Capitalism's pursuit of profit

Capital’s Malthusian moment

Print edition : June 05, 2020

Migrant labourers traversing long distances, passing through Vijayawada on May 18. Photo: K.V.S. GIRI

Migrant workers from Bihar waiting to board buses in Bengaluru to reach Malur railway station, on May 8. Photo: V. Sreenivasa Murthy

In a world that needs substantial reorienting of production and distribution, Indian capital is resorting to a militant form of moribund neoliberalism to overcome its current crisis. In this pursuit of profit, it is ready and willing to throw into mortal peril millions whom it adjudicates as not worth their means—an admixture of social Darwinism born of capital’s avarice and brutalism spawned by Hindutva.

THE anxiety of the Indian bourgeoisie and its articulation are writ large in the slew of actions and reforms that the Central and State governments have announced to overcome the economic crisis triggered by the COVID-19 pandemic. This is obvious from the crude coercive expression of intent by Karnataka which, at the behest of the builders’ syndicate, cancelled special trains from Bengaluru meant to ferry stranded migrant workers to their homes, and from the Central government’s “economic package”. These point to a consciously conceived path to recovery from the current economic crisis by Indian capital in its characteristic moribund manner.

In a world that is starting to build anew, fully conscious that the new may not resemble the old, Indian capital has made a renewed and aggressive push for a decadent neoliberalism it hopes will help overcome the current crisis. This path to recovery will not only devastate the livelihoods of a large section of the Indian population but undermine capital itself. It is increasingly evident that the Indian bourgeoisie lacks an enlightened articulation of its self-interest. Overcoming this crisis will have to be a case of saving capitalism from itself.

Crisis of capital

Much of the world economy was already in chronic slowdown when the COVID-19 shock pushed it into an unprecedented crisis. Suspension of economic activity to limit the contagion by physical distancing, though imperative for mitigating pandemic-driven mortality, has led to a complete breakdown of the usual course of production and exchange. This has been detrimental to both capital and labour, though its repercussions are differentiated in form and severity contingent on their respective role in the reproduction of the social order.

The logic of capital entails operating at a scale and a turnover rate necessary to recover the sunk cost and book profits in a competitive market environment. However, it is also compelled to innovate and proliferate if it is to avert the market gallows. Capital then not only needs to service existing capacity, paying for raw material, rent and wages and realising present profit but also for investment in the future. The rate of profit in the usual course, whether on short-term working capital or long-term investment to augment production, can only be realised ex-post while production decisions and expenditure are made ex-ante. These decisions are informed by profit expectation on the basis of forecasting, within a tolerable (read affordable) range of errors of key variables such as “factor prices”, production behaviour of other firms, and effective demand. This implies unavoidable uncertainty in the realisation of profit.

Ensuring sustained profitability and mitigating innate uncertainty are capital’s persistent challenges and a source of its endemic crisis. There is a widespread heterogeneity of capital in India that tempers concrete manifestation of these general tendencies. Alongside big capital engaged in large-scale operations such as fast-moving consumer goods, car assembly, ore mining, petrochemicals, aviation, pharmaceuticals, small capital occupies large swathes and at times confronts big capital and at other times complements its functioning. Although small capital is most readily identified with retail mom-and-pop stores, it is omnipresent in the productive economy. For instance, micro, small and medium enterprises (MSMEs) form an integral part of manufacturing, servicing the backward-chained industrial supply lines whereby big capital puts out production of smaller components to these tier 1, 2, and 3 enterprises and even micro enterprises. These MSMEs are usually labour-intensive, operating at low levels of capitalisation and are overtly dependent on availability of working capital for continuing operation. This type of production organisation is beneficial for big capital as it outsources uncertainty, minimises supervision and labour costs, and ensures flexibility in operation. For small capital, assured order-based demand provides a semblance of order that helps it tide over market uncertainty despite slender margins. So, while the interests of large and small capital can be antagonistic, as evidenced in the protracted political struggle over foreign direct investment (FDI) in multi-brand retail, they also share at specific conjectures a symbiotic relationship.

The pandemic and the ensuing lockdown has vitiated the conditions of reproduction of capital as a whole. For large capital this has meant that its productive capacity lies idle in the absence of its lifeblood, labour. Capital erodes each day as it is unable to pay for itself or to accumulate for the future. Meanwhile, the future course of the economy becomes ever more uncertain. Forecasters the world over, seasoned in turning uncertainty into measurable risk, have finally tasted the proverbial human apple of Keynes. This twin crisis of profitability and uncertainty cascades back through the supply chain to circumvent small capital. The stability of an order-based demand, which is the MSME’s only hedge against its thin margins, is disrupted and starves it of the immediate need for working capital. Each day of economic activity foregone is then both a tangible loss of wealth and a source of great uncertainty, both of which pose an existential threat to capital. Capital confronts the imperative need to restart production immediately and in earnest; but with the daunting, if not impossible, task of rationally planning business in a situation of both deteriorating profitability and historically unprecedented uncertainty.

Crisis for labour

If the economic burden of the lockdown has been destructive for capital, it has been devastating for labour. Most workers own little means of subsistence and are precariously dependent on the market for their labour power. They retain in the form of wages part of the wealth they create and realise for capital. But any disruption in the operation of capital is immediately detrimental to its very existence. Labour under capitalism is not awarded the same liberty as capital in separating its personhood from its economic entity. While the latter can lawfully bankrupt itself without a sliver of threat to personal well-being, any downturn in economic conditions precipitates into a crisis of social reproduction for labour. So, while for capital the lockdown is a crisis of preserving and furthering wealth, for labour it is a matter of sustaining life.

The sphere of production is not where troubles cease for labour. From the demand side, suspension of productive activity will lead to relative scarcity of goods and services once inventories run down, leading to an increase in the prices of basic commodities. Agricultural commodities seem to be an exception as production remains robust, but continued disruption in supply chains may lead to glut in prices in areas of production and shortages elsewhere. This situation will price out the poorest with little or no owned means of subsistence, while leading to windfall profiteering for holders of inventory and black-marketeers. In this context, direct cash transfers, a prominent demand by some academics and social activists, by itself, will do little to mitigate the suffering of the poor. Given the neglect of fiscal measures in order to resuscitate production and exchange, even such a course would be futile. Goods have first to be produced before they are demanded.

Then, restoring production is imperative in the interest of not only capital but also labour. The question then is not so much about whether the economy needs to be immediately moved to a path of recovery as about doing it in a manner that protects the material interests of a vast majority of people in the country and ensures their safety.

The measures put in place by governments across the world to control the pandemic and resuscitate the economy are to be seen in the backdrop of this exacerbation of the general crisis of capitalism by the pandemic. A large part of the “cost” of the pandemic was socialised straight up by many countries through provisioning for large-scale testing and treatment through their public health systems, in some cases even necessitating emergency nationalisation of the health care sector. They also subsidised the immediate shock to social reproduction of labour by state-sponsored grocery supplies, and, in many cases, substantive cash transfers.

These relief measures from the demand side have been complemented by well-planned and supervised experiments in restoring productive economic activity. These experiments by countries such as Taiwan, South Korea and China have resulted in the realisation that the new world may not resemble the old. That “living with the virus” entails putting in place workplace provisions such as strong hygiene practices, aggressive health monitoring, and in some cases even housing within factory premises. These have substantially increased overhead costs for capital, but have ensured continued economic activity while protecting workers from disease and hunger.

These realisations are not because of some inherent empathy capital has for labour, though there are certainly social values that preclude the crass degeneration of labour as seen in India, but because capital in these countries realises that this is the only pathway that ensures sustained valorisation in the new world via production on an expanding scale and, therefore, higher profits. In other words, capital sees this as the only rational and “progressive” market resolution to this crisis.

Indian capital is starkly different, especially in the way it has encountered this crisis and intends to tackle it. Almost instinctively, its attempts to mitigate the twin threats of deteriorating profitability and proliferating uncertainty rest on imposing its costs on public ownership, small capital, and labour.

Dismantling labour laws

The first order of business has been an immediate resumption of production while mitigating any threat to profitability that may arise from labour’s bargaining power. In pursuit of this rash adventure, it seeks a complete dismantling of labour laws, which, in effect, will give legal sanctity to suppression of wages, lengthening of the workday, and dramatic curtailing of “overhead” costs that would have in the current situation provided for workplace safety for workers. The aversion of capital to labour laws is not because they radically affect profitability of capital as such; they barely cover less than a tenth of all workers. Capital’s aggressive attempt reflects its desire to snuff out the last whiff of challenge from organised labour that its own vulnerability may have offered labour at this time. This effort to dismantle the last vestiges of formal protection offered to labour, existent only in statutes stacked away in dusty piles in government offices, long forgotten by the factory owner and the inspector alike, is essentially a struggle between capital and labour over garnering a larger share in surplus. However, this struggle is paraded, through quackery of hired pens, as measures to tackle “inefficiencies”. These “reforms” may in the first instance increase profitability of capital, and that perhaps is its dominant motive. However, while these costs are determined ex-post, their suppression will shift the uncertainty of realisation of profit by capital to wage earners.

Another facet of capital’s response relates to its desire to expand operations into profitable avenues that have hitherto been dominated by small or publicly owned capital, such as agricultural supply chains, coal mining, defence equipment, India’s space programme, among others. Quite apart from their strategic importance, in itself of significance, these sectors have for long been gainful employers and an important source of revenue for the government. The implication of this expansion of operation of large capital would be a redistribution of wealth away from small capital and public sector undertakings to large corporations.

Lastly, this path advocates the government abandoning its fiscal obligations towards sustaining small capital and labour in a moment of crisis under the ideological duress of the pursuit of “sound” public finance. Globally, there is vibrant debate on the inescapable eventuality of larger government spending even at the cost of “fiscal slippage”, a problem that has been easily remedied in practice by the monetisation of debt dressed up as quantitative easing by many central banks. India has continued to adhere to a militant and emasculating form of fiscal discipline, fearing the flight of speculative capital at the first indication of a credit agency downgrade. This fiscal discipline offers little space for expansion in social sector spending that is imperative to spur demand now.

An obvious target for relief is the MSME sector. The government, having already foreclosed fiscal support to this segment, appears keen to only maintain the pretense of passing the burden to the banks. Commercial banks, already reeling under a severe crisis of non-performing assets (NPA) may deny credit to MSME borrowers. The apparent poor credit-worthiness of MSMEs amidst the ongoing uncertainty offers them ample pretext. The simple course for the government in this situation would have been to protect the banks’ balance sheets, but that is a strict no-no in the government’s approach. In sum, in a world that needs substantial reorienting of production and distribution, Indian capital is resorting to a militant form of moribund neoliberalism to overcome its current crisis.

Contradictions abound

There are, however, intense contradictions that can undermine the realisation of the path that capital envisages. First, prima facie, there is no evidence that labour is in a rush to get back to work. Mortal fear has pushed workers, most of them migrants, to return home. This yearning for home and familiarity in times of a pandemic, though apparently inconsistent with the crude logic of cost-benefit analysis, is a powerful driving force in the mass reverse migration of workers since the partial easing of the lockdown. This withdrawal from the labour market is an exercise in the formal freedom that capitalism supposedly grants, but which it obstructs with might. Rather than provisioning for safety measures and immediate financial support that would reassure workers, employers have resorted to coercion. The restraint on workers’ physical mobility in Karnataka reflects this intent.

Secondly, these measures if followed through, will lead to a huge contraction in effective demand. Consumption expenditure by Indian workers, already among the lowest in the world, will further decline with suppression of wages. Workers exposed to coronavirus due to a lack of safety provisioning at the workplace will also have to pay for their own treatment in the absence of a decent public health system, which entails a further reduction of consumption. Destruction of small capital will impoverish a substantial part of the middle and lower-middle classes, which would result in a slowdown in demand.

Thirdly, it will disrupt the existing supply chains in manufacturing in which MSMEs play a pivotal role. It will not only undermine reproduction of small capital but also have a detrimental impact on large capital that relies on this backward-chained supply lines to maintain profitability and mitigate uncertainty.

Fourthly, while there will be windfall gain for big capital in profitable avenues in which operations are firmly established, such as coal mining and defence equipment production, there will be need for large-scale investment in an uncertain climate in avenues in which there is a need for overhaul of existing operational organisation. Even with the best laid plans, there are teething issues that in the current pandemic may amount to severe disruption caused by a retreating public sector and a dilettante private sector; all at the cost of public welfare.

Given the intense social contradictions these measures are likely to engender and their ultimate superfluity in resolving this crisis, even grievous self-affliction, why is there a broad consensus among the various classes of capital for this path, which is not only devastating for labour but also destructive of small capital? Despite this conflict within its ranks, why does capital exhibit a collective servility—barring a few honourable exceptions—to the government?

The most immediate point of unity among capital big and small is in their opposition to labour. There is a purported economic imperative in keeping their conditions of life wretched, vulnerable to debasing exploitation, and forgiving of Indian capital’s many infractions to capitalism. It is not that this is the only viable path of capitalist accumulation at a time when the world is ripe with instances of development in human capital that has allowed accumulation on an expanded scale: but it is the only possible path commensurate with Indian capital’s retrograde ideological moorings. Any measure to improve the lot of labour is seen as undermining capital’s interests. Even the material, economic imperative of capital is not a monolith but one tempered with its ideological instinct.

Notwithstanding this unity, there are real economic contradictions between strands of capital, which are exacerbated by the current economic predicament. Small capital has found itself methodically undone by the government over the past few years by measures such as demonetisation, the implementation of the goods and services tax (GST), and a liquidity crisis. It now finds itself atmanirbhar against the vagaries of a fast concentrating market in a moment of crisis. Nonetheless, it continues its unwavering political support to the Bharatiya Janata Party (BJP).

There is a sinister ideological impulse at play. The Hindutva project has evolved over the decades from its latent embryo to its full development under the political ascendance of the Rashtriya Swayamsewak Sangh (RSS) and the BJP. Sections of small capital, such as the north Indian Baniya, were already predisposed to a virulently conservative social agenda, having grown up in the communal aftermath of Partition. This social conservatism has now engorged with an increasing section of small capital identifying itself with the political project of Hindutva. Electoral outcomes indicate that even large sections of the working class, an unambiguous target of the BJP’s neoliberal assault, are not free from its intemperance. This suggests that the Sangh Parivar has been successful in instilling the primacy of perceived Hindu interests over economic self-interest.

There are valuable lessons to be learnt from across the world, particularly Taiwan, China and South Korea, on how the economy can be reconstructed in the post-coronavirus world. The state can play a mediating role in ensuring the safety of workers and making adequate provisions for their social reproduction while ensuring production on an expanding scale and, therefore, profits to capital, big and small.

However, the Indian state has shown no inclination to enforce this “progressive path”, nor has capital shown any inclination to submit to it. Its strategy mired in reaction is not without historical precedent. Indian capital has been notorious for capitulation to reaction, limiting the expansion of the home market and profitable avenues for itself.

Capital finds itself mired in its own precarity. If this crisis resolves in the image of the heathen path of Indian capital, laid and paved by the Indian state, workers will have to eventually return to work in the absence of safety provisions and get wages that barely ensure subsistence. Small capital would be decidedly throttled. These measures will expose lakhs to mortal peril of the pandemic and the co-morbidities of poverty.

This path of resolution is chillingly evocative of the “New Poor Laws” enacted in 1834 in Britain for which the work of Reverend Malthus bore the grim ideological justification. In his scheme the right to life was abrogated because of the inadequacy of nature in bearing the burden of its population; it was more humane to let people die than to reproduce a world of poverty with the attendant ignorance and vice. For the Indian bourgeoisie there is no salvation in noble intentions. Its rationale is driven by profit, but it also bears some responsibility for the precarity that is its fate now. In this service it is ready and willing to throw into mortal peril millions whom it adjudicates as not worth their means—an admixture of social Darwinism born of capital’s avarice and brutalism spawned by Hindutva.

Perhaps dominant capital believes this to be the way out of the current crisis. In reality, it may just be lurching from one crisis to the next one. Indian capital thus seeks its Malthusian moment, which brings to mind Antonio Gramsci:

“The old world is dying, and the new world struggles to be born: now is the time of monsters.”

Deepak K. is an economist working on issues of development.

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