have been detailed in Appendix 2. Not only did these changes have to be taken into account, but they had to be taken into account throughout the season, with an ever-decreasing time before the next harvest.Even the next harvest was not a fixed point in time: a late harvest caused the famine to last longer in some years, so people did not know in November whether they needed one month's supply or two months' to survive until the harvest.

Supply by Farmers

Changes in the supply by farmers appears to have had only a limited effect in causing the rise in prices. The supply by farmers (and the reservation demand) was, no doubt,affected by the famine. As has been explained earlier, changes in the retentions by peasants are not likely to have had any effect in causing the famine. It was said at the time though, that the failure of the September 1943 crop to break the famine was due to the fact that peasants were so frightened by the effect of the famine that they retained enough to keep themselves and their families alive even if the next crop were to fail. I have seen no evidence put forward to support this assertion, and it must be looked at with caution,since, as we have seen, officials everywhere are inclined to blame every shortage on hoarding. In this case, it is indeed possible that the terror of famine would have overcome the attractions of a very high price (especially among those who observed the fate of those who sold off their stocks for a high price in early 1943). It is possible, too, that this terror would have overcome to some extent the institutional constraints, that much of the crop belonged to the moneylenders and landlords rather than the producers, though,again, I have seen no evidence to confirm this.

It was suggested at the time that a switch in the supply function of this sort meant that producers (whether peasants or landlords) kept back much of the December 1943 crop,leaving supplies tight in spite of a large supply. It is difficult to believe the suggestion that a substantial switch in the supply function occurred in all of the following

  1. after Japan entered the war (FIC), and
  2. about the time of the cyclone (Sen), and
  3. at the beginning of 1943 (Sen) and
  4. after the September 1943 crop (Sen?, Wavell, Mansergh), and
  5. after the December 1943 crop.

If all these changes had occurred the farmers would have been net buyers by 1944.

Changes in Demand Functions

The price changes recorded could have been caused by changes in the demand function even if there had been a constant supply throughout the season - though obviously a combination of supply and demand changes is more likely.

Market Demand

It has been pointed out above that in the limited-purchasing-power model, which I think must be accepted if one accepts Sen, the aggregate purchasing power would fall off as the poor died and as other people impoverished themselves. This would have caused a fall in the price, rather than the rise actually observed. In the previous section some supply factors which might have outweighed this effect have been mentioned. Below are set out some demand factors which would also have tended to outweigh it.

The most powerful explanation is the effect of the subsistence sector on the market, an effect commonly seen in subsistence economies. If the subsistence sector normally produces a surplus of 10%, the marketed surplus will fall to zero if there is a 10% fall in yields and will double if there is a 10% rise in yields. Government believed at the time that some six million tons were marketed out of a total crop of 90 million in India. Such figures can be little more than guesses. They also depend enormously on definitions,where, for example one draws the line between trade within the subsistence sector and trade from the subsistence sector, or agricultural sector, to consumers, and whether sales to village consumers and deficit producers are included.

However, this effect is modified by changes in levels of consumption. Between surplus and deficit there is a range of subsistence where no food is bought or sold by subsistence producers. At the highest, people eat well, and, in some cultures, use part of the crop for ritual purposes or for alcohol. At the lowest, the family eats a bare survival ration once a day and eats up its accumulated reserves. Below this level, people have to buy in food if they are to survive. The very poor December 1942 crop meant that people switched early to survival rations, but had to come onto the market for supplies at varying stages through the year. The effect was an enormous increase in market demand towards the end of the year, with possibly two to four times the normal number of people trying to buy food on the market. Even if there had been a constant supply on the market, even if there had been a rising supply on the market, supplies would have been inadequate, and prices would have risen sharply.

Changes in Individuals' Demand

It may also be argued that the famine brought about a switch in the demand of individuals. The demand functions before the famine were based on what would be a normal, reasonable, and therefore acceptable price. (The concepts set out in this section are commonplace in marketing.) People would refuse to be cheated. Decisions would be made on the assumption that alternative consumption goods and alternative foods were available. People would be influenced by the fact that they had some food in their larders,and their expectation that they would be able to buy food at a reasonable price if they waited a day or two or went to a different market. Most buyers, no doubt, never questioned that they would always be able to buy all they wanted at a reasonable price if they had the money. The decision would be similar in kind to that made by an Englishman who is asked to pay twice the normal price for a loaf because it is the last one in the shop.

Once there was famine, all this changed. People no longer had the same conception of what was a normal price, nor did they have the same objection to being cheated. One notices in a period of acute shortages a sort of mass hysteria, with people buying goods they do not want just because they are available, with people vying with each other to buy black market goods, and then boasting of the price they paid, taking a perverse pleasure in being cheated. This reaction may be confined to the richer section of the community,but it will affect total demand.

At the same time, there were no longer alternative foods on the market: if anything, wheat was scarcer than rice. People could no longer rely on the fact that they had food at home,nor could they rely on there being plenty of food available at a reasonable price if only they waited a few days or went to other markets.

Their whole time horizon changed. They were no longer planning this week's purchases;they were planning a strategy which would enable them to survive until the next harvest(a problem which was normally confined to the subsistence farmers). Food became not a consumer good in the market, but the only means of survival. Their strategy would have to be based on medium-term expectations and production.

Some of the expectations are:-

expectation of time before the next harvest (with a three-week delay, as in December 1943, proving fatal to many),

expectation of availability of food until then, including imports,

expectation of timing and availability of government handouts and private charity

expectation of future prices,

expectations of future earnings (and, as we have seen, the famine reduced some people's earnings sharply and increased other people's profits enormously)

expectation that this famine would be followed by a short crop, which would mean that they would not survive if they had no reserves at the end of the year.

All these expectations must be assessed according to the degree of uncertainty and to the cost (usually death) if an error is made. Time preference is important: little weight will be given to the possibility of a famine next year if there is a risk of starvation next month.As the harvest approaches, there will be ever more rapid changes in what one is willing to spend in order to survive another week: at one time only a twentieth of one's worldly goods, but in the last week before the harvest all one's worldly goods.

In the famine, those who survived were the ones whose income, capital and savings bought them enough food to survive until the next harvest (death by disease cannot be planned against). Some people whose family income was below the margin were able to survive by selling, murdering or, most common, abandoning the useless mouths in the family. The apathy caused by hunger meant that robbery to survive was very rare indeed.

No long-term demand curve can involve people spending more than they earn on food,so the people of Bengal could not have spent as much on food if there had been another famine the following year. Clearly this means that there was a major shift in demand curves over the famine period.


The September 1943 Crop

The September 1943 crop produced enough to feed the country for three months , and there were only three months to go before the next crop. It may be asked why the famine did not stop when this crop was harvested, why the starvation lasted until December. At the time it was thought by officials that it would break the famine as soon as it was harvested (Rutherford in Document no. 158 Mansergh (1973) pp361-3). When it did not do so, officials put it down to the fact that peasants would not release any of the crop.Later commentators either ignored the question, or skimmed over it. In fact it can be comfortably explained by the supply and demand hypotheses put forward above.

The September crop was an upland rice crop. It was not produced in all areas of Bengal,and the people who grew it did not necessarily produce a crop in December. In normal years most of it was retained for consumption over the whole of the following year, and only the surplus was retained. That is to say, most of the producers relied on it for most of their food. No doubt some landlords, and even some farmers, calculated that they should retain only three month's supply, and market the rest at famine prices, hoping that they would be able to buy all they needed at a low price when the December 1943 crop was harvested. It would be asking too much to expect all subsistence farmers to make such a radical change in their strategy for survival in a single year. It would mean their taking a risk that they had never taken before. The risk would seem greater because they were surrounded by the famine victims. It would seem particularly grave because they had seen the fate of the farmers who had sold their stocks to cash in on the high prices of March, and had not been able to buy back the food they needed to live on at the higher prices of May and June.

Possibly, too, there was some realisation that if the December 1943 crop was only moderately bad, the famine would continue into 1944. There were already many subsistence farmers who had consumed their accumulated reserves and were selling their possessions to buy food. If the crop was low, these people would be buying food again in 1944 and prices would be high. This might mean that the farmers who harvested in September could not buy back the food they had sold.

Even had the farmers wanted to sell their rice, there were difficulties. The marketing structure did not exist to buy all this rice from these areas, nor did the transport system -indeed, the boat denial policy had made the distribution impossible. Local charity obligations and the political and moral difficulties of exporting from a deficit area would have made it difficult to export. Certainly the local community would have been well-fed before any surplus was allowed out.

Let us suppose that, in spite of these problems, these areas marketed 20% of their crop instead of 10%. The increased supply would have come on the market as more and more of the subsistence producers were being forced onto the market to survive. The supply may have doubled, but the number of people on the market increased more

One may question whether the marketed December crop was expected to last until September, and whether the September crop was expected to last only until the next December crop was harvested (with the delays described elsewhere). It is more likely that in some areas the December crop was marketed all the year, while in the areas where a September crop was grown this crop was marketed for much or most of the year. If this was so, it further limits the possibility that the September crop could have been expected to break the famine.

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