Capital contradictions

January 20,2019

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Without going into complex academic debates, let us state in simple terms that capitalism as an economic system suffers from a systemic paradox. On the one hand, it is a productive and dynamic economic system; on the other hand, it comes into being and sustains itself on the basis of inequality and exploitation. The question is: how to best deal with this inherent paradox?

In contemporary times, let us first take the case of capitalism being a productive and dynamic system that has reduced poverty. According to one estimate, extreme global poverty has decreased from nearly two billion people in 1990 to approximately 700 million in present times. That is a huge reduction in absolute poverty.

China, despite its poor human rights record and repressive policies is the biggest contributor to the reduction of world poverty. Another source cites (Weiping, 2018) that between 1981 and 2013, about 850 million people have come out of the $1.9 poverty line in China; only 1.85 percent now live in extreme poverty in the country (this figure has decreased from 88 percent). Similar levels of reduction in poverty have been seen in Southeast Asian countries that achieved economic growth through exports-led industrialisation.

This massive reduction in poverty would not have been possible had the ‘development states’ in China and the East Asian countries not used a combination of state-led economic development policies to suit their contexts. In other words, integration and careful adoption of state-led capitalism made their economies productive and dynamic enough to generate enough growth to bring poverty down substantially in their countries. This is one side of the coin, reflecting adoption of capitalism as an economic system by developing countries.

The other side is that capitalism builds itself up and sustains itself on inequality and exploitation, and is leading to populist and authoritarian regimes around the world. I have cited Pankaj Mishra (Bloomberg, Dec 24, 2018) elsewhere as well to state that there is an inherent contradiction between democracy that promises equality and capitalism that functions on the basis of inequality.

Of course, no one explains it better than Marx himself in ‘Capital’. Capitalism would not have been possible, as per the “primitive accumulation” chapters, without the colonialism, slavery, exploitation, coercion, plunder of common lands and Church property even in its “pre-history of capital” phase in Britain. The rest of ‘Capital’ explains how value is added to commodities through exploitation of labour once capitalism as a system kicks in. Now we are in the post-industrial phase of capitalism, where automation and artificial intelligence is replacing human labour; yet, the inequality perpetuated by capitalism is not decreasing.

Radical economist Utsa Patnaik has estimated that Britain drained a massive 9.184 trillion pounds (or 44.6 trillion dollars as 4.8 dollars were equivalent to one pound sterling during most of the colonial era) from India through the East India Company and the British Raj from 1765 to 1938. This amount is several times more than current Britain’s GDP. So, capitalism came into being and sustained itself not just due to the entrepreneurial ingenuity of the capitalist class as we are often led to believe. Plunder through colonialism, coercion and slavery were very much what gave it impetus and sustained it.

Capitalism has not evolved to any higher moral order over the centuries. Imperialism, ecological destruction, exploitation and coercion are still sustaining it. It functions on the basis of inherent contradictions and generates inequalities. However, the other side of the argument is that it is still the most dynamic economic system that has the capability of producing enough growth to lift millions out of poverty, as discussed above. The question is: how do post-colonial countries like Pakistan deal with this structural paradox of capitalist system?

Pakistan needs to become a strong ‘development state’ to re-orient the capitalist system in Pakistan to generate growth through economic dynamism; yet decrease inequalities through redistributive policies. We at best have ‘crony capitalism’ in Pakistan. The withering away of state controls under the neoliberal order in Pakistan has taken away the contours of the ‘developmental state’. We need a strong state that can set dynamic growth and exports targets, closely interact with the capitalist class to achieve those targets, provide the conditions for sustainable growth and yet redistribute wealth to decrease the frictions that are otherwise harvested by populist narratives.

The elite in Pakistan have for far too long been running the country and funding their institutional and personal pockets through foreign inflows. We are so addicted to foreign inflows that we have not set out a plan to become an economically viable country ourselves. On the other hand, the development expenditure that can foster human development and decrease inequalities is constantly eaten up by debt servicing and non-development expenditure. We are lagging behind on both sides of the coin; neither are we becoming economically viable enough to have dynamic growth, nor are we able to substantially decrease inequality.

It is about time Pakistan thought along the lines of becoming a ‘development state’ again. It is not going to be possible to set long-term targets for growth, exports and redistribution, unless we enjoy sustained political stability as it has been argued in these pages earlier. The last 30 years of neoliberal policies were largely also marked by a period of political instability. The combination of the two left a huge impact on the economy and on socio-political cohesion. There is a need to institute a culture of political stability and get the state to plan growth and effective redistribution, and deliver on it.

The writer is an Islamabad-based

social scientist.


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