 Hello and welcome. I'm Lynne Freese, producer of Global Political Economy, or GPE News Docs. This is part three in the concluding segment of a conversation with Prabhat Patnaik. He's talking about his read on the history of capitalism, that he breaks up into five periods from colonialism into the present, and how imperialism, which existed in the colonial era, persists to this day and the system cannot do without it. Topics sourced from a new book, Capital and Imperialism, Theory, History and the Present, authored by Prabhat Patnaik and Utsa Patnaik and published by Monthly Review Press. A world-renowned economist, Prabhat Patnaik is professor emeritus at the Center for Economic Studies and Planning at Jawaharlal Nehru University in New Delhi. Earlier books by Prabhat Patnaik include accumulation and stability under capitalism, the value of money, and re-envisioning socialism. Professor Patnaik, welcome and thank you for joining us. Thank you, thank you very much. We're going to pick up the conversation where we left off. Let's start by going deeper into what happened to the world economy and the era of globalization for the first time in the history of capitalism, and how all this fits into your read on the history of capitalism into the present, so the fifth of five periods, the current period of protracted crisis. Throughout its history, capitalism had this remarkable feature that it actually kept the entire world segmented in the sense that there was a diffusion of capitalism in the temperate regions, but there was no diffusion of capitalism in the sense of capital shifting from the global north to the global south. That means investment occurring from the global north to the global south, because after all in the global south, for reasons which have to do with de-industrialization under colonialism, there's huge unemployment, huge reserve army of labor because of which the wages are close to subsistence level, and the wages are close to subsistence level, then it would be profitable for capital to invest in the global south using exactly the same technology of production for meeting global demand that actually then they start investing producing in the south using the labor of global south which is much cheaper for producing for the entire globe, but this did not happen. Had this happened, then the gap between the north and the south wouldn't have been so pronounced, the gap in fact shouldn't have been there strictly speaking because of the fact that capital is globally mobile like inside a country, similarly in the world as a whole if it's globally mobile, then it would have the tendency to equalize wages all across, but that did not happen. Why that did not happen is an extremely important question, but certainly historically it did not happen. Because of that the wages in the south continued to remain low and labor from the south as I was saying was not allowed to move freely to the north, therefore the wages in the south continued to remain close to a subsistence level while in the north because investment was taking place because labor productivity was growing, there was an increase in real wages occurring as well, therefore you had a divergence of wages, northern wages kept increasing, southern wages kept remaining at a subsistence level. That is the genesis of this segmentation, that is the real kind of gist of this segmentation. Now what has happened in the current globalization is that to some extent that is being overcome because now capital from the north has started moving south to locate plants in China, in Vietnam, in Indonesia, in Malaysia or to locate service sector activities for instance in India. You have call centers in India which actually do the same job that normally in the US these jobs will be getting performed, but the wages there are much higher compared to the wages here, so it's much more profitable to shift that kind of service sector activity to India rather than to retain it in the United States, so for all these reasons a whole range of activities are increasingly being shifted from the north to the south and that is a unique feature of the contemporary globalization. To the extent that happens then that difference in wages which had existed certainly does not grow and what is more there is some tendency for the wages also in the north to come down. Stiglitz made a calculation according to which if you compare the real wages of a male American worker in 1968 with the real wages in 2011, average male American worker then in 2011 the real wages were marginally lower than in 1968. Now obviously it does mean it has been falling all through or has been stagnant all through, it had gone up but hopefully it has come down somewhat. It's still much higher than what you find in the south, there's no equalization of wages but there is a pressure on northern wages. Let us say therefore that the kind of different wages or if you like the vector of wages all over the world does not go up. It's more or less given, more or less fixed in this period of globalization. But on the other hand labor productivity is going up everywhere. If labor productivity goes up but the real wages do not go up in that case you find that the share of surplus in output increases everywhere. It's like a distribution from wages to surplus, wages to profits. But of course if a hundred dollars are shifted from wages to surplus, if they were part of the wages all of the hundred dollars would have been consumed but if they are shifted to surplus then let's say only fifty dollars are immediately consumed within any given period therefore there is an overproduction of fifty dollars worth of goods because demand has gone down by that therefore there is a tendency towards ex-anti-overproduction which this phenomenon of globalization generates because of the fact that it is actually making workers everywhere including northern workers compete against southern workers who have an albatross around their necks in the form of the huge labor reserves that have been generated because of colonial de-industrialization. So these labor reserves now begin to affect northern wages as well. They cannot go up with productivity and therefore the surplus rises everywhere in the world economy as a whole and there's an ex-anti-tendency towards overproduction. I see you note in the book that this rise in surplus and the distribution between wages and surplus in the world economy as a whole shows up in the inequality of income distribution in most countries established by Thomas Piketty and other researchers. You know people like Piketty who actually document this increase in income inequality do not see the increase in income inequality as arising from this reason. They use all kinds of other theoretical frameworks which I don't go into but those frameworks assume full employment and so on which are really not realistic assumptions. Their work is important because the document is increasing income inequality everywhere in the period of neoliberal. Well that gives us a broader perspective on overproduction crises and capitalism and how the tendency to overproduction was unleashed by globalization. Comment more on what you call desegmentation. Corporate media reports that globalization and outsourcing from north to south made the global south a beneficiary of growth and development. What are your thoughts on that? Firstly I should make it clear that desegmentation which means the coming over of a lot of activities from the north to the south does not mean that south is developing. It is not that the third world countries as a whole are actually witnessing development by the way which is the standard thing that all breadth nodes institutions everybody says that all you know globalization has brought about a high growth rate in the south. That high growth rate is something that is not giving rise to an improvement in the conditions of the bulk of the population in the south because the hiatus now is within the south. The dividing line is now no longer between the north and the south but it has now reached within the south. The dividing line is within the south between a segment of the population who are the beneficiaries of globalization and those who are integrated with international finance capital which consists of the monopoly capitalists, big capitalists and so on on the one hand and segments of the upper middle class that that are beneficiaries that are attached to this big capital and the rest of the population consisting of peasant agriculture, laborers, urban workers, craftsmen, fishermen and so on so that you know petty producers, peasant agriculture is laborers of various description. They are the sufferers from this globalization so it is wrong to say that globalization has benefited the south. No globalization has basically meant a shift of some activities to the south of which there are there's a small segment of the population in the south that's the beneficiary but the rest of the population are actually sufferers. As a follow on to that comment on how growth theory in mainstream economics is concerned with accumulation through expansion whereas you point out that what you call accumulation through encroachment is a hallmark of contemporary imperialism and a direct result of neoliberal policies. Explain that. So I draw this distinction between accumulation through expansion and accumulation through encroachment. Now suppose you have a certain amount of capital let's say capital is in 100 blocks, each block grows by 10% because each block makes some profits out of that profit the investors in the market it grows by 10%. Now that's obvious that is what economic theories all the time talking about they look only at accumulation through expansion. All growth theory in economics is concerned with that accumulation through expansion. The amount of capital stock it increases because of the investment decision. In addition to this there is what I call accumulation through encroachment. Now that accumulation through encroachment can be let us say the public sector units are being privatized. So the private capital stock is rising not because they have made investments not because they have made physical investments but because they have just bought up the public sector units so that taking the economy as a whole there is no increase in the capital stock but taking the private capital stock there is an increase and this increase is what I call through encroachment. Similarly if you have private capital that displaces small producers. Now you don't necessarily take over the exact physical assets of small producers but the market that the small producers had occupied or catered to is the market which now accrues to the big capital and the big capital therefore you know occupies the space that the small producers small capitalists were. So that is again an example of accumulation through encroachment. Now under neoliberalism because of the fact that all obstacles to accumulation through encroachment are removed peasant agriculture is no longer supported or defended by the state. Similarly small capital is not necessarily defended by the state. Similarly public sector units are actually privatized to actually find that the scope for accumulation through encroachment increases considerably. So that increasing scope for accumulation through encroachment also means growth by appropriation of what had been common resources. Yes that's a classic example of accumulation through encroachment and that goes back a long way that began in the 16th century enclosure movements in Britain. So the 16th century enclosure movement meant basically that the commons were appropriated by the big landed states and because the commons were appropriated by the big landed states the land they had increased but at the same time the small the peasantry you know had access to commons and because they had rights over the commons they actually managed to kind of you know a whole lot of commodities were garnered by them from the commons but because the commons were appropriated by the big landed states they cease to have that access anymore because the commons got enclosed and that being the case the small peasant's economy became unviable many of them had to abandon agriculture and become laborers. So the the enclosure of the commons is a classic example of accumulation through encroachment. The mistake which is often made is to assume that this is something which only is confined to the period of birth of capitalism but once capitalism gets born then it only proceeds through accumulation through expansion but no this phenomenon of accumulation through encroachment is a phenomenon that lasts throughout the history of capitalism. You argue this phenomenon of accumulation through encroachment lasts throughout the history of capitalism. So staying with the case of encroachment on peasant farmers talk about what's going on with peasant farmers in India and the broader implications. You know there's a huge agitation going on of peasantry in India at this moment it's going on at this very moment big agitation this agitation is against three farmed laws that our present government has brought in and these laws will basically allow agribusiness to encroach on peasant agriculture through contract farming but contract farming is a way whereby they actually put the squeeze on the peasantry and ultimately the peasants are worried that they will lose their lands and simply become laborers or lands cultivated by big business. We always used to think that the peasants produce let's say food grains higher food grain prices would hurt the laborers I mean hurt the industrial workers so we always thought that there is a conflict of interest between the peasants on the one hand and the industrial workers on the other and a conflict which had to be managed by the state coming in through food subsidy and so on but now what we find is that if peasant agriculture is getting squeezed then peasants actually migrate to cities for jobs because they are not viable anymore as agriculturalists when they move to cities as jobs for jobs they actually don't get jobs they're not that many jobs so they swell the reserve army of labor or a given amount of work is distributed among more people and even the organized that is unionized industrial workers bargaining strength goes down so you find that the distress of peasants gets translated also into the distress of the urban workers so there's a commonality of interest there it's in the interest of the urban workers to make sure that the peasants are not displaced are not distressed so it's it's a commonality at both ends and under neoliberal globalization for the first time in the history of capitalism as you commented earlier distress among workers in the global south gets transmitted into pressure on wages and so bargaining strength of workers in the global north so comment more on your argument that globalization under the hegemony of global finance capital so basically what we refer to is neoliberal globalization is at a dead end it is clear that the world cannot be where it is this prolonged crisis is having very important implications in the capitalist world because of which something needs to be done urgently about it one important implication of this prolonged crisis is in my view the growth of neo-fascism neo-fascist movements are arising everywhere India a little bit Poland Hungary even the United States and the Trump you look at Britain UK you look at Marie Le Pen France you look at you know Germany AFD Brazil Bolsonaro everywhere there is a strengthening of neo-fascist movements now the strengthening is obviously something which gains from you know I mean it profits from the increase in unemployment because neo-fascist movements as marginal phenomena exist in all modern society but they're moving center stage aided by monopoly capital because monopoly capital feels threatened in a period of crisis it's legitimacy social legitimacy goes down therefore it actually uses the neo-fascist movements in its own interests they help in very many different ways they change the discourse in India today the idea of the government is not to continue with a discourse of people's living standards it's to do with accentuating the division between Hindus and Muslims everywhere neo-fascism targets the other changes the discourse we one against the other it occasionally even explains the crisis in terms of the other that the Chinese are stealing jobs from us the Mexican are stealing jobs from us all this poses a very serious threat to the socialist structure of capitalism that being the case there is now a certain urgency that even the liberal bourgeois elements in capitalism face in order to do something about the crisis and it's in that context that some of the moves which are being made today have to be understood one of these moves is the fact that you know that now there is an effort in the United States to revive a kind of Keynesian policy because the United States is less concerned than the other major capitalist countries about pleasing globalized finance because globalized finance considers it its home base and therefore there is not going to be huge capital outflows from the United States elsewhere because United States is safest place currency is as good as gold and therefore you will not find capital outflows the same way that you would find from other capitalist countries so US has a degree of freedom some leeway but anyway the US fiscal deficit is going to increase and the whole argument is we are there by reviving Keynesian we know that Trump had spent $2 trillion as kind of you know rescue come support package during the pandemic when Biden became president he spent another $2 trillion and now he has come up with another proposal to spend close to $2 trillion $1.9 trillion for an infrastructure plan not confined to a single year but over a period of time now I was saying that Biden is attempting to revive Keynesianism but there is an aspect of it which I want to draw attention to which is not often recognized as I said finance capital which is opposed to Keynesianism if the US is pursuing this may find it difficult to migrate elsewhere and therefore Biden may actually be able to stimulate the US economy but suppose he does that then you would find a revival of inflationary pressures already oil prices are rising and the IMF today has said today that actually in the US inflation is beginning to become now when that happens then you would find that an effort would be made to impose austerity on the third world so that inflationary pressures are kept in check so that the prices of raw materials are kept in check so we may end up having a situation where there is Keynesianism in the first world and austerity in the third world now that is something which is again going to really worsen the plight of the working people presence workers and so on in the third world actually make matters much worse that is something which is a fallout of if you like what the capitalist solution might actually lead to as opposed to this what we are arguing is an alternative we cannot have a global solution in the sense that the whole of the third world suddenly rises up on the whole of the first and the third and every possible world you know the world proletariat and the world peasantry rises up because obviously they have not had joint movements of that kind movements have remained confined to individual nations now that being the case that let us say in India now there is a big struggle of the peasantry that is going on now suppose you could have a struggle of the workers and peasants against the crisis which is engulfing the Indian economy if so then politically this might give rise to the coming into government of an alternative political formation that represents the interest of the workers and peasants if this alternative political formation is going to remain faithful to its constituency then it will have to overcome the hegemony of globalized finance capital therefore it has to delink itself from this web of financial flows by having capital controls that is a necessary condition for the autonomy of the state that we have been discussing that if you have globalized finance and a nation state and in the nation state is caught in the web of globalized finance then of course the nation state cannot do anything other than simply count out to globalized finance but in the nation state is going to do something different then it will have to get out in the web of globalized finance and an important way of doing so would of course be through capital controls that's a form of delinking from globalization the problem is when you have capital controls then you would have difficulties in meeting your trade deficit so you would have to have some trade controls and when you have trade controls then you would have pressure being exerted by the advanced countries through for instance the imposition of sanctions on any government that tries to get out of this globalized regime therefore the transitional difficulties are there but one has to face these transitional difficulties as best as one can and the people of the third world the workers in the presence and so on have to recognize this and they have to be aware of the fact that getting out of this globalization is essential for a new order to come in and when they get out of globalization they would be opposed by the local capitalists it will have to be on an agenda that would actually lead on to socialism it will have to be an agenda that is opposed to the local monopoly capital and of course globalized finance capital and that would necessarily give rise to an alternative trajectory of development that must lead on to socialism that would provide an alternative to ending up in a situation where the conditions of life for vast populations in India and throughout the global south are made much worse under a deepening of subsistence wages a swelling of the reserve army of labor and so on in an ideal world that kind of fallout from first world policy could also be avoided if instead of austerity along with kanesianism first world policy would support and promote third world capacity to increase their supply and so keep prices and inflation down that way yes you know i mean after all uh as i said there are two ways in which prices can be kept down one is by squeezing demand the other is by increasing supply that actually if the petty producers the peasant agriculturists and so on are protected and promoted and encouraged to increase production then of course the inflationary pressures would be kept down and likewise of course in the case of minerals oil and so on which is very important commodity in this country so there are two kind of issues here one is to a large production and of course in the case of oil one has to move out of oil use develop other substitutions on these are complex issues i don't want to go into it but therefore they all that has to be done but for a range of primary commodities which are of an agricultural nature output has to be increased and therefore in an as you said in an in an ideal world the first world should be supporting the third world and third world governments to a large output as a means of controlling inflation but not to impose austerity not to impose income deflation but you say this is actually been the typical method not only earlier even now third world debt is supposed to be rolled over and many of the third world countries went to the IMF to enable them to roll over the debt and the IMF wherever it helped imposed conditionalities and oxfam had studied that out of about 81 such agreements where the IMF you know came to the rescue of third world countries to roll over their debt the conditionalities entail austerity out of 81 and 77 cases so so austerity imposition of austerity is not an idea that has been given up by the Bretton Woods institution therefore the tendency would be to control inflation in the first world by imposing income deflation on the third world while ideally as you say in an optimum world it should have been through enlarging supplies from from the third world by enlarging output which could have by supporting present production petty production and so on I believe that a socialist economy can do that in fact I believe that a very fundamental difference between capitalism and socialism is that capitalism encroaches on petty production while socialism can in principle prevent such encroachments and protect and promote petty production. In commenting on imperialism into the present you say a significant feature of this new phase of imperialism is the squeeze it imposes on the rural economy of the third world countries where the bulk of these countries populations live do you then think that this will be the principal source of resistance to contemporary imperialism well I mean I think okay let me put it this way I believe whether it is in the third world or in the first world the existing crisis requires that overcoming it must be by confronting globalized finance if Biden is following a Keynesian policy then he is also in some sense confronting globalized finance because globalized finance doesn't want Keynesianism so the confrontation against globalized finance or getting rid of the hegemony of globalized finance is a necessary condition for mankind to get out of his present predicament now if in the third world we simply keep waiting then the first world confronting globalized finance and getting out of the current predicament there would simply mean that our burdens would become even greater that's what I was talking about austerity here as opposed to you know kind of the Keynesianism there therefore what we have to do is that we also have to make our own effort to get out of the hegemony of globalized finance now that hopefully would not arouse the kind of hostility from the advanced countries that it has done till now but on the other hand we have to reckon with the fact that it will arouse that hostility and if it does then obviously life become very difficult here but we have faced the difficult life and when in the course of doing so we would be following a trajectory of development that would lead on to social so so I would not say that the struggle is only in the third world I would say the struggle is everywhere people are probably not aware everywhere that there's a common enemy that is globalized finance capital but on the other hand unless the struggle is joined everywhere we may end up in a situation where the first world confronts globalized finance and adopts Keynesian policies but the impact of it is to squeeze the third world even further we are going to have to leave it there in this conversation with Prabhat Patnaik and this look into capital and imperialism theory history and the present Prabhat Patnaik thank you thank you very much and from Geneva Switzerland thank you for joining us in this segment of GPE News Dogs