What is Globalization?

"Globalisation" is the term under which imperialism presents itself in its current phase. The term however is a misnomer, since its implicit suggestion, that the degree of freedom of commodity and capital flows of the present epoch is something unprecedented in the history of capitalism, is not tenable. Not that the present epoch is not suigeneris, but what is unprecedented about it is something altogether different, namely an immense "globalisation" of finance, and a communications revolution which inter alia has made such globalisation of finance possible.

Of course, global financial flows themselves are nothing new, and authors like Hilferding, Hobson and Lenin had discussed them at great length for the pre-First World War period. But the present "finance capital" differs from that of the earlier epoch in being detached from its specifically national moorings (and hence not being part of some national capitalist strategy), in being also detached from any specific links with industrial capital, and hence representing a highly volatile force buzzing around in quest of speculative gains in a world not marked (thanks perhaps to the immense pressure of this finance capital itself) by any significant barriers to capital movement arising from inter-imperialist rivalries (Patnaik 2000). It is the emergence of this new form of international finance capital, and the "globalisation of finance" brought about by it, which is at the core of the current phase of imperialism.

I

There are two very common misconceptions about this process of globalisation of finance. The first relates to its nature, and the second to its implications. The fact that we speak of a new form of finance capital, and of the associated "globalisation of finance", does not mean that somehow the process of production under capitalism has ceased to be relevant, or that the multinational corporations engaged in production, which used to be so much talked about in the context of imperialism earlier, have become secondary. Lenin (1975; 114-5) had talked of "monopoly" as constituting a "superstructure" on old capitalism, giving rise to a "mosaic reality". In the same vein we can talk of the new world of finance capital as constituting a "superstructure" erected on the earlier structure of monopoly capitalism giving rise to a "mosaic reality". The MNCs have not ceased to be important; they have become enmeshed with this world of finance, with the process of globalisation of finance, with the quest for speculative profits, and with the quest for the cheap acquisition of assets allover the world as a result of this "financialisation" process. (The case of ENRON, a huge MNC whose executives, over-reached themselves in their speculative activities, underscores the point). To talk in the old vein of MNCs as the key actors in contemporary imperialism, as if nothing had changed since the decade of the sixties, would be wrong. To talk of MNCs as if they themselves had remained unchanged in their attitudes and behaviour would be equally erroneous. And not to talk of MNCs at all on the grounds that all that mattered today was purely speculative finance capital would be even more wrong. We have to talk about a new "mosaic reality" where globalisation of finance is superimposed on the older, pre-existing capitalism, and the new form of international finance capital that presides over this process is not an entity separate from the MNCs but one with which they are enmeshed.

The second misconception lies in the belief that for any economy, especially a third world economy, opening up to this globalisation is good for growth. This belief, in the case of the third world, is sustained by the argument that the international mobility of capital in the current epoch results in a migration of capital from the "North" to the "South", setting up productive enterprises in the latter and overcoming, at long last, the phenomenon of uneven development in the world economy which had arisen precisely because labour, traditionally, could- not move from the South to the North while capital, traditionally, would not move from the North to the South. This earlier reluctance of capital to move from the North to the South, despite the lower wages prevailing in the latter (and hence despite the greater profitability of locating production in the latter) is apparently being overcome at last. And several pronouncements emanating from the North (including of late from Senator John Kerry the Democratic Presidential candidate in the US) buttress this feeling that globalisation is at last overcoming the North-South dichotomy historically associated with capitalism, by ushering in more rapid growth in the South.

The mistake here lies in confusing the mobility of finance for the mobility of productive capital. Notwithstanding what people like John Kerry have to say, the mobility of productive capital from the North to the South continues to be extremely limited. (Even in the case of China, the usually-cited "success story" for productive capital inflows, the bulk of such inflows are from overseas Chinese, and not from the "North", strictly speaking). There are no doubt individual micro instances of such mobility which is what people like Kerry seize upon, but in macro terms the magnitude of productive capital movement from the North to the South (of which Off inflows, other than in the form of takeovers or conversion of debt into equity, would be the appropriate index) is still limited. When we additionally consider the fact that not all fresh DFI inflows are necessarily growth-promoting (indeed such DFI which merely substitutes for the domestic investment that would have occurred in its absence, is likely to be growth-reducing, since it constitutes an implicit form of de-industrialisation), it is clear that the gains in terms of higher growth in the third world from opening up to the globalisation process, would, from this source at any rate, be rather meagre.

On the other hand however opening up to globalised finance has a distinctly growth- retarding effect, since it invariably brings in its train a process of deflation of the economy via reduced State expenditures (U. Patnaik 2002). Finance capital is always opposed to an "activist State" in matters of employment and welfare promotion. But when finance capital is globalised and the State continues to be a nation-State, its opposition acquires a spontaneous effectiveness: any State that dares to be activist, overriding the opposition of finance capital, would find itself confronting a capital flight, with adverse consequences for the economy. To avoid these consequences and hence to prevent possible capital flight, the States make every attempt to ensure that the "confidence of the investors" in the economy, which basically is a euphemism for the "confidence of the speculators", is not undermined. And they do so by eschewing any activist role in employment promotion, and subjecting the economy to a deflationary process which reduces the growth rate.

The opposition of finance capital to State activism in employment promotion cannot be explained by any legitimate economic fears. True, at high levels of employment and activity, the prospects of inflation loom large, as do the prospects of a significant widening of the current account deficit of the balance of payments. Both these factors give rise to fears of an exchange rate depreciation which has adverse consequences for the profitability of globalised finance. But such fears do not constitute an adequate explanation. The opposition of finance capital to employment stimulation by the State becomes manifest even when the economy operates at a level of activity which is so low as to rule out any genuine fears about inflation and exchange rate depreciation. (In the late twenties for instance, the British Treasury, under the influence of the City of London which was a major financial centre of the capitalist world, had rejected Lloyd George’s proposal for a Public Works programme to overcome unemployment, even though the level of unemployment, at 10 percent at that time, was already so high that an increase in activity at that juncture could not conceivably cause inflation or depreciation).

The source of the opposition of finance capital to State activism in matters of employment lies elsewhere. Writing in 1943, Michael Kalecki had said that the fact that employment, in the absence of State intervention, depended on the so-called "state of confidence" of the capitalists, gave the latter a "powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness (Kalecki 1971; 139)." State activism on employment in other words undermines the social power, and with it the social legitimacy, of the capitalist class. And if this true of capitalists engaged in production, then how much more true must this be of the rentier class, whom Keynes (1946) had characterised as the "functionless investor" and which is typified by finance capital?

There is an additional factor. Deflation is typically associated with the selling off of public enterprises at throwaway prices of which the capitalist class in general, and finance capital in particular, are the beneficiaries. Deflation in other words acts as a mechanism of primitive accumulation of capital. When enterprises built out of the savings of the people at large are handed over virtually gratis to a few members of the international financial oligarchy, the effect is exactly the same as the direct expropriation of many petty producers by a few capitalists that Marx had captured under the rubric of primitive accumulation. It is instructive that this process of primitive accumulation is sought to be justified by a piece of utterly bogus theorizing (based on a complete confusion between stocks and flows) which holds that "disinvestment" is a perfectly legitimate means of closing a fiscal deficit.

Of course, the benefits of deflation for finance capital are not exhausted with this. Since deflation, via the recession it generates, drives several small producers out of business, their assets, or at the very least the space occupied by them, become available to large capitalists, and in particular to finance capital. Needless to say, when assets change hands, they do so usually at throwaway prices.

Deflation enforced by finance capital restricts domestic demand and hence contributes adversely to the pace of economic growth via this channel. It does so in another way as well. Since in the era of globalised finance deflation is a pervasive phenomenon afflicting not just third world countries but those of the advanced capitalist world as well, the entire world capitalist economy experiences relative stagnation, which in turn gets imported into the domestic economies of the third world under the regime of trade liberalisation. For both these reasons third world economies when they open up to "globalisation" in the current epoch experience a retardation of growth rather than an acceleration.

The protracted stagnation and double-digit unemployment which the advanced capitalist world has been experiencing, in the decades following the post-war boom aided by Keynesian demand management, the absolute decline in per capita incomes over much of Latin America and Africa over the last two decades, and even the slowing down of the dramatic growth rates, achieved earlier by the East and South East Asian countries, since the beginning of the nineties when they opened themselves up to global financial flows, are all indicative of this profound tendency towards stagnation which characterises the current epoch of "globalisation".

Of course it may be argued that India and China illustrate the opposite of this claim, since they apparently have witnessed higher growth since opening themselves up to "globalisation". But in the case of China, it is questionable if she has opened herself up to "globalisation", since she is insulated from global financial flows and retains a degree of (implicit if not always explicit) trade restrictions.

In the case of India, which is more open to financial and trade flows, despite not having full capital account convertibility, the growth rate of the material commodity producing sectors has come down since the introduction of economic "liberalisation", and particularly so in the last quinquennium neo-liberal policies had gathered momentum. The high growth claims are based entirely on the performance of the service sector and hence are quite dubious, given the theoretical and statistical problems associated with the growth rate figures of this sector. (Even in the case of China the growth rate figures are likely to represent an exaggeration). Besides, the adverse impact of the openness to globalisation on a range of material indicators impinging on welfare, is quite indubitable in the case of India, as we see below.

II

The impact on employment of this global stagnation, arising from the globalisation of finance, is scarcely ever recognized, especially in the advanced capitalist world, where the accent instead is on the "export of jobs" to the third world. This works to the advantage of international finance capital: while one section of workers, those of the third world, is pitted against another section, those belonging to the first world, the role of international finance capital, the significance of its hegemony, goes completely unnoticed. Both these stances, viz. the promotion of a rift between the workers, and the silence on the hegemony of finance, contribute to a perpetuation of this hegemony.

The view that highlights the "export of jobs" as the primary cause of unemployment would have some credibility if the total number of jobs was incapable of being augmented. This, however, is far from the case. State intervention of an appropriate kind can counter the current deflation and enlarge the level of activity in the world economy as a whole. True, no individual nation-State caught in the vortex of globalised finance, with the exception perhaps of the US., can pursue employment-augmenting policies (it can do so only if it ceases to be a part of globalised financial flows by putting restrictions on such flows, for which however it would have to pay a certain price, on which more later, arising from imperialist hostility). The exceptional position of the US arises from the fact that its currency (notwithstanding the recent strength of the Euro) is looked upon wealth-holders everywhere as a stable medium of holding wealth, almost ‘’as good as gold". A capital flight from the US, even if its government pursues an expansionary policy, remains an unlikely event (as is being demonstrated now with the widening fiscal deficit under the Bush administration). The US therefore has the capacity to act as a "locomotive" pulling the entire world capitalist economy out of stagnation through the expansionary fiscal policy of its own State. But, from its national perspective, the US has little to gain by acting as such a "locomotive", since that would entail a larger national debt of the US for the purpose of expanding employment elsewhere in the world. Since the US State cannot rise above its national perspective, it cannot, despite its exceptional position, pursue employment-promoting policies for the capitalist world as a whole.

But even though an expansionary policy by the US alone for promoting employment in the capitalist world is not likely, a concerted expansion by several capitalist States is both possible and can achieve the same end. Indeed even during the great Depression of the 1930s, there were many plans, e.g., the Kindersley, Francqui, ILO and Keynes Plans, which had suggested precisely this, namely a co-ordinated expansion among a group of leading capitalist countries. The real hurdle to this plan today, as it was during the 1930s, is the opposition of finance capital, expressed above all as an objection to fiscal deficits which a large number of academic economists, journalists and pamphleteers are made to articulate in an ethos where finance capital has ideological hegemony. Thus the hurdle to employment promotion, and hence the factor underlying persistent and large- scale unemployment, is the hegemony of finance; the argument about "export of jobs" is a convenient camouflage.

We can look at the issue in the following way. There are two very distinct hurdles to the pursuit of employment -promoting policies by States in the current epoch. The first is the fact that finance capital opposes such policies; and the second is the fact that while the States are nation- States, finance capital in today’s world is international finance capital. If instead of nation-States there was a global State then the second of these reasons would have ceased to be operative. Since there is no actual global State it would have to be a surrogate global. State that can at all contemplate pursuing employment-promoting policies for the world economy as a whole. The State of the leading capitalist country, the US, though it is capable of acting as such a surrogate global State, and does play this role in certain respect, is nonetheless too much of a nation-State to take on the employment-promoting role of a possible global-State. It would therefore have to be a whole group of nation-States acting in concert that can act as a surrogate global State for purposes of employment-promotion. But even if such a group of nation-States could be persuaded to act in concert to promote global employment, it would still have to confront the opposition of globalised finance capital, i.e. the first hurdle mentioned above. It is not surprising therefore that globalised finance capital uses a whole gamut of weapons to prevent employment-promoting policies, by an entire group of nation-States acting in concert, from taking effect. And one important weapon is to shift the focus to the so-called "export of jobs" to the third world.

III

Let us now consider the impact of globalisation upon the different classes within a third world society. Deflation reduces the employment opportunities in such an economy, especially within the rural sector, a phenomenon that has occurred in India in the period of neo-liberal reforms, notwithstanding the claims about high growth. Between 1993-04 and 1999-00, the two years of large sample surveys by the NSS, rural employment increased by a mere 0.58 percent per annum, which was far below the growth of rural population. There was a drop in the work participation rate observed over this period; but this is likely to have been the outcome of the "discouraged worker effect" of higher unemployment, rather than a reflection of any genuine withdrawal of potential workers for purposes such as education. Numerous micro studies also point to a sharp increase in rural unemployment, as does, to a limited extent, the current-daily-status unemployment rate.

Associated with rising unemployment is a restriction on the purchasing power in the hands of the rural population. Ironically, despite a reduction in per capita output of foodgrains in the period since 1990-91, per capita absorption has dropped even more precipitously, so that an average Indian absorbs about the same amount of foodgrains today as he or she did on the eve of the second world war (U.Patnaik 2004). If the difference between output and absorption even shows itself at the level of the all-India data, then one can legitimately conclude that for rural India it must have been even sharper. The other side of this difference between output and absorption has been a massive increase in foodgrain stocks (nearly 65 million tonnes prior to the recent drought), which inter alia have been dumped on the world market at throwaway prices. This paradox of a country with a huge starving population undertaking massive exports at throwaway prices is a singular contribution of the deflation associated with the neo-liberal policies.

Between 1990-91 and 2003-04 (BE), the ratio of central government expenditure (including transfers and loans) to GDP at factor cost went down sharply, from 20.54 percent to 17.41 percent. This has been a consequence largely of the decline in central government tax revenue to GDP and also, to a certain extent, of the decline of the ratio of the fiscal deficit to GDP. And one of the sharpest cuts has been in rural development expenditure, which, from being 14 percent of the GDP on average during the eighth plan period, has come down to less than 6 percent of late.

An argument is often advanced of the following kind since much of the rural development expenditure, even when intended for the benefit of the rural poor, really gets into the hands of the rural rich, a reduction in it is of little consequence as far as the poor are concerned. This argument is erroneous: it does not take into account the multiplier effects of the government’s rural development expenditure. Even when such expenditure is cornered by the rural rich, its multiplier effects generate some employment for the rural poor, and hence are of some indirect benefit to them. To be sure, if the expenditure was not cornered by the rural rich but actually came into the hands of the rural poor, that would be most desirable. But even when this does not happen, expenditure undertaken is still far better than expenditure not undertaken.

Cuts in government expenditure also affect the level of demand for the industrial sector. Together with import liberalisation which in practice has a demand-constricting effect (once the pent-up demand for a variety of hitherto not-available luxury goods is catered to through the setting up of domestic productive capacity with the help of liberalised imports), such cuts precipitate industrial stagnation and recession, affecting especially the small-scale sector. Industrial employment is affected adversely at the same time that the "social wage" is cut, catching the industrial workers in a pincer move. The virtual disappearance of the cotton textile industry in its old centres like Bombay and Ahmedabad, and the absolute impoverishment of lakhs of workers who are thrown out of employment as a consequence, is only one striking illustration of a pervasive phenomenon.

But it is not just the traditional petty bourgeoisie, the small capitalists, and the workers both urban and rural, who become victims of neo-liberal economic policies. The peasantry too, not excluding even the rich peasantry, is pushed into great adversity, which is now getting reflected in a spate of suicides by peasants allover the country. Secular stagnation in the world economy, on account of the pervasively deflationary policies being followed, results in a secular fall in the terms of trade for primary commodities vis a vis manufacturing. While the terms of trade fluctuate a great deal from year to year, the trend through these fluctuations is a downward one for primary commodities, especially agricultural products. A second factor, of more recent origin, also contributes to such a decline. And this has to do with the secular depreciation in their real exchange rates which third world countries experience when they enter into the process of financial liberalisation. Let us consider this closely.

Wealth-holders, whether in the first or in the third world, do not generally consider third world currencies as safe mediums for holding wealth, a judgement that does not get altered no matter how much deflation is undertaken in the third world economy to make its currency more attractive. As a result, opening up the economy to free capital flows usually leads to a secular decline in the value of the third world currency as capital slowly drains out of the country; and this decline itself fuels the belief that the currency is not a safe medium for wealth-holding. There are to be sure fluctuations in the real exchange rate with occasional bursts of speculative capital inflow pushing up the currency value, but through these fluctuations the secular trend is downwards. This entails a reduction in the relative values of commodities, typically primary commodities, which these economies export, since the money wages are fixed in terms of the local currencies, providing an additional cause for the adverse movement in their terms of trade.

In India the peasantry had been insulated against a decline in its terms of trade, arising from factors such as those mentioned above, because of the system of public procurement and distribution that had been in place for quite some time. But with liberalisation this system became substantively inoperative. Moreover since there were only a few crops which were covered under this system, the changes in cropping pattern that occurred, as agri-exports gathered momentum under liberalisation, took the peasantry out of the ambit of this system even as world prices were crashing. At the same time, the prices of inputs such as electricity and fertilizers increased as subsidies were sought to be cut in the new deflationary environment; and the entitlement to credit from institutional sources which agriculture enjoyed in the dirigiste period disappeared as foreign banks (which were averse to lending to the peasantry) were allowed to operate, and even the domestic nationalised banks were asked to keep an eye on their profits rather than get carried away with "social responsibility". Caught in the grip of these factors, and having to confront, for the first time, multinational seed companies, with their vast monopoly powers buttressed by intellectual property rights enshrined under the WTO, the peasantry experienced an unprecedented squeeze, which necessarily had an impact on other rural classes as well, especially the labourers.

While a vast segment of the population was thus adversely affected by neo-liberal policies, a certain section, consisting of the domestic rentier class, professionals engaged in the burgeoning service sector, a section of the capitalist class that could grab public assets, large capitalists who benefited from the decline of the small producers, the local agents and employees of foreign companies, governments, aid agencies, NGOs, and Bretton Woods institutions, and a whole range of fly-by-night operators, speculators and middlemen mediating the newly oRened up and rapidly expanding "foreign connection", gained from the phenomenon of globalisation.

This essential divergence between the fortunes of the many and the fortunes of the few gets camouflaged by two widely-held erroneous perceptions. The first asserts that poverty in the Indian economy has been declining. This is sought to be established by referring to the consumer expenditure figures thrown up by the NSS 55th round. While it is admitted by everybody that the data thrown up by this round are "contaminated", the argument put forward by several economists (with the blessings of the World Bank) states that after proper adjustments are made, a decline in poverty is still quite indubitable. This has been challenged by independent scholars (Sen 2004) who, after careful scrutiny of the data, have concluded that no conclusions can be reached one way or the other on the poverty question with the existing data. A more potent line of attack questions the very methodology of existing poverty estimates. Since the "poverty line" criterion was meant only as a surrogate for a calorie norm (in terms of which basically poverty is defined in India), and since calorie absorption data are directly available, there is no reason to go through the rigmarole of updating the poverty line and using the NSS expenditure data to estimate the poverty ratio. It would be far better to go to the point directly and see from calorie absorption data what the percentage population below the calorie norm for poverty would be. On doing this exercise it turns out that this latter percentage exceeds that calculated on the basis of the "poverty line" approach by a huge margin in recent years, which suggests that any poverty calculation on the basis of consumption expenditures is fundamentally flawed and that poverty as originally defined has, far from coming down, actually increased in the post-liberalisation period.

The second erroneous perception relates to food absorption. It is argued that the reason for the large accumulation of foodstocks lies in a change in consumption habits of the people entailing a diversification away from foorgrains. It would follow from this that far from being indicative of a decline in living conditions of the mass of the people, the accumulation of foodstocks actually indicates the contrary, namely some improvement in their living standards where they can even afford to enjoy more diversified consumption. The idea that with an improvement in per capita incomes, societies consume less of foodgrains per capita, is utterly wrong. True, they may consume less foodgrains directly, but their indirect consumption of foodgrains (in processed forms and as inputs for the animal products that are consumed) goes up. Taking direct and indirect consumption together, per capita foodgrain consumption increases with per capita incomes, and is associated with an improvement in the peoples’ living standards. Thus the per capita foodgrain consumption, taking both direct and indirect consumption together, was nearly a tonne per year in the former Soviet Union. It is close to that figure in the US, and only slightly less in the other advanced capitalist countries. So, when in India we find a decline in per capita total absorption of foodgrains, and that too accompanied by a decline in daily calorie intake, the conclusion is inescapable that there is a squeeze on the population, especially the rural population. The question then arises: how can such a squeeze be sustained, especially in a society characterized by robust electoral politics?

IV

There are at least three safety-mechanisms which international finance capital acquires for itself to ward off any threats to its global dominance. The first has already been mentioned above, namely a division between the workers in the North and those in the South, which ensures not only that there is no global unity among workers against globalised capital, but also that any potential challenge to the hegemony of finance capital within the North, itself is warded off by placing the blame for the economic ills upon a distant group of hapless workers.

The second, briefly mentioned earlier, consists in the fact that any stepping out of a neo- liberal regime entails costs of transition which are so large that most political formations within any country do not have the strength to undertake it. Even the prospects of a political formation with an alternative agenda coming to power triggers off capital flight, an exchange rate depreciation resulting in inflation (to the detriment of the very masses in whose interests the alternative agenda was conceived to start with), and a threat of bankruptcylo. All this is quite enough to unnerve the political formation that had dared to espouse an alternative agenda; it usually falls in line by declaring that it too is "pro-reform", that it too is full of the best possible intentions towards "foreign investors".

Sometimes however a political formation with an alternative agenda may come to power unexpectedly. In such a case, even if it is intrepid enough to put in place immediate capital controls to ward off capital flight, it would still have to deal with the issue of inherited foreign debt which has to be rolled over; and such rolling over becomes impossible without the "co-operation" of international finance capital, the Bretton Woods institutions and the States of the advanced capitalist countries, especially the "super-imperialist" US Statell. But even if the new domestic government carries its intrepidity several steps further by announcing a unilateral debt moratorium, or even if the debt overhang is not significant enough to cause much worry for the new government, nonetheless any departure from the neo-liberal agenda brings retaliation from the entities just mentioned. Together with this comes a clamour of criticism, from those with vested interests in neo-liberalism, from "intellectuals" serving these interests, and from the media both domestic and foreign (which in any case have come very close to finance capital in the current epoch), about declining living standards of the people (which, even if true, is caused by imperialist retaliation itself), about the unwisdom of the "doctrinaire" economic policies being pursued by the government, about "violation of human rights", and about alleged tales of "nepotism" and "corruption". These are sometimes made into excuses for imposing sanctions (pushed through a pliant Security Council) and, in the last analysis, for armed intervention, by proxy or even directly.

The third mechanism springs from the divisions among the people of a third world country that the pursuit of a neo-liberal trajectory of development inevitably generates. The impoverishment of the people creates conditions where different sections among them often struggle against one another even more fiercely, as has been happening in many parts of Africa, of which Sudan is the latest example. The tragedy of this fierce struggle for dwindling means of livelihood, is portrayed by the so-called "liberal" opinion (especially when the regime concerned is not a client of imperialism), only as an instance of "bloody-mindedness" leading to "genocide" which it is the "White Man’s Burden" to put an end to. Likewise, situations of unemployment, as is well-known, are conducive anyway for the exacerbation of communal, ethnic, religious and racist divisions among the people. Reliance upon the inflow of direct foreign investment for growth also produces secessionist tendencies, and in the process breeds much bitterness among the people, because of the belief that being on its own would enable a region to draw more foreign funds. In short, the epoch of globalisation also generates very strong tendencies towards a fragmentation within the ranks of the deprived, which naturally helps international finance capital consolidate its hegemony.

There is however a further implication of these divisions, namely they are capable of being used by fascist forces to counter the prospects of the coming together of the people against imperialism. Third world societies, especially in the epoch of liberalisation, become sites for a struggle between secular, democratic and egalitarian tendencies on the one hand and fascist tendencies (allied to imperialism) on the other. This may sound strange at first sight, since most fundamentalist outfits, especially in the Arab world, are today giving anti-imperialist slogans. But fascism must not be confused with fundamentalism the former is characterised above all by proximity to finance capital and is concerned with making the poor acquiesce in their exclusion rather than rise against the system for overcoming their exclusion, which, by contrast, certain types of fundamentalism advocate, though no doubt in a most inchoate fashion.

We have seen that neo-liberalism works to ensure that those who want a change of trajectory are enfeebled by considerations of the costs of transition. Even when the people vote for a change therefore they continue to remain trapped within the same trajectory. At the most a few verbal concessions are thrown towards them, such as "liberalisation with a human face" but these lead to no substantive changes. But additionally even if perchance a democratic government takes charge which has sufficient courage to embark on a new trajectory, then the fascist elements can always be unleashed upon such a government.

In short, there is a fundamental contradiction between the adoption of neo-liberal policies and the preservation of democratic institutions. We in India are currently witnessing before our very eyes a situation where the democratic compulsion of providing some relief to the poor clashes with the commitment of the new government to the agenda of globalisation. And if this clash leads to a denial of relief then the disillusionment among the people may well work to the benefit of the fascist forces. Fighting domestic fascism and fighting imperialism in other words are part of the same project. And this fight can be carried forward only by uniting the people on a broad front, preparing them for the costs of transition, and working to put in place in all earnestness an alternative development trajectory.

* Prabhat Patnaik is an economist and political activist based in Delhi