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INTERMEDIATE CLASSES
- The crisis of neo-liberalism

Michael Kalecki, the renowned Polish economist — who had discovered John Maynard Keynes’s theory that revolutionized economics, independently of, and prior to, Keynes himself — had put forward a novel idea in 1964. He had characterized a whole range of new regimes in decolonized Third World countries — from Nehru’s India and Nasser’s Egypt to Sukarno’s Indonesia — as “Intermediate Regimes” where the “intermediate class” (or the petit bourgeoisie), which occupies the social space between the capitalists on the one hand and the workers on the other, and which comprises the middle class in urban areas and the peasantry in rural areas, was, according to him,wielding State power.

The petit bourgeoisie wielding State power, he argued, had never happened in history. Whenever, perchance, its representatives came to power, they “invariably served the interests of big business (often allied with the remnants of the feudal system)”. But a dénouement where they wielded State power on their own became possible in the particular conjuncture following decolonization for two specific reasons, one internal and one external.

The internal reason was the country’s colonial past, which had stunted the growth of the bourgeoisie proper and correspondingly of the proletariat. The external reason was the existence of the Soviet Union and the socialist bloc on the one side, and of the United States of America and the capitalist world on the other, between whom the intermediate regime could manoeuvre to get aid without too many strings, and to prevent any pressure to move towards either classical capitalism or classical socialism. Kalecki saw the intermediate regime as a durable phenomenon, whose two main features were state capitalism — that is, an emphasis on the public sector, and on non-alignment.

Kalecki’s theory has been much discussed and much criticized. Whether these regimes, even as they were at the time, could be characterized as intermediate regimes with petit bourgeois hegemony, or whether they were regimes dominated by the bourgeoisie which only used the public sector as a means of developing capitalism, as the Communist Parties in countries like India argued, was one point of controversy. The other related to its alleged durability. Indeed, within a few years of Kalecki’s writing, Egypt under Anwar Sadat and Indonesia under Suharto (whose accession to power was accompanied by a massacre of communists), had already moved away from his picture of an intermediate regime. One point, however, where Kalecki was certainly right was the social and political weight of the intermediate class or petit bourgeoisie in the ex-colonial Third World countries. The question, therefore, arises: how do we trace the subsequent history of this intermediate class in India?

The Nehruvian dirigiste regime had got into a crisis long before economic liberalization — starting in the mid-1980s and gathering momentum in the 1990s — supplanted it. The proximate reason for the crisis is not far to seek. Given the importance of the State as an economic player within that regime, growing public expenditure was crucial for sustaining the growth process under it. But its capacity to raise fiscal resources to keep such expenditure going, atrophied progressively, primarily because of the resistance of the capitalists, and the rich in general, to pay taxes. (India was and remains, to this day, a country with one of the lowest ratios of tax revenue to national income anywhere in the world.) Inevitably, therefore, what ensued was a combination of inflation, caused by excessive government borrowing, indirect taxes and a slackening of growth, and with it of the growth rate of employment, which inter alia alienated urban middle-class support from it.

The crisis of the dirigiste regime began from the mid-1960s, though the Green Revolution — for which bank nationalization and the introduction of directed credit towards agriculture was an important contributory factor — gave it a transitory reprieve. The crisis of unemployment afflicting the urban middle class, captured so tellingly in Mrinal Sen’s film, Chorus, radicalized it greatly. This was manifest in some parts of India in the support for the movement led by Jaya Prakash Narayan, and in other parts, especially in West Bengal, in its moving closer to the Left.

The Left’s inability to move centre-stage, for which it was best positioned just before Indira Gandhi’s assassination in 1984, together with international developments, including the emergence of the phenomenon of globalized finance and the subsequent collapse of the Soviet Union, opened the way for the supplanting of Nehruvian dirigisme not by any alternative proposed by the Left, but by the neo-liberal trajectory of development.

What neo-liberalism has done, however, is to bring about a schism between the peasantry and the urban middle class, the two major components of Kalecki’s intermediate class. The peasantry has been, quite clearly, a victim of neo-liberal policies, which have entailed a withdrawal of State support from it, expressed, among other things, in the dwindling of institutional credit to peasant agriculture and the re-emergence of private moneylending in new forms. Not surprisingly, per capita foodgrains availability for all uses has declined to a level no higher than what it had been in the years before World War II (aided also by government holding of excessive stocks and the export of foodgrains). At the same time, important segments of the urban middle class have been beneficiaries of the neo-liberal regime, which explains their desire for the so-called “development” identified with neo-liberalism. It is a symptom of the schism between the peasantry and this segment of the urban middle class that the Left’s attempt to relate to this segment by pursuing the development agenda, as it is currently understood, alienated from it the support of sections of the peasantry in its one-time bastion, West Bengal.

The neo-liberal trajectory itself, however, has now run into a crisis, characterized by slowing growth, acute inflation, absolute stagnation in manufacturing output, growing unemployment (camouflaged as rising informal, temporary and intermittent employment), dwindling opportunities for large segments of the urban middle class, and an extremely precarious balance-of-payments situation that can get into a tail-spin with the tapering off of the “quantitative easing” being pursued by the Federal Reserve Board of the US (which is pumping huge amounts of liquidity into the world economy). The crisis of the neo- liberal trajectory is, once again, alienating large sections of the urban middle class from the current economic regime.

This is manifesting itself in two alternative, and not necessarily mutually exclusive, ways. One is through the support for a change that would bring in even more vigorous neo-liberal development — and the person being projected as the harbinger of such vigorous neo-liberalism is Narendra Modi who obviously enjoys the backing of the corporate-financial elite. The other is through the support for a clean, corruption-free capitalism, which was evident in the urban middle-class backing for Anna Hazare’s movement and which now underlies the rise to power of the Aam Aadmi Party in Delhi.

The common assumption behind both these ways, in which middle-class anger is expressing itself, is that the reason for the crisis of neo-liberalism lies not in neo- liberalism itself, not in the fact of the Indian economy being hitched to a world capitalist economy under the neo-liberal dispensation that is itself afflicted by an acute crisis, but, rather, in the manner of its pursuit by the Manmohan Singh government. The reason is seen, for instance, to lie in non-governance, corruption, the indecisiveness of the government, crony capitalism and such like factors.

What is never asked is why the very government that was presiding over a growth rate that was apparently propelling India to the status of an economic superpower should suddenly get afflicted by non-governance and indecisiveness; and whether it is at all possible to dissociate corruption from neo-liberal capitalism, under the aegis of a corporate-financial elite that is enriching itself through the expropriation of public property (via privatization and disinvestment), and of common property, tribal property and peasant property (via land acquisition).

Not only is the intermediate class split between its rural and urban components, but the latter is also far more marginal today than it had been in Kalecki’s time, despite its visibility and volubility, since it has no alternative to the agenda of the corporate- financial elite. This way it will only be living up to its historical role of “serving the interests of big business”. There is, however, another possibility, which Latin America demonstrates, and that is of the urban middle class joining the other classes, notably workers and peasants, in the resistance against neo-liberalism, and to effect an alternative trajectory of development. This happened in Latin America because the urban middle class drew the conclusion from the crisis of neo-liberalism there that it was a cul-de-sac. Will it do so in India?