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.