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The
standard argument for the proposition that a capitalist
class is at all socially necessary is that this class
undertakes productive investment: it thereby causes
the development of the productive forces, which is a
condition for social progress. The social legitimacy
of capitalism thus lies in the fact that capitalists
undertake investment. The view that capitalists may
operate enterprises better, even if this were true,
will not in itself justify their social existence, if
the surplus value produced under such better operation
was fully or largely consumed. The better running of
enterprises by capitalists
will then have relevance only for
their own private consumption, but none for society
as a whole. It is the fact that they invest the bulk
of the surplus value produced under their supervision
which provides the basis for claiming that they have
social relevance, that they play a role in social advance.
True, as Marx had shown, this investment on their part
is not a matter of volition. It is imposed on them by
the impersonal and coercive logic of capitalism. Nonetheless
it is what underlies the socially positive role claimed
for them. In short, when capitalists are undertaking
investment, they are simply doing what they are supposed
to do, what they claim is their basic raison d'etre;
if they did not do so, they would cease to have any
social legitimacy.
In the era of neo-liberalism however we witness a strange
spectacle: capitalists demand a social bribe even for
undertaking investment. Governments have to offer them
inducements in order to elicit investment from them,
in the form of guaranteed rates of return, ''viability
gap financing'' (which refers to the amount of grant
made available to them by the government under the ''public-private
partnership''), tax exemptions, free land for their
investment projects, opportunities for making capital
gains through land speculation in the Special Economic
Zones, and immunity from labour laws in such zones.
Demands have been made that there should be zero taxation
in such zones, and now there are even demands that manufacturing
as a whole should be exempted from paying any corporate
income tax. This is over and above the abolition of
the long-term capital gains tax which exempts capitalists
from parting with even an iota of their gains from stock-market
speculations, and whose proclaimed objective is to keep
the boom going, ostensibly to stimulate investment.
How is it that the capitalists now feel emboldened to
demand a social bribe, and an increasing one at that,
even to carry out the basic task which they have always
claimed is their essential social role? Two factors
have contributed to this change, both characteristic
of the neo-liberal era. The first is the systematic,
deliberate, and entirely unjustified vilification of
the public sector, which was seen earlier as providing
an alternative agency to the capitalists. Imperialist
agencies had always indulged in such vilification from
the very beginning of the era of de-colonization when
a host of newly-liberated third world countries, inspired
by the socialist example, had sought to build up the
public sector as a bulwark against metropolitan capital;
the domestic monopolists have joined this process more
recently. And the entire media controlled by both, imperialism
and the domestic monopolists, have gone hammer and tongues
attacking the public sector, until the very term has
come to be perceived as a dirty word. With the public
sector discredited, there appears no alternative to
the capitalists, and the pound of flesh they demand
can be easily passed off as being socially necessary.
The second factor is the institutionalization of a free-for-all,
where state governments vie with one another for attracting
private investment, and the capitalists, both domestic
and foreign, are the beneficiaries of this competitive
struggle among them, with each state government outdoing
the others in offering better terms.
Let us consider each of these factors. There can be
scarcely any doubt that the public sector played a key
role in India not only in building the productive base
of the economy, but also in the achievement of whatever
technological self-reliance we have. Even in the matter
of efficiency of functioning, once we define the term
efficiency carefully and refrain from the absurdity
of treating it as being synonymous with profitability
(which depends on a host of factors like pricing policy
and product-mix, with regard to which the public enterprises
have had to act under constraints owing to their social
obligations), the public sector comes off at least as
well as the private sector. Moreover, even in spheres
where it has functioned comparatively poorly, the reason
has often had to do with the deliberate neglect, and
even subversion, by a government bent upon pursuing
neo-liberal policies than with any intrinsic limitations
of the public sector. And yet there has been a veritable
campaign against this sector, largely based on intellectual
sleights-of-hand and untruths. An example of the kind
of intellectual sleight-of-hand that passes for argument
in this realm can be given from the supposedly intellectually
''respectable'' Approach Paper of the Planning Commission
for the Eleventh Plan.
The Paper talks about the massive investment requirements
for infrastructure needed in the Plan and then points
out that resources on this scale cannot obviously be
generated within the public sector. Hence the private
sector must do the bulk of such investment, for which
it must be enticed in various ways through social ''bribes''.
This argument appears so reasonable, and indeed so obvious,
that it may pass unnoticed. But a careful look will
show that when the Paper talks about the inability of
the public sector to finance such investments, it is
referring to budgetary and other internal resources.
But the private firms that are required to do the job
instead are not supposed to be using their internal
resources for it; they would be mobilizing finance from
various sources. Why cannot the public sector do the
same? The Approach Paper in other words uses the term
''resources'' to mean ''savings'' in the case of the
public sector, and to mean ''finance'' in the case of
the private sector, with a view to undermining the role
of the public sector!
If the undermining of the public sector has given capitalists
the upper hand, the whittling down of the bargaining
strength of the State has only reinforced this process.
Since capital has acquired global mobility, a nation
State interested in having some investment within its
shores has to compete with other nation States for attracting
capital. Thus, if Indonesia, or Pakistan, or Poland,
offers better terms to capital, then India willy-nilly
has to follow suit. Even more pertinently, within India
itself the same story gets repeated across the various
state governments. The Volkswagen Company for instance
was simultaneously negotiating terms with the Tamilnadu,
Andhra Pradesh and Maharashtra governments for setting
up an automobile plant. It finally went where it got
the best terms. And this is what all the capitalists
are doing.
One obvious implication of this is for state finances.
If tax concessions are offered then the state government's
revenue suffers. If land purchased from peasants has
to be offered free to the capitalists then the state
is burdened with additional expenditure. The same happens
if a whole range of complementary facilities have to
be made available for the project from public funds.
What all this means is that the amount of funds available
with state governments for expenditure on public health,
public education, sanitation, and rural infrastructure
dwindles. Consequently, either these sectors are neglected
and the potential users, including especially the poor,
are driven to make use of private facilities in health,
education etc., and to pay through their noses for doing
so; or the state governments perforce turn to imperialist
agencies like the DFID, ADB, JBIC, and the World Bank,
who come with ''aid-packages'' for these sectors. In
the latter case however there are invariably ''conditionalities'',
like ''user charges'' and the removal of all existing
legislation that defends the interests of the weaker
sections, which also hurt the poor. (These explicit,
visible ''conditionalities'' are in addition to the
implicit, invisible and potentially even more dangerous
process of imperialist penetration into the bureaucracy
and state administration that is facilitated through
the acceptance of such ''aid packages''). The social
''bribe'' demanded and extracted by the capitalists
therefore invariably impinges on the poor and the working
masses.
There is something bizarre about this phenomenon. Historically,
booms under capitalism have been associated with greater,
and not lesser, expenditure by the State in other directions.
That is because the State shares in the boom, and its
revenues and expenditures increase as a consequence.
But we are having a boom at the moment which is associated
with a reduced capacity of the State to spend in other
directions. Since the boom itself reduces the share
of the workers in output, does not give rise to larger
employment, and is associated with a crisis of petty
production, the fact of its also reducing the capacity
of the State to spend in other directions, and hence
constricting the availability of public education and
health etc., has enormous significance. But this is
what booms in the era of globalized finance look like.
The process of capitalists extracting social ''bribes''
moreover has no limits. Since the competitive struggle
among state governments progressively worsens their
fiscal situation, making it progressively more difficult
for them to use public investment as a counterweight
to the capitalists, the magnitude of social ''bribes''
demanded and actually extracted by the capitalists will
only increase over time.
A pointer towards this tendency is the demand made in
certain circles that local self-governing institutions
should also be given the autonomy to borrow and to negotiate
investment projects with capitalists, including multinational
banks and corporations. This will further increase the
mismatch in bargaining strength between the capitalists
and the state organ engaged in negotiating with them,
and will further intensify the competitive struggle
among the aspirants for investment, namely the tinier,
more fragmented and more numerous local self-governing
institutions. This can have only one possible result
which is to raise the scale of social ''bribes'' for
capitalists' investment. This increase in the scale
of social ''bribes'' is an important feature of neo-liberalism.
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