An elixir of logic

The Retreat to Unfreedom: Essays on the Emerging World Order by Prabhat Patnaik; Tulika Books, New Delhi, 2003; pages XIV + 302, Rs.525.

IT is not often that a collection of essays on seemingly different themes, written over a substantial interval of time, can achieve coherence. The essays of Prabhat Patnaik in the collection under review, written between 1996 and 2002 - covering a range of topics varying from the political economy of globalisation and its implications for development of poor countries through the political economy of Indian development to the current conjuncture and future prospects of socialism as a historic project - are truly remarkable for their coherence and consistency of perspective.

The collection consists of 19 essays of which all but two are being published for the first time. Not only do the essays cover a vast territory in terms of the issues addressed, they are also different in terms of the level at which the arguments are put forward. For instance, the essay on financial liberalisation and credit policy challenges the prevailing orthodox wisdom in the most rigorous fashion, and the non-economist may find it a bit out of his or her depth. On the other hand, the last two essays in the collection, which focus on socialism and constitute a veritable tour de force in terms of an analytical approach to history and politics from a political economy perspective, will be accessible to the intelligent lay reader while still being rigorous in their arguments.

The collection has been neatly grouped into four parts, falling broadly under the themes of the political economy of globalisation, India's political economy, the Indian economy under globalisation and socialism. However, while its division into four thematic areas is useful, its most outstanding feature is that there is an underlying universal and overarching theme running through all the essays. This theme is the specific nature of contemporary globalisation, namely the enormous degree of centralisation and internationalisation of finance capital, which impacts significantly on social, economic, cultural and political processes everywhere. Within this overall perspective, each essay makes an important point of its own on some aspect or the other of the broader picture of a world where, far from progress being the norm, a more or less universal retreat into unfreedom is taking place on account of it being held to ransom by rampaging finance capital.

THE overall theme deserves elaboration. It is a commonly held view, even among those who may be critical of some aspects of contemporary capitalist globalisation, that it is an antidote to reactionary ideologies such as religious fundamentalism and communalism. Similarly, it is often held that the way poor countries can make progress is through economic integration with the advanced capitalist countries, and that this will also strengthen democracy and put an end to pre-capitalist modes of exploitation. These views fail to see that capitalism has historically proceeded by devouring, in a predatory fashion, pre-capitalist modes only up to a point. But once challenged by forces of social progress seeking to go beyond capitalism to a more rational and democratic mode of economic organisation, it seeks to survive and grow by utilising the very pre-capitalist relations and ideologies that it railed against in its early phase of growth. To put it differently, the phenomena of poverty and deprivation that one sees in much of the Third World, while no doubt partly the consequence of backward economic and social relations extant in these countries, is also often the consequence of the manner in which these countries have been linked with the advanced countries through colonial rule in the past and through continuing neo-colonial relationships.

Apart from this general point drawn from both theory and history, Patnaik also draws our attention to a specific and exceptionally important consequence of the dominance of global finance capital for all countries and especially for the poor countries. This is the imposition of deflationary macro-economic policies across the board in a world of increasing mobility of capital as finance. What is globally mobile in the contemporary world is not so much industrial or productive capital, but capital as finance, which has no essential interest in production, but seeks only quick gains through speculation in currency and share markets and through lending at high rates of interest. This global finance capital is highly centralised and concentrated and of metropolitan origin and loyalty. At the slightest sign of vulnerability - real or perceived - this capital rushes back to the metropolis like a homing pigeon, leaving Third World countries devastated in its wake.

Such capital flight is itself then used as an argument for the sale at rock bottom prices of Third World country assets, especially those of the public sector, to metropolitan capital, as part of the conditionalities of what is termed, in Orwellian fashion, "a rescue package". In a futile bid to prevent such capital flight, developing countries, under "advice" from the World Bank, the International Monetary Fund (IMF) and their experts, including the suitably loyal ones from the Third World, impose a deflationary macro-economic policy and maintain a regime "friendly to foreign capital". Patnaik shows that assuming that "internationalism", in the sense of opening up and integrating developing countries into the world economy dominated by advanced capitalist countries by suitably curbing national sovereignty, reducing the role of the state in development in these countries and reducing or removing control on international capital flows, is far from progressive and is in fact a recipe for disaster leading to massive deprivation and loss of economic and political sovereignty as well. He illustrates the point by referring to the impact of globalisation on sub-Saharan Africa under IMF-World Bank auspices and to the rise of fascist, secessionist, religious fundamentalist and communal forces in countries affected by globalisation.

The contemporary world economy, as Patnaik points out, is not only characterised by enormous and structured inequality both across nations and social classes, but also by a retreat from the brief phase of progress that followed the end of the Second World War and the temporary defeat of the imperial world system. For a while, in the 1950s and 1960s, the economies of the world grew rapidly, more so in the socialist countries and, to a lesser extent, in the Third World countries where the state played a proactive role in development, but also to some extent in the advanced capitalist world.

With the rise to dominance of footloose finance capital, the picture changed dramatically. Ironically, the period when the advanced capitalist world celebrated the collapse of socialism in the former Soviet Union and Eastern Europe was also a period marked by a considerable slowdown in growth and sharp increase in unemployment rates across the capitalist world. This is directly linked to the dominance of finance capital which not only desires a deflationary environment to enable it to obtain high levels of the real (as opposed to nominal) rates of interest on monies lent, but also imposes deflationary macro-economic policies on sovereign states as they vie with one another to ensure that capital does not leave their shores. An important implication of the current state of the world economy is that the relative autonomy that at least some large Third World states enjoyed in the years following the end of the Second World War - using also the Cold War period competition between the rival capitalist and socialist camps - is no longer there, at any rate, certainly nowhere near the same extent as before.

The current chorus of "Liberalise, Privatise and Globalise" (LPG) - on which, we are repeatedly and wrongly told by the major political parties and the media, which uncritically picks up the same refrain, there is a consensus across the political spectrum - arises from the new conjuncture where advanced country finance capital has become dominant, and ruling classes even in large Third World countries have much less relative autonomy than before.

Patnaik also makes the point, using several examples, that the LPG route is no solution at all to either the problem of all-round development or that of mass deprivation. In fact, to the extent that the need under the LPG regime to keep foreign finance capital from leaving the country in search of greener pastures paralyses macro-economic policy and state initiative for the development of physical, industrial and human resource infrastructure by requiring the maintenance of high real rates of interest and a deflationary macro-economic policy regime, the situation leads both to loss of sovereignty and accentuation of mass deprivation. Besides, insofar as the framework of parliamentary democracy limits the option to ruling regimes of pursuing such anti-people policies for long periods of time, calls are made for presidential forms of government or full and fixed terms for a government once elected and measures taken for abridging the democratic rights of people through legislation like the Prevention of Terrorism Act (POTA), ostensibly meant to combat terrorism, but equally for use against popular discontent with the consequences of economic policies. (It is another matter that the same political spokespersons who called for such legislation had no qualms about dissolving Parliament way ahead of time when no credible threat to their extant majority was present.) The other stratagem available, and often used in parallel, is to divert such discontent into other channels using fundamentalist, communal and secessionist ideologies and slogans. The Indian experience in recent times shows that Patnaik's inferences are far from idle speculation.

In the set of essays brought together in the section entitled "India's Political Economy", Patnaik deals incisively with India's anti-imperialist struggle, the crucial differences between Chinese and Indian situations in terms of strategies for development and the importance of democracy as a site for carrying forward the battle for progressive social and economic change. In a fascinating essay entitled "Globalisation and Counter-Revolution", Patnaik argues that "...the days of bourgeois nationalism are over; the bourgeoisie's only hope for growth and consolidation in societies like ours in today's context lies in becoming a junior partner of metropolitan capital". He goes on to infer: "The project of a relatively autonomous bourgeois development in the Third World is over. The new phase of the democratic revolution can only be led by the working class."

The set of essays on the Indian economy brings out the severe limitations of the kind of economic growth India has witnessed through the 1990s and beyond. They acquire additional relevance in the context of the ill-founded claim that India is shining because of progress made since 1998. But the essays do not confine themselves to a critique alone. They also offer an alternative vision of economic growth based on broad-basing it through basic land reforms, better and more equitable resource mobilisation for proactive development measures to be taken by the state, and genuine democratic decentralisation with a view to enhancing people's participation in the development process. The last two essays in the collection deal imaginatively with the crisis of socialism in the contemporary world and ways of overcoming the crisis and advancing towards a rational, socialist society.

The redoubtable British economist, the late Joan Robinson, wrote of the Italian economist Piero Sraffa's path-breaking work, Production of Commodities by Means of Commodities, that it was like a double-distilled elixir of logic. It would not be an exaggeration to say that Patnaik's collection of essays merits a similar description.