Globalisation of Capital: Some Questions
April 7, 2007
By Debarshi Das, Sanhati
The New York Times columnist Thomas Friedman is a known whipping boy of the liberal left. When his bestseller The World is Flat was released in 2005 it was received with usual disdain and ridicule (I found the following review particularly enjoyable: The peculiar genius of Thomas L. Friedman). In the book, Friedman argues that due to advancement in information technology, globalisation has become a practical panacea for us. Here ‘us’ implies all the citizens of the world, not just those living in the first world. The playing field has been levelled so much that it has become flat. What is required is to reap the benefits of globalisation by pushing for greater openness of trade for goods and services and freer movement of capital. Globalisation creates wealth for all the stakeholders, and interconnects them in gigantic supply chains. People all over the world will be keen to maintain the supply chains undisturbed. World peace will thus be attained. There are some who are creating obstacles on this highway to peace and prosperity. Friedman calls them Islamo-Leninists.
Leaving aside the inanity of his arguments, the thrust of it – that the world is becoming a level ground for the smooth movement of capital more than ever before – has been knocking at our door for quite some now. Have we taken due recognition of the change? Have the programmes for social revolution been accordingly amended?
Let us do a little stock taking of Indian communist parties. Our attempt here is to draw a brief sketch, which runs the risk of being a caricature. One of the first tasks which a communist party does in its programme is to identify the ruling class of the nation state in which it is located. It gives a clear idea as to who are the rulers, who are the ruled; who may be identified as an ally and who are the enemies of social revolution. This document fundamentally sets one party apart from another, since identification of one’s friends and enemies decides what the immediate and eventual tasks of the party are.
Almost all the communist parties of India identify imperialism as a great threat to social revolution. This formulation has its basis not only in the colonial history of India – Lenin’s theorisation of imperialism as necessarily being of reactionary nature had an influence as well. However some of the parties believe that in the fight against imperialism the domestic capitalist class can be an ally, since the interests of the national bourgeoisie are mostly in conflict with the imperial capital. Participation in parliamentary politics therefore is part of the tactic, as it only strengthens the nation state in the fight against imperialism. Alliance with the domestic bourgeoisie is needed also to engender a process of indigenous capitalist development, which by strengthening the nation state will ensure a tougher resistance against imperialism. In order to assist development of domestic capital one needs a strong public sector. Some of the important functions which the public sector will serve are, (a) investing in sectors which are shunned by private capital due to high risk or long gestation period needed to recoup the return (these sectors may be vital for the long run growth of even private capital); (b) account for the externalities which do not enter into the cost-benefit calculations of private capital (simply put, it takes social costs and benefits into consideration, such as establishing a water purifying plant or a public park). These parties recognise that in agriculture, where the majority of India earns its livelihood, capitalist mode of production may not be dominant. There is prevalence of tenancy farming, subsistence family farming which do not satisfy the principal conditions of capitalist production (namely, production for the market, existence of wage labour and accumulation of capital). But capitalism seems to have made an entry into the scene and it is believed to be the ascendant mode.
On the other side of the spectrum are the political groups and parties which do not have much faith in the national nature of the domestic bourgeoisie. Their formulation draws from Mao Tsetung’s idea of comprador bourgeoisie – a capitalist class which does not see much profit in developing independently, in conflict with or in disjunction to imperial capital. It mostly works as agent of the latter. This class is incapable of bringing about a vibrant capitalist economy, where reinvestment of surplus will transform the productive forces. Capitalism is often thought to be associated with huge transformations. Marx had identified it with change, creation and dynamism. Joseph Schumpeter had described its trajectory as that of ‘creative destruction’. But compradors do not have such ground shattering changes on their agenda. They are what Mao described as ‘underlings’; they are for the status quo, not for change. Therefore there is not much point in allying with this reactionary class. Parliamentary politics, a ploy of the agents of global capital and feudal landlords, may not at all be a weapon for bringing about ‘new democratic revolution’ – a revolution to transform a semi-feudal, semi-colonial state into a capitalist one (with the important qualification that this change is to be brought about at the behest of the new democratic state). Therefore the principal tactic for throwing out the semi-feudal, semi-colonial state is to apply extra-parliamentary means. Mass organisations will keep contact with the ‘civil society’ – whereas the party will work from underground. These parties and groups are often pigeon-holed in the nomenclature Naxalites, and more recently Maoists.
What brings Tom Friedman into this unlikely company is the change that has taken place in the last three decades or so. Friedman, perhaps unknowingly, is referring to the fluid identity and movement of global capital. Capital is losing its national origins more than ever before. Lenin’s finance capital had a strong nation state and other state-centred paraphernalia tethered to it. Since nation states, controlled by their capitalist classes, had their stakes in their respective capitals, they fought world wars in the service of capitals. The neoliberal world of today presents us with a different beast. The new finance capital is much more faceless and swift. Unprecedented amounts of capital are crossing national borders in a matter of seconds. These flows do not owe allegiance to any nation. Capital originating from India will be as swift in the global hunt for higher return as the capital from Honduras.
In the wake of dominance of ‘nation-less’ capital, the identity and existence of the nation state itself is increasingly coming under pressure. Nonetheless, it is true that much of the flow is denominated in terms of US dollars. This provides the US economy the freedom to go on purchasing goods and services from the rest of the world by simply issuing dollars. The faith of the global investors on dollars is partly explained by the fact that (a) US has been the leading capitalist nation for several decades now, (b) though its economic might may be waning, it’s military and global political prowess are still unchallenged. However, a declining US economy running on huge current account deficit can not carry on the way it has been doing. A collapse of global confidence on US dollar is long overdue. In sum, the mightiest of the nation states is itself not very comfortable with the new beast.
Need not the programmes of communist parties be responsive to these political economic changes? Should we not move away from the binary of domestic capital (national or comprador) and imperial capital, when their colours are intermingling like never before? Following are some tentative hypotheses.
National capital a la Bombay Plan and Nehruvian Socialism is long gone. One seldom finds corporate houses beseeching the State’s intervention in support of ‘Indian’ capital for fighting multinational corporations. Communist Party of India and Communist Party of India (Marxist) seem to be much more concerned about indigenous capitalist development than the domestic capitalists. Exhortations for nation state from party quarters notwithstanding, the domestic bourgeoisie does not appear to be troubled by the nation state’s future either. On the other hand, the subservient nature of domestic capital seems to be on the decline too. Indian business houses are buying large businesses of First World origin. There are instances of the reverse nature as well. Perhaps all this demonstrates: capital is on a process of metamorphosis – to become a homogenous, single and global category. Conflicts between different capitals, with trenches dug along national boundaries, are subsiding. In sum, there is not much hope of indigenous capitalist development to be carried out by the ‘national’ bourgeoisie. Moreover, the fight against imperialism in a particular country can not be seen in isolation from the fight in other countries. As capital loses its national mooring and becomes global, it is transforming its dialectical opposite into a single mass. Successful resistance against capital has to be built up at an international level. There are insinuations – political or academic – harping on the differences among labours. These have to be clearly analysed and put into perspective. Leon Trotsky’s Permanent Revolution seems to be relevant. So do the World System theories a la Andre Gunder Frank et al.
What effect did these developments have on the domestic ruling class alliance? The previous characterisations had feudal landlords as one important partner in the ruling alliance. Has their stature remained the same? Who will be the allies in the resistance against capital?
Events in India seem to indicate that the balance within the ruling class alliance is tilting in favour of industrial capital (as also services). Terms of trade in the domestic economy has been going against agriculture for a long time now. This is affecting profitability in agriculture and the surplus generated from it. Procurement operations of grains and farm subsidies are being curtailed in the name of fiscal prudence. Quantitative restrictions on farm products imports have been lifted, import duties have been drastically reduced; land is being grabbed on a massive scale. Compensations paid for acquired land should have kept the landlords contended, since their livelihood does not depend on land. But it will imply an eventual emasculation of the landlords – as the basis of their political and social power is eroding. One could also infer that a substantial part of the small, middle peasants is joining the ranks of those who are below them. Marginal peasants and landless labourers are accumulating losses, getting thrown out of jobs, or from the lands. Primitive accumulation in England is often compared to the process of land grab under way in India. Like India, England had its tragedies and victims. But there were the shock absorbers as well. Industrial revolution (which came a little later) and migration to the colonies absorbed a large part of the destitute. In India, however, the rest of the economy is not producing sufficient jobs for the unskilled. A severe crisis in agriculture will perhaps herald the next big political upheaval.
These have been some of broad questions that are needed to be addressed. We have attempted to answer a few of them and the answers are, at best, the first approximations. Detailed studies, analyses and debates are required. An alternative vision of development for the Third World, devising a global system of economic management (both these agendas have been appropriated and manipulated by global capital through its leverage over the multilateral lending institutions), question of democracy and economic incentives in a new democratic state or a socialist state, these are some of the issues which are interconnected to the ones which have been raised here. One thing seems to be clear: global peace and prosperity are not as close at hand as Friedman would like us to believe.
As one reviewer points out, two points are more distant to each other on a flat world, than on a round one. It may be appropriate to view the world as a whole. But let us keep it round, so that all of us may join hands.
April 7th, 2007 at 9:30 pm
Is it true that “different capitals, with trenches dug along national boundaries, are subsiding” ? We have instances, for example in Africa or Middle East, where European and US capital are often seen in conflict (even on two sides of a civil war). Or in other words, is inter-imperialist rivalry declining ? Doesn’t seem so.
April 8th, 2007 at 8:33 am
To add to my earlier comment - it is a known fact that the Social Forum process is largely financed by European capital and can be looked upon as an attempt by them to curb the hegemony of US capital. Pratyush’s journal at radicanotes.com has an interesting entry related to this
http://radicalnotes.com/journal/2007/04/07/stiglitzs-another-world/
April 8th, 2007 at 5:56 pm
Pinaki, what Debarshi might be suggesting is that outright wars between advanced industrial nations may be a thing of the past. What the future might hold is strategic posturing, competition in economic and ideological control, military financing of two opposing sides in a third geographical location, etc. On the scale of the vast, bloody, protracted, and repeated inter-imperialist rivalry that has happened in the last century, where the spheres of conflict were the advanced nations themselves, this new future perhaps does fit Debarshi’s description…
April 9th, 2007 at 1:58 pm
Thanks Pinaki for providing me with an opportunity to clarify.
First, I contend that the antagonism among the capitals is declining. Not that it has vanished.
Second, I have used the term capital and finance capital interchangeably in the article. This might have been a source of confusion. Apologies for that. While remarking that capital is becoming a supranational entity, I primarily had finance capital in mind (acquisition of Corus by Tata and other such examples may testify to a tendency of the nation-less-ness of productive capital as well). More precisely, that part of capital which is volatile and swift. This component of capital has exploded astronomically in volume in the last three decades or so. As much as 43% (or 10% of the GDP of the country) of the much vaunted $140 billion foreign reserves that India holds (March, 2006 data) is courtesy this kind of footloose capital (cumulative portfolio inflows and short term debt). Global mutual funds, hedge funds, pension funds etc. which manage billions of dollars, are the sources of such flows. In the Indian nomenclature these are known as FII (Foreign Institutional Investments), as opposed to items like FDI (Foreign Direct Investments).
These ‘hot money flows’ are different in nature from productive investements in the sense that they earn returns by buying assets which have high yields, and selling these ‘at the drop of the hat,’ when they anticipate a fall in the prices. They do not earn returns by directly building machines or factories (and there are questions regarding whether the supposedly productive FDI does at all bring in new technology, generate employment and output). Increasingly economies all over of the world are gearing their policies to attract and placate such flows, a sign of the ascent of neoliberalism. It has been seen repeatedly, attempts by a country to rein in the capriciousness of these flows have led to humiliating backing downs. Thailand, December, 2006 provides a recent example.
Are these flows linked to the real economy? There are theories of investment in mainstream economics which assert that higher asset prices (which may have been spurred by FII) are a signal for higher real investments. Therefore more portfolio investments imply higher real investments and higher growth. There are disputes on this. But what is definite is, if a country is on full capital account convertibility, inflows or outflows of capital affect its foreign exchange rate directly. A sudden and huge outflow – the kind that was witnessed during the Southeast Asian crisis of 1997-98, in Brazil and Argentina in 2002, or Mexico in 1994 – leads to a collapse in the price of the domestic currency and a consequent loss of confidence on the ‘fundamentals’ of the economy by investors (both domestic and overseas). This induces further outflow. A vicious cycle of downward spiral ensues. It has been established that poor economies are more prone to finance capital-led havocs than rich ones (in a way, Kuver was not much off the mark). The standard deviation of capital account surplus (capital account surplus is an indicator of the net cumulative inflows) of the former is nearly twice than that of the latter. But it appears, to me at least, that because no nation state has any direct control over these massive flows of money, it is not a matter of distant future when a rich country will be in the same position as, say, Indonesia was in 1998 when its GDP plummeted by nearly 14%.
Perhaps Dipankar will be able to throw more light on these issues. His M Phil dissertation was on related themes I recall.
April 10th, 2007 at 7:13 am
There are optimists. there are pessimists. and then there are Friedmanists (people who beleive what they read or what they are told including Freidman himself). On Pinaki’s argument and Kuver’s counter argument, I shall recommend a chapter in the flat book written in a round world. It’s titled The Dell Theory of Conflict Prevention. Has anyone of you read the book or are you relying on reviewers who can also be anyone of the three types mentioned above?
April 10th, 2007 at 12:44 pm
“In those days [1999], Mr Friedman … used to peddle the silly idea that countries with McDonalds would never go to war against each other. Well, before he could say ‘take-away’, the United States bombed Yugoslavia, while Pakistan and India fought a war over Kargil. All these countries had McDonalds (OK, the Indian ones don’t serve beef) but they still went to war. I don’t know whether the Panamanians ate Big Macs in 1989 but even if they did, I suspect George Bush (the elder) wouldn’t have thought twice about invading them…In The World is Flat, Mr Friedman ditches McDonalds in favour of another lemon, the Dell Theory of Conflict Prevention: “No two countries that are both part of a major global supply chain, like Dell’s, will ever fight a war against each other so long as they are both part of the same global supply chain”.”
: Siddharth Vardarajan, ‘The Hindu’ Book Review.
Sorry for spamming.
May 5th, 2007 at 2:34 am
I would like to take this opportunity to comment on the article carried on the Sanhati website, about the pro-CPM intellectuals’ statement, and its critical analysis. For 3 decades, the intellectuals have been appeased and gratified by the CPM, and given plum posts and made into the cream of society. Very good. But these people were entirely devoted to relishing their privilege - rather than using their proximity to the powers that be to advance the cause and interests of toiling and poor people in West Bengal. So much good and strategic counsel could have been given, which could have helped the system to improve. But no, none of this was done. And if anyone did try their best to do something and then saw that this is impossible - then they should have distanced themselves from the rulers and exposed the failures. I know that Dr Ajit Narayan Bose did this. But everyone else was simply basking in privilege.
The CPM has to be ousted and its fascism arrested. And such parasitical creatures as these intellectuals should face public disgrace.
God forgive them, for no one else will.
May 5th, 2007 at 10:55 pm
Rama - thanks for your comments. Cuckoo’s Call is quite an interesting blog…
July 1st, 2008 at 2:49 am
interesting