The dirty picture of neoliberalism: India’s New Economic Policy

Wealth and poverty in India. Photo by DaveWilsonPhotography.

By Raju J. Das

April 11, 2012 -- Links International Journal of Socialist Renewal -- The Bollywood movie The Dirty Picture (apparently) runs on three things: entertainment, entertainment and entertainment. The dirty picture of neoliberalism runs on three things, as well: class, class, and class. Indeed, neoliberalism must be seen as the restoration and reinforcement of class power (Harvey 2005), class power of large owners of business over the working masses.

This article makes a series of observations on the multiple aspects of neoliberalism in India as a class project. What is problematic about the “New Economic Policy” (NEP) is not this or that aspect of it (e.g. the idea that it causes an increase in the number of people below the official poverty line). The whole policy is the problem. So it requires a dialectical totalising critique, one that places its limited benefits in relation to its enormous costs, seen from multiple vantage points.

India’s NEP is more than a governmental policy. It is a program of the bourgeoisie tourt court, with devastating impacts on the toiling masses. Neoliberalism in rural areas – agrarian neoliberalism -- is particularly ruthless in its impacts. Neoliberalism is also a spatial project: it is implemented through transformation of space relations, and it produces enormous spatial unevenness. Neoliberalism in India, like in the periphery as such, is also a part of the imperialist project, implemented via burgeoning “new compradore” elements both in the business world and outside. Given the adverse impacts of neoliberalism, it has resulted in massive resistance from below which has been countered by the state via a combination of palliatives and repression. Interestingly, in spite of some opposition it has offered, the left has been, overall, a conduit through which NEP has been delivered. Neoliberalism has, however, opened up interesting possibilities by renewing the classical political questions: national-democratic question and the agrarian question as well the question of socialism itself. What follows is presented in the form of a few theses.

What is NEP and what it is not?

The New Economic Policy (NEP) is not just a government policy, and it is, in a sense, neither entirely new, nor is it merely economic. NEP represents the demands of the capitalist class. More specifically, it represents demands of hegemonic fractions of the domestic and international (including imperialist and diasporic) capitalist class. This class now wants to, and with modern technological changes is able to, do business in a different manner than earlier. It wants the state to clear the way for this.

Formally introduced in 1991, NEP expresses specific demands to create conditions where domestic and foreign capital can invest money to make a lot of money quickly, by using cheap natural resources of the country such as land and cheap skilled and unskilled labour, and via speculation and other non-productive means. All existing barriers to capitalist accumulation should be removed. New facilitative conditions should be created. Specific demands of business politically expressed as NEP include: deregulation of private business; privatisation of government-owned businesses, trade liberalisation, allowing entry of foreign capital to own business in India; tax cuts and other incentives for business, and withdrawal or reduction of meagre government benefits for the poor. The NEP therefore is the neo-liberal program of the bourgeoisie first, and a government’s policy second. [i]

All major interventions, including major anti-poverty policies since de-colonisation, have been more or less about propping up a national capitalist regime, a little protected from imperialism and a little free from the fetters of feudalism. The pre-1991 age was not the golden age for the masses. Mass poverty and (petty) bureaucratic heavy-handedness were rampant. Much of the resources in the hands of the state was used for the propertied classes (in the form of various subsidies and cheap loans) and for the wealthier, high-income, educated people.[ii] The NEP is not different from the pre-1991 policy regime in terms of its basic class content. So, it is in a sense not that new. It is not that there is no difference between the NEP and the pre-1991 regime. But the similarity between the two is not to be un-dialectically under-stressed.

The NEP is not merely economic. This is because it must ensure political and ideological conditions for capital accumulation. The political refers to state repression and judicial coercion (including suppressing democratic rights, discussed later). The ideological refers to the promotion of market fetishism in all spheres of everyday life, including in our consciousness. Associated with market fetishism is the idea of getting rich quickly by any means and of the market as the dominant method of helping the poor (hence the popularity of such things as self-help groups and microcredit in the development discourse). [iii]

In sum, a dialectical conceptualisation of NEP or neoliberalism is needed: it must be sensitive to both difference and similarity between the pre-1991 and post-1991 policy regimes, the economic and the non-economic character of NEP, and such a conceptualisation must see the governmental aspect as also rooted in the class character of the society.

Winners and losers

The NEP has led to a small minority of winners and a very large majority of losers. Not only in terms of its underlying driving forces, but also in terms of necessary consequences, the NEP is a class project in that it produces an enormous amount of class inequality. The NEP has vastly benefited the capitalist class, including its financial elements, producing close to 70 dollar billionaires in the country. It has placed a colossal amount of wealth in the hands of a few, the wealth produced by the sweat of the propertyless masses. A part of this wealth has been hidden away in overseas banks and another part is publicly displayed via pretentious lifestyles.[iv] The NEP has certainly brought some foreign technology and cheaper intermediate goods in some cases. It has also benefitted some educated people – including tech-coolies -- employed in IT and related industries, providing cheap labour to global capitalism. The economic success of this stratum is mobilised as an ideological prop for the NEP. A wide variety of consumer items is now available for those with money (approximately 200 million in the country of 1200 million).

On the other hand, the NEP has heaped unspeakable miseries on the bottom 800-1000 million), the proletarians and semi-proletarians and vast numbers of small-scale business/landowners. It has produced a massive amount of economic inequality, insecurity, unemployment and under-employment, casualisation, informalisation, heightened level of labour exploitation and lax or non-implementation of protective factory acts. It has produced what Utsa Patnaik calls “a republic of hunger” and what Jean Dreze calls “a nutritional emergency”. It has produced a graveyard of people who are committing suicide because they cannot pay their bills, and this is happening not just in villages but also in erstwhile booming cities such as Tirupur.

In poor countries such as India, a specific form of neoliberalism is agrarian neoliberalism. Agrarian neoliberalism represents an internally contradictory logic: enhancing the value of rural areas as an arena for big business activities; and reducing state investment in rural areas, whether for promoting rural economic development or social welfare. Rural areas have become an arena of capitalist accumulation in newer ways: buying peasants’ land at dirt cheap prices; contract farming; cultivation of capital-intensive high-value farm products such as flowers and shrimps in a country where millions even do not have access to rice or wheat or a glass of safe water to drink; agribusiness sale of seeds, etc. to peasants; and patenting of indigenous knowledge of peasants. In terms of the state neglect of rural areas, rural development expenditure as a percentage of the net national product has been decreasing.[v] Government subsidies for fertilisers, electricity and other farm inputs and investment in irrigation have been slashed. Access to cheap loans to farmers has been limited.Price support to farmers has been reduced, and the Public Distribution System has been drastically curtailed.

Peasants are losing land to capitalist industrialisation and land speculation. Land ceiling laws are reversed because these are considered to be constraints on capital flows into farming. Peasants are being forced to leave their land because farming is not viable: costs of cultivation are going up due to shrinking government support. Highly indebted, many are driven to distress sales of their products. They are also affected by the import of subsidised foreign farm goods.

As Professor Utsa Patnaik (2007) has admirably documented, food production and availability per capita is decreasing, in part because land is converted to non-food crops both by big companies and smaller owners attracted by the prospect of making a little cash. This is a grave danger to food security. Also, in the areas where high-value farm products are produced (shrimps; flowers), an intense exploitation of labour and land happens in order to make the sector competitive in the global market. Declining investment in rural infrastructure (especially flood and irrigation control) is increasing vulnerability to drought and floods. Agrarian distress is creating a huge reserve army of labour, a part of which is forced to migrate to cities, putting pressure on wages that are already very low. This, along with shrinking government support for workers, allows capital to raise the level of exploitation. That NEP has produced increasing numbers of wealthy people on the one hand and thousands of millions of people whose basic need for food remain unsatisfied singularly speaks to neoliberalism as a class project.

On its own terms, NEP is not a big success either. It has unleashed some entrepreneurial energy. Yet, India still accounts for only 2 per cent of the global economy and less than 1 per cent of world trade. Even in the IT sector, India remains a relatively minor player dependent on the technology and markets of the West. There is little sign that in key sectors the average level of labour productivity has improved relative to that in richer countries. India remains a cheap labour platform of global capitalism.

NEP as a spatial project

The NEP as a capitalist agenda is fundamentally a spatial-scalar project. It is implemented through accumulation projects that involve massive restructuring of space relations, producing spatial unevenness at multiple scales. Massive restructuring of space relations has two aspects.

1. To accelerate the movement of commoities at a cheaper cost between places and between India and the rest of the world. To increase the pace of elite consumption, a new built environment is being produced. This is in the form not only of shopping malls in the cities, but also of new roads, railway lines, including dedicated railways lines, modern airports, sea ports, etc.[vi]

2. To produce spaces like this and to set up enterprises (hotels, manufacturing units) as well as to construct housing for sale, slums are being cleared and peasants and tribal people are dispossessed of their land. Tribal land is required also for its natural resources, which are subjected to intense exploitation. Between big bosses’ rights and little people’s rights to be in a place, it is usually force that decides the matter. This force is often the brute force wielded by private goons of moneybags and the more legal force of the state (police, courts, etc.).

The production of space not only facilitates accumulation and money making in the ways just noted, it is also an opportunity in itself to make money, because space or the economic landscape is a commodity. What is called infrastructure is big business indeed. The production of space has an ideological moment to it as well. By constantly asserting that the country needs a large amount of money for its infrastructure, the state justifies measures to court private capital through various cash and kind incentives and for justifying cuts in welfare expenditure.

The NEP has also resulted in an enormous amount of unevenness between regions, because neoliberal investment, whose main motive is profit making, tends to be geographically concentrated, although the patterns of unevenness are not written in stone. Just because investment happens in a few places or states, producing impressive glass buildings, gorgeous shopping malls and islands of “hi-tech” firms, this does not mean that all the places in the country can experience this: the process in which some places in the country become developed includes most other places not developing. Neoliberalism is a process of production of spatial inequalities (and spatial displacements). A most important form of this unevenness is between rural and urban areas; urban areas grow 500% times faster than rural areas. Agriculture has more or less stagnated as public expenditure has dwindled and public resources are diverted from it to infrastructure projects in the interests of big business. The geographical face of the country outside the cities and their closely connected hinterlands is dismal; this is not to deny enormous unevenness between the richer areas inside cities (e.g. gated communities) and slums. [vii]

The patterns of uneven development have interesting political dynamics, between cities and between states. With pro-business reforms, regional elites have some more power vis a vis the central government, and these regionally based elites compete with each other for external loans and domestic as well as foreign capital. Some states (and some cities) get more investment than others, thus creating a new layer of uneven economic development. When all places are equally neoliberal in courting capital, small differences in policy or other factors necessary for profitmaking become metamorphosed into large differences.

NEP and imperialism

The NEP  is a part of the imperialist project. India’s NEP is a part of global neoliberalism, whose history is connected to working-class struggle in the West and anti-colonial struggles in the periphery. More specifically, capitalism, under the rule of financial capital, has been seeking to withdraw, since the 1970s, many of the concessions (e.g. welfare benefits) it had conceded to the working class in the advanced countries (Harvey, 2005). And global big business is no more willing to concede some autonomy to peripheral states and the national bourgeoisie of poor countries that it had tolerated in the aftermath of anti-colonial struggles. Natural resources, markets, space (including spaces to dump waste) and labouring bodies of poorer countries cannot be entirely left in the hands of the national bourgeoisie to exploit. International capital must have free access to these. The NEP, the medium of and outcome of global neoliberalism, playing itself out in India establishes direct exploitative connections between the bourgeoisie (including financial segments of it) of rich countries and India’s poor masses to a degree that did not exist earlier. An important aspect of neoliberalism is “the new determination to drain the resources of the periphery toward the center” (Dumenil and Levy, 2005: 10) via the activities of international financial capital and other segments of the international big business.

Such transfer of resources occurs via exploitation of workers and peasants of India by imperialist capital, a process that the NEP furthers. This imperialist exploitation is abetted by the imperialist countries and India’s pliant-compradore state, which is epitomised in sultans of reforms such as Dr Manmohan Singh.[viii] It is also interesting that some of the Indian states are run under budgetary guidelines formulated by the US “knowledge” firm McKinsey, the IMF and the World Bank and DFID, etc. and comprador intellectuals and advisors bought off by these institutions. In many ways, neoliberalism – privatisation, cuts in government spending, etc-- was imposed by international institutions under the name of conditionalities for loans and which have directly affected the masses. It is also interesting that exactly the same sort of measures have been undertaken in imperialist countries themselves in the interests of their top “1%”, which have impacted their own “99%”. Neoliberalism – the onslaught of capital on the toiling masses – is the thread that links the toiling masses of the world, although these masses in the poorer countries are affected a lot more than in richer countries.

NEP and class struggle

The NEP has been an arena of, and an object of, class struggle. This class struggle has been from above and from below. Given the devastating impacts of the NEP it is not surprising that there has been massive resistance against it. Millions of people have gone on strike multiple times since the 1990s. Some of the resistance has been against the venal, atrociously corrupt way in which the partnership between capital and the state has undemocratically milked public resources. Much of the resistance has been directly against privatisation, liberalisation, globalisation and reduction in state support for the poor and farmers.

Because of the struggle from below, real and potential, the state has slightly slowed the pace of “reforms” (especially, labour laws etc.), and this is so especially when a given reform will adversely affect weaker members of the bourgeoisie which cannot compete in the global market.The state has also tried to provide some palliatives as a part of the neoliberal policy to ensure that reforms are not politically derailed by the social unrest. In terms of actual support for the poor, this is too little relative to the amount of damage caused by neoliberalism (note that both the necessity for palliatives and the limits to these palliatives are caused by neoliberalism). The dominant neoliberal view is one of market idolatry: the poor should be sacrificed at the altar of the god of the market, the god of reforms, the god of growth, which has more power than the millions of gods in our holy land, and this god will benefit the poor (aam admi) in the long run. In the short run, while the poor are prostrating before the market god, they get bruised laying on the hard surface, so they need some form of band-aid. The so-called employment guarantee scheme, like the farmer loan waiver, is one such thing. Finance Minister Chidambaram, like many others (Khatkhate 2006; Bhagwati 2001), think that “growth is the best antidote to poverty”. So, “what is needed is not less, but more reforms’, says our finance minister (quoted in the Hindu, November 8, 2006).

The bourgeoisie needs “growth” (meaning a massive increase of money in its hands in the shortest possible time). The political parties and the neoliberal state, at the central and provincial levels, will deliver this. This is the limit to how much and in what way the workers and peasants can benefit from the palliatives. The idea that there is such a thing as neoliberalism with a human face means that neoliberalism itself is inhumane.

And where numbing of consciousness through official and academic market-oriented propaganda, including by finance ministers and other spokespersons of capital, fails, where intoxication of the masses by the fetishism of seasonal festivals called elections eases (note that the majority of the masses think that reforms are pro-rich) and where official bribing in the form of limited welfare is ineffective, and where therefore the masses do rise in revolt, the state has been using repression launching class struggle from above to clear the barriers to the twin methods of accumulation: accumulation by dispossession and accumulation by exploitation (Das 2012). Dispossession of tribal peoples and years of tribal poverty exacerbated by neoliberalism have led to Maoist resistance in several hundred districts. The Maoist threat is elevated to the biggest threat to the nation and then is conveniently used as an excuse to suppress any legitimate democratically organised protest against neoliberalism. Interestingly, the politics of the fight against Maoism, which is not necessarily against capitalist accumulation as such (more below on this), is being used to remove all barriers to precisely that, i.e. capitalist accumulation.

The capitalist class has also directly engaged in struggle from above by undermining the power of workers striking against capital. Capital has done this by hiring goons to hurt striking workers, resorting to the bribing of union leaders and locking employees out. In many recent years, person days lost to lockouts are five times the number lost due to strikes. The courts also have ruled against the democratic right to strike.

NEP and the left

It is undeniably true that left parties have put pressure on governments to implement certain pro-poor measures (e.g. public works) and to slow the pace of certain neoliberal measures. But overall, the left forces (unless otherwise noted, by “left”, I am henceforward referring to the parliamentary left as represented by the Communist Party of India (CPI) and the Communist Party of India (Marxist) (CPI-M) have virtually converted themselves into a conduit for the implementation of the NEP through ideological and political-administrative means.

Ideologically, the parliamentary left (as well as much of the "unorganised left")[ix] has not provided a serious critique of the NEP. Whatever critique it has, this critique is rather limited. It is limited because it is more or less from the standpoint of economically less-competitive sections of the so-called progressive national bourgeoisie (and a very small segment of the "relatively well-paid" salaried working class, mainly unionised public sector workers). The critique is from a standpoint which points to the solution of the problems in merely government regulation. The left critique has not been from the vantage point of the NEP being essentially a project of the capitalist class (as opposed to a merely new government policy). It has not been from the vantage point of the working class and poor peasants as a bloc of anti-capitalist classes. It has therefore not been from the vantage point of the transcendence of capitalism for which theoretical and practical preparations must be made now. The left is at the pre-democratic revolution stage, that is, at least as many as two stages removed from posing anti-capitalist, proletarian, revolutionary socialism as the goal. Indeed, it is this vision that directly influences the left view of everything, including the NEP. Without a revolutionary theory, it lacks revolutionary practice. One wonders: what is "left" of the left (ideology)?

Politically, the parliamentary left has propped up, and supported various parties (Janata, Congress, etc.) from time to time, which have implemented NEP. It has justified this support on two grounds: anti-imperialism (and anti-feudal struggle) as well as anti-communalism struggle (to keep the Hindu fundamentalists out of power). The left, on whose radar anti-capitalist socialism does not yet exist because it is more interested in democratic changes within the capitalist system, has lent a pro-poor cover to the governments so they can administer the bitter pill of NEP with a little sweetener, i.e. NEP with a human face, in a more consensual manner. The left has turned itself in practice into a radical-nationalist fraction of the bourgeoisie. Its radical blusters and theoretical-sounding rhetorical flourishes cannot hide this fact. At the provincial scale, where the organised parliamentary left was/is in power, it has pursued NEP and pro-big business measures.[x] And it has done this in a more ruthless fashion via its control over trade unions and using the misperception that the left is pro-working class.

Concluding comments: New Economic Policy and old social problems

Neoliberalism is about changing the balance of class power in favour of the capitalist class. This is true in rich countries. This is no less true in poor countries such as India. India’s NEP is a policy on behalf of capital, and it is therefore a policy of capital, tourt court, mediated and implemented by the state at central and provincial scales.

A dialectical view of the NEP points to the weight of its contradictions. More specifically, the NEP has brought to the fore the revolutionary-political questions anew. Consider the national question. The national question is no longer about fighting formal colonialism. It is rather about fighting new imperialism, practiced dominantly through economic mechanisms. It is the imperialism of the IMF, World Bank, multinational corporations and international “aid” agencies. This is an imperialism that is justified and sold to Indians through the discourse of development and progress. It is also sold via chauvinistic ideas about India’s “superpower status”, which is but as a regional subordinate helper of the supreme guardian of global capitalism (the United States), which, as Wood says (2003: 133), guards the subordinate guardians (subordinate states such as India) of the capitalist imperatives in different parts of the world. That a prime minister, left to choose between holding on to his top job of public service to a nation and sealing a strategic partnership with the USA, would choose the latter says a lot about the imperialist character of the “neoliberality” – the neoliberal mentality – of current state managers. The post-colonial neoliberal state itself has become a mechanism of new imperialism.

Consider the democratic question. There has been massive resistance to the NEP, as mentioned earlier, to which the state is responding in a most undemocratic manner. It is also promoting venal capitalism; massive corruption in the public offices has been endemic since the 1990s. By making all political parties/groups equal as far as their adherence to neoliberalism is concerned, the NEP has also created a situation where casteism and religious fundamentalism are made use of to divide the poor electorate and to garner votes, creating conditions for the perpetuation of undemocratic relations based on religious and caste identity.[xi] The NEP is creating new aspects of the agrarian question as well, the question of peasants’ property and their miseries caused by agribusiness. So the democratic question – including democratic governance, equal rights of citizens irrespective of caste or religious background, agrarian question -- becomes important in new ways in neoliberal times.

And the national question and the democratic question – i.e. new imperialist subordination, the state and society becoming more undemocratic, peasants losing land -- are rooted in the fact that the NEP is basically a capitalist project. The NEP represents capitalism in its most naked and ruthless form. This is where the dirty picture of the NEP is coming from. The dirty picture of neoliberalism, once again, runs on three things: class, class, and class.

If the above assessment is broadly correct, it indicates a very different sort of solution to the national and democratic questions as well as specific problems such as mass impoverishment the NEP is creating than what the current left is offering. The intellectual and political fight against the NEP cannot be about merely changing the dirty clothes of the state (meaning changing its policy and making it regulate affairs of capitalism more as during olden times). It cannot be about interrupting, deconstructing and destabilising things and narratives about the NEP or wider society a bit here and a bit there, although that is certainly necessary. The idea that there is such a thing as neoliberalism with a human face is basically based on the lie that basic interests of capital are fundamentally compatible with the basic interests of toiling masses of the country in a sustainable, contradiction-free manner.

Control of society’s resources by big business, unregulated growth, exploitation of labour, income inequality and ecological devastation cannot belong to the same set in which socially coordinated wealth creation, equality, solidarity, popular democracy and satisfaction of needs belong. Therefore, the intellectual and political project must have a larger goal of theoretically and practically transcending the conditions which produce the dirty picture of neoliberalism itself.

[Raju J. Das is associate professor at the departments of geography and development studies, York University, Toronto, Canada. Das is on the editorial board of Science & Society and the editorial advisory board of Dialectical Anthropology.]

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Notes