Paper at Desh Bhagat Yadgar Committee Seminar
Sitaram Yechury
Globalisation has today become the buzzword. It offers respectability to a nakedly aggressive design of imperialism which seeks to economically recolonise the developing third world. Its admitted objective is to restructure the economies of the third world countries in such a manner that they dovetail to imperialists' interests of garnering super profits. In other words, the economies of these countries are to be so restructured that they, without any restrictions, make themselves available for imperialism's plunder and loot. This predatory character of imperialism, in the current phase, has become more aggressive, particularly since the dismantling of socialism in the former USSR and Eastern Europe. With no countervailing force now present, at the global scale, imperialism is seeking to impose its hegemony through such economic enslavement of the world.
Any attempt at a scientific inquiry of why such an offensive was mounted by imperialism in the last two decades of the 20th century and intensified today must consider both the objective conditions and developments resulting from development of world capitalism and the subjective desire of imperialism to strengthen its hegemony and exploitation in search of super profits.
One of the features of capitalist development is that while it grows, there is a tendency towards centralisation and concentration of capital. This is an inherent law of capitalist production and development. Over a period of time, there would be fewer and fewer capitalists but larger and larger ones.
During the course of the second half of the 20th century, after the Second World War, aided by tremendous advances in science and technology, capitalism developed enormously. This was based on intensifying the exploitation both within the capitalist countries and of the third world countries. During the course of this half century, tremendous concentration of capital took place. It is this concentration of capital, both of financial and industrial capital, that today is seeking to reorder the world and redefine international legality in order to pursue its super profits without any obstacle or hindrance. The internationalisation of finance capital seeks to impose what is know as financial liberalisation, ie, creating circumstances for finance capital to have unhindered access to third world countries in order to make speculative profits. It is this centralisation of industrial capital that is seeking unrestricted access to the economic resources and the markets of the third world countries to reap super profits.
At another level, imperialism today seeks to legally deprive third world countries of their right to restrict the inflow of imports and regulate trade flows. In other words, independent third world countries are being forced to surrender their economic sovereignty in the interests of this international capital.
Imperialism seeks to achieve this objective through its trimurti – IMF, World Bank and WTO.
Internationalisation of Finance Capital
A new feature of the present stage of the world capitalist development is the internationalisation of finance capital. Over $1.5 trillion ($1.5 lakh crores) today moves in and out of the world financial markets every day. The global stock of principal derivatives (options, futures and swaps involving interest rates and currencies) was $6.9 trillion ($6.9 lakh crores) in 1991. It was estimated roughly to be over $20 trillion (20 lakh crores) in 1993. The global communication revolution since has led to a greater speed of this growth in terms of volume, turnover and spread of financial transactions.
This enormous amount of capital creates no value and adds nothing, directly, to the wealth of nations. But it has the potential to wreak havoc on the economies, particularly in the third world. It is this internationalisation of finance capital that is today assaulting the sovereignty of independent nations, seeking free and uninhibited access to their economies in pursuit of super profits that massive transnational banks and financial corporations seek to derive.
It is, however, important to note that the present day finance capital is highly globally mobile sucking in finance capital from individual countries dominated by finance capital originating from the advanced countries. Further, this finance capital is more pre-occupied in its search for quick speculative gains rather than its amalgamation with industrial capital leading to economic development. It, therefore, truly represents the parasite that thrives at the expense of real economic growth. In pursuit of quick and super profits, this finance capital moves in and out of countries at amazing speed. When it moves out of a country (like in Mexico in 1994 and now in South East Asia in 1997-98) it bursts the bubble plunging the entire economy into a crisis.
Earlier in 1994, the IMF's General Assembly meeting at Madrid had proudly portrayed Mexico as a model for the third world. A few weeks later, with the sudden withdrawal of speculative capital, Mexico declared that it could not pay its debt commitments, its currency was devalued by more than 60 per cent and the country had to submit itself to strict and humiliating conditions and pay the debtors by selling its oil fields at cheap prices. This warning was not taken seriously, on the contrary, imperialism deliberately went about forcing the third world countries to open their capital markets as the only solution against such crisis like Mexico.
The mechanics of the internationalisation of finance capital operate in such a manner that the third world countries having been inflicted by a severe currency crisis and consequent declining export earnings are forced to service international capital by liquidating their productive economic assets. Even the World Bank Chief Economist Joseph Stiglitz, declared in Manila in 1998 that, "The crisis would not have taken place if there had not been a liberalisation of capital operations in their economies." In three years, from 1990-93, Foreign Direct Investment (FDI) increased from $26.3 billion (2630 crores) to $67 billion (6700 crores). In contrast, Foreign Portfolio Investment (FPI) increased from $9.3 billion (930 crores) to $93 billion (9300 crores)! The speed of its rise continued in subsequent years. The Malaysian premier has, as a result, banned any currency trading (prohibiting free conversion of the local currency Ringgit into dollars and other hard currencies) to prevent further damage. He has also introduced many measures making it difficult for foreign investors to speculate. All these amount to virtual rolling back of the IMF prescription of liberalisation of capital markets.
Concentration of Industrial Capital
Simultaneously, we find massive concentration and centralisation of industrial capital as well. A survey conducted by The Economist in 1993 estimated that the total worldwide assets of multinational corporations amounted to roughly $ 20 trillion. This has subsequently grown phenomenon. Similar is the situation as far as world trade grows. The bulk of international trade is conducted by the multinational corporations who, with their monopoly power, are able to manipulate international prices creating havoc by the dumping commodities in the third world. This leads to the deindustrialisation in the third world leading to consequent growth of unemployment, inequality and misery.
Thus, we find that the objective laws of development of capitalism brought the world to a situation where there has been a tremendous growth of concentration and centralisation of capital. This, in turn, is seeking to undermine the economic sovereignty of independent countries and intensifying exploitation.
The emergence of this international finance capital is an important factor that explains the relatively low growth rates accompanied by high unemployment rates in the advanced countries. This happens because in order to appease international speculators, there is a competitive reduction in tax rates and restrictions on the size of the fiscal deficit. In other words, governments are forced to cut back expenditures and thereby deflate both employment and domestic demand leading to lower rates of growth.
This, in turn, leads to a situation where the advanced countries turn to the third world economies and intensify exploitation. The imposition of neo-liberal policies serves this purpose of removing obstacles to the free operation of internationally mobile finance and industrial capital. In addition, it seeks to impose a new form of international division of labour, this time not through direct colonial occupation but through coercing third world economies to dove tail to imperialist interests.
Thus we find, true to Marx's analysis of capitalism, the rapid centralisation of capital at a global scale is nakedly revealing its predatory and capricious nature. Marx in Capital (Vol.1) says, "With adequate profit, capital is very bold. A certain 10 per cent will ensure its employment anywhere; 20 per cent certain will produce eagerness; 50 per cent positive audacity; 100 per cent will make it ready to trample on all human laws; and 300 per cent and there is not a crime at which it will scruple, nor a risk it will not run, even to the chance of its owner being hanged."
Disasterous Consequences
The effect of this on the world is all too evident for us to see today. The intensification of exploitation is widening inequalities in a sharp manner.
This is starkly illustrated by the fact that the combined assets of the 358 billionaires in the world is greater than the combined annual income of countries constituting 45 per cent of the world's population of 2.3 billion (230 crore) people. Further, the net wealth of 10 richest billionaires is one and a half times more than the national income of all the least developed countries put together. The share of the poorest 20 per cent of the world's population now stands at a miserable 1.1 per cent down from 1.4 per cent in 1991 and 2.3 per cent in 1960. The 1998 Human Development Report shows that the ratio of overall consumption of goods and services between the richest 20% and poorest 20% of the world's population is 16:1!
Parallelly, the capitalist development taking place in the advanced countries itself is based mainly on advances in science and technology which permit the constrained replacement of human beings by machines. The net result is while moderate growth is achieved, it is done without generating employment and, in effect, reducing its future potential. This can be judged by the following.
On an average, in all the developing countries, the unemployment level has reached figures higher than 8 per cent of the labour force. There are 120 million (12 crore) people officially registered as unemployed and over 700 million (70 crore) are under employed. In addition, 1.3 billion (130 crore) people live in absolute poverty on less than $1 a day while 3 billion (300 crore) people live on less than $2 a day. The worst affected is the youth. In the OECD (28 developed countries), youth unemployment grew from 11.6 per cent in 1990 on the average to 13.4 per cent in 1997. In some countries like Spain, youth unemployment is a staggering 39 per cent while in France it is 28.1 per cent. In countries like France, Germany, Italy, the overall unemployment percentage is in double digits.
Succumbing to Imperialist Pressures
This being the nature and character of the current phase of globalisation and liberalisation, why is it that the Indian ruling classes, instead of defending our economic sovereignty and the interests of the country, are succumbing to such imperialist pressures? The answer to this question lies in understanding the specific nature of capitalist development undertaken by the Indian capitalist class after independence. Due to specific circumstances of seeking to prevent the popular people's struggle for independence from assuming a revolutionary character, the Indian bourgeoisie sought an alliance with landlordism. The massive struggles of the peasantry – Tebhaga in Bengal, Surma Valley in Assam, Worli in Maharashtra, Anti-Betterment Levy in Punjab etc, crowned by the glorious Telangana armed struggle – sent warning signals to the bourgeoisie. In order to retain and consolidate their status as the ruling classes, they needed an alliance with the landlords. At the same time, the Indian bourgeoisie, seeking to develop capitalism in India as a part of the world capitalist system, needed to collaborate with foreign finance capital. Thus, the trajectory of capitalist development chosen by the Indian bourgeoisie was one which collaborated with imperialism on the one hand, and allied with semi-feudal landlordism, on the other.
This had serious implications for the nature of economic development in the country. Collaboration with landlordism meant keeping the vast mass of Indian people subject to feudal and semi-feudal exploitation. This, in turn, meant that more than 70 per cent of the population did not constitute a market that is required for capitalist development since they did not have the purchasing power to buy the commodities produced by the capitalist system. The domestic market, hence, remain restricted imposing severe constraints on capitalist development.
The bourgeoisie initially sought to overcome this bottleneck by using the State power at its command to mobilise resources from the people and establish the public sector to create the necessary infrastructure for capitalist development. By using the State to protect itself from foreign capital in the initial stage and by intensifying the exploitation of the people, the bourgeoisie benefitted immensely. The assets of the top 22 monopoly houses shot up from Rs. 312. 63 crores in 1957 to Rs. 1,58,004.72 crores in 1997 – an increase by 500 times!
Today, the same bourgeoisie is seeking privatisation of the public sector because it has amassed this much capital. It is seeking to appropriate people's assets for its private profit. Since it cannot explain such banditry publicly, it takes recourse to a mal propaganda of denigrating the public sector. The public sector was established for the bourgeoisie's benefit in the initial phase and the cries for its privatisation are again being made for the benefit of the bourgeoisie.
However, to sustain a rapid pace of capitalist development was not possible unless the domestic market expanded rapidly. This required that land reforms be implemented in right earnest and purchasing power be given as a result to the vast mass of Indian people. But implementation of land reforms would go against the interests of the bourgeois ruling class partner – the landlords. The bourgeoisie cannot afford this as this would upset its ruling class coalition. Hence, it had to seek other alternatives.
There are two alternative courses available to the bourgeoisie. One is to sell its products in the export markets. The other is to produce those type of commodities that the rich in India could consume, ie, luxury consumption goods. In the export market, India would have to compete with the technologically advanced countries like Japan, South Korea etc. In order to produce luxury consumption goods such as modern electronic gadgets etc, the Indian bourgeoisie requires technology far advanced than what it possessed. Therefore, in order to make use of the alternative courses, the Indian bourgeoisie and its leader the big bourgeoisie required to acquire modern technology.
Such technology was available but at a price. And, this had to be paid for in foreign exchange. India's exports were never higher than its imports. Meaning that foreign exchange to buy this modern technology was just not there. This, therefore, had to be borrowed. Thus, the Indian big bourgeoisie goes to the IMF to borrow foreign exchange through which it seeks to acquire modern technology and produce such commodities from which it can enhance its profit through the export market and by catering to the luxury consumption of the rich in the country. The Indian bourgeoisie, therefore, goes in for the IMF loans by mortgaging the country.
The IMF, like in smart moneylender, looks not at the capacity of the borrower to return the principal amount but looks at the capacity of the borrower to pay the interest on this loan. If the borrower does not have the capacity, the IMF imposes conditions to make the borrower acquire the capacity to pay the interest and the principal.
Thus, the first conditionality of the IMF is the reduction of the fiscal deficit. The fiscal deficit is the difference between the government's overall expenditure and its revenue. Reducing fiscal deficit means reducing government expenditure. Thereby giving the government the capacity to pay the interest. Thus, the constant concern of the Indian government to reduce fiscal deficit is because of such an IMF conditionality.
A reduction in government expenditure means a reduction of subsidies and whatever little that the government is spending for the welfare of the people. Such reduction, therefore, means directly a reduction in government's spending in areas such as food security, health, education etc. This directly affects adversely the lives of millions of our people.
Thus, what we see is a situation when the Indian ruling classes in pursuit of greater profits are mortgaging the country on the one hand, and imposing the burdens of taking loans on the common people. If this needs any proof, consider the following. In the latest budget presented to the Parliament, the country was informed that this year, we have to pay interest charges of more than Rs. 1 lakh crores.
According to the report of the Comptroller and Auditor General of India for the year ending March 1999, the total liability of the Central government increased by 61 per cent during the last five years. It stands today at Rs. 10,12,486 crores. This is 57.44 per cent of the GDP "The pressure of repayment of the principal and payment of interest on the external debt has already turned the net inflow negative since 1994-95". Thus, today, India is returning more resources abroad than what we are borrowing.
Parallel with this, the conditions of the people have vastly deteriorated. Notwithstanding the disputes on the veracity of statistics, there is no doubt, from all statistical sources, that the number of people below the poverty line has increased in absolute numbers. The freeze on the recruitment, the privatisation of the public sector, the closure of nearly four lakh factories in the private sector have all contributed to swelling the ranks of the unemployed. Starvation deaths and suicides by farmers are becoming a regular feature.
Adverse Impact on our Economy
As a result of this, we find that the Indian ruling classes led by the big bourgeoisie are embracing the policies of liberalisation and opening up our country to the predatory loot of foreign capital. Foreign capital has been given unhindered access to virtually every sphere of our economy. There are no restrictions, including the one that prevailed in the country for long time that a part of profits earned by foreign capital must be reinvested in the country. Foreign capital can now take over domestic Indian industries, loot India's rich economic resources and exploit India's cheap labour. The super profits that it makes, it can safely take back to its own country.
On the other hand, this Vajpayee government, while accelerating the pace of facilitating the loot of India, has succumbed to US pressures and lifted quantitative restrictions three years in advance of our commitment to the WTO. Quantitative restrictions are restrictions imposed by a country on the import of certain commodities. In India, there was a prohibition to import many agricultural commodities since this would adversely affect the lives of millions of people involved in the domestic production of these commodities. In April this year, the Vajpayee government clandestinely agreed with the US to lift such restrictions.
As a result, many items have already begun to enter India creating devastating effects for our farmers. As a result of such agricultural imports, the price of green tea has crashed from Rs. 18to Rs. 3, of rubber from Rs. 70 to Rs. 28, of coffee from Rs. 72 to Rs. 32, of coconut from Rs. 7 to Rs. 3 etc. Millions of farmers involved in the production of such commodities today face starvation. In North India, sugarcane is being burnt in the fields and sugar mills are closed because imported sugar is coming at a cheaper price. The suicides of farmers in many parts of the country reflects the gravity of the situation.
This, however, does not mean that the people are benefitting from such a crash in prices. It is the trader who is benefitting and the Vajpayee government has now permitted foreign companies to engage in our domestic trade!
Grim Future
Putting all these together, we find a grim future for India. The IMF conditionalities and the borrowings has resulted in a situation where the country has to borrow to pay the interests on the earlier borrowing. The country is not only mortgaged but we are today truly in a debt trap.
The access given to foreign capital is undermining the economic sovereignty and permitting unbridled loot of Indian resources. The privatisation drive is handing over people's assets to foreign and domestic private capital while at the same time throwing millions of workers out of job. Unemployment is, thus, galloping. The conditions of the people are worsening as noted above. This is the disastrous impact that these policies are having on our economy and the people.
But then a legitimate question arises – why is the Indian bourgeoisie permitting foreign capital to loot India and thereby deprive the Indian bourgeoisie itself of its assets and profits? As noted above, the Indian bourgeoisie, faced with a crisis of its own making because of its alliance with landlordism, had no option but to adopt such a course. It does so at the expense of the country and the people. While the takeover of Indian capital by foreign capital will effect many non big capitalists, the leader of the ruling class alliance – the big bourgeoisie – seeks to emerge as a junior partner of imperialism in this drive for globalisation. For this, the big bourgeoisie is prepared to mortgage the country and heaping inhuman miseries on the people.
Is there an alternative? Of course, there is. A people's alternative. As we have noted earlier, the genesis of the crisis which led the big bourgeoisie to adopt this course of liberalisation lies in the narrow and restricted domestic market. If the domestic market can be expanded by land reforms, then this in itself will create sufficient demand for industrialisation without taking recourse to foreign capital. To understand this, consider the following. Some economists estimated some years ago that if enough money is given to people below the poverty line to buy one saree or a dhoti, then to meet the consignment demand for cotton textiles, India would require three times the number of textile mills than what we have now! On the contrary, more than four-fifths of the textile mills are closed today. They are closed today not because people do not need the cloth that they produce. They are closed because people who need the cloth do not have purchasing power.
The present ruling classes, however, cannot adopt such a course since, as noted, they cannot go against the landlords and implement land reforms. It is only the people's struggles, the unity of all patriotic Indians in defence of our economic sovereignty that must oust the present ruling classes to protect India and its people.
BENGHAZI, LIBYA – Mehdi Mohammed Zeyo was the most unlikely of revolutionary heroes. The bespectacled 49-year-old worked in the supplies department of the state-owned oil company. He was a diabetic with two teenage daughters.