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Because international finance capital requires
stability at the core, all the important capitalist powers endorse
the crucial political and economic positions taken by the United
States. But the Americans are not providing stability to world
markets, even as the countries of the South fall prey to predatory
capital. As the global economy crushes the poor beneath its heel,
the welfare states of the underdeveloped world are further
weakened, public services less accessible, employment more
insecure and income disparities accentuated.
The contradictions of a rapacious imperialism are making
themselves felt more acutely, but the ground needs to be prepared
for a resistance movement across the countries of the South.
by Jayati Ghosh
Two features define the capitalist world economy at the start of
the 21st century. The first is the continuing, indeed
overwhelming, significance of imperialism as the defining feature
of global economic relations, with the term broadly defined as the
struggle by large capital over control of economic territory of
various types. The second is that this current imperialism is
different in several crucial ways from that described by Lenin
nearly a century ago as the monopoly stage of capitalism. To some
extent the differences are simply the result of history, the
evolution of both the institutions and processes of capitalism.
But they are also the result of the effects of the recent
processes of deregulation of trade and capital markets as well as
other forms of economic liberalisation (constituting the essence
of what is typically called "globalisation" which have given the
new imperialism its cutting edge.
In terms of the current world economic trends, therefore, we can
identify a number of important differences from the imperialist
globalisation of the late 19th century. These include: the
implications of accentuated internationalisation, the
concentration of both production and finance, the greater
domination and changed nature of finance capital, as well as the
effects on inter-imperialist rivalry (or the lack of it). Further,
in the present day, multilateral institutions and rule-based
regimes are used to further the aims that in earlier periods of
history were resolved through more direct militaristic or
political means.
There is also the changed nature of the systemic instability of
global capitalism and the new forms of economic territory that are
currently being contested. Technological changes have furthered
the process of global corporate dominance as well as allowed for
the possibility of confronting it at an international level. The
implications of the global spread, privatisation and concentration
of media industries, meanwhile, add another dimension to the
current imperialist regime.
It is obvious that the processes of concentration and
centralisation of capital, as well as the internationalisation of
production, have gone much further, with some important
implications. The recent phase of globalisation has been marked by
some of the strongest and most sweeping waves of concentration of
economic activity known historically. Looking at the multinational
firms, vertical disintegration of production has allowed parts of
the production process to be relocated and geographically
separated, but this has been associated with greater vertical
integration of the control and ownership) of production.
In addition, the past decade in particular witnessed a wave of
cross-border mergers and acquisitions across not only major
manufacturing industries but even in the service sector and in
utility provision. The increased concentration of economic
activity in general could reflect the recession and slump in
recent years: concentration is always more marked in the downswing
phase of economic cycles. This process should not however be
misinterpreted to imply that the links between multinational
conglomerates and their home governments have disappeared: they
may appear to be more tenuous, but nevertheless still exist and
continue to influence geopolitical and economic strategies of the
major capitalist powers.
Internationalisation is, of course, most marked in finance. The
domination of financial flows in cross-border transactions, as
well as the greater role played by speculative elements and the
separation (and to some extent supremacy) of finance capital over
productive capital, are too well known to require further
discussion. However, some of the more significant outcomes of
these processes may be noted.
They include the enhanced differentials in speeds of adjustment
between capital markets and the markets for goods and services,
implying both more rapid changes in terms of financial variables
and more accentuated effects on real economies. The speculative
capital flows play a destabilising role, leading to more
volatility of relative prices in general and periodic crises of
varying intensity in particular economies. There are constraints
on national economic policy-making, especially in the fiscal and
monetary arena in almost all countries, and one is confronted with
the heightened inability of states (independent of political
persuasion) to ensure basic needs and minimum socio-economic
rights to all citizens. The need of finance to constantly, if
temporarily, discover new avenues or emerging markets for
investment, ensures that deflation is not a uniform process across
the world economy, but is always accompanied by a few pockets of
capital-inflow-led boom.
The domination of finance capital has had an impact on the nature
of inter-imperialist rivalry as well. The point is essentially as
follows:
when finance capital, independent of national origin, seeks to
ensure the stability of its investments, it will be especially
concerned about some degree of stability at the capitalist core,
notably in the United States government and private securities.
This means that(notwithstanding the recent and continuing decline
of US stock markets, the move away from US financial assets and
the associated decline of the US dollar in world currency markets)
there will be attempts to maintain some degree of stability in
terms of the most important financial assets available, and
therefore to reinforce the geopolitical arrangements which
underlie such stability. One important reason for the success of
imperialist globalisation has been its ability to draw local
elites and middle classes across the world into its own ranks This
requirement creates a different source of pressure from that
determined solely by US military domination. It means that in
crucial political and economic areas, the important capitalist
powers tend to act together or at least implicitly endorse the
positions taken by the US, whether in the World Trade Organisation
(WTO) negotiations, or in the use of the International Monetary
Fund (IMF) to determine country policies to directly or indirectly
benefit US-based capital, or in the "war on terror" and the
treatment of so-called "rogue states" and so on. It also means
that US unilateralism in economic and political matters tends to
be accepted (if not condoned), whether in terms of allowing the
continued use of unilateral protectionist measures such as Super
301, or the US Farm Bill, or in terms of pushing for greater
enforcement of multilateral liberalisation in precisely those
sectors in which the US economy is perceived to have competitive
advantage, or in terms of military engagements with what it
chooses to define as "rogue states".
The new imperialism, in addition to utilising new institutions and
international rules and protocols to its own end, is also about
the struggle to control newer forms of economic territory. This is
not to deny the continuing significance of economic territory as
traditionally conceived, in the form of natural resources, markets
and labour. Indeed, control over natural resources "particularly
energy and oil resources" remains central to imperialist
preoccupation. This is demonstrated by a number of recent and
current events: the significance of the proposed (and soon to be
constructed) oil pipeline through Afghanistan to the US military
intervention and ongoing geopolitics of the region; the (failed)
attempt to instigate and support a military coup in Venezuela
against a president elected by a huge popular margin; the US
administrations continuing obsession with forcibly instituting
regime change in Iraq using whatever means possible. While these
are in fact the most blatant political expressions of imperialism
today, it is in the area of developing new markets that the
economic implications are most pronounced.New markets for the core
capitalistsNew markets are sought to be developed and made
accessible in two ways.
The first is the opening up of existing markets in developing and
formerly socialist countries through the processes of trade and
investment liberalisation, using the agencies of conditional
lending by the IMF and World Bank and, more recently, the rules
and dispute settlement procedures of the WTO. Such opening up,
especially if it involves the relative de-industrialisation of the
newly liberalised economies, contributes new markets for
manufactured goods and services for the core capitalist
countries.It is surely not an accident that, despite fears of
manufacturing jobs being exported from North to South, in fact the
manufacturing trade balance of the South with the North remains
negative and indeed the deficit has been growing. Associated with
this is the lowering of world prices of Southern exports, as more
and more developing countries are forced to increase export
volumes either to repay debt, or to pay for more imports, or
simply because they have been told that it is good for them to do
so.
This in turn provides the related advantage of cheaper imports to
the core countries, not only of raw materials and tropical
agricultural commodities, but also of the manufactured goods that
developing countries have been encouraged to specialise in and
which are now characterised by massive over-capacity
internationally.The more innovative form of finding new markets in
the recent past has been that of creating markets where none
previously existed, that is, by encouraging and furthering the
commercialisation of activities that were earlier not perceived as
commercial, or were defined in the public domain, or were only
enabled by social intervention. The push towards commercialisation
and then privatisation of a range of public services; such as
power, telecommunication, and now water and sanitation is the most
obvious expression of this. The proliferation of new forms of
commerce has never been so rampant. Knowledge and what is defined
as intellectual property, rights to energy use, pollution control
certificates, all are now subject to trading; and even the via
media for trade have expanded to include e-commerce and the like.
The forced commercialisation of a wide range of services therefore
provides the newest and most promising hinterland for capitalist
expansion.One aspect of this is also that information and
entertainment have themselves become not just commercialised but
have emerged as major industries; indeed, they are now the
fastest-growing segments of the global economy. They are also
among the most concentrated and centralised of all sectors. The
multimedia boom has spawned large multimedia companies which can
now be counted among the largest multinational corporations. This
is really a phenomenon of the last decade, as giant media firms
have sought synergy through not just vertical integration but by
effectively acquiring control of every step in the mass media
process, from creation of content to its delivery in the home as
argued by media critic Ben Bagdikian. The 1990s witnessed an
unprecedented wave of mergers and acquisitions among global media
giants. As a result, the top six multinational conglomerates News
Corporation, Time Warner, Disney, Bertelsmann, Viacom and TCI now
effectively own and control huge swathes of the media, publishing
and commercial entertainment activities across the world. Many of
these firms have explicitly rejected national identities and
posited themselves as global or internationally-based
corporations.
Nevertheless, and despite the attempts to programme according to
local sensibilities, the bulk of the content, the forms of
expression as well as the structures of ownership and management,
reflect the domination of the core capitalist countries,
especially the United States. In sheer quantitative terms, the
most important new markets are of course the financial ones, and
the explosion of financial activity reflects the ability of
capitalism to create and enlarge the spheres of economic activity
even where material production is flagging. In addition, financial
services such as banking and insurance, an area in which companies
based in the core capitalist countries clearly have competitive
advantage have been among the fastest-growing areas of world
trade.
The huge cross-border and intra-border flow of financial resources
often reflects trade in commodities that are purely notional, such
as derivatives trading. That huge profits can be made from this
pyramiding of financial assets reflects the ingenuity of
capitalism, but it also marks speculative bubbles, which do have
to burst eventually.In addition, the new imperialism seeks to make
use of the skilled labour that is found in some developing
countries. This has meant greatly enhanced labour mobility of a
small section of highly skilled and professional workers, even as
other labour finds it much more difficult to move, and aggregate
rates of labour migration are lower than they have been in the
history of capitalism. This in turn has contributed in no small
measure to the enthusiasm for the process of global integration
among such groups of skilled workers in developing countries. In
fact, it can be argued that one important reason for the success
of imperialist globalisation has been its ability to draw local
elites and middle classes across the world into its own ranks, to
offer part inclusion into a privileged international space within
which the travails of the local working poor can be forgotten,
even while their crucial role in generating productive surplus is
sustained.
Predator and the prey Despite the appearance of complete
domination by a single and determined superpower, which has been a
requirement for periods of stable world capitalism in the past,
the current world economy is an unstable one, which is prone to
systemic instability and constant possibility of crisis. This
emerges from many factors.First, the US is not currently
fulfilling its role of leader in the world economy to maintain
stability. Such a role, as argued by the economist Charles
Kindleberger, requires the fulfilment of three functions at a
minimum: discounting in crisis; counter-cyclical lending to
countries affected by private investors, decisions; and providing
a market for net exports of the rest of the world, especially
those countries required to repay debt. The absence of discounting
in crisis is not universal; there are countries that have received
large bailouts orchestrated by the US Treasury and the IMF. But
the spectacular collapse of Argentina, the bleeding of Sub-Saharan
Africa despite impending large-scale famine, and the indifference
to implosions in Eastern Europe and elsewhere, bear witness to the
fact that the US administration does not see its responsibility to
discount during times of crisis in terms of salvaging the larger
system. Similarly, counter-cyclical lending has been discouraged,
as private finance (including portfolio capital) has been
associated with creating sharp boom-and-bust cycles rather than
mitigating them, and US policy has been geared towards protecting
such behaviour rather than repressing it.
Finally, while the US did play a crucial role as the engine of
world trade by running very large external trade deficits in the
1990s, that role has been much diminished after 2000. Indeed, even
before then, the import surplus in the US reflected private
investment-savings deficits, as the governments budgetary role
became more contractionary.Second, partlybecause of this
inadequately accepted role of the leader, and partly because of
the deflationary impulse provided by the greater mobility of
finance capital, aggregate growth in the world capitalist system
has been far below expectations in the recent phase of
globalisation. It is now clear that the period has been associated
with a deceleration of economic activity in much of the developed
world, a continuing implosion in vast areas of the developing
world including the continent of Africa, and a dramatic downslide
in what had hitherto been the most dynamic segment of the world
economy East and Southeast Asia. The rate of global output growth,
which averaged three percent in 1990-97, was less than half that
in 1998-2000, and even worse subsequently. Nearly 40 countries
have experienced a decline in per capita income since 1990.
These processes are reflected in rates of growth of world trade
(in value terms), which have decelerated despite the enforced
liberalisation of trade in most countries, as well as in declining
rates of greenfield investment (involving the setting up of
physical plant, equipment etc) across the world.Third, the recent
process of imperialist globalisation has been marked by greatly
increased disparities, both within countries and between
countries. The gap in per capita income between the industrial and
developing worlds has more than tripled between 1960 and 1990.
Between 1960 and 1991, the income share of the richest 20 percent
of the worlds population rose from 70 percent to 85 percent, while
the income share of the poorest 20 percent of population fell from
2.3 percent to 1.4 percent. In fact, the income shares of more
than 85 percent of the worlds population actually fell over this
period.
The ratio of shares of the richest to the poorest groups doubled
from 30:1 to 60:1. Subsequent data indicate a marked worsening of
such disparities.
While there is inevitably a debate over this, most careful studies
find increased inequality within and across regions, as well as a
stubborn persistence of poverty, and a marked absence of the
convergence predicted by apologists of the system. In addition,
the majority of the people across the world find themselves in
more fragile and vulnerable economic circumstances, in which many
of the earlier welfare state provisions have been reduced or
removed, public services have been privatised or made more
expensive and therefore less accessible, and employment conditions
have become much more insecure and volatile.Fourth, these features
in themselves have led to a major crisis of legitimisation for the
system.
Not only are the basic tenets of the neo-liberal argument (which
forms the theoretical support for the current pattern of
imperialist globalisation) under question, but increasingly the
institutions which serve to uphold it (the IMF, the WTO and so on
lack popular support and legitimacy. The anti-globalisation
umbrella movement is one expression of such growing dissent in
local and national contexts. One important and new feature, is
that the process of integrating elites from developing countries,
and rewarding them materially for their active cooperation in
furthering corporate globalisation, has slowed down.
The complicity and participation of local elites has been a potent
force in ensuring the success of global capitalist integration but
as the world recession bites and rewards become more scarce, such
complicity can no longer be taken for granted. Since the political
economy of resistance movements everywhere requires the
involvement of at least some middle class and professional
elements and often some local elites as well, this may prove to be
a critical development.
Fifth, imperialism has an increasingly ambiguous relationship with
various backward-looking, revanchist and reactionary tendencies in
different parts of the world. At different times and places, such
tendencies have been encouraged and allowed to spread, but
increasingly many of them are now seen as threats to the system,
to be rooted out and destroyed. All of those currently seen as
enemies of the US and therefore as the objects of attrition in the
current war against terror Osama bin Laden, Al Qaeda and the
Taliban, Saddam Husseinhave been at one time or the other overt or
covert factotums of the US administration, used against other
perceived enemies or simply to destabilise regions.
Even now, in clientelist regimes such as that in Saudi Arabia,
reactionary forces have been allowed to grow.Elsewhere, US
imperialism has turned a blind eye or even implicitly encouraged
the growth of semi-fascist movements (such as the Hindutva
tendencies in India) as well as separatist forces, which encourage
the disintegration of large nations. However, many of these
movements now threaten to spin out of control and to destabilise
the system itself, even if only partially. The terrorist attacks
of September 2001 mark a watershed only insofar as they forced a
realisation of this tendency towards destabilisation; they do not
mark any major changes in the basic organisation of the system
itself, which is still run as cynically as before.Finally, one
important contradiction that looks likely to become more
significant in the near future is the requirement of deflation,
which predatory finance capital imposes on the system as a whole
even while it encourages differential rates of deflation in
different areas so as to maximise its own profits.
A sustainable prey-predator relation requires the continued
existence of the prey, but widespread deflation makes this less
likely. The current downslide in the major equity markets, and
especially in the US, suggests that while finance can be separated
from real economic trends for extended periods, and can even
profit from such separation, it cannot do so indefinitely.All this
means that, while the world capitalist system may not yet be in
full-fledged crisis (even though parts of it clearly are) there
are systemic instabilities, which suggest that the current pattern
cannot continue without some changes or even substantial overhaul
in the medium term.South Asian supporting cast.
The South Asian region (broadly interpreted to include the region
from Afghanistan to Burma) has become very important for the
imperialist core, and in particular the United States. While South
Asia,s economic significance may appear to be weaker than some of
the other regions in terms of both markets and resources, this is
not completely true. The Indian economy is viewed as a major
market for a range of consumer goods, and even the limits of that
market given the prevailing income distribution have not
completely diminished expectations. In addition, there are large
possibilities in terms of introducing commercialisation and the
possibility of private profit generation into activities that have
not previously been treated as commercial in India, either because
of lack of development or because of the role played by the public
sector.
Between 1960 and 1991, the income share of the richest 20 percent
of the world,s population rose from 70 percent to 85 percent,
while the income share of the poorest 20 percent of population
fell from 2.3 percent to 1.4 percent.There are other sources of
interest in South Asia. Geopolitically, the region is viewed both
in terms of its capacity (especially India) to assist in the
containment of the potential power of China, and as a means of
providing access to the oil and mineral resources of Central Asia
and the Bay of Bengal area. The region is also the location of the
struggle for control over other, newer forms of economic
territory, such as certain types of skilled labour.The economies
of South Asia and especially India are often portrayed in
comparative discussion as among the success stories of the
developing world in the period since the early 1990s.
The sense that the Indian economy performed relatively well during
this period may simply reflect the much more depressing or chaotic
experiences in the rest of the developing world, with the
spectacular financial crises in several of the most important and
hitherto dynamic late industrialisers in East Asia and Latin
America, and the continuing stagnation or even decline in much of
the rest of the South. In comparison, the Indian economy, and
indeed most of the smaller economies of the region, were largely
stable and have been spared the type of extreme crisis that became
almost a typical feature of emerging markets elsewhere. But the
picture of improved performance is a misleading one at many
levels, since in fact both India and the entire South Asian region
as a whole experienced economic growth which was less impressive
than the preceding decade. Further, across the region this growth
pattern was marked by low employment generation, greater income
inequality and the persistence of poverty. In other words, despite
some very apparent successes in certain sectors or pockets, on the
whole the process of global economic integration did little to
dramatically improve the material condition of most of the
population.In India, the rate of growth of aggregate GDP in
constant prices was between 5.5 percent and 5.8 percent in each
five-year period since 1980, and the process of accelerated
liberalisation of trade and capital markets did not lead to any
change from this overall pattern. Further, while investment ratios
increased (as a share of GDP), this reflected the long-term
secular trend, and in fact the rate of increase decelerated
compared to earlier periods.
More significantly, the period since 1990 has been marked by very
low rates of employment generation. Rural employment in the period
1993-94 to 1999-2000 grew at the very low annual rate of less than
0.6 percent per annum, lower than any previous period in
post-independence history, and well below (only one-third) the
rate of growth of rural population. Urban employment growth, at
2.3 percent per annum, was also well below that of earlier
periods, and employment in the formal sector stagnated. The only
positive feature was the decline in educated unemployment, largely
related to the expansion of IT-enabled services in metropolitan
and other urban areas. However, while this feature, along with
that of software development, has received much international
attention, it is still very insignificant in the aggregate
economy. Other indicators of the Indian economy point to
disturbing changes in patterns of consumption. Thus, per capita
foodgrain consumption declined from 476 grams per day in 1990 to
only 418 grams per day in 2001. The National Sample Survey data
also suggest that even aggregate calorific consumption per capita
declined from just over 2200 calories per day in 1987-88 to around
2150 in 1999-2000.
It has been argued that this may represent the positive
diversification of consumption away from foodgrain that is
associated with higher living standards. But, usually the
aggregate foodgrain consumption does not decline due to indirect
consumption (for example, through meat and poultry that require
feed).
In any case, the overall decline in calorific consumption
(covering all food products) suggests that the optimistic
conclusion may not be valid. Given the aggregate growth rates and
the evidence of improved lifestyles among a minority, this points
to substantially worsening income distribution in India, which is
also confirmed by the survey data. While the evidence on poverty
has been muddied by changes in the procedure of data collection,
which have made the recent survey data non-comparable with earlier
estimates, overall indicators suggest that while the incidence of
head-count poverty had been declining from the mid-1970s to 1990,
subsequently that decline has been slowed or halted, as indicated
by the economist Abhijit Sen. Meanwhile, declining capital
expenditure by the government has been associated with more
infrastructural bottlenecks and worsening provision of basic
public services.
The major positive feature which is frequently cited, that of the
overall stability of the growth process compared to the
boom-and-bust cycles in other emerging markets, reflects the
relatively limited extent of capital account liberalisation over
much of the period, and the fact that the Indian economy was never
really the chosen favourite of international financial markets
over this period. In other words, because it did not receive large
inflows of speculative capital, it did not suffer from large
outflows either. Meanwhile, stability to e balance of payments was
imparted by the substantial inflows of workers remittances from
temporary migrant workers in the Gulf and other regions.
In other countries of the region, the economic growth experience
subsequent to liberalisation has been even less impressive in most
cases. In Pakistan, average annual growth rates plummeted in the
1990s compared to that of the earlier decade, by about one-third.
Industrial growth rates almost halved from 8.2 percent to 4.8
percent per annum. The earlier success at reducing poverty was
reversed in the 1990s, as the percentage of households living in
absolute poverty increased from 21.4 percent in 1990-91 to 32.6
percent in 1998-99. Unemployment rose, real wages fell and income
distribution worsened. All this occurred in a climate of much
greater macroeconomic instability than in the past.
Per capita foodgrain consumption in India declined from 476 grams
per day in 1990 to only 418 grams per day in 2001 In Bangladesh,
while aggregate growth rates over the 1990s were marginally higher
than in the earlier decade, the overall incidence of poverty (at
around 45 percent of the population) has been stubbornly resistant
to change. Indeed, the rate of poverty reduction slowed down after
1994-95 because of both lower growth of production and lower
employment generation. Industrial growth was positively affected
by the expansion of the export-oriented textile sector (taking
advantage of previously unutilised multilateral multi-fibre
arrangementMFA quotas) but other than textiles and garments, most
manufacturing sectors have stagnated or declined. All the
productive sectors have been adversely affected by trade
liberalisation in India, given the porous border, which allows for
the possibility of substantial smuggling. Thus import penetration
has adversely affected production and employment in both
agriculture and most manufacturing, and even sectors of rural
economic diversification such as livestock and poultry rearing.
Income distribution worsened over the 1990s.
The economy of Nepal has been affected by Indian trade
liberalisation because of its open border with India. Growth in
the productive sectors has been weak, especially in agriculture
where the removal of subsidies was not accompanied by public
investment in rural infrastructure. In Sri Lanka, relatively low
growth in the 1990s (especially in the agricultural sector) was
associated with high macroeconomic imbalances, high trade deficits
and reduced employment generation. Domestic political strife and
the state of war in the Sri Lankan north and east were only partly
responsible for this; an important role was played by the decline
in value of agricultural exports, the mainstay of Sri Lankas
economy.This has been the dismal record of the South Asian
economic performance in the age of globalised liberalisation. The
constant hectoring for more liberalisation and the habit of
attributing failures to inadequate reform, either wittingly or
unwittingly, fails to take note of the very obvious adverse
consequences of the process that has been unleashed so far. Ways
of Indian capitalThroughout the region of South Asia, the process
of increased integration with the global economy was not
associated with higher GDP growth or more productive employment
generation, or improved performance in terms of poverty reduction.
Rather, employment possibilities became more fragile and there
were clear income distributional shifts towards increased
inequality. In all the countries, the combination of attempts to
impose fiscal disciplineby cutting public expenditure resulted in
adverse consequences for producers as well as reduced quality and
quantity (in per capita terms) of physical infrastructure and
basic public services. The loss of revenues from import tariffs,
the associated necessary declines in domestic duties, and the need
to provide incentives to capital through tax concessions, all led
to declines in tax-GDP ratios across the region, further reducing
the spending capacity of the states. If such have been the
consequences of the process of global integration, adversely
affecting the material circumstances of the large majority of
citizenry in the region, the question may be asked as to what
influenced government policy in all these countries to make the
neo-liberal economic strategy so inevitable nonetheless? In other
words, what was the domestic political and social support for the
process of liberalisation, which made it fit so neatly into the
requirements imposed by international imperialism? Obviously, the
political economy processes involved are complex and vary from
country to country.
But some idea may be had from a more detailed consideration of the
Indian experience in particular. One of the interesting features
of the political economy of the Indian strategy of liberalising
economic reform has been the at first conditional, and
subsequently more unqualified, support extended to it by various
elements of the large capitalist class and other social groups
which have substantial political voice, such as middle class and
professional groups. To some extent this can be explained by the
proliferation and diversification of the Indian capitalist class
that took place during the years of import-substituting growth and
later. There were three factors that led to this.
The first was related to the process of introduction of new
products and markets. In India, over time there were a number of
areas outside the traditional bases of existing monopolistic
groups, such as trade, services of various kinds and operations
abroad by non-resident Indian groups, which served as sites for
the primary accumulation of capital. A typical example is trade,
which saw the growth and proliferation of relatively independent
capitalist groups, some of which on occasion made relatively
successful forays into industrial production, particularly in
steel, tyres and cement sectors that have been through periods of
shortage, have a burgeoning black market and extremely high
margins from trade.
Another example was finance. While the ability of domestic capital
to use the financial sector as a site for accumulation was earlier
contained by the presence of a large public sector in banking,
matters changed substantially from the 1980s, especially when the
stock market came into its own. The subsequent periods of
speculative boom in the stock market allowed some insiders within
the erstwhile financial community to accumulate substantial sums
of capital, most often at the expense of the small middle class
investor. Over time, groups that had accumulated capital in this
fashion sought to diversify into manufacturing, not only by
entering new niche markets, but also by investing in large
capacities in industries characterised by economies of scale. This
created a direct challenge for several of the traditional business
groups.
These traditional monopolies had in the past been protected by the
barriers to entry created by the governments industrial and trade
policies, which involved not just import substitution but also
substantial regulation of capacity creation and production. They
had therefore been able to hedge against risk by investing small
sums embodied in uneconomic plants in each individual industry,
given the narrow domestic market base for most manufactured goods.
This meant that they were unable to compete successfully with the
new entrants, who because of newer technology were also less
averse to import competition.Established big capital, insofar as
it could not enter into certain spaces and was not able to take
full advantage of the entry of new products, found its relative
position worsening in the economy over time. To reverse this
decline, it looked for new avenues, including expansion abroad. It
is necessary to distinguish here between two different types of
expansion abroad.
One is simply expanding activities abroad, which requires little
export of capital from the domestic economy since it is largely
locally financed. The other involves the export of capital through
the non-repatriation of exchange earnings, which, at the very
least, involves the acquisition of rentier status, but may help
the expansion of activities as well. The non-repatriation of
exchange earnings, for a given level of domestic activity being
maintained, has to be financed for the economy as a whole through
larger international borrowing.The second avenue open to
established big business was to move into the space occupied by
the public sector or smaller capitalists; and hence they also
demanded an opening up of space through industrial deregulation.
This was achieved by the elimination of anti-monopoly legislation,
the removal of licensing requirements, the removal of legislation
reservingcertain sectors for small capitalists, a regime of high
interest rates that squeezed small capitalists, the privatisation
of a number of profitable public sector units, and the delinking
of the public sector from budgetary support of any kind. In short,
even the established big businesses that were, to start with, the
beneficiaries of state controls of various kinds, began to chafe
against these controls at a certain stage. Hence, large capital
extended at least qualified support to the neo-liberal
liberalisationprogramme, no matter how uneasy it may have felt
about some other aspects of the programme, such as import
liberalisation.
Among certain other sections such as the agricultural capitalists,
the regime change met with qualified approval, though parts of it
were objected to. Agricultural capitalists, while being hostile to
the withdrawal of subsidised inputs and directed credit,
favourably anticipated the prospect of exporting at advantageous
prices in the international market. In the event, a substantial
section of domestic capital was willing to make compromises with
metropolitan capital on the terms that the latter demanded. It was
therefore all for allowing metropolitan capital to capture a share
of the Indian market even at the expense of the entrenched
capitalists, not to mention the public sector, in the hope of
being able to better its own prospects as a junior partner, both
in the domestic as well as in the international market.
It was thus in favour of import liberalisation, a full retreat
from state interventionism, and accepting the kind of regime that
metropolitan capital generally, and the World Bank and the
International Monetary Fund as its chief spokespersons, had been
demanding.It is true that the more powerful and the more
entrenched monopoly houses of India were more circumspect. They
would not have minded import liberalisation in areas other than
their own, including those dominated by the public sector, would
not object to collaborating with foreign capital and thus the
relaxation of controls to facilitate the same, but they would not
welcome encroachment by metropolitan capital. Their attitude
towards neo-liberal economic liberalisation was more ambiguous.
Support for liberalisation was growing not just among a section of
industrial and agricultural capital. A whole new category of an
altogether different kind of businessman was coming up, containing
those who were more in the nature of upstarts, international
racketeers, fixers, middlemen, often of non-resident Indian origin
or having NRI links, often linked to smuggling and the arms trade.
Such private agents in any case did not have much of a production
base, and their parasitic intermediary status as well as the
international value of their operations naturally inclined them
towards an open economyAnd finally, one should not exclude a
section of the top bureaucracy itself, which had close links with
the IMF and the World Bank, either as ex-employees who might
return any time to Washington DC, or through being engaged in
dollar projects of various kinds, or as hopeful aspirants for a
lucrative berth in Washington DC; the weight of this section in
the top bureaucracy had been growing rapidly, and its inclination
naturally was in the direction of the Washington consensus-style
policy regime.
Thus, quite apart from the growing leverage exercised by the
international agencies in their capacity as donorsthe internal
contradictions of the earlier economic policy regime generated
increasing support within the powerful and affluent sections of
society for changing this regime in the manner desired by these
agencies.Besides this support from large corporate capital, the
large and politically powerful urban middle classes, along with
more prosperous rural farming groups, whose real incomes increased
in the consumption-led boom of the 1980s, actively began to desire
access to international goods and gave potency to the demands for
trade liberalisation. And of course, the technological and media
revolutions, especially the growing importance of satellite
television, imparted a significant impetus to the international
demonstration effect, which further fuelled liberalising and
consumerist demands. One important social change, which was
arguably influential in creating pressures for the shift in
macroeconomic strategy, was the accelerated globalisation of a
section of Indian society.
Apart from the media, one major instrument of this was the
post-war Indian diaspora. The NRI phenomenon by means of which a
qualitatively significant number of people from the Indian elites
and middle classes actually became resident abroad, contributed in
no small measure to consumerist demands for opening up the
economy. The importance of non-resident Indians was not only
because they were viewed as potentially important sources of
capital inflow, but also because of their close links with (which
in many cases made them almost indistinguishable from) dominant
groups within the domestically resident society.While the
liberalising reforms failed in the aggregative sense and also in
terms of delivering better conditions for most of the Indian
population, there was anticipated and achieved a definite
improvement in material conditions for a substantial section of
the upper and middle classes. Since these groups had a political
voice that was far greater than their share of population, they
were able to influence economic strategy to their own material
advantage. It is in this sense that local elites and middle
classes were not only complicit in the process of integration with
the global economy, but active proponents of the process. The
streak of venom.
While the neo-liberal economic reform programme entailed a changed
relationship of the government with economy and polity, it was not
a withdrawal of the state so much as a change in the character of
the association. Thus, while the state effectively reneged on many
of its basic obligations in terms of providing its citizens access
to minimum food, housing, health and education, state actions
remained crucial to the way in which markets functioned and the
ability of capital to pursue its different goals. Government and
bureaucracy remained crucial to economic functioning at the end of
the decade of reforms; in fact the overall context was one of
greater centralisation of economic and financial power. Many had
believed that a ‘retreat of the state’ and the
exposure of the economy to the discipline of the market would cut
out arbitrariness of decision-making and the corruption that is
inevitably associated with it. It would streamline the functioning
of the economy by making it a rule-governed system though
admittedly the rules of the market.
What happened instead in the Indian economy during this period of
neo-liberal structural adjustment was an increase in the level of
corruption, cronyism, and arbitrariness to unprecedented levels.
The privatisation exercise became another vehicle of primitive
accumulation by private capital as it acquired public assets
cheaply. Precious natural resources, hitherto kept inside the
public sector, were handed over for a pittance (and alleged
kickbacks to private firms with dubious objectives. With the wider
corruption that increasingly pervaded the system, the discipline
of the market proved to be a chimera.
The privatisation exercise became another vehicle of primitive
accumulation by private capital as it acquired public assets
cheaply. Across the South Asian region, indeed, and not confined
only to India, the period has witnessed an increase not only in
levels of open corruption but also in a decline in substantive
democracy and acceptance of basic socio-economic rights of
citizens. While the formal denial of democracy has been more
limited (as in Pakistan) across the region, the states have in
effect become more centralising and more authoritarian in certain
ways, even as their ability to control events and processes
becomes more tenuous.It could be argued that the centralised,
centralising and increasingly authoritarian state is in fact a
necessary requirement for this type of liberalisation which is
based more on external legitimisation (from foreign financiers and
the perceived discipline of international markets) than on
internal legitimacy derived from the support of the majority of
its citizens. Such a change in the nature of the state may
therefore be a fallout of the substantially increased income
inequalities associated with liberalisation and the social and
political processes that they unleash.
These inequalities have accentuated certain longer-term structural
features of South Asian societies, whereby more privileged groups
have sought to perpetuate and increase their control over limited
resources and channels of income generation in the economy. This
in turn has involved the effective economic disenfranchisement of
large numbers of people, including those who occupied particular
physical spaces in rural areas, or were urban slum dwellers who
constituted both the reserve army of labour for industrialisation
and the most fertile source of labour supply for extra-legal
activities. The basic disregard for rule of law which has
characterised economic functioning in most parts of South Asia
over several decades, became even more pronounced in this period,
with both economic and other lawlessness becoming accepted
features pervading all aspect of civil society, and allowed
everything even the rights of citizens to become marketable and
negotiable. Meanwhile ordinary citizens tended to experience
reduced civil liberties and security along with worsening
socio-economic rights, which may even have been necessary to allow
the more centralised state to direct particular forms of
lawlessness to the benefit of powerful agents and groups.
These concomitant trends of greater economic and financial
centralisation and increased income inequality in turn operated to
aggravate the various regional, fissiparous and community-based
tensions that have become such a defining feature of South Asian
societies and polities. One of the features of the region as a
whole has been an increase in the degree of instability and the
growing absence of security. It has been reflected not only in
greater cross-border tension, as between India and Pakistan, but
also in civil- and communally-inspired clashes within national
boundaries. These conflicts both emerge from the prevailing
material contradictions and contribute to them. They also serve
the very important political economy use (for the states
concerned) of distracting people from the real and pressing issues
resulting from the government denial of basic economic
responsibility, and serve to direct anger in other less
potentially threatening directions. Obviously, not all such
tension has had a direct and monocausal material underpinning.
Nevertheless, it is true that the combination of greater material
insecurity in terms of both lower real incomes and more precarious
employment opportunities for a very large section of the
population, with the explosion of conspicuous consumption on the
part of a relatively small but highly visible minority, can have
very adverse social and political consequences.
The frustration that may arise because of the gap between
aspiration and reality for growing numbers of people in the system
can be only too easily directed towards any apparent or potential
competitor in such a system, or even to those who are not in
competition but simply represent a group that can be attacked with
relative ease.
The streak of venom that has been periodically directed towards
various minority groups across the region can be seen as one
expression of this trend. The inability to confront those who are
responsible for the system, or actually benefiting from it, or
even the lack of desire to confront these much more powerful
elements, given that they still have the power to distribute some
amount of material largesse, has meant that they could not become
the direct objects of any aggressive vent for frustration. Rather,
the outlet was increasingly found in terms of growing antagonism,
increasingly finding violent expression, towards other categories
of people who are nearer home, closer in terms of lifestyle and
more susceptible to such attack. It is worth noting that often
these groups are already the most disadvantaged and materially
weak sections of society.There is the broader international
context to this, which is particularly reflective of this phase of
imperialist globalisation.
Across the world, in both developed and developing countries,
there is a greater tendency on the part of the rulers, and those
who are privileged in society, to ignore the interests of the
majority and to blatantly push for those policies that will only
benefit a small minority. The rise of finance capital and the
hugely powerful role played by speculative capital in determining
the fortunes of even large industrial countries has made this even
sharper. Increasingly, governments point to the threat of capital
flight as the reason why they cannot undertake basic measures for
the welfare of most of the citizens, since anything that involves
more expenditure for the people is inherently viewed with
disfavour by international capital.Of course, this international
tendency then has its counterpart in each national economy, as
particular groups that actually benefit from the process seek to
establish that there is no alternative.
Which is why we have the spectacle of local elites and governments
not just advocating, but also able to continue to push through,
policies that are likely to be to the detriment of most of the
people. The situation is neither inevitable nor permanent,
however, and the contradictions in the global system that were
outlined earlier in this paper mean that even in particular
regions, forces that will instigate change are likely to surface. |
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LABOUR
PARTY PAKISTAN
LPP
(For a democratic socialist Pakistan)
For
further inquiry please contact at labourparty@gmx.net
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