People's Democracy

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


No. 45

November 11, 2012



Neo-liberalism and “Corruption”


Prabhat Patnaik


“CORRUPTION” plays a very important and specific role in the institutionalisation of a neo-liberal regime. It is not just something that a neo-liberal regime increases the scope for, because of its pervasive transfer of assets at throwaway prices to big capitalists; nor is it merely the outcome of the large-scale avarice that such a regime unleashes in general. These factors of course are conducive to a massive increase in the scale of “corruption”, such as what we observe in India today. But over and above these, there is a structural reason for the increase in “corruption”, especially among bourgeois politicians, under such a regime; and that is to enlist their political support for this regime. “Corruption” is politically necessary for neo-liberalism. The reason is as follows.


One of the most striking features of the neo-liberal era is the taking over of old established political parties by neo-liberal technocrats. Dr Manmohan Singh is among the most important Congress leaders today. But the first time one ever heard of his having anything to do with the Congress Party was when he was inducted directly as the finance minister in Narasimha Rao’s government. He in turn inducted into the government a number of neo-liberal technocrats from the World Bank and the IMF, one of whom he reportedly even tried to push unsuccessfully for the finance minister’s post. In neighbouring Pakistan, likewise, Shaukat Aziz, a banker, became finance minister under General Musharraf, and later prime minister in a Pakistan Muslim League government in 2004, even though he had nothing to do with the League until he became its prime minister. Such instances can be multiplied. We find in country after country neo-liberal technocrats entering established bourgeois political parties in powerful positions and then putting these economies firmly on a neo-liberal policy trajectory.




Initially this policy trajectory was sought to be imposed on these countries through finance ministry bureaucrats recruited from the Fund and the Bank. Now, this imposition is done to even greater effect, since such bureaucrats also hold crucial political positions through their entry into established political parties.


Why, it may be asked, do established political parties allow this to happen? Why do they allow such interlopers to enter their parties, occupy powerful positions, and pursue policies which are palpably unpopular and risk losing their electoral support? The simple answer is that they have little choice in the matter once the economic affairs of a country are opened up to the vortex of global financial flows. After this initial breach has been made, they find themselves incapable on their own of managing affairs on the basis of the traditional “expertise” they have; and, besides, in a country that is so opened up, retaining the “confidence of the investors” becomes crucial for avoiding capital flight, and globalised finance capital naturally has greater “confidence” in a country whose economy is run by ex-employees or trusted friends of the Fund and the Bank than in one where traditional politicians hold exclusive sway.


Nonetheless traditional politicians do not find it easy to accept the whole gamut of neo-liberal measures. And a tension remains between them and the neo-liberal technocrat-interlopers. Pervasive “corruption”, involving traditional bourgeois politicians under the neo-liberal regime, plays the role of overcoming their opposition to such a regime. The more honest among them, if they are intransigent, are slowly eased out. Those who remain are either honest but pliable, or dishonest and therefore pliable. “Corruption” acts as the glue that attaches the neo-liberal regime, including the hegemony of neo-liberal technocrats, to the extant political system; it serves to buy the acquiescence of important  participants in the political arena to the pursuit of neo-liberal policies ushered in by these technocrats.


This is not necessarily to suggest that “corruption” is deliberately promoted by the votaries of neo-liberalism. Such a regime, promoting consumerism, greed and self-seeking, and associated with significant State-sponsored transfers of assets to big capitalists, creates, as we have seen, plenty of opportunities for “corruption” anyway; all that is required from those at the helm of affairs is that they turn a blind eye towards it. And the “neo-liberalism-at-any-cost” attitude that they have makes them do precisely that, if “corruption” serves to further the neo-liberal agenda.


Many have been puzzled by the fact that prime minister Manmohan Singh, himself free of any charges of personal “corruption”, has not only not pursued “corruption” charges against his colleagues with adequate alacrity, but has even given his consent to measures suggested by his colleagues, which he should have known might be misused for “corrupt” purposes. The answer to this puzzle lies precisely in his “neo-liberalism-at-any-cost” attitude which makes him turn a blind eye to many transgressions as long as these help him carry forward his neo-liberal agenda.


One way of turning this blind eye is not even to recognise subtle instances of “corruption” as such. Recently for example when Mamata Banerjee objected to some neo-liberal measures of the union government, the latter promptly went into a huddle over how much money could be offered for a “Bengal package” in order to get her consent to these measures. Whatever Mamata Banerjee’s motives and calculations might have been, the idea of offering money to a state to buy its chief minister’s support for a set of neo-liberal measures that are meant for the nation as a whole, seemed perfectly acceptable to the neo-liberal technocrats at the helm, even though it was a subtle instance of “corruption”.





The point being made here is stronger than merely saying that “corruption” flourishes under a neo-liberal regime, or that it flourishes to an even greater extent than under the earlier dirigiste regime that drew much flak for it. What is being asserted is that “corruption” is a necessary component of the very modus operandi of a neo-liberal economy. It is not an aberration; it is central to its functioning, since it plays the role of creating a support base among bourgeois politicians for such a regime.


But where do resources for effecting such “corruption” come from? The obvious mechanism is large-scale transfer of petty property or public property to private individuals or corporates, both domestic and foreign, at throwaway prices, a process that falls under the rubric of what Marx had called “primitive accumulation of capital”. A part of the proceeds of such “primitive accumulation” finds its way into the pockets of politicians belonging to established bourgeois political parties, who are thereby made to acquiesce in such “primitive accumulation” in particular, and in the neo-liberal agenda in general.


We thus have a complete circle, a whole new political economy: the neo-liberal interlopers straddle traditional bourgeois political parties, pushing them into pursuing neo-liberal policies; and the latter fall in line inter alia because of the extensive prevalence of “corruption” that benefits their important members, the means for which comes from the pursuit of these neo-liberal policies themselves (with the attendant process of “primitive accumulation of capital”). A whole range of resources, from coal to natural gas, that have always been seen legitimately as the exclusive preserve of the State, in its role as “the custodian of the nation’s interests”, are handed over for private exploitation and profiteering, and the gleeful beneficiaries give “cuts” to prominent members of “bourgeois” political Parties (one of which was even described by such a beneficiary as “apni dukan”) to keep the system going. And the neo-liberal technocrats presiding over this entire process justify this open aggrandisement in the name of promoting the “animal spirits” of “entrepreneurs” for higher growth!


Many have noted that in the current era of neo-liberalism, the process of primitive accumulation becomes far more significant compared to the process of normal accumulation, which consists in merely reinvesting the produced surplus value. In other words, the growth of capital in the hands of the big corporates through the expropriation of petty property or State property increases greatly in significance compared to the growth of their capital through the reinvestment of the surplus value produced on it. One reason for this relative increase is that the scale of “corruption” required to keep the neo-liberal regime going, to make traditional bourgeois political parties submit to the dictates of neo-liberalism (and the appetite for “corruption” it should be noted also grows over time), is too large to be accommodated from the produced surplus value, especially that part of it which accrues to the government. The part of surplus value that accrues to the big capitalists in any case belongs to them, and sustaining “corruption” out of it would mean a diminution in what is left for them rather than an increase. An increase in their wealth, which can also sustain the requisite “corruption”, requires therefore a transfer of property from others to the capitalists, that is, from petty owners or from the State. It requires, more than a “flow” transfer (in the form merely of income shifts), a “stock” transfer (in the form of property shifts) in favour of the capitalists, which is precisely what the process of primitive accumulation of capital brings about.


But to make such “stock” transfers of assets from petty owners to large capitalists possible, the former must be reduced to penury, their “flow” incomes must be squeezed, which requires a withdrawal of support from them by the State. And such a withdrawal occurs too as part of the agenda of neo-liberalism, through the so-called “retreat of the State” and “leaving things to the market”. Their input costs are jacked up through a reduction of subsidies, even as their output prices become subject to world market fluctuations. This pincer drives them to borrowing from usurious moneylenders, because institutional credit is also increasingly denied to them, and, eventually, to being dispossessed of their assets (if they have not committed suicide in the interim). The absolute impoverishment that we see in contemporary India, which is confirmed by NSS data on hunger and malnutrition, is closely linked to this phenomenon.


“Corruption” is usually seen as a moral failure, a fall from grace, on the part of some individuals whose numbers, it is lamented, have grown rapidly of late. It is however a systemic phenomenon rooted in the political economy of neo-liberalism, with a very definite role in its modus operandi. Even if this role is not consciously engineered by those who promote this regime, ie, even if they do not use “corruption” as a deliberate instrument in a conspiracy to promote neo-liberalism, they certainly have sufficient implicit understanding of the role of “corruption” under such a regime not to thwart its operation.