These are notes taken by Audrey Chan from Professor Prabhat Patnaik’s talk at the Socialism 2023 conference, which took place in the KL Selangor Chinese Assembly Hall on the 2nd of December 2023.
Capitalism is facing an existential crisis. The crisis of overproduction/underconsumption cannot be overcome within neoliberal capitalism itself. The only way out of this crisis is to go beyond neoliberal capitalism which is to go beyond capitalism. We need to start on a process that will lead us to socialism.
We are at a time that is favourable to advance socialism. Capitalism is now caught in a very deep crisis for which there is no revival within capitalism itself. No ideas to get out of this crisis within capitalism itself. We need to move beyond neoliberal capitalism – making an advance toward socialism in a certain protracted and measured manner.
Neoliberalism has led to the globalisation of capital – in particular globalisation of finance capital. And this has linked the destinies of workers in advanced capitalist countries to the labour in the global south. Any attempt of American or European workers to demand better wages or terms is met by the threat that the capitalists will relocate factories into global south. The average real wage of male American worker in 2011 is marginally lower than it was in 1968. There has been a loss of bargaining strength of American workers as their fortunes are undermined by southern labour reserves where wages are at a subsistence level. Because capital is globally mobile, capital threatens to move its activities to global south, and this restrains wage in the global north.
Despite the shift of investments to the Global South, there is still plenty of labour reserves in global south relative to labour force. Technological progress to ward off competition between the firms and the ensuing rise in labour productivity has kept the growth of employment down. There is significant unemployment in the Global South and that keeps wages there depressed.
Mobility of capital / finance in the neoliberal era means that it is globalised finance capital that is confronting nation states. The nation state is all the time, obliged to accede to demands of finance capital, and comply with policies dictated by globalised finance. Political democracy creates the illusion of alternative governments. But as long as the nation state remains within globalised finance, economic policies that can be pursued are the same.
One feature of the current economy is an attack on petty production, for example peasant agriculture. Attacks occur through taking away land from peasants to set up factories. Primitive accumulation of capital across the board. We find that multinational products are replacing products of petty production. Small traders displaced because of malls. The entire petty production sector is going through dispossession of assets and income due to encroachment of multinational companies.
This has led to the exodus of villagers and other petty producers to cities seeking employment. But employment is actually not increasing because the rate of industrial sector growth is not high enough to absorb the available labour force. This keeps wage rates down to subsistence levels.
In the era of neoliberal capitalism, the working class everywhere in the world is under attack. Global labour reserves in the south don’t get exhausted, and this keeps the wage low. Real wages do not increase in the Global North either. But labour productivity is rising everywhere. The share of surplus in output increases. Because of this, there is an enormous rise in income inequality. The income of the working people, petty producers do not increase. They decline in per capita terms.
This then exacerbates the overproduction crisis. Each dollar transferred from the working people to the surplus earners (capitalists, lawyers, accountants, investment bankers, advertising agencies etc.), reduces consumer demand. The surplus earners consume less per dollar compared to the working class. Therefore consumption falls, aggregate demand falls, and overproduction is made worse. Consequentially investment dries up and job creation remains sluggish.
Nothing within contemporary neoliberal capitalism can overcome this. Capitalism has mastered the management of deficient aggregate demand using Keynesian measures – state spending that will generate demand that was lacking, to maintain economies near full employment. In the post world war II period, the golden age of capitalism, the state was able to increase demand, financed through taxing the rich, the surplus earners. This counter balanced the insufficiency in demand contributed by the working people.
In the current system, governments could stimulate the economy and generate both investment opportunities and employment by taxing the rich a bit more or by running a fiscal deficit. But both of these measures are ruled out under neoliberal capitalism. The financiers are the rich. Any country that introduces higher tax rates, finance will flow out of it. There will be a financial flight / capital flight out of that country.
A larger fiscal deficit can help generate a larger aggregate demand. But fiscal deficit is out, in period of neoliberal capitalism – they have introduced new laws for “fiscal responsibility”. 3% of GDP is the maximum amount of fiscal deficit permitted in this neoliberal era. Finance does not like fiscal deficit. Any state spending by fiscal deficit delegitimizes capitalism. If the State has to come in directly to prop up demand and generate economic activity then why do we need capitalists?
Since the state cannot use fiscal policy to stimulate growth in demand, many states have turned to monetary policy in the past 15 years. In the US, there was zero short term and long term interest rate. However instead of increasing investment, this policy gave rise to inflation especially in property prices. Easy credit conditions also encouraged capitalist to jack up profit margins. The US government has recently increased interest rates to tame inflation.
Monetary policy cannot stimulate regeneration of aggregate demand and fiscal policy is not allowed to work. So there is no way to overcome crisis of overproduction/underconsumption within framework of neoliberalism.
This is why, neofascism is rising all over the world. Neofascist / fascist elements are always there as fringe elements all over the world. But the fringe can take centre stage if it gets financial support from the economic elite. Argentina, Holland, Sweden, Poland, Hungary, France, Germany (AFD – fascist party is second largest party), Turkey, India… everywhere there is an ascendancy of extreme right neofascist govt.
The neofascists have become useful to the corporate sectors as the neofascists change the discourse. It is no longer about the condition of life or material aspects or living. It’s to find some ethnic religious minority and vilify that minority to create a target for the working people to vent their dissatisfaction. It creates discord among the working class and it helps obscure the real cause of current situation – underconsumption due to an extreme imbalance in the distribution of national income.
Neofascism is solidly backed by monopoly capital in many countries – a neoliberal / neofascist alliance. Corporates are helping fund promotion of anti-immigrant / anti-black / anti- some kind of racial / ethnic minority politics. This helps maintain capitalism in this period of crisis. A united people can challenge the neoliberal order. That is why discord along ethnic and religious lines is helpful in preserving the existing imbalances in income distribution.
An important difference between 1930s and now, is that then, the fascists were financed by national finance capital. In Japan and Germany the fascists of the 1930s worked with national finance capital to rearm their country. They used large deficit budgets to enlarge military expenditure. This created the aggregate demand that lifted these countries out of deflation and low growth rates. The State then had a lot of power over finance capital.
But currently, the nation state with a fascist government is confronting globalised finance which is against larger fiscal deficits especially if these require higher taxes on finance capital itself. Thus the overproduction crisis, underemployment and weak aggregate demand cannot be resolved even when the country takes a neofascist turn.
There is an attempt to move out of neoliberalism by introducing protectionism as the US is doing in the name of countering China. This is an attempt by the US economic-political elite to handle the crisis of overproduction. Protectionism can generate jobs at the expense of other countries. Protect yourself against imports and thus try to solve domestic unemployment. This shifts unemployment from one’s own country to another country. It will give rise to further acute distress to global south and to former partners of the US in Europe and Northeast Asia (Japan, South Korea and Taiwan)
The conditions are therefore favourable to move beyond neoliberal capitalism and advance towards socialism. The Left has to remember a few important things.
- We need to build an alliance between workers and petty producers – the peasants, the petty traders, the small and medium sized businesses. The Left should incorporate the demands of these producers and protect them against multinational and other large corporations. The Left will be weakened if we don’t realise this.
- Land is essential for building factories to increase the productivity of the economy. If factories are to be set up, let them be owned by peasant cooperatives and not by the capitalists who the State helps in expropriating petty producers. There is a tendency on part of the left to say that building industrial capacity is essential and for that task to be achieved, expropriation of petty producers needs to happen. This is the wrong approach.
- The struggle for democracy. This is integrally linked to the struggle to overcome capitalism. Neofascism squeezes, oppresses people at large – terrorise workers, peasants, intellectuals, terrorise the opposition. The Left needs to lead the fight for the democracy and rights of the workers and petty producers.
- Any such struggle has to be a national struggle at this stage. We don’t have effective international trade unions. We can’t wait for international lobbyists to be formed to struggle effectively. Therefore, it is essential for the struggle to start as national struggles.
- Delinking from neoliberal globalisation. Putting up capital controls, trade controls. But these efforts will be something that will be resisted strongly by the elites who have been benefitting from the current system. Sanctions and barriers will also be put by international powers. Delinking is not going to be easy but it is very essential.
We need a worker, peasant and petty producer alliance to oppose the corporate-neofascist alliance. Workers and peasants have to be trained, informed and educated and made aware of the current struggles. Appropriate slogans need to be introduced focusing a set of fundamental economic rights to take the message to the people and persuade them that divisions along caste / religious lines are irrelevant because we all need to fight for fundamental universal economical rights.
These are the kind of transitional programmes to place in front of the people to fight for the democracy and move beyond neoliberal capitalism.
- How to ensure better distribution of wealth if/when capital flight happens?
A new deal today will involve welfare measures and greater taxation on the rich including wealth taxes.This will likely lead to capital flight. Investment strike by the economic elite is likely. We need some trade controls to get better control over the economy. We also need to prepare a strategy where the Government and public sector undertake investments, mobilising unutilised resources to build productive capacity in agriculture and industry. Through a sequence of measures beginning with very simple measures like introducing welfare expenditures – taxing the rich – slowly move towards an arrangement that is socialism.
- 2 pathways were charted for us – guarantee production for petty producers. Secondly mobilising. Nation struggle. Aren’t petty producers part of the bigger producer?
Petty bourgeoisie are part of the globalised capital – in favour of neoliberalism. Will oppose measures to delink from global neoliberalism. The Anti colonial struggle of earlier period actually had a section of the bourgeoisie part of the bloc against imperialism. Big part of the businesses are with international capital now. Division is now within the nation – big businesses on the one side. The Worker peasant alliance on the other. It is central that the worker-peasant alliance reaches out to and recruits petty traders. Petty traders and small businesses are being ousted because of multinational companies – malls etc. taking up space that could be used by petty traders. Can organize petty traders into cooperatives to move to higher forms of production. Defence of petty production does not mean keep to what has been happening till now. We need to move towards cooperatives of petty traders and small businessmen owning malls and factories.
- Given the characteristics of neoliberal economy today, it is very globalised, supply chains connected, resources distributed around the world. If we were to delink from the global economy, how do we sustain ourselves?
Delinking requires capital controls. But if you don’t allow capital to go out, capital won’t come in. And trade deficits won’t be financed. There is a need to get back the autonomy of state. This has been undermined by globalised finance. It is easier for large countries to delink but for smaller countries, it becomes difficult. Economic unions among countries in the global south have to be built. Bilateral trade arrangements have to be forged. This will help countries subjected to imperialist sanctions. Russia could withstand sanctions cause of its relation to other countries. Neoliberalism detests bilateral trade agreements.
- 70% of food production in the world is provided by peasants. A lot of people don’t understand this. Does raising awareness help this? Food is essential
Every country should make an effort to be food self-sufficient. One of the things imperialism / WTO has done is to destroy food security in the Third World. Africa was made to sacrifice its food security to move into cash crops and specialisation. Cash crop prices are highly volatile. No cash to buy food – people starve. Not every country is possible to be food sufficient but as much food as possible should be produced in the country. Second thing is about international peasant action – international trade union action – not realistic. We have to have struggles against neoliberal organizations at a national level to delink from neoliberal globalisation.
- Relatively recent development – global corporate tax rate – 15%? Singapore is a tax haven – historically abolished tax to the rich.
The big Corporations are dominant all over the world. I do not have much hope that anything will come from this. Countries should impose tax rates that they assume is necessary. I don’t have much hope in international agreements sponsored by Western governments which are integrally linked with globalised finance capital.