People's Democracy

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


No. 46

November 23, 2008



Prime Minister’s Pipedreams

THE recently concluded G-20 summit meeting to discuss the global economic crisis has, to the glee of international finance capital, not come out with any decisive shift from ‘neo-liberalism’ in the approach or policies to redress the causes that led to the current crisis in the first place.

Aboard the aircraft on his return from the summit, Dr Manmohan Singh saw seven big messages that emerged at this summit. The first was that this global crisis required a global response, acknowledging the global nature of the crisis. Secondly, the steps taken so far through the massive bail out packages in many countries must be supplemented with a fiscal stimulus (read: greater public expenditures). Thirdly, provision of larger resources to the developing countries through the Bretton Wood institutions of IMF and World Bank. Fourthly, speedy introduction of regulatory reforms in the financial system (nothing ingenious!). Fifthly, multilateral surveillance of these regulations. Sixthly, to avoid excessive protectionism by individual countries to protect their domestic economies in the light of the crisis.

And the last was a reference to his intervention where he recollected the observation of John Maynard Keynes regarding casino capitalism of speculative finance capital.

These appear more of the Indian prime minister’s wish list than a set of considered decisions taken at the G-20 summit.

It is clear that a combination of bailout packages with fiscal stimulus is the way in which the leaders of the G-20 are considering as the way out of the current crisis. As noted in these columns in the past, bailout strategies are implicitly based on the presumption that once the financial institutions that have collapsed are resurrected, the future will be milk and honey. This ignores the basic cause of the current crisis. The current crisis has been caused due to the problem of solvency of the borrower who defaulted in the repayment of loans (sub-prime loans). The crisis has not occurred because of the inadequacy of the lender. Unless the borrower is economically empowered, no amount of pumping of liquidity for the lender can redeem the situation. What such pumping of liquidity will do is to cut the losses of the lenders ---international finance capital. This will not help the ruined borrower. Further, this will neither help the millions of common people whose levels of livelihood have been emasculated without any immediate scope for future employment opportunities. But, then, this is the cruel inhuman logic of capitalism.

The economic status of the vast mass of people ruined by this recession, leading towards a depression, can be redeemed only with massive doses of public investment that will create employment opportunities, with future security apart from boosting domestic demand. This is presumably what is meant by the fiscal stimulus that the G-20 is talking about. But such a stimulus can be effective only when we are clear about whom it should target as beneficiaries and for what purpose. Mere increases in public spending to create infrastructure through public-private partnership, as our prime minister contemplates, will not serve the purpose. This may bolster profits for the private sector but the required levels of economic empowerment of the vast masses of the people will remain unfulfilled. This can be done only through the infusion of public expenditures by the government on public works projects on a massive scale. In India, such public investment must necessarily be centered around agriculture, which is currently in one of its worst phases of distress.

Any set of policy prescriptions to emerge out of this crisis can succeed only if there is a strict control over cross-border flows of international finance capital. If this is not done then, as in the past, the movements of finance capital based on speculation may render void all efforts of boosting domestic demand led industrialisation in the country. It is precisely such restrictions that finance capital would resist. Given India’s track record under Dr Manmohan Singh, the earnest course in this direction appears unlikely.

Further, it is clear now that the institutions which emerged from the Bretton Woods conference post-Second World War are no longer adequate to deal with the current global economy dominated by finance capital. These surely need to be restructured. This would mean that they need to be democratised from the present pincer control exercised by the G-7. This cannot be achieved by adding a few ‘emerging economies’ on the high table. Dr Manmohan Singh, however, seems to be satisfied if India enters the high table and may not proceed beyond for affecting a meaningful democratisation.

As long as there remains the approach of resurrecting the pre-crisis global financial order by pumping in massive doses of liquidity, the current recession is bound to develop into a depression --- ruining the economic livelihood of billions of people across the globe.

Under these conditions, it is incumbent upon us in India to mount intense pressure on the Manmohan Singh government to urgently start a massive public works programme through substantial government investment. This is the only way to protect a further deterioration of the living standards of the mass of the Indian people. In the process, it needs to be restated that capitalism, based on exploitation and forever crisis ridden, is incapable of resolving the basic problems facing humanity. On the contrary, it exacerbates them. And the final human solution lies only in transcending capitalism.