Misery is Relative / Comparison of Minimum Wages in Delhi and London

GurgaonWorkersNews no.28 (July 2010)

The following text is devalued with increasing speed: the global crisis and subsequent struggles shake the global wage scale. In June 2010 the Indian government ‘free-floated’ the petrol and diesel prices, fueling the already double-digit inflation. In the UK the government increased the VAT by 20 per cent and cut wage-subsidising benefits. The collapsing Euro inflates the Rupee. The struggles in China and Bangladesh put pressure on wages in the global low-income zones. We will see whether class struggle and crisis will re-shape the global wage-division, old concepts like ‘workers’ aristocracy’ and most of the concepts of ‘integrated’ working-classes ‘in the imperialist nations’ will help little to understand. We need global proletarian debates.

The following ‘relative’ comparison of Delhi and London minimum wages and their respective purchasing power would be a rather tedious endeavor if seen as a purely statistical enterprise or poverty competition. It would result in the usual ‘statistical findings’, e.g. that if you are inclined to become a well-groomed truck-driver with a passion for cheap daily newspapers and road-side cups of tea you should move to Delhi; whereas for any other reasons you should make it to or stay in London – if you can – because you will earn roughly four and a half times as much in terms of purchasing power. If you were a textile company manager looking for low wage zones your perspective might be a little more blunt. You would compare the absolute wage difference between a potential minimum wage worker in London’s East End (around 1,200 GBP per month) and those of a worker in Delhi’s Okhla industrial zone (around 76 GBP per month). The fact that in absolute terms the London wages are about sixteen times higher will make investment decisions a fair bit easier.

We compare the workers’ wages to consumer goods and services. This in itself will tell us little about the actual social position we find ourselves in once we depend on this wage and have to sell our labour power for it. How does our wage compare to the income of people in the city around us? Will we feel ‘excluded’ from wider social life and life-styles? How does the wage compare to the general ‘productive social wealth’, the material power to set in motion bodies and minds for profitable purposes or mass destruction? We compare wages which are set by two different states, wages which are defined as ‘minimum’ in terms of the local, moral, historic minimum level of reproduction for a worker. One local context is the capital of an ‘ex-colony’, the capital of a developing country, the regional centre of an emerging global industrial cluster. The other local context is the capital of an ‘ex-empire’, the centre of historical Industrial Revolution, with 250 years of industrial working class history. The centre of world finance, real estate bubbles and a declining manufacturing base. This also means that Delhi area is dominated by a work-force which – in general sense – knows how many acres of wheat you can reap in a certain amount of time or how many shirts or metal parts a worker can produce per day. Productive workers from mainly rural backgrounds have a rough notion how their productivity relates to wages they receive and prices they have to pay. London is characterised by mainly ‘unproductive labour’: a cleaner might know how much money their company charge the client, they know about exploitation on an immediate level, but less on a social scale.

Workers’ wages and their consumption level tell us something about the ‘stage of capitalist development’, if we agree that one of the characteristic outcomes of industrial working class struggle is that after the class wars of mining, railway building and machine and weapon manufacturing workers a following generation of workers is able to buy ‘industrial goods’ in form of long-lived consumption goods like radios, fridges or washing machines. We also have to mention the ‘sources’ of our consumer products. In Delhi we refer to the most common trade-form for basic food items, vegetables or durable consumer goods: small traders. The prices in London are based on prices of large super-market chains for daily goods and internet price comparisons for durables – because this is how proletarians shop in general. We leave it to a different research to find out whether the demise of small traders and the consequent drop of general wage level due to increased competition will be compensated by ‘cheaper’ large-scale and ‘more direct’ trading.

When we compare London-Delhi wages relative to food items, the London wages are about five to six times higher, if we compare them in relation to the mentioned ‘durable consumer articles’, London wages are fifteen times higher. The astonishing fact is the relative ‘expensiveness’ of agricultural goods’ in India, compared to ‘basic manufactured items’: While I can buy five times as much rice of my London minimum wage, I can ‘only’ buy three times as many shirts or shoes. This is only partly due to higher relative petrol prices in India, which form a decent chunk of food prices. Apart from room rents – which are a peculiar issue – it is personal services such as cooked food or hair cuts where a minimum wage in Delhi can command as much personal service labour as the wage in London. This tells something about the low levels of service proletarian wages in the Indian metropolis! Out of good attitude we put ‘global goods’ into the equation, e.g. Nescafe, Mc Chicken, Nokia mobile phones or IPods. We can see that the ‘wage division’ widens when it comes to these ‘global goods’ – which doesn’t mean that the Delhi young proletarian would not have access to the ‘use value’ of these goods. Let’s not argue about the use value of a McChicken, but of Chinese Fake-Brand MP3-Players or Handy-Cams. Apart from the ‘old school’ consumer durables like fans, gas-cookers and bicycles, the modern proletarian in Delhi owns a mobile phone with gadgets. We suggest the thorough article on Sanhati: “Do 600 Million Cellphones Make India a Rich Country”

But let’s stick to the basics: the level of minimum wage as means of reproduction for a worker. Behind this phrase a political field of question opens up. In London the nominal/direct wage does not cover reproduction, in the sense that in case of illness, unemployment, old age the state has to guarantee an additional part of income. The London minimum wage is hardly a ‘family wage’: the state has to top up in terms of child benefits etc. In Delhi these ‘welfare provisions’ only exist on paper, in 90 per cent of cases workers won’t get unemployment or pension money, neither health care. For most workers in Delhi the minimum wage has to cover parts of these future or ‘accidental’ costs. In a purely economical sense we would have to add these monetary benefits or service costs to the London minimum wage. On the other hand a London worker is very likely to be ‘fully proletarianised’ in the sense that s/he hasn’t got a ‘second home’ in a village and no access to – however small – a piece of land and wider family network which could act as a basic security net. We can argue whether it is not the other way around – that the urban wage has to finance the maintenance of the small piece of land and the rural family members. Fact is that many workers in Delhi industrial areas try to save money – first of all on rent – in order to be able to ‘save money for the home’. Ideally a ‘single worker’ – who is either unmarried or whose family lives in the vilage’ will try to save half of his or her monthly wage. The most common life perspective – or illusion – is that the urban industrial wage work is a temporary stage and that there is a future as semi-peasant / shop-keeper etc. in the village.

When it comes to rent and living arrangements the ‘village’ plays a role. In London only ‘migrants’ would stay five people to a room, no separate kitchen – which is the norm in Delhi, not only for families, but also for unrelated young workers. In this way they can drop the rent share of their total wage to under 10 per cent. In London you might rent a room in a shared flat, giving you access to a kitchen and a toilet, which will cost you around 50 per cent of your wage. In the relative wage comparison we took all three different scenarios into account: comparing the most common set-up; comparing ‘a single worker’ to ‘a single room’ according to the respective local ‘workers’ housing standards’; comparing ‘a single worker’ to ‘a single room’ according to London housing standards. The main obvious result is that compared to other ‘goods’ rent in London is relatively high and the main reason for why the relative wage levels are ‘only’ four to five times higher. Who would have thought?! At this point the quantitative state of mind leaves us clueless: Is it expression of a higher living standard to live in a London Stratford bed-sit, while your two-weeks dead neighbour starts to send his whiffs through the mortar?

What about the ability of workers in Delhi and London not only to be a categorial part of global working class formation, but to take part in it in a physical and communicative way. We can compare costs for flights Delhi-London and costs for an hour spent on the internet and we can see that a flight belongs to the ‘fridge/washing machine’-category out of reach for most Delhi workers, while the internet is closer to home. Here again, we reach other forms of exclusion. Even if a worker in Delhi would be able to save money for the flight, that does not mean that s/he will get a visa. Even if a worker in Delhi can surf on the net, the fact that the Hindi sites are still rather insular compared to the ‘global electronic village’ of the the English speaking Indian upper-class is not an ‘economical’ problem. Which does not mean that the worker in Delhi would not have the means for ‘political mass-expressions’, see prices for printing a small newspaper or for sending it by post. On a similar relative price level range the products of ‘knowledge circulation cum mental domestication’ such as daily newspapers or cinema. In terms of access to career paths to leave the minimum wage misery it looks rather bleak for proletarians on both sides of the globe. A truck driving license might be within reach, but won’t solve the initial problem. The worker in Delhi would have to save around 833 years in order to afford the two years fees for a MBA (management degree), while the worker in London might make it in 20 years. Great.

How do these wages relate to themselves in the historical dimension, does the gap close or widen over time? Difficult question. We can assume that since it’s introduction in 1997 the relative minimum wage in the UK fell – which was 3.60 GBP at the time. But did it increase in Delhi? Minimum wage in Delhi 1990 was around 900 Rs. The early 1990s were turbulent times in terms of inflation, up to 18 per cent annual consumer price increase in 1994 to 1996. If we assume an average annual inflation of around 8 per cent for 1990 to 2010 period, the wage of 900 Rs would have had to increase to 4,177 Rs by 2010 to compensate. Here the fundaments of statistics become drift-sand. Since 1990 the share of temporary and casual jobs, the amount of jobs through contractors increased rapidly, while more and more permanent workers lost their jobs. May be the minimum wage has increased in real terms, the general conditions of industrial workers in Delhi have hardly improved. In what kind of ‘working class position’ would a London minimum wage be situated in Delhi? If we take a common commodity basket (rent, food, clothes, transport, consumer goods – according to average share of total wage), we come to a medium wage ratio of 4.5 times higher wages in London. This would mean that the ‘equivalent’ to the London wage in terms of purchasing power would be around 23,400 Rs per month in Delhi. What kind of wage workers in Delhi would earn this kind of wage – which would place them into widely hailed ‘emerging Indian middle-class’? Some call centre workers earn that kind of money. Permanent workers in the automobile industry earn this much, partly more. We can see that major wage differences run within the industrial areas of Delhi as much as within the global working class. We can also see that the ‘wage question’ is everything but an ‘economical question’, but – in the end – a question of social-historical power, of class power. Let’s stop calculating!

But whoever wants to know how we calculated things: We could see a rather shaky exchange rate between Rupee and British Pound during 2009 – 2010. At the end of November 2009 the rate was 1 GBP / 78 Rs. Since then the British Pound steadily declined in value – or rather, the Rupee got appreciated. On 3rd of May 2010 the rate was 1 GBP / 68 Rs. For the total wage calculation we take the minimum wage for industrial helpers in Delhi May 2010 of 5,200 Rs per month based on an 8-hours day and a 6-days working week. We have to emphasise that only a fraction of workers actually get this wage, most workers earn less or have to work considerably longer hours for it. We base the London hourly minimum wage of 5,80 Pounds on the same monthly working times.

Monthly Minimum Wage Delhi: 5,200 Rs / 76.5 GBP
Monthly Minimum Wage London: 81,600 Rs / 1,200 GBP
Exchange Rate 3rd of May 2010: 68 Rs / 1 GBP

Item [Kilo Rice]: Price Rs in Delhi [22 Rs] / Price GBP in London [1.10] – Amount of Items I can buy with monthly wage in Delhi [236] / London [1091] (London Wage this times higher/lower than Delhi Wage [4.6])

Food

Kilo Rice: 22 Rs / 1.10 GBP – 236 / 1091 (4.6)
Kilo Wheat Flour: 14 Rs / 0.3 GBP – 371 / 4,000 (10.7)
Kilo Potatoes: 10 Rs / 0.5 GBP – 520 / 2400 (4.6)
Kilo Pasta: 35 Rs / 0.8 GBP – 149 / 1,500 (10)
Kilo Red Lentils: 48 Rs / 1.2 GBP – 108 / 1,000 (9.2)
Kilo Chickpeas: 80 Rs / 1.3 GBP – 65 / 923 (14.2)
Kilo Sugar: 35 Rs / 1 GBP – 148 / 1,200 (8.1)
Kilo Carrots: 20 Rs / 0.85 GBP – 260 / 1412 (5.4)
Kilo Apples: 40 Rs / 1 GBP – 130 / 1200 (9.2)
Kilo Milk: 26 Rs / 0.75 GBP – 200 / 1600 (8)
Kilo Joghurt: 45 Rs / 2 GBP – 115 / 600 (5.2)
Liter Bottled Water: 12 Rs / 0.7 GBP – 433 / 1714 (4)

McChicken: 52 Rs / 1 GBP – 100 / 1200 (12)
Nescafe 50g: 63 Rs / 1.5 GBP – 86 / 800 (9.3)
0.5 Liter Bottle Coke: 20 Rs / 0.6 GBP – 260 / 2,000 (7.7)
Bottle Beer: 50 Rs / 1.3 GBP – 104 / 923 (8.9)
10 Cigarettes 30 Rs / 3 GBP – 173 / 400 (2.3)

Consumer Goods

Shirt: 150 Rs / 15 GBP – 35 / 80 (2.9)
Shoes: 250 Rs / 20 GBP – 21 / 60 (2.9)
Plastic Bucket: 60 Rs / 3 GBP – 86 / 400 (4.6)
Block Soap: 13 Rs / 0.6 GBP – 400 / 2000 (5)
Second-Hand Bicycle: 500 Rs / 30 GBP – 10 / 40 (4)
Nokia Mobile Phone: 1,500 Rs / 25 GBP – 3.5 / 48 (13.7)
Cheap Television: 5,000 Rs / 30 GBP – 1 / 40 (40)
Flat-Screen Television: 10,000 Rs / 110 GBP – 0.52 / 11 (21.1)
Fridge: 8,500 Rs / 100 GBP – 0.6 / 12 (20)
Washing Machine: 7,000 Rs / 120 GBP – 0.7 / 10 (14.3)
Dell Laptop Inspiron 14: 31,400 Rs / 500 GBP – 0.16 / 2.4 (15)
IPod Classic 80GB: 12,000 Rs / 179 GBP – 0.43 / 6.7 (15.9)
125cc Honda Motorbike Stunner CBF: 57,000 Rs / 2,300 GBP – 0.091 / 0.5 (5.5)
Basic Ford Fiesta 1.6: 650,000 Rs / 12,000 GBP – 0.008 / 0.1 (12.5)

Personal Service

Fresh Squeezed Fruit Juice: 20 Rs / 1.8 GBP – 260 / 666 (2.5)
Tea in Cafe: 4 Rs / 0,8 GBP – 1,300 / 1,500 (1.2)
Basic Meal: 20 Rs / 3 GBP – 260 / 400 (1.5)
Haircut: 20 Rs / 8 GBP – 260 / 150 (0.6)

Housing

Monthly Room Rent (three to a room): 400 Rs / 400 Rs – 13 / 3 (0.23)
Monthly Room Rent (working class room): 1,100 Rs / 400 GBP – 4.7 / 3 (0.64)
Monthly Room Rent (same standard): 5,000 Rs / 400 GBP – 1.04 / 3 (2.88)
Monthly Electricity Bill: 40 Rs / 30 GBP – 130 / 40 (0.3)

Transport

Innercity Bus Journey: 15 Rs / 1.2 GBP – 347 / 1,000 (2.9)
500 km Train Journey: 200 Rs / 60 GBP – 26 / 20 (0.77)
Flight Delhi-London AirIndia: 20,000 Rs / 310 GBP – 0.26 / 3.9 (15)
1 Week Thailand (Mallorca) incl. Flight: 15,000 Rs / 180 GBP – 0.35 / 6.6 (18.8)
Liter Petrol: 48 Rs / 1.2 GBP – 108 / 1,000 (9.3)

Knowledge Circulation

Daily Newspaper: 4 Rs / 1 GBP – 1,300 / 1,200 (0.77)
National Letter Stamp: 5 Rs / 0.41 GBP – 1040 / 2927 (2.8)
Soft-Back Book (Penguin): 200 Rs / 9 GBP – 26 / 133 (5.1)
Cinema: 50 Rs / 7 GBP – 104 / 171 (1.6)
Hour Internet: 15 Rs / 1 GBP – 347 / 1,200 (3.6)
Print of 7000 Copies 4 Pages A4: 4,000 Rs / 400 GBP – 1.3 / 3 (2.3)

Career

Truck Driving License: 1,600 Rs / 1,400 GBP – 3.25 / 0.86 (0.26)
MBA Two Years Fees: 1,000,000 Rs / 49,900 GBP – 0.0052 / 0.024 (4.6)
Three Years Apprenticeship Mechanic: 187,200 Rs (three years no income) / free

The Political Economy of Oil Prices in India

Sanhati

Based on the recommendations of the Kirit Parikh Committee, the Government of India (GOI) on 25 June, 2010 announced the full deregulation of the prices of two crucial petroleum products: petrol and diesel.[1] Henceforth, prices of these two products will be determined by the unfettered play of market forces and government “subsidies” on these products, which worsen the fiscal situation, will be completely removed.[2] In one deft move, therefore, government control over the determination of the prices of these key commodities was willingly ceded to the magic of the market, presumably to “rationalize” prices and to wipe away losses of state-run Oil Market Companies (OMCs) to the tune of Rs. 22,000 crore.

There were generally three types of reactions to this announcement in the mainstream English news media. Firstly, the markets were ecstatic about the full liberalization of petrol and diesel prices and these sentiments were almost immediately reflected in rising oil stock prices.[3] Secondly, there were strident complaints that this policy change was not enough: prices of kerosene and liquefied petroleum gas (LPG) were still minimally under government control and therefore even after the deregulation move, the losses of the OMCs on account of these two petroleum products would stand at Rs. 53,000 crore for fiscal 2011.[4] Thirdly, various opposition parties have pursued their ‘Bharat Bandh’ without much vigor.

Before getting into a detailed analysis of the political economy of oil prices in India, let us quickly address three questions. Why are the financial markets and the mainstream media pleased with the liberalization of petrol and diesel prices? An important reason is that this policy shift is a victory for capitalist interests of a long drawn struggle against the regulation of oil prices in India. Using the myth of subsidization and fiscal burden, capitalist interests have long been pushing for the liberalization of oil prices. The first crucial victory of this struggle came in 2002 when the government dismantled the administrative pricing mechanism (APM). This move reduced the “subsidies” on petrol and diesel but the government decided to continue to “subsidize” kerosene and LPG. In 2005, the GOI constituted the Rangarajan Committee to study pricing and taxation of petroleum products.[5] This committee recommended a half-way house: a ceiling on the refinery gate price (computed according to the so-called trade parity formula) along with the freedom for OMCs to set retail prices. Of course, this was not enough. Accordingly, in 2009 the next committee was constituted to examine the same set of issues, i.e., the Kirit Parikh Committee.[6] In its report submitted in February 2010, the Kirit Parikh Committee finally recommended what the capitalist sector had been telling GOI all these years. It recommended full liberalization of petrol and diesel prices.[7] Although it was famously opined that the “executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie” we wonder whether it might be more reasonable to believe instead that “the committees of the Indian state are but committees for managing the affairs of the big bourgeoisie under neoliberalism.”

In any case, this immediately bring us to the second question: what will the next committee recommend? The Kirit Parikh Committee has allowed some minimal control over the prices of kerosene and LPG. Recall that the private sector is livid with the residual losses of the OMCs (often misleadingly equated to the “under recoveries”) to the tune of Rs. 53,000 crore resulting from the marginal control that had been retained in the pricing of kerosene and LPG. Thus, even if one does not know the exact date when the next committee on petroleum prices will be set up, one presumes that this yet-not-constituted committee will strongly recommend liberalization of kerosene and LPG prices. Otherwise, it would be either censored or ignored under the current arrangements.

The third question is related to the carefully constructed mythology of oil prices in India. One of the crucial components of the carefully nurtured mythology about oil (i.e., petrol, diesel, kerosene and LPG) prices in India is the idea that the government offers a huge subsidy to consumers. This subsidy, it is claimed routinely in government pronouncements, policy analyses and media reports, shows up as the “under recovery” of state-owned OMCs and pushes up the budget deficit of the government. The subsidization of oil products, follows the next step in the argument, is wasteful of scarce resources. It is ultimately unsustainable from a public finance perspective and should therefore be curtailed. How should this huge subsidy burden be curtailed? By withdrawing government control over petroleum product prices and letting market forces a free rein, or so runs the argument.

The wide currency of this argument would be obvious from even a cursory glance at mainstream media reports related to oil prices in India. A Business Standard report last year highlighted the close to Rs. 25,000 crore of “under recoveries” of the OMCs, dramatizing this “finding” by suggesting a revenue loss of Rs. 75 crore a day.[8] Similar reports find their way to the international media too. Earlier this year, Reuters highlighted the need for deregulation of oil prices because of the increasing burden of “under recoveries.”[9] A special 2008 report on BBC made the same point and speculated that Indian oil companies might be losing about 100 million US Dollars (USD) a day.[10] The Financial Times, in an editorial of July 6, 2010, argued for the need to phase out “subsidies” and end state control over petroleum prices.[11] Such pronouncements are not confined to media reports. It is also propagated by policy analysts in various research institutes. In a series of studies starting at least as early as 2006,[12] the International Energy Association (IEA) of the Organization for Economic Cooperation and Development (OECD) has highlighted the so-called fiscal burden of “under recoveries” of the OMC and has argued for the deregulation of oil prices.[13]

To sort through the complex of issues surrounding oil prices in India we need to address, at least, the following questions. Is the government really subsidizing petroleum products? Can “under recoveries” of the OMCs be understood as a measure of such subsidies? What, after all, are these “under recoveries”? Why is the private sector ecstatic with the deregulation of petrol and diesel prices? To answer these questions we will adopt a political economy perspective, i.e., we will try to see the class interests lurking behind the analysis of “experts”, changes in government policy and news coverage in the mainstream media. Once we carefully sort through the issues we will see that there is a simple motive force behind the whole complex of policy changes and committee recommendations: private sector PROFIT and more PROFIT.[14]

OIL INDUSTRY: STRUCTURE AND PRICES

To understand the much talked about “under recoveries” of the OMCs, it would help to familiarize oneself with the structure of the oil industry in India. The industry starts at what analysts call the “upstream” end, the site of exploration and production of the primary component that gives all varieties of petroleum products: crude oil. The major state-owned players in the upstream sector are Oil and Natural Gas Corporation Ltd. (ONGC), and Oil India Ltd. (OIL); the major private sector players are Reliance, Cairn Energy, Hindustan Oil Exploration Company Ltd. (HOEC), and Premier Oil.

The output of the upstream sector is crude oil, which feeds into the “downstream” sector: the sector responsible for refining the crude oil to get petroleum products (like petrol, diesel, kerosene and LPG), marketing the final products, and development and maintenance of pipelines. The major state-owned entities in the downstream sector are Indian Oil Corporation Ltd. (IOCL), Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Petroleum Corporation Ltd. (BPCL), and Mangalore Refinery and Petroleum Ltd. (MRPL); the major private sector players are Reliance, Essar and Shell.

The distinction between the upstream and downstream sectors give us several important prices. There are the price of crude oil, and the refinery gate price of petroleum products. The first is the price that refiners pay to purchase the crude oil (either from domestic or foreign producers), and the second is the price at which the refiners “sell” the petroleum products to the next stage of the industry. Note in passing that about 80 per cent of India’s crude requirement in 2008-09 was met with imports. Hence, this is the primary channel through which international prices of crude oil affects the Indian economy.

The final sector of the industry is that which maintains an interface with the consumers, the sector which takes care of transportation and distribution of the petroleum products to the retail outlets. The major state-owned players in this sector are GAIL (India) Ltd., and IOCL; the main private sector players is Petronet India Ltd., though Reliance, Essar and Shell have also entered into the fray. This brings us to the third important price in oil industry analysis, the pre-tax price: this price can be arrived at by adding marketing, storage and transportation costs to the refinery gate price of the relevant petroleum product. Adding excise duty (a form of tax levied by the Central Government) and sales tax (levied by State Governments) to the pre-tax price gives the final retail price of petroleum products, the price, for instance, that you or any of us pay at the petrol pump.

Let us summarize: the retail price of petroleum products (like petrol, diesel, kerosene and LPG) equals the sum of the price of crude oil, refining cost plus profit, marketing & storage cost plus profit, distribution cost plus dealer profit, and taxes & duties.

PETROL: COMPONENTS OF PRICE

To clarify matters further and to get a firm grasp on the various prices that we have introduced, let us work through a concrete example. In July 2009, the average international price (FOB) of crude oil was 64.618 USD per barrel, which translates into 1.538 USD per gallon and hence 19.87 rupees per liter. Note that in converting from USD to rupees we are using the average exchange rate between the USD and rupees that prevailed in July 2009: 48.83 rupees per USD.[15] Two things should be kept in mind. First, in 2008-09, India imported about 80 percent of its crude oil consumption; second, in the current dispensation there is zero customs duty on crude oil.[16] Hence, for the oil industry in India, the price of crude oil was 19.87 rupees per liter.[17]

figure1.jpg

Figure 1: Price Build-Up for Petrol

In a written reply to a question in the Lok Sabha in August 2009, Petroleum Minister Murli Deora informed that “of the Rs 44.63 a litre retail selling price of petrol in Delhi, Rs 13.75 is because of the incidence of excise duty and Rs 7.44 a litre due to sales tax.”[18] Here we have two more prices: the retail price of petrol in Delhi(44.63 rupees per liter) and the pre-tax price of petrol (23.44 rupees per liter).

As far as we know refinery gate prices of petroleum products are not publicly available; hence we cannot give exact figures for these prices. But we do have publicly available information which allows us to provide rough estimates of refinery gate prices. In a November 2006 report on the cost structure of OMCs, we learn that the average operational and function costs (excluding labour cost) of the OMCs come to about 1.9 rupees per liter. Thus, if we deduct this amount from the pre-tax price of peterol (23.44 rupees per liter), we arrive at the following rough estimate of the refinery gate price of petrol in India in July 2009: 21.54 rupees per liter. This information is summarized in Figure 1 and 2.

figure2.jpg

Figure 2: Components of Retail Price of Petrol

UNDER RECOVERIES?

With this background in place, we can now address the issue of “under recoveries”, which is misleadingly referred to either as “losses” or as “subsidy”. The OMCs “are currently sourcing their products from the refineries on import parity basis which then becomes their cost price. The difference between the cost price and the realized price represents the under-recoveries of the OMCs.” (Rangarajan Report, 2006, v). In other words, under recovery = import parity price – realized price. Realized price is something on which the government exercised some control. If this is fixed at a lower rate than the import parity price then under recovery shows up. But under recoveries are different from losses. To understand this we need to focus on the definition of import parity price. The Rangarajan Report informs us,

[i]mport parity pricing has been a commonly used approach in a regulatory context or in making a case for tariff protection. The argument in support of this approach is that in a situation where there is no domestic manufacture of a product, the cost of supplying it in the domestic market will be the landed cost which is the import parity price. However, even in a situation where there is domestic manufacture, import parity price can be taken as the international competitive price that sets the ceiling for the domestic price. When domestic refiners are given the import parity price, they enjoy a rent which is equivalent to the differential in ocean freight and associated costs as between crude and products. In such a situation, there is case for mandating the refiners to share the rent with public interest. (Rangarajan Committee Report, 2006, pp. 5)

In other words, import parity price is the price which one would pay if the good is imported. In India this is clearly not the case as demand for petroleum products (like petrol, diesel, kerosene and LPG) can be met by domestic refineries. Indeed, there is a 35% surplus refining capacity over the domestic demand (Sethi, 2010). The price at which domestic refineries can supply petroleum products (export parity price) is less than the import parity price. The difference was about 1.71 rupees per litre of diesel in April-Spetember 2005 (Rangarajan Committee Report, 2006, pp. 4). To correctly measure the under recoveries, therefore, a better formula would be to use export parity price as the benchmark. Using import parity price inflates the notional concept of under recovery, which is then trumpeted by the mainstream media as state-owned OMC losses. Secondly, it is also to be noted that the government had provided sumptuous subsidies towards building the refineries. It is but natural that the refineries share some burden by quoting a lower benchmark price. Instead, the private refineries are being allowed to sell products at import parity price to the state OMCs (Rangarajan Committee Report, 2006, pp. 30). The third reason why under recoveries are only notional and “are different from the actual profits and losses of the oil companies as per their published results” is that “[t]he latter take into account other income streams like dividend income, pipeline income, inventory changes, profits from freely priced products and refining margins in the case of integrated companies.” (Rangarajan Committee Report, 2006, v). Public Sector oil companies do constitute an integrated structure – the notional losses of the OMCs are therefore shouldered by the upstream firms such as the ONGC, and GAIL (Rangarajan Committee Report, 2006, 30). They also are some of the biggest profit earners of the country[19]. Hence to talk about unsustainable susbsidies is a white lie.

To sum up: first, under recoveries can only occur when there is some control over the prices that OMCs can charge the consumers; if OMC were given full flexibility in terms of setting prices, they would probably always charge a price so as to keep the under recoveries to nil. Second, most of the OMCs don’t import petroleum products (like petrol, diesel, kerosene and LPG). They buy these products from refineries which, in turn, import crude oil. Thus, import parity price – which uses the import price of petroleum products instead of crude oil – is only a notional cost that they pay for the products they sell to the consumers. Hence, “under recoveries” of the OMCs refer only to a notional value of the losses of the OMCs; it is not a real quantity which figures on their balance sheets. Thus, it is a mistake to equate “under recoveries” with state-owned OMC losses, as the mainstream media constantly does. Of course, the meaning of under recoveries will change drastically if we allow private sector players into the scenario, as we will see later.

While the mainstream media commits the mistake of portraying the under recoveries of the OMCs as “losses”, government officials and policy analysts err by depicting the under recoveries as “subsidies” or “effective subsidies” (the 2009 IEA report and the Kirit Parikh Committee are notable recent examples). Let us see why.

GOVERNMENT SUBSIDY?

It is meaningful to talk about government subsidies in relation to a commodity only when the tax revenue generated by the commodity (for the government) is lower than the subsidy that the government offers to producers/sellers of that commodity. Another way of saying the same thing is to insist on the usage of net subsidies: if the government tax revenue on a commodity is higher than the subsidy that it offers on that commodity, then on a net basis the subsidy is a negative quantity. In such a situation it is meaningless to say that the government subsidizes the commodity.

figure3.jpg

Figure 3: Financial Balances of the Oil Sector in India

Is the GOI subsidizing petroleum products in any meaningful sense, i.e., on a net basis? There is a simple way to answer this question: compare the total tax revenue coming from petroleum products to the exchequer with the sum of under recoveries and direct subsidies. Figure 3 plots precisely these quantities for the past few years. Note that the sources of the data in Figure 3 are as follows: (a) the data for under recovery, taxes (sales tax) and duties (excise and customs duties), and total revenue has been taken from the website of the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum and Natural Gas, GOI, and the Kirit Parikh Committee Report; (b) the data for direct subsidy has been taken from Table 26, Basic Statistics on Indian Petrol and Natural Gas. [20]

Several interesting facts emerge from Figure 3. First, the direct subsidy of the GOI for petroleum products is extremely small. In fact, direct subsidy is a tiny fraction (less than 1 percent) of the total tax revenues from the oil sector. Second, the total contribution of the oil sector to the exchequer has been higher than the sum of under recoveries of the OMCs and direct subsidies on petroleum products for all the years since fiscal 2004. Third, even the sum of duties (customs and excise) and (sales) taxes on petroleum products, which is only a fraction of the total contribution of the oil sector to the exchequer, has exceeded the sum of under recoveries of the OMCs and direct subsidies in all the years since 2004-05. The inescapable conclusion from Figure 3 is that there is a negative net subsidy on petroleum products in India. Another way of saying the same thing is that the government extracts a net positive tax revenue from petroleum products in India. The oft-repeated assertion that petroleum products are subsidized in India is simply not true.

WHAT ARE UNDER RECOVERIES, TRULY?

We have suggested, so far in our analysis, that under recoveries of the state-owned OMC are neither financial losses (because notional prices are used) nor can they be used as measures of subsidization (because there is negative net subsidy on the oil sector).

What are they? Why is the private sector and the mainstream media so concerned about under recoveries?

To get a handle on this important issue, let us imagine a vertically integrated, state-run corporation that sells petroleum products. This corporation imports crude oil, much like India does today, refines it to produce petroleum products and sells it to consumers. Thus, this corporation contains within itself both the upstream and the downstream sectors of the industry, as well as the retailers/dealers. If the final price at which this hypothetical corporation sells petroleum products to the consumer is higher than the sum of the price of crude oil, the cost of refining & distribution (with some rate of return included) and taxes/duties, then this corporation would be said to be making a profit (from the perspective of the people of the country).

Now, let us break up this hypothetical state-owned corporation into two parts, one of which is involved only in refining and the other only in distribution, both still being state-owned. In this case, there will be two balance sheets and the transaction that was earlier internal to the big corporation would now show up as sale/purchase between the two smaller corporations. Even in this case, we would adopt the same procedure as above to see whether the two firms taken together are making a profit: if the final retail price is higher than the sum of the price of crude oil, the cost of refining & distribution (with the same rate of return as before included for both corporations now) and taxes/duties, then the arrangement is profitable. In other words, it does not matter if “losses” show up in the balance sheet of one of the corporations as long as the government’s tax revenue is adequate to cover that “loss”.

Thus, if the government administratively fixes the price of petroleum products such that the distribution corporation suffers under recoveries, it is hardly a matter for concern because (a) the government’s tax revenues are far above the under recovery of the state distribution corporation (in our example), (b) upstream firms make enough profits to bear the burden. This is more or less the situation of the oil sector in India if we consider the state-owned upstream and downstream corporations taken together. Since the total revenue from the sector, and government taxes, are higher than the “losses” showing up on the balance sheets of some of the corporations, Indian society is not making a net loss.

The last and crucial step of the argument is to allow private sector players into the scenario and see how everything changes drastically. Continuing with the example, suppose now, we have, in addition to the two state-owned corporations, a private corporation. This hypothetical capitalist firm is involved in refining and distribution. Now, it is obvious that government control over prices that lead to “under recoveries” would translate into true losses or lower rates of profit for the private corporation. If the realized price is lower than the import parity price, in the balance sheet of the private OMC it would show up as loss – provided the OMC adopts the import parity price as the benchmark. But since the private firm has the refining facilities arm, like Reliance for instance, overall the firm might still make a profit because (a) taking import parity price as the benchmark means high profit margin for the refinery, (b) even without this high margin the refinery may itself be profitable enough to make up for the loss of the private OMC. Nevertheless, let us note that decontrolling the “realized price” promises even higher opportunities to earn profits for the private sector firm, as no under recovery now shows up.

That really brings us to the crux of the matter as regards under recoveries. The under recoveries of the OMCs do not mean much as long as they are covered by the tax revenue of the oil sector only when private sector players are absent from the scenario. As soon as private sector players enter the picture, the under recoveries of OMCs become a proxy for the losses of private sector players. Since the private sector wants to enter the oil sector and earn windfalls, it highlights the under recoveries and policy analysts endeavor to show it as a burden and the mainstream media faithfully relays that concern. The way to remove the under recoveries, i.e., the way to ensure a positive and high rate of profit for private capital in the oil sector is to do away with cause of under recoveries: government control over petroleum product prices. Hence, the recommendations of various “experts” is to liberalize oil prices, and the GOI, by accepting and implementing that recommendation is working to ensure high and positive rates of profit for private capital in the oil sector.

Let us end with an example that you can chew. From Petroleum Minister Murli Deora’s answer to the Lok Sabha we know that the pre-tax price of petrol was about 23.44 rupees per liter in July 2009; if Reliance or Essar sold petrol in Delhi in July 2009, this is roughly the after-tax revenue it would make on each liter of petrol. What would be an estimate of the cost that Reliance or Essar would bear for a liter of petrol? In July 2009, the average international (FOB) price of crude oil was, as we have already noted, 64.618 USD per barrel, which translates into 19.87 rupees per liter.. Thus, if Reliance or Essar imported crude for their refineries, they would pay about 19.87 rupees for each liter.

What mark-up over processing and marketing cost would they want? The average international pre-tax price of gasoline in July 2009 was about 2.33 USD per gallon; since the international price of crude oil was 1.538 USD per gallon, this implies a mark-up over processing and marketing cost of 1.515 (= 2.33/1.538). Thus, for an international oil company, the price of petrol (gasoline) was set at about 152 per cent of the cost (of crude oil). It seems reasonable to assume that Indian capital would also like a similar, if not higher, mark-up over cost. Thus, in July 2009 Reliance or Essar or Shell would have liked to be able to set a pre-tax retail price that was 152 percent of the cost of crude oil. So, what pre-tax price of petrol in India would have been required to ensure an internationally competitive mark-up over processing and marketing cost? The answer is 30.20 rupees per liter (= 19.87 * 1.52).

Now things are clear. According to the Petroleum Minister, the pre-tax price of petrol in Delhi was only 23.44 rupees per liter in July 2009; that meant, using an international rate of return benchmark, a 6.75 rupees per liter less profit for a private sector player like Reliance. That, it is clear, was enough to create a hullabaloo about under recoveries and fiscal burden and the efficiency of the market and push the government to set up the Kirit Parikh Committee and decontrol petrol and diesel prices. Profit, you see, is what this whole fuss is about.

Resources for Further Study:

Rangarajan Committee Report: http://petroleum.nic.in/Report1.pdf

Kirit Parikh Committee Report: http://petroleum.nic.in/reportprice.pdf

Surya Sethi’s 2010 EPW article: “Analysing the Parikh Committee Report on Pricing of Petroleum Products,” Economic and Political Weekly, March 27, 2010. [PDF] »

——————————————————————————–

[1] http://www.pib.nic.in/release/release.asp?relid=62834

[2] The Times of India has reported that diesel prices have not yet been fully deregulated. This is misleading. The very first paragraph of the press release of the government (http://www.pib.nic.in/release/release.asp?relid=62834) says: “In the light of Government’s budgetary constraints and the growing imperative for fiscal consolidation, and the need for allocating more funds to social sector schemes for the common man, the Government has decided that the pricing of Petrol and Diesel both at the refinery gate and the retail level will be market-determined.” (emphasis added) The next sentence of the press release has the caveat that the TOI report picks on: “However, in respect of Diesel, the initial increase in retail selling price of Diesel will be Rs. 2 per litre at Delhi, with corresponding increases in other parts of the country. Further increases will be made by the Public Sector Oil Marketing Companies (OMCs) in consultation with the Ministry of Petroleum & Natural Gas.” So, it is true that any price increase of diesel which is over Rs. 2 will require government consent at the moment, but this seems mere window dressing given that the principle of market-determined retail prices has been accepted and loudly affirmed.

[3] http://blogs.wsj.com/indiarealtime/2010/05/20/governments-price-rise-gives-gas-to-oil-stocks/

[4] http://www.deccanherald.com/content/77473/under-recoveries-remain-high-despite.html

[5] http://petroleum.nic.in/Report1.pdf

[6] http://petroleum.nic.in/reportprice.pdf

[7] Writing on the budget earlier in the year, Debarshi Das had already noted the government’s move towards decontrolling prices of petroleum products to facilitate the growth of private profit: http://sanhati.com/excerpted/2205/

[8] http://www.business-standard.com/india/news/psu-oil-companies-may-lose-rs-25000-crunder-recovery/369561/

[9] http://in.reuters.com/article/idINIndia-48367020100510

[10] http://news.bbc.co.uk/2/hi/7430784.stm

[11] http://www.ft.com/cms/s/0/44586cac-8930-11df-8ecd-00144feab49a,s01=1.html

[12] http://www.iea.org/work/2006/gb/papers/petroleum_product_pricing.pdf

[13] http://www.iea.org/papers/2009/petroleum_pricing.pdf

[14] Some of the points raised in this article were also made by Surya Sethi in a post-budget analysis in the EPW (“Analysing the Parikh Committee Report on Pricing of Petroleum Products,” Economic and Political Weekly, March 27, 2010)

[15] International prices of crude oil and other petroleum products can be found here: http://www.eia.doe.gov/emeu/international/prices.html#Motor

[16] Paragraph 4.43, Kirit Parikh Committee Report.

[17] To be more precise, we will need to add the the cost of insurance, ocean freight, ocean loss; this quantity is typically assumed to be about Rs 50 per tonne (http://www.projectsmonitor.com/detailnews.asp?newsid=9540). Since it is not very large, for our current computation, we will ignore it.

[18] http://www.expressindia.com/latest-news/Kerosene-LPG-prices-lowest-in-India-Govt/498859/

[19] http://en.wikipedia.org/wiki/List_of_companies_of_India

[20] http://petroleum.nic.in/petstat.pdf

Through and Beyond: Identities and Class Struggle

Paresh Chandra


The New and the Primitive: the New is the Primitive

I

In India, the effectuation of the New Economic Policy in 1991 is seen as a move forward, a move out of the “mires” of public sector enterprise, a “mandate” for privatization and against public and state ownership of industries. It is a short-sightedness characteristic of our times, our inability, Fredric Jameson would say, to historicize, which speaks when we make such utterances. Unable to look beyond the immediate we are unable also to make logical generalizations and connections that are needed to contextualize what occurs. Before putting forth my arguments I feel the need to make two assertions: (a) The NEP was not adopted because ‘Plan 1, public sector,’ failed and (b) state ownership does not mean public ownership, hence the seeming failure of public sector enterprises is by no means evidential of the problems of truly collective ownership of means of production.

Historians have noted that ‘at the eve of Independence’ the Indian bourgeois class was much more developed than that of most third world nations. Post 1910 the British government had begun to include the interests of this class in its policies, partly because of its own compulsions (the British needed the support of the Indian bourgeoisie in World War I) and partly because of strength of this class (Mukherjee, 2002). Subsequently, the plan of development that was charted out centrally after Independence had to accommodate the said interests as well. In 1944-45 when prominent capitalists sat down to ponder the possibilities facing an Independent India, and divined the Bombay Plan, they knew that they were going to have a very big say in the path the country takes. As a result of underdeveloped infrastructure, it seemed convenient to Tata, Birla and Co. to lay out an arrangement which required the state to make all necessary large investments, before they take over. To overstate for rhetorical effect, the next thirty years fulfilled the wishes of the Indian capitalist class. Of course, the Bombay Plan was never actually followed, but the ‘development’ that ensued in these years was more or less in concert with it. In the 80s, even as the judiciary’s earlier attempts to strengthen labour laws and expand the purview of Constitutional provisions like the “Right to Life” took a down turn, the state continued with this construction of infrastructure, at the same time beginning to prepare for the change of hands that was finalized in 1991. From state capitalism to privatization in the age of neoliberalism – this has been the movement of the Indian socio-economic formation. So, we might as well stop arguing about this “development paradigm”, for its “theoretical underpinnings” and its genealogy are clear enough: contesting this development is without a doubt, contesting capitalism.

Neoliberalism, the stage of finance capitalism, even as it (as will be discussed later) uses direct dispossession to accumulate capital, is also the most decentralized and dispersed form of capitalism. As Jameson observes in his essay “The Cultural Logic of Late Capitalism” the magnitude of this system and the manner in which it operates is such that one cannot find a centre to it, and it becomes impossible to locate a dominant form to understand or attack. It is capable of assimilating and preserving local forms and identities, which it brings together in relationships or ‘networks’ of competition.  Due to the absence of a dominant form of hegemony, of a monolithic state, it becomes impossible to think of a universally valid form for struggle. The problem of “identities” the way it exists in the current conjuncture, where many of them coexist, all equally subordinated to the rule of capital, and without palpable partiality on part of the state, is one that is borne off this situation. Identities are forced to compete in the networks created by the generalization of capital that has brought neoliberalism. In this situation it is hard to believe in grand-narratives; since identities coexist, interests appear relative, none seems to have a greater claim to authenticity than any other – the schizophrenia of the postmodern subject is what we get. The internationalism of neoliberalism, together with its ability to preserve and force identities into competitive relations, makes it hard to conceive of a transcendental politics; and the harder it is, the greater the need to envision it. Jameson (1991, p. 49) says:

“…the as yet untheorized original space of some new “world system” of multinational or late capitalism, a space whose negative or baleful aspects are only too obvious – the dialectic requires us to hold equally to a positive or “progressive” evaluation of its emergence, as Marx did for the world market as the horizon of national economies, or as Lenin did for the older imperialist global network. For neither Marx nor Lenin was socialism a matter of returning to smaller (and thereby less repressive and comprehensive) systems of social organization; rather, the dimensions attained by capital in their own times were grasped as the promise, the framework, and the precondition for the achievement of some new and more comprehensive socialism. Is this not the case with the yet more global and totalizing space of the new world system, which demands the intervention and elaboration of an internationalism of a radically new type?”

II

Terms like “development”, “displacement”, “identity” and “violence”, come together most visibly in the context of the rush for resources that are buried in parts of India inhabited predominantly by “tribals” and the attempt of the state to dispossess by force the tribal population of its lands (which it is doing under the garb of waging war on the “Maoists”). The people living on this land depend upon it for their existence, often completely, sometimes partially. Capitalism and capitalist development, not just in India, but world wide needs these resources to feed the “economy of wants” and so the land has to be taken away. Recently we went to Orissa and spoke to many activists who have been working in areas where dispossession and displacement is being challenged by the local people. In these conversations we found, what we find only too often – the state, using the cover of bringing “development”, builds highways to the most underdeveloped parts of the state, which are also the most mineral rich. Mining companies follow, mine for resources, in the process acquiring local land by hook or by crook, and taking from the people the power to reproduce their labor power. This has happened before, in India and in other countries – the “enclosure movement” in 18th century England was the most famous/notorious example of this. Marx had called this process of accumulation of capital through direct dispossession primitive accumulation. This method of accumulation, one must keep in mind, is primitive only when seen in a logical register and historically, as we witness, it can be used by capitalism at any and all points. Michael Perelman writes:

“While primitive accumulation was a necessary step in the initial creation of capitalism, it actually continues to this day. For example, at the time of this writing [Perelman’s essay], petroleum and mining companies are displacing indigenous people in Asia, Africa, Latin America and even in the United States.” (Saad-Filho, 2003, p. 125)

Pratyush Chandra and Deepankar Basu (2007) in an essay titled “Neoliberalism and Primitive Accumulation in India” argue that primitive accumulation is not simply the originary moment of capitalism but is also constitutive of it. Starting with the premise that the very existence of capitalism is predicated upon its expansion and the continuous separation of laborers from the means of production they argue that while in a perfectly functional capitalist setup the market takes care of this recurrent enactment of the capital-relation, “at the boundaries (both internal and external), where capitalism encounters other modes of production, property and social relations attuned to those modes and also to the earlier stages of capitalism, other ways of subsistence, primitive accumulation comes into play. More often than not, direct use of force is necessary to effect the separation at the boundaries” (Chandra and Basu, 2007).

Neoliberalism is a response to the crisis of the Keynesian welfare state, through a reassertion of the absoluteness of the power of the ruling class and a restructuring of the state as regulator of circulation into a more partisan mould. The state even in its welfarist avatar was an organ of the ruling class, but now it becomes more blatantly than ever a tool in its hands. “Despite the talk of separating the political from the economic, which is a staple rhetoric of the current phase, it is the state as the instrument of politico-legal repression that facilitates neoliberal expansion. Firstly, the state intervenes with all its might to secure control over resources – both natural and human (“new enclosures”) – and secondly, to ensure the non-transgression of the political into the economic, which essentially signifies discounting the politics of labor and the dispossessed from affecting the political economy” (Chandra and Basu, 2007). An interesting account of this process is offered in “Aspects of India’s Economy,” No. 44-46. The relationship between the model of development that the Indian state (now) espouses and impoverishment of the people is explored in great detail, and how development itself becomes exclusion is established.(1)


Of Identities and Co-option

I

Marxian attempts to understand Indian reality, with their “fixation” with ‘class’ and ‘mode of production’ have not found sympathy in Indian sociology. These analyses do not hold, it is argued, because caste is the dominant feature of ‘social stratification’ in India. This objection is predicated upon the understanding that class, in being an import, even if it has managed to ground itself in India, is only an addition to forms of stratification; caste has its own grounds and class its own. ‘Overlaps’ are acknowledged, but in the same breath comes the warning that class remains a relatively less affective part of this reality; capitalism/class/class-struggle together are said to form one aspect of Indian reality (owing, some many scholars might suggest, to the experience of colonialism), while caste, patriarchy, religion with their own respective baggage form other aspects.

There are two arguments to be made to combat these objections, the first takes issue with their epistemological foundations, and the second with their ahistoricity. Firstly then; the reduction of notions like capitalism and class to ontological fixities (admittedly, something which Marxist scholars have also been guilty of) implicit in these objections does not recognize that it is the logic of capitalist production which is re-enacted in each reality, not its form. India can be capitalist, and just that, even if the Indian reality has a bazillion other features which Europe never had to contend with. Of course, formally speaking, it is a different capitalism. Secondly: Even as the process started by the ‘colonial encounter’ unfolded, the seeds of capitalism were already coming to fruition in the decaying structures of the Mughal feudal order. Indian reality, of which the caste system and the experience of colonization both were parts, was giving birth to Indian capitalism. Capitalism, as a possibility, was not superimposed upon, or imported into the Indian landscape, but was borne by its own facticity.  In an essay entitled, ‘Potentialities of Capitalistic Development in the Economy of Mughal India,’ in addition to establishing that the Mughal economy was highly monetized and dominated by domestic industry, Irfan Habib (1995) also shows that contrary to usually held opinion, caste did not obstruct the emergence of capitalism in India.

“It has been held, and the opinion has been powerfully reinforced by Weber, that the caste system put a brake on economic development, through separating education from craft, segregating skills, preventing intercraft mobility, and killing or restricting individual ambition in the artisan…Three or four points ought to be borne in mind. First, the mass of ordinary or unskilled people formed a reserve, from which new classes of skilled professions could be created when the need arose…Secondly, in any region there was often more than one caste following the same profession, so that where the demand for products of a craft expanded, new caste artisans could normally be drawn to that place. More important still, castes were not eternally fixed in their attachment to single professions or skills. Over a long period, economic compulsions could bring about a radical transformation in the occupational basis of caste.” (Habib, 1995, pp. 216-217)

Caste was present at, and constitutive of, the foundational moment of Indian capitalism, and is, hence, also a functional characteristic of its being – the last few decades show how Indian capitalism first contained discontent, by limiting its expression to caste-assertions, and then sublimated it through elite formation. It used caste-division to not only resolve contradictions that its inherently self-contradictory nature threw, but also to perpetuate itself.


II

“Country feeds town,” has gone from being a catch phrase for “backward-looking” reformers to become a sort of theoretical cliché. In the current Indian conjuncture, however, as a few say often, the cliché has come back to life. That tribes of Chhattisgarh, Jharkhand, Orissa etc. are sitting on mineral resources which are needed for the country’s “development” is again a discursive commonplace these days. Many opposed to development at such costs say: “it’s their land, their resources; they should be allowed to decide what is to be done with it.” The tribal/non-tribal identitarian binary being posed by many anti-displacement assertions is implicit in the first statement concerning country and town. It seems as if it is impossible to talk without creating “identities.’

Each utterance, right from the moment of its enunciation contradicts some other – the bad universality of abstract labor does not demolish the particularity of concrete forms of labor, but robs them of their respective singularities. No statement can in its singularity be a universal and coexist with other interests; and the only relation between diverse forms is one of competition. The “I” always defines itself as different from and in opposition to an “other”.  In this case, ostensibly, the competition is of two, tribal India and non-tribal India. This seems to imply that there are only two groups of interests in India, at least as far as this debate is concerned. As if the people yoked together by these absurd over-generalizations are similar, as if the “tribal community” is completely homogenous, as if the non-tribal community is completely homogenous. The tribal populace wants its lands, the non-tribal wants minerals. We know that calling somebody a non-tribal is hardly calling her/him anything at all; the term is too inclusive to be of use. We also know that there are too many differences of interests as far as the non-tribal population is concerned. In the case of “tribals” this is not so obvious. What is being referred to here is not that there are many different tribes, but that even within each tribe homogeneity is absent; hierarchies and conflicts of interest exist. If in anti-displacement discourses it is held that the tribal people should have the right to decide what happens to their land and resources, one is impelled to ask: if this is allowed, does it guarantee that the resources will be distributed equally? Will those who have never had land, or access to other resources get their share? That this will not happen is easy to see even now. Whenever the question of returning acquired land arises the seemingly homogenous tribal society breaks. Only some owned land earlier. Should the returned land be redistributed? Or should it be returned to those who had owned it earlier? On this question the conflict between the few who owned or own means of production and those who did not/do not becomes clear – what can be called class-conflict becomes apparent.

However, should the struggle of the tribal people for their land be condemned because it does not seem to challenge other forms of exclusion within? Is class somehow a more significant identity than that of being a tribal fighting against dispossession? Many left groups and intellectuals affirm this contention, and draw back from such struggles – “we don’t do tribal politics, we do class politics,” they say. It is here that we falter in our analysis of politics, and it is in this that the reification of identity is seen. In saying that they do not do “tribal politics”, such groups think that they stay safe of the pitfalls of identitarianizm, only to create another reified identity – class.


III

“Caste is not merely a division of labor; it is also a division of laborers.” (B. R. Ambedkar)

“The organization of the proletarians into a class, and consequently into a political party, is continually being upset again by the competition between workers themselves.” (Marx and Engels, 1999, p.98)

The Chashi Mulya Adivasi Sangha was made in the Narayanpatna-Bandhugaon region of the Koraput district of Orissa, by the Adivasis, initially to stop liquor production and the problems caused by its consumption but which eventually led the struggle to get rid of “lemon grass” cultivators. This region is a scheduled tribal area, and as per the Constitution no non-tribal can procure land here. Yet 85% of the land was owned by non-tribals, who in this instance were Dalit. Huge chunks of land were owned by Dalit landowners, who employed both tribal and non-tribal/Dalit workers to cultivate lemon grass. The Chashi Mulya Adivasi Sangha’s struggle against liquor production, partly due to the inertia of its own success and partly because it was a pressing need of the community, had to extend to and change into a struggle against these Dalit landowners. Most Adivasis living in this area are very poor, and migrate to other parts of Orissa for seasonal work. Even those who have some land are only able to reproduce their labor power on what they get from it. The Sangha’s struggle transformed into a struggle for land, a struggle which as many point out was completely within the purview of law and the Indian Constitution. This struggle was not driven by an Adivasi ‘land-hunger.’ It was simply the struggle to procure the minimum means necessary to reproduce themselves (2), much like the struggle for minimum wages elsewhere.

On this occasion Adivasis, by and large, constituted the exploited and some Dalits owned the means of production. However, there were also a large number of Dalits employed by these landowners. In this struggle against the landowners these Dalits were essentially, as dictated by their location, on the same side as the struggling Adivasis. But they chose to overlook this logical unity of all exploited, to side with the exploiters, deeming their “Dalit” identity more significant. Standing by the Dalit exploiter they stand against their fellow workers. What seems to be a Dalit versus Adivasi struggle is then actually a struggle between two groups of workers, between two segments of the working class.

The first shock: Dalit landowners! This proves that the congealed identity of being a Dalit, of having suffered a “historical wrong” does not make one immune to taking up the role of exploiter. In addition one sees that even among the Dalits there are exploiters and exploited. The Dalit landowner/exploiter in a situation like this cannot be let off because of his Dalit identity. The tribal worker perhaps finds it easy to understand the conflict between her/him and the Dalit- landowner, because of the latter’s out-group status. Even though the Dalit-exploiter and the Dalit-worker are not exactly friends, the Dalit-worker continues to side with the Dalit-exploiter. There is more than one reason for this. The first is the exploiter’s in-group status. The second, and the most important of all, is the tribal-worker’s out-group status, which implies that the tribal-worker is perceived only as a competitor in the labor market. The third is the perception of the tribal-worker, that the Dalit-worker is an outsider.

An attempt to resolve this contradiction on a local level has led to the breaking of the Sangha. The Bandhugaon faction has decided to compromise; they will not take land of all Dalits, because they say some of them are “poor”.(3) Furthermore they have decided not to put an immediate end to all lemon grass cultivation since it is a source of employment. The Narayanpatna faction tried to take over all the land, end lemon grass cultivation and the ownership of landlords altogether. The thesis and antithesis of a genuine contradiction have been broken apart and the movement has spiraled downwards (4). The unity needed between the Dalit-worker and the tribal-worker cannot be created here; this conflict cannot be resolved on this level. For these segments of the working class to come together they need to transcend (not forget) their identities and allow themselves to be assimilated in the larger struggle against capitalism.

In this localized struggle, a resolution is impossible because local issues are inextricably intertwined with locally defined identities. Only when the immanent logic of transformative politics is generalized, the logic escapes the hold of the local form that pulls it down. In the context of what is happening in Orissa, such a generalization would require this movement to interact with other movements in the state, which are predominantly anti-displacement. Admittedly, unlike the Naryanpatna movement, the moments of enunciation of the other struggles have been defensive, but convergence is necessary and desirable insofar as this union can also benefit these defensive identities, by shifting the grounds on which the battle is being pitched by them, making co-option harder. A programmatic understanding of the situation, evolved gradually through such a dialogic interaction would give the Narayanpatna movement a direction that can be used as a referent to decide upon questions that cannot be answered locally.


IV

The Marxian notion of class is part of a particular act of abstraction performed to understand society and to perceive possibilities of its transformation. Capitalism is understood as a system in which the primary conflict of labor and capital is the dominant determinant of social being. In their analysis of capitalism Marx and Engels came to the conclusion that only those who labor, i.e. workers, have the potential of being agents of radical transformation.

“All previous historical movements were movements of minorities, or in the interest of minorities. The proletarian movement is the self-conscious, independent movement of the immense majority, in the interest of the immense majority. The proletariat, the lowest stratum of our present society, cannot stir, cannot raise itself up, without the whole superincumbent strata of official society being sprung into the air.” (Marx and Engels, 1999, p. 100)

“Class struggle” is, in this way, a process of transforming society, and “class” is envisaged not as an identity, like caste or gender or that of being a tribal, but as a process of continuous becoming (conscious) – the working class-in-itself becoming the working class-for-itself.

Where does one find class? It is a problem faced very often by literature students – for instance if one does an analysis of Balzac’s Pere Goriot keeping in mind the “class angle”, how does one go about it. Often critics end up identifying classes with particular characters, and reduce class struggle to an interpersonal battle. The way out of this mess is to study contexts, situations and relationships. One character through the length of a novel does not remain a “member of the working class”, although he might well be a factory worker throughout. In life too one finds a factory worker, but not the “working class”, and being a factory worker, or just a worker is also an identity. Much like representation in art, representation and self-representation in life needs identities. If one does not identify a worker, one cannot even begin to understand the working class, but to say that being identified as a worker makes a person of the revolutionary class is problematic. A fixed form of the working class to be identified at all times and in all locations does not exist. These indurated forms are identities, which at their moment of articulation express the inherent revolutionary logic of the working class, but are not themselves the complete working class.

The relationship between identities and the process called class is akin to that between particulars and the universal immanent in them, and constructed through continuous abstraction from them; the relationship is dialectical. An identity is valid at a particular spatio-temporal location, and rooted within it is the logic of truly transformative politics. But so long as an identity does not destroy itself, it continuously gets co-opted within the competitive system of capitalism. After a point an identity needs to transcend itself and move towards assimilation into the multitude of struggling identities. At the same time if one does not recognize the struggles of identities, one recognizes nothing, since struggle is necessarily posed in terms of identities. The class-for-itself is always in the process of being constructed, but is never out their, present a priori, to be recognized as somehow different from and superior to the multitude of identities.

In the Communist Manifesto Marx and Engels repeatedly asserted the significance of the union of many smaller groups of workers waging their local struggles. The struggle for transformation of society is to a large extent the struggle against the divisions within the working class, for it is understood that a united working-class-for-itself would necessarily transform society – in fact society is being transformed in fighting off segmentation within the working class. Marx and Engels wrote:

“Now and then the workers are victorious, but only for a time. The real fruit of their battles lies, not in the immediate result, but in the ever-expanding union of workers.” (Marx and Engels, 1999, p.98)

Only the path that goes through and beyond the thesis and antithesis of identities to a transcendental synthesis can transform the base. It is through identities that articulation and struggle take place, but the struggle of a localized identity is not enough, and is always exposed as superstructural, seen to reinforce the hegemonic structure. Identities are inevitable, and a necessity, but identitarianism divides and restrains the revolutionary multitude. Even in charting out the role of Communists, Marx and Engels had in mind the weeding out of segmentation and sectarianism within the working class, and the creation of a union.

“The Communists are distinguished from the other working-class parties by this only: 1. In the national struggles of the proletarians of the different countries, they point out and bring to the front the common interests of the entire proletariat, independently of all nationality…” ( Marx and Engels, 1999, p. 102) (5)

Marx and Engels here speak of national struggles, but the essence of what they say deals with insurgent identities in general. A localized identity can only fight for immediate results, after which the struggle and its result is subsumed in the hegemonic system. An identity ‘voices’ demands, which the system is asked to fulfill. In this two-step act of asking, and being given, the basis of hegemony goes unquestioned; the status of the giver as a giver and his capacity to give goes unchallenged. To put it in other terms (since the state is not itself ‘superior’ but works on behalf of those who are superior), the state, which in being a state, is a symptom of class power is not questioned. Its role as adjudicator of social relations and as the regulator of value distribution is predicated upon the fact that value is apportioned differentially; at the same time it is its task to maintain and defend the differential apportionment of value. In the act of placing a demand, an identity asks the state for a share of the value being distributed, a share which, presumably, was being denied to it. Once the state allots the identity its share the struggle subsides. This is what one means, when one says that an identity (earlier insurgent) is co-opted into the system.


Challenging Development, Challenging Neoliberal Capitalism

“In 1970…1 per cent of the population had 18 per cent of the wealth, in 1996 the same 1 per cent owned 40 per cent of wealth. After 50 years of independence 26 per cent of the total population lives below the poverty line and 50.56 per cent are illiterate, if we take official figure into account. Even today due to various reasons, 98 children out of every 1,000 between the ages of 1-5, die. An official report of the government’s mines and mineral department, published in 1996-97, states that India’s natural gas will be consumed within 23 years, crude oil within 15 years, coal within 213 years, copper within 64 years, gold within 47 years, iron ore within 135 years, chromites within 52 years, manganese within 36 years and bauxite within 125 years. All this is taking place in the name of national development.” (Debaranjan Sarangi, ‘Mining “Development” and MNCs’, EPW Commentary, April 24, 2004. Quoted in “Factsheet on Operation Green Hunt” published by the ‘Campaign against War on People.’)

“The notion that growth of manufacturing or services industries is per se desirable is a form of fetishism. We need to ask questions such as “Does it create net employment (i.e., does it create more jobs than it destroys)?”, “Does it meet mass consumption requirements (either directly or by developing the capacity to meet these requirements)?”, “Does it squander the economic surplus on luxuries? Does it divert resources from more pressing priorities?” “Is it environmentally sustainable? Does it exhaust natural resources?”, “Does it uproot people?”, and so on. In fact one can cite several industries which, not as an avoidable by-product of their development, but as an essential part of it, harm the masses of people, and benefit only a small class. True, the so-called ‘value added’ by these industries contributes to the GDP; but this fact merely underlines the irrationality of using GDP as a measure of development.” (Aspects of India’s Economy, No. 44-46, India’s Runaway Growth: Private corporate-led growth and exclusion, p. 9)

It should be clear that changing the manner in which notions like development are envisaged is not an administrative matter. The hegemonic understanding of development is intimately connected to the interests of the hegemonic class, and challenging this development implies challenging hegemony. By extension, to transform the development paradigm would necessarily require the transformation of the power relations structuring a socio-economic formation. Assuming that the need for a unity among those “who have nothing to lose but their chains”, is established in our minds, one could contend that the tribal opposition to the form of development that the Indian state has embarked upon, which has emerged in response to the immediate danger to their lives, would need to consciously recognize the constellational unity it bears with workers’ opposition to hegemony in other locations. In a paragraph that has already been quoted, Perelman goes on to say:

“Emphasizing the social relations of advanced capitalist production to the exclusion of the ongoing process of primitive accumulation obscures the fact that the struggles of the Ogoni people in Nigeria or the Uwa in Columbia are part of the same struggle as that of exploited workers in Detroit and Manchester.” (Saad-Filho, 2003, p. 125)

The same can be said about the “tribals” struggling in Chhattisgarh or Orissa and workers in Gurgaon.(6) As mentioned earlier, displacement and dispossession are forms of primitive accumulation, which is only one form of accumulation of surplus, the other two being relative and absolute surplus value. Capitalist development is about the maximization of the accumulated surplus, and the various forms of accumulation bear an essential unity. If in rural areas we witness this accumulation in the form of direct dispossession, in other locations we see it in the form of increasing alienation of workers from their work, in low wages, increasing work hours, higher and higher degrees of mechanization and lack of job security. If this is the case, then one should also recognize that the challenges being posed to capitalism, at various moments are part of a single struggle to transform society.

Till the conflict between the tribal population and the state continues to be posited in terms of “war”, “village community”, and so on, this unity of logic will not be recognized – binaries like tribal/non-tribal, village/town etc. will blur the lines along which the actual struggle is being waged and (as was explicated earlier) will give the sense of a false unity of interest between exploited and exploiter. In the moment at which land is acquired the ruling class within the tribal population, which holds most of the land fights back together with the landless tribal who too works on this land. However these landowners usually fight either for compensation or for a part of the new stakes and go over to the state soon enough. In the final analysis the interests of the ruling class within the tribal population and those of “external”, more dominant state forms like multinational companies are the same. When the crucial moment of conflict comes this unity between the rulers becomes apparent, the logical unity of parts of the hegemonic structure is clearly reflected in the coordination of forms. To counter this structure, the revolutionary class needs to recognize and consolidate its own multitudinal, insurgent structure. The workers who participated in the huge strikes in the automobile industries in Gurgaon, following the incidents in the Rico factory, are part of the same struggle as the one being waged against dispossession by those tribals who either work on others’ land or possess land enough only to reproduce their labor power. To be able to reconfigure the development paradigm, to move to a form of development that takes into account the interests of the majority, the multitudinal majority needs to consciously create itself through the recognition of its diverse and localized forms.

It would be useful here to hint at the difficulties of such a dialectical theorization of the relationship between forms and logic, identities and class. Indeed we find in the difficulty of such a theorization an allegory of the difficulty of class struggle in its entirety. Formally, there is no difference between this understanding of the struggle of an identity (as a moment of class struggle), and the one which reifies the insurgent identity. But logically, there is a difference. The latter gets co-opted at each moment because it fails to question the foreclosure that creates this exploitative structure, seeking to solve, as Laclau says “a variety of partial problems”, while the former posits the struggle of partial forms as the process of creation of a good universality. Formally, the attempt to de-legitimize the struggles of identities, or to “subsume” them, rendering them somehow less important than the struggle against capital, and the attempt to understand how these struggles are moments in the process of struggling against exploitation at large also appear the same. But logically they are different. While the former reifies a partial form of the struggle, and posits it as superior to another, the latter tries to perceive (and create) a constellational unity between these partial forms. Formally there seems no difference between a call to concede the superiority of one identity, and the one to recognize the constellational unity between identities. But logically there is a difference. Totalitarian is the very fabric of capitalist differentiation – on the surface neoliberalism seems to allow difference, but actually it hollows out the concreteness of diverse forms. The unity that we need to forge to end exploitation will have immanent within it the logic of difference, where the universal is the particular and nothing more.


Winding Up

In the era of “late capitalism”, with the “death” of the high-capitalist adventurer/entrepreneur, modernism, the individual, of meta-narratives like class and nation, difference rules. On the one hand capitalism is extending its domain, making every “outside” it’s part, constantly subsuming the hinterland, repeatedly redefining its own centre, and on the other this is also the era of “identity-assertions”. Many have analyzed these phenomena, but the effort to understand them as facets of a systemic totality have been inadequate. Neoliberalism, with its form of decentralized hegemony is able to make use of difference. As capitalism pushes its boundaries, not just geographically, but also in spheres which have been within its geo-political territory without being constitutive of it, identities are posed. Neoliberalism instead of suppressing these is able to co-opt them – it brings identities into competitive relationships, at the same time allowing each validity on its own turf. This horizontality that neoliberalism is able to maintain creates a relativity in values which seemingly makes classical notions like class-struggle, working class, capitalism, communism, transformation, revolution and so on meaningless. If each identity is able to make its assertion, then why talk of fundamental/radical transformation, and furthermore if there are so many equally valid voices how does one decide what the nature of transformation will be? And yet, when encountered by the realities of neoliberalism, the costs of its form of development, one understands the need for transformation. This is the antinomy of postmodernity – one’s condition is abominable and because it seems impossible to ascertain the nature of the system, transformation seems unattainable.

This paper, seeking to be an intervention in this situation has tried to hypothesize the possibilities of such a political dialogue between local forms and identities, to take into account the postmodern stress on difference and at the same time assert that a system of differences is a system nonetheless. What is the “internationalism of a radically new type” that Jameson speaks of, but an attempt to rethink the working class as the agent of change within the capitalist system, in the era of postmodernism? To rearticulate the relation between diverse identities and the meta-narrative of the “working class” one can make use of the notion of “class composition”, “designed to grasp, without reduction, the divisions and power relationships within and among the diverse populations on which capital seeks to maintain its dominion of work throughout the social factory – understood as including not only the traditional factory but also life outside of it which capital has sought to shape for the reproduction of labour power” (Cleaver, 2003, p. 43). What have been called identities in this paper, can, when speaking of class composition be termed as “sectors of the working class”. These “sectors of the working class, through the circulation of their struggles, “recompose the relations among them to increase their ability to rupture the dialectic of capital and to achieve their own ends” (Cleaver, 2003, p. 43). The sort of dialogue needed for this recomposition would need to take the form of a direct, political confrontation, an engagement that would leave nothing unchanged; one’s identity and the ideology constituted by ones own experience changes in this encounter, even as the other is made to take into account one’s identity. “A double agenda,” as Cleaver (2003, p. 55-56) puts it: “the working out of one’s own analysis and the critical exploration of ‘neighboring’ activities, values and ideas.”

“The particular interests of passion cannot therefore be separated from the realization of the universal; for the universal arises out of the particular and determinate and its negation…Particular interests contend with one another, and some are destroyed in the process. But it is from this very conflict and destruction of particular things that the universal emerges…” (Hegel, 1974, p. 89)

Notes:

(1) Interestingly the writers try to extract the notion of “primitive accumulation”, in its logical purity and conflate history and logic in a manner rejected in this paper’s deployment of the said notion. They write:

“This giant capture of land and natural resources by the corporate sector is superficially similar to the ‘primitive (or primary) accumulation’ of capital which served as a necessary stage of capitalist development in Europe. It resembles that stage in its brutality and venality. But whereas the capital thus accumulated in the original countries of capitalist development was deployed in manufacturing activity that absorbed the bulk of the dispossessed rural labour force, such absorption is very restricted here.” (Aspects of India’s Economy, No. 44-46, India’s Runaway Growth: Private corporate-led growth and exclusion.)

The difference between the ‘original’ European situation and the current one in India that they point out is certainly present. But the implicit assertion that the “proletarianized” workforce needs to be absorbed in the location where dispossession occurs lacks logic. The dispossessed do become part of what Marx had called the latent reserve army of labour, and this is ‘absorption’ enough.

(2) Pratyush Chandra writes:

“Now, the sense of being dispossessed is rampant among the rural poor, those who are ready to take up arms. Whatever be their identity, they come mostly under the class of allotment-holding workers, a term that Kautsky and Lenin used to characterise the majority of the so-called “peasantry” – land in whose possession is just for reproduction of their own labour-power. Hence, rural struggles today, including against land acquisition and those led by the Maoists, are not merely against threats to their livelihood but to life itself – to the very sphere of their reproduction.” (Chandra, 2009)

(3) In situations like these, using a definition of poverty alien to the context can cause problems. Compared to the urban middle class even the Dalit exploiter is “poor”. But in that particular context, they control the labour processes of many others through their control over the means of production. Saying that they should not be treated as “class enemies” only blunts the thrust of transformative politics, which in that location is that those who work should own the land and that only food crops should be grown.

(4) The other reason for this spiral downwards has been the uncalled for violence that the state has used against the Narayanpatna movement, killing two Adivasis, injuring many other, and forming a violent “shanti sena” to terrorize the people (till the time this paper was written).

(5) To complete the quote: “2. In the various stages of development which the struggle of the working class against the bourgeoisie has to pass through, they always and everywhere represent the interests of the movement as a whole.” (Marx and Engels, 1999, p.102)

(6) http://radicalnotes.com/developing-unrest-new-struggles-in-miserable-boom-town-gurgaon/

References

Butler. J, Laclau, E. and Slavoj, Z. (2000). Contingency, Hegemony, Universality: Contemporary Dialogue on the Left. New York: Verso.

Chandra, P. and Basu, D. (2007). Neoliberalism and Primitive Accumulation in India.http://www.countercurrents.org/chandra090207.htm (accessed on January 16, 2010).

Chandra, P. (2009). Revolutionary Movement and the “Spirit of Generalization. http://radicalnotes.com/the-revolutionary-movement-in-india-and-the-spirit-of-generalisation. (accessed on January 15, 2010)

Cleaver, H. (2003). Marxian categories, the crisis of capital, and the constitution of social subjectivity today, in Werner Bonefeld (Ed.), Revolutionary Writing: Common Sense Essays in Post-Political Politics. New York: Autonomedia.

Habib, I, (1995). Essays in Indian History: Towards a Marxist Perspective. Delhi: Tulika Books.

Hegel, G. W. F. (1975). Lectures in Philosophy of World History. Introduction: Reason in History, trans. H. B. Nisbett, Cambridge: Cambridge University Press.

Jameson, F. (1991). Postmodernism, Or, the Cultural Logic of Late Capitalism. Durham: Duke University Press.

Marx, K. and Engels. F (1999). The Communist Manifesto, in Prakash Karat (Ed.) A World to Win: Essays on The Communist Manifesto. New Delhi: LeftWord.

Mukherjee, A. (2002). Imperialism, Nationalism and the Making of the Indian Capitalist Class, 1920-1947. New Delhi: Sage.

Negri, H. and Hardt, M. (2004). Multitude. New York: Penguin Press.

Perelman, M. (2003). The history of capitalism. In Alfredo Saad-Filho (Ed.) Anti-Capitalism: A Marxist Introduction. London: Pluto.

Cochabamba, Bolivia: Water (commons) Fair

Massimo De Angelis

Commons, understood generally as the autonomous institutions and practices of people self-organisations and self-help, are the backbone of people livelihoods all around the world. Especially in the global South, without commons people would die, because they would lack access to the basic resources like food and water necessary for life. When we hear the often-quoted statistics referring to the 40% of world population living on less than a dollar a day, we in the North tend to see only victims. We do not see self-reliant and dignified subjects from whom we have a lot to learn. Indeed, how could they live on such a low level of monetary income, if not through the fact that they pool their resources and labour together and build commons, thus overcoming the scarcity that they face as individuals? But to the external and untrained eye, commons are either invisible or opaque, because they are relational fields among a group of people that constitute itself as community, hence build some sort of wall or border around them which obscure its workings or indicate its presence to the outside only as an amorphous cluster.

Obviously, one cannot demand transparency to a commons, unless its activity create negative externalities on other commons, because a commons is not a public institution, and the borders around it — in spite of the different degree of porosity and possibility for an individual to go through — have generally a rational kernel: they represent the contextual limit of the sphere of its activity. On the other hand, we can legitimately demand transparency to a public institution because such institutions ought to benefit all of us, and not only a part of us, ought to be our commons. Hence our demand for transparency in this case implies a demand that we should all be part of its relational field and be able to exercise control over it, whether by sending people reps to its board of directors, or as social movements contesting the effects of its managerial and top-down administration. This is the same as regarding public institutions as distorted commons, i.e. to regard them in an aspirational way, as what, from the commons perspective that understand commons through the lens of commoning and grassroots democracy, they ought to be.

Now, if commons transparency and visibility is not a given property of commons, when commons become visible and invite you to see how they work and what they do, when in other words they come out, celebrate and share among themselves and communicate with others, we know there is something going on, we know that we are in the presence of a social movement that is not made of individual “citizens” or “civil society”, but of . . .commoners.

A social movements of commoners is one that seek to extend the scale of commons, extend the social power mobilised by commoning. In this sense, the struggle undertaken by this social movement is not only one that manifests itself in cathartic street demonstrations, but is also hidden in the daily reproduction of livelihoods. Actually, it is this latter activity that gives this movement both strength and its rhythmical presence into the streets. I do not think we can measure a commoners movement with the yardstick of traditional social movements where we correlate the presence on the streets with the strength of the movement. When we talk about commoners movement, strength seems to be, if not the cause, definitively the material basis of the presence in the streets. While the presence in the streets is produced through events, the strength is reproduced in daily processes, and there is an obvious lag between the time of productive contestation and the time of reproductive commoning. So for example, 500 years of indigenous resistance is not 500 years of daily street battles, but 500 years of value reproducing commoning activity that sustained and reproduced itself in spite of the massive wave of murderous enclosures deployed against it. Commoners movement is a type of social movement and social struggle we should hope to see growing and develop in the next century if any change to our conditions of life and living must occur.

One such a social movement is the one I saw at the III Feira del Agua in Cochabama. And indeed, if anybody had any doubt about the existence and relevance of commons to people lives and livelihoods, well a Fair like this should help dispel any such doubt. Spread along the four sides of a large football pitch and beyond, dozens of community water associations and cooperatives like the one of Flores Rancho that I visited the other day (see previous post) are making their own showcase, with the help of hand-made posters and polystyrene models, to mark their presence and to exchange information, knowledge and technology.

From feira de l’agua
From feira de l’agua
From feira de l’agua
From feira de l’agua
From feira de l’agua
From feira de l’agua

Associations like these form the largest bulk of the third Feira del Agua, held in Cochabamba during the days of 15 and 18 April, coinciding with the 10th anniversary of the water war that forced the then Bolivian government to repeal its water privatisation law. Among other participants in this feira del agua, noticeable presences besides some international development NGOs, some associations proposing waterless bio-toilets and some documentation centers, are also Semapa, the municipal water company that is highly controversial for the allegation of corruption and ineffectiveness in providing water, and Misicuni, a consortium of national and international companies that is building a large dam in the mountains North of Cochabamba and that promises to fill the water deficit of the region.

From feira de l’agua

Cochabamba is indeed a region with a water deficit. In spite of all the amazing self-organisation efforts that community groups are doing, they cannot offer water to all the communities. The area of Cochabamba mostly affected is the South, the vast suburban area where about 200000 people live and water provision is poor. In the 1980s and 1990s, a large migration from rural and mines region into cities like Cochabamba occured, this putting pressure on water provisions. Three distinct realities in this region then developed with respect to water. First, the market reality, that is the reality of those who lack access to water, don’t organise and thus depend on private providers. This generally occurs in unsafe and unregulated forms. Water is delivered at home by private suppliers who drive cistern-trucks and is poured in “turril” , i.e. large 200 litres open canisters that households generally keep outside. Here the problems is not only the astronomical cost of this water (up to 30 bolivianos, £3, for a turril, and think that this is not just drinking water, but water for all household usage), but also the water contamination as a result of storage in old and rusty containers and exposure to the elements.

The second reality is of those who self-organise themselves and are lucky to live in areas in which there is water and community wells can be dig. Now, the work they are doing here is quite impressive, since community build from scratch entire water systems, dig deep wells (up to 100m), construct water deposits and connect pumps, lay the pipes for home distribution, monitor the water quality which in this region is always threatened by waste contamination, and manage the entire system. Not bad as a form of commoning! Interestingly, it is generally recognised here that the initiative to dig for water emerges in a population that has recently migrated from the countryside, and therefore has a memory of self-reliance and a relation to nature that is empowering. Rural people always go close to water sources and get their act together to use water. This is not a trivial fact, and I am starting to consider that indeed a crucial aspect of the countryside subjectivity’s everywhere in the world is such a self-reliance and autonomous spirit, one that is lost through successive waves of urbanisation which add mediations between people and nature in the form of money and bureaucratic and legal codes. A point here to be considered in the future: if we do not have the need for one revolutionary subject any longer, we may need a composite one, and one of its crucial components can be found in the self-reliant spirit of indigneous and campesinos wordwide.

From feira de l’agua

The third reality is of those who self-organise themselves but are not lucky to live in areas with water. The commons self-organisation in this case occurs through a system of water collection by cistern trucks. The water is generally purchased from the municipal water company Semapa at far lower prices than those of the market, and distributed in the community. Generally, the community associations also establishes systems of distribution through deposits from which water is piped into the houses. In one case (the Asociation de Produccion y Administracion de Agua y Saneamiento APAAS, a community based organisation set up in 1990) water is fetched 7 km away, and to get the water the community has set up pipes, pomps and deposits along the crest of a mountain down to their suburban neighbourhood.

From feira de l’agua
From feira de l'agua

The different community organisations seem to function in different ways according to different conditions, but all heavily rely on community work besides self-funding and some access to external funding. The need for some socialisation of production in some functions — and therefore of greater scale — is met with associations of the second level, i.e. associations of associations.

This is for the example the case of Asica-Sur (www.asica-sur.org/index.php), one of the main organiser of this feira de l’agua.

From feira de l’agua

Asica-Sur pulls together about 90 community organisations of the second and third category discussed above roughly split in half among those which have access to a well and those that do not. Asica-Sur offers 4 types of services to their members: it offers community associations a platform of organisation and negotiating power vis-a’ vis the state and municipal water authorities; it strengthen the capacity of these water systems by facilitating information and sharing knowledge; provides technical assistance and services, for example through its cistern trucks that it provides to the communities without wells, but also enabling smaller community groups to access government and NGOs funds; and it offers help in the management of water resources, infrastructure and equipment. Its function seems also increasingly to mediate and find political solutions to problems encountered by larger water community systems.

For example, the case mentioned above of APAAS, is now encountering some problems due to recent human settlements along the 7 km pipeline, problems unknown 20 years earlier when it was established. The recent dwellers are allegedly stealing water and pretending that APAAS give them water for free as payment for the fact that the pipes are passing through their territory. Obviously, this water war among the poor need to find some solution, and political processes, rather than abstract recipees, are here fundamental. What situations like these also reveal is that the building of commons in a context ridded with socio-economic trends typical of capitalist systems (such as the continuous migration of the poor) is far from those studied as typical models in the West under the influence of neo-institutionalism. Unlike those cases, here the problem of access to a resource like water is never circumscribed to a given community, and although there is is an appeal to traditional forms of administrations or forms of convivir [living together] “based on ancient cultural rules and customs where the prevailing collective work and active participation in the deliberation and decision making on the assets and affairs concerning the community is under the principles of reciprocity, solidarity, justice , fairness and transparency” (from an Asica-Sur pamphlet), these forms have to deal with a reality in progress and a web of bottom-up and bottom-bottom conflictuous situations that continuously challenge the forms in which these basic principles apply. Here we have a major challenge of commons and commoning as a political paradigm, a challenge that is not envisaged by the many who while subscribing to this paradigm, offers static models as panaceas. The reality is one in which the commons and commoning perspective must embrace the new and the challenges of the times, while at the same time valorising and reclaiming the old and the ancient. The solution is not inscribed in written handbooks of given knowledge, but in the art of negotiation and political and organisational inventiveness of communities. In a seminar I attended I heard a Columbian activist referring not only to Mingas (community collective work) to build and maintain water systems, but also of Mingas of social resistance. And to this what we may add the need for Mingas of inter-communities relations and solidarity. In other words commoning of all types is really the ultimate material force of transformation of our realities.

One thing that it is clear while talking to the many associations and their collective organisations like Asica-Sur is that they all want to do more than what they are doing — whether it is a question of access to water to more members of the community, or of sanitation and water quality. We could say that in these days and age, their social movement is a social movement for growth (not so much “economic growth”, but growth in access to water and the betterment of its quality). This however implies that they all need more resources, i.e. to mobilise more social power. When we look into this more in details, we find that the question of resources and scale necessarily leads as to problematise the question of the construction of commons in relation to markets and states.

A “resource pool” is the first constituent element of a commons, the others being a community and commoning. Pooling resources address a specific need, the need of power to, that is to extend the scale of social production that a given community is able to mobilise for its own reproduction. Now, from the perspective of a community, and given its conditions of material and financial wealth, what are the sources of a resource pool or, which is the same thing, in what ways a community can increase its power to, or extend the social power it is able to mobilise? I think there are two general cases here to be considered. One, that applies to a community, say of fishers, who decide to manage their common fishing waters but in which production is organised by the individual fishers themselves. This is the case dealt with by a large bulk of neo-institutional commons literature, where much emphasis is put to confute Hardin’s tragedy of the commons. The commoning you need to refer to in order to make this confutation is only with respect to decisions and rules and not with respect of working together: the herders still go on the field with their own cattle and in their own time. There is in other words some equity principle at work (“now it is my turn and then is your turn” or, “not more than 5 cows each farmers”) and not some community sharing (“let us share the cows and the work on the field”)). The second case, which interests us here, is one that applies for all those resources that are required to engage in some form of common production.

If I am not missing something, I believe pooling of resources at this level can only occur in one or in a combination of the following ways — leaving out robbery of peers from other communities: a) the members of the community all tip in from their own material or financial savings; b) donors (like NGOs) are found; c) the community subscribe a debt; d) the state pour resources into the community; e) the community expropriate property, occupy, squats (like in the case of brazilian landless movement, MST).

Each of these sources represent challenges and limits from the perspective of scale and social justice, because themselves need to have “sources” and in particular sources of power. The first one, is of course limited by the degree of material wealth of the community, as well as complicated by the division of wealth within the community and the degree of cohesion in spite of wealth difference. The second one, a part from being limited by the money available and the work and know-how necessary to bid for the money, also may require to align local project to international NGOs priorities. The third one tie local community to repayment plans and therefore to markets. The fourth one bring with it the alignment of local communities to the state priorities and may favour their cooptation. The fifth one bring in the threat of repression. Talking to people from different water associations present in this Fair, I had the impression that all of these options have been used in one way or in another, a part from debt. For example, APAAS participated in a competition and won money from the World Bank to fund the purchase of pipes running 7 km. Some community organisations pull savings and buy the land upon which they dig the well partially funded by an NGOs. In another case, the state pour in money for a community water deposit as part of the “Bolivia Cambia Evo Cumple” campaign, and in others some foreign development funds are channelled into community organisations.

From feira de l’agua

In other words, it feels like that in order to grow commons cannot escape development, whether we are talking about transfers from states, supranational institutions such as the World Bank or NGOs, or the need to access money from the market in order to pull savings. In principle, we could of course imagine an alternative process that does not use any state nor markets, i.e. one based entirely on point e) above. In this case, all extension of commons occurs by means of all communities expropriating resources from the wealthy and simultaneously forming direct relations of association among themselves, giving rise to associations of second, third and upper level controlling all forms of social production and distribution made possible by the recently expropriated resources that extend the “pool”.

Obviously, this solution is in principle conceivable not only in moments of intense social revolution, but moments of intense social revolution that do not require an extension of the role of the state, neither in terms of its apparatus in defence of new property configurations against threat of restauration, nor in terms of extension of socialised functions that at the moment of revolution cannot be organised by communities nor by existing markets. Allowing for the state indeed simplifies enormously the problem of transition to a socially just society, as through indirect expropriation (case d) it is possible to fund organised communities of commoners and give rise to an increase in scale of commoning without the use of capitalist markets. This seems the avenue taken by Morales government, although timidly. As I was told by some community associations activists, the government has started to give money directly to grassroots associations and not to local authorities, and this is seen as a great improvement. However, this has happened significantly in areas where there is more opposition to the govenrment — such as Santa Cruz — while in area like Cochabamba — the stronghold of MAS, the party in government — there has been only timid disboursements. However, it may well be the case that the existing power relations and configurations of needs of the people necessitate the state to operate also for the development of market themselves — including capitalist markets — in which case the problems of transition becomes even more complex and risky. This is also the case here in Bolivia.

In any case, ultimately, the “socialist” principle to be a transformational principle must be articulated to the anarchist principles of individual freedom, and the communist principles of community constitution of values through commoning. The extent to which the measuring and valuing mechanisms of capitalist markets overpower the measuring and valuing mechanisms of commoning is a crucial factor to decide whether the “socialist” state is functional to a process of capitalist development or a transformational process towards the development of social justice. In Bolivia I think it is still too early to tell, and the process seems a very interesting process to study. The general question posed by the problems of access to resources becomes how can development be instrumental to the extension of commons, without the latter becoming in turn instrumental to the extension of capitalist development?

The 5 cases listed above apply from the perspective of an association of producers which aim at mobilising more social power than what they have at their disposal, and hope to internalise the means for such a mobilisation. But if we scale up and reach higher levels of association, we discover that there are other ways to extend the social power of commoners. One for example is posed by Asica-Sur with the question of cogestión — co-management. The question of co-management with Semeca is not yet defined clearly, and it raises several eyebrows among some community activists who are afraid that the messing up with the organisational forms of the municipal company would irreversibly contaminate the community organizational values. This would be a case in which the quest for extension of social power would backfire. But the rationale is obvious: to have access to more resources now available to the ineffective and corrupt structure of Semapa. The question is really to find a form that articulates community forms of organisation with this greater urban scale organisation.

Another issue posed, and it is perhaps linked to the question of comanagement, is that the state must allow organisations and firms that have at their disposal means of production and equipment to make it available to smaller organisation who do not have. This is perhaps a type of mild form of temporary “expropriation” that does not damage anybody really, but would give community associations access to fundamental resources and increase the scale of their operations. It is also evidence of a conception that sees the need for private and public property to be communalised, not so much in its formal ownership status, but in terms of the forms of its access and control, allowing us to move beyond old dichotomies.

But mega-projects are also on the horizons and bring new challenges. Misicuni, is a consortium of public and private companies that is building a dam higher up in the mountains around Cochabamba and that promises to fill the water deficit of the area. It is a project that has been in the pipelines for some decades now, but that only in the last few years started to move on. There is some controversy surrounding the project, whether a mega project of this scale was really necessary and whether alternatives could not be found. However in general, all the association representatives I have talked to where happy with the promised water availability promised by Misicuni. I was told by one of the Misicuni representatives present at the Fair, that it will be finished by 2012, a date however that raised some eyebrows of incredulity given the past history. I asked Carlos Oropeza, a dirigente of Asica-Sur, if this development would reduce the need for grassroots associations, but he did not seem to be concerned. “Local coop will buy water and distribute it themselves”, he told me. Asica-Sur is apparently already building the deposits and strengthening the infrastructure for local distribution.

Courtesy: author’s blog

A Generalised State of Exception and the Maoists in India

Pothik Ghosh
A shorter version of the article appeared in The Hindustan Times (April 8 2010)

Appearances, as the cliché goes, are often deceptive. The annihilation of 73 Central Reserve Police Force (CRPF) personnel in Dantewada, Chhattisgarh, by combatants of the Maoist People’s Liberation Guerrilla Army has, however, given a new twist to that cliché. The incident, thanks to the phenomenology constructed for it by an ever-increasing number of breathlessly sensationalist television news channels, has become as overwhelming as its visual effect. But before ‘liberal’ middle India allows itself to be overwhelmed by the appearance of the incident and gives in to a sense of outrage served to it by its bad conscience – the tragedy-hungry, bloodthirsty and shrill mass media – it would do well to take a step back from the popular representations of the “massacre” and ponder hard on what lies beyond the vanishing point of those ‘galling images’.

Before the more vocal, patriotic and humane sections of this liberal citizenry begin shouting at the top of their voices that the law of the land, the sovereignty of its state and, therefore, the very idea of democratic India is facing its gravest adversary ever, they would do well to remember how the rule of the law (nomos) is envisaged in modern jurisprudence. Constitutive of a modern and democratic legal regime is its undemocratic exception, something that it bares when the socio-political order it is meant to maintain and enable runs into an existential crisis. This appearance of the undemocratic exception, from the depths of the democratic law where it lies carefully concealed, onto the surface of legal legitimacy entails the suspension of the democratic aspects of the ‘normal’ law. That the Indian Constitution has provisions for the declaration of internal emergency – something the nation actually experienced once as a matter of political and legal fact in the ’70s – under certain conditions shows how the democratic law of a democratic state can suspend itself to legitimately institute its undemocratic exception.

The first and most important thing we must, therefore, grasp is the conditions that lead to the institution of the exception as the norm imply a situation in which usual (‘normal’) forms of mass democratic politics, including electoral politics, cannot be allowed to have an unbridled run without imperiling the system of representative democracy that purportedly make such forms of politics possible and necessary in the first place. The emergence of the exception as the law ensures precisely that by either entirely precluding or significantly eliding rights that allow and/or enable such forms of democratic politics. In such circumstances, electoral politics ceases to be an effective vehicle in carrying forth the voice of the toiling masses and the underclass that are embodied in various identities of either religious/ linguistic/ regional/ gender minorities or socio-occupational marginals.

That, needless to say, compels such social groups, which encounter the law of the Indian state not as an embodiment of democracy but in the form of its undemocratic exception, to look to other not-so legitimate means of politics to express their disaffection and disenfranchisement. That has precisely been the case in large swathes of eastern and central India leading to the emergence of the Maoist path of armed struggle as the only possible form of politics for the agrarian-tribal working masses to articulate their utter lack of agency and their progressive immiseration. It would not, as a matter of fact, be an exaggeration to say the state has enforced an undeclared internal emergency in those areas. It is this that the liberal India must bear in mind before spewing, as is its wont, venom on the Maoists and their social base for not adopting the constitutionally-ordained way of elections and non-violent mass politics to articulate their discontent and having unleashed, instead, an armed campaign that seeks to jeopardise the sovereignty of the democratic Indian state. Our legalist democrats must understand that the state the Maoists challenge is not the state of democratic law but, to borrow Italian legal theorist Giorgio Agamben’s concept, the “generalised state of exception”.

Clearly, the Maoist-dominated areas of eastern and central India, of which Dantewada is a key nerve centre, are in a state of war that, in both the apparent military sense and the structural political-economic one, has been thrust upon the underclass and working strata of the local tribal population on behalf of global capital – of which Indian capital is a significant and powerful part – by the Indian state. This modern capitalist state consists not merely of multiple levels of governmental agency but devolves into the local elite, many of whom belong to the same tribal population from which the Maoists also derive their social base. That, one believes, should take care of the claim that the Maoists comprise an external force that has sowed the seeds of fratricidal conflicts within idyllic tribal communities. The capitalist Indian state, as the example above shows, is as much internal to such stratified tribal communities as the Maoists.

In that context, it might be useful to wonder how such conditions, which necessitate the suspension of democratic law and the institution of its undemocratic exception as an ethico-legal norm, get created in the life of a democratic state. For, only by seeking to answer that question would we arrive at a better understanding of how the political economy of capital, especially in areas under Maoist control, determines the military aspect of the conflict.

The undemocratic exception of the law is the established norm at the moment of the founding of the law of the liberal-democratic state and the capitalist socio-economic formation that such law is meant to facilitate, conserve and reinforce. It is this historical moment of founding of capitalism, when existing instruments of pre-capitalist feudal coercion were deployed to alienate a section of pre-capitalist producers such as peasants and artisans from their means of production, that Marx termed primitive accumulation of capital. This process was meant to be a double-whammy: resources in the form of capital were accumulated even as the dispossessed sections became the workforce that would labour in accordance with the demands, determinations and caprices of capital. The law of the liberal-democratic capitalist state, which allows competition and contention, could not have been the norm in the founding of capitalism and its state as such competition would have meant a direct challenge to the emergence and existence of capitalism as a system. That was precisely the reason why the undemocratic exception was the norm in the founding of capital. And it is this undemocratic exception that returns as the law, even as the ‘normal’ democratic law is suspended, to enable capital to indulge in primitive accumulation as and when that is required of it.

That has precisely been the case in those areas of Maoist influence. Primitive accumulation of capital, as Marx explicated it, is not a one-time historical affair. It recurs with cyclical constancy in and through various moments of stabilised and established capitalism, when those moments run into a crisis of overaccumulation, enabling capital to reconstitute and refound itself to tide over such crises. In such situations, primitive accumulation of capital kicks in, as does the undemocratic exception, to enable the crisis-ridden system to reconstitute itself. Overaccumulation is a moment in the development of capitalism when the value of accumulated capital falls. This spells a considerable weakening of the hegemony of the hierarchised configuration of capitalist class power.

The only way in which capitalism can beat this crisis is by investing in and expanding into relatively less capitalised zones. In a sense, this expansion is akin to the historical founding of capitalism. Thus primitive accumulation of capital must be seen not as the conception of a historical event but as a logico-historical conceptualisation, as indeed it is in Marx’s own theorisation That is precisely what has been happening in ‘Maoist country’ where the executive arms of capital have, through coercive means, been trying to enable capital to beat its current crisis of overaccumulation – of which the international financial crisis is the most visible symptom – by expanding into those areas and occupying them by dispossessing the populations of those less commodified areas of their community-held commons (such as mineral resources, forest produce and land), and even their autonomous means of expression and life, in order to be able to invest.

It is this attempt by capital to reconstitute itself into a stable system once again that has led to the suspension of the democratic laws and invocation of and amendments to constitutional-legal clauses that institute the coercive exception as the legal norm in those areas. The ongoing Maoist insurgency is no more than a response to this generalised state of exception and the political economy it is seeking to rescue and reconstitute.

A Picture of Finance Capital, Or the Income Pyramid under Capitalism

Deepankar Basu, Sanhati

The ideology of neoliberalism: trickle down theory of growth and distribution. The reality a tad different: the gushing up of income and wealth. But, in a manner of speaking, we always knew that this is what neoliberalism was all about; we knew, in other words, that the neoliberal turn of the late 1970s was meant to facilitate the flow of income, wealth and power up the societal pyramid, that it was meant to restore the economic and political clout that “finance capital” had lost during the post World War II period. We knew that it was meant to efficiently pump the economic surplus out of the working people and channel it up the income ladder to the top fraction of the capitalist class. That neoliberalism performed this role even more effectively than expected by its hardest-core champions emerges clearly from recent studies of income and wealth trends of the past few decades.

TOP US INCOMES OVER THE CENTURY

Noted Marxist economists Gerard Dumenil and Dominique Levy have studied the changing patterns of income and wealth under neoliberalism in great detail . [1] Drawing on the extensive research on income and wealth inequality around the world by Emmanuel Saez [2] and Thomas Piketty [3], Dumenil and Levy clearly show: (a) that the neoliberal regime was preceded by falling income shares of the top income groups in the US for an extended period of time, (b) that the so-called neoliberal turn has clearly reversed the trend towards progressive redistribution of income of the post-War years, (c) that the income shares of the top income groups have climbed back up to pre-War levels, and even surpassed them, and (d) that ownership of the productive resources of society remains as skewed as before making claims of the development of middle-class capitalism in the U.S. totally baseless.

Below, we reproduce some of the striking trends that Dumenil and Levy’s presented in their article in the New Left Review (Volume 30, November-December, 2004) and also extend the analysis to the year 2007 (by using an extended data set that Saez and Piketty has made publicly available). [4] The picture that emerges from such an analysis clearly show that the trends identified by Dumenil and Levy (2004) have continued operating unhindered right until the end of 2007, i.e., right till the onset of the Great Contraction of 2008. Did the current crisis have anything to do with this worsening distribution of income in society? Will the Great Contraction turn into the Great Depression of the 21st century? Will the current crisis unleash progressive social forces that will reverse the horrific neoliberal income trends? Will the working class regain its social and political strength? These are important and interesting questions, but I do not wish to address them in this article.

Let us instead study the evolution of income distribution in some detail. Chart 1 presents data relating to the shares of total income going to various “top” income earning groups in the U.S. for the period 1917-2007. Even a cursory glance reveals the most striking feature shared by all the graphs, their U-like shapes. The U-shape implies the following: the share of total income garnered by the “top” group was historically high in the 1930s (the pinnacle of the original liberal era of capitalism); the share steadily declined after the second World War, through the “Golden Age of Capitalism” (because of the struggle of the working class); the trend reversed course around the late 1970s (with the onset of the neoliberal counter-revolution), and steadily gained lost ground in the next three decades. This general feature is true of all the graphs and is the remarkable feature about income distribution that emerges from all serious studies.

The first graph on the left-top of Chart 1 displays the share of income going to the top 10 per cent of income earners in the U.S. Towards the end of the 1920s, the share of the top 10 percent had nudged 50 per cent (from below); it recovered that level by 2006. The top 10 per cent of the population takes half of all the income created during any year; isn’t that remarkable? Well, that is (neo) liberal capitalism.

The second graph of Chart 1, the one on the right-top, displays the share of income going to the group of income earners running from the top 5 to the top 1 per cent of the population. Much like the top 10 percent, their income fell through the Golden Age and then started the ascent in the neoliberal era, without as yet reaching the historically high levels in the late 1920s.

dip1.png

CHART 1

The third graph at the bottom-left of Chart 1 displays the share of income going to the top 1 percent of the U.S. population. Quite astonishingly, they get more than a fifth of all the income generated in society now: just a nice throwback to the glorious late-1920s, they would point out. Thus, in 1928, the top 1 per cent of the income earners in the U.S. got about 24 per cent of the total income; in 2006, the top 1 per cent of the population was once again receiving about the same share: 24 per cent of the total income generated in the economy.

What about the scenario at the very top, the top of the top so to say? The fourth graph in Chart 1, the one at the bottom-right, provides some clues. As can be seen, the share of income garnered by the top 0.01 per cent of the income earners was about 5 per cent of the total income during the 1920s; that figure had already been reached by the end of the 1990s. The dip in the share at the end of the 2000 is a reflection of the bursting of the dot-com bubble and the ensuing short recession in the early parts of 2001. They got their act together pretty quickly, and the share of total income going to this group rapidly climbed up in the “boom” of the 2000s, surpassing the figure for the heyday of liberal capitalism. In 1928, the top 0.01 per cent of the income earners in the U.S. garnered about 5 per cent of the total income; by 2006 their share of total income was back at that level: 6.04 per cent. Neoliberalism triumphs liberalism!

What do we take away from these striking graphs? I would suggest the following three. First, we can safely make the claim that income and wealth are awfully concentrated in capitalism; a capitalism that caters to the middle class is a myth. To understand the import of this simple proposition recall that the mainstream media never tires of portraying the U.S. economy as a haven for the middle class, where anyone, even Joe the Plumber, can easily climb up the economic ladder with grit, determination and hard work; or, so the story goes. Aggregate trends in the distribution of income over the last three decades that have been presented in Chart 1 clearly makes nonsense of this oft-repeated fairy tale.

Second, the concentration of wealth and income under capitalism is nothing new; it is rather the normal state of affairs in capitalism, as the data for the last 90 years show. When one takes a long and historical view, the so-called Golden Age of capitalism, based on the compromise between capital and labour, and buttressed by re-distributive policies of a welfare state, seems to be the exception rather than the rule. The workings of welfare state capitalism quickly led to the creation of a situation, endogenous it must be remembered, that militated against the core principles and institutional features of welfare state capitalism.

And third, that the concentration of income, wealth and power keeps increasing as we move up the income pyramid, so that the buck really stops at the top. What about the very top of the top of the top? Well, let us see.

TOP OF THE TOP

Tucked away in an obscure corner of the business section of the New York Times on February 18, 2010 is a small article with some very striking facts relating to the important issues of income, class and power in the U.S. that we have been discussing. [5] The article discusses interesting facts relating to income and taxation of the top 400 income earning families in the U.S., the families sitting on the very top of the income and wealth pyramid in the U.S. Data about the earnings of the top 400 families, based on tax return information, was first made public by the Clinton Administration. Much along expected lines, the Bush Administration cut off access to this report, the so-called “top 400 report”; the Obama Administration has again made it public. [6]

Writing on Tax.com, a Web site run by Tax Analysts, David Cay Johnston provides a wealth of information about the top 400 families that might be worth looking at carefully; the NY Times report drew on Johnston’s article, and we will also use data that he has made available on-line along with his article. [7]

Here are some facts to get started with. Average annual income of the top 400 income-earning families was $131.1 million in 2001; it had more than doubled within the next 6 years, reaching $345 million in 2007. That was a whopping 17.5 per cent annual compound rate of growth over that 6 year period. In 2007, the total income of the top 400 families was $138 billion, rising from $105.3 billion a year ago. Adjusted for inflation, the top 400 families witnessed a 27 per cent increase in their income between 2006 and 2007; the bottom 90 per cent of U.S. families saw their income rise by a mere 3 per cent during the same period. If we go back a little further we see the divergence taking shape more clearly. Between 1992 and 2007, the real income of the bottom 90 per cent of the U.S. families increased by 13 per cent; during the same period, the real incomes of the top 400 increased by 399 per cent.

To put these numbers into some perspective, let us compare the incomes of the top 400 U.S. families with some figures for the whole U.S. economy. Median real income, i.e., income adjusted for inflation, for U.S. families in 2007 was $52,163. According to the U.S. Census Bureau, 37.3 million persons were below the poverty line in 2007 (i.e., about 12.7 per cent of the population was deemed “poor”), where the poverty line was defined (in 2008) as follows: it was $22,025 for a family of four; for a family of three, it was $17,163; for a family of two, $14,051; and for unrelated individuals, $10,991. While the incomes of the top 400 families increased to astronomical amounts, there were 45.7 million people without health insurance coverage in the U.S. in 2007. [8]

To make the comparison a little more systematic and to get an idea of the true nature of the income generation process under neoliberalism, we have summarized some data in Chart 2. [9] The graph on the top-left in Chart 2 plots the inflation adjusted average income of the top 400 U.S. income-earning families from 1992 to 2007. Average real income increased from $71.6 million in 1992 to $356.7 million in 2007, a 399 per cent increase over the 15 year period, which translates into a real income increase of $285.2 million.

The graph on the top-right of Chart 2 plots the ratio of the average income of the top 400 families and the average income of the bottom 90 percent of U.S. families (arranged in terms of household income). In 1992, the ratio was 2419; in 2007, it had become 10634. Think about these numbers again. In 1992, the average income of the top 400 U.S. families was 2419 times the average income of the bottom 90 per cent; in the next 15 years, that ratio had seen a more than 4 fold increase. That is neoliberalism in a nutshell.

The next graph, the one on the bottom-left of Chart 2 plots the share of total income (what the IRS calls the adjusted gross income) that went to the top 400 families. In 1992, the figure was 0.52 per cent; by 2007, it had increased to 1.59 per cent. Now think about that again. During the period under consideration, the U.S. economy had about 105 million households; thus in 2007, the top 400 out of these 105 million households were getting 1.59 dollars for every 100 dollars generated in the economy. (If you divide 400 by 105 million, you get a 0.0000038!)

The last graph, the one on the bottom-right of Chart 2, shows the policy response of the U.S. governments to this rising inequality. What should the state do when faced with this enormous concentration of wealth at the very top of the income pyramid? Why, aid that process. Effective tax rates for the top 400 families saw a remarkable secular decline over this 15 year period, starting at 26 per cent in 1992 and falling to about 17 per cent by 2007. So, as the incomes started flowing up, tax rates started going down. Result: disposable real income, i.e., after-tax real income, of the top 400 U.S. families shot through the roof.

dip2.png

CHART 2

EVOLUTION OF WAGE INCOME

How did this huge income inequality get built up? The simple answer: neoliberal counter-revolution. The whole institutional set-up and policy framework that characterized the so-called Golden Age of capitalism was the result of the class struggle of labour against capital; the power of the working class had managed to institute policies that resulted in the re-distribution of income away from capital and towards labour. The neoliberal counter-revolution reversed this historical trend and got the re-distribution to start working the other way round: move income away from labour and towards property owners and the top wage-earners (managers, technocrats, CEOs, etc.). Probably nothing demonstrates this better than the evolution of wage income, i.e., the income of the working people in the U.S. over the last few decades. Let us take a look.

Chart 3 presents some relevant data on wage income. The first graph in Chart 3, the top-left graph, plots the time series of the average annual real wage in the US economy for the period 1970 to 2005. Average annual real wage is computed from the National Income and Product Account data as the ratio of total wages and salaries and the number of full-time employees; to take account of inflation over the years, the wage has been expressed in 2006 prices. [12] The average annual wage, as shown in the graph, increased from about $38,000 (2006 $) to $47,670 (2006 $). So, did workers really increase their average incomes during the last three decades? The answer is no.

The picture presented in the graph is misleading. The average annual wage in the graph has been computed by including the wages and salaries not only of production workers but also of supervisory workers and managers and CEOs. The “wages and salaries” that accrue to the latter category of “workers” cannot be considered wages in the strict sense of the word; this income comes out of the economic surplus created by production workers. Thus, from a societal viewpoint, income of managers, bureaucrats, CEOs and other such employees are a deduction out of the the total social surplus. Hence, to get a better and more accurate picture of the evolution of what would normally be called wage income, we need to look at the wages of production workers. [13]

The second graph in Chart 3, the top-right graph, plots the time series of weekly real wages of production and non-supervisory workers in the nonfarm business sector of the US economy for the period 1964 to 2009. This data – relating to the production workers in mining, logging and manufacturing, construction workers in construction and non-supervisory workers in the service sector – is taken from the website of the U.S. Bureau of Labour Statistics and is expressed in 1982 prices to remove the effect of price increases (i.e., has been deflated by the consumer price index for all urban consumers with a base year of 1982). Here, we see a remarkable trend, a trend that really explains the secret of neoliberalism: real weekly wages of production and non-supervisory workers fell between 1964 and 2009. True, there was a slight recovery starting from the mid-1990s, but that has not managed to take the real wage back to the level of 1964, let alone the higher level of the early 1970s. Real weekly wages in 1964 was about $314 (1982 $); in 2009, it was about $287 (1982 $). Moreover it is clear that the recovery that had started in the mid-1990s will be pretty difficult to sustain in the midst of the deepest recession since the Great Depression.

Thus, the upward movement of average annual real wages that is depicted in the first graph of Chart 3 is really driven by increases of the “wages and salaries” of non-production and supervisory “workers”, the fraction of the working or middle class that derives its income as a deduction from the surplus value generated by production workers. This would imply a growing inequality even among the ranks of the wage earners.

And that is precisely what is depicted in the third and fourth graph in Chart 3, the bottom-left and bottom-right graphs. Let us look at them one at a time. The bottom-left graph plots the ratio of two quantities: (a) the average annual real pay of the top 100 CEOs in the Forbes survey of the top 800 CEOs (in terms of pay), and (b) the average annual real wage in the U.S. economy (the data that has been plotted in the top-left graph in Chart 3). [14] In 1970, the ratio was about 39; in 2005, it was about 768, coming by way of 1043 in 1999. Thus, in 1970, the average income of the top 100 CEOs was only about 39 times the average annual wage in the economy; in 1999, the average annual income of the top 100 CEOs had become 1043 times the average annual wage in the economy!

The bottom-right graph plots the average real pay of the rank 10 CEO (in 2006$), i.e., the pay of the 10th CEO from the top when all CEOs are ranked according to their incomes. The real pay of the rank 10 CEO in 1970 was about $1.87 million (2006$); in 2005, the corresponding figure was $73.24 million (2006$), having climbed down from an astronomical $109 million (2006$) in 1999. That is more than a 50 fold increase in 19 years!

dip3.png

CHART 3

Thus, neoliberalism not only increased the share of property income (in aggregate national income) but also increased the share of income that accrues to the hangers-on of capitalism, the managers, the supervisors, the technocrats, the bureaucrats, in short the class of people who oversee and facilitate the extraction of surplus value from the working class, and contribute to the reproduction of capitalist relations of production.

How did this impact on the working class and the macro economy? Since real wages were stagnant or even falling, the working class that had become used to increasing consumption levels over previous decades had to be fed with an ever exploding mountain of debt. First the dot-com bubble and then the housing bubble partly facilitated this process. The growing debt kept consumption levels of the working class growing even, but only at the cost of increasing the financial fragility of the macro economy. When the housing bubble burst towards the end of 2006, that started off the financial crisis.

(I would like to thank Debarshi Das, Panayiotis T. Manolakos and Sirisha Naidu for very helpful comments on an earlier draft of the article. The usual disclaimers apply.)

REFERENCES

[1] http://www.jourdan.ens.fr/levy/dle2004t.pdf

[2] http://elsa.berkeley.edu/~saez/

[3] http://jourdan.ens.fr/piketty/indexeng.php

[4] The data is available on the website of Emmanuel Saez: http://elsa.berkeley.edu/~saez/

[5] http://www.nytimes.com/2010/02/18/business/economy/18irs.html?ref=business

[6] http://tax.com/taxcom/features.nsf/Articles/0DEC0EAA7E4D7A2B852576CD00714692?OpenDocument

[7] http://tax.com/taxcom/features.nsf/Articles/0DEC0EAA7E4D7A2B852576CD00714692?OpenDocument

[8] http://www.census.gov/Press-Release/www/releases/archives/income_wealth/014227.html

[9] Data used to construct the graphs in Chart 2 comes from David Cay Johnston’s summary of IRS Statistics of Income data and is available on-line at: http://tax.com/taxcom/features.nsf/Articles/0DEC0EAA7E4D7A2B852576CD00714692?OpenDocument

[10] http://www.dollarsandsense.org/archives/2009/0509keeler.html

[11] Dumenil, G. and D. Levy. 2004. Capital Resurgent: Roots of the Neoliberal Revolution. Harvard University Press.

[12] This data is from Saez and Piketty.

[13] Production workers, as we have used the term here, is related to though not strictly equivalent to what is referred to as “productive workers” in Marxian political economy

[14] Average annual wages are in 2006$ and average CEO pay is in 2006$; hence, the exact ratios might a little off the mark though the trend will certainly be fairly accurate.

Kobad Ghandy on “Sugar’s Bitter Policies”

MAINSTREAM, VOL XLVIII, NO 8, FEBRUARY 13, 2010

The following article on the present rise in prices of sugar has been written by Kobad Ghandy, the CPI (Maoist) leader now lodged in Ward No. 8 of Tihar Jail No. 3. Though suffering from prostrate cancer and incarcerated in prison he retains an alert mind as is reflected in the following article sent specially for publication in this journal (Mainstream).

At Rs 50 per kg sugar prices have never been so high. With sugar prices soaring, prices of all sugar linked products—sweets, mithais, tea etc.—have also sky-rocketed. Not only will festivals for most become a drab affair, children’s wailing for the little sweet or toffee will get louder. At the rate at which sugar prices have been rising it will be out of reach of many a poor and middle-class life.

One would have thought, given the free-market mantra of the rulers, that high sugar prices would at least convert into higher prices for the producers—the fifty million sugarcane farmers. But that was not to be; the so-called free market functions only to benefit big business, traders and politicians. In this case both the producers and consumers are being crushed by the cane and sugar pricing policies of the government dictated by the millers and international sugar cartels.

It is indeed a policy that has resulted in windfall profits for a few at the cost of millions of farmers and crores of consumers. And the solution being suggested—huge duty free imports—will help no one except the importers, the foreign traders and the bureaucrats/politicians who will get their commissions on each order. The entire people of our country are made to suffer so that a few may make fortunes. This is indeed tragic.

And while the entire people suffer the politics of sugar is diverting the entire issue with the Central and UP governments throwing the blame on each other.

Farmers being Crushed

In October last year the Ministry of Consumer Affairs (Food and Public Distribution) changed the pricing regime for sugarcane and introduced a Fair and Remunerative Price (FRP) mechanism, replacing the Statutory Minimum Price (SMP) system that was prevailing till then. Soon after passing the ordinance the Central Government declared an FRP to the millers to purchase sugarcane at Rs 130 per quintal, when, according to the NAFA (National Alliance of Farmers’ Association), the input cost of one quintal of sugarcane is roughly Rs 233.5 per quintal. This FRP therefore amounts to a massive loss to the farmer.

Immediately after the announcement, farmers (from UP) took to the streets stopping rail and road traffic. They marched to Parliament. They seized trains that sought to bring imported raw sugar and prevented them from reaching the mills. Some took the extreme step of self-immolation. Others burnt their crop. With the rabi season approaching many resorted to distress sales, selling their crop to local gur manufacturers at Rs 155 per quintal. Under pressure from the farmers the UP Government banned the import of raw sugar.

According to the new order, the FRP shall be fixed by the Central Government from time to time. It also specified that any other authority fixing a price for the crop above the FRP would have to bear the difference. (The latter point was retracted after the farmers’ march to Parliament.) The practice so far was for States such as UP, Tamil Nadu, Punjab and Haryana to declare the State Advised Price (SAP) that mills are required to pay farmers. This was usually higher than the SMP which was announced by the Central Government on the basis of the cost of cultivation estimated by the Commission for Agricultural Costs and Prices (CACP).

As it is, for a number of years, sugarcane growers have been squeezed by the low prices paid by the millers and the spiralling input costs. This has led even to many suicides of sugarcane farmers who had at one time earned a good amount for the crop. In fact in the four years from 2004-05 to 2008-09 the SMP for sugarcane barely rose from Rs 79 per quintal to Rs 81 per quintal while input costs increased phenomenally. In addition, the millers cheat the farmers in varied ways—weighing, recovery rate etc. So it is not surprising that sugar production dropped drastically from 27.8 million tonnes in 2007-08 to 16 million tonnes last year. In the coming year production is not likely to be more than 15 million tonnes.

The government did not create a buffer stock in 2006-07 and 2007-08 when production was at its peak. In 2006 when international prices were high (Rs 20,680 per tonne) and local prices were low (Rs 13,000 per tonne) the government banned exports. At that time due to large stocks and ban of exports the millers harassed the farmers paying them late. In 2007-08 when international prices crashed to Rs 13,000 per tonne the government exported 68 lakh tonnes of sugar even though sugar production was dropping. Later when there was shortage the government imported sugar at Rs 10-35 per kg.

It is these shortsighted policies of the government which have played havoc with the lives of the sugarcane farmers. In its report for 2008-09 the CACP warned the government that unless it raised the SMP for sugarcane the net area under the crop would continue to fall. But the government could not be bothered. They expect the millers will import raw sugar and continue to make money. The area under sugarcane cultivation dropped from 4.38 million hectares last year to 4.21 million hectares—that is, a drop of about 1.5 lakh hectares in just one year. Farmers are shifting away from sugarcane cultivation.

Consumers Robbed

Sugar prices have tripled in the last one year from Rs 17 per kg a year back to Rs 50 today. In just the last four months it has risen by over 40 per cent from Rs 32 per kg. Notwithstanding the claims of the Agriculture Minister, sugar prices are unlikely to drop. When production is estimated at a mere 15 million tonnes and consumption at 23 million tonnes without a single kg of buffer stock (compared to 10 MT at the beginning of last year), the price will be determined by the cost of imports. Given the shortfall, a minimum of eight million tonnes will have to be imported.

The raw sugar import cost to the miller will not be less than Rs 38 per kg. With such high costs, what the consumer has to pay is not likely to be below Rs 50 per kg. And with India entering the international market with huge purchases, the international prices are only likely to go up—expected to be up to Rs 70 per kg.

The question that arises is that when the millers are paying Rs 13 per kg to the farmer (FRP rate with recovery at 10 per cent) why should sugar be so expensive? Even if we calculate that for every kg of sugar produced the transportation and processing charges come to Rs 5, the cost of production would be a maximum of Rs 18 per kg. If we add another one-third as profit the selling price comes to Rs 24. Then if we count the wholesaler’s/ retailer’s profit sugar should not cross a maximum figure of Rs 30 per kg. Then why Rs 50? Even if they give the sugarcane grower the rate that is remunerative—say, Rs 23 per kg or Rs 230 per quintal for sugarcane—the maximum price to the consumer will come to Rs 40 per kg. This would be still less than the cost of imported sugar or raw sugar.

So there is no reason for sugar prices to sky-rocket as millers continue to pay a price lower than the remunerative price. Though this may vary from State to State the plight of the farmer in the two main sugarcane growing States—UP and Maharashtra—is pathetic. In Maharashtra, sugar mills are cooperatives dominated and controlled by powerful politicians like Sharad Pawar. In Maharashtra, every farmer is tied to a particular cooperative mill and is not free to sell it to any other. So they are at the mercy of the cooperative bosses who keep the prices of sugarcane low. In UP many mills are owned by big business houses like Birla, Bajaj etc.

Depending on imports is no solution to the sugar problem—whether shortage or high prices. The only solution must be to promote sugarcane production by investing in agriculture and subsidising the farmer. In this way not only would the farmer and rural economy flourish, the consumer too would get sugar at a reliable price.

Need for a Pro-active Agrarian Policy

With nine lakh tonnes of imported sugar stuck at the ports since the last month due to the UP Government’s ban on processing it, the Centre has been blaming the Mayawati Government for the high sugar prices. The Mayawati Government, on the other hand, instead of announcing a high SAP, has clamped cases on the millers under the Essential Commodities Act in order to share the booty made by them. The plight of the millions of sugarcane farmers and crores of consumers is not on the mind either of the Congress or the BSP. They are interested in only extracting their share of the windfall profits being made by the millers, cooperatives, big traders and hoarders.

The only policy that would benefit both the producer and consumer is for the government to invest heavily in agriculture and subsidise sugarcane production. Sugarcane production requires large quantities of water, so irrigation projects should be its first focus. Unfortunately the government has systematically been cutting investment in agriculture. Rural development expenditure of the government averaged 14.5 per cent of the GDP in the 1985-90 period. This dropped to eight per cent in the early 1990s and since 1998 it has dropped even further to a mere 5.6 per cent of the GDP. In real terms, there has been a reduction of about Rs 30,000 crores annually in development expenditures on average in the first five years of this century compared to the pre-reform period.

When investment in agriculture should be increasing as it is there that the bulk of our population live, the above figures indicate a massive reduction with disastrous consequences. Rather than become dependent on imports and thereby compromise the food security of the country, the government needs to invest heavily in agriculture (with focus on irrigation) to boost the production of sugarcane and other crops.

To solve the sugar/sugarcane problem the government needs to increase investment in irrigation, subsidise input cost (fertiliser, pesticide, electricity) and ensure a remunerative price is paid to the farmer. To maintain consumer prices it should put a halt on the profiteering, hoarding and illegal methods of the millers and subsidise sugar particularly for the poor. If the government can announce a massive bail-out to the three-to-four oil companies and Air India, why does it shy away from bailing-out 50 million farmers and a few crore masses? The amounts being suggested to the three-to-four oil companies and Air India run up to Rs 20,000 crores, a lesser amount would be needed for the millions of sugarcane farmers.

‘The Four Rs’ of global capitalism

Michael A. Lebowitz, Links: International Journal of Socialist Renewal

February 19, 2010 — Correo del Orinoco — In Venezuela, people know what the 3Rs stand for: revise, rectify and re-impulse. Like Karl Marx, who stressed that the revolution advances by criticising itself, President Hugo Chavez has argued that it is necessary to recognise errors and to go beyond them in order to advance.

But who knows what the four Rs of global capitalism are? At the recent meeting in Davos, Switzerland, of the wheelers and dealers of global capitalism, the conference theme was “Rethink, Redesign, Rebuild — Improve the State of the World”. But what did they do? Although we don’t know what happened in their dinner meetings (which, as Adam Smith wisely observed, inevitably end up in a conspiracy against the public), there doesn’t appear to be much sign that they improved the state of the world. Of course, there was never a question that these corporate giants and their faithful servants would rethink the logic of capital — a logic of exploitation, expansion of capital, unending generation of needs and consumerism, and the destruction of what Marx called the original sources of wealth, human beings and nature. How could they? But did they redesign and rebuild in order to improve the state of the world for capital?

Not noticeably. However, that doesn’t mean they have not already been advancing on their real 3Rs. To improve the state of world capitalism, Reverse has become a major theme — especially in the western hemisphere. Given the growing rejection of neoliberalism and global capitalism that has been occurring in Latin America, given the inroads that have been made by a new conception of national sovereignty, international solidarity and socialism for the 21st century, capital sees the need to reverse those advances. Honduras, the Colombian military bases, subversion in Paraguay, Ecuador, Bolivia and Venezuela — all this is capital’s effort to improve the state of its world.

Of course, as we know, global capitalism has had its problems lately — the economic crisis, which is the result of a long process of overaccumulation. And so, it is indeed engaged in a process of redesigning or, rather, Restructuring. It is important to recognise that a crisis in capitalism is not the same as a crisis of capitalism. For a crisis in capitalism to become a crisis of capitalism, you need actors who are prepared to put an end to capitalism. There is, though, no sign of that in the immediate future. And so, like before, capital will proceed to restructure itself. After the depression of the 1930s, capital restructured itself internationally through the Bretton Woods agreements that created the International Monetary Fund and the World Bank. We can already see a similar attempt underway with the shift from the G7 to the G20 — in other words, the incorporation of new emerging capitalist powers such as the BRICs (Brazil, Russia, India and China). And, international capital clearly hopes that through this process of restructuring in which it brings the new important capitalist actors to the head table for international discussions, it will be able to resume its process of growth in accordance with the logic of capital. Reverse, Restructure and Resume — these are the 3Rs that global capitalism wants.

However, there is a fourth R of global capitalism. The very solution to the crisis that capital introduces — that restructuring which brings the emerging capitalist countries to the central committee — implies the right of the latter to be full members, i.e., to achieve levels of consumption and economic development equal to the present levels of the North. Yet we know that the world’s resources and the Earth itself cannot possibly sustain this. And in this situation of true scarcity, how can capitalism solve this?

Capitalism, after all, is a system in which all capitals are trying to expand as much as possible. However, it is not a system in which all its members march in unison; and, as Lenin explained in relationship to World War I, the combination of uneven rates of development and scarcity is a major source of conflict among capitalist countries. In this situation, the new emerging powers want the fourth R– Redivision. Redivision of resources, redivision of industrialisation, redivision of the right to emit carbon — the struggle is on. It is a struggle over access by capital to scarce resources, energy, water and food.

Clearly, in this world of immense inequality, exclusion and starvation, redivision is necessary if we are ever to realise the ideal embodied in the Bolivarian Constitution of Venezuela of the importance of ensuring the overall human development of all people. We want a world, a socialist world, in which (as Marx and Engels stressed) “the free development of each is the condition for the free development of all”. But, capitalist redivision is a process of struggle over the right to exploit. It is a struggle not only among capitals but also against the exploited and excluded of the world.

Who would doubt that this struggle will become more intense as the logic of unremitting capitalist expansion comes up against the reality of natural limits? The slogan writers for Davos were right. We do need to “Rethink, Redesign, Rebuild — Improve the State of the World”. And, we need to redivide, too — to create a world without capitalism. As Fidel Castro and Hugo Chavez continue to remind us, humanity is faced with a critical choice — socialism or barbarism?

[This article first appeared in the February 19, 2010, issue of Correo del Orinoco, the new weekly English-language newspaper published in Venezuela.]

Proletariat, a dangerous idea: Class struggle in Journalism

Pratyush Chandra

Last week, India’s “wall street journal”, Mint, brought out an interesting editorial entitled, Proletariat, a misleading idea (posted on December 29). In the editorial of a business newspaper meant for stockmarketeers and businessmen, what else do you expect on a conceptual matter? First it will trivialise the concept, mostly because of the authors’ ignorance, but sometimes for conscious propaganda too.

In the editorial a historical snapshot of the usage of the term, “proletariat”, is presented – underdog (during the industrial revolution), obsolete (due to Western welfarism), buried (after the cold war), renewal (during the recent “upswing in industrial unrest”). Ultimately, the argument is simple that the workers’ problems must not be posed as matters of class struggle (“conflict between managements and labour”), rather they should be left entirely to free market “competition between firms” with full freedom to hire and fire, which will eventually resolve everything. And also don’t talk about “rights” because they politicise the workplace, obstructing a free competition between firms. Don’t talk of unionisation – let the bosses continue to scramble freely for golden pie in market growth, and you wait open mouthed for flying crumbs to fall. That’s the message.

This message is understandable, but I was still surprised why such an urgency to call “proletariat, a misleading idea” – does it really need an editorial to be devoted upon? Casually, I continued browsing Mint‘s website for other pieces on labour matters, and I found out the reason. There was an elaborate report on the labour unrest in the auto industry which was posted the previous day (December 28): The rise of the new proletariat“. It provides a decent backgrounder (decent in comparison to other news reports on labour issues) on the recent industrial unrest in India. In fact, Maitreyee Handique’s (the reporter) has been sensitively presenting the labour side of industrial relations in India. She quotes a Trade Union leader in this particular report:

“Today, my boys are educated. They know how to use computers. They are not going to (sit by) and watch exploitation”.

So these “boys” constitute the “new proletariat”!

Further,

So what’s different about this wave of trade union activity? Timing. It comes as the world is emerging from a financial crisis that marks an inflection point in its industrial development. As the world’s fastest-growing economy after China—and one that sailed through the economic crisis relatively unscathed—India is poised to become one of the powerhouses that pulls everybody else out of the trough.

Take India’s automobile sector—it’s helping to define the future of the global car industry by churning out the low-priced models that are propelling growth as markets elsewhere lose steam. It’s also one of the key fronts on which workers are fighting companies, which explains why the stakes are so high.

And more,

In other nations, such as Malaysia, contract workers are actually paid more because they don’t have job security, said C.S. Venkataratnam, director at the International Management Institute in New Delhi.
“Here (in India), the typical argument is that workers are not qualified,” he said. “In India, we do not pay premium, but discounted wages, for quality.”

Workers say lopsided numbers at many companies – a small regular workforce dwarfed by a larger group of contract hires that’s being constantly retrenched and replenished – render it impossible to register demands and make management responsive.

However, the reporter is determined not to take sides and end the report with an employer’s view:

Kapur said the trouble at the factory was “politically motivated by outside influences”, without elaborating. He accused the unions of trying to create an atmosphere in which industry wouldn’t be able to survive, saying that this had already happened in the two states where the communists are holding power.

“Kolkata and Kerala don’t have industries, and now it’s starting in Gurgaon,” Kapur said.

Despite this balancing between the perspectives of labour and capital in the report, it seems the title “The Rise of the New Proletariat” was quite chilling for the business community, and the very next day the editors, who sensed this, felt the need to target the very two issues that the above report brought out:

“the disparity in wages between contract and permanent employees and difficulties in forming unions at workplaces.”

And they found India’s new chief economic advisor, Kaushik Basu’s statement authoritative enough to correct the damage done.

Further, Mint in the end had to assure its readers:

“Today, the nature of work in modern economies is very different from what it was in the Victorian age. Many workers in the same firm don’t even work together. The idea of a proletariat rests on shared experiences at a workplace. That is a fiction even in assembly line manufacturing today. A gentle draught of economic reason is enough to evaporate a politically evocative expression.”

It seems that the very Idea of Proletariat is dangerous, it smacks of class struggle, it (mis)leads workers to unrest leaving the capitalists distraught.

Ethiopian farms lure Bangalore-based Karuturi Global Ltd. as Workers Live in Poverty

Jason Lutes, Bloomberg

Until last year, people in the Ethiopian settlement of Elliah earned a living by farming their land and fishing. Now, they are employees.

Dozens of women and children pack dirt into bags for palm seedlings along the banks of the Baro River, seedlings whose oil will be exported to India and China. They work for Bangalore-based Karuturi Global Ltd., which is leasing 300,000 hectares (741,000 acres) of local land, an area larger than Luxembourg.

The jobs pay less than the World Bank’s $1.25-per-day poverty threshold, even as the project has the potential to enrich international investors with annual earnings that the company expects to exceed $100 million by 2013.

“My business is the third wave of outsourcing,” Sai Ramakrishna Karuturi, the 44-year-old managing director of Karuturi Global, said at the company’s dusty office in the western town of Gambella. “Everyone is investing in China for manufacturing; everyone is investing in India for services. Everybody needs to invest in Africa for food.”

Companies and governments are buying or leasing African land after cereals prices almost tripled in the three years ended April 2008. Ghana, Madagascar, Mali and Ethiopia alone have approved 1.4 million hectares of land allocations to foreign investors since 2004, according to the International Institute for Environment and Development in London.

Emergent Asset Management Ltd.’s African Agricultural Land Fund opened last year. On Nov. 23, Moscow-based Pharos Financial Advisors Ltd. and Dubai-based Miro Asset Management Ltd. announced the creation of a $350 million private equity fund to invest in agriculture in developing countries.

‘Last Frontier’

“African agricultural land is cheap relative to similar land elsewhere; it is probably the last frontier,” said Paul Christie, marketing director at Emergent Asset Management in London. The hedge fund manager has farm holdings in South Africa, Mozambique and Zimbabwe.

“I am amazed it has taken this long for people to realize the opportunities of investing in African agriculture,” Christie said.

Monsoon Capital of Bethesda, Maryland, and Boston-based Sandstone Capital are among the shareholders of Karuturi Global, Karuturi said. The company is also the world’s largest producer of roses, with flower farms in India, Kenya and Ethiopia.

One advantage to starting a plantation 50 kilometers (31 miles) from the border with war-torn Southern Sudan and a four-day drive to the nearest port: The land is free. Under the agreement with Ethiopia’s government, Karuturi pays no rent for the land for the first six years. After that, it will pay 15 birr (U.S. $1.18) per hectare per year for the next 84 years.

More Elsewhere

Land of similar quality in Malaysia and Indonesia would cost about $350 per hectare per year, and tracts of that size aren’t available in Karuturi Global’s native India, Karuturi said.

Labor costs of less than $50 a month per worker and duty-free treaties with China and India also attracted Karuturi Global, he said. The $100 million projected annual profit will come from the export of food crops, including corn, rice and palm oil, he said. The company also is plowing land on a 10,900- hectare spread near the central Ethiopian town of Bako.

The project will give the government revenue from corporate income taxes and from future leases, as well as from job creation, said Omod Obang Olom, president of Ethiopia’s Gambella region and an ally of Prime Minister Meles Zenawi’s ruling party.

“This strategy will build up capitalism,” he said in an interview in Gambella. “The message I want to convey is there is room for any investor. We have very fertile land, there is good labor here, we can support them.” The government plans to allot 3 million hectares, or about 4 percent of its arable land, to foreign investors over the next three years.

Surprised Workers

Workers in Elliah say they weren’t consulted on the deal to lease land around the village, and that not much of the money is trickling down.

At a Karuturi site 20 kilometers from Elliah, more than a dozen tractors clear newly burned savannah for a corn crop to be planted in June. Omeud Obank, 50, guards the site 24 hours a day, six days a week. The job helps support his family of 10 on a salary of 600 birr per month, more than the 450 birr he earned monthly as a soldier in the Ethiopian army.

Obank said it isn’t enough to adequately feed and clothe his family.

“These Indians do not have any humanity,” he said, speaking of his employers. “Just because we are poor it doesn’t make us less human.”

One Meal

Obang Moe, a 13-year-old who earns 10 birr per day working part-time in a nursery with 105,000 palm seedlings, calls her work “a tough job.” While the cash income supplements her family’s income from their corn plot, she said that many days they still only have enough food for one meal.

The fact that the project is based on a wage level below the World Bank’s poverty limit is “quite remarkable,” said Lorenzo Cotula, a researcher with the London-based IIED.

Large-scale export-oriented plantations may keep farmers from accessing productive resources in countries such as Ethiopia, where 13.7 million people depend on foreign food aid, according to a June report by Olivier De Schutter, the United Nations special rapporteur on the right to food. It called for ensuring that revenue from land contracts be “sufficient to procure food in volumes equivalent to those which are produced
for exports.”

Karuturi said his company pays its workers at least Ethiopia’s minimum wage of 8 birr, and abides by Ethiopia’s labor and environmental laws.

‘Easily Exploitable’

“We have to be very, very cognizant of the fact that we are dealing with people who are easily exploitable,” he said, adding that the company will create up to 20,000 jobs and has plans to build a hospital, a cinema, a school and a day-care center in the settlement. “We’re going to have a very healthy township that we will build. We are creating jobs where there were none.”

The project may help cover part of the $44 billion a year that the UN Food and Agriculture Organization says must be invested in agriculture in poor nations to halve the number of the world’s hungry people by 2015.

“We keep saying the big problem is, you need investment in African agriculture; well here are a load of guys who for whatever reason want to invest,” David Hallam, deputy director of the FAO’s trade and markets division, said in an interview in Rome. “So the question is, is it possible to sort of steer it toward forms of investment that are going to be beneficial?”

Buntin Buli, a 21-year-old supervisor at the nursery who earns 600 birr a month, said he hopes Karuturi will use some of its earnings to improve working conditions and provide housing and food.

“Otherwise we would have been better off working on our own lands,” he said. “This is a society that has been very primitive. We want development.”