People's Democracy

Editorial

‘OCCUPY WALL STREET’ PROTESTS

Growing Anger Against

Capitalist Crisis

AT the recently-concluded summit of India, Brazil and South Africa (IBSA) held at Johannesburg, South Africa, prime minister Manmohan Singh has called upon the developed countries to “take steps to avoid hard landing of global economy”. This call comes a fortnight before the leaders of G-20 are to meet at Cannes, France. 

Before departing for the summit, the prime minister held high level consultations with the managers and advisors of the Indian economy expressing deep anxiety on tackling Indian economy’s twin problems of soaring inflation and sharply declining industrial growth rate. 

Both the PM’s call to the developed nations and the prescription to be adopted for the Indian economy reflect the fact that India under the leadership of the UPA-II government continues to look for solutions within the framework of neo-liberal economic reforms.  These, as we shall see later, will only deepen the misery of the vast mass of the Indian people. 

Importantly, these expressions of the Indian prime minister show that he is completely oblivious, as many leaders of the global economy have ‘chosen’ to be, of the growing global anti-‘Wall Street’ protests.  These are sweeping across the world from Australia through Asia, Europe and, of course, to the Americas.  Over 1500 protest actions took place all over the world on the ‘global day of action’ in 82 countries.  The `Occupy Wall Street’ movement began on September 17, 2011 in Liberty Square in New York Manhattan’s financial district and has now spread to over 100 cities in the USA.  The rallying point of all these actions was the focus against `corporate greed’ as the cause of the current global capitalist crisis that is threatening to slide into a double-dip recession. 

While, on the one hand, protestors in Boston outside the Bank of America building carried screaming headlines declaring `class war’, the rightwing Republican Party has raised the alarm that these protests are, indeed, a `class war’. 

Since the global recession began, reportedly the sale of Karl Marx’s Das Kapital have soared. Even the venerable Pope, reports suggest, has ordered copies for the Vatican. During the anti-Vietnam war protests, in the same city of Boston, university campuses had posters saying: “if you want to make the grade, then you have to be good at Mar(x)ks”. 

Those falling back on Karl Marx’s seminal work Das Kapital to understand the functioning of the capitalist system and the genesis of its crises will do well to read the concluding chapter of Volume I.  “Capital comes dripping from head to foot, from every pore, with blood and dirt”. He buttresses this with a quote, in a footnote, from a worker T J Dunning: “With adequate profit, capital is very bold. A certain 10 per cent will ensure its employment anywhere; 20 per cent will produce eagerness; 50 per cent, positive audacity; 100 per cent will make it ready to trample on all human laws; 300 per cent and there is not a crime at which it will scruple, nor a risk it will run, even to the chance of its owner being hanged.” It is this pathological drive to maximise profits at any cost, the inherent character of the capitalist system and not the individual greed of some or weakness of regulatory mechanisms that is the root cause for the present crisis.

Greed is but a euphemism, one amongst many others, for profit maximisation, the raison d’etre of the capitalist system.    The myth that greed is something alien to capitalism and, hence, can be kept under check is, once again, exploded. Capitalism has greed as its inseparable companion.  It is the system and not the avaricious attributes of individual capitalists that is the culprit. 

Another consciously engendered myth that the State under capitalism is a benign neutral entity has been shattered.  True to its character, the capitalist State intervened to bailout those very financial giants who, in first place, caused the current crisis.  The Special Inspector General for the US government’s financial bailout programmes says, “Since the onset of the financial crisis in 2007, the federal government, through many agencies, has implemented dozens of programmes that are broadly designed to support the economy and the financial system.  The total potential federal government support could reach upto $ 23.7 trillion.”  Compare this with USA’s GDP which is just over $ 14 trillion.  The US treasury spokesman, however, denies the veracity of this figure.

Similarly, there have been large-scale borrowings by the governments of several developed countries to finance such bailouts.  Corporate insolvencies have thus been converted into sovereign insolvencies.  In order to meet this debt burden, the EU is today in convulsions with governments like Greece, now Spain more likely to follow, adopting severe `austerity’ measures, meaning, drastic cuts in social benefits and expenditures for the working people.  General strikes and protests have become the order of the day. 

The impact of the crisis has been severe.  One in six US citizens are living in poverty, according to new census data. The US Census Bureau reported that average household incomes dropped and the poverty rate increased for the third year in a row. The official unemployment rate is currently 9.1 per cent, meaning 14 million US citizens are out of work. And the overall poverty rate climbed to 15.1 per cent in 2010, or 46.2 million, up from 14.3 per cent in 2009. The poverty line is set at an annual income of $22,300 for a family of four. Real median household income declined by 6.4 per cent to $49,445 between 2007 and 2010. The income drop for black people was a whopping 15 per cent compared with a 7.1 per cent average. The unemployment rate for African-Americans is currently 16.7 per cent. Reflecting the impact of the recession, the US poverty rate from 2007-10 rose faster than any three-year period since the early 1980s, when a crippling energy crisis and neoliberal government cuts contributed to inflation, spiraling interest rates and soaring unemployment.  The total number of people living in poverty — over 46 million — is the highest in numerical terms since the census began tracking it in 1959. As a proportion of the population it ties with the 1993 poverty level for the highest since 1983. The income share of the country’s top 1 per cent is hovering around 20 per cent, up from about 8 per cent in the 1970s.

Further, new US census data analysed by the Pew Research Centre shows that the recession wreaked havoc on the wealth of all Americans but that whites lost the least amount as a percentage of their holdings. Between 2005 and 2009, the median net worth of Hispanic households dropped by 66 per cent and that of black households fell by 53 per cent. In contrast, the median net worth of white households dropped by only 16 per cent. The median net worth of a white family now stands at 20 times that of a black family and 18 times that of a Hispanic family — roughly twice the gap that existed before the recession and the biggest gap since data began being collected in 1984. The recession also has slashed the wealth of Asian American households, which in 2005 had higher median wealth than white families but by 2009 had less. Their median wealth figure dropped by 54 per cent. Between 2005 and 2009, the share of wealth owned by the wealthiest 10 per cent of all households rose to 56 per cent from 49 per cent. The share of Americans with no wealth at all rose sharply during the recession. A third of Hispanics had zero or negative net worth in 2009, up from 23 per cent in 2005. For blacks, the portion rose to 35 per cent from 29 per cent, and for whites, it rose to 15 per cent from 11 per cent. For years, statistics have depicted growing income disparity in the United States, and it has reached levels not seen since the Great Depression.

On the other hand, what is the situation of the financial giants on the Wall Street that in the first place triggered this crisis? The Bank of America, having then acquired the ‘bankrupt’ Merrill Lynch has earned $ 3.7 billion in the first half of 2011.  Goldman Sachs set aside $ 5.23 billion as bonuses to its executives.  The bank reported net additional revenues of $ 11.89 billion and net earnings of $ 2.7 billion for the first quarter. 

In this context, the PM’s concerns noted above, indeed, appear natural. But what are the prescriptions that are being offered to us in India?  While headline inflation stood at 9.72 per cent in September, food, fuel and consumer goods grew costlier than this.  On the other hand, the index of industrial production fell to a dismal 4.1 per cent. Global recession has seen exports falling from 82 to 36 per cent between July-September.  Imports fell likewise indicating a sluggish domestic demand.  This has widened our trade deficit to an unprecedented $ 73.5 billion. 

Investors are complaining that the RBI’s measures to control inflation has pushed the cost of credit, leading, in turn, to declining investment.  The presumption is that if cost of capital is cheap, then investment will rise leading to higher growth. 

The fallacy lies in the fact that what is produced through higher investments needs to be sold which requires purchasing power in the hands of the people.  With this drastically declining globally and in our country, the neo-liberal prescription simply cannot work.  It is only a veil to camouflage the earning of higher speculative profits utilising cheap credit. This is reflected in the global trends where the same financial corporates that triggered this recession increased speculative trading by increasing the amount of derivatives on their books by $ 11.3 trillion in the third quarter from the first quarter.  The main culprits of the current recession, J P Morgan Chase, Citigroup, Bank of America and Goldman Sachs account for about 90 per cent of the activity in derivatives or speculative trading.

Keynesian State intervention was one possible way in which such naked pursuit of profit maximisation could have been muted.  Keynesianism far from being the palliative to provide relief to the people was structurally designed to stabilise the capitalist system from its inherent tendencies of plunging into recurrent crises. Under the neo-liberal dispensation, however, State intervention comes to the rescue of corporates at the expense of the people, further destabilising the system. 

In the Indian context, as noted repeatedly in these columns,  our economic fundamentals can only be strengthened  and stabilised when interventions are designed to expand the purchasing power of our people, thus, enlarging aggregate domestic demand. This, in turn, would set in motion a trajectory of sustainable growth. 

The PM and his advisors could do well to reconsider and reverse  the trend of providing over Rs 5 lakh crores as tax concessions to the rich, as revealed in the last two budget documents.  These monies, if instead, were invested in public work projects, this would have built the much-needed infrastructure while generating large-scale employment and, thus, vastly enlarging people’s purchasing power. 

The choice can still be made.  The UPA-II government must be made to make this choice through mounting popular pressures backed by mighty protest actions. 

(October 19, 2011)