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Mainstream, VOL LV No 39 New Delhi September 16, 2017

India and the Evolving New World Order

Monday 18 September 2017, by Kobad Ghandy

This article has been sent to us for publication by the eminent Marxist-Maoist thinker, Kobad Ghandy, from the Visakhapatnam Central Jail where he is currently lodged. He started writing it in Hyderabad Jail and completed it at the Visakhapatnam Central Jail. We are carrying here its first part due to paucity of space. The second part will follow shortly.

Part I : Evolving New World Order

It was the spring of 1972. Standing as an accused in a Court in London, I was asked for my statement. “Your Honour,” I said, “it was not I who indulged in violence, but a handful of white racists who attacked while we were giving speeches. They were let off while the cops arrested three of us, targeting and beating me, the only Indian in the group. Your Honour, the British rulers robbed our country, impoverishing a rich nation, humiliating our people (dogs and Indians not allowed!); and were responsible for killing some 35 million Indians during their period of rule. Indians were also used as cannon fodder for British wars and slave labour to work in their plantations all over the world. Such racist attacks are a result of this white supremacist mind-set, to continue the humiliation of our countrymen. But the sun has set all the British Empire and we shall no longer be cowered.”

By now the judge was livid. Displaying his own imperial venom, instead of looking at the facts of the case, and racism in its historical perspective, he thundered: “Lock him up immediately, he is dangerous to be let loose; I will pass the sentence tomorrow.” The next day, when I was brought from Brixton Jail, he sentenced two of us to three months’ hard labour.

Now in Hyderabad jail, when I read about the Kuchibotla incident and the numerous other lynchings, shootings and hate attacks on Indians in the US, the above experience of mine came to mind. After all, it was this racism, witnessed in the UK, that changed the entire course of my life. Contemplating the past, I wondered why, after nearly 50 years of mind-boggling advances in technology, the mind-set continues to be what it was when I was in London—nay, it seems to have gone further backwards from those days.

In fact, Indians throughout the world are being humiliated as never before. Attacks on Indians/Asians have grown ten-fold in the past few years—and not only in the US, but also in Britain, Australia etc. Lakhs of Indians in Arab countries are being treated as slave labour (not much different from the indentured labour of British times) and our women humiliated, beaten and sexually exoploited by the Sheikhs. American and other governments are putting restrictions on the entry of Indian labour (and goods) and promoting xenophobia, while at the same time their companies continue to lord it over our country.

We seem to be going back to the days of imperial lordship both in India and abroad—of course 21st-century style.

Rising Xenophobia and Protectionism

Earlier, a similar psychosis was whipped up after the 1929 stock-market crash, during the period of economic stagnation and political protectionism of the 1930s. This finally resulted in World War II. It was particularly virulent among the Axis powers, but fascism grew in much of the ‘civilised’ world as well. Such a situation seems to be repeating after the 2008 banking crash and the decade-long economic stagnation that has followed. Is history repeating itself, and are we heading towards another World War?

Even that apologist of US imperial rule, Francis Fukuyama, sounded worried as his “End of History” hypothesis seems to be going awry. Recently, he said1: “That crisis (2008), in retrospect, was really important, because it was engineered by the elites and it hurt ordinary people, and then the elites managed to largely shield themselves from the consequences. The last time that happend was in 1929 to 1931....”

But there was one major differences between 1929 and 2008. In the post-1929 period the scramble for world markets became exceedingly fierce, as one huge economy—the USSR—had totally withdrawn from the international market significantly reducing the size of the cake. As a consequence this resulted in intense rivalry for markets, extreme protectionism amongst the big powers precipitating into military warfare.

On the other hand, in 2008, though the West was enmeshed in a major economic crisis, a new $ 10 trillion economy had emerged, and China continued to grow at a phenomenal 6-7 per cent. As China, unlike the USSR of the 1930s, has been completely integrated with the Western markets, it helped cushion the impact of the banking crash on the world economy to some extent. In fact the Economist (October 3, 2015) reported that during the peak of the 2007-08 crisis, American officials made weekly calls to reassure their Chinese counterparts that they would not default. They were worried that if China withdrew their huge $ 3 trillion investments in US Treasury Bonds, it could trigger a run on the dollar and the collapse of an already fragile financial architecture.

Yet, though there seems no sign of recovery, and the continuing stagnation in the major Western economies is fuelling fascist xenophobia (to divert the people’s attention away from the real cause of their increased sufferings) and increased protectionism (to safeguard the country’s dwindling markets and jobs), it has not, for the present, precipitated to extremes and war.

But, it has resulted in Brexit and a Trump victory, the rise of a fascist Le Pen’s party in France to the Number Two position, the wafer-thin defeat of extreme Right-wing parties in Austria and the Netherlands and the rise of strong neo-Nazi parties all over Europe. The rise of these parties have threatened the very survival of the EU/Euro, as they seek its dismantling together with rapprochement towards Russia.

While these sharp divisions within Europe and America will weaken them further and make cohesive action difficult, it will further facilitate the rise of a new geo-political architecture with China replacing the US as the world’s Number One economic power.

But, more on that later; let us first look at the state of the Western (including Japan) camp.

Stagnation of Western Economies post-2008

After the 2008 crash, the Western countries, to save themselves from collapse, resorted to Quantitative Easing—that is, heavy borrowings—and reducing interest rates to unheard-of lows. Though these monetary manipulations prevented immediate collapse as in 1930, it has resulted in spiralling government debts, which is creating ever new problems.

Due to heavy borrowings the rich countries’ average debt to GDP ratio rose by 50 per cent in just the first years since 2007.2 In fact Eric Tussaint, in his recent book Bankocracy, says: “The public debt system as it functions in capitalism is a permanent mechanism for the transfer of wealth produced by the people to the capitalist class. The crisis which began in 2007-08 reinforced this mechanism because the losses and debts of major banks were transformed into public debts. On a very large scale, sovernments socialised bank losses, so that banks could continue to make profits.” Tussaint shows that in 2013 the total international assets of the major banks exceeded a staggering $ 100 trillion—the combined nominal GDP of the three largest economies (the US, EU, China) was $ 46 trillion in 2016. With such economic clout it is no wonder that Goldman Sachs is said to pull the major political strings in Europe (incidentally, France’s new President was a Rothchild investment banker) and Trump’s top circle comprise three Goldman Sachs men (including the ex-CEO), the fourth, the Secretary of State, being the ex-CEO of Exxon.

If we turn to the interest rates, while the Euro area and Japanese interest rates have been stuck at near zero levels, that of the US has been around one per cent. In fact, the world’s oldest central bank, Riksbank of Swedan, holds interest rates at a record -0.5 per cent.

Despite such desperate measures, revival seems far off, and economic decline continues. In the five years to end-2016, the profits of the MNCS have fallen by 25 per cent. Returns on investments declined to their lowest in two decades. The majority of the giants have recorded sluggish growth.3 According to an UNCTAD report,4 growth rates of Europe and Japan continue to stagnate at near-zero levels while in the US it would slow to 1.6 per cent in 2016 (in fact the US Quarter One growth of 2017 was the lowest in three years at 0.7 per cent). It reported that global trade growth has slowed even more dramatically to just 1.6 per cent in 2016, a full percentage point lower than the world output.

Even before the crisis, according to Thomas Picketty, during the entire period of globali-sation, only the top one per cnt have made phenomenal wealth while the rest have lost out horribly. And after 2008, conditions have further worsened due to austerity measures of the various governments. Money for welfare was diverted to bail out the banks. For example, the UK has resorted to austerity measures on a scale never seen in living memory, cutting welfare payments, pensions and government-funded services. Those in employment are earning 15 per cent less than what they earned a decade ago (which was already low due to years of globalisation) and students emerge from the university saddled with debts of $ 40,000 (Rs 30 lakhs).

With trade growth declining, basic commodity prices (minerals, oil, agri produce etc.) crashing, the world markets are shrinking resulting in countries dumping steel and other produce and many countries running up huge trade deficits. The slump in oil prices has badly hit the economies of producer countries like Brazil, Venezuela, Iran, Russia etc. while countries like the US have been running up huge trade deficits—a phenomental $ 310 billion with China in 2016, $ 67 billion with Germany, $ 56 billion with Japan and $ 62 billion with Mexico.5 Of the major economies (G-20) it is only China and Germany that have sizable trade surpluses, the bulk of the rest are running big deficits.

With all indicators down, the Economist warns6 that Sod’s Law decrees that sooner or later, policy-makers will face another downturn. And, it adds, the danger is that this time, having used up their arsenal (that is, of monetary manipulations of QE and low interest rates) governments and central banks will not have any ammunition left to fight the next recession.

The writing is, therefore, on the wall: the crisis in Western economies is likely to only deepen resulting in:

* further attacks on the people’s living standards; so further shrinkage of local and world markets;

* intensification of trade wars (witness the US’ recent draconian sanctions on Russia) resulting in growing protectionism among the major powers;

* aggressive push of Western investments and goods into Third World countries, thereby seeking to push the burden of the crisis on the backs of backward countries. An example of this was the demonetisation in India which destroyed crores of livelihoods, but gave an unimaginable market reach to the US digital conglomerates;

* greater militarisation fearing trade wars may turn into hot wars;

* greater contradictions between the major powers and within them.

All this has happened before in crisis situations which comes in cycles in a capitalist/imperialist economic system. But there is one new phenomenon—while the bulk of the major economies are going under, Chia is rising from strength to strength. Though its growth rate and exports have also somewhat slowed, this has been insignificant compared to the G-7 countries.

So, now let us look at the rise of China, and also the US’ state in the world economy (particularly in relation to China) before turning to India and its place in the comity of nations.

China’s Rise—Changing Geo-political Equations

The Economist (October 3, 2015) reported: “In the first change in the world economic order since 1920-1945 when America overtook Britain, the dominance of the US is being eroded by China. Measured at Purchasing Power Parity (PPP) China has already become the number one economy, overtaking the US—measured thus, as a share of world GDP, the US and China are 16 per cent and 17 per cent respectively. Judged by its share of world steel production and consumption, transport and commodities production and consumption, the US is going to the dogs. The number of countries for which America is the biggest export market has dropped from 44 in 1999 to 32 now. Over the same period the figure for China has risen from 2 to 43.”

For the Economist to say all this, the situation must be quite serious as the publication is strongly with the US establishment. But this is not all. It has been reported7 that for the first time in recent history an economy other than the US has emerged as the largest contributor to global growth, with China accounting for one-third of the world’s growth compared to a 17 per cent by the US and less than 10 per cent each for Europe and Japan.

This huge growth is based on both, a vast expansion of the home market by raising the living standards of the people and also its exports sweeping entire world markets.

If we first look at the home front, according to the Economist,8 “Between 1980 and 2010 China cut the number living below the poverty line ($ 2 per day) by around 600 million—by far the biggest reduction in a single country ever...“ In fact, after the 2008 crisis when world trade declined, China focussed on increasing its home market.

But capitalism has its own laws which needs markets worldwide; otherwise it faces a crisis of overproduction. Already Chinese steel production capacity is 50 per cent more than its need (both home and export). Though there may be a relative decline in exports post-2008, it is still massive resulting in an annual trade surplus of $ 600 billion with the rest of the world and foreign exchange reserves of $ 3.5 trillion. And while the West is retreating into protectionism, China has launched the world’s biggest infrastructure project ever—the Belt and Road Initiative (BRI), earlier called the One Belt One Road (OBOR).

Even before the launch of the BRI, the Chinese have had huge projects in rail, road, ports etc. in Asia and Africa and particularly Iran. In February 2016 the first train from China reached Tehran covering 10,399 kms in 14 days. With Iran being sanctioned by the West, and China not bowing to US pressure (like India), Chinese investment and trade with Iran has reached gigantic proportions opening a door to both Europe and the Midle East. China has vast road and rail projects in Iran which is also a focus of the OBOR network. China is Iran’s largest trading partner and the largest market for Iranian oil. Not only state investment, Iran is becoming a popular destination for Chinese entrepreneurs.

With already such huge projects abroad, the basis was laid for the biggest infrastructure project ever conceptualised in the world—the BRI. With its “basic principles” and “strategic objectives” established in October 2013, it was finally launched at the BRI Conference in May 2017. This was attended by 29 Heads of State with leaders or senior officials attending from Russia, Japan, Germany, France, the UK and even the US. Of the 130 countries that participated, all South Asian countries (except India, which boycotted) were to be seen. Sixtyeight countries are already part of the BRI encompassing two-thirds of the world’s population, one-third of its GDP and about $ 1.4 trillion of Chinese Government money.

With China’s growing outreach, it is not only beginning to dominate the international fora, but setting up its own international bodies. By next year it will be the third largest financier of the UN and has committed $ 6 billion to the Paris Climate Change Fund (compared to the US’ $ 3 billion, which now Trump refuses to pay). Also, with the US under Trump walking out of the international free trade agreements like the TPP (Trans-Pacific Partnership), most countries of Asia and even Latin America are turning to China to fill the gap. An example is the 16-nation RCEP (Regional Comprehensive Economic Partnership), in which ASEAN countries, China, Japan, Australia, New Zealand, South Korea and India take part, accounting for 40 per cent of the world GDP.

The parallel international bodies, set up at China’s initiative, are the SCO (Shanghai Cooperation Organisation) and BRICS (Brazil, Russia, India, China, South Africa), both of them seeking to consolidate the Central Asian countries and the emerging middle-level economies around the China-Russia axis. Then, parallel to the ADB (Asian Development Bank), China announced its intention to form the AIIIB in 2013. This was finally launched in January 2016 with a $ 20 billion paid-up capital involving 57 countries including 13 NATO members, India, Saudi Arabia, Iran and Eurasia.

But the most defining aspect of the rise of a new global power is not only the huge capital accumulation but a lead in technology. The latter gives a lead not only in manufacturing, but also communication and weaponry. The steam engine and other technological discoveries gave Britain this lead in the late 18th century. For the last 80 years it is the US that has led in all spheres of technology including nuclear, microchip and internet. But now even here China is all set to take the lead—its vast capital interwoven with technological innovation is all set to get a scientific leap.

The policy, known as Made in China 2025, sets goals for China to be a global leader in 10 fields with the huge infusion of state and private money. Manoj Joshi of the think-tank Observer Research Foundation has in fact said9: “Behind the horizon is an array of even more dramatic AI (Artificial Intelligence—said to be the next major leap after the internet)-based technologies, where China has emerged as a global leader—in quantum computing and communications and electro-magnetic, pulsar propulsions in space. These have greater military consequences, and in all of them China has displayed a capacity, such as the launch last August of the world’s first quantam communications satellite, Micins.” In the next five years the Chinese Government will alone spend $ 250 billion, while its tech giants Baidu, Alibaba, Tencent, Huawei etc. will spend several times that sum.

The US is worried about losing its techno-logical lead. So much so that the White House is preparing a broad investigation into China’s trade practices and growing worries over a China Government-led effort to make the country a global leader in microchips, electric cars and other crucial technolgies of the future.

From all these facts it is clear that China is all set to change global equations. But the US will not give way without a fight. After all, it still has two trump cards—the $ (Dollar) and the Gun.

US Down but Not Out

The Dollar, as a currency, still dominates with 60 per cent of the world’s output lying in the $-zone.10 In addition, the US’ defence budget is more than all the major powers put together—and Trump has added an additional $ 54 billion in the current budget.

Take first the $. Though the US firms’ share of the stock of international corporate invest-ment has fallen from 39 per cent in 1999 to 24 per cent today, its financial clout has in fact grown. American fund managers run 55 per cent of the world’s assets under manage-ments, up from 44 per cent a decade ago. In addition, the bulk of the top eight billionaires of the world (with the same wealth as 50 per cent of the world’s population) are mostly American.11 Most of these are the Digital Moguls, who, according to author John Naughton, are the “Robber Barons” of our age. After all, Google, Facebook, Apple, Microsoft controlling shares are held by the same handful of private investment funds led by Vanguard Inc.12 So, for example, the bulk of the Private Equity and Venture Capitalist funds taking over Indian industry and finance are American!!

If we turn to military expenditure, in 2016 the US spent $ 622 billion—compare this with its main rivals, China’s $ 192 billion and Russia’s $ 66 billion. But, this is not all: the world’s top arms purchasers were also client states of the US/UK— between 2005 and 2015 the Saudis were the largest importers with $ 94 billion. In addition Egypt bought $ 30 billion and the UAE $ 26 billion, not to mention Israel which has one of the most sophisticated war machines in the world. The next two biggest importer of arms (between 2008 and 2015) were India at $ 34 billion and Iraq at $ 28 billion—both increasingly tied to the US. Also, in the export of arms, the West was far ahead—between 2008 and 2015 the US exported $ 268 billion of arms, France $ 52 billion, the UK $ 25 billion compared to Russia’s $ 89 billion and Chin’s $ 28 billion.13 In addition the US also 800 military bases in 70 countries.14

Though Russia has a huge arsenal of nuclear arms and China has recently established its foreign military hase in Djbouti, they are no much to the US’ fire-power. Not that this fire-power was of much value in Vietnam or Afghanistan!!

As it is, the US has a history of military adventures (either directly or through proxies) throughout the world—no matter whether it was the Republicans or the Democrats in power. Though Republicans and Democrats are united against Trump’s Russia-rapprochement policy, Trump is no peacenik.

Trump’s first foreign visits were to the US’ two most loyal henchment—Saudi Arabia and Israel. With the Saudis he signed a $ 110 billion arms deal and blessed the new Saudi-initiated Islamic Military Alliance—a grouping of 41 Sunni countries under the command of the former Pak Army Chief. He was instrumental in ratcheting up further tension in the Middle East by disowning the Iran nuclear deal, re-imposing sanctions and tacitly supporting the Saudi-led GCC and Egypt’s blockade against Qatar, an ally of Iran and Turkey. It continues to provoke China in the South China Sea (Fukuyama has warned this as a major flash-point) and has threatened to bomb North Korea back to the stone ages and is even considering military action on Venezuela.

Though the US establishment is divided as never before, with the Congress unitedly bypassing the President to impose draconian sanctions on Moscow (unheard-of in US history), flexing its military muscle is not only a habit, the economic stagnation could provoke it to more desperate actions—as the Russian sanctions show; which the Russians have called a declaration of

“Trade War“

, angering even some European allies of the US which depend on Russia for much of their energy needs.

Though China would want a peaceful environment for its huge BRI project and market expansion, the US may put spokes in the wheel. As already mentioned, it may not be too happy to witness China’s growth without stiff opposition—using the $, that is, economic protectonism and even the gun. After all, Obama’s “Pacific Pivot”, US meddling in the South China Sea (thousands of miles from its shore) and the

Thad

missile system being established in South Korea—all do not augur well for the future. Though the sharp divisions within and amongst the countries of the West may disturb coherent action, the situation is fraught with dangers.

In this sensitives situation, countries of the world should not be provoked into military action by any of the blocks against the other, should stand for peace and base their economy on self-reliance. Did Subhas Chandra Bose not brilliantly utilise the contradictions amongst the major powers to free India from British chains? A similar situation is developing in the world. How can India best use it to its advantage?

(To be Continued)

Notes

1. Open, January 5, 2017.

2. Economist, January 13, 2015.

3. Hans editorial, Hyderabad, February 2, 2017.

4. The Hindu, September 22, 2016.

5. The Hindu, April 23, 2017.

6. Economist, January 13, 2015.

7. The Times of India, December 27, 2015.

8. Economist quoted in The Indian Express, November 2015.

9. Outlook, May 2017.

10. Economist, October 3, 2015.

11. Oxfam Report, The Hindu, January 4, 2017.

12. Vandana Shiva, Deccan Herald, January 4, 2017.

13. SIPRI Report, The Hindu, January 21, 2017.

14. The Hindu, January 4, 2017.

ISSN : 0542-1462 / RNI No. : 7064/62