Please Read

Financial Crisis In India - Brief Study

Saturday, March 7, 2020

Neoliberal Economic Policies & Working Class


After the 2nd World War, the ruling classes had to give some concessions to the working masses owing to, first, the necessity of immense labour for reconstruction of production systems after huge destruction; second, successes of national liberation movements in erstwhile colonies; and last, but not the least, creation of a big socialist bloc of countries. However, as the expansion of market in capitalist countries proved to be a temporary phase leading to the unending cycle of increasingly severe economic crises and elimination of the socialist bloc in 1978 with the restoration of capitalism in last major socialist country China, the neo-liberal economic policies have been unleashed in all capitalist countries leading to steep increase in inequality of wealth and impoverishment of the vast majority of the people. India has also followed the same policy prescriptions from 1980s onwards intensifying further in 1990s.

In the initial years after 1947, despite gaining state power in independent India, capitalist class neither had complete control over the economy of the country nor sufficient capital to launch a full-scale industrialization. Hence it adopted the path of so called ‘mixed’ economy wherein the creation of big primary industry especially for capital goods and infrastructure was assigned to state or ‘public’ sector which used capital accumulated from public exchequer to serve the interests of the capitalist class. However, during this period, some capitalist groups accumulated huge amounts of capital as beneficiaries of the policies of import substitution, licensing, and controls. They were also provided with large amounts of state finance capital by government agencies like public Financial Institutions viz IDBI, ICICI, IFCI, etc and Public Sector Banks created through bank nationalization. This helped these groups to grow fast in size and by 1980s, these capitalists had consolidated their control over the economy and accumulated vast amounts of monopoly capital. The now ambitious monopoly capital was no longer dependent on state institutions and planned large scale industrialization without shackles of licensing and control by state. Hence the rising clamour for so called liberal reforms.
This interest of the Indian capitalist class also converged with the global monopoly finance capital which was looking to maximize its profits by moving the manufacturing from high wage mature capitalist economies to lowest-cost centres in Asia, Africa, Latin America and Eastern Europe. As the mature capitalist economies of Europe and America have moved to more and more financialization and speculation leading to closure of factories the global production centres have relocated to the newly industrialized countries like India to cater to the consumption both in those countries and also to the demand of newly emerged domestic upper and middle classes resulting in the accelerated expansion of a  new insecure and low-wage work force in auto, textile, mining, electronics, education, the public sector, finance, and a proliferation of commercial jobs in retail, hospitality, healthcare, etc.

Now commodity production dominates all production from extraction of iron ores to high technology and biomedical and pharmaceutical goods. Migrant workers are constantly being recruited by contractors to replenish the supply of low-wage labour available to capital. Monopoly capital promotes the migration of workers to strategic industrial centres so as to expand reserve armies of labour and continue the conditions necessary for low wages and unsecure conditions among all workers. As unemployment grows exponentially through urban migration, labour and wage costs are reduced and restrained. This larger reserve army of cheap labour increases labour competition and reduces the bargaining power of workers throughout the world, as Foster and McChesney wrote in The Endless Crisis:

‘The new imperialism of the late twentieth and twenty-first centuries is thus characterized, at the top of the world system, by the domination of monopoly-finance capital, and, at the bottom, by the emergence of a massive global reserve army of labour. The result of this immense polarization is an augmentation of the ‘imperialist rent’ extracted from the (global) South through the integration of low-wage, highly exploited workers into capitalist production. This then becomes a lever for an increase in the reserve army and the rate of exploitation in the (global) North as well.’ 

Ideological apologists of globalization and neo-liberal market-based strategies ignore the growing importance of state violence that is used to support the system of economic inequality and exploitation. In addition, the imposition of neo-liberal reforms is accompanied by heavy funding of police and private militias to suppress workers and peasants who oppose the new system dominated by an alliance of the domestic and foreign monopoly finance capital.

The concentration of finance capital through speculative banking has stimulated the expansion of monopoly capitalist investments and laid the basis of their deeper penetration into the yet underdeveloped hinterland of the country. The expropriation of the surplus labour in these new markets has expanded the profitability of capital. Also, the shift from competitive to monopoly capitalism represents new stage of development of Indian capitalist class. Economies characterized by competition between many firms have been replaced by ones in which competition is limited to a handful of giant corporations in each industry.  Further advances in transportation and communication technology has intensified the competitive struggle between big corporations for informal control over economically backward regions for natural resources and low-wage labour has resulted in an economic assault against people in such regions.

Neoliberalism means a strict system of privatization and economic liberalization that is a system of ‘reforms’ that removes all forms of social insurance and protection, privatizes natural resources and companies, and allows for the free flow of international and domestic trade, without government restrictions. This has produced a series of financial, monetary, and ecological catastrophes that have also intensified mass poverty and the inequality and has undermined quality of life for workers and peasants.

The financialization of capital has forced countries like India to develop manufacturing and production not only for national and local markets but also to generate export promotion leading to growth of a larger working class. Ostensibly, FDI is the lifeblood that provides the capital necessary to create manufacturing and jobs that will reduce economic insecurity, although at the cost of uprooting peasants and by imposing harsh living conditions on those which migrate to work at FDI destinations. By and large big business, both domestic and foreign, are the primary beneficiaries of FDI, multiplying their financial leverage.

Since the early 1990s India has adopted neoliberal policies encouraging FDI that dramatically expanded new productions in non-union factories in special economic/special export processing industrial zones provided with government subsidies for development, low-cost land, tax abatements, and lowering of tariffs. The rapid expansion of the auto industry for the domestic and regional markets is in no small measure a consequence of central and state governments subsidies and regulatory support through widespread non-enforcement of labour and union laws by multinational manufacturers, thus containing labour costs and increasing worker productivity. 

The rapid growth of foreign investment has dramatically transformed major cities into modern hubs of production for export, and has markedly increased gross domestic product. However, although India is regarded by bourgeois economists as a successful model of economic development, the country’s investment linkages with the imperialists economy neglect the vast majority of the population, and intensify their inequality and exploitation. Indian cities have become the cradle of economic insecurity for urban dwellers and recent migrants. The degradation of labour is heightened by uneven development as precarious labour responds to fight economic insecurity and poverty. Ultimately these precarious workers become the visible element of a system that reproduces economic insecurity for the majority of the people, while it enriches the few at the national and global levels.

The rise of the industrial working class in in the wake of neoliberal reforms aimed at expanding corporate profitability and upper class power. The state has encouraged FDI by reducing taxes and tariffs, and facilitating the development of industrial zones where labour standards have been relaxed are being withdrawn and labour unions are unwelcome. The rapid growth neoliberal capitalism has modernized India’s industrial centres and brought them into the world economy and the country is now firmly united with the capitalist imperialist economy as exploitation of its vast majority of the population grows. The new Modi government’s Make in India policy is taking this to new heights and the government has made clear its intention of relaxing labour regulations and protections.

This neo-liberal capitalism is replicating now the earlier exploitative and dangerous forms of proletarianization that forced peasants from rural to industrial urban regions to work in commodity production and service sectors. This process bears striking similarity to the dangerous, unsanitary, and impoverished working and living conditions among workers in Manchester which were vividly described by Friedrich Engels in The Condition of the Working Class in England in 1844.

The mainstream neoliberal economists have been predicting that international development and investment through globalization will lead to amelioration of poverty and inequality. Through the support of World Bank, IMF, foreign trade, Foreign Direct Investment (FDI) and foreign aid, countries like India would direct development and economic expansion. However, these policies have led ever-more commodification of agriculture and natural resources, creating greater reliance on global economy. However, the World Bank inspired models of poverty indexes fail to consider that the subsistence peasants living outside of the formal money economy have greater security than those who are forced into the formal economy. As they are dispossessed by neo-liberal commodification of agriculture and pushed into urban areas their money income may increase and exceed the government poverty index levels, but, in fact, they are often considerably worse off than they were in the countryside. As these displaced rural peasants are forced off the land and become urban workers they are unable to obtain even the basic necessities for survival. This modern working class, primarily composed of peasant workers and their families, migrating from rural regions to industrial zones, typically lack residency and work privileges equivalent to those enjoyed by urban inhabitants. The majority of the population in Indian megacities consists of these displaced rural peasants who have moved to shantytowns on the periphery of urban centres, many of which lack clean water, medical services and sanitation.

To understand the level of labour exploitation let us take an example from a report published in The Mint (September 28, 2016). In a study of the textile workers of Bangalore, a report Doing Dutch, co-authored by Clean Clothes Campaign, says that manufacturers are paying ‘starvation wages’ at factories in a major hub for the global garment industry in Karnataka, forcing many workers into crippling debt. Workers surveyed at 10 garment factories in and around Bengaluru took home on average Rs 6500-7000 a month, and 70% were in debt.

The factories were supplying to Dutch retailer brands that have “acknowledged the importance of living wages”. The International Labour Organisation defines a living wage as a ‘basic human right’. Last year, the Asia Floor Wage campaign pegged a decent living wage in India at Rs. 18,727 per month. “Workers cannot properly support their families with this wage,” said the report. “Food and housing, usually a one-room apartment without a water tap and with a shared toilet outdoors, are the biggest expenses. Almost everyone would like to buy healthier and more varied food, but is unable to do that because of low wages.”

The $40 billion Indian textile and garment industry, much of which operates in the informal sector and is poorly regulated, employs an estimated 45 million workers. The report said there are around 300,000 workers in and around Bengaluru, the capital of Karnataka, and that 80% of the workers in the city’s 1,200-odd factories are women. A woman worker interviewed in 2015 said she walked an hour to work and an hour back to save on bus fare. 

Similarly, the workers employed in Gurgaon’s industries barely earn enough to pay the rent on small units built on agricultural land in the city. These are old farms that have been transformed into what are known as ‘villages’, where they live in Spartan lodging for exorbitant rents and often with deplorable sanitary conditions.

To understand how the wages for labour have been kept restrained or even depressed in real terms after adjusting to inflation, let us see a 15th September 2016 report by an advisory firm Korn Ferry Hay Group. It says between the 2008 recession and 2016, India has seen real salary growth of a mere 0.2%, according to an analysis of post-recession wages in 51 countries while during the same period, India’s GDP gain stood at 63.8%. “India has made less progress than some other countries in bringing high-value jobs to the country. This has led to poor job growth, therefore, an oversupply of un/semi-skilled people, and poor wage growth,” Benjamin Frost, global product manager-pay, Korn Ferry Hay Group, said in a release. Indian workers also suffer from a massive disparity in wages—the highest among countries surveyed. “Of the countries that we looked at, Indian wage growth was by far the most unequal—people at the bottom are 30% worse off in real terms since the start of the recession; whilst people at the top are 30% better off,” Frost added.

India has a workforce of close to 470 million. Of this, only about 7% are in the organised sector. Out of these 31 million, about 24 million are employed by the state or state-owned enterprises. And of the vast reservoir of over 435 million employed in the unorganised sector, about half are engaged in the farm sector, another 10% each in construction, and small-scale manufacture and retail. These are mostly daily-wage workers earning less than the officially decreed minimum wages. For example, according to Faridabad Majdoor Samachar, a workers’ publication, in 2013, 75% of workers in Faridabad were not listed on company records, 85% were employed by contractors, and 80% of all permanent and contractor workers earned less than the statutory minimum wage.

The presence of this expansive reserve army of workers has allowed managers to hire informal labourers, while systemic unemployment has diluted the power of conventional strikes and work stoppages. The informal sector has been a distinctive feature of our economy especially tertiary workers in unregulated sectors. However, the existing unions have failed to recognize this fact and have not directed efforts to organize these informal workers who are completely marginalized in our economy.

This rapidly expanding contract labour force is also significantly responsible for the erosion of acceptable working conditions for permanent workers and for declining union membership. The wage differential between permanent and contract workers ranges from 4:1 to 5:1, jeopardizing a growing number of permanent jobs. The contractualization has therefore emerged as central issue for the labour movement throughout India. In the Gurgaon industrial belt, for example, contract labourers comprise 80% of the workforce; these workers earn 25-50% of the standard wage and are prohibited from organizing in unions. The area is inhabited by displaced young migrant from rural areas in Haryana and other parts of the North and East of the country who are deliberately recruited because of their lack of social ties and unfamiliarity with the region. Per a report on the labour market of Gurgaon, ‘policy of recruiting mostly migrant workers, without local roots, has been used by the bosses as a strategy to undermine the power of workers in the case of a conflict.’ 

Through creating a flexible supply of labour through temporary, informal, contract, and migrant labour, capital therefore expands the share of workers employed under insecure and precarious conditions. The development of modern capitalism no longer frees labour from all old bondages but is compatible with the forms of unfree and bonded labour that are entrenched in caste systems of exploitation, and these endure and grow as multinationals compete for cheaper labour. These contracted informal workers are highly vulnerable and precarious. They are also cruelly exploited by the avaricious firms by setting of high production quotas and speeding up of production assembly lines. Employers also exploit differences to create hierarchical systems of relative favouritism to promote lower wages and poorer conditions for all labourers. Contractors and employers hire young workers with limited social ties to work in mines and factories. Employers also seek to divide workers based on age, caste, ethnicity and gender.

The Indian state does not compel managements to recognize unions formed by contract labourers. In the growing industrial belts, corporate hostility to unions is reinforced by government policies that prevent union organization among contract workers.  When permanent workers try to form unions, management apply familiar union-busting techniques for converting these permanent jobs into contract labour. Due to lax enforcement of labour laws the situation is such that even in the firms with traditional unions, 50% of the workers are now casual workers who are not covered by labour agreements and who earn a fraction of the officially negotiated rate.

With the onslaught of neo-liberal policies, workers have faced growing constraints imposed by erstwhile workers’ movements that are legacies of 20th century capitalism, and are now struggling to build new working class institutions that must redefine the shape of class conflict in the years to come. Since the 1980s the assault on the working class has been in full swing, as capital and the state united in opposition to the representation of existing unions and the labour protection and welfare laws forged by the labour movements earlier. To capital, organized labour posed an obstacle to expanding corporate profits and restoring absolute hegemony in workplace. Over the last 3 decades a resurgent capitalist class conducted a fierce war against labour unions turning them from a formidable force in major organized industries into a weak irritant at best. Trade unions’ traditional forms of power – work place bargaining, regulatory capacity and right to strike– have all been eroded.

The growth of FDI in manufacturing industries, that traditionally had higher levels of unionization, has reduced the organizational power of workers. To lure multinational capital, local state authorities and politicians either ensured that new industrial enterprise zones were union free, or permitted employers to form company-dominated unions. In most cases state labour authorities and trade unions failed to enforce existing labour laws for the vast majority of workers who were contract labourers. As foreign capital investment in production and natural resources has grown, and total labour force has expanded, existing trade unions have lost many members in absolute terms and also declined relative to the total workforce.

An increasing concentration of existing trade union members are employed in the public sector which is more unionized than private sector industry which in turn is more unionized than private sector services. A rising proportion of trade union members are employed in managerial or professional occupations. The character of such unions and the relations between union and members is fundamentally different from those of unions of manual workers. Also, there are instances of young and ethnic minority workers not joining these unions in sufficient numbers. 

The expansion of monopoly capitalism has contributed to the process of neo-corporatism – the recognition of labour unions and their co-optation by capital and state institutions that support the preservation and expansion of repressive labour policies. Labour unions, even those rooted in militant rank-and-file organizations, have become part of the neoliberal capitalist state through affiliated political parties. These new unions and parties, which often form part of governing coalitions, have encouraged foreign monopoly capital investments that severely exploit the working class. Through absorption into state-sanctioned systems of representation, collective bargaining, and electoral politics, the original workers’ movements have been marginalized and disregarded, and are often under assault.

Unstructured and often unregulated labour markets that are filled by day labourers, domestic workers, street peddlers, and food cart operators, temporary labourers and for-hire drivers, all mainly employed in the informal economy with few legal rights also reveal the weakness of traditional unions and have forced them to be solely dependent on non-governmental organizations (NGOs) and advocacy groups, and on political and electoral advocacy groups to defend their rights. Campaigns to improve the conditions of fast-food outlet and retail store workers are pursued primarily by advocacy groups, NGOs and by external union and community organisers to generate public attention for raising minimum wages. The large work force in service and commerce has weak ability to organize unions. It is far more difficult to organize part-time and temporary service, retail and hospitality workers employed with irregular working hours and nebulous connection to the workplace than industrial workers who work full time in factories.

The existing unions have also been incorporated into the state governing structures through neo-corporatist forms of institutional recognition of labour representation and collective bargaining rights that assented to the dominance of the capital and the state in return for recognition and minimal economic gains for their members. As industrial investments have expanded throughout the country, new independent workers’ movements have emerged challenging the hegemony of capital, state, and union policies that have in many instances relinquished institutional power for the majority of the working class. Nevertheless, when workers’ movements are transformed into formal bodies for organized labour, they are usually only able to represent a small portion of workers, and encounter significant limitations in extending wage and social protections to the vast majority of impoverished workers.   

The weakening of existing unions has severely eroded the power of those who could count on parliamentary agreements to defend working conditions. As new industries have grown through FDI, labour agreements, which were gained by official strikes and stoppages, have been seriously undermined. While labour protections established at independence in 1947 permit workers to organize into unions, since the institution of neoliberal reforms in 1991 corporations have flouted these laws with the active support of state and central labour authorities, thwarting the formation of trade unions unless they are controlled by management. Capital investment has flowed to the manufacturers and contractors who employ informal labourers earning a fraction of the wages of full-time permanent workers, with no job security. But the vast discrepancy in wages between permanent and contract workers in the rapidly expanding auto sector, rather than dividing workers, has generated solidarity and a rejection of two-tier labour forces. Independent unions are forming to represent worker interests in industrial belts and SEZs.

Traditionally labour representation in India has formed around political parties. The key central unions are now affiliated with BJP, Congress, left parties, and regional political parties. Before the neoliberal reforms of 1991, these parties bargained with the state and capitalists for their members and supported trade union centres for wage gains. However, now the unionized enterprises that represent 6 to 7% of all workers in formal enterprises – and perhaps even less if casual workers are taken into account – have come under severe pressure. As Indian labour unions lost political and social power, insecurity rose among workers. Until the 1990s the labour was managed by state through a combination of repression and institutionalized bargaining, where workers’ gains were conditioned by national economies in an era when large businesses benefited from import substitution and controls. However, these corporatist, parliamentary and social dialogue based patterns of labour-management bargaining have now become unacceptable to monopoly capital. Therefore, power of traditional unions, formed by mostly left political parties has weakened significantly leading to the rise of autonomous and syndicalist forms of workers’ organizations directly in factories.

Many people writing on the decline of labour power assert that the erosion of union effectiveness can be addressed by devoting union resources to organizing, policy interventions and alliances with labour-friendly political parties. But there is little evidence to support this over the last 3 decades. Irrespective of their claim to left or right, all governments have embraced the neoliberal policies. As traditional unions contract, they are on the defensive, and must conform to neoliberal economic policies rather than promoting rank-and-file unionism. In contrast, vibrant new forms of worker organization have demonstrated a remarkable capacity for innovation. Matching this has been an upsurge of workers’’ movements which are consciously inspired by democratic and rank-and-file unionism.

The capacity of most existing unions to represent workers has declined in all regions. As these unions restrict themselves to work within the legalistic boundaries allowed by monopoly capital and state or organizing some ritualistic and symbolic protests from time to time, there is a growing tendency for emergence of new unions as the workers are becoming prone to disregard traditional unions and labour authorities. Militant workers are establishing assemblies that represent rank-and-file associations. In some cases, existing unions are becoming irrelevant to workers even if recognized by the state and affiliated to leading central unions.

There has been an established wisdom among investors that these vulnerable and precarious low-wage workers pose no threat to corporate profit margins, more so as the established trade unions show no inclination to organize them or fight for their rights. However, with the beginning of this decade came the first troubling indications that direct action by electronics, mining, automotive, textile workers could pose a risk to the national and multinational investors and brands. In a growing range of industries, worker protests over wages and work conditions could only be suppressed by repression and violence by armed state forces and private mercenary gangs working in tandem. The spread of labour militancy across different industrial zones raises crucial questions about the revival of a labour movement and the capacity of state and labour unions to contain dissent in such a way as to restore confidence in capital markets.

Momentous and unexpected labour uprisings and mass strikes are unfolding today among migrant workers in urban industrial zones who to varying degrees are challenging the neoliberal capitalist project. The intensity of these class conflicts in mines and factories was not envisaged by foreign investors, multinational corporations, and private contractors – or by many leftist scholars and activists. The mass uprising by women textile workers of Bangalore which brought central government to its knees in 2 days and forced it to withdraw the restriction on withdrawal of workers’ provident fund demonstrated this in a powerful way. Similarly, large number of non-official union strikes by auto sector workers across different states from NCR to Tamil Nadu have taken place in last few years. 

Despite not being represented by organized trade Unions, the workers engage in a range of tactics and strategies to advance their collective interest both within and outside existing trade unions and organizational structures. They mobilize around collective interests to improve their conditions. Despite being repressed en masse they expose the growing activism among workers that has the potential for transforming itself into mass movements. As the finance capital seeks to avoid traditional unions, workers are forming new rank-and-file worker organizations to defend their collective interests even as compliant state seeks to repress labour demands by blocking the establishment of worker collective institutions. The emergence of this contemporary union movement will not be smooth and organic. The alternative social forces in informal sector will challenge and subvert the current structures and strategies. 

As the Indian capitalist class and state has strived for more and more capital, they have also succeeded in removing the fangs of the traditional unions that formed and consolidated in the era of national liberation struggle and independence. The forces of organized labour formed in the image of their European predecessors have adopted policies that demobilized workers in exchange for dispensations to unions members employed in industrial sectors in key industries. However, todays’ emerging mobilization of the workers is and must challenge not only the national and international capitalists, but also the institutional regime responsible for co-opting unions into a system that protected a small proportion of the urban working class. The independent rank-and-file workers’ unions have arisen in direct response to the rising FDI aimed at eroding the power of traditional labour unions. As multinational companies demand strict subservience and impose draconian conditions on precarious workers, new class-struggle unions are forming and expanding in India’s industrial belts.  The new industrial proletariat is taking shape as inchoate worker organizations are fulfilling the forestalled functions of traditional unions. Workers are involved in rank-and-file militancy in three ways:

Worker Assemblies – organized in conditions where some or all the workers lack independent union representation, or where existing union is disengaged from some or all workers at a plant. Workers form parallel unions that do not have official recognition and sometimes do not even have a name but reflect the interests of unorganized workers.
Independent unions – new independent unions represent workers who have not been absorbed into traditional unions through corporate arrangements with management. They form autonomously on a firm-level, local or regional basis.
Pressurizing traditional unions – workers use different approaches for this. One, raising direct demand for official status as independent union through labour office getting a measure of standing and authenticity among workers, or, changing affiliation to traditional unions that are more responsive to rank-and-file members, or, in some cases forcing traditional unions to change their approach.

As neoliberal policies are implemented by Indian government, and multinational companies demand strict subservience and impose exploitative conditions on precarious workers, new class struggle unions are emerging and expanding in industrial belts around New Delhi, Pune, Chennai, Ahmedabad and Bangalore. The insurgency among auto workers is representative of the expansion of direct struggle by workers against rapacious domestic and multinational employers and a compliant state which serves the interest of capitalist class.

The history of workers’ struggles in Maruti Suzuki illustrates the expanding significance of independent unions in India’s massive manufacturing industries. This has prompted business and government leaders to stage an offensive against unions that workers have organized in an attempt to gain improved wages, working conditions, and democratic labour representation. As private contractors for international manufacturers seek to restrict trade unions, independent unions are forming to represent worker interests in industrial belts and export processing zones. 

While the class conflict between workers and management is expanding in manufacturing industries, weak central unions are unable to consolidate power on a national level. If the conditions of industrial workers in export-producing factories and installations in India are to be improved, they require a major workers’ movement that embraces the aspirations of the young men and women who comprise the vast majority of the workers. While the traditional labour unions have lost the capacity to respond to state and monopoly capitalist policies that erode wages, laboring conditions, health a safety, and human rights of workers – broadly defined as the ability to work and live in dignity, the rise of independent unions demonstrates the salience of consolidating the struggles through a rank-and-file union.

2nd Jan 2017

No comments:

Post a Comment