People's Democracy

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


No. 41

October 13, 2013





On Neo-Liberalism, Social Discontent and Creeping Fascism


                                                                                                Utsa Patnaik


OVER the last two decades a definite rightward shift is observable in the attitudes and thinking of what is generally termed the ‘middle class’ in India, though actually this class is not in the ‘middle’ at all but belongs to the top five percent or so of the population ranked by income. The so-called ‘middle class’ is primarily urban, educated and vocal, and is mainly high or middle-caste; it reads and contributes to the print and electronic media. Because in this country some four-fifths of the population constituting the mainly lower caste labouring poor is not visible to this class and so not considered by it to be ‘within the pale’ at all, it calls itself the ‘middle class’ by ignoring this majority and comparing itself to the very rich. The anti-colonial struggle for Independence had mobilised large masses of the people under the leadership of the educated elite and had produced some degree of genuine commitment by it when it became the governing elite, to the principles of egalitarianism, to the idea that it was right to seek to reduce inequalities of assets and income through land reforms and curbs on the growth of monopoly power of capitalists, it was right to seek to raise the living standards of the abysmally poor majority of the people.


The progressive legacy of the anti-colonial struggle lingered for four decades, but it was given a decisive burial with the economic volte face of the early 1990s, the switch away from Nehruvian policies to the precisely opposite ideas of neo-liberalism. What we see emerging today is the political fall-out of following for two decades the neo-liberal economic trajectory. There is a clear retrogression as regards the level of social consciousness  – we see middle class demonstrators vocally supporting capital punishment, unthinkable in the past; some academics who were always right-wing but silent earlier now feel free to write openly that all current economic problems can be solved by removing food subsidy for the poor entirely; and a notorious provincial political figure, Narendra Modi whose tenure as chief minister saw pogroms of the minority community, acquires the respectability of leading a major opposition formation as potential prime ministerial candidate for the entire country. Members of parliament from rural areas and lower castes are openly denigrated. A creeping fascism with Indian characteristic is developing which is inseparable from the policies of neo-liberalism.




What are the main features of neo-liberal policies which mark them as a decisive departure from pursuit of the ideal of reducing inequality? First and foremost, they represent the interests of finance and the monopolies entwined with finance, which are strongly opposed to any form of State intervention for benefiting the masses, and redefines ‘development’ to mean giving subsidies and virtually free land, mineral and cyberspace assets to the leading monopoly capitalist houses.  An insensate obsession with reducing government spending for development by putting forward a fallacious argument that the fiscal deficit is the paramount evil to be countered, has been a feature of the core economic policy of finance for over a century in the capitalist world. We find the same silly ideas being propagated continuously through the print and electronic media in this country, and put into actual practice by successive finance ministers, causing massive unemployment and income loss to the people.  


‘Austerity packages’ for the masses combined with large subsidies for the monopolies was the typical feature of the policies dictated by financial interests during the inter-war period in Europe, particularly in Germany which was indebted owing to the aftermath of defeat in war. A combination of economic crisis and austerity packages, had a major role to play in providing a fertile soil for Fascist ideology and practice to take root in Germany as indeed also in Japan. While historical parallels always have to be drawn with caution because specific circumstances are bound to be very different in one case compared to the other, and at one time compared to another, nevertheless a study of the past historical conjunctures favourable to fascism, can provide us with valuable insights for analysing our own contemporary situation. In India today the deadly combination of an economic crisis inevitably generated by the neo-liberal growth path both globally and locally, entailing rising unemployment and social discontent, seems to be providing the right soil for right-wing and proto-fascist ideas to flourish.


The end of WW1 saw a defeated Germany which was sought to be punished by the victors, especially France, by not only occupying the mineral-rich Ruhr, but also by demanding heavy ‘war reparations’ namely compensation money for the death and damage inflicted during the war, a sum so large that it could not possibly be met without squeezing the German people severely or incurring heavy external indebtedness. J M Keynes in his Economic Consequences of the Peace took a humane view and opposed large reparation demands since given the state of the German economy it would impose an intolerable burden on its people and fuel their anger. The argument among the leading capitalist countries about reparations went on, the USA under the Dawes Plan lent money to Germany, starting a flood of foreign lending to other countries as well, termed ‘the dance of the millions’ by recipient states. In the meantime the global economy started to go into a tailspin starting with agricultural depression from the mid-1920s. Since at that time countries like Germany and USA were large exporters of agricultural products, falling prices affected their rural producers badly.  The agricultural depression came some years before the financial and economic collapse from 1929 in the US, resulting in a  sudden drying up of loans. 


Germany’s creditors demanded that it follow austerity measures. As an economic historian of that period has pointed out, ‘conditionalities’ attached to loans to governments by international institutions in the modern era of finance capital are not new; creditors have always demanded austerity measures which mainly took the form of cutting back on public spending to balance the budget. In spite of the fact that people were already suffering the effects of first agricultural and then manufacturing depression, to please  its international creditors, the German Chancellor Heinrich Brüning who was an economist, imposed deflation during 1931-32, by cutting spending, raising taxes and lowering salaries and insurance benefits. Brüning was nicknamed the ‘Hunger Chancellor’ by the German working class and his policies marked the discrediting and downfall of the Weimar republic. In the last free elections in 1930 not only the Communists but to a much greater extent the Nazis gained in strength. The rise of the Nazis was fuelled by rising unemployment  and growing mass  discontent into which the fascist party tapped by promoting an ideology of extreme chauvinism and militarism, violently targeting its own minorities, smashing the trade unions of workers, all in the name of promoting a fast and efficient growth of the economy. The autobahn or expressway later became a symbol of modern infrastructure development by the Nazis. An unholy alliance between the fascists and the monopoly capitalists controlling vital iron and coal production soon led to the direct seizure of State power.      


Although in India we are talking of a very different country at a very different time, some similarities with the situation described above are obvious. First as part of loan conditionalities and later by internalising the faulty logic behind cutting public spending, successive Indian governments subject to neo-liberal dogmas since 1991, have imposed income deflation and unemployment on the people at the same time that a minority has enriched itself greatly. The agrarian depression was the result of large cuts in State spending which lowered the rate of growth of both food and non-food crops, below the population growth rate leading to reduced output per head; extension services were withdrawn; and finally farmers were exposed to the ups and downs of global prices by the government withdrawing the earlier protective measures and stopping the purchase of exportable commercial crops at support prices.


Following the sharp global price falls from the mid-1990s onwards the unprecedented suicides of indebted farmers started, which continue to this day as more and more free trade agreements are signed. From 2004 onwards the UPA-1 government went in for very sharp cutback of public spending and by 2007 brought the fiscal deficit down to 2.7 percent of GDP. This was to please foreign finance and entice it into the country, regardless of the fact that large spending cuts mean higher unemployment and income loss for the laboring masses. In 2004 and 2005 this author presented papers at conferences on food security in Berlin and Luxemburg respectively at which agriculture ministers of European, Latin American and African governments were present as were senior officials from the WTO and United Nations organisations. They were surprised and disturbed by the argument that despite the highly publicised good GDP growth rate in India – entirely owing to services growing – in reality fiscal contraction combined with exposure to global price falls had made for a situation of growing hunger and a crisis of employment and livelihoods, as was clear from an overwhelming and incontrovertible mass of data. One minister from Germany exclaimed to this author, ‘Manmohan Singh is not a Hitler!’ to which one responded ‘Not at all, but he may be a Brüning’. This assessment has turned out to be substantially correct.                  




There has been an undermining of collective cabinet and parliamentary functioning through misuse of direct executive power to push forward the neo-liberal agenda repeatedly over the last decade: witness the unpopular and dangerous nuclear power policy and the free trade agreements. The neo-liberal agenda has not been entirely uncontested as the adverse impact became obvious: the positive achievement of the Left and progressive civil society forces had been the enacting of the Mahatma Gandhi National Rural Employment Guarantee Act. In the states where it has been implemented properly, it has definitely helped to counter though not reverse, the strong forces leading to rising unemployment. While it is unfortunate that targeting has been retained, given the dogmatic opposition by the die-hard neo-liberals in government to any form of increased subsidies benefiting the masses, the recent passage of the Food Security Act must be seen as an advance however partial, and a step towards restoring a universal PDS.


In addition to economic struggles however, ideological struggle is equally necessary to counter the right wing intellectual tendencies and the creeping fascism we see growing around us, as the present ruling order discredits itself. Intellectuals ganging up against and ignoring the sensitivities of dalits, frequent denigration of lower caste, tribal and rural peoples’ representatives in parliament, are all straws in the wind. In particular it is a disturbing fact that recent middle class movements against ‘corruption’ are so simple-minded that they do not critique in the slightest, either the capitalist order or its neo-liberal avatar which privileges money-making above principle, and of which corruption is an integral and inalienable part. This simple-mindedness is perhaps not surprising when we consider that this so-called middle class has been the biggest beneficiary of neo-liberal policies which have pushed down the masses into a morass of unemployment and hunger. Hence the deafening silence on any critique of capitalism and on any real issues of relevance to the people.