People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)

Vol. XXX

No. 18

April 30, 2006

Imperialism Driven Privatisation Spree - II



N M Sundaram


LET us delve on the South Commission Report a little more in detail. The report asserted that privatisation did not ‘offer an across the board solution.’ It further cautioned that ‘in many cases, privatisation could turn a public monopoly into a private one’ pointing out that ‘the need to avoid a private monopoly might have been the reason why public enterprises were set up in the first place.’ Admitting that there could be ‘some cases where privatisation might lead to greater efficiency, particularly if the states’ management capabilities were severely limited’, the report emphasised that ‘it would be impractical or undesirable in some sectors, particularly those of strategic importance for the development process.’ It went on to say that ‘past experience suggested that efficiency of public and private enterprises was correlated.’


Pointing to ‘strong pressures’ for privatising state-owned enterprises, the report pinpointed the ‘social role that public enterprises were discharging.’ Elaborating on this aspect, it said that ‘in some cases, the public enterprises were created to serve an important social objective, such as development of a disadvantaged region, or to initiate the local development of new economic activity’ or ‘some other pioneering function… There were also public enterprises that performed a crucial function in strategic industries. In some cases, public ownership might respond to the need to exercise control over a critical natural resource like oil.’


Commenting on the functioning of public sector, the report ‘favoured more autonomy … to improve performance.’ The report identified that ‘where public enterprises failed to make a profit, pricing policies or operational inefficiencies were generally to blame.’ It deplored that ‘in many developing countries, the practice of keeping prices charged by public sector enterprises unduly low had in many cases amounted to subsidising goods or services, mainly consumed by the people in the higher and middle income groups in the cities’ and stressed that this would ‘add to public sector losses which drain resources that could be used to meet more pressing social needs.’ (Ibid)



The South Commission Report is as relevant today as it was at the time of its publication. But these recommendations remained unimplemented, in the face of the avalanche of offensive from the countries of the North, which did not want to share the responsibility or the burden, whichever way one looks at it, of pulling up the underdeveloped countries of the South on the path of a semblance of development responsive to needs of their economies – the needs of their own people. They wanted the process of exploitation reminiscent of the colonial period to be continued in new and diverse ways. This avalanche that started raging – the avalanche of what came to be known as neo-liberal globalisation – swept all these salutary goals and aspirations away.


Looking back, it might appear paradoxical that the policy of neo-liberal globalisation was ushered in around the same period as the urge for the New International Economic Order was given shape, with the US under president Nixon breaking away from the Bretton Woods monetary arrangement, by delinking its dollar from gold, in August 1971.


It was a period of complex crises in the economies of the world, particularly of the developed countries, one following the other. For one, the oil crisis rocked the world. Then there was continuing recession accompanied by hyperinflation – ‘stagflation’ as it was called – and burgeoning unemployment. The situation threatened to slide back into depression itself. The Western banks and financial institutions were flush and overburdened with petroleum surpluses that threatened to burst into a financial crisis, unless investment opportunities were quickly found. The developing countries had plunged into a debt burden of unmanageable proportions, with attendant fear of default. There appeared to be no end to the continuing crisis.


It was at this time the developed countries pitched upon the strategy of neo-liberal policies with emphasis on free markets, as a way out. No wonder the urge for giving shape to the New International Economic Order was promptly sacrificed at its altar.




It is one thing that the South Commission Report was never acted upon, swept away as it were by the avalanche of neo-liberal globalisation. But how could perceptions of individuals change so diametrically; is there nothing called intellectual integrity?


Within a year, history witnessed the same Dr Manmohan Singh turning things topsy-turvy as India’s finance minister under prime minister P V Narasimha Rao, in a reckless spree of privatisation by embracing neo-liberal economic policies dictated from outside. Ever since, it has been downward slide for India’s quest for self-reliant economic development. In reality, the policy of neo-liberal globalisation with its primacy of free markets had been initiated much earlier, but it was during this period, a brazen effort was made to give it respectability by imparting to it the halo of being in the best interests of India’s development and progress.


The same was the fate of other Third World countries as well. The destructive policy of neo-liberal globalisation with focus on free markets – free trade, untrammeled investments and indiscriminate privatisation – was forced to be adopted by all these counties which had been subjected to unbearable debt burden and extortionate political and economic conditions imposed by the international lending institutions, namely the IMF and the World Bank, acting at the behest of imperialist powers particularly the US.




The measures for self-reliance including nationalisation of industries and services that were undertaken did not mean embracing socialism. The pattern chosen did not deviate from the capitalist mode of development; it was on the contrary, an attempt to develop the country’s economy in the capitalist path, by creating the wherewithal for such development. In the process of bringing about this change, certain strategically important industries were nationalised, such as infrastructure, transport and communications, aviation, heavy industry, defence, finance and the like. Public sector was created precisely in this background. These measures just served the purpose of capitalist development, albeit efficiently and with a measure of self-reliance.


There was therefore, no ideological content in nationalisation of certain industries and establishment of a strong and vibrant public sector; this was just a sensible and practical choice. Of course, in the sense that the measure of creating a strong public sector in strategic and important industries had the element of freeing economic development from the clutches of imperialist exploitation, which sought continued dependence of the former colonies, there was an element of anti-imperialist ideology attributable to it. There was certainly no ideological distinction as between capitalism and socialism.




In fact, it was the demand of the Indian capitalists themselves, who neither had the large capital required for investment in these crucial sectors of economic development nor the inclination to tie up their own resources for long periods. They themselves wanted the government to shoulder this responsibility. They wanted the government to mobilise resources at public cost through taxation and borrowing for undertaking the required developments in the public sector, so that they could use the services, infrastructure facilities and industrial raw materials so made available, for development of their industries. More often than not, these could be secured from the public sector cheap and at subsidised rates at the cost of the public sector industry or the exchequer or both. This was a cozy and convenient arrangement and the private capitalists could develop their industries profitably.


The creation of public sector industries and the employment that could be provided directly and indirectly expanded the home market, thereby enabling the private industries also to thrive.


In reality this was the crux of the Bombay Plan or the Tata-Birla plan, as it came to be called. The essence of this was incorporated in successive planning efforts starting from the Second Five Year plan that gave primacy to the public sector – ‘commanding heights of the economy’ as it was described.




All these salutary measures aimed at independent national development, suited to the requirements and genius of each country, are now being systematically dismantled. The clock is being turned back as it were, in a manner to once again pave the way for colonial exploitation, the new way – the neocolonial way.


The manner in which governments, Indian government included, react to the situation, is as if privatisation is a magical remedy for all the ills besetting their countries’ economy and development. Lot of motivated ‘public opinion’ is whipped up by governments themselves and hired opinion makers through propaganda in favour of privatisation of everything. There is hardly space provided for rational thinking. The refrain is that whatever the private sector does is good and efficient and whatever the public sector does must be inefficient. This is hardly an objective judgment. This is downright irrational and dishonest. Concrete experience belies this perception.


Media propaganda too is being liberally used. The media that has long been subverted by indigenous and foreign financial interests, and in most cases owned and controlled by them, constantly beat the drum in favour of privatisation and neo-liberal reforms. This is the way of creating public opinion – manufacturing consent.


If establishment of public sector industries had no or very little ideological basis to it, the frenetic pace of privatisation cannot be said so. But critics of public sector accuse those defending this sector as being ideologically motivated. The truth is the other way round.


Privatisation as is being witnessed now has a deep-rooted ideological basis. This is the result of pressures from international financial institutions like the World Bank and the IMF, GATT and its successor WTO and multinational banks and investment firms; these are clearly due to pressure from imperialism.


These are not just demands for privatisation of crucial sectors of Third World economies. These are political as well as economic demands made for reversing the process of self-reliant economic development. These are in the nature of appropriating national decision making rights of independent countries. These are part of the offensives of imperialism driven finance capital under the aegis of neo-liberal globalisation. These privatisation offensives therefore, are clearly ideological in character, to sub-serve the needs and demands of imperialism. This is part of the conspiracy of recolonising Third World countries; part of the process of empire building.




Many of the decisions being taken under duress and often without public scrutiny cannot be said to be democratic and in the best interests of the country in question. Often, a rumpus in the government consisting of some select members of the cabinet and/or the bureaucracy, whose probity is usually suspect, take decisions and impose them as national policy. Often times, the decision is dictated from outside in the name of neo-liberal reforms. Let us consider how the process operates.


Political and bureaucratic elements, subverted in diverse ways by powerful political and economic forces, execute these policies without even a semblance of democratic scrutiny. Most intellectuals and media, largely driven or influenced by external forces kowtow to these policies, giving them an aura of respectability and passing off their own preferences as those of the people.


The maladies of the public sector such as bureaucratic, corrupt and distorted state intervention, evils of pubic monopolies, high cost structures and the like, have no doubt to be cured with determination and concern for public good. But privatisation cannot be the remedy. How could replacing public enterprises with private corporate structures unresponsive to people and civil society be the remedy? How could it be sensible to throw the baby away along with the bath water?




It must be realised that without a basic social transformation, public ownership by itself cannot sustain itself built as it is on a narrow and fragile foundation. It will remain crisis ridden and vulnerable as the very system on which it is built. The national capitalist class, reluctant to take on the landed interests would not undertake thoroughgoing land reforms for expanding the base of the home market. Accompanied by labour squeeze in the form of job and wage losses, the crisis inherent in the system is bound to increase manifold feeding the self-defeating urge for privatisation and yielding increasingly to imperialism’s dictate of neo-liberal globalisation.




Unless the urge for protecting and strengthening pubilc ownership is accompanied by campaign and struggle for more fundamental social changes like land reforms, employment generation and ending poverty, such regressive experience as privatisation would continue. Those fighting privatization of the economy should realize this truth and correspondingly widen the horizon and scope of their struggle.