Friends,
The elections to the Lok Sabha this year are being held in the backdrop of intense popular anger against the outcomes of the economic policies followed by the ruling classes of the country. These outcomes include, among others, increased poverty, worsening unemployment, a reduction in real incomes for a majority of the population, and corporate encroachment on the assets and livelihoods of the most marginalised sections of society. 23 years of neoliberal economic ‘reforms’ in India have turned out to be 23 years of relentless assaults on the Indian people. All the political formations which were in power during these years – the Congress/UPA, BJP/NDA and the United Front – followed the same basic set of economic policies which piled misery upon the Indian people.
While the outcomes of these ‘reforms’ are more well-known, what is often not recognised is that the reasons given out for rolling out liberalisation measures in 1991 were bogus. It is often claimed that the country had no choice but to adopt the structural adjustment policies prescribed by the IMF. But as Prabhat Patnaik and C P Chandrasekhar (the latter is the speaker in tonight’s public meeting in Lohit mess) pointed out in an important paper in EPW in 1995, the economic crisis at that time was almost entirely speculative in origin, having little to do with the developments in the real sectors of the economy. The vulnerability of the economy to speculative forces was itself in part a result of the gradual 'liberalisation' measures put in place during the second half of the 1980s. Even the foreign exchange crunch could have been easily averted if the Indian banks had not refused to accept the accumulated savings of Indians working in Kuwait who wished to shift the money to India during the Gulf War (about $5-7 billion were reportedly lost to the western banks as a result). Moreover, the magnitude of forex reserves at the end of March 1991 was still large enough to cover almost three months' imports, which was generally considered 'safe' enough in the Indian context. When import restrictions were imposed (by March 1991), it was the speculative outflow of funds and not the trade or current account deficit which was responsible for the foreign exchange crunch. And yet the Indian government went in for the full gamut of structural adjustment policies - not because of any objective necessity, but because the IMF and the World Bank, as well as elements within the Indian government and the business class (the leading sections of the Indian ruling classes, in short) considered this a golden opportunity to jettison altogether the dirigiste regime which had prevailed since independence.
The problems associated with the economic regime that prevailed till 1991 were very different from what right-wing economists would want us to believe. The dirigiste regime was rife with contradictions – a key factor being the fact that a continuous growth in state spending was essential for the growth of the domestic market, while at the same time the state exchequer was the medium through which large-scale transfers were made to the capitalist and proto-capitalist groups; the state in other words was an instrument for the primary accumulation of capital. These two roles that the state had to perform were incompatible in the long run. But what the ruling classes wanted to do was to eliminate every aspect of the economic regime which were inconvenient for capital – which included the interventionist nature of the state, and the sizeable public sector that the economy had come to acquire.
That 2.8 lakh farmers have committed suicide in India since 1995 is perhaps the most horrifying outcome of the economic reform measures put in place in our country. The deep agrarian crisis in India is a direct result of measures which include actual declines in central government revenue expenditure on rural development, cuts in subsidies, declines in public infrastructure and energy investments that affect rural areas, dismantling of the universal public distribution system, reduction in priority sector lending by banks which reduced the availability of rural credit and pushed peasants into the hands of moneylenders, and the liberalisation of external trade. Trade liberalisation, which entailed the removal of quantitative restrictions and reduction in import tariffs, was instrumental in triggering severe crashes in the prices of a number of important crops and in causing increased volatility in crop prices. The decline in real incomes and the high indebtedness which the peasantry fell prey to resulted in the most blood curdling episode of structural violence the country has seen in recent times, something which can only be called policy-driven mass murder.
The failure to create jobs is yet another important feature of the era of neoliberal reforms. This phenomenon used to be called ‘jobless growth’ when growth rates were high, but now even the much trumpeted economic growth rates have come down. The National Sample Surveys of 2004-05 and 2009-10 show that even during the period of extraordinarily high growth between these two years, the number of those who reported their “usual status” as being employed increased by a mere 0.8 percent per year. The population of the country grew at around 1.5 percent per annum during the same period.
Neoliberal economic reforms have resulted in vicious attacks on the workers in India. Jobs have become increasingly contractualised and casualised, thus diminishing job security. This in turn has meant that it is far more difficult for workers today to unionise for their rights, as employers find it easier to "hire and fire" workers. Successive governments, instead of implementing laws designed to protect workers, have sought to dilute, weaken and do away with labour laws. They have actively encouraged the mushrooming of Export Processing Zones and Special Economic Zones where labour laws effectively do not apply. And yet it is often not recognised that as per data (and contrary to the lies peddled by the corporate media), far more mandays (61%) are lost due to investor strikes (lockouts) rather than workers' strikes (39%).
State policy under neoliberalism, which focusses on appeasing finance capital, has entailed a withdrawal of the State from its role in supporting and protecting petty production against the onslaughts of big capital. This has exposed petty producers (such as peasants, craftsmen, fishermen and artisans), and also petty traders to a process of expropriation. Such expropriation has occurred both through a direct takeover by big capital of their assets, like land, at throwaway prices, and also through a reduction in their incomes, and hence their capacity to survive. The dispossessed petty producers throng urban areas in search of work, adding to the number of job-seekers. This, along with the inability to create new jobs, has worsened the problem of unemployment in the country.
The neoliberal era has been a time when big capital is out to grab assets at throwaway prices or for free, including the property of petty producers as mentioned above, along with common property, tribal property (through predatory mining by corporates) and state property (through privatisation). This period in other words has seen a process of “primitive accumulation of capital” with a vengeance. This process often requires the complicity of state personnel, which forms the basis of the big ticket corporate-led corruption that we have seen in this period.
The high inflation that has hit the people hard in recent times (10% as measured by the Consumer Price Index for Industrial Workers during 2008-13) has resulted in an absolute fall in the real incomes of vast sections of society. This phenomenon again is a result of the anti-people policies which characterise neoliberalism — India’s vulnerability to the effects of changes in international prices has increased with trade liberalisation and the deregulation of the administered price regime in the oil sector. At the same time, increased industrial concentration due to the dilution of anti-monopoly measures and reduced regulation has encouraged a profit driven escalation in the prices of manufactured goods such as pharmaceuticals. The imbalances between demand and supply of primary products are accentuated by the government’s reluctance to release additional food through the public distribution system in order to limit subsidies. The drive to reduce subsidies has also resulted in a continuous increase in the prices of commodities such as petroleum and fertilisers whose prices are administered. In some instances, as in the case of natural gas, price increases are not even driven by costs, but a shameless attempt to provide large transfers to industrial groups like Reliance. These increases have fed into the costs and prices of other commodities.
The need of the hour is to intensify our fight against the anti-people policies pursued by the ruling classes of the country, and a better understanding of the politics and economics of development under neoliberalism is essential to sharpen this struggle.
We invite one and all to tonight’s public meeting in Lohit Mess, to be addressed by Prof. C.P. Chandrasekhar.
The elections to the Lok Sabha this year are being held in the backdrop of intense popular anger against the outcomes of the economic policies followed by the ruling classes of the country. These outcomes include, among others, increased poverty, worsening unemployment, a reduction in real incomes for a majority of the population, and corporate encroachment on the assets and livelihoods of the most marginalised sections of society. 23 years of neoliberal economic ‘reforms’ in India have turned out to be 23 years of relentless assaults on the Indian people. All the political formations which were in power during these years – the Congress/UPA, BJP/NDA and the United Front – followed the same basic set of economic policies which piled misery upon the Indian people.
While the outcomes of these ‘reforms’ are more well-known, what is often not recognised is that the reasons given out for rolling out liberalisation measures in 1991 were bogus. It is often claimed that the country had no choice but to adopt the structural adjustment policies prescribed by the IMF. But as Prabhat Patnaik and C P Chandrasekhar (the latter is the speaker in tonight’s public meeting in Lohit mess) pointed out in an important paper in EPW in 1995, the economic crisis at that time was almost entirely speculative in origin, having little to do with the developments in the real sectors of the economy. The vulnerability of the economy to speculative forces was itself in part a result of the gradual 'liberalisation' measures put in place during the second half of the 1980s. Even the foreign exchange crunch could have been easily averted if the Indian banks had not refused to accept the accumulated savings of Indians working in Kuwait who wished to shift the money to India during the Gulf War (about $5-7 billion were reportedly lost to the western banks as a result). Moreover, the magnitude of forex reserves at the end of March 1991 was still large enough to cover almost three months' imports, which was generally considered 'safe' enough in the Indian context. When import restrictions were imposed (by March 1991), it was the speculative outflow of funds and not the trade or current account deficit which was responsible for the foreign exchange crunch. And yet the Indian government went in for the full gamut of structural adjustment policies - not because of any objective necessity, but because the IMF and the World Bank, as well as elements within the Indian government and the business class (the leading sections of the Indian ruling classes, in short) considered this a golden opportunity to jettison altogether the dirigiste regime which had prevailed since independence.
The problems associated with the economic regime that prevailed till 1991 were very different from what right-wing economists would want us to believe. The dirigiste regime was rife with contradictions – a key factor being the fact that a continuous growth in state spending was essential for the growth of the domestic market, while at the same time the state exchequer was the medium through which large-scale transfers were made to the capitalist and proto-capitalist groups; the state in other words was an instrument for the primary accumulation of capital. These two roles that the state had to perform were incompatible in the long run. But what the ruling classes wanted to do was to eliminate every aspect of the economic regime which were inconvenient for capital – which included the interventionist nature of the state, and the sizeable public sector that the economy had come to acquire.
That 2.8 lakh farmers have committed suicide in India since 1995 is perhaps the most horrifying outcome of the economic reform measures put in place in our country. The deep agrarian crisis in India is a direct result of measures which include actual declines in central government revenue expenditure on rural development, cuts in subsidies, declines in public infrastructure and energy investments that affect rural areas, dismantling of the universal public distribution system, reduction in priority sector lending by banks which reduced the availability of rural credit and pushed peasants into the hands of moneylenders, and the liberalisation of external trade. Trade liberalisation, which entailed the removal of quantitative restrictions and reduction in import tariffs, was instrumental in triggering severe crashes in the prices of a number of important crops and in causing increased volatility in crop prices. The decline in real incomes and the high indebtedness which the peasantry fell prey to resulted in the most blood curdling episode of structural violence the country has seen in recent times, something which can only be called policy-driven mass murder.
The failure to create jobs is yet another important feature of the era of neoliberal reforms. This phenomenon used to be called ‘jobless growth’ when growth rates were high, but now even the much trumpeted economic growth rates have come down. The National Sample Surveys of 2004-05 and 2009-10 show that even during the period of extraordinarily high growth between these two years, the number of those who reported their “usual status” as being employed increased by a mere 0.8 percent per year. The population of the country grew at around 1.5 percent per annum during the same period.
Neoliberal economic reforms have resulted in vicious attacks on the workers in India. Jobs have become increasingly contractualised and casualised, thus diminishing job security. This in turn has meant that it is far more difficult for workers today to unionise for their rights, as employers find it easier to "hire and fire" workers. Successive governments, instead of implementing laws designed to protect workers, have sought to dilute, weaken and do away with labour laws. They have actively encouraged the mushrooming of Export Processing Zones and Special Economic Zones where labour laws effectively do not apply. And yet it is often not recognised that as per data (and contrary to the lies peddled by the corporate media), far more mandays (61%) are lost due to investor strikes (lockouts) rather than workers' strikes (39%).
State policy under neoliberalism, which focusses on appeasing finance capital, has entailed a withdrawal of the State from its role in supporting and protecting petty production against the onslaughts of big capital. This has exposed petty producers (such as peasants, craftsmen, fishermen and artisans), and also petty traders to a process of expropriation. Such expropriation has occurred both through a direct takeover by big capital of their assets, like land, at throwaway prices, and also through a reduction in their incomes, and hence their capacity to survive. The dispossessed petty producers throng urban areas in search of work, adding to the number of job-seekers. This, along with the inability to create new jobs, has worsened the problem of unemployment in the country.
The neoliberal era has been a time when big capital is out to grab assets at throwaway prices or for free, including the property of petty producers as mentioned above, along with common property, tribal property (through predatory mining by corporates) and state property (through privatisation). This period in other words has seen a process of “primitive accumulation of capital” with a vengeance. This process often requires the complicity of state personnel, which forms the basis of the big ticket corporate-led corruption that we have seen in this period.
The high inflation that has hit the people hard in recent times (10% as measured by the Consumer Price Index for Industrial Workers during 2008-13) has resulted in an absolute fall in the real incomes of vast sections of society. This phenomenon again is a result of the anti-people policies which characterise neoliberalism — India’s vulnerability to the effects of changes in international prices has increased with trade liberalisation and the deregulation of the administered price regime in the oil sector. At the same time, increased industrial concentration due to the dilution of anti-monopoly measures and reduced regulation has encouraged a profit driven escalation in the prices of manufactured goods such as pharmaceuticals. The imbalances between demand and supply of primary products are accentuated by the government’s reluctance to release additional food through the public distribution system in order to limit subsidies. The drive to reduce subsidies has also resulted in a continuous increase in the prices of commodities such as petroleum and fertilisers whose prices are administered. In some instances, as in the case of natural gas, price increases are not even driven by costs, but a shameless attempt to provide large transfers to industrial groups like Reliance. These increases have fed into the costs and prices of other commodities.
The need of the hour is to intensify our fight against the anti-people policies pursued by the ruling classes of the country, and a better understanding of the politics and economics of development under neoliberalism is essential to sharpen this struggle.
We invite one and all to tonight’s public meeting in Lohit Mess, to be addressed by Prof. C.P. Chandrasekhar.
