August 8, 2012
August 8, 2012
The ‘Financial Aristocracy’ and Government à bon marché in India
[This article was first published in the July-August 2012 issue of Analytical Monthly Review.]
My voice is a crime,
My thoughts anarchy,
I do not sing to their tunes,
I do not carry them on my shoulders.
– Cherabandaraju, who was the lead accused in a “conspiracy case” involving poets and their poetry.
It’s been two decades and a year since India’s elite embraced neo-liberalism. Money –– the standard of all things, the measure of one’s worth –– now has very many more avenues for profitable deployment than it had in early 1991. Indeed, India’s moneybags now almost have de facto the freedom to accumulate wealth by any and all available means. “Corruption” has hit the roof and “civil society”, with the upper middle class at its wheel, is morally outraged, dead set against the political representatives of the “immoral” state, though not against the most powerful section of capital, the “financial aristocracy”, which effectively calls the shots. Various estimates of the “magnitude of black money generated in the country” and “the unaccounted wealth stashed abroad” in tax havens and offshore financial centres have been doing the rounds. The din and the babble over these matters in Parliament wouldn’t subside, so the government commissioned a White Paper (WP) on Black Money.
In his Foreword to the WP the Union Finance Minister Pranab Mukherjee (as we go to press, he’s been kicked upstairs, soon to occupy Rashtrapati Bhavan, the palatial official home of the President of the Union) writes that “there is much that we could do, both individually and collectively, to strengthen the moral fibre of our society”. Surely few would take seriously such preaching/moralising from one of the leading political representatives of a system that is rotten to the core. But how would one view –– what one could reasonably presume to be an intention on the part of the government, since it finds a prominent place in the WP –– the proposal of a scheme for voluntary disclosure of black money stashed overseas with a view to bringing it back as “white” money? Surely, if the finance minister has any “moral fibre”, the lump sum income tax dues along with interest and a penalty would have to be paid, but the quid pro quo is immunity from prosecution.
The honourable minister surely knows that the monies in question may not be merely part of income accruing from legal activity that had not been declared for tax purposes, but also those from misappropriation of assets/properties, insider trading, commissions and kickbacks, etc, as also monies from illegal activities like drug trafficking. Surely Mukherjee knows that not only does such a scheme totally disregard the principles of propriety and equity, but it will also contribute to further damaging the “moral fibre of our society” which he, no doubt, wants to strengthen! If the government had any “moral fibre” it would heed the plea of common folk to confiscate the illegal wealth of the holders of black money. Indeed, those common folk also expect that any government with “moral fibre” would also take measures to seize and impound not only the black money in Swiss banks but the entire global wealth portfolio of black money-holding residents.
Now, a white paper –– if we correctly understand what ought to be the intent of such an exercise –– should make a contribution to finding a solution to the problem. It should signify the intent of the government to deal with the problem of black money. And, at the very least, it ought to educate its readers on the subject of black money. But the WP is bereft of conceptual clarity. How then would the Ministry of Finance even make a reasonable start in estimating the size of India’s black economy?
Growing Black Economy
In a remarkable book entitled The Black Economy of India (Penguin Books, New Delhi, 1999), its author, Arun Kumar estimated the size of India’s black economy as approximately 40% of its official (“white”) gross domestic product (GDP) for the financial year 1995-96. Earlier, one of the Cambridge’s foremost economists, Nicholas Kaldor had estimated the size of India’s black economy as 2-3% of its white GDP for the financial year 1955-56, and a Direct Taxes Enquiry Committee (Wanchoo Committee) had arrived at a figure of 7% of white GDP for the late 1960s.
From Kaldor’s estimate of 2-3% of official GDP for 1955-56 to Arun Kumar’s estimate of 40% of white GDP for 1995-96, it’s a 16-fold increase in the relative size of the black economy. In our understanding, this is the result of the increasing influence of a faction of the big bourgeoisie which has been slowly but steadily organising itself for the private appropriation of the country’s national wealth. It must be emphasised that as per Kumar’s estimates for 1995-96, around four-fifths of India’s black gross domestic income is generated through legal economic activity, and overwhelmingly this tends to be property incomes rather than incomes derived from work. And, it must be remembered that these estimates exclude capital gains. What this suggests is that as the proportion of the black economy in India’s official GDP has increased, so has the class distribution of income changed more and more in favour of capital.
Let us illustrate one of the means by which black income is generated, mentioned in the WP in Section 1.3.11 under the heading, “under-reporting of production”. Again we draw on Arun Kumar’s work. Our example pertains to the evasion of indirect taxes through non-declaration of part of total output in the production of say liquor (alcoholic beverages). Since all costs of production and other costs are accounted for in the declared part of total output, the sales revenue from the undeclared part of output is an off-income-statement profit on which no income taxes have to be paid, and on which no dividend has to be paid to the shareholders. Note that since the undeclared output is also sold at the same price as the declared output, what would have been excise duty, sales tax and octroi to be collected and handed over to government, is now privately appropriated as profit. Such under-reporting of production has been and still is (reportedly) one of the most profitable avenues for the “industrialists”, politicians and government officials involved, but it is mostly off-limits for journalists. Instead, what makes good copy are the yacht parties of a liquor-cum-airline billionaire, his pictures at Formula One racing and IPL (Indian Premier League) cricket spectacles as a prominent team-owner.
Kumar’s analysis suggests that growing illegality within a triad composed of powerful sections of the polity, the bureaucracy, the police and the judiciary (the latter three taken together), and business is the cause of the trend increase in the size of the black economy. Further, the concurrent increases in the relative share of the tertiary sector (very high for an economy with such a low per capita GDP) and the share of property incomes in gross domestic income are interlinked with the increasing share of the black economy in total gross domestic income. In the example that we outlined above, the generation of black income in the alcoholic beverages industry would not be possible without the connivance of the other two institutions of the triad, the polity and the bureaucracy, the police and the judiciary (the latter three taken together), and payments made to them.
That Which Moves the Markets and the Economy
What about the footprints of the black money stashed abroad that is now being retraced to make the money reappear white? Leaving aside the occasional emission of hot air by an L K Advani or a Narendra Modi of the Hindu Nationalists or a Baba Ramdev of Bharatiya Morality, any serious consideration of “bringing back the black money stashed abroad” would be frowned upon by those who advocate “full capital account convertibility of the rupee”. In the WP, the government takes pride in the fact that during the course of its tenure in office, between 2006 and 2010, total liabilities towards (presumably, resident) Indians in Swiss banks came down from Rs 23,373 crore to Rs 9,295 crore. But surely officials in the Department of Revenue, Central Board of Direct Taxes, know that high net worth individuals and companies appoint portfolio managers to manage their funds parked overseas and that these funds are “invested” in a portfolio of assets, financial and non-financial, of which bank deposits, and such like, is just one type of asset in their diversified portfolios. And, in today’s financial world, deposits in Swiss banks can be moved in quick time into other assets in other tax havens and offshore financial centres, perhaps even brought back for another round of business in India.
The WP mentions such means of return flow of capital in the form of “foreign direct investment through beneficial tax jurisdictions, mobilisation of capital by Indian companies through global depository receipts, and investment in Indian stock markets through participatory notes [PNs]” (Section 2.4.9). The latter, PNs – an instrument which permits a foreign investor to invest in Indian securities but remain anonymous to Indian regulators – an easy route to money laundering, have still been allowed, and the WP doesn’t even recommend doing away with them. It also doesn’t disapprove of the preferential routing of foreign investment through Mauritius and Singapore even though this route is used by foreign investors to avoid payment of taxes and also to conceal the identity of the ultimate investors from the regulatory authority, even though the latter knows very well that resident Indians are using this route to invest in their own companies (round tripping).
In the period since July 1991, the stock market –– with its relatively small market capitalisation and a limited number of shares that are traded –– has been extraordinarily volatile. From 2003-04 to 2007-08, net capital inflows (in search of better yields) far in excess of the current account deficit on the balance of payments took the markets to a new high, triggering the “wealth effect”, the expansion of liquidity and, in turn, consumer credit, the Le Grande Bouffe (self-indulgent, elite consumption), and the release of “animal spirits” to boost private investment, leading to high growth until 2007-08. But net capital inflows turned quite abruptly into outflows with the outbreak of the great financial crisis in September 2008. Nevertheless, with the first signs of an ebbing of the crisis, and with easy monetary policy in the developed capitalist world, the emerging markets, including India, once again became “the favourites”––there followed a repeat of the wealth effect, liquidity, booming consumer credit, Le Grande Bouffe, “animal spirits”, and so on, leading to high growth, but capital inflows subsided again with the euro zone’s crisis. The fate of the Indian economy has thus become a function of abrupt changes in the direction of net capital flows, and the Indian government, realizing this pattern, does all it can to please the financial markets, for it is these (metaphorical) financial shopping centres that have the power to engineer booms and busts with the volatile inflows and outflows of capital.
Ever since they were invited to invest, the government has always been doing all it can to satisfy the demands of foreign institutional investors (FIIs), turning the country into a tax haven as far as listed equity capital is concerned. Next year it will be 20 years since the FIIs started playing the Indian markets. As active portfolio managers, they move the markets, and yet, we have yet to come across any study by the Securities and Exchange Board of India (SEBI) which tells the public about the different categories of FIIs, how active each of these are, details of their typical portfolios, their respective inflows and repatriation of funds, their use of PNs, their associations with private equity firms, Indian institutional investors and promoter-dealer networks, and so on. In the world of globalised finance, however, where investment portfolios for the major centres are combined, where the markets (stock, bond, money, real estate, government securities, forex and commodities) tick almost round-the-clock from Sydney-Tokyo Monday morning to New York-Chicago Friday 5 PM, via London, Frankfurt, etc. in between (and the digital books are passed at the appropriate times), tracking such practices as “round tripping” –– discovering the footprints ––must be exceedingly difficult.
Cacus-like Retracing of Footprints
Questions as to of how the financial aristocracy and the industrial bourgeoisie in India actually got their wealth, how the structure of the system is biased in their favour rarely, if ever, seem to be posed in the Indian media, even today when a Google search with “India corruption” throws up 66.7 million results! India’s billionaires are all “entrepreneurs” and “innovators” par excellence, that is, if one goes by the business media! We are reminded of New York University Professor Bertell Ollman’s recounting of Marx’s response to the ancient Roman myth of Cacus:
Cacus was a Roman mythological figure who stole oxen by dragging them backwards into his den so that the footprints made it appear that they had gone out from there. After quoting Luther’s account of the story, Marx exclaims: “an excellent picture, it fits the capitalist in general, who pretends that what he has taken from others and brought into his den emanates from him, and by causing it to go backwards, he gives it the semblance of having come from his den.”
Capitalists present themselves as producers of wealth, providers of jobs, donors and public benefactors. The press (their press) usually refers to them as “industry”. Is this an accurate description of who they are and what they do? …The footprints are there for all to see, but if we limit ourselves to what is immediately apparent … we will arrive at a conclusion that is the exact opposite of the truth.
… In the case of the capitalists, only by examining how they got their wealth from the surplus labour of previous generations of workers [and from all kinds of business exploits in connivance with “friends in high places”, I might add] (history) and how our laws, customs and culture are biased in their favour (structure) can we see it is not the capitalists who are serving society but the rest of society that is serving them.
Now, in official parlance, corruption simply refers to payments in kind or in monies over and above official emoluments –– “gratification” –– that a holder of public office or a state employee receives for services rendered. And, black money, again in official-speaks, refers to “assets or resources that have neither been reported to the public authorities at the time of their generation nor disclosed at any point of time during their possession”. So, for example, only the value of the “gratification” alleged to have been “earned” by A Raja –– when he was Minister for Telecommunications and Information Technology in 2008 –– for deliberately issuing licences to create 2G subscriptions for cell phones in a dubious first-come-first-serve manner, based on 2001 prices, rather than in an open auction process, is “corruption”. But such “gratification” could, at most, only be a small fraction of the billions of rupees of revenue foregone by the state.
The loss of Rs 176,645 crore (10 million = 1 crore) –– as estimated by the Comptroller and Auditor General of India (CAGI) –– that this sale of part of the wireless spectrum entailed for the public exchequer, and the corresponding windfall gains to the private parties who got the licences essentially stemmed from the sale of a small part of a scarce natural resource, the wireless spectrum, that itself, needed to be sold because of the prior privatisation of the telecom service function. In February this year, the Indian Supreme Court found the grant of the 2G licences “unconstitutional and arbitrary” and quashed all of them. The Court is right that the then telecom minister Raja “virtually gifted away an important national asset”, for soon after the grant of licences, some of the licence holders, Unitech Wireless, Swan Telecom and Tata Teleservices sold a chunk of their equity stakes to Norway’s Telenor, United Arab Emirates’ Etisalat, and Japan’s NTT Docomo respectively, reaping huge capital gains.
Now, in Prabhat Patnaik’s view, the private acquisition of part of the wireless spectrum (public property), on a dubious first-come-first-serve basis at 2001 prices in 2008, that is, at “throwaway prices”, rather than on the basis of an open auction (which would have established a just or fair price) is “what Marx would have called the ‘primitive accumulation of capital’”. His criterion to establish whether the privatisation of the public resource in question is part of “primitive accumulation” or not rests on the fairness or otherwise of the price at which the transfer of public assets takes place. In our view, all privatisations –– they occur because there are profits to be made from the private acquisition of certain public assets or service functions –– irrespective of whether the prices at which such transfers take place are “fair”/”just” or not, entail “accumulation by dispossession”, but not necessarily primitive accumulation. For Patnaik, it is the “throwaway price” at which the transfer of assets or service functions from public to private ownership or control takes place that makes the “accumulation by dispossession” primitive accumulation.
Indeed, a few well-known Marxist intellectuals, David Harvey among them, seem to go even further. Harvey characterises a whole array of practices in the neo-liberal era that transfer assets and channel wealth and income from common folk to the upper classes or from the periphery of the world capitalist system to the centre under the rubric of “accumulation by dispossession”. And he goes on to claim that these practices constitute a continuation and proliferation of the accumulation practices that Marx had designated as “primitive” or “original” during the period of the rise of capitalism.
Now, in our understanding, Marx had in mind two principal ways of “primitive accumulation”, one, the expropriation of common folk through the enclosures (powerful landowners used their influence over state matters to appropriate public lands for their private benefit), ultimately leaving them with little or no choice but to work for wages in agriculture or industry, and two, the pillage of what was to become the periphery of the world capitalist system though conquest, enslavement, resource extraction and plunder. In chapter 31, “Genesis of the Industrial Capitalist” in Part 8, “The So-called Primitive Accumulation” of Capital, Volume I, he argues the latter thus:
The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalised the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief momenta of primitive accumulation.
Both these ways of original accumulation of capital which brought the capitalist mode of production into being involved “stealing” property from people, in the first, from one’s own people, and in the second, through colonialism, which entailed “theft” on a grand scale from other peoples. In both cases, the powerful took what they wanted, and in this, Marx emphasised violence.
I wouldn’t characterise the various ways of “accumulation by dispossession” that Harvey outlines –– privatisation, financialisation and the manipulation of crises, redistribution in favour of capital though the fisc, the turning of agricultural lands into real estate accompanied by the eviction of ordinary folk, the turning of common property entitlements into private property rights of the moneybags, environmental predation, and so on –– as constituting “primitive accumulation”. Nor would I characterise what US imperialism has done in recent times as primitive accumulation, for instance, the 2003 invasion of Iraq to turn it into a neo-colony and establish control over its oil reserves, or more generally, where stronger US corporations/banks have teamed up with Washington to profit from the financial distress of weaker corporations/banks unable to withstand the effects of a financial crisis abroad. To make his point about primitive accumulation Harvey even argues that the slave trade continues, citing practices of sexual slavery/sex trafficking. But one only has to contrast this with the European slave trade and how western Europe underdeveloped Africa, go back to Walter Rodney’s How Europe Underdeveloped Africa (1972) to know that Harvey’s making of such a parallel is too farfetched.
In his historical investigation of the origins of the world’s first industrial capitalist power, England, Marx emphasised the role of force, the part of violence –– as he put it, capital came “dripping from head to foot, from every pore, with blood and dirt” (Capital, Volume I, chapter 31 again). But Patnaik, with respect to 21st century India, emphasises some economic mechanisms at work that are leading to unjust/unfair accumulation of capital, which he then labels “primitive”. And, if one were to go by Harvey, then all the takeovers of public resources through privatisation (and by other means) in the present neo-liberal period would be part of what he understands as the ongoing process of primitive accumulation.
In our understanding, the process of primitive accumulation as far as India is concerned goes back to the times when England had brought south Asia under its effective control, both territorially and commercially, over the period roughly from the mid-18th to the mid-19th centuries, turning it into an underdeveloped capitalist country, a process that got a boost only after England established its domination of the sea lanes of the Indian Ocean. Of course, the process continued over the period following Crown rule and up to Independence, and after, for instance, the inter-war period when the Indian bourgeoisie launched the process of dependent industrialisation, and post-Independence until it came into its own, albeit with Indian capitalism still underdeveloped. Of course, England, India and England’s other colonial possessions made each other by their mutual interaction –– India and England’s other colonies contributed to the development of England even as England underdeveloped them. In all of this, one locates the very roots of India’s contemporary condition, its present order (and disorder), including current “accumulation by dispossession”. There is little reason to call the latter “primitive” or “original”.
With respect to India, primitive accumulation can be located in the drain of wealth during the period 1757-1813 followed by deindustrialisation, and later, in the commercialisation of agriculture accompanied by the growth of landless labour, the Indian Forest Acts of 1878 and 1927 and the Land Acquisition Act of 1894 under which common folk were dispossessed of land and common property resources for the development of the railways, plantations and mines, installations of the British Indian Army and other colonial repressive apparatuses, and later, large dependent industry. Persistent differences and disparities in the accumulation of capital as between the centre and the periphery of the world capitalist system have been an intrinsic, inherent, pervasive and almost permanent property of the process throughout, but primitive accumulation has long since played out its historic part in getting capital its initial wealth.
From Agricultural Lands to Real Estate
Nevertheless, the question related to the appropriations of national resources by capital remains. In its chapter on “The Way Forward”, the WP briefly touches upon the connection of real estate, the stock market, mining and allocation of property rights over natural resources and the spectrum with black money. The process of conversion of agricultural and other lands to real estate has been a source of acquisition of immense personal wealth by very powerful real estate developers. Foremost among them is the DLF group –– its patriarch is Kushal Pal Singh who inherited its riches –– the country’s most valuable real estate company, which acquired agricultural lands on the outskirts of New Delhi dirt cheap and converted them into expensive real estate.
More generally, the process of capitalist development as it relates to forests and mining, large dams, special economic zones (SEZs), transformation of the urban landscape, and the private appropriation of common property resources by corporations is at the core of what the financial aristocracy is up to in India today. Part of this has been ably documented by Perspectives, a non-funded, independent study-group of some students and teachers of the University of Delhi and New Delhi’s Jawaharlal Nehru University, in two reports, Abandoned: Development and Displacement (Perspectives, Delhi, Revised, Second Edition, January 2008) and Communities, Commons and Corporations (Perspectives, Delhi, January 2012). The identity of the beneficiaries and the victims of the process of capitalist development as outlined in these books tell a lot about the identity and the nature of India’s ruling classes. For instance, chapter 2 of Perspectives’ Communities, Commons and Corporations tells the story of the impending ruin of coastal communities and eco-systems as a result of corporate plunder in the district of Kutch, engineered by a partnership of the Adani group, led by billionaire Gautam Adani, and politics-as-business, led by the Bharatiya Janata Party’s (BJP) chief minister of Gujarat, Narendra Modi. Here we find how capitalism actually handsomely rewards the most blatant anti-social behaviour even as it severely punishes those who put in place the shared use of common resources. Clearly, we ought to highlight the importance of the opening of the energy, mining, telecommunications, civil aviation, infrastructure (ports, highways, etc), banking, insurance, and other sectors to private capital following the IMF-World Bank prescribed stabilisation and structural adjustment programmes that India undertook in the early 1990s and the transformation of the character and composition of big bourgeoisie that was brought about as a result.
Private Enterprise at Public Risk
The accumulation-by-dispossession story that we are relating reminds us of parts of Marx’s description of the “financial aristocracy” and its nexus with the upper rungs of the polity during the July Monarchy (July 1930 to February 1848) in his The Class Struggles in France, 1848-1850. Sample this:
It was not the French bourgeoisie that ruled under Louis Philippe, but one faction of it: bankers, stock-exchange kings, railway kings, owners of coal and iron mines and forests, a part of the landed proprietors associated with them – the so-called financial aristocracy. It sat on the throne, it dictated laws in the Chambers, it distributed public offices, from cabinet portfolios to tobacco bureau posts. …
…The ruling class exploited the building of railways in the same way it exploited state expenditures in general and state loans. The Chambers piled the main burdens on the state, and secured the golden fruits to the speculating finance aristocracy. …
… Cheap government, governement à bon marché…
… [T]he finance aristocracy … get rich not by production, but by pocketing the already available wealth of others…
Marx is here speaking of a capitalism during the period of the July Monarchy in France where the “financial aristocracy” had triumphed over the industrial bourgeoisie –– the former not only had a free rein over the banks, the stock market, railways, minerals, land, water and forests, but controlled the state and nakedly used state institutions to promote its interests. We are not however drawing any kind of parallel with India today, except that the period from the early 1990s onwards has witnessed the rise of a “financial aristocracy” which has been increasingly calling the shots in the corridors of power. Nevertheless, in France, an 1842 public-private partnership (PPP) built the railways –– the government secured the land, mainly through expropriation, bore the costs of putting much of the infrastructure in place, the bridges, the tunnels and the track bed, while companies controlled by the financial aristocracy put in place the rails, the stations and the rolling stock and got the operating leases that guaranteed their dividends, essentially skimming their profits off of state expenditure. Nevertheless, the French railways did get built, and the successors to the financial bourgeoisie of the 1840s, with Louis-Napoléon at the political helm from 1852 to 1870, for all their stock swindling, saw to the building of the first steamship fleets, the Suez canal, etc. In sharp contrast, there are, as yet, no assets of comparable worth that the Indian financial aristocracy has developed to offset the wealth of the nation that they have secured for themselves.
In India today, public-private partnerships are the norm in infrastructure projects –– in airports, ports, power, railways, and highways, for example, the National Highways Development Project (NHDP) since 2000, one of whose major undertakings has been the construction of the so-called Golden Quadrilateral (four/six lane express highways connecting the four major metros) and the North-South and East-West Corridor, and the green-field, modernisation and expansion projects of the Hyderabad, Mumbai and Delhi international airports. In the field of railways, a dedicated freight corridor project, linking the ports of western India and the ports and mines of eastern India to Delhi and Punjab, is being planned. In this project, besides engineering, procurement and construction contracts, PPP with the build-operate-transfer form of project financing is being envisaged, under which “special purpose vehicles” headed by private entities will receive “concessions” from the Indian Railways to construct and operate sections of the facility.
Generally speaking, in PPP arrangements for the development of physical infrastructure, especially in the NHDP, besides government providing more than the required amount of land for the project, permitting commercial exploitation of the additional area, transferring some of its existing assets, changing the rules of the game to favour the “special purpose vehicle” (government may even take an equity share in it) that develops, builds and operates the asset for the contracted period, and giving income tax and import duty concessions, there is a provision called “viability gap funding”, under which the government, at its discretion, provides a capital subsidy (grant) of up to 40% of the project cost to ensure the asset’s economic viability from the point of view of its private developers/financiers. No wonder billionaires such as Gautam Adani, G M Rao, Jaiprakash Gaur and G V K Reddy are thriving.
Interlinked M-C-M and M-M Routes to Accumulation
Basically, finance capital is socially “bribed” to accumulate, whether by the M-C-M route or by the M-M course. In the former, M-C-M, money begets more money via production, whereas in the latter, M-M, the same happens with no relation to production. Let’s look at their Indian avatars (incarnations).
Mukesh Ambani, chairman and managing director of Reliance Industries Ltd (RIL), in which he inherited the largest share, 45% of the equity capital, member of the board of directors of the Bank of America and of the international advisory board of the Council on Foreign Relations, is among the top-10 of the world’s billionaires. He heads a business empire that was gradually integrated backwards; indeed, the claim is that he initiated that vertical integration strategy which took RIL from textiles to polyester fibres to petrochemicals, petroleum refining, and upstream into oil and gas exploration and production. His father, Dhirubhai Ambani was one of the most adept of India’s moneybags as far as thick-as-thieves relations with state and central governments went; he could influence a whole host of rules and regulations related to industrial licensing, taxation, including import duties, and quantitative restrictions on imports. And, in a financial environment (right from the early 1980s) where insider trading was the norm, with his mastery of the stock dealer-business promoter combination, given its privileged access to price-sensitive information, its web of non-bank financial firms, the accumulation of wealth through destabilizing stock prices was trouble-free.
Such stock market conduct in what was truly a laissez-faire setting guaranteed that the dominant promoter-dealer combinations could maximise their profits or minimise their losses any which way they chose. Indeed, looking at the structure and conduct of the stock market as a whole, in a long-term sense, the switching of funds from the early 1980s on, significantly shaped structural change in the real economy, preparing the material ground for neo-liberal consolidation in the 1990s and the emergence of quite a few financial aristocrats whose route to enrichment was of the M-M type.
A tracking of one such career, that of Uday Kotak and his financial business group would definitely be intriguing. Kotak is the principal founder and promoter of the Kotak Mahindra Group (KMG), along with Anand Mahindra, a minority partner, now the chairman and managing director of the transnational automaker, Mahindra and Mahindra. Beginning from the latter half of the 1980s, over time, especially after 1992, KMG gradually established itself in a whole range of across-the-board financial services from stock broking/dealing to auto-financing, investment banking, wealth management, fund syndication, mutual funds, life insurance, private equity, and real estate funding to commercial banking in 2003. Various joint ventures with transnational finance companies –– for instance, with Goldman Sachs in investment banking and securities from 1996 (working together since 1992) to 2006, with Ford Credit International from 1995 to 2005 in auto-financing, and with Old Mutual plc from 2000 onwards in life insurance –– made it possible to take on various competitors. Financing against securities (as collateral), investment banking, and wealth management has been KMG’s forte.
Indeed, from 2003 onwards, with a whole range of bank and non-bank financial activities in its business portfolio, the KMG has been engaged in activities from commercial bank-style taking of deposits from the public to raising capital for clients through underwriting and issuing securities, market making, assistance in M&As, raising funds for leveraged buyouts, venture and growth capital, placing loans to broker/dealer arms, secured by stocks/bonds, for their speculative trading and carrying of securities, investment portfolio management and private banking for high net worth individuals.
Today, the group is organised, by-and-large, with Kotak Mahindra Bank (KMB) as a bank-cum-holding-company possessing 16 different entities, wherein a large part of the bank’s total credit to financial companies is to its own subsidiaries and associates, the risk of contagion thus running both ways. Among the country’s banks, Indian and foreign, given the manner in which KMG is structured, KMB has the highest profit from capital market-related transactions, both in absolute terms and as a proportion of total consolidated profit. In India today, the regulators, the Reserve Bank of India and the SEBI do not seem to take seriously the regulatory agenda of Glass-Steagall, itself dead in the United States long before Bill Clinton repealed the Act in 1999. But in the wake of the great financial crisis, shouldn’t the affiliations of KMB and its various subsidiaries and associates, given the nature of their business, be a matter of concern? Should the investment banking and securities entities be allowed to “gamble” with a significant part of the public deposits of KMB (we are referring to the speculative trading and carrying of securities by subsidiaries and associates with the use of bank credit)? Should a significant proportion of the subsidiaries’/associates’ loans be secured by stocks and bonds? Should the bank act as an agent of its non-bank subsidiaries in placing loans to brokers and dealers? Should it help its private equity arm raise funds for leveraged buyouts, and venture and growth capital?
The process of financialisation that we are concerned with over here actually got resuscitated from the early 1980s onwards, which had a lot to do with Ambani’s RIL –– and later, Reliance Asset Management Company (a public limited company since 1986) –– with its reliance largely on capital raised from the stock market that triggered that bourse’s active revival, leading, by the early 2000s, to the emergence of financier Aristos like Kotak. Unlike the latter, however, it was RIL’s exploits in the real part of the Indian economy that got Mukesh Ambani to the top of the heap. Let’s then get to that company’s foray in the upstream oil and gas business.
The Panna-Mukta oil field and the Tapti gas field, discovered and developed by the public sector ONGC, was handed over to a partnership of Enron Oil & Gas India Ltd (incorporated in the Cayman Islands) and RIL, with the ONGC tagged along in what became a three-party consortium for the main benefit of the two private partners [Of course, Enron later sold its stake to British Gas Exploration and Production India Ltd (also incorporated in the Cayman Islands) for $ 350 million in an offshore deal]. But what about the KG-DWN-98/3 deepwater block (also referred to as the KG-D6 block), which was claimed to be RIL’s discovery of India’s biggest natural gas reserve, and the world’s largest gas discovery of 2002, which took the company’s share price into the stratosphere? It now transpires that the KG-D6 gas reserves are a mere 1.93 trillion cubic feet (tcf) and not the 5.3tcf claimed for the D1-D3 development area in March 2004 or the vastly inflated 11.3 tcf attested to in October 2006.
Like the Panna-Mukta-Tapti fields, RIL has made hay with the award of highly favourable production sharing contracts for the development of the country’s largest natural gas reserves in the Krishna-Godavari (KG) basin where the government has borne practically all the risks and the private contractor gets the lion’s share of the profits, and moreover, the latter is permitted to vastly inflate capital expenditure over the estimates initially agreed upon (“gold plating”). Indeed, the Ministry of Petroleum and Natural Gas and the Director General of Hydrocarbons seemed to have been more interested in protecting the private contractor’s cost recovery and share of profit petroleum than the public interest. The more basic question, however, is: Shouldn’t the blocks in the KG basin that were awarded to Reliance have been the public sector ONGC’s, for the KG basin’s potential was first made evident by the latter way back in 1983? In upstream oil and gas, can one then say that the government has aided RIL’s accumulation by making it easy for the company to “pocket” the national wealth?
Likewise, huge personal fortunes have been made from the privatisation of the telecom service function so much so that the Telecom Minister A Raja’s dubious “first come first served” 2G spectrum licence allocation in 2008 even attracted real estate magnates like Sanjay Chandra (son of Ramesh Chandra) of Unitech (India’s second-most valuable real estate group) who floated Unitech Wireless, and billionaires Vinod Goenka and Shahid Balwa of DB Realty who promoted Swan Telecom. Soon after they got their 2G licences, even though they didn’t satisfy even the basic criteria of prior telecom experience, they sold a significant part of their equity capital to transnational telecom companies reaping huge capital gains. Swan Telecom reportedly paid Rs 1,537 crore for its license, but soon thereafter sold 45% of its equity capital to the UAE-headquartered Etisalat for Rs 4,200 crore, while Unitech Wireless paid Rs 1,661 crore for its 2G license, but went on to sell 60% of its equity capital to the Norwegian transnational telecom company Telenor for Rs 6,200 crore! But, as we saw, the Supreme Court has now become a spoke in the wheel of such wheeler-dealers.
If for some, the switching of some capital from real estate to telecom hasn’t been a smooth ride, the reverse route seems to be paying huge dividends. For Sunil Mittal, whose Bharti Airtel is now India’s largest mobile operator, and whose conglomerate business group, Bharti Enterprises has tied up with Walmart and is set to open a chain of retail stores in India once the government allows foreign capital to control organised retail, Bharti Realty is now one of the main ways to deploy the accumulated wealth from telecom. Bharti Tele-Ventures (now Bharti Airtel) was the first private operator to launch cellular telecom services in India –– aided by the deliberate initial restriction to enter that was placed upon incumbent public sector telecom entities –– and gain a first-mover advantage (The public sector MTNL’s entry into mobile telephony was stalled for quite some time, and only when it was, later on, allowed to come in as a player that tariff rates came down significantly). Bharti snatched the pecuniary benefits flowing from the significant advantage the new mobile user derived from being connected to the already existing large public-sector network of fixed line users, which made the access of new mobile users to the network that much more valuable. Besides, with huge investments from Warburg Pincus and Singapore Telecom and a series of takeovers of firms that had bagged licences in different telecom circles, the purchaser of an Airtel connection expected a quantum growth in the size of the overall network to increase the value of his/her connection, but it was Airtel that derived most of the pecuniary benefits of this value enhancement.
Moreover, the incumbent private operators now resorted to peculiar manoeuvres –– companies like Bharti and Hutchison-Max (Hutchison-Essar) bid high to bag licences and then got the regulator to change the rules of the game in their favour, and then, the Cellular Operators’ Association of India, which represented them, got the Telecom Regulatory Authority of India to adopt a pricing formula that allowed them to snatch rents (excess profits). Also, in the initial years, when the bulk of the network was composed of public-sector fixed-line users, tariff rules were stacked in favour of the mobile operators. And, as mentioned, mergers and acquisitions have been one of the most important aspects of the dynamics of accumulation in the industry. The biggest so far has been Vodafone’s February 2007 acquisition of the controlling interest of 67% from Li Ka Shing Holdings (Li Ka-shing is the chairman of Hutchison Whampoa) in Hutchison-Essar for US$11.1 billion in an offshore deal that circumvented payments of capital gains tax to the government of India, and the subsequent July 2011 buy-out of Essar’s 33% stake for $ 5.46 billion. Such has been the route to unprecedented private accumulations of capital in the telecom sector over the course of the last two decades.
‘Where Money, Filth, and Blood Comingle’
With huge capital gains, Essar has successfully exited from Telecom, but the Essar group –– headed by Sashi and Ravi Ruia, among the country’s top billionaires –– also has a prominent stake in mining, steel, oil and electricity. Interestingly, in the mineral-rich region of south Chhattisgarh, following the provincial government’s creation in June 2005 of an armed private vigilante force –– called Salwa Judum (SJ) –– to cut off the villagers from the Maoists, companies such as Essar Steel and Tata Steel allegedly began to contract with SJ for protection and “ground-clearing” services. In Dantewara, Bastar and Bijapur districts, in the context of large-scale acquisition of land by corporations, entire villages were evacuated and villagers forcibly herded into camps, from which those who escaped were branded Maoists and hunted down.
Indeed, in all of this, according to a 2009 draft report authored by Sub-Group IV of the Committee on State Agrarian Relations and Unfinished Task of Land Reforms, set up by the Ministry of Rural Development, New Delhi, SJ was “supported with the fire power and organisation of the central forces”. But more to the point, the draft report –– though it was quickly officially disowned and withdrawn from the ministry’s website –– drew attention to what it called “the biggest grab of tribal land after Columbus” in the making as being initially “scripted by Tata Steel and Essar Steel who want seven villages or thereabouts each to mine the richest lode of iron ore available in India.” Backed by the security forces, the SJ evacuated hundreds of villages, hounding the inhabitants into police camps, and forcing many more to just run any which way they could to save life and limb.
In such circumstances, why shouldn’t the victims, the indigenous Gondi poor, look to the Maoists (indeed, they are the Maoists over here) to defend their villages, provide a modicum of security in their lives, address their collective needs, their rights to jal-jangal-zameen (water-forests-land)? For this is their ancestral property and they, more than any other, know what the Land Acquisition Act of 1894 –– created by the British colonialists but still on the statute –– is intended to do to them. The iron ore from the Bailadila mines is exported to Japan cheap compared to the price that the sponge iron manufacturers of Chhattisgarh pay for lower-quality iron ore, and the Essar pipeline (267 km long) carrying the ore in the form of a slurry all the way through the provinces of Chhattisgarh, Orissa and then Andhra Pradesh to the port at Visakhapatnam makes it cheaper at further cost to the Gonds. The latter are being deprived of the land under their feet, their ancestral land; the minerals in the ground below are being taken away; the forests with which they enjoy a symbiotic relation are being cut down.
Iron ore and coal mining are lucrative businesses. What’s better then than getting black gold at a song?
Acquisition for a Song
A recent leaked draft performance audit by the CAGI brings to light irregular and arbitrary allocation of blocks of already explored coal deposits to public and private sector firms between 2004 and 2009 instead of openly auctioning them to the highest bidder. It was known to Prime Minister Manmohan Singh –– who was also officiating as Minister of Coal during the relevant period –– that there was going to be a substantial difference between the price of coal as supplied by the public-sector enterprise Coal India Ltd and the cost of production of coal from the (to be) acquired captive mines of merchant power plants set up by independent power producers, cement and steel plants, but he didn’t agree that the Indian state as the legal owner of the natural resource on behalf of its citizens should make sure that a significant part of such benefit accrues to them. He allowed the windfall gains of what turned out to be approximately Rs 10.7 lakh crore (Rs 4.80 lakh crore to the private companies) –– estimated as the difference between the price of coal and its cost of production at current prices (31 March 2011) in the captive mines multiplied by 90% of the geological reserves –– to be snatched by the companies. Indeed, when the prime minister was officiating as Minister of Coal, going by the date of allotment of the blocks of already explored coal deposits, significant windfall gains accrued, among others, to Tata Power, Tata Steel, Essar Power, Hindalco, Adani Power, GVK Power, ArcelorMittal, BALCO and Sterlite Energy (the latter two, part of the Vedanta Resources business group).
Essentially, putting this in a way similar to how Prabhat Patnaik expressed it in the case of the 2G spectrum, Prime Minister Manmohan Singh allowed the already discovered coal deposits to be given to private sector companies, including subsidiaries of ArcelorMittal and Vedanta Resources, controlled by billionaires Lakshmi Mittal and Anil Agarwal, at “‘throwaway’ prices, certainly at prices way below what a fair auction would have fetched”. The windfall gain of Rs 4.8 lakh crore to the private companies represents a loss to the citizens of India; this money “could have been spent on their benefit but was diverted to private pockets.” Now, even if no bribe was paid, the loss to the people as a result of this privatisation of the already discovered coal deposits remains. Indeed, it constitutes a regressive re-distribution of wealth from the citizens of India to a whole host of private companies, including transnational corporations like ArcelorMittal and Vedanta Resources.
Bred on Privatisations Worldwide
That brings us to Lakshmi Mittal and Anil Agarwal, both of whose initial wealth was inherited, and has grown phenomenally through privatisations –– sale of state-owned assets at “’throwaway’ prices” in the neo-liberal era constituting accumulation by dispossession. One of Vedanta’s prized purchases was 51% of the equity capital of the highly profitable Indian public sector enterprise BALCO in 2001. Sterlite Industries, a subsidiary of Vedanta Resources, which acquired BALCO, funded both the Congress Party and the BJP; indeed, in 2003 India’s present Home Minister, P Chidambaram was a non-executive director on the board of Vedanta, which has its largest mining and non-ferrous metals business portfolio in India, besides Zambia and Australia, the Indian part essentially based upon acquisition of state-owned assets. The company’s Indian business portioning also includes commercial power generation and iron ore mining. Besides BALCO, Vedanta’s aluminium business in India also encompasses the Lanjigarh Alumina project in Orissa for which it is still bent upon mining bauxite in the Niyamgiri hills despite the fact that this will destroy the habitat of the Dongria Kondh tribes, and continues to lobby in New Delhi for the environmental passage of this project.
Lakshmi Mittal, the chairman and CEO of ArcelorMittal, the world’s largest and most globalised steel company, brought India back into his business coffer in 2005 with a memorandum of understanding (MoU) that the then Mittal Steel would set up a 12 million tonne per annum (mtpa) steel plant in the province of Jharkhand. Then again in 2006, after the merger of his company with Arcelor, he committed, in another MoU, to set up another green-field steel plant of the same capacity in Orissa, and once more, promised a six mtpa plant in Karnataka, in all, pledging 30 mtpa fresh capacity in-the-making in India. But such words-of-honour apart, Mittal’s business record is not one of green-field creations but acquisitions. The latter, underway since 1989, first involved the takeover of state-owned steel plants at rock-bottom prices in the periphery and semi-periphery of the world economy, including in an Eastern Europe in transition to capitalism and countries that were formerly part of the USSR. The deals were really sweet –– the sellers retained pension and environmental liabilities and Ispat International (this Mittal family-dominated firm later acquired the family holding enterprise LNM Holdings NV and merged with International Steel Group in 2004 to form Mittal Steel) getting tax loss carry forwards from historical losses, besides favourable government and World Bank loans to further sweeten the leveraged buyouts. Upon accomplishing a significant original accumulation of capital via such acquisitions, Mittal then took advantage of the long structural crisis which the steel industry in the Triad was going through to takeover distressed steel companies in North America and Western Europe.
Essentially, neo-liberal policy worldwide, of which privatisation was a vital component, the transition to capitalism in Eastern Europe and the former Soviet Union, and political connections in Britain, from which the Mittal international business empire was controlled, explains Lakshmi Mittal’s metamorphosis into “The Metal King” of the world. Right now, however, for ArcelorMittal in India, it’s an acquisition race to acquire the most lucrative iron-ore mining leases in the Chiria and Gua areas of Paschim Singhbhum district of Jharkhand. Further, there’s much more at stake in the Saranda forest region of the same district, where the armed forces of the state have been trying to “flush out” (the official discourse) the Maoists (the counter-insurgency over here is called “Operation Anaconda”) in order to make the area safe for the exploitation of the huge deposits of iron ore which are the object of attraction of companies such as ArcelorMittal.
Intersection of Business and Politics
In the age of finance capital, the distinction between the political and the economic, the “public” and the “private”, is getting increasingly blurred. Politics has also become a form of business, and a very lucrative one at that. Take the two major political parties, the Congress and the Bharatiya Janata Party –– their declared sources of funds are not even a fraction of their expenses, that is, if one looks at these over an electoral cycle. In the present neo-liberal era, where ever and whenever they are or have been in power, they have helped the financial aristocracy in plundering the nation’s wealth of natural resources, oil, gas, forests and minerals, aided the “big bulls” in engineering the rise of the stock and real estate markets through various means, all to amass private fortunes.
Indeed, one is witness to a veritable orgy of corruption and graft, influence peddling, bribery and embezzlement, all following the de-regulation and unfurling of “economic freedom” for the moneybags from July 1991 onwards. Buying the votes of parliamentarians, purchasing the appointment of particular individuals as union ministers, shopping for the pens of senior media persons, indeed, paying for “justice”, snapping up the support of some NGOs and social activists, not to forget “laundering” of black money, allocation of mines, forests, land, water, and spectrums at “throwaway prices”, all these manoeuvres have been subject to market principles. Yet, Team Anna and its followers, and a number of other decent people still believe that the system can be reformed by Lok Pals and Lok Ayuktas, this commission and that legislation. What does one do when the system is rotten to the core? Its managers produce a White Paper on BM, and the business press and TV debate it. Some may even announce a “fast unto death” if some bill to set up another investigatory authority is not passed or their demand for some special investigation team to probe their charges of corruption against ministers, including the prime minister, is not met. But, sadly, things have gone far past such devices to reform the system.
The “February Revolution [of 1848 in France] aimed directly against the finance aristocracy”; it “complet[ed] the rule of the bourgeoisie by allowing, besides the finance aristocracy, all the propertied classes to enter the orbit of political power”. But is bringing the so-called “industrial bourgeoisie” back into the circuit of power the answer to the problems of the Indian people? Who are the Indian industrial bourgeoisie’s most-powerful constituents today? The IT and ITeS “entrepreneurs” and the “technology magnates”? The Azim Premjis, Shiv Nadars, Yusuf Hamieds, Cyrus Poonawalas, N R Narayana Murthys, Deshbandu Guptas, Pankaj Patels, Nandan Nilekanis and K Anji Reddys? But can the IT and ITeS entrepreneurs contract with the who’s who of the Wall Street’s financial conglomerates and gain as arbitrageurs of India’s cheap “human capital” without the banks, the stock-exchange, the realty firms, and the SEZ developers? According to a government report of 2008, 62% of the total number of India’s SEZs is IT/ITeS SEZs; so aren’t the IT and ITeS entrepreneurs beneficiaries of the process of accumulation by dispossession?
What about the “technology magnates”? In the pharmaceutical industry, like the IT/ITeS entrepreneurs, aren’t the technology magnates simply arbitrageurs of India’s cheap “human capital”, which grasps the base technologies and, occasionally, even develops the key technologies to bring in huge profits from the export of medicines to the Triad countries? And, the more venturesome, the so-called innovators, aren’t they basically venture capitalists who finance the start-up phases of a portfolio of R&D projects only to reap extraordinary rates of return, mainly in the form of capital gains, from the few that go on to show a potential to emerge as key technologies and succeed in the marketplace? Can these technology magnates do without the stock market, the banks –– finance capital? It should be clear therefore that we are not, even for a moment, suggesting that the financial aristocracy is shackling the development of capitalism in India. Viewed from the system’s own inner logic, the financial aristocracy is as necessary as the industrial bourgeoisie.
The February Revolution of 1848 in France brought the industrial bourgeoisie back into the orbit of political power. But the plebeians and the proletariat were meant to be kept under the thumb and at the mercy of the new ruling combine. They revolted in Paris in June (1848), but were brutally crushed –– 1500 of them killed –– their dreams shattered. Nevertheless, they came back with a bang into the tide of history in 1871 when they established the Commune between mid-March and end-May of that year, only to be crushed once more, this time with much more savagery. But the Communards did “lop off as speedily as possible” the “worst sides” of the old state and tried to put in place “a form of government”, a truly “democratic republic” –– “the dictatorship of the proletariat”. A socialist intent such as this stems from a leadership that is sensitive and responsive to the “moral economy of the crowd”. In India too, poor and middle peasants, dispossessed wage workers, artisans, and lower middle-class households struggling to keep themselves from going under have an incipient set of values, norms and beliefs concerning the economy, the polity and the society, which in a revolutionary situation, they might be willing to defend against those of capitalism. They regard the reigning capitalist principles and practices as morally wrong.
There are two capitalist modus operandi which deeply affect people’s lives, where those who take the decisions are outside the framework of liberal, political democracy, in the market and the economy. Indeed, it is the leviathan state that protects this sphere by guaranteeing the right to protection of property and contract. It is in the economy that exploitation of the dispossessed wage worker and poor peasant is the norm, a practice that is, nevertheless, repugnant if one were to go by the principles of the moral economy of the crowd. So too would be the sharp practices of speculators and hoarders of essential commodities in a situation of shortage. The other “corrupt” practice that is abhorrent, again, if one goes by the moral economy of the crowd, is the separation of property from need, which is a consequence of capital’s relentless drive to maximisation of its net worth (as valued by the market) by any and all available means.
Can then “the crowd” be made to feel disgusted and repulsed when it is explained to it that one of India’s most wealthy and powerful business houses funded its lobbyist to manoeuvre to get its nominee appointed as union minister for communications and information technology? Or at such manoeuvres as the removal of Mani Shankar Aiyar as union minister for petroleum and natural gas in January 2006 and his replacement by Murli Deora at Washington’s behest (it didn’t want the Iran-Pakistan-India gas pipeline project)? Of course, in feudal times state offices were bought in quite an undisguised manner and without any loss of face. In those times, a state official using his public office for the purposes of private gratification was not unusual, indeed, this was expected of him.
Nevertheless, in 21st century India, Prime Minister Manmohan Singh doesn’t think that there is anything unusual going on over here and would have continued to accommodate A Raja in office if it were not for court strictures. Perhaps the distinction between the “political” and the “economic”, the “public” and the “private” is getting blurred as the financial aristocracy increasingly calls the shots. Business and politics are so closely intertwined; indeed, politics is also a form of business, and a very lucrative one at that. But even as we say this, we need to acknowledge that A Raja the politician was merely a willing instrument of his wealthy and powerful clients, all capitalists, just as Murli Deora was of his masters in Washington DC.
The Aristo and “the Crowd”
How then –– say as a neo-realist script writer –– would one picture the typical financial aristocrat in India today? There are those who headquarter their companies in Amsterdam, own and control them from London, globally integrate mine, manufacture and trade in different parts of the world, including India, stash the family wealth in the Dutch Antilles, and hire the palace of Versailles for the wedding of their daughter. Grounded in global markets, and accumulation on a world scale, they are at their best with a political leadership and a state bureaucracy steeped in neo-liberalism. The “commanding heights” of policy formulation –– the Planning Commission and North Block –– have to be “captured”. So the Aristo’s foundation funds academic think-tanks, “world-class” universities, and the right kind of NGOs to spread the word about “good governance” and shape the agenda of social activism. “[W]hat better way to parlay economic wealth into political, social and cultural capital, to turn money into power?” The governing principle is, of course, market valuation. So you don’t put all your political, social and cultural eggs in one basket. The Hindu nationalists, the Sangh and its Parivar, may mouth the doctrine of Swadeshi (economic nationalism), but clearly, it’s not a part of their real agenda. Moreover, for the Aristo, what can be a more worthy agenda than restoring the grandeur of Vedic culture, bringing back that Golden Age in the present epoch of globalisation?
Whether national or transnational, the Family and the Business are the two defining symbols of the Indian financial aristocrat’s world. All his (it’s a patriarchal and enclosed extended-family life) decisions are guided by the concrete interests of his Business and those of his Family. That which is good for them is all that ultimately matters. The Aristo is gentle, good natured, understanding, even loving when it’s a matter of the enclosed family; predatory otherwise. Key politicians, judges, regulators, businessmen connected to the Family and those who are dependent on his Business (they will enjoy his patronage as long as they accept subordination), police officers, media persons, stock market dealers, all basically imbued with the profit motive, are “in his pocket”. He has an air of arrogance and superciliousness, he’s impenetrable, impervious, his gaze, cold and harsh. He will even buy up a bundle of news and current affairs TV channels if the opportunity presented itself. His struggle is pitted against rival Families and Businesses. He is part of the insignificant minority of Indians who hold tremendous wealth and power. His “temple to the new India” is an obscene symbol of the gross inequality that stares anyone in the face in India today. Philanthropy and corporate social responsibility are in if they’re good for the image of the Family and the Business, and they are, for he’s definitely not the drab kind of businessman operating in the realm of legality; indeed, if Aristo has gained the upper hand, it is through his utter defiance of all codes, legal and moral.
But what of the footprints that bothered Cacus? It all depends where the Aristo has been the predator. If it’s in Chhattisgarh or Jharkhand where’s he’s grabbed mining rights, or at the Ministry of Mines in New Delhi, where they pontificate on good governance but change the rules of the game for a price, perhaps he knows better. In this setting, predators don’t need to bother about such things as “footprints on the sands of time”. Are we being harsh and cynical? No, this is a world where predators go unpunished; it’s at the intersection of business and politics, the latter, politics-as-business.
The antithesis of this domain of the Aristos and their exploits is the milieu of “the crowd” –– having to make do each day, day-in-and-day-out, with less that Rs 20 in each of their pockets, “the crowd” is constantly struggling for the prime necessities of life. Between 1997 and 2007, 182,936 peasants who couldn’t pay their debts killed themselves, their souls yet to rest in peace. P Sainath, the rural affairs editor of The Hindu, calls this spate of farm suicides “the largest sustained wave of such deaths recorded in history”. But what of those the dead left behind, the 800 million impoverished and dispossessed –– “the crowd”? Contrast its plight with the affluence, the Mammon of the Aristo and you know that Marx’s words still ring true: “national wealth is, once again, by its very nature, identical with misery of the people”. The continuing great financial crisis –– a Part II, perhaps a Part III too –– may ultimately lead to the devastation of industry and foreign trade, which will make the rule of the financial aristocracy still more unbearable.
In such times, one needs to be particularly sensitive and receptive to aspects of the moral economy of the crowd. The leaders of the Communards in Paris in 1871 were Proudhonists and Blanquists. But the pulse of “the crowd” forced them to lump many of their prejudices, alerted them that they had to “lop off at the earliest possible moment” the “worst sides” of the old state, that they also had to allow the working class to “safeguard itself against its own deputies and officials, by declaring them all, without exception, subject to recall at any moment.” Yes, if we want to know what the dictatorship-of-the-proletariat looks like, we need to “Look at the Paris Commune. That was the Dictatorship of the Proletariat.” But we also need to gauge the pulse of “the crowd”.
The Indian left is the natural ally of “the crowd” against the capitalist convention and practice of accumulation of wealth by any and all available means, including “accumulation by dispossession”. The “dispossession”, nay the “theft” in India since 1991 –– as we have seen –– is essentially of state/public assets created by the social labour and sacrifice of scientists, engineers and workers, and surely, “the crowd” is more than aware of the “roguery”. As it is, this damned of the Indian earth has been subject to a very high rate of exploitation, but with the devious “theft” of social property and the pillage of Mother Nature by the aristos, things have gone from bad to worse. Thus, for the left, the need of the hour is to embrace “the crowd”; it is then that practice of the leadership principle of the “mass line” (“from the masses, to the masses”) will begin. Of course, the left cannot go by what “the crowd” wants irrespective of what it has in mind, but the left should never enforce what it believes is the right thing to do or achieve irrespective of what “the crowd” is convinced by.
 In what follows, we will, among other things, be profiling the “triumphs” of a number of “financial aristocrats” in India today. These accounts are not intended to disparage, indeed, in our view, the business behaviour of these financial aristocrats, their modes of acquisition and their pleasures are normal and socially necessary for the functioning of capitalism in India.
 Black Money: White Paper, Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, May 2012.
 “‘Black Money’ and the ‘Free Market’”, editorial, Economic & Political Weekly, 9 June 2012, p. 7 . I draw liberally, without using the inverted commas, from this and three other unsigned edits (also referenced) that Bernard D’Mello wrote for the Economic & Political Weekly as part of his duties as deputy editor.
 “‘Black Money’ and the ‘Free Market’”, op cit, p. 7.
 “Captive of Hot Money”, editorial, Economic & Political Weekly, 14 April 2012, p. 8.
 Bertell Ollman, “Marxism”, Monthly Review, Vol. 30, No. 7, December 1978, pp. 36-37.
 Black Money: White Paper, op cit, Section 2.1.1, p 2.
 CAGI, “Performance Audit – Report No. 19 of 2010-11”.
 Prabhat Patnaik, “Concern Over Corruption––Crusaders for the Lok Pal Bill Seem Rather Naïve”, The Telegraph, Kolkata, 27 July, 2011.
 See chapter 4 of David Harvey’s his 2003 book, The New Imperialism (Oxford University Press, Oxford).
 Also see chapter 1, “Lust for Gold, Lust for Silver” of Eduardo Galeano’s Open Veins of Latin America: Five Centuries of the Pillage of a Continent, Monthly Review Press, New York, 1973 (1997).
 Would Patnaik consider the [Communist Party of India (Marxist)-led] Left Front government of West Bengal’s attempt to enable the Salim group of Indonesia to acquire land in and around Nandigram (on which Salim proposed to set up an SEZ) and its use of the state’s repressive apparatus to force the local peasantry to acquiesce as state abetment of “primitive accumulation”? Tragically, a party calling itself communist connived with and assisted the government it led in trying to force the peasants to give up their land. We would, however, not characterise even this episode as part of the process of “primitive accumulation”.
 “The law itself becomes now the instrument of the theft of people’s land”, as Marx put it in chapter 27, “Expropriation of the Agricultural Population from the Land”, in Capital, Volume I. Again, in the same chapter, he refers to “The stoical peace of mind with which the political economist regards the most shameless violation of the ‘sacred rights of property’ and the grossest acts of violence to persons, as soon as they are necessary to lay the foundations of the capitalistic mode of production …” And further on, “the fraudulent alienation of the State domains, the robbery of common lands, … , and its transformation into modern private property under circumstances of reckless terrorism, were just so many of the idyllic methods of primitive accumulation.”
 The railways in colonial India were developed on the basis of a guaranteed rate of return on private investment –– what Daniel Thorner called “Private Enterprise at Public Risk” (the last chapter of his 1950 book Investment in Empire) –– which calls the bluff as regards the British claim of laissez faire in the mid-nineteenth century.
 Prabhat Patnaik, “An Aspect of Neo-Liberalism”, Macroscan, 19 December 2006.
 See chapter 6, “Findings in Respect of Panna-Mukta and Mid & South Tapti Fields” in the CAGI’s “ Report No. 19 of 2011-12 for the period ended March 2011, Performance Audit of Hydrocarbon Production Sharing Contracts (Ministry of Petroleum and Natural Gas)”, Government of India, New Delhi, 2012.
 See “Reliance KG-D6 Reserves Est. Off 80%: Niko” . This figure is according to Niko Resources, RIL’s Canadian partner in the venture.
 See chapter 4, “Findings Relating to KG-DWN-98/3 Block”, CAGI’s 2012 “Report No. 19 of 2011-12 …”, op cit.
 In this account of the accumulation process following the privatisation of the telecom service function, we have drawn on the following three articles by C P Chandrasekhar: (i) “The Telecom Mess”, Macroscan, 25 January 2000 ; (ii) “The New Monopolists”, Frontline, 16 February 2001, pp 102-103; and (iii) “Telecom Licensing: The End to the Mess?”, Macroscan, 12 November 2003.
 “Coal for a Song”, editorial, Economic & Political Weekly, 14 July 2012, pp. 7-8.
 CAGI, “Draft Performance Audit –– Allocation of Coal Blocks and Augmentation of Coal Production by Coal India Ltd”, unpublished, 2012.
 Ibid, Annexure 1B: Benefit Extended to Private Companies Year-wise as per Year of Allocation, pp. 94-101.
 Sadly, the then Left Front government of West Bengal, headed by the Communist Party of India (Marxist), when asked for its view regarding competitive bidding as an alternative to the prevailing irregular and arbitrary allocation of blocks, expressed its “reservations on the implementation of competitive bidding for allocation of captive blocks” (Ibid, chapter 5, section 5.4.1, p. 32).
 Part of the information on Sterlite Industries Ltd. is from Crocodyl Collaborative Research on Corporations . Besides this, there’s a brilliant book by Felix Padel and Samarendra Das entitled Out of This Earth: East India Adivasis and the Aluminium Cartel (Orient BlackSwan, Hyderabad, 2010) that, among other things, is a deeply upsetting account of the impact of the mining and beneficiation of bauxite on the indigenous peoples of Orissa and their habitat.
 In the latter, as Nancy Holmstrom and Richard Smith (“The Necessity of Gangster Capitalism: Primitive Accumulation in Russia and China”, Monthly Review, February 2000) put it in the context of the transition to capitalism in Russia, there was “a continent-wide drive to privatise state-collective property”, … “a hellish free-for-all ‘grabification’”, … plunder of “the nation’s wealth of natural resources”, sale of “state-owned gold, diamonds, oil, gas, Siberian forests, even plutonium”, and their unloading “on the West [by the new bourgeoisie] to amass their private fortunes”. After all, “capitalism as a social system requires such a one-time wholesale expropriation of social property.” Of course, the process of “primitive accumulation” in Russia and China, at least, helped create their own powerful capitalist classes; elsewhere, for instance, in Romania, in its power elite’s bid to gain membership of the European Union (EU), state-assets were sold to foreign capital, like the Sidex Steel Works that the UK’s then Prime Minister Tony Blair did a lot to ensure transfer to Ispat International, promising in a quid pro quo to, in turn, help Romania gain its much-prized EU membership, which it got on 1 January 2007.
 According to Mark Reutter (“Meet the New Owners: The Billionaire Mittals”, 2005 ):
In 2001, Mittal made a £125,000 (about $235,000) contribution to the British Labour Party. A month later, Labour Party chief and UK Prime Minister Tony Blair interceded on Mittal’s behalf to help him secure the purchase of Romania’s state-owned steel works. Blair’s personal letter to the Romanian Prime Minister argued that Mittal’s bid could help Romania gain EU membership.
The Romanian press reported that Mittal personally met with Privatization Minister Ovidiu Musetescu and presented a letter of bank guarantees worth $47 million as the first step in purchasing the majority of shares in the Sidex Steel Works. It has since come to light that the Blair government supported international loans worth hundreds of millions of dollars to assist Mittal’s growing chain of steel mills.
 On plans for coal mining in and on the outskirts of Saranda forest in Paschim Singhbhum district, see Satyen Bera’s “Between Maoists and Mines”, Down to Earth, 30 April, 2012.
 “The Anna Hazare Scam” by Analytical Monthly Review, April 2011 at .
 Derived, of course, from E P Thompson’s classic essay “The Moral Economy of the English Crowd in the Eighteenth Century” in Past and Present, No 50, February 1971, pp 76-136, reprinted in his Customs in Common (Merlin Press, London, 1991), “moral economy of the crowd” is now part of our historical vocabulary. We use the phrase to refer to a set of norms, values and beliefs that common folk evoke as worthy of defence against those of capitalism.
 “Notes from the Editors”, Monthly Review, April 1999.
 “The Anna Phenomenon”, editorial, Economic & Political Weekly, 23 April 2011, pp. 7-8.
 Arundhati Roy, “Capitalism: A Ghost Story”, Anuradha Ghandy Memorial Lecture, 20th January 2012, St Xavier’s College, Mumbai; later published in Outlook, 26 March 2012, p. 18.
 “Neo-Liberal Terrorism in India: The Largest Wave of Suicides in History”, Counterpunch, 12 February 2009.
 Marx wrote this in Capital, Volume I, Chapter 33 – “The Modern Theory of Colonisation”.
 Engels’1891 Introduction to Marx’s The Civil War in France, Op cit.
(*Bernie is a writer inspired by Marx and Engels. He is grateful to John Mage and Subhas Aikat who –– recognizing our collective responsibility –– helped in remedying some of the shortcomings in an earlier draft. He dedicates this essay to the memory of the lifelong communist Ajit Roy (1920-2011). )