The Trillionaire III: Democracy as a Weapon

16 05 2007

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Democracy, geographic distance and demographic divergence have provided the necessary conditions for the unity of India despite its massive poverty, but these have been merely necessary conditions for its survival. Still, this does not explain the success of its economy. What does?

Three points that are normally proffered as explanations for the current economic success are the investments in capital goods industry by the Indian state in the first four decades since independence, the protection of nascent Indian capital and its class through strong protectionist policies, and an emphasis on education by India’s middle class. Each of these is important and has played a crucial role in building up the resources needed to launch the Indian economy onto the global stage.

What is significant to note is that a large part of India’s industrial sector had already originated during the colonial era, riding on the need for import substitution during the world wars, as well as the ‘Great Depression’. While the individual capitalists were small and the capitalist class was vulnerable by global standards, they were clearly industrialists with manufacturing and financial assets inside India and not trading agents of foreign companies. Indian industry and capital emerged in this context of colonial rule, specially the need to survive in opposition to colonialism. The structural conditions of colonialism, where the government was not friendly to local industrialists, meant that per-force, Indian industrialists had to depend on India’s mass-based freedom struggle for survival. The strength of the Indian freedom struggle’s mass base provided the Indian capitalists with support in negotiating with British colonialists. On the other hand, the successes of Indian capitalists in the colonial period were also perceived as achievements of the larger Indian nation despite its colonial subjugation.

This dialectical relation of the Indian capitalists and its anti-colonial mass movement had two important consequences. One, it helped the Indian capitalist class realise the importance of anti-imperialism in its own survival in an independent India. Two, it also trained them in dealing with a populist state policy, which often severely curtailed the growth of individual capitalists to protect the larger economic system based on private property. While left critiques of neo-liberal policies have concentrated on India’s “sell-out” to global capital and its representatives, it is important to remember that even today many of India’s leading industrialists are direct heirs of those who started their industries during, and in direct opposition to, British colonialism. While the desire to merge with international capital is surely evident, one must not overlook the sense of nationalistic pride that is often evident too. India’s biggest buyout in the global marketplace as yet – Tata’s $ 11 billion purchase of Corus (formerly British Steel) – was often described in starkly nationalist terms (‘India Shining’?) as the former colony buying out a symbol of its colonial master’s industrial pride.

Emotions like pride and patriotism have little currency in global financial markets. What it does indicate is that India’s current transition into a global player is not merely a sell out. Neo-liberal reforms, or the package of liberalisation, privatisation and globalisation, has not resulted in the takeover of the Indian economy by multinational capital, it has rather led to a situation where there is now a fast growing breed of Indian multinationals – as rapacious and trans-border as any US multinational corporation/company (MNC). These economic reforms have not led to a deindustrialisation of India’s economy nor has it led to a weakening of the India state vis-à-vis international players.

Leftwing critics of the current economic policy often argue that this has reduced the independence and flexibility India had in its foreign policy, as well as in some crucial sectors of domestic policy, before these reforms integrated the Indian economy so closely with the global one. They cite the weakening of India’s support to Palestine and proximity to Israel, its weak response to the US aggression on Iraq, its lack of support to the least developed countries in the WTO as examples of India giving up its previous role as a leader of the non-aligned world and its growing alignment with US policies.

While there is no dispute with the fact of change in policy direction, it must be remembered that its earlier role as a Third World spokesperson was nothing more than a strategy of managing imperialist pressure. It was the foreign policy of a state whose dominant class, the industrialists, were frightened of competing in the global market and wanted total protection from global capital. Today, as is so clearly evident, India’s private sector is confident of being an independent player in the global market and is not frightened by global capital. Moreover, the Indian capitalist class is growing a whole harvest of budding MNCs of its own. And MNCs, whether US or Indian, have the same character. They want low barriers on movement of capital and goods and efficient control over people. It is this change in the capitalist class that is leading to a change in India’s foreign policy, and to some extent its domestic policy.

Does that make it less independent and more submissive to US interests? I would argue that this is precisely the wrong question to ask. The foreign policy of major industrial powers like Germany, Japan, France and the UK is aligned much closer to the US than India even today. Does that mean that these countries are less independent than India on the international stage? In a way yes, as they are that much more closely integrated into the global financial systems, but this very integration provides them with their strength. Why should it be otherwise for the newly emergent economies?

India, and countries like India – China, Brazil, Russia, perhaps South Africa – are on the cusp of joining the club of imperialist countries themselves. The two things that are holding them back are massive areas of poverty inside their borders and the environmental limits of industrialisation. While the latter is too complex an issue to deal with in this column today, I would like to end by revisiting the complex called poverty.

Though poverty remains a drag on the economy, its main impact is on politics. It is difficult for a country to sustain smooth economic functioning (a prerequisite for high growth and successful globalisation) when nearly two out of three citizens live in poverty, and more importantly, perceive themselves left out of the growing and visible prosperity. It is here that democracy, geographical distance and demographic divergence work to fragment systemic challenges to the present economic regime, while also providing local relief to people. And it would be a foolish leftist who would ignore the immense importance of this ‘local relief’ to the real lives of people.

But democracy, by its very working, also provides powerful platforms for mobilising people on political agendas and organising for change. Leftists in general, and communists in particular, have been reasonably successful in working the levers provided by democracy and its institutions in India. But while at a practical level they have been good at working democracy, they have not theorised what a functional democracy means for a people’s movement. And as Vladimir Lenin had pointed out almost a century ago, a communist who cannot theorise his or her actual conditions is no communist.

The ability or not of communists to understand and theorise the working of democracy will decide whether democracy will serve the interests of resurgent capital or become a weapon in the hands of the people.

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This article was published in my weekly column in The Post on 16 May, 2007.

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6 responses

17 05 2007
tumpa

grt

17 05 2007
sisyphus

Your statement on “the ability of communists” to theorise sounds pretty enigmatic. while whatever you say preceding that is pretty much drawn from that same tradition of theorisation… there is this whole notion gaining currency that democracy thrives better at the ‘local’, even when global finance capital dominates. it could be fragmentation for somebody, but could be positively more democratic for somebody else. but people’s struggles determine the nature of democracy, the point is are we willing to engage with them?

18 05 2007
Srini

Aniket,

There are a few dangerous generalizations you make in your post. You argue that other countries of the G8 are independent vis-a-vis their foreign policy despite their closeness to the American foreign policy. And it wouldn’t therefore make sense for countries such as India which “are on the cusp of joining such imperialist countries” to articulate their own so called “independent” concerns vis-a-vis foreign policy even when pressurized by global hegemons such as the United States.

I sense the above as rather misleading. While it is true that the industrialized nations of the G-8 are governed by the rational concerns that emanate out of Globalization, there are also nations which have tried to formulate alternate strategic alliances in order to militate against the pernicious effects of American Hegemony that is buttressed through the agencies of globalization.

No wonder, you have China and Russia forming the Shanghai Cooperation Council that articulates certain independent objectives that run counter to the imperialist nations’ aims.

The dynamic of globalization has a certain imperative instrumentalist origin. It can’t be merely said to be responsible for the aligning of the national bourgeoisie in India with their global behemoth counterparts.

It is therefore pertinent to understand the dynamic of multilateral relations not only in terms of the machinations of the MNC bourgeoisie and perhaps in realist terms.

I would therefore request you to not to merge the various entities of international relations, the underpinnings of global capitalism and constructivist ideas on poverty in one whole like the way you have done.

19 05 2007
Trillionaire India at Blogbharti

[…] Aniket Alam is of the view that economic reforms have not led to the ‘weakening of the Indian state vis-a-vis international players’: Though poverty remains a drag on the economy, its main impact is on politics. It is difficult for a country to sustain smooth economic functioning (a prerequisite for high growth and successful globalisation) when nearly two out of three citizens live in poverty, and more importantly, perceive themselves left out of the growing and visible prosperity. It is here that democracy, geographical distance and demographic divergence work to fragment systemic challenges to the present economic regime, while also providing local relief to people. […]

25 05 2007
Subhanil

Aniketda,
Your three part article on India, is indeed very thought provoking. Without going into the points of agreement, which are quite few, let me come directly to the critique of your article.

1. You tend to argue in your article that the Indian bourgeosie or the capitalist class, in the era of LPG, has performed remarkably going to the extent of buying foreign companies. Well true and false both. While you have mentioned, the TATA buy out of Corus, you have failed to mention the systematic sell out of our public sector resources for a song to the Indian capitalists under the policy of LPG. The state’s policy reflecting a complete bias in favour of the capitalists, do not end there. India with the abolition of the long term capital gains tax and many other tax concessions to the rich has one of the lowest tax-GDP ratio in the world, which gives the Indian and foreign capitalists a bonanza in the country. Not to speak of the huge non-performing assets lieing with the national banks because of the Indian capitalists’ refusal to pay the loans. Therefore, the character of the state has undergone a fundamental change in the era of globalization. Today, the Indian state far from retreating from the economy has only changed the character of intervention. Earlier, it tended to be pro-people, now it is blatantly pro-finance capital and capitalists. So, it has been the state, which by facilitating the primary accumulation of capital has helped the capitalists to look to the moon.

2. In fact it can be argued, that the poverty and massive unemployment still plaguing our country is actually a result of providing such sops to the capitalists; in other words the genesis of such agrarian distress and other problems that you have cited in your article is actually a result of the re-orientation of the state’s policy of facilitating the capitalist class. Let me give you just one illustration. Our Parliament has passed an Act called the Fiscal Responsibility and Budget Management Act. This restricts all governments from having a fiscal deficit of more than 4%. Now, in a country where there is no floor on the amount to be spent on social sectors, no floor on the tax to be collected, no floor on poverty, such an Act, essentially means a reduction in public expenditure, particularly in social sectors. In our country, poverty, unemployment, are closely correlated with the public expenditure on social sectors. With LPG, the government in order to serve the interests of finance capital reduces these spendings and thereby generates more poverty and unemployment. Therefore the expansion of the capitalists ad the generation of misery for the people are both opposite sides of the same coin.

3. Coming now to the question of democracy. It is true that the Indian state through the process of elections tests the wicket, so to say and coopts large sections of the marginalized into its fold. But this also undergoes a change with respect to neo-liberalism. While the election results of successive general elections since 1991 will suggest that people have rejected the LPG policies, still every party that comes to power follows the same policies. This is a result of the complete hegemony of neo-liberalism and the logic of finance capital within the political establishment. This hegemony is essentially anti-democratic. Since the popular anger of the people against LPG is never manifested. Therefore you see a Chandrababu Naidu ousted with YSR taking the mantle but following the same policies with cosmetic changes. The CMP of the UPA is a small break from this hegemony, but given the politics of the Congress the CMP is still to be implemented properly. Therefore, the democratic movement in the country has to defeat the logic and politics of LPG. Otherwise the future of the people and democracy are both at great peril.

4. Coming now to the question of imperialism and our development. Imperialism’s motive force is finance capital today. LPG policies actually mean a subservience to this finance capital, and given the earlier paragraphs, it essentially means misery for the people.

5. AS far as the issue of Germany, Japan etc are concerned, they are no comparison to India simply because all of them are advanced capitalist and imperialist coutries, who have fought world wars against each other. Today, because of the resurgence of the finance capital, the intra-imperialist rivalry has muted. It is in the interest of these countries to rally with the US, which is the leading imperialist country of the world and excercise their dominion over the world. The development of India or the third world, has to challenge today’s imperialist policies, which are imposed on the third world by this block itself. Therefore there is no question that India will improve the plight of its poor without coming out from the logic of neo-liberalism or international finance capital. Any attempt to do so will be resisted by the imperialist block led by the US. Therefore any alliance with US is essentially coming under the subjugaiton of the Fund-Bank and inviting misery for the people.

I hope I have not been boring with this very long response.
regards,
Subhanil

26 07 2007
Shaukat Ansari

Aniket, while there are many points in your article that I find questionable, I want to specifically address the question of integration with the global financial economy. After pointing out that industrial powers such as Germany, the UK and Japan have achieved a certain degree of strength through their integration with the world economic system, you ask,

Why should it be otherwise for the newly emergent economies?

There are a number of reasons why it should be otherwise for the developing nations, India included. First, the countries named above do not have the same history of colonial underdevelopment, to borrow the phrase coined by the late economist Andre Gunder Frank. The destruction of Indian industries during the period of British colonial rule and the whole scale plundering of the country’s valuable resources place India in a completely different historical and economic category than the industrialized powers, which were able to develop precisely because their ruling classes operated within a system of economic protectionism supported through heavy state involvement and violence, a process which continues right up to this day. The politics of neoliberalism ensure that the rules and policies imposed on the Third World are not applicable in the imperialist metropolis. This is why Western countries continue to offer heavy agricultural subsidies to their farmers while economic liberalization has led thousands of Indian agricultural workers to committ suicide as they are unable to compete with the Western products that flood the country. At the same time that India and other developing countries are told to slash public funding for a number of industries the Western TNCs enjoy state funds and subsidies in the form of R&D grants to ensure that they remain competive–or actually, to ensure that their monopoly never weakens.

In short, when Third World countries are required to operate with ‘open economies’ by the IFIs, it impossible for their economies to function on the same level as the Western powers. A country whi9ch has a history of underdevelopment will never be able to reverse this trend and begin develop in the same way as the industrialized metropoles within the framework of capitalism. Even when domestic production in the Third World is permitted by the metropolis, they still never manage to break the West’s monopoly in the most advanced areas. Thus, if developing countries begin to produce consumer goods, they still continue to import capital goods and heavy industry from the West. If they begin to manufacture limited capital goods, the West maintains the monopoly on petro-chemicals and computer software. What this means is that the only way for the Third World to break this pattern is by rejecting capitalism all togetrher and reverting to socialism.

Shaukat

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