Terms of Trade| Opposition should not wait for (the) Godot of economic doom
Recent weeks have been tumultuous for the Indian economy. On May 4, the Monetary Policy Committee of Reserve Bank of India announced an unscheduled interest rate hike, pre-empting higher upside movement in inflation than it had seen in its April 2022 meeting.
The Consumer Price Index (CPI) grew at 7.79% in April 2022, significantly higher than its 6.95% reading in March 2022. On May 7, the government hiked the prices of cooking gas cylinders by ₹50, taking the price over R 1,000 in many parts of the country. On May 9, the rupee fell to a new low of ₹77.44 against the US dollar.
The Congress, the main Opposition party in the country, launched a scathing attack on the government on Twitter, posting old clips of Prime Minister Narendra Modi’s pre-2014 speeches where he would attack the United Progressive Alliance (UPA) government over a fall in the value of the rupee. It also put out tweets berating the general economic situation in the country. Statements of other Opposition parties also echoed similar sentiments.
Even as newsrooms were processing these developments, on May 9, news came from Sri Lanka that Prime Minister Mahinda Rajapaksa (his brother Gotabaya is the president of the country) had resigned from office, after protesters retaliated in a big way against violent suppression by both State and pro-regime private actors. Sri Lanka has been battling a severe economic crisis, which is the result of years of mismanagement, made worse by the pandemic’s shock to tourism earnings and the pain of surge in international commodity prices, especially that of food, fuel and fertilisers.
An economic crisis forcing people who were otherwise happy to support a majoritarian government on ethnic lines has triggered a similar question – even though it is not being expressed overtly – in the minds of many opponents of the Bharatiya Janata Party (BJP) in India. Will the current government’s policies lead to a big economic crisis for India and will this lead to a large-scale political revolt, especially within the Hindu vote bank of the Bharatiya Janata Party(BJP)?
Such fantasies are best described by using the metaphor of Irish playwright Samuel Beckett’s 1953 play Waiting for Godot, where two characters spend their time waiting for the character called Godot, who never arrives. The Godot, in India’s political landscape could well be described as the economic crisis, which it is believed will lead to a widespread revolt.
The reason this column is using this metaphor is not because the current government’s policies are guaranteed to bring in economic prosperity for most Indians. In fact, the economic track record of the government has been quite underwhelming so far, and this includes even the pre-pandemic period. However, whether or not the Indian economy will sink into a large crisis is a question that is also contingent on what Marxists describe as the nature of a country’s domestic capitalist class. A brief digression is useful before taking this discussion forward.
Among the most fundamental ideological differences between various streams of communist parties in India (Maoists included) has been about the nature of the domestic capitalist class or the bourgeoisie in India. The ultra-left Maoist view has always seen it as being “comprador” in nature, while the most “revisionist” take on it has described as it nationalist and progressive, so much so that at one point of time the Congress was seen as bringing socialism in India by a section of the Communist Party of India (CPI) leadership. This was an important theoretical consideration in the CPI supporting the Emergency in 1975.
The term comprador itself was first used in the Chinese context in the late 19th century. For example, Jonathan D Spence’s authoritative work The Search for Modern China uses it while discussing The Reform Movement of 1898 to describe Chinese merchant intermediaries who would collaborate with western traders.
The term would later be used to describe the class of intermediary capitalists whose material interests were primarily located in trading with foreign capital rather than developing a domestic production base. “In economically backward and semi-colonial China the landlord class and the comprador class are wholly appendages of the international bourgeoisie, depending upon imperialism for their survival and growth”, Mao would write in his 1926 Analysis of The Classes in Chinese Society.
It is not very difficult to understand why a comprador capitalist class was dominant in colonised countries in the early 20th century. With domestic industry having been destroyed through policies such as forced imports and drain of wealth by colonial masters, there was little in terms of commercial opportunities rather than situating oneself as the bottom of the food chain of colonial trade. Because the colonial trade master’s material interest was always at odds with that of the domestic farmer or artisan (pay as little as possible to sell at as high a price at possible), the comprador capitalist was equally pervasive for the colonised countries. This fact was valid even after they became independent or made revolutions (as in the case of China).
There are many examples of rulers backed by their comprador capitalist allies who have brought their countries to economic ruin. Africa has seen many dictators who exploited mining booms to make their private fortunes without doing much to boost the domestic economy and literally took off in aeroplanes full of cash and gold when the boom ended and the political situation erupted.
Is the Indian bourgeoisie comprador in nature? One could give the benefit of doubt to a Maoist ideologue who has lived in a jungle for decades and is fighting a multinational mining company and its cronies for claiming that this is still the case. However, anyone who has a more holistic view of the Indian economy cannot but accept that many Indian capitalists are world leaders in their spheres of activity.
One can give many examples: Reliance in petrochemicals; Infosys, TCS and Wipro in IT services; Mittals, Tatas and Jindals in steel making are a few of them.
How is this relevant to the discussion about India’s future economic prospects? The fact that leaders of the Indian capitalist class are firmly invested in the domestic production base also means that they will do all they can to prevail upon the regime to ensure that the economy’s production capacity and the factors that help in keeping with competitive in the world economy (this is where macroeconomic stability comes into play) are preserved. To put it simply, any government which presides over the unravelling of macroeconomic stability will see a withdrawal of support, perhaps even backlash, from the captains of domestic industry.
It is concerns such as these which explain the bipartisan consensus around fiscal consolidation and inflation targeting in India and the sudden break between big business and the second UPA government after the macroeconomic situation suddenly deteriorated in the early 2010s. Concerns around macroeconomic stability were the biggest reason the current government did not announce a big fiscal stimulus after the Covid-19 pandemic.
To be sure, macroeconomic stability and egalitarian growth need not be the same thing. And this brings up the second important political economy question.
Given the fact that elections in India are still free and fair – even if one were to accept the criticism that the ruling BJP has been misusing prosecution agencies to fix Opposition leaders and has a large advantage on the political finance front, there is little evidence to show that voting process per se has been compromised – there is good reason to believe that the BJP has to factor in the potential anger of the mass of voters, which comes from economic misery on account of factors such as low growth, high unemployment and inflation. All of them are factors to reckon with today.
In fact, there is reasonable ground to argue that the basic challenge before successive governments in India has been to maintain the proverbial fine balance between material interests of the domestic big business and the pressing concerns of the people at large. The last instalment of this column had tried to explain the growing culture of offering freebies to win elections in the context of efforts to bypass the inherent class contradiction in India’s political economy. An earlier instalment of the column had underlined the difficulty facing trade union movements in the country, which, had it been stronger would have made it more difficult for the state to maintain a semblance of balance between capitalists and workers.
But what about the lack of widespread anger among the farmers of the country, who still account for more than 40% of India’s workforce? Why did India not see an agrarian revolution as the Maoists believed it would?
When peasant violence first erupted in the now famous Naxalbari village of North Bengal in 1967 – it would sow the seeds of what later became of the Naxalite or Maoist movement in India – the People’s Daily; the mouthpiece of the Communist Party of China, reported the events with much enthusiasm and home.
“A peal of spring thunder has crashed over the land of India. Revolutionary peasants in the Darjeeling area have risen in rebellion...The spark in Darjeeling will start a prairie fire and will certainly set the vast expanses of India ablaze”, the Chinese Communist Party said in a July 1967 article published in its mouthpiece. Fifty-five years and many splits (and unifications) later, the Maoists find themselves confined and cornered in what are deeply forested pockets in central India while the so-called comprador bourgeoisie they sought to eliminate with overwhelming support from the masses have made immense progress during this period.
Why have the Indian peasants not risen in rebellion, even though their material conditions continue to be abysmal? Average per capita income from cultivation was ₹27 per day, an HT analysis of the 2018-19 Situation Assessment Survey of agricultural households, had shown.
This is indeed among the most perplexing and profound political economy questions in India. Given its importance, the question has attracted some of the best minds in social sciences and political economy, both in India and abroad. From the Mode of Production debate in the 1970s and 1980s to polemics on the validity of the agrarian question itself in later decades, political economy discourse is full of insightful writings and debates on this issue.
As the Indian economy has transformed, these debates need to be updated and revisited as well. It is here that a doctoral research of Srishti Yadav; it was carried at the New School for Social Research in New York, offers important insights. Yadav’s paper <i>Caste, diversification, and the contemporary agrarian question in India: A field perspective</i> was published earlier this month in the Journal of Agrarian Change and gives a useful summary of her research, which is based on the marriage of theoretical debates on the agrarian question with a field study of a village in the Rewari district of Haryana in 2018.
The paper shows that households who have been able to diversify into non-agricultural professions and increase their incomes (they are mostly from upper castes or Other Backward Classes or OBCs) are unlikely to have any incentive to invest in agriculture (even though they still practice it). Taking care of farm productivity is mostly the preserve of those households who still draw most of their incomes from farming (and hence lead a life of relative deprivation).
Those who do not own much land (mostly Dalits), while they are unable to achieve comparable upward mobility into quality employment or business activities like the dominant castes, are still better off in terms of the fact that they are free to refuse engagement as bonded workers which their ancestors had to suffer in the not so distant feudal past. They have also seen a rise in their welfare entitlements such as free food and occasional cash transfers which have allowed them to bid up their reservation wages (below which they refuse to work).
While large landowners dream of a different occupation for their children, they resent similar upward mobility for those at the bottom of the socio-economic hierarchy, which increases their labour cost directly or indirectly (through labour saving investment). The paper also shows that migrant workers have entered the fray as a cheaper substitute for local farm labourers.
Yadav’s findings question some established (and also debated) notions such as Indian agriculture being completely crisis ridden where farmers are being forced out en masse into non-farm manual work or large landowners still controlling farming or large landownership being the sole preserve of the upper castes (Yadavs, an OBC group, happened to the biggest landowners in the village studied in the paper).
While the overall income scenario from farming was quite underwhelming, Yadav’s research notes “rupturing class solidarities” amidst “conjugated oppression” via which “caste, tribe, region, and gender shape how sections of the working class ally with dominant classes and castes to preserve their pre-existing privileges from those below them in the social hierarchy”. In short there is no simmering socio-economic landscape despite deprivation.
The discussion so far sums up the political economy landscape in India. The regime’s biggest quid pro quo to the domestic capitalist leaders is its promise of zealously protecting macroeconomic stability. That the opportunities big business might have lost because of low growth are being compensated in a way by what many economists have described by forced formalisation of the economy is only an icing on the cake.
On the other hand, the class anger which is stymied in segmented labour markets and caste based divisions make sure that India is extremely unlikely to have a situation where an economic meltdown or even prolonged misery is followed by a large and possibly violent insurrection.
Just one example is enough to make this case. India will most likely ban wheat exports in a few days as reports of domestic production being lower than expected continue to pour in. Doing this will hurt both big traders and big farmers momentarily, but it will protect everyone from a much worse scenario of food shortages or inflation. And both sides are likely to accept the decision without much ado when it is made.
The Opposition, in the meantime will do well to look at possible fault lines it can exploit to win back political support rather than hope for economic doomsday which will lead to a mass rebellion.
At least one Opposition leader saw the point in taking the contradiction route rather than seek vindication when the rupee fell to an all-time low on May 9. “Modi ji, you used to criticise Manmohan ji when rupee fell. Now rupee is at its lowest ever value. But I won't criticise you blindly. A falling rupee is good for exports provided we support exporters with capital and help create jobs. Focus on managing our economy, not media headlines,” Congress leader Rahul Gandhi said in a tweet. It remains to be seen whether the upcoming Chintan Shivir (brainstorming session) of the Congress takes this line of thinking forward.
The views expressed are personal