It is a great honour for me that I have been invited to deliver the Sixth Annual Lecture under the auspices of Tarakeswar Chakraborti Memorial Endowment. I am grateful to the AIBEA and its dynamic general secretary, my good friend, Comrade Venkatachalam or CHV as he is affectionately known, and to the Department of Economics,
While most of the bank employees in the audience here would be familiar with Comrade Tarakeswar as a legendary trade union leader who devoted more than five decades of his life to the cause of the bank employees of our country, I have had the privilege of knowing about his wider contributions to the struggle for social progress. I did not know him personally, but having read the fine Note on Com Tarakeswar that Com CHV sent me at my request, I feel very privileged to be delivering this Lecture.
The first decade of the present century has seen developments that can truly be called dramatic in a long-term historical perspective. Two decades ago - ten years before the new millennium arrived - it appeared to many that the battle for a society free of exploitation and not based on the drive for private profit had been lost, with the decisive rise to unipolar global dominance of the USA, the dismemberment of the mighty Soviet Union and the restoration of capitalism in former USSR and the formerly socialist countries of Eastern Europe. Confident spokespersons for global capitalism even announced ‘the end of history’. At about the same time, our rulers in India began to proclaim loudly the virtues of globalization, liberalization and privatization (LPG, for short), and imposed upon the country, without even the legitimacy of a genuinely earned parliamentary majority, a series of so-called ‘economic reforms’ which are still being pursued two decades later despite having been rejected by the people of this country in every general election held from 1991.
Unfortunately for those who thought that capitalism had decisively won the battle for the hearts and minds of the people all over the world and that history had effectively been “ended”, the world today presents a rather different picture. Since the last quarter of 2007 when the US economy officially entered into a recession – recall, by the way, that this was several months before the collapse of Lehmann Brothers and the official recognition of what is somewhat misleadingly referred to as the ‘global financial crisis’ – there has been no end to the prolonged economic slump in the developed capitalist world. In fact, the emerging consensus is that the developed capitalist world will see what has been described as a ‘double-dip’ recession, meaning the re-emergence of a decline in output even before the recovery from the earlier crisis had run its course. In this context, it is also important to remember that economic recovery, in the sense of an increase in output following an earlier decline, does not imply, under capitalism, any recovery of employment. In other words, an economic recovery under capitalism can take place even while the rate of unemployment increases.
The issue today is, moreover, not only about the ‘Great Recession’, as spokespersons for capitalism describe it, not wanting to use the dreaded term ‘Great Depression’. It is also about the collapse of the ‘social contract’ that emerged in the late 1940s and the early 1950s in post second world war Europe between the social democratic labour movements and the ruling classes in the context of dramatic changes in the balance of class forces in the world. This development, in turn, presages a period of intensified class struggles in the advanced capitalist world.
To understand this point, a bit of history is needed. Just go back and rewind to the end of the second world war. At the end of that war, there were three new features of the world economy and polity. One, the major imperial powers, both those who won the war, like Britain and France, and those who lost the war like Germany, Japan and Italy, in short all the traditional imperial powers, were greatly weakened by World War II as well as the Great Depression that preceded the war and was only ended by it. The
Globalization is integral to capitalism. Capitalism means making profits. Making profits means making profits anywhere in the world, doing anything, be it running factories or educational or health care institutions or drug rings. Make profits anywhere or anyhow, that is capitalism. Capitalism does not say that profits must be made only by ethical means. So the essence of capitalism is pursuit of profit, which means it is inherently global and globalizing in character. It will always expand. It will always go to new places, look for new opportunities. So, from its birth, capitalism has been an expanding and globalizing mode of production. As Marx put it, ‘Capital is nothing but self-expansion of value’. Its entire history stands testimony to this aspect of capitalism.
In 1945-50, even while capitalism continued to spread across the world, the kind of hegemonic globalization that was in full flow earlier under the colonial dispensation, was briefly arrested. For the next 25 years, which was also the period of rapid capitalist growth, capitalist globalization had to co-exist with independent nation states, trying to develop their economies. Take the 1950s for example. A number of ex-colonies, including
The fact that, immediately after 1945-50, a large number of newly independent countries pursued State-led development, resulted also in expanded markets for advanced capitalism. Given the technological monopoly of the advanced capitalist countries, the developing countries had to source most of their manufacturing sector equipments and technologies from them. So, while decolonization and the rise of a Socialist camp strengthened the Nation States and thus arrested the onward march of hegemonic globalization under the direct aegis of Imperialism, over time, it also contributed to the rebuilding of advanced capitalist economies and promoted the further internationalization of capital.
At the end of the second world war, the new situation in
The ‘threat’ of socialism was no idle threat. There were two countries in
In the 1950s and the 1960s, the new global capitalist economy expanded. The global capitalist economy experienced a five percent per year rate of growth of GDP for more than two decades with hardly any interruption, a record unprecedented in the history of capitalism. The major capitalist economies did not experience any synchronized recession between 1945 and 1973. There was a mild recession in 1958, but it was confined to the
By the early-mid 70s, fundamental changes came about in the world economy. The rapid growth of the advanced capitalist economies from the mid 1940s to the mid 1970s had made the giant global corporations of world capitalism very strong. They had become powerful monopolists. They were able drive up prices when the economy approached high levels of output and employment. The trade unions in advanced capitalist countries had also become very strong. When monopolists raised prices, workers demanded higher wages. This price-wage spiral resulted in a state of inflation, with prices rising rapidly. So advanced capitalism had to deal with inflation from the early 1970s onwards. For the advanced capitalist economies, the 1970s turned out to be years of what has come to be characterized as “stagflation”, meaning the simultaneous existence of slow growth and rapid price rise, with unemployment rates creeping up.
In a capitalist economy, unemployment is not a problem but a solution. We need to understand this. For you and me, for working people, unemployment is a problem. For capitalism, unemployment is a partial solution, as long as it does not get so high as to cause social unrest. As long as unemployment exists, workers can be held in check. Trade unions can be held in check. Capitalism likes some amount of unemployment, not too much, because then there will be social revolt, but enough unemployment to keep the workers on their toes, afraid of the threat of unemployment. The threat of dismissal is the capitalist mechanism for disciplining the working class. Even during the heydays of Keynesian demand management, unemployment never fell to anywhere near zero.
In the 1970s, when three decades of economic expansion had led to low levels of unemployment, this meant a rise in the bargaining power of workers, and, with the huge rise in the power of monopolies on the one hand and an increase in the bargaining power of workers on the other, a period of inflation emerged. This was further exacerbated by the rise in the price of crude oil decreed by the Organization of Petroleum Exporting Countries (OPEC) in 1973 and again in 1978. A key objective of President Reagan when he became President of the
Reagan and Thatcher systematically set about destroying the workers’ bargaining power in order to tackle inflation without curtailing the power of capital. They actively promoted the rise of finance capital, propagated and implemented pro-rich economic policies lowering tax rates for the rich, citing in support the infamous ‘Laeffer Curve’, even while cutting back pro-poor welfare programmes.<!--[if !supportFootnotes]--><!--[endif]--> The economy was rapidly deregulated and State power was used to smash workers’ struggles. Thatcher smashed the mineworkers’ struggles in the
Over the long post war boom from 1945 to 1973, the trans-national corporations (TNCs) from the rich countries were able to accumulate enormous surpluses. The oil TNCs also made huge profits from the OPEC-imposed oil price increases in 1973-and 1978. The enormous cash reserves of TNCs and the money made by OPEC countries contributed to substantial increases in the liquidity in the international financial system. In addition, workers and employees in the advanced capitalist countries were saving money for life after retirement. These led to the rapid growth of pension and provident funds and mutual funds of various kinds. All of these together led, by the end of the 1970s, to a huge increase in liquidity in the global economy. These funds were naturally seeking profitable investment outlets. This was the start of the contemporary process of globalization. This process is essentially globalization of capital as finance. This is not globalization primarily of industry, of technology, of science, of production, though these also happen to varying extents. Moreover, it is a new kind of finance. Earlier, we had national finance. We had British capital, French capital, American Capital. What has emerged since the late 1970s, on the other hand, is international finance capital. Very rich people, big companies, in several countries, have invested in financial assets in other countries. Global finance capital today is international in character. Lenin had already explained in his classic work Imperialism the rise of finance capital in the global economy between 1870 and the beginning of the Great War in 1914. What we now have, from the 1980s, is the further evolution of finance capital to that of highly mobile and foot-loose international finance capital, its global mobility in real time having been made possible by important advances in technology, especially in the field of information and communication technology (ICT). While a large number of wealth holders may hold some part of this global finance capital, its ownership and control is in fact highly concentrated and centralized.
What does this new power - centralized global finance capital, personified by a bunch of huge global speculators in currency, share and money markets - do? It seeks to make as much money as possible in the shortest period of time. With the click of a computer’s mouse, it can move billions of dollars across financial markets around the world. It can operate round the clock since one or another financial market somewhere in the world is open at any time during the 24-hour day. It is not keen on long term investments in setting up productive facilities, undertaking production, finding markets, dealing with labour and host country governments and so on, It seeks to make quick profits through speculation in currency, stock and other financial markets. For this purpose, it wants to create uniform rules of the game across entire the world, so that it can enter into and exit from various markets located in different territories without let or hindrance and operate on the basis of minimum regulation by national governments.
How do you make money from money, without having to bother with the cumbersome process of production and marketing and so on? One simple and ancient way is to first lend the money to get interest. Second, you can put money in the stock market. Third, you can put money in the currency market, you can buy US dollars, sell them, buy German Marks, sell them, buy British Pounds and sell them and so on. So we can make money, from money, without bothering to employ many workers, run industries, face strikes, bribe governments, avoid all that, by simply putting your money into stock markets and currency markets. You can also lend money to governments by buying government securities, governments will tax the people and give you the money back with interest!
So, from the 1980s onwards, the main demand of global finance capital was financial deregulation. Not simply in the
At the level of economic ideology, once the Keynesian mechanism of demand management, of government keeping an economy at near full employment levels of output by undertaking the necessary expenditures, was discredited with the emergence of stagflation in the 1970s, the monetarist/neoliberal counter revolution to the Keynesian revolution of the 1940s and 1950s triumphed. It represented the interests of dominant finance capital with its insistence on minimal regulation and its abhorrence of inflation. It was declared that government policy would make no impact on the rate of unemployment. A so-called natural rate of unemployment was postulated. It was argued that this rate would prevail in the long run, and government trying it to reduce unemployment below this level by undertaking demand creation measures would only lead to inflation. This was the start of era of neo-liberalism. The change was dramatic. As late as 1971, Nixon, the then President of the
Neoliberalism cannot, however, solve the basic problem of capitalism as an economic system. I will spend a few minutes discussing the nature of capitalism as an economic system. What is the essence of capitalism? In capitalism, there are two contradictory forces. On the one hand, competition among capitalists drives capitalists to innovate and technologically advance, to mechanize, to automate, try and increase productivity from mechanization, so that they may lower their unit cost and sell at a marginally lower price in order to defeat their competitors and capture the market. This is one part. But more important, the class struggle between capital and labour is fundamental. What does it do? For the capitalist, the worker is a source of profit. But the worker is also a nuisance because, unlike the machine, the worker will go on strike. Capitalists naturally prefer machines, since they do not argue nor go on strike. No strikes, no problem. So capitalists will constantly try to eliminate labour, by mechanization or automation. Also, if they depend on the skills of the worker, then, they cannot rapidly adjust levels of output to serve changing markets, they cannot expand scales of production quickly. And if the production process is crucially dependent on the skills of the workers, the bargaining power of the workers will be high. So capitalists prefer to constantly make workers redundant. Class struggle between capital and labour as well as the competition among capitalists thus leads to the constant replacement of labour by machinery under capitalism. Capitalism constantly renders the skills of the working people redundant. It creates unskilled labour on mass scale. Before capitalism, we have heard of artisans, we heard of skilled agricultural workers, but not of a mass of unskilled labour. Unskilled labour on a mass scale is a product of capitalism.
It is true that capital needs the worker to generate surplus value and thereby profit. But each capitalist looks at the worker as an element of cost. ‘Try to get rid of the worker, mechanize, automate’ -this is the refrain of capital. This aspect of production relations under capitalism leads, via the processes of mechanization and application of micro-rationality to each element of the production process, to a sustained increase in productive forces. The productive power of the society advance rapidly. Technology improves all the time.
On the one hand, as seen above, the production relations of capitalism, the competition between capital and capital, class struggle between capital and labour compel a rapid growth of productive forces. But on the other hand, same capitalist relations of production do not allow the purchasing power of the masses to go up correspondingly. The capitalists want to limit wages, and to dismiss workers. The purchasing power of the mass of the population grows rather slowly under capitalism. There is thus a constant contradiction between the rapid growth of producing power and the much slower growth in consuming power in society. This periodically results in a crisis, in the inability of society to ensure that its consuming power matches its productive power. Periodic crises remain therefore an integral part of capitalism. No matter what the government does, it cannot forever prevent crises under capitalism. Crises-which also arise from the anarchic and unplanned character of capitalism and from other sources-will come and go. Capitalism does not collapse by itself merely because it is crisis-ridden. Those who share a vision of a more rational and just society will have to work for transcending capitalism. But capitalism will periodically, again and again, no matter what the state does, no matter what the government does, go into crisis. So business cycles consisting of phases of expansion, recession, depression, recovery and expansion again constitute an inevitable feature of capitalism as a system. It is part of the essential nature of capitalism as an economic system. Marx talked about it at great length in Capital. He talked about the anarchy of capitalism, about the crisis of under-consumption, about the tendency for the rate of profit to fall.
The current economic crisis of capitalism is thus not an aberration but an inevitable aspect of capitalism as an economic and social system. In a capitalist economy, demand is a constant problem. In other words, as Professor Prabhat Patnaik has pointed out, capitalism is a demand constrained system.<!--[if !supportFootnotes]--><!--[endif]--> Under capitalism, there is always a tension between rising productive power and slowly growing consuming power. There is of course a great deal of advertising and other efforts to promote consumerism, all that happens, but does not always work. It is not enough. So capitalism will frequently go into crisis.
The Current Crises of Globalization
Apart from the inherent tendency of capitalism as an economic system to go through business cycles involving both expansion and recession, there are features specific to the current crisis of global capitalism. I have used the term ‘crises of globalization’, not crisis in the singular, deliberately. The most visible crisis, especially highlighted by the media, is the continuing global recession. In recent weeks and months, the focus has been on the Eurozone developments, where what is being portrayed as a crisis brought about by the profligacy and ‘living beyond the means’ ways of the state and the people of specific European countries such as Greece, Spain, Italy, Ireland and Portugal, is really not a crisis of sovereign debt but of massive attacks by speculative finance that has managed to defeat all attempts to regulate it and the dominance of neoliberalism in both policy and ideology. While finance capital operates globally, and with minimal control by governments, given increasingly free movement of capital as finance across country borders, the nation-states, including powerful metropolitan states remain paralyzed and ineffective in responding to the crises repeatedly caused by financial speculators in country after country. After being initially pushed on the defensive in the wake of the crisis of 2008, finance capital in the
The inability of governments in the western world to address the serious economic crisis of Europe and the
But there is also the climate crisis, a classic outcome of an economic system driven by private profit that has no mechanism for rational management of natural resources. There is the emerging food crisis, where neoliberal policies across the globe have had the most devastating consequences, made much worse by the role of speculative finance and trade in global commodity markets. What the various kinds of crisis in the globalized capitalist world of today bring home is the utter untenability, from the long term standpoint of survival of the human race and civilization as we know it, of the profit-driven capitalist system.
The Rise of People’s Movements
We have so far focused on the crisis of contemporary globalization. It is also important to take note of some positive developments, which is hinted at by the first part of the title of my talk. The period since the onset of the current global crisis has seen increasing anger among ordinary people in the developed capitalist countries against the financial elite and the governments seen as pampering them. People’s protests have taken different forms. In recent months, a spectacular protest movement has emerged: The Occupy Movement. It began initially on September 17th in
The Occupy movement is of course not without weaknesses. Observers – even sympathetic ones – have pointed out that the movement lacks a coherent programme and a well-articulated understanding of the nature of the system. It has yet to work out a common understanding of the role of the State as well as various social classes in the prevailing economic system. It does not have a set of demands around which actions can be designed and put into effect. From the viewpoint of activists in the third world, the Occupy movement does not grasp the centrality of imperialism in the global system. However, notwithstanding the weaknesses as identified by various observers, the movement has shown great imagination and creativity in its forms and des of action. It has shown resilience in the face of police action and in the context of having to keep it alive through a very cold winter season. There is no reason to assume that the movement will not be able to address the various weaknesses identified. As of now, one would have to admit that the movement has been a source of great inspiration to people all over the world who are fighting not just neoliberalism, but imperialist hegemony and the depredations of finance capital.
Given the scope and the rapidity of expansion of the OWS/Occupy movement, one would have to say that the print and electronic media, even in the Western world where the Movement has carried out most of its activities, have given it much less coverage than was warranted. Of course, they initially tried to ignore it or lampoon it, but had to change tactics after it became clear that the movement was gaining widespread popular support. Print and electronic media in India, with some honourable exceptions, gave the OWS/Occupy minimal coverage, but that should not cause any surprise, given the servility of large sections of the Indian media to corporate power, domestic and foreign.
While OWS/Occupy has at least attracted some media coverage, the rise of militant working class actions in Europe, which is potentially of great significance at this turning point in the global situation, received even less. For more than two years now, the Greek working class, under the militant leadership of the Communist Party of Greece, has battled the attempts of the Greek government and international finance capital to impose huge burdens on the working people of
Elsewhere in the world, as well, there are important changes under way. The frequency with which Western powers have been invading sovereign countries, ostensibly on ‘humanitarian’ grounds (in their own, selective ways, of course), sometimes using the UN as a fig leaf for legitimacy and at other times not even bothering with such ‘minor’ matters, is of course a disturbing negative development directly correlated with the collapse of the USSR and the rise of a unipolar world under US dominance. However, it is also true that across the world, people’s movements for democratic rights and for better conditions of life and livelihood have been on the rise. The fact that the major capitalist countries have entered a period of economic stagnation while other countries such as
Taking all these developments into account, it seems fair to say that we are living through a period of severe crisis of capitalist globalization - multiple crises, as we have noted earlier – and that the world is at a turning point. The contrast in intellectual climate, between 1991 and 2011, in the developed capitalist world and among neoliberals all over the world, could not be sharper. The capitalist ‘end-of-history’ triumphalism of 1991 has been replaced by a deep pessimism over the future of capitalism as an economic and political system. The recent results of the Russian elections suggest that winds of change are blowing in that country as well. Surely, it is up to progressive forces all over the world to seize the opportunities that the current world situation provides for the advance of democracy and social progress. Translated to the Indian context, this means finding ways and means to mobilize ever broader sections of working people against neoliberal policies and corrupt regimes, and for an alternative set of people-centered economic policies. That will be the most fitting tribute we can pay to Comrade Tarakeswar Chakraborti who dedicated his entire adult life to the struggle for the cause of working people and for democracy and social progress.
<!--[if !supportFootnotes]--><!--[endif]--> It is interesting that post 1991, imperialism systematically dismembered
<!--[if !supportFootnotes]--><!--[endif]--> The Laeffer curve was proposed by an obscure economist called Laeffer and purported to show that lower tax rates lead to increased tax revenue by improving tax compliance. The empirical basis for such a claim is non-existent.
<!--[if !supportFootnotes]--><!--[endif]--> P.Patnaik, The value of Money, Tulika, 2008
<!--[if !supportFootnotes]--><!--[endif]--> This is an important contrast with the situation in India where a major segment of the middle class is still supportive of neoliberal policies as it believes them to be beneficial.
<!--[if !supportFootnotes]--><!--[endif]--> For a lucid exposition of the Eurozone crisis, see the excellent article by C.P.Chandrasekhar entitled ‘End of Europe’ on the website http://www.networkideas.org/news/nov2011/news30_Europe.htm