Lohia‘s Prescription for Capitalism‘s Crises

by Mastram Kapoor

The President of the USA, Barack Obama, in his message to the G-20 London summit, called for a global effort to overcome the global economic crisis and expressed his determination to take a lead in this matter. He said: “The leaders of the G-20 have a responsibility to take a bold, comprehensive and coordinated action that not only jumpstarts recovery but also starts a new era of economic engagement to prevent a crisis like this taking place in future.” He described the crisis as a crisis in credit and confidence that has swept across borders with consequences for every corner of the world. He said: “For the first time in a generation the global economy is contracting and trade is shrinking. Trillions of dollars have been lost, banks have stopped lending and tens of millions will lose their jobs across globe. The prosperity of every nation has been endangered along with stability of governments and survival of people in the most vulnerable parts of the world.”

These words, coming from the mouth of the President of America, are a real warning and any country which will show complacency in this matter will only be living in delusion and inviting serious trouble. For example, there is an atmosphere of complacency in India where the Leftists claimed credit for successfully preventing the crisis by opposing and stalling the privatisation of banks and insurance sectors and the economists supporting the present system and government were expressing glee over inflation going down till they realised that they were facing the worst situation.

In the developed countries the crisis is due to no demand and in the developing countries like India it is due to no purchasing power. In our country, where 77 per cent of the population is living on Rs 20 a day, there must be zero purchasing power for non-essential goods and luxury goods in which the prices have gone down, and the remaining 23 per cent, who have flourished under the present economy, must be waiting for prices to go down further. The demand for essential commodities has not gone down—so there is no price reduction here. On the contrary, the prices are rising continuously because the production of these commodities has gone down over the years due to neglect of the agricultural sector and the demand has remained constant or has increased due to increase in population.

The real cause of this global crisis is great disparity among the nations of the world. The world has been divided between the Haves and Have-nots. The Haves have a surfeit of goods which they want to sell to the Have-nots but the Have-nots have no purchasing power to purchase these goods. In the words of Dr Lohia, uttered long ago in the fifties of the last century, “Some areas of the world have created a large part of the material and cultural goods of the world and want to preserve what they have created, and on the other hand, the large part of the world which is not creating such goods but is striving to create.” He therefore suggested that “those who want to preserve what they have created must help others to create by inventing and supplying to them machines, tools and technology which they would need for their development”.

This will not only reduce poverty and increase the purchasing power of the poor countries but also keep factories going and protect jobs in the rich countries. The rich countries, however, tried to tackle this disparity by giving aid to the poor countries in such a way that the aid was used for profiteering though the backdoor and corrupted the ruling elites of these countries; and, therefore, this aid neither strengthened the productive capacity of these countries and increased their purchasing power, nor reduced the disparity between the rich and poor countries.

President Barack Obama has underlined the fact that the success of the American economy is inextricably linked to the global economy. He says: “There is no line between action that restores growth within our borders and action that supports it beyond. If people in other countries cannot spend, markets dry up—already we have seen the biggest drop in American export in nearly four decades, which has led directly to American job-losses.”

But the remedy he suggests to tide over the crisis is too hackneyed and bookish. It is pumping money into the corrupt and bankrupt companies to stimulate growth in the rich countries without simultaneously stimulating it in the poor countries to reduce the disparity between the two. It is going into the same process which created the crisis although with a warning that “if we continue to let financial institutions around the world act recklessly and irresponsibly, we will remain trapped in a cycle of bubble and bust” and with determination to crack down on offshore tax havens and money-laundering and stress on rigorous transparency and accountability to check abuse.

•

IN comparison with this, the remedy proposed by Dr Lohia is far more effective and relevant. The poor countries need the means of production with simple technology (small machine technology in Lohia’s words) which may enable them to increase the productivity of every individual and help millions of villages as well as urbanised underdeveloped areas to become self-sufficient in matters of education, health and hygiene, production of electricity, water supply, environ-mental protection in addition to increasing the earning and purchasing power of the population there. This would create unlimited market for the goods produced in the factories in the rich countries and protect them from job-losses.

The crisis of capitalism the world is facing today may turn out to be a blessing in disguise since it may start such a process out of compulsion. High-level government spending to create employment, a la ‘New Deal’, in countries hit by the crisis, may be directed to produce less energy-consuming, simple and easy-to-control small machines and tools and supply them to the Third World countries on concessional terms, without strings and underhand corruption. For example, instead of producing and supplying cars, computers and mobile phones or war material, they should produce and supply things like bullock-driven tractors and harvesters, small generators which can produce electricity from sun, wind or water and such other goods as are needed to increase the productivity. A huge demand for such small machines and simple technology can be created in the Third World countries. This will not only considerably reduce energy consumption and environmental degra-dation, but also decrease the gap between the rich and poor, nationally and internationally.

It is unfortunate, rather tragic, that Lohia, a great thinker and Gandhian Socialist, who was engaged in the search for a new world order along with thinkers like Albert Einstein, Bernard Shaw, Pearl Buck, Bertrand Russel, Scott Buchanan, Stringfellow Barr, etc., was either ignored or misinterpreted by intellectuals in his own country as well as others, just because he was a bitter critic of the ruling elite of the day and was looking ahead into the future which could not be grasped by these intellectuals. In this connection a footnote added to his essay ‘Economics after Marx’, written during the ‘Quit India’ movement in 1942, is reproduced below to show that his analysis of the crises of capitalism is very much relevant even in the present context.

“A vast lore has been written on these crises, their periodicity and nature, their causes and so forth. Attempts have been made to number these crises and the regular intervals at which they have occurred. We may also not worry overmuch with the University professor’s characterisation of these as monetary crises, production crisis, crisis in confidence and so forth, for such categories express external forms and do not go to the root of the matter. Marx partly goes to the root when he traces these crises to the conflict between production and consumption, between the higher yield of mechanised labour-power and the constant or decreasing total wages of the working class. But then Marx traces the overcoming of these crises to the same source which is their cause. He and his disciples emphasise the period of improvement in the means of production, building better machinery and so forth, during which goods of consumption do not immediately appear on market but wages are still paid. They indeed drop phrases about the pressing needs of the peasantry, improvement in agriculture, enmeshing of the whole world in the capitalist net, but these facts have not been properly digested in the general Marxist theory on industrial crises.

“In fact, capitalist politicians and economists have elaborated a medicine-hook for industrial crises and this is none other than the New Deal, works-programmes, war-industries and, perhaps in an unwilling measure, war, followed by post-war reconstruction. Quite a few of these works-programmes like draining of marshes, fighting malaria, building of town-halls for assemblies do not at all enter the consumption market but add to the health and entertainment of the people and also pay out wages to the labourers. Even among the means of production, a distinction is made between the machines to manufacture machines which enter into consu-mption at a late stage and the machines which do so earlier. The industry of housing on a capitalist-cum-municipal basis can also tide over a crisis for some time, as it does not immediately enter the market. Capitalism is groping towards various combinations of industries which produce no or slow effect on the market.

“Unless the undigested facts of socialist theory on crises are properly understood, we are forced to look upon the capitalist crises, periodic or general, as simple, cold, highly unpleasant but not fatal.”

Someone may perhaps draw President Obama’s attention to the socialist theory on capitalism’s crises, some indications of which have been given in this article.

The author is a freelance writer and journalist in Hindi; he has written, edited and translated over a hundred books and pamphlets on literature social and political thought, education and children’s literature, and these include 11 volumes of documents on the freedom movement and 17 volumes of the Collected Works of Dr Lohia. He has had a long association with the socialist movement.