Prabhat Patnaik: We are entering a new era of struggle

We interviewed Prabhat Patnaik, one of India’s most important Marxist economists and whose works are closely followed in Turkey. Prabhat Patnaik is professor emeritus at the Centre for Economic Studies and Planning at Jawaharlal Nehru University in New Delhi, India and from June 2006 to May 2011, he served as the vice-chairman of the Kerala State Planning Board.

Patnaik answered our questions about the past and present of capitalism; He argued that this mode of production could not survive with its own internal dynamics and could not accumulate capital, and always needed an external stimulus (colonies, pre-capitalist markets, state expenditures, accumulation by encroachment, etc.). 

According to Patnaik, the reproduction schemes developed by Marx in Capital are the product of a theoretical framework in which capitalist production is assumed to be a closed system, and Marx actually rejected this assumption in his writings. The Indian writer draws attention to the fact that the current crisis of neoliberalism is also experienced at a time when external stimuli have disappeared.

Recalling the great peasant resistance in India at the beginning of the year, Patnaik argues that the ground for a worker-peasant alliance is more solid today than in Lenin’s time; because both classes are under attack by globalised financial capital. According to our guest, peasant resistance in India is the first to be a political opposition to neoliberalism; besides, it is a rather long-term struggle, unlike the working class, which is weakened against capital and stays away from long-term actions.

Prabhat Patnaik considers the Russia-Ukraine war to be a symptom of the collapsing neoliberal order. According to him, the sanctions against Russia to maintain order are one of the factors that led to the collapse of the system. Patnaik sees this as an opportunity not only for the peoples of the “Global South” but also for the workers of the “Global North.” What happens in Europe concerns the entire world; according to Patnaik, increasing strikes in the winter months is a sign: a sign that we are now entering an era of struggle…

‘LACK OF EXTERNAL STIMULI IS ONE OF THE CAUSES OF THE CRISIS’

Your articles and books are followed closely in Turkey. Your recent book Capital and Imperialism: Theory, History, and the Present was translated into Turkish. Let me ask about it: You reject the analysis of capitalism as a closed self-contained system and also you claim that capitalism has always been historically ensconced within a pre-capitalist setting, even its very existence and expansion is conditional upon an interaction between the two. So, it is obvious that you refuse the claim that a simple reproduction can create an expanded reproduction without an external stimulus within the very logic of capitalist production, don’t you? Therefore, colonial setting and imperialism can not be labeled as “stages” in the history of capitalism but they are inherent qualities of capitalist production from the very beginning. 

Yes, absolutely. Because when Marx wrote the reproduction schemes he assumed that whatever surplus value was produced, either consumed, accumulated or accumulated in the form of productive capital, the fact that surplus value can be accumulated in the form of money, in which case it doesn’t create any demand for goods. It is something which has been there in Marx’s writing for a very long time. Marx has rejected what he’s called Say’s law which basically says that supply creates its own demand therefore there is never a problem of efficiency of aggregate demand. But I think while working on his reproduction schemes his concern was really much more to show how exactly the process of circulation of commodities occurs. Not necessarily to claim that actually this is the way that things happen in capitalism. The reproduction schemes are fundamentally based on the assumption that Say’s Law is valid. But in fact that is something which Marx rejected throughout his writings. So I think we should not think of his picture of expanded reproduction as a realistic picture of how things happen under capitalism. The moment we reckon with the fact that accumulation can take money form, that money can be a form in which wealth can be held, then of course it becomes perfectly possible not only to see capitalism as a system subject to overproduction, not just cyclically, but something that can be subject to overproduction over a period of time, and therefore something that may actually settle down at a state of simple reproduction without necessarily experiencing expanded reproduction in the absence of an external stimulus, or in the absence of the availability of an external market. I believe colonialism has played that role or pre-capitalist markets have played that role, passed the way that Rosa Luxemburg had argued in Accumulation of Capital. And after the exhaustion of the pre-capitalist markets, obviously they did get exhausted, I think state intervention has played a similar role. And I argue at this moment in capitalism, since both the external markets are exhausted more or less and since state intervention is virtually ruled out in neoliberalism, capitalism is without an exogenous stimulus, which is why you are experiencing the existing crisis.

So you also reject Nicolai Bukharin’s criticism of Rosa Luxemburg regarding the external market and his emphasis on competition between capitals. You insist that wealth-demand for money can also be used for accumulation.

Yes. Competition forces capitalists to accumulate capital. But accumulation of capital can take many diverse forms. One is accumulation in terms of money. There is no reason why competition should force capitalists to actually accumulate in the form of capital goods. And that’s basically my point. Once one recognises the fact that accumulation can take a money form, then the need for an external stimulus becomes quite obvious.

You count three external stimuli in your book: pre-capitalist markets, public expenditure and innovation. How do you evaluate today’s setting of global capitalism regarding these stimuli? Do we have them in the era of neoliberalism?

Of the three, which have been generally discussed in the literature, I think innovations are really not a serious exogenous stimulus. This is where my argument would be different from Michael Kalecki’s, whose work I rely on so much. Because of the fact that innovations are introduced precisely when the markets are growing. In other words in a period in which there is growth taking place you have innovation being introduced. And this is something very clear during the period of the Great Depression. Lots of inventions came on stream but none of them were introduced as innovations into the production process which they actually had to wait for the post-war period of capitalist boom in order to be introduced. The automobile boom actually far from lifting the United States from the recession or the Great Depression of the 1930s. Actually it became stored because of the depression. So I don’t believe that innovations really provide an authentic exogenous stimulus. Whatever investment is decided upon, it is the form of the new processes, but the new processes themselves stimulate a larger amount of investment, that is what I am skeptical about. 

Obviously, I think public expenditure can be an exogenous stimulus if public expenditures are financed not so much at the expense of the working people, but if it is financed either by taxing the capitalists or taxing the surplus earners more generally. Because in that case a part of the taxes would come out of their savings, so there is some net stimulus. Or, public expenditure can be financed by a fiscal deficit. But the point is that in conditions of neoliberalism, taxing capitalists or surplus earners is generally frowned upon by globalised financial capital. And so is the fiscal deficit which is why most countries have got fiscal responsibility legislation. Because of this fact, under neoliberalism, the individual nation-state policies must conform to the globalised financial capital, otherwise it leaves the country, goes somewhere else. And because of that, most governments find themselves in a position where they really cannot stimulate the economy, neither of the two ways in which alone they could stimulate the economy. And that’s why neoliberalism does not have access to pre-capitalist markets or in the sense that pre-capitalist markets have lost their weight now in stimulating boom under capitalism. And secondly, under neoliberalism the state cannot lead this role. And that is why the period of neoliberalism is associated with a period of general stagnation which has settled to the capitalist world after 2008.

‘HIGH PROFITS ARE THE REASON FOR INFLATION’

So you are skeptical about the so-called Green Energy, Industry 4.0., etc.?

There has been a lot of talk about it. But I do not see any of them in fact stimulating any economy. I mean we are currently moving into a fairly serious world wide recession. You may say that this world wide recession has nothing to do with the more long term factors that I am talking about. But I believe it does have to do with the longer term factors in a certain way. That’s the following: Basically in order to stimulate the economy within the parameters of neoliberalism, the governments, particularly the United States and Europe as well, for a very long time have been pursuing a policy of almost zero interest rates and quantitative easing which is really kind of putting enormous amounts of liquidity into the economy. You know the current inflation was actually stimulated by the rising profit margins. I believe the rising profit margins was in fact facilitated by the floating of this enormous amount of liquidity in most capitalist economies which really greatly reduces the liquidity risks. It would be handicap if the serious illiquidity risks that it will have to face. But the availability of this enormous amount of liquidity and virtually zero interest rates are something that actually reduce the liquidity risks to a point where many of the corporations felt they moulded to push up their profit margins. And I think that was the beginning of the inflation. In order to curb wages now the governments all over the capitalist world are actually increasing interest rates. So that is pushing the world economy into a serious recession.

In your book, you emphasize the role of metropolitan centers regarding the deindustrialization of the colonial periphery. The ocean of small producers and labor reserves serve for center and local landowners and also capitalists can stabilize the value of money even if there is a near constant share of wages. But for decades there has been a deindustrialization in imperialist countries and a sort of industrialization in former colonies. How do you explain this reversal? Moreover, real wages have been decreasing in all advanced capitalist countries progressively. How do you explain this tendency?

Let me state one thing first. Even though there has been a migration of capital in production. There have been movements of goods but capital in production has moved to a few countries of the Global South, particularly Southeast Asia and perhaps to some extent South Asia as well. But notwithstanding this movement of capital, it is true in that sense today’s capitalism is very different in this particular respect from what it was in the colonial period. In the colonial period, the world economy was segmented. Labor from the Global South was not allowed to move to the Global North – it still is not allowed to move freely. And capital from the Global North, even though it was allowed legally to move to the Global South, did not actually do so. So the point is now that the second part is no longer true. Capital from the Global North, at least for certain times of activities, is moving to the Global South. One would have thought that this would therefore use up the labor reserves which are there in the Global South, which are a legacy of colonialism. But that is not happening. And as a matter of fact labor reserves in the Global South are increasing relative to the work forces despite the movement of the capital from the Global North to the Global South. That is because of the fact that the rates of technological progress that this kind of movement of capital brings about are really very high. And what is more, if labor reserves do not get exhausted wages remain at the subsistence level where labor productivity is rising, share of surplus rises, and surplus earners prefer to buy commodities, their preference is for commodities which are really less employment-intensive. 

So the shift in income distribution has also an effect in reducing employment. And of course the very high rates of labor productivity growth. Growth of employment in many countries is simply even less than the natural rate of growth of the workforce. Let alone absorbing the labor reserves. And what is more, the labor reserves are also getting replenished, because in neoliberalism there is necessarily an attack on petty producers and peasants. The whole idea is to open that entire sector for encroachment by capital. And that is why during the period of planning in many of the countries of the Global South, there was actual protection of the petty production sector. Minimum prices for the many crops, subsidiaries. In India price protection still exists for foodgrains which the current government tried to undo. But there was a year long peasant agitation against the withdrawal of this price protection.

‘PEASANT RESISTANCE IN INDIA WAS THE FIRST POLITICAL OBJECTION TO NEOLIBERALISM’

I would like to ask you about this peasant resistance against the imperialist capital. Because you make a distinction between accumulation through expansion and accumulation through encroachment. It sounds like today’s imperialism needs perpetual primitive accumulation and expropriation rather than just absorbing the surplus value. Do you agree with that? Especially in the Indian subcontinent, South East Asia and North Africa peasants and small producers are still important. It seems that expropriating Asian and African peasants is one of the main goals of imperialism.

Yes, of course, absolutely. And in fact this is something that neoliberalism brings about. And one of the things which I stand by is the fact that primitive accumulation is not something which is confined only to the origins of capitalism. The exogenous stimulus that I was talking about is in fact the part of primitive accumulation. As a matter of fact, Marx increasingly became aware of this. He wrote a letter to Danielson in 1881 in which he talks about the drain from India, the drain of the value from India to Britain. Huge figures. He says that the drain from India amounts to the incomes of 60 million agricultural and industrial workers in India. It is really something that cannot be treated just as an epiphenomenal. I think Marx himself was aware of the fact that there was a process of primitive accumulation occurring simultaneously with normal accumulation. He did not have time to develop this idea. So primitive accumulation is something that under neoliberalism, particularly an effort is made to impose a process of primitive accumulation in the Global South. And that, in turn, implies that many peasants and petty producers lose their occupations and they join the workforce in quest of jobs, but of course not enough jobs have been created. So the labor reserves increase, therefore even though there is a shift in the activities, a whole range of activities from the Global North to the Global South, this does not raise wages of the Global South, while it keeps wages in the Global North down. 

So what is the significance of the Indian peasant resistance?

There are a number of things one has to bear in mind. This basically implies that the peasantry is now facing globalised capital, international agribusiness and so on. When Lenin was talking about worker-peasant alliance, the basis of that alliance lay in the fact that the workers would usher in a democratic revolution against the feudal lords and that would free the peasants. But after the peasants are freed from the classes of feudal lords, then of course the basis of that worker-peasant alliance no longer exists. Certainly, not between the peasantry as a whole and the workers. That was the Soviet industrialization debate. The Bukharin-Preobrazhensky debate was about that. And Stalin’s solution to the whole problem through forced collectivisation was, I think, left a mark on the development of socialism, i.e. the entire authoritarian structure that developed and so on. Those were really shaped in that period because recisitums [tasfiyeler] in the Soviet Union because of forced collectivisation. 

Now we live in a very different world, where the basis for a worker-peasant alliance is really much firmer, because both are now confronting globalised capital. So there is no question of kulaks developing capitalist threat to socialist order. Because of the fact that they cannot develop as a capitalist class if the economy is open to encroachment by international agribusiness which would like to keep them under its control. So that actually puts a constraint on the development of indigenous capitalism from among the rich peasant class. On the other hand, to the extent they are squeezed. They have a real interest in making a common cause with the industrial workers. In other words, the basis for a worker-peasant alliance today is stronger than that of any kind from Lenin’s days.

I think the significance of the Indian peasant struggle is that it was the first challenge at the political level to the neoliberal order. The working class has been greatly weakened, both in the Global North and the Global South as well. If you go on strike, the capital would shift elsewhere, and would locate its plant elsewhere. That kind of fear is something that will generally keep the working class subdued. They have one-day strike, two-day strike but not a prolonged action. So the peasant action in India was the first prolonged action. And literally every means at the disposal of the state was used to break the peasant resistance. But they did not succeed. In every conceivable way they were mobilised against the peasants but the government did not succeed.

‘NEOFASCISM, NEOLIBERALISM’S RESPONSE TO POSSIBLE WORKERS’ MILITANCY’

You highlight one of the main consequences of the recent crisis is neo-fascism. It seems like neo-fascism claims that it is against neoliberalism and financial slavery, however, there is no indication that this movement try to cut transnational financial flows or raise workers’ consumption with a new industrial policy and public expenditures. I think India’s Narendra Modi is one of the best examples of this tendency. So, does it seem like there is no escape from neoliberalism? Presidents like Modi, Erdoğan, and Orban claim that they are resisting the Western hegemony and making their countries independent. Is that possible? 

Not at all. Modi is forever begging globalised capital to come and set up plants here, the whole slogan is “make in India.” I think neofascism is neoliberalism’s answer to possible worker class militancy. The militancy that you are currently witnessing in large parts of Europe, and a militancy which can threaten at any kind, even in the Global South. In much of Asia that militancy is going to manifest itself. I think Sri Lanka is a good example. The economic crisis neoliberalism has been pushing that country is going to now explode in the sense of working class and general urban resistance. The point is that now the crisis of neoliberalism has brought it to a situation, where it simply cannot continue without requiring an alternative pillar of political support. Neofascism provides that political support in a number of ways. Firstly, it is of course authoritarian. And it is not just authoritarian in terms of state authoritarianism, but it also has its army of thugs and hooligans who go around and terrorise people. Secondly, it actually divides the working class along the lines of ethnicity, religion and so on. And third, yet most importantly, it changes the discourse. Modi now does not claim anymore that he has brought about an economic revival, created jobs that provided for employment but now he claims that he built a temple. So they change the discourse. I think that is why neofascism is useful for neoliberalism. Except that unlike all fascisms, neofascism also cannot provide any solution for the economic crisis of neoliberalism. Not even a military solution.

You said that the western sanction regime pushes the world economy away from the neoliberal order to a host of ad hoc arrangements and undermines the imperialist-dominated order altogether. Do you still believe that? Do those ad hoc arrangements draw us up to a bloody world war? Also, Russia has not nationalized any foreign or Russian industry yet and has been strictly avoiding any sign of a Soviet-style economy or socialist measures. It seems that when neoliberal era and imperialist unipolarism come to an end, it doesn’t mean that individual countries which have a strife with the West automatically adopt a new and social economic policy. 

I agree with that. Socialism does not come by stealth. I think the Ukrainian war is certainly an immense crisis for global capitalism. Neoliberalism imposes upon the world an order, that is really an imperialist order because it has opened up all countries to the penetration of metropolitan capital. The post-war period you had dirigiste governments everywhere. They nationalised the industry, introduced some kind of planning, and controlled their local resources. That is something that imperialism tried to subvert. It tried to subvert through individual actions. People often tell me that in the 1950s and 60s yes imperialism was there and today is not, but the truth is the opposite. In the 1950s and 60s imperialism was weakened, which is why they attacked Mosaddeq, Allende and so on. Fundamentally imperialist military interventions were required to topple these regimes. While today that does not really require any military intervention of that kind. Except if a country is trying to threaten the order.

So the point is that I believe that because of the crisis of neoliberalism you really have some kind of a threat to the regime. When you have that kind of a threat, then the efforts to control that threat actually further accentuate the crisis.

Let me give an example. Russia, China, newly emerging countries, they are obviously revolting against the unipolar world. Russia is certainly not a socialist country, they are oligarch controlled. Except that one should not forget that oligarchs were opposed to the Russo-Ukrainian war. And China, while it calls itself a socialist country, there are all kinds of debates and discussions about it. But fundamentally, what you have today, therefore, is not a threat of socialism for the imperialist order, but the threat of multipolarism. 

That is sought to be countered by having sanctions against Russia. What have the sanctions achieved? The sanctions in fact have the opposite effect of making all kinds of countries, India included, have bilateral deals with Russia. And if you have a bilateral deal, then you have opted out of global order, to that limited extent at least. So the global order whose defense is the primary objective, gets undermined by the same defense. That is the symptom of the crisis of imperialism and neoliberalism in the current context. 

A country like Saudi Arabia is developing relations and some kind of bilateral talks with China. Going with Russia in the OPEC+, in order to cut down the daily production of oil against American wishes. These are straws in the wind. They are symptoms of a collapsing order. Saudi Arabia, who would have thought? The global order imposed by imperialism, I think, is collapsing. 

‘THINGS GOING ON IN EUROPE INTEREST THE WHOLE WORLD’

So you think that working people of the Global South can use this opportunity.

Yes, of course, people of the Global South can use this opportunity. But I believe what is happening in the Global North is quite interesting. After all, British workers, German workers… Italian workers, they actually oppose the Ukrainian war. The Italian neofascist government, for instance, is in fact holding the line. Neoliberalism and neofascism have once more formed a formidable alliance in Italy.

What is happening in Europe is of great interest to the entire world and also to the future of capitalism. I am not saying that the workers are engaging in a socialist struggle, the workers are engaging in an economic struggle. But the economic struggle within the parameters of capitalism is really not going to be very successful. So the point is to see what the workers would do next. Obviously, then, political issues would come on to the agenda. And I believe, in a once, European workers are on paths of strikes and actions and so on, these would have a great impact on the Global South as well. I believe generally that we are entering a period of struggles.