Themes > Analysis

15.03.2001

Imperialism and the Diffusion of Development

I am acutely conscious of the great honour that has been bestowed on me in asking me to deliver the Ansari Memorial Lecture this year at the Jamia Millia Islamia. It is an honour as much because of the person being commemorated as because of the list of distinguished speakers who have preceded me in commemorating him. Dr.Ansari was a remarkable figure of the National Movement, whose qualities of head and heart have been brought to light recently through the labours of Professor Mushirul Hasan of this university. These lectures instituted in his memory have, through the care of the organisers, been able to draw some of the finest minds and have deserevedly become an important event in the academic calendar of Delhi. I recall attending one Ansari Memorial lecture, delivered by Professor Irfan Habib and presided over by Professor Nurul Hasan, which was a source of great pleasure and profit for me.

                                                        I
 
The topic I have chosen today has to do with a basic divide in development economics. On the one side are those who argue that the fetters on the development of the third world come from its integration into the world capitalist system. This does not mean that the internal structures of these economies play no role in arresting their development, but these structures, even though inherited from the past, are so enmeshed into their links with world capitalism, i.e. the internal and external constraints upon their development are so inextricably dialectically related, that distinguishing between them is pointless. Underpinning this totality, shaping this overall dialectic, however, is their link with world capitalism which is the decisive element. As against this position, there are those who argue that capitalism diffuses development, that, if the fruits of this process of diffusion are not reaped in abundance by large segments of the third world, the reason lies in their pre-existing social structure, which is independent and sui generis, having nothing to do with their integration into the world capitalist system. Indeed, on the contrary, such integration can play the role of undermining the pre-existing structures, and hence can usher in development by bending these structures themselves. While some authors of this latter group would contest the proposition that colonialism historically underlay the emergence of the phenomenon of underdevelopment, others would not necessarily contest the issue (or may even concede the point). They would however argue that the contemporary world is very different from what prevailed historically, and that only an "East India Company phobia" can blind us to this fact.
 
A divide along these lines is present within the Marxist tradition as well. Indeed the classic Marxist texts themselves can be cited in defence of positions on either side of the divide. Thus Marx's remark that "the country that is more developed industrially only shows, to the less developed, the image of its own future" can be, and occasionally has been, cited in defence of a "diffusionist" position. One can, quite justifiably in my view, quarrel with this claim, on the grounds that both the historical context of this remark (made with reference to Germany in relation to England) as well as its theoretical context (referring to "immanent tendecies" of capitalist relations wherever they are introduced rather than to actual growth trajectories), are very different from what this claim supposes. But, in the absence of any discussion of the inequalizing effects of capitalism in the international arena in the main body of Marx's work, a "diffusionist" interpretation of this remark has tended to persist. Likewise, Marx's defence of free trade on the grounds that it would hasten capitalist development and hence accelerate progress towards socialism has tended to obscure the international dichotomies spawned by capitalism. On the other side however there are Marx's numerous remarks on colonialism, his reference to India having "to pay 5 million pounds in tribute for 'good government', interest and dividends of British capital", and his remark about "exploitation" by a "conquering industrial nation", implicit in which is the notion of one nation exploiting another. Indeed, of the three main elements that we can note, following R.P.Dutt, in Marx's writings on India (and hence by implication on the colonial question), namely the destructive role of colonialism, the regenerative role of colonialism, and the necessity of a political transformation whereby the colonial people free themselves from imperialist rule, the last one already presupposes an anti-"diffusionist" position.

One can cite remarks in support of either side of the divide in Lenin's writings too. His statement in Imperialism that "While.. the export of capital may tend to a certain extent to arrest development in the capital-exporting country, it can do so only by expanding and deepening the further development of capitalism throughout the world" can be adduced in support of a "diffusionist" position, of the view that imperialism tends to "equalise" differences. On the other hand however the whole thrust of Imperialism was to show how "Capitalism has grown into a world system of colonial oppression and of the financial strangulation of the overwhelming majority of the population of the world by a handful of 'advanced' countries", to underscore inter alia in other words the fundamental inequalities across countries that imperialism was perpetuating and accentuating.
 
The element of ambiguity in Marxist writings on the subject derives from an ambiguity with respect to the precise relationship between the two basic types of revolution that Marxism saw on the agenda, namely a socialist revolution in the advanced countries and a democratic revolution in the third world. When the former was prioritised, the implications of anti-"diffusionism" receded into the background, and with it, to an extent, the very recognition of it. On the other hand when the historical focus shifted from the former towards the democratic revolution in the third world, theoretical attention too was given, to a much greater extent, to the existence and implications of international inequalities under capitalism. It is significant that in both Marx and Lenin, the emphasis shifts towards an anti-"diffusionist" stance in the course of their lives as their attention shifts from Europe to the East as the potential theatre of revolution. (Lenin's Imperialism represents that special moment when a synchronisation of both types of revolution in a world conflagration occasioned by the "general crisis of capitalism" appeared to be on the historic agenda). It is also significant that the Marxist theorist who sought to integrate colonialism into the very law of motion of capitalism, Rosa Luxemburg, prioritisd the socialist revolution and accepted a "diffusionist" position; her early death prevented any possibility of disillusionment with the European revolution, and hence of any shift in her position.
 
A clear anti-"diffusionist" position was articulated for the first time at the Sixth Congress of the Communist International, which argued that despite being integrated into the world capitalist system, the backward economies had not witnessed any significant development of the capitalist mode of production, and of productive forces under the aegis of this mode of production: backward economies' agriculture for instance was characterised as witnessing a "pauperisation", rather than a "proletarianisation", of the peasantry. In Marxist academic circles this position found extensive articulation in Paul Baran's classic work The Political Economy of Gowth which was published in 1957. Paradoxically however precisely when the anti-"diffusionist" position appeared dominant in Marxist, and wider academic, cirlces, its premises were being undermined.

                                                        II
 
Much of the third world witnessed significantly accelerated growth rates, compared to their own historical experience, in the post-war period which ushered in the era of decolonisation. (I shall not go into the question of relative rates of growth between the advanced and the third world economies since these aggregate categories conceal crucial differences). This fact per se however did not cast doubts on the veracity of the anti-"diffusionist" position. Since decolonisation had loosened the grip of imperialism on these economies, an acceleration in their growth rates was only to be expected and tended rather to substantiate the anti-"diffusionist" position. To be sure, that position had further argued that these economies, despite the fact of decolonisation, could not achieve any significant improvement in the living condition of the mass of the people as long as they remained within the capitalist orbit. But this claim too appeared vindicated by the experience of notable third world economies like India, which despite accelerated growth continued to be burdened with acute mass poverty, in contrast for instance to China where measures such as radical land redistribution and universal public distribution of certain necessities had ensured a degree of economic security for all. It is the emergence of the so-called "East Asian miracle" that appeared to undermine the anti-"diffusionist" position.
 
Several aspects of this "miracle" are clearer to us now than they had been at the time. Unlike the initial impression that was sought to be conveyed, namely that their success was a vindication of free market, free trade (laissez faire) policies which had enabled them to achieve spectacular rates of export growth through the sheer competitiveness enforced on them by their exposure to the world market, we now know that their economic regimes were  highly protectionist and dirigiste, in fact far more so in many ways than in India despite her plethora of controls and regulations. But even though their growth experience did not establish that the spontaneous operation of capitalism was not inequalising, it did cast doubt on the anti-"diffusionist" position for at least two reasons. The first was the sheer magnitude of growth. The world had seen the Soviet "miracle", but that was traced to an alternative social system. It had seen the post-war Japanese "miracle" but that was treated as an exception, produced under very special circumstances by a sui generis capitalism, in the only major Asian country to have escaped colonialism. East Asia not only produced a "miracle" but did so in countries that had been ravaged by colonialism; its growth rates were far in excess of anything witnessed in any other part of the decolonised world. The second reason lay in the fact that this "miracle" occurred not in the teeth of opposition from imperialism, but under its benign patronage, in countries which were often referred to as "client States" of imperialism. The East Asian experience might not have disproved the tendency towards spontaneous inequalising that occurs internationally under capitalism, but it did strongly suggest that imperialism was capable of consciously accommodating (e.g. through providing market access) growth rates in parts of the third world which were so high as to enable these parts to break out of their third world status altogether. In other words it was capable of consciously engendering "diffusion" of development, unlike what Marxist and other radical development economists had been saying.
 
The anti-"diffusionist" position lost further credibility when the so-called "miracle" spread to South-East Asia. Economies like Indonesia and Malaysia were large and populous economies, unlike most of the participants in the first round of the "miracle". Being rich in raw materials they had had long and painful histories of colonial exploitation. Their high growth experience did not even have protectionist neo-mercantilist regimes as a pre-requisite. They could not even be "explained away" in terms of being "frontline States" against Communism in imperialist strategy, for by the time their "miracles" occurred the "Communist threat" had receded considerably. And they appeared to contradict the notion that East Asia-type development can be "tolerated" only in some small parts of the third world but cannot be replicated over a wider region.
 
There can scarcely be any doubt that subscription to a "diffusionist" standpoint is quite pervasive today. In fact the ease with which the globalisation agenda has been pushed through owes much to the pervasiveness of this belief in "diffusionism", which even the Asian crisis has not succeeded in denting. The question is whether this belief is correct, i.e. whether the unfettered integration of a third world country into world capitalism today would bring it accelerated growth capable of lifting it from the morass of underdevelopment, or economic retrogression that rolls back the gains of decolonisation. In the rest of this lecture I would like to argue that even if successful "diffusion" of development into the third world was possible prior to the 1990s, i.e. even though the Marxists and other radicals had exaggerated their case earlier, it is no longer possible today because of certain changes that have occurred in the nature of world capitalism in the mean time. The fact that radical analysis had been somewhat off the mark earlier does not mean that it is off the mark now. But the reason why it is not off the mark now is not simply because the veracity of the earlier analysis is belatedly asserting itself; it is because the world has changed in a manner not anticipated earlier, which paradoxically validates the earlier conclusions. In the light of this change, to deny those conclusions now simply because they had been somewhat off the mark earlier would be altogether unwarranted.
 
                                                        III
 
The most significant change that has taken place in world capitalism in recent years is the emergence of a new form of international finance capital, which differs from what writers like Hobson, Lenin and Hilferding had written about in the pre-first war period. The Leninist notion of finance capital for instance was essentially nation-State based, and nation-State aided. It represented a "coalescence" of banking and industrial capital, being presided over by a financial oligarchy that was thrown up by a "personal union" between magnates belonging to the banking and industrial spheres. And it operated in, indeed gave rise to, a universe characterised by intense inter-imperialist rivalry, a belief in the pervasiveness of which underlay the notion of the "general crisis of capitalism" adopted by the Communist International under Lenin's leadership as its theoretical lynch-pin. In contrast, what we have today is finance capital that is "international" in the sense of not necessarily having German, or French or American interests stamped upon it, and not, for that reason, enjoying the backing of only some particular nation-State in the advanced capitalist world. It is a fluid mass that sucks in finance from all over, that breaks barriers to its unfttered movement all over the globe, and that is funadmentally in search of quick profits, and hence speculative in character, rather than having any enduring links with industry. What is more, far from giving rise to inter-imperialist rivalries, it is perhaps an important factor contributing to a recession of such rivalries: since a world broken up by rivalries is not very conducive to the global fluidity of speculative finance in search of quick gains, it exerts pressure for muting rivalries.
 
Three implications of this phenomenon of globalised finance capital are of relevance to us here. First, it undermines the possibility of Keynesian demand management, and indeed of any State intervention for boosting the level of activity. This is not to say that the State "retreats" from the sphere of the economy, but, rather the nature of its intervention undergoes a change. When such intervention in the earlier period invoked the "national" interest, this was not without a rationale. For example, when State intervention in the advanced capitalist countries was directed palpably towards boosting the level of activity and employment, it conferred benefits in varying degrees on virtually all domestic social groups; likewise, when the State intervened in the underdeveloped countries for building up the productive base of the economy through "development planning", it could not be acused objetively of serving only the sectional interest of some particular domestic social group. But State intervention in contemporary capitalism, whether in the advanced or the backward economies, gets increasingly oriented towards serving the narrow sectional interests of globalised finance capital in order to keep up its "confidence" in the economy.
 
There are at least two distinct reasons why Keynesian demand management is undermined by speculative financial flows. First, any boosting of activity to levels close to "full employment", as was the aim in the heyday of Keynesianism, gives rise to expectations of inflation and currency depreciation, so that long before the economy comes anywhere near full employment a flight of finance capital occurs which realises these very expectations (providing a retrospective justification for them), and thereby forces a contraction of the level of activity. Secondly, when this boosting is done under the aegis of the State, especially through higher State spending for purposes other than militarism, this becomes all the more a cause for panic in financial circles, since an activist State of this genre appears too radical for comfort. The only ways then that an advanced capitalist country can achieve high levels of activity and employment in these conditions are: either if it is so decisively the financial centre of the world that the sheer expansion of its financial sector that must necessarily occur in the era of globalised finance is enough to generate high employment; or if its currency is so decisively the lynchpin of the entire system that everyone has confidence in its value even when the economy of the country has high levels of activity. The Anglo-Saxon world would generally be the beneficiary of the first set of considerations, and the US in particular (whose currency is considered "as good as gold" even when not officially decreed to be so as under the Bretton Woods system) of the second. By the same token however the fact that Continental Europe, despite having a string of Socialist or Social Democratic governments, elected to office on the promise of getting rid of unemployment, continues to remain saddled with massive unemployment underscores the impossibility of Keynesian demand management in an economy caught in the vortex of globalised finance. Taking the advanced capitalist world as a whole, this means a lower level of activity on average than during the halcyon days of Keynesianism.I shall come later to what this entails, but let me move now to the second implication of globalised finance, which concerns third world countries.

                                                       IV
 
If the rates of return in the two regions are identical, then finance, whether originating in the advanced or backward capitalist countries, would tend to move to the former, which constitutes the bastion of capitalism. Therefore, when an underdeveloped country gets caught in the vortex of globalised finance, it has to ensure that this "natural" tendency of finance to flow to the metropolis is kept in check through the counteracting offer of a higher rate of return in its domestic economy; and it does this by jacking up its domestic "real" rates of interest. In other words, the sheer fact of an underdeveloped economy getting opened to free (or even relatively free) financial flows necessitates an increase in the real interest rates even to keep capital movements exactly as they were prior to the opening up. The higher cost of borrowing discourages productive investment and reduces the level of aggregate demand through this channel; it also undermines the viability of small units which cannot afford to pay high rates of interest on the credit needed to carry on their day-to-day production. It thus has a contractionary effect on the economy both from the demand and supply sides.
 
What is more, it accentuates the fiscal crisis of the State by raising the cost of servicing government debt. The magnitude of interest payments in the government budget shows a steep increase. This increase cannot be met through higher taxes; on the contrary, a "liberalised" regime of the sort favoured by international finance capital is characterised simultaneously by a lowering of the tax-GDP ratio. The government in such a regime has to forego substantial revenue through a reduction of import duties, and, since raising excise duties in a situation where import duties are being lowered, is both stupid (as it deliberately discriminates against domestic producers and in favour of foreign producers) and untenable, there is a relative reduction in overall indirect tax revenue. Since any increase in corporate taxes would frighten off speculators (apart from keeping off direct foreign investment whose enticement becomes the overriding objective of a "liberalised" economy), this too is eschewed; indeed there is a reduction in such tax rates to boost the "confidence of investors". And since personal income tax rates cannot move in a manner totally opposed to that of corporate income tax rates, the overall tax-GDP ratio goes down precisely when the government's interest payment obligations mount. The consequence is an accentuated fiscal crisis, because of which government investment, social expenditure (including subsidies to the poor), and development expenditure get curtailed. This contributes further to a contraction of the economy, apart from producing a crisis of infrastructure (which becomes a further excuse for emphasising the need to entice direct foreign investment), and accentuating poverty. Opening up an underdeveloped economy to the unfettered movement of finance therefore has the effect of enforcing a contraction of the economy.
 
We do not have to go far for a confirmation of this [1] . In India itself, even though the process of financial liberalisation is not complete, the 1990s have seen a sharp increase in the real rates of interest, which at present are way above the rates prevailing in the metropolis. While the real rate of interest in the advanced capitalist countries today is close to zero percent, in India it is about 9 percent. The substantial increase in the interest burden of the government, the reduction that has taken place simultaneously in the tax-GDP ratio, and the accentuated fiscal crisis of the State, resulting in reduced public investment, reduced development expenditure and increased rural poverty, are all visible phenomena in our own country.
 
But contraction of this kind is not the only consequence of financial liberalisation. A higher domestic interest rate, we have seen, becomes necessary in a backward country merely to neutralise the pull of the metropolis. Despite this overall neutralisation however there would still be bursts of movement of finance into and out of the country.Consider the situation when finance flows in. This would, other things remaining unchanged, lead to an appreciation of the exchange rate, which would result in a de-industrialisation of the economy by making imports cheaper. The burst of inflow of finance in other words would have led to an increase in the country's short-term debt, incurred ironically for financing its own deindustrialisation. On the other hand when finance flows out, since any depreciation of the exchange rate would  exacerbate inflation and give rise to expectations of further depreciation, inducements have to be quickly created for finance not to flow out, and this often entails an IMF bail-out package with conditionalities such as denationalisation of the country's assets. Quite apart from the overall contractionary effects therefore, the country loses out both when there are financial inflows and when there are financial outflows, both on the swings and on the roundabouts.
 
Of course when finance flows in, the government may prevent the exchange rate from appreciating, and may instead add to reserves. If these reserves are simply accumulated, then this may provide some cushion in a period of outflow; but if these reserves are used for adding to consumption (which typically would be of the rich) through larger imports then again there would be no cushion when an outflow occurs. The same would be the case if the reserves are used for the more worthwhile purpose of increasing investment. The country in such a case would be borrowing short-term funds to make long-term investments, and would be borrowing in foreign exchange to invest in assets that do not necessarily earn any, both of which are factors contributing to the economy's vulnerability. This last scenario is what was enacted in East Asia where banks, under newly-liberalised financial regimes in the 1990s, borrowed abroad to finance investment in the non-exchange earning sector. A crisis had to be a necessary fall-out. The crucial element underlying the East Asian crisis in other words was not the so-called "crony capitalism" characteristic of those economies (as if capitalism elsewhere is free of "cronyism"), but the liberalisation of the financial sector. It is this which constituted the fundamental shift in the East Asian setting, and underlay the crisis [2] .
 
In several Latin American countries during the last decade, for improving "investors' confidence" and preventing panic outflows, governments have committed themselves to maintaining the exchange rate visavis the US dollar, occasionally even bringing in legislation to this effect. But since at these exchange rates imports have outcompeted domestic production, the country has had to borrow from abroad to finance its own de-industrialisation; and what is more, for being able to continue borrowing, higher and higher interest rates have to be offered, which inevitably stifles domestic production and destroys the finances of the government [3] . In short, the point is not what particular policy a government should follow in a regime of financial liberalisation; the point is financial liberalisation itself. The real trap lies not in the meachanism for promoting "investor confidence", but in having to promote "investor confidence" at all. And international finance capital in its new incarnation relentlessly pursues, no doubt with local support, the task of pushing every third world country into this trap. Once such a country gets caught in the vortex of international financial flows, no matter what particular policy it pursues, the tendency is for a progressive atrophy of its sphere of production, and a progressive denationalisation of its domestic assets. This fact constitutes the second implication of the emergence of the new kind of international finance capital.

                                                        V
 
The question would be asked: even if a tendency for production to atrophy is embedded in the functioning of international finance capital, can't such a tendency be more than offset by the export boom made possible by trade liberalisation all over the world? One hears so much these days about the possibility of export-led expansion of the IT sector that this question is a very natural and pertinent one. For answering it however we have to be clear about a few general issues.
 
In a world of liberal trade, the growth rate of the third world as a whole would depend upon the growth rate of its exports, which basically means exports to the metropolitan countries [4] . Unless we visualise the third world making significant capital exports to the metropolitan countries (not "drain" but capital exports), which is obviously unrealistic, this rate of growth of exports would be tethered to the rate of growth of the metropolitan countries themselves. Since the era of globalised finance is characterised by a slowing down of the growth rates in the metropolitan countries, then, quite apart from the effect of globalised finance on the third world that we have discussed, the latter's growth rate would get adversely affected for this additional reason as well. The only offsetting factor against this adverse effect is a progressive reduction in the third world's import propensity from the metropolis, or an increase in the metropolitan countries' import propensity from the third world, i.e. if liberal trade enables the third world to outcompete the metropolis in a whole range of products. Is this possible?
 
What is quite remarkable is that the range of manufactured products which even the champion exporters within the third world, namely the Asian "miracle" economies, have been successful in exporting, has been a limited one [5] . And the markets in the advanced capitalist countries for this range of goods, whether belonging to the traditional segment, e.g. textiles, or to the modern segment, e.g. consumer electronics, are not growing particularly rapidly. This being the case, third world economies can at best play the game of "hopscotch", some economies stepping into the role of being successful exporters in this range ousting some other economies, and then stepping out as they in turn are ousted by others. Particular economies can temporarily provide shining examples of export success, and even be labelled as "miracle" economies; but after a while as they are ousted from their export slot, their "miracles" would begin to wane.
 
This in fact is what has been happening. East Asia's export success, after it had moved out of traditional areas like textiles, was based on a few items like consumer electronics, office automation and telecom equipment.When South-East Asia stepped into these very areas, the venue of the "miracle" shifted to South-East Asia, and East Asia's export performance started becoming less impressive. And within South East Asia too the recent success of thePhilippines in exporting these very goods has no doubt been purchased at the expense of the others, in a situation where advanced country demand for such exports has reached near saturation. In short, the success in different periods of different Asian economies in pushing out manufacturing exports is not indicative of the fact that the world has entered a new era when all implicit and explicit trade barriers have broken down and anyone can outcompete any one else in the world market by being a cheaper producer. All that it indicates is that the metropolis is now willing to readjust the traditional division of labour between the third world and itself to locate certain newer areas within the domain of the third world. Since these newer areas however are strictly bounded, the growth rate of exports, and hence by implication the overall growth rate, of the third world as a whole, would be slower in a regime of free world trade, in so far as globalisation of finance lowers the growth rate of metropolitan economies, for reasons we have seen. What is more, since in the face of reduced activity in the metropolitan economies, they would be keen on penetrating third world markets to boost their own domestic employment, i.e. to use export surpluses to the third world (financed by "hot money" inflows into the latter) to offset at least partly the consequences of their inability to pursue Keynesian demand management policies at home, liberalised world trade would have the opposite effect of precipitating deindustrialisation in the third world, and hence curbing its growth rate.
 
This of course does not preclude particular segments of the third world achieving high growth rates for certain periods while other segments languish. But trade liberalisation in a world where the metropolis is growing on average more slowly than before would necessarily have a growth-reducing effect on the third world as a whole. When we add to it the directly contractionary effect of globalised finance on the third world economies via the high interest rates and accentuated fiscal crises, it is clear that the current phase of world capitalism, far from being conducive to the diffusion of development to the third world, in the sense of bringing the bulk of the people in the latter closer to the living conditions of the people in the metropolis, has precisely the opposite effect.
 
Since in a regime of liberal trade in the current world situation, the third world according to the above argument can achieve export success mainly in those spheres where it is not directly competing with the metropolitan countries, it follows that the export of primary commodities, which are in heavy demand in the metropolis but not producible there, would emerge as a favourite pursuit. The export of a variety of agricultural commodities falls into this category and invariably entails a shift of land-use from the production of foodgrains for domestic consumption. A ubiquitous effect of trade liberalisation in the tropical third world has been a decline in the rate of growth of per capita foodgrain output (or even an absolute decline as in India), a consequent undermining of domestic food security, and wild fluctuations, far greater in amplitude than under the earlier era of protected dirigiste regimes but in consonance with the fluctuations occurring in the world market, in the prices of agricutural commodities [6] . Such fluctuations hurt consumers during upswings, hurt producers during downswings, destroy investment incentives of a risk-averse peasantry, and thereby contribute further to the arresting of development.
 
                                                         VI
 
I now come to the third, and perhaps the most significant, implication of the new phase of world capitalism, and this has to do with its socio-political effects on the third world. There are two effects in particular that deserve notice. The first is the attenuation of democracy that necessarily occurs in a country caught in the vortex of globalised finance; and the second is the fracturing in a multitude of ways of the unty of the nation that had come into being in the course of the earlier anti-imperialist struggle. These two processes complement one another.
 
Since a country caught in the vortex of globalised finance must ensure that it retains "investors' confidence" at all times, it necessarily has to take measures that please international finance even if these affect the people adversely. This per se is a negation of the very essence of democracy, and is immanent in the situation, not a result of any particular malevolence. The real question is: how can this essential negation of democracy occur even when formal institutions of democracy remain in place?
 
A whole array of measures are adopted for the purpose, ranging from taking economic policy-making outside the purview of elected governments, to making elections themselves infrequent, inconsequential, and inexpressive of popular will. Some of these measures are unfolding today before our very eyes in our own country.
 
Our parliament has before it a proposed legislation that puts a statutory ceiling on the fiscal deficit. Since there are no floors on the magnitude of tax revenue, since there are no floors on the magnitude of social expenditure, since there are no floors on the magnitude of anti-poverty expenditure, what this entails is a legitimisation of cuts in expenditures of these kinds, and of the sale of public sector assets "for a song" in the name of closing the deficit, even though such sale, while appearing to close the deficit actually closes no deficit. What is more, the Committee on whose recommendations this piece of legislation is supposedly introduced has several other recommendations which no doubt would take effect in due course; one such recommendation is for a "high-powered committee" to oversee economic policy making. In other words, economic policy-making is to be taken out of the hands of elected governments and handed over to a bunch of so-called "experts" consisting no doubt of either aspirants for slots in the IMF and World Bank bureaucracy or superannuated ex-employees of these institutions. In the same vein there is the proposal that the Reserve Bank should be made autonomous of government "interference"! Since the Reserve Bank is responsible for formulating the monetary policy and the exchange rate policy of the country which in turn profoundly affect the entire macroeconomics of an economy, this amounts in effect to taking economic policy entirely out of the purview of the elected government of the country. And this is sought to be achieved through legislation passed by the parliament itself!
 
But that is not enough. To make things further safe, there are proposals for a fixed term for the legislature, for Ayub Khan-style "basic democracy" and for a Presidential form of government. And a committee of persons handpicked by the government, which enjoys no legal or moral standing whatsoever, is working towards rewriting the Constitution of the country!
 
I now come to the second effect, namely the fracturing of the unity of the nation forged in the course of the anti-imperialist struggle. This too is happening in our own country before our very eyes. The most obvious instrument of it in our case is Hindu communal-fascism which seeks to substitute a Hindu Rashtra for the nation-State that emerged out of the anti-imperialist struggle. By detaching the concept of the nation from the context of the anti-imperialist struggle, by pitting one section of the people against another in the name of religion, by contributing threfore to the emergence of rival communal-fascist movements, it serves, notwithstanding all its talk of "swadeshi", to weaken the anti-imperialist consciousness [7] , and to subvert the anti-imperialist struggle, even as its government carries out with ruthless determination, at the behest of international finance capital,  the process of annexation of the economy by such capital. Communal fascism in short plays the role of ushering in the hegemony of international finance capital over the domestic economy.
 
Communal-fascism however is only one of the ways of the fracturing of the nation. There are a variety of other ways, at least one of which deserves attention here. And this has to do with secessionism. Accentuated fiscal crisis of the central government in a federal polity inevitably gets "passed downwards", making the centre starve the states of funds. The latter therefore increasingly look outside the country, in fact to international finance capital, for a bail-out from the crisis, which encourages secessionism, promotes a break-up of the federation into smaller autonomous units, and, in the process lets loose fascisms of another kind, based on ethnic groups. The example of the erstwhile Yugoslavia comes readily to mind. The portents in our case too appear ominous: indeed one of the "discussion papers" released by the Constitution Review Committee reportedly talks of giving Treaty-making powers to state governments.
 
The erosion of democracy and the fracturing of the nation-State forged in the context of the anti-imperialist struggle constitute, in themselves, a reversal of development. But even if we take the term development in its narrower and more usual interpretation, as meaning only material development, the constriction of democracy and the fracturing of the nation into a host of conflicting entities, constitute an additional reason for the stifling of such development. The diffusion of development in the new phase of imperialism remains a chimera for this reason too, apart from the reasons we have discussed already. This means not only that the struggle for development must take the form of a struggle for liberation from this new phase of imperialism, but also that the latter is indissolubly linked to the struggle for the preservation of democracy and of the unity of the nation that emerged from the earlier anti-imperialist movement spearheaded by persons like Dr. Ansari.