Last Saturday, Prime Minister Manmohan Singh met the advisers and managers of the economy. The concern and anxiety over soaring inflation and sharply declining industrial growth was the agenda. This comes in the backdrop of global anti-‘Wall Street’ protests that have reportedly spread to 1,500 cities. The palpable anger of the people against the deprivations imposed upon them since the financial meltdown of the ‘Big Five’ on Wall Street in New York in 2008 have now reached unprecedented levels of unemployment and declining livelihood standards. The rallying point was a focus against ‘corporate greed’ as the genesis of their travails.
It is, therefore, not surprising to see screaming banners calling for a ‘class war’. Since the global recession began, the sale of Karl Marx’s Das Kapital has reportedly soared. People will do well to read the concluding chapter of Volume 1: “Capital comes dripping from head to foot, from every pore, with blood and dirt.” Marx buttresses this with a quote, in a footnote, from a worker TJ Dunning: “With adequate profit, capital is very bold. A certain 10 per cent will ensure its employment anywhere; 20 per cent will produce eagerness; 50 per cent, positive audacity; 100 per cent will make it ready to trample on all human laws; 300 per cent and there is not a crime at which it will scruple, nor a risk it will run, even to the chance of its owner being hanged.” It is this pathological drive to maximise profits at any cost — the inherent character of the capitalist system and not the individual greed of some or weakness of regulatory mechanisms — that is the root cause for the present crisis.
Greed is but a euphemism for profit maximisation, the raison d’etre of the capitalist system. The myth that greed is something alien to capitalism and, hence, can be kept under check is, has once again, exploded. Capitalism has greed as its inseparable companion. It is the system and not the avaricious attributes of individual capitalists that is the culprit.
Another consciously engendered myth that the State under capitalism is a benign neutral entity has been shattered. True to its character, the capitalist State intervened to bail out those very financial giants who, in the first place, caused the current crisis. The Special Inspector General for the US government’s financial bail-out programmes says, “Since the onset of the financial crisis in 2007, the federal government, through many agencies, has implemented dozens of programmes that are broadly designed to support the economy and the financial system. The total potential federal government support could reach upto $23.7 trillion.” Compare this with the US’s GDP that is just over $14 trillion. The US Treasury spokesman, however, denies the veracity of this figure.
Similarly, there have been large-scale borrowings by the governments of several developed countries to finance such bailouts. Corporate insolvencies have, thus, been converted into sovereign insolvencies. In order to meet this debt burden, the European Union is today in convulsions with governments like Greece — now with Spain likely to follow — adopting severe ‘austerity’ measures: drastic cuts in social benefits and expenditures for the working people. General strikes and protests have become the order of the day.
On the other hand, the Bank of America, having now acquired the ‘bankrupt’ Merrill Lynch has earned $3.7 billion in the first half of 2011. Goldman Sachs set aside $5.23 billion as bonuses for its executives.
In this context, the Indian State pursuing the trajectory of neo-liberal reforms is, naturally, concerned as reflected in the prime minister’s Saturday confabulations. While headline inflation stood at 9.72 % in September, food, fuel and consumer goods grew costlier than this. On the other hand, the index of industrial production fell to a dismal 4.1%. Global recession has seen exports falling from 82 to 36% between July-September. Imports fell likewise indicating a sluggish domestic demand. This has widened our trade deficit to an unprecedented $73.5 billion.
Investors are complaining that the Reserve Bank of India’s measures to control inflation have pushed the cost of credit, leading, in turn, to declining investment. The presumption is that if cost of capital is cheap, then investment will rise leading to higher growth.
The fallacy lies in the fact that what is produced through higher investments needs to be sold, which requires purchasing power in the hands of the people. With this drastically declining globally and in our country, the neo-liberal prescription simply cannot work. It is only the veil to camouflage the earning of higher speculative profits utilising cheap credit.
Keynesian State intervention was one possible way in which such naked pursuit of profit maximisation could have been muted. Far from being the palliative to providing relief to the people, Keynesianism was structurally designed to stabilise the capitalist system from its inherent tendencies of plunging into recurrent crises. Under the neo-liberal dispensation, however, State intervention comes to the rescue of corporates at the expense of the people further destabilising the system.
In the Indian context, our economic fundamentals can only be strengthened and stabilised when interventions are designed to expand the purchasing power of our people, thus, enlarging aggregate domestic demand. This, in turn, would set in motion a trajectory of sustainable growth.
The PM and his advisers could do well to reconsider and reverse the trend of providing over R5 lakh crore as tax concessions to the rich, as revealed in the last two Budget documents. If, instead, these monies were invested in public works projects, this would have built the much-needed infrastructure while generating large-scale employment, thus, vastly enlarging people’s purchasing power.
The choice can still be made. The UPA 2 government must be made to make this choice through mounting popular pressure.
Sitaram Yechury is CPI(M) Politburo member and Rajya Sabha MP
The views expressed by the author are personal