A GROWING APPETITE – Corruption is a necessary element of neo-liberal economies

Nov 8 2012

Prabhat Patnaik*

Manmohan Singh is among the most important Congress leaders today. But the first time one heard of his having anything to do with the Congress was when he was inducted directly as the finance minister in P.V. Narasimha Rao’s government. He, in turn, inducted into the government a number of neo-liberal technocrats from the World Bank and the International Monetary Fund, one of whom he reportedly even tried to push unsuccessfully for the finance minister’s post. Likewise, in neighbouring Pakistan, Shaukat Aziz, a banker, became finance minister under General Musharraf, and later prime minister in a Pakistan Muslim League government in 2004, even though he had nothing to do with the League until he became prime minster.

Such instances can be multiplied. One of the most striking features of the neo-liberal era is the taking over of old established political parties by neo-liberal technocrats in country after country, who then put these economies firmly on a neo-liberal policy trajectory. Initially, this policy trajectory was sought to be imposed on a country through finance-ministry bureaucrats recruited from the Fund and the Bank. Now, this imposition is done to greater effect, since such bureaucrats also hold crucial political positions through entry into established political parties.

Why, it may be asked, do established political parties allow this to happen? Why do they allow such interlopers to enter their parties, occupy powerful positions, and pursue policies that are palpably unpopular and risk losing electoral support? The simple answer is that they have little choice in the matter once the economic affairs of a country are opened up to the vortex of financial flows. After this initial breach, they find themselves incapable on their own of managing affairs on the basis of the traditional ?expertise’ they have; and, besides, in a country that is so opened up, retaining the ?confidence of the investors’ becomes crucial for avoiding capital flight. Globalized finance capital naturally has greater confidence in a country whose economy is run by ex-employees or trusted friends of the Fund and the Bank than in one where traditional politicians hold exclusive sway.

Nonetheless, traditional politicians do not find it easy to accept the whole gamut of neo-liberal measures. And a tension remains between them and the neo-liberal technocrat-interlopers. Pervasive corruption, involving traditional bourgeois politicians under the neo-liberal regime, plays the role of overcoming their opposition to such a regime. The more honest among them, if they are intransigent, are slowly eased out. Those who remain are either honest but pliable, or dishonest and therefore pliable. Corruption acts as the glue that attaches the neo-liberal regime, including the hegemony of neo-liberal technocrats, to the extant political system. It serves to buy the acquiescence of important participants in the political arena to the pursuit of neo-liberal policies ushered in by these technocrats.

This is not necessarily to suggest that corruption is deliberately promoted by the votaries of neo-liberalism. Such a regime, promoting consumerism, greed and self-seeking, and associated with significant State-sponsored transfers of assets to big capitalists, creates plenty of opportunities for corruption anyway. All that is required from those at the helm of affairs is that they turn a blind eye towards it. And the neo-liberalism-at-any-cost mindset that they have makes them do precisely that, if corruption serves to further the neo-liberal agenda. Subtle instances of corruption, which further this agenda, are not even recognized as such.

Recently, for example, when Mamata Banerjee objected to some neo-liberal measures of the Union government, the latter went into a huddle over how much money could be offered for a ?Bengal package’ in order to get her consent to these measures. The idea of offering money to a state to buy its chief minister’s support for a set of neo-liberal measures that are meant for the nation as a whole, to which she was apparently ideologically opposed, seemed perfectly acceptable to them, even though it was a subtle instance of corruption.

The point being made here is stronger than merely saying that corruption flourishes under a neo-liberal regime, or that it flourishes to an even greater extent than under the earlier dirigiste regime that drew much flak for it. What is being asserted is that corruption is a necessary component of the very modus operandi of a neo-liberal economy. It is not an aberration, it is central to its functioning, since it plays the role of creating a support base among bourgeois politicians for such a regime.

But where do resources for effecting such corruption come from? The obvious mechanism is large-scale transfer of petty property or public property to private individuals or corporates, both domestic and foreign, at throwaway prices ? the process of what Marx had called “primitive accumulation of capital”. A part of the proceeds of such “primitive accumulation” finds its way into the pockets of politicians belonging to established bourgeois political parties, who are thereby made to acquiesce in such “primitive accumulation” in particular, and in the neo-liberal agenda in general.

We thus have a complete circle, a whole new political economy: the neo-liberal interlopers straddle traditional political parties, pushing them into pursuing neo-liberalism; and the latter fall in line inter alia because of the extensive prevalence of corruption that benefits their important members, the means for which comes from the pursuit of neo-liberalism it- self (with its attendant process of “primitive accumulation of capital”).

A whole range of resources, from coal to natural gas, which have always been seen legitimately as the exclusive preserve of the State in its role as the custodian of the nation’s interests, is handed over for private exploitation, and the gleeful beneficiaries give cuts to prominent members of bourgeois political parties (one of which was described by such a beneficiary as “apni dukan”) to keep the system going; and a set of neo-liberal technocrats presiding over this entire process justifies this aggrandizement in the name of promoting the ?animal spirits’ of ?entrepreneurs’ for higher growth.

Many have noted that in the current era of neo-liberalism, the process of primitive accumulation becomes far more significant compared to the process of normal accumulation, which consists in merely reinvesting the produced surplus value. In other words, growth of capital through the expropriation of petty property or State property increases greatly in scale compared to the growth of capital through the reinvestment of surplus value produced on it. One reason for this relative increase is that the scale of corruption required to keep the neo-liberal regime going, to make traditional political parties submit to the dictates of neo-liberalism (and the appetite for corruption, it should be noted, also grows over time), is too large to be accommodated from the produced surplus value, especially that part of it which accrues to the government.

The part of surplus value that accrues to the capitalists belongs to them, in any case, and sustaining corruption out of it would mean a diminution in what is left for them rather than an increase. Therefore, an increase in their wealth, which can also sustain the requisite corruption, requires a transfer of property from others to the capitalists? that is, from petty owners or from the State. It requires, more than a ?flow’ transfer (in the form merely of income shifts), a ?stock’ transfer (in the form of property shifts) in favour of the capitalists, which is precisely what the process of primitive accumulation brings about.

But to make such stock transfer of assets from petty owners to large capitalists possible, the former must be reduced to penury, their flow incomes must be squeezed, which requires a withdrawal of support from them by the State. And such a withdrawal occurs too as part of the agenda of neo-liberalism, through the so-called ?retreat of the State’ and ?leaving things to the market’. Their input costs are jacked up through a reduction of subsidies, even as their output prices become subject to world market fluctuations. This pincer drives them to borrowing from usurious moneylenders, because institutional credit is also increasingly denied to them, and, eventually, to being dispossessed of their assets (if they have not committed suicide in the interim). The absolute impoverishment that we see in contemporary India, which is confirmed by NSS data on hunger and malnutrition, is closely linked to this phenomenon.

Corruption is usually seen as a moral failure, a fall from grace, on the part of some individuals whose numbers, it is lamented, have grown rapidly of late. It is, however, a systemic phenomenon rooted in the political economy of neo- liberalism, with a very definite role in its modus operandi. Even if this role is not consciously engineered by those who promote this regime, they have sufficient implicit understanding of it not to thwart its operation.

*The author is a former professor, Centre for Economic Studies, Jawaharlal Nehru University, New Delhi

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