The Chimera of a Stabilised Capitalism
Prabhat Patnaik
THE vision of a capitalism that is “stabilised” through a rectification of its “excesses”, and hence pre-empts any social challenge to its existence, has always endured in one form or another among economists. This vision is in sharp contrast to the Marxist perception which holds that the only way that the so-called “excesses” of capitalism can be got rid of, is through a transcendence of capitalism itself. This vision of a rectified, and hence “stabilised” capitalism has of course been shown repeatedly to be a chimera; but that fact has not prevented the persistence of such a vision in one form or another.
The English economist John Maynard Keynes had seen this “excess” as consisting in the large-scale involuntary unemployment that the system was forever saddled with, not just in depressions when this unemployment got hugely magnified, but even in its ordinary quotidian existence. The mode of rectification according to him was through the intervention of the State by injecting demand into the system; and yet the capitalism which had supposedly been “rectified” with Keynes-inspired State intervention, instead of getting stabilised, got re-saddled once again by substantial unemployment, regarding which the State could do little in the new situation.
In a different context, in third world societies where the workings of capitalism have unleashed mass poverty that is increasing over time, a vision was held out that this situation could be stabilised, that the exclusion from resources of ever-growing number of people could be arrested, and even reversed, through the infusion of micro-credit, without any need for transcending the system. The World Bank was an enthusiastic promoter of the idea that while individual marginalised households might not be able to access credit on non-exploitative terms and hence take any initiative to improve their miserable living condition, through, for instance, the setting up of micro-enterprises, they could overcome this predicament by forming self-help groups. Institutional credit on easier terms could be accessed by such groups who could then take initiatives to improve their lot through small local business ventures.
What was striking about this World Bank vision is that it did not involve any simultaneous attempt on the part of the State to curb capitalism, to put restrictions on its spontaneous tendencies. In India for instance bank nationalisation was used to partially redirect institutional credit away from monopoly houses towards agriculture and small borrowers, which was an interference in, indeed a partial reversal of, the spontaneous tendency of capitalism to effect a process of centralisation of capital. The World Bank vision on micro-credit did not entail any nationalisation or any interference by the State in the spontaneous tendencies of capitalism. It visualised poverty and unemployment disappearing through the provision of micro-credit within the framework of capitalism itself (entities like the World Bank of course do not see capitalism as being characterised by any spontaneous tendencies whatsoever). So, for them it was a case of “having your cake and eating it too”; you could have your capitalism and yet overcome poverty, not through the usual route of transferring vast masses of hitherto unemployed or underemployed workers to capitalist enterprises, but by developing micro-enterprises locally, where the poor themselves live, through microcredit.
This of course was contrary to all experience. Wherever the setting up of micro-enterprises has succeeded in helping the poor, it has done so through significant State intervention rather than through the unrestricted functioning of capitalism; the obvious example here is the Kudumbasree experiment in Kerala, where, with the help of the state government, a large state-wide women’s cooperative has made significant progress in entering a diverse range of activities. But the World Bank, and a section of economists sympathetic to its view, persisted in believing in and propagating this chimera of micro-credit-sustained micro-enterprises eliminating poverty within the framework of an unrestricted capitalism.
Now a comprehensive study carried out by the All India Democratic Women’s Association (AIDWA), which approached 9,000 women to share their experience of micro-credit, has revealed a truly alarming picture. The main findings of the AIDWA study which were presented along with testimonies by several witnesses at a public hearing in Delhi on August 23-24, were the following.
First, commercial banks, including even public sector banks like the State Bank of India, simply do not lend to women borrowers without some collateral and without several documents being presented which the potential borrowers find difficult to obtain. As a result, women borrowers from marginalised households are more or less completely excluded from direct institutional credit.
Second, these commercial banks lend instead to Non-Bank Financial Companies (NBFCs) and Micro Finance Institutions (MFIs) controlled by capitalists, which function as intermediaries. They borrow from banks at low rates of interest, less than 10 per cent, and lend to the final borrowers at exorbitant rates ranging between 21 and 26 per cent; and, what is more, such loans by banks to what are de facto the modern counterpart of the old village moneylender, are counted as priority sector lending!
Third, these NBFCs and MFIs resort to “loan pushing”, demanding very few documents from the borrowers, other than easily available ones like Aadhaar cards. But once the loan is taken, they harass the women ceaselessly for getting the EMIs, and subject them to terrible verbal and even physical abuse.
Fourth, since loans are often taken by the women for meeting education expenditure of the children and healthcare expenditure in case of sudden illness, which do not necessarily increase their income stream in the foreseeable future, repayment becomes difficult; and the exorbitant rates of interest further aggravate the problem. As a result, the borrowers are compelled to take loans from multiple sources on increasingly onerous terms, using a later loan to service the earlier ones. They get inexorably pushed into a vicious cycle of debt from which there is no escape. Thus, microcredit that was supposed to be an antidote to mass poverty within capitalism, becomes itself an instrument of pushing people, including women, deeper into poverty.
Ironically, this altered role of microcredit, from alleviating poverty within capitalism to accentuating it, occurs because of the functioning of capitalism itself. There are two ways in which the functioning of capitalism subverts what was considered to be an instrument of poverty alleviation into an instrument of poverty accentuation. The first is the macroeconomic consequence of the functioning of capitalism, which manifests itself in multiple ways: through the privatisation and hence commercialisation of services like education and healthcare that raise the costs of these services and necessitate borrowings by households that cannot be easily paid back; and through the crisis of stagnation of the material productive sectors, with which the system inevitably gets afflicted and which reduces employment opportunities, reduces household incomes, and hence pushes households further into debt. In other words, far from microcredit acting as an antidote to the tendency towards immiserisation that is immanent in capitalism, the microcredit system itself gets caught within the operation of this tendency and gets subverted over time, because it cannot prevent this tendency at the macroeconomic level.
The second way in which the functioning of capitalism subverts the microcredit system that is supposed to stabilise it by alleviating poverty, is by entering into this system itself. Capitalism in other words does not leave the microcredit system alone; it enters this system just as it enters into every other sphere where it sniffs some opportunity for making profits. As a result, instead of self-help groups of women from marginalised households getting institutional credit on cheap terms, NBFCs and MFIs controlled by capitalists become the receivers of cheap institutional credit and they try to make a “killing” by charging exorbitant rates to the marginalised households.
The tendency of capital is to enter every sphere where it sniffs an opportunity to make a profit, whether it is high finance or the manufacture of military equipment or retail trade; it should hardly be surprising therefore that it would also enter the very sphere that was created to provide an antidote to itself.
It is a chimera to believe that the immanent tendency of capitalism to create wealth at pole and poverty at another can be halted, and the system stabilised that way. It is a chimera to believe that arrangements like microcredit can be devised within capitalism itself to counteract the effects of such an immanent tendency. The entity that makes all such beliefs into a chimera is none other than capital itself.
