Rick Kuhn’s Henryk Grossman and the Recovery of Marxism (University of Illinois Press/Amazon) is not just another biographical sketch of a Marxian economist. In fact, it is an authoritative attempt to understand and interpret Grossman’s contributions to the Marxist critique of political economy as realizations of his lifelong commitment to the working class and revolutionary politics. The book begins with a comprehensive and lucid survey of Grossman’s political activism at the turn of the twentieth century, when capitalist expansion, intensification and competition were increasingly met with a rise in the self-activity and organization of the working class against exploitation and national oppression. The biography shows how Grossman’s approach to Marxism and his theoretical agenda congealed against this backdrop. This entirely new approach to Grossman’s Marxism makes his complex theoretical insights equally accessible to political economists, activists and non-academic audience. The following discussion with Rick Kuhn touches upon some of the themes in Grossman’s life and work detailed in the book.
Radical Notes (RN): Let us begin by asking you about the meaning of the title that you chose for this tremendous biography, Henryk Grossman and the Recovery of Marxism. It seems it has a dual connotation. On the one hand, it may
signify that the book tries to detail Grossman’s role in the recovery of Marxism during his own time, while on the other, it might be an attempt to assess the importance of Grossman’s contributions for the “recovery of Marxism” in our times. Is this ‘ambiguity’ intended, or we are just reading between the lines?
Rick Kuhn: The history of Marxism is not simply a history of doctrines and debates. We have to apply historical materialism to Marxism itself. Marx’s insights were only possible once capitalist society and particularly working class struggle had reached a certain level of development, in the middle of the nineteenth century. Without the growth of capitalist production and hence an extensive working class, Marxism, the theory and practice of working class revolution, is inconceivable. Later insights into the nature of capitalist society, and even more broadly, human society and its relations with nature, emerged in the context of the growth and achievements of the working class and the engagement of Marxists with new problems.
But the curve of Marxist theory is not a monotonic, upward sweep of accumulating insights. Particularly during periods of working class defeat or the adaptation of working class institutions to capitalism, earlier insights have been lost, distorted and denied. Under new, more favorable circumstances, later Marxists rediscover or reinvent them. Thus struggles for women’s liberation and over the environment were the contexts for recoveries and extensions of Marx’s previously neglected, misunderstood or obscured analyses of women’s oppression and capitalism’s implications for the natural world. Hence the work of recovery, in the first case, by Hal Draper, Barbara Leacock, Karen Sacks during the late 1960s and 1970s, and in the second by Paul Burkett and John Bellamy Foster around the turn of the millennium.
Against the background of his experiences in the workers’ movement before and after the First World War, and particularly the upsurge in class struggle during the period of the Russian revolution, Henryk Grossman recovered and extended some fundamental aspects of Marx’s critique of political economy. But Grossman’s best known publications during the late 1920s and early 1930s appeared after the revolutionary wave had crested. He continued his work in Marxist economics through to the 1940s and also made important contributions to the history of science. As Victor Serge put it, the 1930s were ‘the midnight in the century’. As a consequence of Stalinism and fascism the workers’ movement suffered not only terrible physical but also theoretical setbacks.
Hence, as you correctly observe, the need to recover Grossman’s own analyses and to re-recover those of Marx. The German New Left rediscovered Grossman during the 1960s in the context of a massive, international revival of class and other social struggles. I have continued this process. The later stages of my project happily coincided with the movement against capitalist globalization and the largest anti-war movement in history.
RN: One aspect that strikes us most in the text is that you have devoted around one third of the biography to Grossman’s formative period – to his politics in Poland and his contributions to a Marxist theorization of the national and Jewish questions. One reason, which immediately comes to mind, might be an attempt to rebut the general image of Grossman as an academic economist, not as a communist revolutionary, which you have effectively portrayed him to be. What lessons do we get from his early political life and his contributions to direct political questions like the question of national self-determination and its relationship with the proletarian revolution?
Kuhn: Those aware of Grossman’s work in economics have generally had little awareness, to put it kindly, of his engagement with working class organizations and their struggles. Just reading his publications, it is not difficult to spot his identification with the interests of the working class and commitment to the goal of socialist revolution. But those who propound the dominant interpretation of his economics still ignore this and have not bothered to investigate the details of his non-academic life especially before the First World War.
Although Grossman’s family background was bourgeois, he became an organic intellectual of the working class. In other words, experiences in his twenties, with building the organizations of the Jewish workers in Galicia (Austria-Hungary’s Polish province) from about 1902, at the latest, until after 1908 shaped his outlook. Despite some political shifts, for the rest of his life his understanding of the world was Marxist.
Grossman was the theoretician and outstanding early leader of the Jewish Social Democratic Party of Galicia. Before the foundation of the Jewish Social Democratic Party (JSDP), in 1905, he provided assistance to Marxists in Russia’s Polish territories. They were members of the Social Democratic Party of the Kingdom of Poland and Lithuania, to which the exiled Rosa Luxemburg belonged, and particularly the Bund, the organization of Jewish workers and then the largest Marxist organization in the Russian empire. During the waves of demonstrations, strikes and protests that swept Austria-Hungary when the 1905 Revolution was convulsing Russia, Grossman was a full-time revolutionary and agitator.
Jewish workers in Galicia, who overwhelmingly spoke Yiddish, experienced national oppression and exploitation. To mobilize them into the international workers movement they needed, Grossman argued, their own political party through which they could struggle for their own emancipation and that of the entire working class. The JSDP was a means of fighting oppression and exploitation and combating the politics of other left wing currents in Galicia. To neglect their national oppression, as the Polish nationalists of the Polish Social Democratic Party of Galicia did, left them open to the appeals of Jewish nationalists. Ignoring their exploitation and common interests with Polish and Ukrainian workers in Galicia and the international movement could only weaken their defense of their wages and conditions and the overall struggle for socialism.
So Grossman belonged to the very substantial tradition of opposition to Zionism amongst Jewish socialists. This is something I particularly identify with, as a Marxist with a Jewish upbringing whose political activity includes supporting Palestinian resistance against the intrinsically racist state of Israel. The relationship between racism and capitalist interests is also a focus in my current work on anti-Muslim racism in Australia.
RN: What are the major facets of Grossman’s rediscovery of the Marxist critique of political economy?
Kuhn: Key elements of Grossman’s economic work were already evident in his first publication on crisis theory, a lecture delivered in 1919. They were the relationship of economics to the class struggle, the importance of the distinction between use and exchange-value, Marx’s method in Capital and the inevitability of economic crises under capitalism.
The last is best known. Grossman argued that the tendency for the rate of profit to fall, discussed by Marx in volume three of Capital, constitutes a propensity for the system to break down. The tendency occurs because investment in improved labour-saving technology increases the ratio of capitalists’ outlays on machinery, equipment, buildings etc. compared with what they spend on purchasing labour power. It is only labour power, however, that creates new value, the basis of profits. Following and extending Marx, Grossman identified a variety of countervailing factors that can help maintain or improve profit rates. In fact he went into some detail about all the processes critics allege that he neglected. The offsetting mechanisms mean that the tendency to break down takes, in the longer term, the shape of successive crises rather than a single downward path to collapse.
Capitalist crises can also, Grossman pointed out, be understood in terms the impossibility of the outputs of different industries being consistently in the right proportions to maintain smooth growth. Both explanations of economic crises ultimately derive from the contradiction at the heart of capitalist production which is simultaneously the creation of use values, for the satisfaction of human needs, and of values, in the pursuit of profit.
RN: Throughout your work, not only in the book but also in other research articles, you have questioned the economistic and schematic interpretations of Grossman’s theory of crises. In fact you find the intersection between revolutionary politics and his classical Marxist theory of crises based on the decline in the rate of profit as “the core of Grossman’s major theoretical project in economics”. Could you elaborate on this?
Kuhn: I tried to make the biography of Grossman as accessible as possible. This included a style that is, hopefully, direct and engaging, and giving prominence to the story of Grossman’s life, the conflicts in which he was involved and the content of his writings. So references to subsequent evaluations of his ideas are relegated to the endnotes. With one exception. Giacomo Marramao observed that in ‘Lukács’s History and Class Consciousness that one finds the philosophical equivalent of Grossmann’s great attempt at a critical-revolutionary re-appropriation of Marxian categories.’ This is very important, although it needs to be extended because both Lukács and Grossman drew on Lenin’s recovery of Marxist politics and the inspiration of the Russian revolution. Both embraced Lenin’s theory of revolution and the revolutionary party.
Grossman explicitly stated that his best known work, The Law of Accumulation and Breakdown of the Capitalist System, was designed to supplement Marxist discussions about political revolution by examining the logic of economic crisis, which is an element in revolutionary situations. In relation to the dominant interpretation of Grossman-that he had a mechanical theory of economic breakdown-it is worth noting that he wrote this not in some obscure unpublished manuscript or letter, but in the book’s introduction.
The argument in Marx’s Capital, Grossman demonstrated, moves from discussion of fundamental, abstract features of capitalism through a series of steps to the everyday appearance of capitalist reality. The structure of Grossman’s book is similar. The final chapter, which is sadly not included in the abridged English translation, operated at a concrete level of analysis, focusing on the implications of the preceding analysis of crises for the class struggle. The purpose of the entire argument was to explore the objective preconditions for successful revolutionary action by the working class.
RN: Can you tell us briefly about Grossman’s understanding of imperialism? To what extent do his theorizations in this regard converge with and diverge from other major theorists of imperialism, especially, Lenin and Luxemburg?
Kuhn: This is one of my current areas of research. Like Luxemburg, Grossman argued that modern imperialism was a consequence of the advanced stage of capital accumulation and consequently the intensification of capitalism’s tendency to break down. But he rejected Luxemburg’s assertion that capital’s survival depends on finding non-capitalist markets in which to realize surplus value. For Grossman, the problem lies not in inadequate sales of commodities, but the system’s inability to create enough surplus value. Unequal exchange and monopoly control of key resources, imperialism, are responses to this problem of securing additional surplus value for metropolitan capitals. Meanwhile, the speculative export of capital and domestic economic speculation are consequences of the inability of capital to find profitable outlets for productive investment.
Grossman regarded Lenin’s Imperialism, the Highest Stage of Capitalism as containing descriptive insights, but as deficient when it came to providing an explanation of the logic of imperialism. He also refuted Hilferding’s emphasis, which Lenin took over, on the dominance of ‘finance capital’ as an ongoing feature of contemporary capitalism.
RN: You mention in the book that Sweezy in his survey of Marxist economic theory criticized Grossman’s crisis theory and Grossman in turn termed his criticism as “distortions”. Can you briefly tell us about these claims and counter-claims?
Kuhn: Paul Sweezy’s The Theory of Capitalist Development, published in the early 1940s, has had a massive influence on radical economics in the United States. Its systematic and accessible introduction to Marxist economics was a major achievement. The book also introduced Grossman’s work, most of which was not available in English, to a large audience and included some favorable comments about some of his secondary arguments. But it simply ignored Grossman’s explanation of why crises will occur as the rate of profit declines, but well before it reaches zero. To justify his verdict that Grossman had a ‘mechanistic’ approach, Sweezy caricatured the role played by Otto Bauer’s reproduction schemes in Grossman’s analysis. In Research in Political Economy (preprint), I synthesized Grossman’s various published and unpublished replies to his critics, most written before 1942, which nevertheless deal with Sweezy’s unoriginal objections.
Interestingly, Sweezy takes the structure of his own explanation of crises, the balance between tendency and countertendencies, from Marx’s and Grossman’s discussions of the tendency for the rate of profit to fall. Both Luxemburg’s and Sweezy’s approaches were underconsumptionist. Luxemburg insisted that capitalism tends to break down. Sweezy, like Keynes, argued that ‘the deliberate action of the state’-expanded government spending-could theoretically prevent ‘chronic depression’.
RN: How relevant is Grossman’s approach today?
Kuhn: Grossman provides a framework for understanding fundamental contemporary developments. It highlights the ongoing crisis-prone nature of capitalism and developments that help restore profit rates. Neo-liberal policies-attacks on wages and conditions, dismantling of the welfare state, knocking down barriers to trade with less developed parts of the world-are not the result of the fevered imaginings of delusional politicians, but efforts to restore profits rates. The same is true of the United States’ current imperialist adventures in Iraq and Afghanistan. Grossman’s discussion of speculative activity as a response to capitalism’s crisis tendencies provides insights into the phenomenal growth in global financial flows over recent decades.
RN: As you note, “Changes in the level of population, through the availability of labor power, influence capitalism’s breakdown tendency. Capital accumulation increases the need for workers to valorize capital. Eventually the impossibility of this valorization, because population growth is too slow, gives rise to crisis and unemployment: ‘Unemployment was a consequence of insufficient population!’ The need for labor power pushes capitalists to attempt to extend the length of the working day, to seek supplementary sources of surplus value and labor on the world market. The mercantilist preoccupation with population … and early colonial policy were not about finding markets. They were concerned with capitalist production and hence the need for labor. As much of the labor used in colonial capitalist production was extracted from slaves, Grossman developed, for the first time, Marx’s comments on the importance of the slave trade for the emergence of capitalism in an account of the trade’s origins and significance from the fifteenth century.” (133)
Can you tell us more about Grossman’s analyses in this regard?
Kuhn: Grossman had a long term interest in slavery as an institution under different modes of production. In a manuscript, probably written in the early 1920s, he dealt with slavery among Christian peoples to the ninth century. During the 1930s, he noted that the development of machinery in the ancient world was in response to problems that could not be solved by the application of human labor because slavery could be regarded as a natural perpetuum mobile, a machine that continues to operate without the expenditure of additional energy. In a letter to Horkheimer he offered a critique of the depiction of slavery in Margaret Mitchell’s bestselling novel, Gone with the Wind. The Law of Accumulation examines the role of slavery during the early period of Spanish and Portuguese colonialism, and also identifies forms of tribute labor imposed on native populations of Central and South America. The account of slavery also deals with French and English colonial expansion and the institution’s economic significance in the Americas into the 19th century. He was making an historical case against Luxemburg’s explanation of imperialism, in terms of the realization of surplus value. So, rather than offering a history of colonial economies, Grossman explicitly confined himself to demonstrating that the underlying logic of capitalist territorial expansion was the creation of surplus value.
RN: Grossman’s The Law of Accumulation and other major works were conceived during his association with the Institute for Social Research which gave rise to the Frankfurt School. However, it seems that after Carl Grünberg’s death, Grossman distanced himself from the mainstream activities and engagements of the Institute. One can understand the political and organizational reasons for his disillusionment, but were there theoretical and methodological reasons too?
Kuhn: In Frankfurt am Main and exile, through to the end of the 1930s, Grossman was dedicated to the Institute and valued collaboration with his colleagues. In New York, however, the core of the Institute around Max Horkheimer moved away from Marxism, particularly its stress on the role of the working class in liberating humanity. In theoretical terms, this culminated in Horkheimer and Theodor Adorno’s The Dialectic of Enlightenment of 1944, which rejected the concept of scientific explanation. Grossman remained a Marxist. He stood by and developed his own earlier analyses. But the desperation of the midnight in the century affected him and led to a massive contradiction in his thinking. After being very hostile to Stalinism for a couple of years, he became an uncritical supporter of the Soviet Union around 1936. So distinct differences at the levels of high theory and more concrete political analysis emerged between Grossman and the Horkheimer clique. In addition, because of a financial crisis, Horkheimer and Friedrich Pollock tried to drive as many members of the Institute as possible off the payroll during the early 1940s. This led to personal stresses and hostilities.
RN: In Chapter 5, the section that discusses the reception of The Law of Accumulation is titled, “An Economic Theory without a Political Home”. Can you please give our readers a glimpse of this ‘homelessness’ of Grossman’s theory?
Kuhn: The roots of the widespread misinterpretation of Grossman’s arguments lie in the initial reception ofThe Law of Accumulation. Bourgeois economists, social democrats and orthodox Communists were all hostile. Conservatives and social democrats obviously disliked the argument that capitalism is inherently crisis-prone and that the solution is workers’ revolution.
The defeat of the Russian revolution and the victory of state capitalism-personified in Stalin-led to the establishment of dogmas in all areas of Soviet intellectual life, including genetics. The explanation of economic crises which Grossman advocated did not comply with the views of Stalin’s man in economics. Jenö Varga explained crises in particularly crude underconsumptionist terms. Grossman therefore had to be wrong.
By the 1930s, social democracy and Stalinism dominated working class organizations around the world. Representatives of both currents accused Grossman of believing that capitalism would mechanically break down and that organized working class action was therefore superfluous. So no significant section of the labour movement took up his analysis.
RN: Despite a rediscovery of Grossman’s works in the late 1960s, till now his major book has been translated in English only in an abridged form, and your standard biography has only just appeared. Does this not show that this ‘homelessness’ continues? What could possibly be the reason behind this?
Kuhn: Yes, to some extent. But today the nature of the homelessness is different and less absolute. From the 1920s to the 1960s, the influence of Stalinism and social democracy meant that the space for classical Marxist politics and theory in the labor movement was very restricted. That has changed. The 1960s and 1970s saw the emergence of a new or revitalized revolutionary left. Then the downturn in the levels of class struggle around the world during the late 1970s through to the 1990s, coupled with many defeats weakened the organized labor movement. The end of state capitalism in Russia demoralized the Stalinist left, old and new, and led to the collapse or final embrace of reformism by many organizations which had illusions in the USSR. In many countries, the neo-liberal trajectory of social democratic parties since the end of the long boom, in the mid 1970s, weakened their leftist pretensions and eroded their memberships.
Of course this is a generalization, there have been ups and downs. The Brazilian Workers Party, for example, emerged out of working class mobilizations before emulating the neo-liberal behavior of its older social democratic siblings. In South Korea, Italy and France there have been some periods of quite sustained class struggles. And there have been important social movements, especially against the USA’s wars.
Overall, then, the left has declined drastically in size. But there is somewhat more space for currents, like that of the unorthodox Trotskyist tradition, to which I belong, which are open to Grossman’s analysis.
RN: Since for several years now you have been working on Henryk Grossman, can you tell our readers about your initial motivation? Also, what went into making the book? What are your hopes for the book regarding its contributions and achievements, politically and within Marxist circles?
Kuhn: Through Anwar Shaikh’s excellent 1978 essay on the history of Marxist crisis theory I became aware of Grossman. The fall of the Berlin Wall in 1989 prompted me to start learning German again. Before that my research was mainly on Australian politics and political economy, an area which I continue to explore. This, however, does not provide much scope for international travel. I wanted to do some work on Germany andAustria. Once I had a certain proficiency in German, around 1993, I began the Grossman research.
Studying Grossman was, in part, a search for my own roots. Not only because my parents were Jewish refugees from Vienna-Grossman’s home for several years-and my mother’s mother was, I discovered as a bi-product of my project, even born in a Galician shtetl (Jewish village) where there was a JSDP branch. Tracing Grossman’s story was also an investigation of my heritage as a socialist: the history of the institutions and struggles of the labor movement.
The research has taken me on many journeys through time, space and different cultures. A couple of examples. To grasp Grossman’s experiences in Galicia it was necessary not only to understand the institutions of the Austro-Hungarian empire and the history of eastern European Jewry but also to trace the activities of the JSDP, which led me to learn to read Yiddish and to add an appreciation of klezmer to my musical tastes. Grossman participated in or was affected by Marxist debates about the best way to organize and the national question, the zig-zags in the line of the Communist International, particularly as they impacted on the Polish and German Communist Parties. I stalked primary material from Kraków and Warsaw to Boston and Berlin, from Vienna and New York to Frankfurt am Main and the village of Tellow in the north-eastern German state of Mecklenburg-Vorpommern. In New York, the Australian novelist Christina Stead and her partner, the banker, writer and economist, William Blake were amongst Grossman’s closest friends. This led me into their biographies and a key source, Stead’s papers in the National Library of Australia back in Canberra, my hometown.
Hopefully my detailed and sympathetic account of Grossman’s life and work will disrupt the cycle of distortion of his ideas that social democrats and Stalinists began in 1929. Grossman vindicated the Marxist synthesis of theory with practice, analysis of objective realities and constraints with strategy and tactics designed to realize the working class’s capacity to be an historical, revolutionary subject. He provided useful tools for people who not only want to understand but also want to change the world. But I have no illusions about the impact of my publications on the level of the class struggle, the fundamental driver of socialist politics. There is no substitute for practical activity: building campaigns against the immediate consequences of capitalist exploitation and oppression, and constructing an organization capable of merging them in the struggle for socialism.
Radical Notes 
Special Economic Zones – Neoliberal “Enclosures” in India
Soumitra Bose
Specially Enclosed Zones for forming Capital through production or servicing within a nation-state and without the encumbrances of law of the native land is what gets called as Special Economic Zone (SEZ). What speciality of Economy this zone is going to provide is hazy not only from the content point of view but even from every angle of view one looks at it. Can a nation state, by definition, have multiple “economies” within its territorial boundary? Can an “Economy” be quantified through any stretchable definition of qualification as one co-existing with “others”? Is the usage of “Economy” over determined by factors other than “Economy” or if not then where is the line drawn to distinguish the exchange mechanism or production process or evenproduction relation with the regulating rules relating to human rights, social benefits and even simple polity of the nation-state?
The concept of enclosed space has changed its point of incidence. Marx saw an enclosed space as a catchment basin from where cheap labour will be evicted and culled in to work in industries. Labourers from not specialized but specially charted out areas will be brought in to the most “advanced” type of production relation or that is what will be touted. In reality it will never be the most advanced type of production relation but will have the most advanced type of surplus extraction from the labourers. In Marx’s days, the entire nation-state territorial space was the hearth of the Capital, spaces were enclosed and insulated to juice out the labour power, evict them, make them readily available for the Capital sector- today in SEZ the enclosed space is the special sector of Capital, whatever we have outside is the area from which labour power will be uprooted, evicted and made available for the “enclosed spaces”. This very specific nature of the transposition requires a huge space or innumerable middle range spaces to be declared as the SEZ where the “advanced” Capital will establish the most advanced form of labour extraction, rent extraction and super-profit extraction. This would be the most “advanced” form of not production relation but of extraction relation. That too let us harbour no illusion that advanced might mean sophisticated. Sophistication would have brought in more organic composition of Capital that in turn would have meant advanced organic composition both in Fixed Capital and in variable capital.. In addition to adding more machines in the production process more technical composition of Capital would have to be brought in the personal skills of the labourers and daily tools used by the labourers. Let us be very clear that no such thing is going to be the essential part within the case study of the production process within SEZ. We must also not overlook that the SEZ may not have any production coming out at all. It could be a simple centre for hospitality, and centre for entertainment. We might call that as production, but no one will deny that no Capacity will be built up. No means of production may be produced. Special Economic Zone would therefore attain some credential in its description because it is a different kind of animal of economy that is going to be garnered here, one that does not require that profit and super-profit comes out of the Capital invested in some or the other production process.
Primitive accumulation of Marx’s description has essentially come back and is active. Capitalism has created within itself sub-sectors and shows partiality on one over the other. At this day today, agriculture is not outside the Capital project, nor is small scale industries or even what gets called as the Sunset or traditional industries. Capital is moving towards a regime of a different and a more restricted kind of Capital formation in one or two preferred sub-sectors at the cost of her other sub-sectors. Moribund nature of Capital is still a convincing proposition because the project of Capital has therefore become more skewed, focussed and living off itself. Agriculture had just started to form Capital with the newer machines and factor inputs. Agricultural produces then were just getting forwardly linked to other processed products and even giving rise to large scale mass consumer products. Agro-industry had a possibility of taking a dangerous turn through GM food industry [cash crop] but could equally have taken a rather desirable route of developing retail-food consumer industry. Retail industry in India has been very conservatively poised to be flourishing up to Rs 28 billion in the next two to three years based on the present production capability. The huge potential of the augmented production and processed production would have transgressed even into the so-called traditional near-static realm of the security food production. Cereal too had shown all signs of becoming a viable and very important cash crop. Economy based on the agricultural showed the promise of becoming the most spread out and most popular industry and yes, even heavy industry there too. The agricultural equipment building up capital industry, the storage industry, the preservative industry, the processing mills industry, the distribution and Just-In-Time supply chain all these had the possibility of being the best optimized network in the human history. Capital, and especially Capital in the third world had chosen to ignore that route and go for what it perceives as a faster track of building up SEZ on some low graded low skill assembling industry and hospitality industry. It has chosen to ruin down even all present capabilities of agricultural and agro-industries and for the sake of realty industry- this is the famous python eating off its own tail. That is the very specific nature of the accelerating rate of moribundity of Capital.
“Primitive Accumulation process” had accumulated Capital through accumulating the sources of Capital that is labour, in turn labourers had to be provided, that created more jobs and more distributed income and therefore more small savings. The present day SEZ-patterned neo-modern primitive capital or what we may term as predatory capital is evicting producing farmers to snatch their land, render them jobless and provision less and skill less gradually. The only thing that is extracted of them in this SEZ is the cheap labour without any strings attached. The whole logic of enclosing the other way around has come up simply due to this narrow objective of extracting the cheapest possible labour without bothering about the provisions given to them for keeping them alive and work-worthy for the next day. The traditional definition of wage comes into question here. What therefore the labourers in SEZ would get is a diminutive form of wage that is destined to go down progressively. This downward shift in wage or remuneration may be in real terms or in nominal terms (in absolute terms or in terms of inflation adjusted basis), but the lowering down of the wage down the tenure is a fact nonetheless. The Enclosing is done also to avoid the competitive wage war between different companies within one industry – that is why it is predatory. The enclosure ensures physical insulation from intra-industry competition, intra-market vagaries and cross-industry side effects. Enclosure establishes a corporate fiefdom on the production process and is eked out to be isolated from the general society or the production environment of the surroundings and the nation-state in consideration. This is the crux of the benefit that globalised Capital gets from any SEZ – regardless of the ontological position of the industry, its standard, organic composition, technical composition, labour law, democratic polity, comparative advantage or disadvantage or general labour market, any enclosed zone can be prepared with the exact desired level of input-mix and then packet it as one single product exactly right for maximum profit extraction. The entire process of production is now a product and a package. SEZ is the one package comprising the product that is sold in the market (service, solution or material product), service that goes along with it. The market however is usually not the open market; it is a specific market in a distant territory or a link in the forward chain of an end product. The market therefore does not have the immunity to withstand on its own as an independent product and is solely dependent on a parent firm in some distant metropolitan region. The product is the optimized output-mix with the lowest variable capital or labour involved. SEZ abhors among other things any kind of normal market competition. Here comes the specific import and necessity of SEZ distinct from any producing firm. The enclosure then extends to every aspect of life for the labourer and gets in or out of the enclosure as per the profit consideration of the owner of the SEZ. Labourers may pour in the SEZ every day and pour out at the end of the work or they may be interned.
Colonisers colonised the native land through gradual occupation of cities and then moved on to the feeding base for those city markets and eventually the whole territory. SEZ is a mechanism very similar to that kind of project with the only difference that every SEZ is different from the other and for all other life carrying activities it has to depend on the unenclosed area – the “other”. Capital is a social relation is what Marx opined and went further to say that it transforms every human relationship into itself. SEZ does the same thing with a more wholesome form.
This phenomenon brings us to the perusal of the business model of SEZ. The entire all-engulfing market lies “outside” the SEZ – it lies out there, out in the “other”. Even if for hypothetical consideration we consider there are infinite numbers of individually insignificant SEZs, individual SEZ is not capable of changing the nature of the overall SEZ scenario within a nation state. There is a proposal to visualize the whole of India as a conglomeration of SEZs – then there would be a virtual SEZ market where each individual SEZ would be a product by itself. In that condition each individual SEZ would not need any protection or special insulation from the others, it could have competed with the other SEZs. Well! That is the paradox, here. So SEZ cannot be innumerable in numbers, it has to be limited and thus it has to survive by primitive accumulation of the labour power from the “other” sector – or the normal nation-state economy sector. This is the reason why the great Capitalist China moving with a firm double digit GDP has now restricted the number of SEZ into only 6 big ones and are now slowly tightening the leash through promulgating more and more restrictive laws. Latin America has abandoned any concept of SEZ and it is only India and especially the so-known Indian parliamentary left that is full agog with SEZ concept. The dependence of SEZ on the “other” for its sustenance is not only the limiting factor in its sustenance and growth but it is also the nemesis. The growth rate in an SEZ project is bound theoretically to go down and eventually (not asymptotically) reach the zero level and head towards being negative. SEZs are bound to turn red in various time tenures, but by that time it will take down along with the entire neighbourhood, the ecology, the producing potential, and aggravate chaos and anarchy exponentially. SEZ is a fast loosing proposition in any medium to long term. A product lasts only its life cycle. Even if it is insulated from the competition and general market obsolescence, the life span of a product can only be extended but doom it will! An SEZ, as it depends on one product or one service or one type of solution or a few collections of it, has to face the same track history of that of a product. SEZ in a long term is nothing but a bankruptcy generating, devastating device creating social, political, cultural and demographic land mines. After a couple of bouts or life cycles of a set of SEZ, the whole land, labour will lose its recycle ability and desert will it render. And right here in this consideration the future value of the Capital is loosing. Every marginal productivity unit measure of unit Capital will fetch progressively lower and lower value. The short term apparent gain will be for the nation-state a gradual drain in the pent up wealth that human civilization has kept on providing all these years- it is therefore a project plan with a diminishing return. SEZ baffles the country’s statistic and metric by short-term spurts but just like administering steroids it kills slowly the country in any middle to long-term tenure – it is Capital de-formation on a longer tenure- a bad proposition!
The entire concept of bundling up of the ancillary industries with the production unit of the principal product is a loosing proposition. Had this business case been successful then from the profit point of view the forward integration would have been more profitable and then again the conglomerate behemoth model of the mid twentieth century would come back. The separation of core production unit from the ancillaries brings success only when the ancillaries cater to various competitive firms within the same industry. SEZ organization inhibits that. Even if it allows such outward journey of intermediate products the transportation advantage will not be achieved and the concept of optimum supply chain will not be achieved. The concept of down stream production chain can never live long by supplying to one or a few pre-ordained customers. Any change in the order pattern would jeopardize the organization and sustenance of the ancillary firm and would turn it red. With the bringing down of the feeders the main firm will go red- this is an over determined process of doom and bankruptcy.
SEZ is an enclosed space subsidized by the government and exempted from paying the excise duties and various other normal taxes. If the number of such SEZ units grows then the nation-state will be loosing the potential income, whereas the financial institutions and private or public venture capital concerns will invest money in those. With every additional SEZ in the country the marginal productivity of one invested dollar loses its comparative sheen after the number of SEZs had reached a critical number. A country cannot sustain that as the public funds will soon be depleted of its operating generated own fund from domestic operations. They will have to borrow in money from financial institutions beyond the nation-state boundary. This fund comes along with interest tags. The interest money that will be paid is nothing but the portion of the super-profit generated from regular Capital operations. With the increase of tenure and amount, the super-profit will turn into a rent and will be siphoned off the nation-state boundary dipping the nation-state into perennial economic and thus political in-sovereignty.
SEZ needs a continuous inflow of Capital unless all its products are to be bought back. In the case of being bought back the firm loses the freedom of the market price and is bound to move towards a decelerating growth rate and faced with the inflationary nation-state economy this plateaued out growth rate would be in real terms go down over a longer period. In the case of no such obligation of being bought back the firm has to depend on the outside market and the cost of acquiring new business would be going up as more and more SEZ firms throughout the world would pour in products- in this case too the rate of return is diminishing and the entire advantage of protection and subsidy dies off. Please note this is not the general neo-con logic of free market because in an SEZ the only UPS of the final product is the cheap labour that does not grow in quality or value. Going down the value chain never fetches any medium to long-term guarantee to the producing firm. In a normal nation-state competing market protectionism at the inception hours helps stabilize the company through giving it enough fail-over during which it hones on to the value proposition and becomes capable of fighting with the external open market- that is the interest pursued by the nation-states in building up its own army of competing industries. In an SEZ case the native nation-state subsidizes revenue and does not build up any value proposition. It remains dwarf and always dies outside the incubator.
In any nation-state economy then walking over to the international market place, revenue earned strengthens the native currency against the international basket of standard currency of the SDR (Special Drawing Rights). This is simply because the repatriation is inward within the native state. In SEZ it is mostly repatriated abroad or the revenue earned is used to import foreign goods. Hard currencies bob up the countries reserve for a very short while and depletes that again as fast as it came. The foreign direct investments come in a normal market as well as in an SEZ with strings attached. As long as the domestic market is not very strong and demanding for finished industrial products FDIs are always traps. Companies will only come to the native country when they find very higher marginal returns to their dollars that again entails their getting lured by the strength and volume of the native-market. The entire credit money of the WEST would require a producing economy outside the credit capital or debt capital generating sector that can SERVE the credit offered- this is the monetary aspect of the primitive accumulation. The (M3-M1) of the WEST will be served by the M1 of the EAST.
The FIIs extract interest that gets compounded. The serving potential of a native country’s operative profit goes down with every additional native dollar earned through one more unit of labour spent in the native economy. With all these the metropolitan market or the market in the west uses the native space as a space sub-serving its main product that is either produced or designed within the WEST and the biggest chunk of the sales revenue minus the operating cost goes over to the Western owner either through patents, or through owning intellectual property or through design consultancy fees. The smaller portion that comes to the native country goes to pay for the labour and the acquisition cost. With every such unit sales-revenue the differential of the Western and the Eastern allocation yawns up more and more creating an ever skewed distribution. The absolute value of the production-sales-repatriation cycle looks exciting from the native stand point in the beginning years and then figures out that it is loosing the relative value proposition competing with the WESTERN peer or the WESTERN co-producer. The value game becomes, if not war but definitely a contention of attrition.
What is the benefit of getting into SEZ then? If it is so gloomy then why all comprador corporates of the native nation-state are rushing towards this obvious doom? Yes, there is some gain; however effervescent, however fleeting there are some thrills there, but they are there as long as the overall picture is not paid attention to, as long as the collective is not taken into consideration, as long as the individual rivalries enthral the individual players without any heed to the collective doom. The euphoria of chaos, the ecstasy of anarchy, the elixir of crossing interests and the moto of contention of killing others to survive, living for a short while, for a fast buck and for cravenness for speed is what SEZ would offer- it is the same attitude that goads homo sapiens to consumerism, to over-accumulation and needless possessiveness. People frenzy as if there is no tomorrow, and Capital leads human and every relationship generating from humans into a simulacrum of no-tomorrow! Capital is the only tomorrow!
The faster a third world producing and thriving economy would SEZise itself the longer would the WEST survive and the better would it. We saw the vaporising of the Asian tigers with only surplus reserves into basket cases and tourism destinations slipping down to providing solace to worn heels of the WEST. We experienced how famous industrial centres of countries like India (Durgapur-Asansol-Ranigunge belt, Gaziabad belt, Old Mumbai belt, Steel plant colonies) turned from high skilled settlements into almost deserts within the last 4 decades or so, we experienced how new and promised lands lost their crown to newer up-comers. We also saw how producing economies and sectors are giving way to service sector and entertainment gizmos and eating away the best of the brains and wisdom into brain and skill drain.
The SEZ offers its owners a nice prelude to the Capital flight they would carry along and stash in the financial institutions abroad, to have a nicer life for may be one life time (without any consideration to their progeny) comparable to their western compatriots before the native-country ever dreams to have a convertible currency regime. The owners do not want to take any chances, if the native country sinks they are afloat transmigrated and transmuted into citizens of the world and in particular of the western world. If the country shores up for a while then they will come back to reclaim their ancestral rights as sons and daughters to the soil, they will then enjoy a cheaper economy and again the moment the signal turns amber they would take the next flight out. SEZ is that space ensuring a safer proposition of Capital flight off the native land to the promised metropolitan. Who paid for all these? Don’t even dare to ask – of course those half clad, half fed, lesser children of native land, those who never could wake up to comprehend their rightful claim. Here speed is the Mantra – the faster you can fly befooling the producers the smarter you are! SEZ is that smart contraption that takes the owner places and takes the producer-labour for a song!!!