Profit Inflation, Keynes and the Holocaust in Bengal, 1943–44

The year 2018 marks the 75th anniversary of the Bengal famine, 1943–44. This paper argues that the famine arose from an engineered “profit inflation,” described by John Maynard Keynes in general terms as a necessary measure for “forced transferences of purchasing power” from the mass of working people, entailing reduction of their consumption in order to finance abnormal wartime expenditure. Keynes had a long connection with Indian financial affairs and, in 1940, became an advisor with special authority on Indian financial and monetary policy to the British Chancellor of the Exchequer and the Prime Minister. Facing trade union opposition in Britain to the highly regressive policy of profit inflation, he gave it up in favour of taxation. But, in India, extreme and deliberate profit inflation was implemented to finance war spending by the Allied forces, leading to the death by starvation of three million persons in Bengal.

I thank Mihir Bhattacharya, Radhika Desai, Cristina Marcuzzo and Amit Bhaduri for helpful comments on an earlier version of this paper.

Keynesian demand-management policies are usually associated with raising employment and incomes, but John Maynard Keynes also systematically discussed the exact opposite, measures for curtailing mass incomes that he considered necessary to raise resources for financing wartime spending. In A Treatise on Money: The Applied Theory of Money (1930) and in How to Pay for the War: A Radical Plan for the Chancellor of the Exchequer (1940), specific measures for reducing mass consumption were explicitly discussed by Keynes.

During World War II, six million persons were put to death in Europe under fascist terror. But, the death of three million civilians in undivided Bengal in India during a shorter sub-period of the war, 1943 to 1944, has gone unnoticed in the international literature. This paper argues that these deaths were the direct result of the Keynesian policy of profitinflation deliberately followed at that time by the British and colonial governments with a very specific purpose, to raise resources from the Indian population by curtailing mass consumption, in order to finance the Allies war in South Asia with Japan. Keynes himself was given the brief of advising the British government on Indian financial matters during the war. Because the policies followed were of demand management, which are always opaque to the general population, and remain opaque to this day even to the educated elite, the extreme compression of mass demand to raise forced savings that led to three million civilian deaths could be successfully camouflaged as a simple famine and attributed variously to natural phenomena like cyclone, or to food shortage, or to speculation and hoarding, or to not importing food in time, or a combination of these factors.