Abstract
We report the creep of unproductive finance into the Indian economy. The consequences are the aborting of the circuits of money and production and the employment of labor. The way forward for the next 25 years is for the working class to lay claim to the the mode and relations of production through socialist, secular, democratic means.
Introduction
The contribution of Rudolf Hilferding to Marxian economics was the development of Finance Capital in the monetary and real circuits of Marx and Engels. He sought to conceptualize the emergence of the large financial houses of his time and work through the implications of their instantiation into the capitalist economy. Coming to the 20th century, at first the discussion revolved around banks versus markets for the functioning of capitalist economies, both positively and normatively. In India, the subject was not moot because initial conditions were given in the form of an extant banking sector. The task was to protect it from the encroachment of private finance. A related theme was which came first in history: the financial or the real? Metaphors like ‘the tail wagging the dog’ and one being ‘handmaiden’ to the other were freely used. The heat generated moved to the soft light that finance mattered, never mind in which form. So, the belt protecting banks in India was removed and the real was made handmaid to finance. Subsequent studies settled on the thesis that there was a threshold above which finance operated. Or, there was a threshold below which finance was futile in that the conditions for ‘primitive accumulation’ had not been laid. “No frills” accounts remain stillborn in conditions of immiseration. It is only when a certain stage of development has been reached that finance can play a productive role. The wheel has turned full circle in the current stage of the theoretical and empirical journey connecting finance and production. Now, finance does not matter at all! In other words, attention must be directed at implanting the seeds of technological and social revolutions in the town and countryside in economies like India where the role played by agriculture remains pivotal. The supply and demand chains connecting agriculture and industry cannot be clogged. The former provides the encompassing Basic good, food, to both sectors, the latter supplies intermediate inputs to the former. In the tradition following Marx, the connections between town and country were presented in the form of Departments. The Departmental schema can as well be written for Non Basics or luxury goods not required in the input-output system of an economy. Robots and Artificial Intelligence (AI) can substitute for labor as an arguable possibility. The consumption of inessentials is an aspect of the grotesque inequalities that prevail in India. The question has been posed: Why cannot we have a society where the reserve army of the unemployed remain in check through turning invisible and dying? The middle class will burgeon and their increasing incomes will absorb consumer goods. The fundamental flaw in such a model is that it is fatally narrow in terms of the production of commodities and will always teeter on the brink of collapse, if not collapsing periodically, because the law of value cannot be circumvented. The production of goods and services and the distribution of the surplus between profits and wages is the sine qua non of capitalism and is ignored at its peril.
Clearly, the allocation of resources and incentives in the desired direction must be orchestrated by a central authority under the aegis of a Plan. The Indian Plans were renowned for that purpose, the fruit of inputs from the best minds in the subject within the country and without. The celebrated Polish Marxian economist Michał Kalecki visited and refined the Departmental schema to take cognizance of agriculture and the nuances of a “mixed economy”. All shades of ideological expression were freely expressed. That the Heavy Industry Mahalanobis model was adopted and a fully-articulated classical-Marxian model founded on Basics was not is beside the point. The point is the Plan and a hundred opinions thereof which bloomed as they were informed by unfolding experience. Alas, the Planning Commission was crushed under the heel of liberalization. Perspective and the long-term has given way to the project-granting largesse of Niti Aayog. Intellectuals have been replaced by card-carrying bureaucrats. The two macroeconomic arms of the government, the monetary and the fiscal authorities, have followed suit. The Reserve Bank of India (RBI) is shorn of economists. Its constitutional mandate to direct credit towards the amelioration of poverty has been forgotten in its obsession with inflation. It is not realized that inflation targeting is the outcome of a specific mainstream model and is not divinely ordained. Successful battles with inflation in other parts of the world in the last century were the result of dialogue between Capital and Labor and social democratic states where each gave and took in tune with a Plan. Coming to the fiscal authority, the Fiscal Responsibility and Management Act fallaciously transfers to the composite the logic of the household to plan to eventually balance its budget. Governments are not so constrained.
We proceed to analyze finance and the working class in India in that order.
Predatory and Progressive Finance
How many Indians have ceased to enter their banks for fear of being assaulted by officers desperately seeking to transform their meagre savings into mutual funds? Even the nomenclature has changed. Banks are wealth managers. No proletarian is immune. Finance is insatiable. The working class is a continuum and at the higher ends of the spectrum the middle class is seduced to debt-finance their homes, for instance. The fortunes of the real estate market is the barometer of financial crises the world over but it is a woeful feature of these crises that people believe that ‘it’ will not happen again even when the alarm bells are ringing. Myopia and short memories are hand-in-glove.
The working class get bamboozled. What can we expect when work is intermittent and wages paltry? The daily gyrations of the market dazzle with the prospects of astronomic gains (and catastrophic losses, but these are believed to average out). Food can be put on the table, rent can be paid, children can be sent to school. Moving from households to firms, the distinction between financial and non-financial firms is dissipating. When demand is weak and prospects are bleak, productive firms must seek alternate avenues to serve their bottom line and to placate their owners. Finance promises possibilities that increase and multiply. Shares are issued on the basis of prospectuses promising projects which may or may not be viable. On hand, on the other hand, are smart overnight gains to be made in financial markets. Shares are issued to be bought back. Financial innovations proliferate as offerings are tailor-made to different tastes. In short, profits are not ploughed back into the accumulation of capital but distributed to shareholders. With vultures of mergers and acquisitions perched on the shoulders of managers, the value of the stock of the company at any point of time is the only number on the radar of companies. Rentiers and managers are joined. The axe falls on employees, actual and potential. Downsizing is the fate of the former, no vacancies of the latter as they enter the labor market. Both the fiscal and monetary authorities are co-conspirators. A worldwide consensus on public finance is that unearned incomes must be taxed. Thus, a dividend tax and a capital gains tax. At the same time, undistributed profits for the purpose of investing in employment-generating clean investments would not only be exempt from taxation but would be showered with incentives. The face of the Indian government is turned resolutely in the opposite direction. Corporation taxation is not finessed as above and, in general, is frowned upon. Coming to the RBI, the downward-moving interest regime of recent memory meant easier borrowing for all financial interests as well as the government. We clarify that debt-taking per se is bread-and-butter activity in a capitalist economy. What is at stake here are the sectors or Departments into which monies must flow. The danger of reliance on markets is credit cycles. In contrast, planned credit disbursements would follow the imperatives of a Plan.
For constructing an alternative schema, we can do no better than return to the Chakravarty Committee Report (1982) which oriented the Indian monetary system in the right direction. The case was made for monetary targeting, that is the flow of credit to the Basics sectors and the denial of credit to the non-Basics sector. The RBI and the banking sector were to work closely to that end. To the latter was left the hard task of not only inviting and screening entrepreneurs but handholding them with advice and corrections through the life cycle of projects. The RBI would be on protective standby with its reserves policy. What might back RBI reserves policy? Countries of the world are joined in the common but uncoordinated objective of fighting the ravages of climate change. The task is herculean with gigantic projects costing the earth (double entendre intended!) and beyond the pale of consortia of private interests. Unsurprisingly, all governments have succumbed to the plans of private interests. The axiom that private capital is for maximizing profits is ignored. In fact, the tension of using fossil-fuel-guzzling energy today to generate activity and provide employment while provisioning for green energy tomorrow can only be faced by governments. Only the state can steer the painful and difficult transition from brown to green. Private professions of faith are not credible. Monopoly capital from India stands out in its plan to take over the world in green investments tomorrow while ravaging the environment today, breaking all laws with the connivance of the government.
Output is produced by workers and capital which is the congealed labor of past comrades. The two are in conflict at the point of production and the division of the surplus. Yet wages must be adequate to absorb the surplus and profits must be adequate to provide the incentive to accumulate capital. In the next section, we illustrate the dynamics of the working class in this tension.
Workers of India, Unite
Until recently, the working class as a revolutionary force was written off after presumably withering away decades ago. No single cause is responsible. Computers and the increasing role of drones in production processes means less use of the input of labor. The push from political economy was the brute-force ramming of laissez-faire and markets into the body economic of societies the world over. Trade unions were crushed and the work force was atomized. In India, the incontrovertible statistics speak for themselves. The informal sector is a large and growing part of the country. Work is piecemeal and makeshift. Security and welfare are absent. The anti-working class credentials of the government have never been in doubt. More and more powers are usurped by the Centre. The recent four Labor Codes are a case in point. Chirayu Jain, 2022, has closely investigated the implications for the construction industry that is the largest provider of employment after agriculture and domestic work in India. Over years, dialogue and protest by worker organizations led to the successful implementation of welfare and safety nets for a business that is accidents- and fatalities-prone. The efforts culminated in the Building and other Construction Workers Act (BOCW) in 1996. BOCW Boards were local, working with state governments in provisioning for varying worker protections based on the differing conditions. The new codes rend asunder these particular arrangements worked out over decades, abrogating the design of all welfare schemes to the Centre. Significantly and shockingly, the new Social Security (SS) Code, 2020, allows for funds to be invested in assets. The government expresses the intent to curb contractualization but the working of the Code will strengthen that process. Laborers working continuous, arduous hours and meeting the definition of permanent labor can be classified as contractual, thereby depriving them of their rights.
Yet, Lo and Behold! The working class rose Phoenix-like from the ashes in the home of imperialism, striking at the heart of monopoly capital in the US. With purity of purpose, not manipulated by political parties, small groups of workers collected and began to resist exploitation in the form of subpar wages and Dickensian working conditions. The efforts to unionize has incurred the wrath of the capitalist class that is using every trick in the book to bash the rebirth of the trade union movement.
In India too, hope must be wrung from all forms of worker organization and resistance. The cause célèbre, of course, is the recent movement of farmers that snowballed to the point of a faceoff with an implacable state. As with the US, there were no signs that the small groups of farmers congregating from different states would fuse into a united front. Even Marxists did not grumble that a coming together of big and small farmers was contradictory. Indeed, the growth of a broad working class consciousness through living together, sharing and striving to understand diverse histories and cultures, was an unfolding miracle. The farmers remain strong. The Samyukta Kisan Morcha (SKM) has rejected the committee formed by the government on the Minimum Support Price (MSP) and other issues for its anti-farmer composition. In late July 2022, dairy farmers from all over the country protested outside Parliament against the imposition of the GST (Goods & Services Tax) on final dairy products and intermediate goods used in the production of milk products. Since farmers are net buyers of agricultural goods the imposition would increase the prices of an array of related essentials for all households. The farmers asserted that cooperatives and small firms in the sector would be wiped out and large corporate houses would expand to take up the space vacated by them. India is the largest milk producer in the world.
Protests in India are fortified by the invasion of capital in the despoilment of natural habitats. A diary of hearings of the dispossessed and marginalized every day can easily be maintained. Some entries are presented here. A large river-linking project connecting two states in India has earned the ire not just of affected tribals (Pal, 2022). The Union Government has used arithmetic in an erroneous manner in a plan to distribute ‘surplus’ water from the state of Gujarat to the ‘deficit’ state of Maharashtra. The mathematics displays ignorance about natural flows including floods and droughts. Lessons that could be learnt from aborted schemes in other countries are ignored. The project will submerge 6,065 hectares of land and affect 61 villages in both states. 2,509 families will be uprooted. Protests have been building up over February and March 2022. Another illustration is the notification on June 28, 2022, by the Union Environment, Forest and Climate Change Ministry of an amendment of Forest Conservation Rules, 2022, to allow for the Central Governmentto first collect money from developers to clear forests and then coerce the state governments to obtain the consent of affected tribals. In Sitapur, villagers underwent a fast unto death in Ratauli Deh village of Laharpur for non-completion of anti-erosion work along the Sharda village by the government along with the non-provision of other essentials like education. Over the month of June 2022, residents of the Vadgam constituency in North Gujarat began a protest as the water levels of the Mukteshwar and Karmavad lakes had dipped precipitously and the water bodies were drying up. In an imaginative form of protest, 50,000 women sent postcards to the Prime Minister advising him to bring both the water bodies under the Narmada command area. Early the same month, women in Koraput’s Semiliguda district, members of the Maliparbat Surakhya Samiti, blocked construction of a road leading to a bauxite mine. The project was being conducted under false pretenses. In West Bengal, thousands of tribals have been protesting since February 2022 against an open-pit coal mining project in Deucha Panchami. They face eviction and the evisceration of their forest land. A geological survey shows that the region contains many faults. The use of explosives for excavations posed the danger of activating the faults and making the area earthquake-prone. The coal block is the largest in India and the second-largest in the world. On March 14, 2022, 884 Anganwadi workers, many of them single mothers, were sacked for demanding, over 39 days of protest, a raise in their honorarium and civilized working hours. After breaking their backs serving the public during the pandemic, they had not received their wages since January 2022.
The merchant class is not immune. Petty traders and shopkeepers planned a nationwide strike at the end of July 2022 to protest the hike in taxes on a set of Basics ranging from food to items of daily consumption. It is often forgotten that indirect taxes like the GST are regressive, that is impact negatively on the poor while direct taxes like income taxes can be progressive and impact on the rich. The government has been dismissive of the latter on the incentive effect argument. In an economy that is contemptuous of the working class, the capitalist class must be kept fat and happy.
Conclusion
Indians have no cause to celebrate their 75th birthday. More than one transition has been aborted. Agriculture must be nourished with consolidation of land holdings and the absorption of appropriate state-of-the-art technology that offers dignified employment. Ample scope for green, labor-intensive manufacturing is available. The heat of oppression beats down mercilessly on the poor and unemployed. Still, out of nowhere the bracing winds of democratic change are sweeping the country in the form of the spontaneous coming together of men and women cutting across caste and creed. While Indians cannot wish each other Many Happy Returns of the Day, they might wish each other Many Happy Returns of the Morrow.
References
Jain, Chirayu, 2022, A New Labor Regime, Phenomenal World, July 9, 2022
Pal, Sumedha, 2022, Gujarat: Tribal Protests Intensify Against Par-Tapi-Narmada Project Over Displacement, The Wire, March 25, 2022
(Aneesh Correa and Romar Correa are independent researchers.)
