Themes > Analysis

05.04.2000

The Humbug of Finance

I have chosen as the title of my lecture a phrase used by Professor Joan Robinson, who, in her book Economic Philosophy, talks of "the humbug of finance which Keynes had destroyed".[1] What she means by the phrase "the humbug of finance" is the view held by British finance capital, based in the City of London, in the late twenties, and propagated by the British Treasury (because of which this view came to be known as the "Treasury View") that in all circumstances the government's balancing its expenditure with its income, i.e. not resorting to any fiscal deficit, is the most desirable policy for an economy. The British colonial government in India, it may be recalled, had used precisely this argument for pursuing deflationary policies even during the years of the Great Depression because of the fall in its tax revenue. This had succeeded in worsening the impact of the Depression on our economy[2], had thwarted the industrialisation prospects which the policy of protection of the inter-war period had opened up[3], and had resulted in a wholesale running down of the economy's infrastructure.[4] This view in short was pervasive in the pre-Keynesian era. A slight variation of this view is that the fiscal deficit must under all circumstances never be allowed to exceed a certain small limit.
 
The theoretical articulation of the Treasury view was contained in a White Paper of the British Treasury in 1929, called "Memorandum On Certain Proposals Relating to Unemployment", and written in response to Lloyd George's suggestion that Britain should undertake public works for reducing unemployment which at that time stood at 10 percent (it was to reach 20 percent later). The White Paper argued that in any economy there is at any time only a certain pool of savings, and that if more of it is used for home investment then less becomes available for foreign investment, or if more of it is used for public works financed by government borrowing, then less is left over for private investment and foreign investment. It follows then that public works can never increase total employment in an economy since the increase in employment brought about by public works would be exactly counterbalanced by the reduction in employment arising from reduced private and foreign investment.
 
The fallacy of this argument was exposed by a young Cambridge economist and pupil of Keynes, Richard Kahn, in a classic paper published in 1931.[5] The argument was simple: total savings in an economy depend, among other things, on its total income. There is therefore no fixed pool of savings, unless we assume that income cannot be augmented, i.e. the economy is already at full employment, in which case the need for public works does not arise. The Treasury View in other words was arguing against proposals for reducing unemployment on the basis of a theory that implicitly assumed that unemployment did not exist at all. In an economy in which there is unemployment, in the sense of resources lying idle owing to lack of aggregate demand, if investment increases then these resources start getting used up directly and indirectly, through various rounds of the "multiplier". As a result, income rises and so do savings. Indeed, Kahn showed, the whole process of increase in income and employment would go on and on, until an amount of savings had been generated which exactly equalled the increase in home and foreign investment. Far from there being a predetermined pool of savings above which investment cannot increase, it is the total investment that determines the total savings: the direction of causation in other words is precisely the opposite of what pre-Keynesian theory believed. A corollary of Kahn's theorem was that if the government expanded public works for generating employment and financed these by borrowing, i.e. by enlarging the fiscal deficit, then an exactly equivalent amount of savings would accrue in private hands. A fiscal deficit in other words finances itself.
 
The argument advanced by Kahn in 1931 was central to Keynes' opus The General Theory of Employment, Interest and Money published in 1936. Keynes argued in a similar manner that in a situation of "involuntary unemployment", or "demand constraint", the government can enlarge employment and output by increasing its fiscal deficit; far from there being any adverse effects of this on any other stream of expenditure, such government action in fact would stimulate the total expenditure from these other streams via the "multiplier", and not even generate any significant inflationary pressures. Moreover, since the government can successfully pursue such a policy, it must do so, because, as Keynes put it, "it is certain that the world will not much longer tolerate the unemployment which, apart from brief intervals of excitement, is associated -- and, in my opinion, inevitably associated -- with present day capitalistic individualism."[6] Even if the government used the fiscal deficit for no worthier purpose than "to dig holes in the ground", that is still preferable to letting unemployment persist, since "'to dig holes in the ground' paid for out of savings, will increase, not only employment, but the real national dividend of useful goods and services"[7] (again because of the "multiplier"). To argue against the mitigation to human suffering that an increased fiscal deficit can provide is therefore bad theory, the sheer "humbug of finance".
 
The reason for my reviving this old and familiar discussion is that today in India we are once again witnessing the parading as wisdom of this "humbug of finance", and there is even large-scale acceptance of this "humbug" as wisdom. What is more, the "humbug" that is being paraded as wisdom in our country is even more of "humbug" than what Kahn and Keynes had attacked. In other words the "humbug of finance" that we are being subjected to even "out-humbugs" the "humbug of finance" that the British Treasury was purveying during the Depression of the late twenties. Let me explain this last point first.

                                                             I
 
There were no public sector enterprises in Britain during the late-twenties. The government sector's transactions therefore were co-terminus with budgetary transactions, so that the term fiscal deficit corresponded to the deficit of the government sector. This deficit had necessarily to match, as an algebraic truism, the surplus of the rest of the world vis-à-vis the British economy plus the surplus of the British private sector. An increase in the fiscal deficit, assuming foreign transactions were unaffected, would necessarily correspond to an equivalent increase in the private sector's surplus of income over expenditure. What Keynesian theory argued is that an increase in the fiscal deficit in a demand-constrained system would cause an equivalent increase in private surplus (and hence finance itself) through an increase in the private sector's income (via larger employment and output through the demand stimulus obtained from the government) rather than through a reduction in private expenditure, in particular investment expenditure, which the Treasury View with its fantastic notion of a savings pool had claimed. As the government deficit goes up by Rs.100, employment, output and incomes go up until private savings have gone up by Rs.100 (assuming private investment remains unchanged), i.e. an extra Rs.100 of wealth has been put into private hands, which is held directly or indirectly in the form of claims on government.
 
Now, even though the use of fiscal deficit for increasing employment is perfectly legitimate, one may have reservations about this particular mode of raising employment, for three reasons: first, a fiscal deficit-financed expansion in activity, as just mentioned, does accentuate wealth inequalities compared to an equivalent tax-financed expansion of activity. In a society wishing to keep wealth inequalities in check, it is better to finance government expenditure by taxing capitalists than by borrowing from them. Secondly, there may be problems about knowing how much fiscal deficit is needed to get to "full employment" (which in a capitalist economy would never mean employment for everybody willing to work, but would only entail lowering unemployment to that level of the reserve army which is the minimum necessary for the avoidance of cumulative price instability). Suppose for instance that the owners of wealth increase their consumption as their wealth increases but with a time-lag. Then if, say, with Rs.100 of fiscal deficit the economy gets pushed to full employment before private consumption has responded to the increased wealth, then once it begins to respond, Rs.100 of fiscal deficit would turn out in retrospect to have been too large, since now there would be too much demand. Thirdly, even if private wealth has no effect on private consumption, if the economy gets taken to full employment through a fiscal deficit-financed expansion in activity, then at full employment there would be a large overhang of private wealth in liquid form (as direct or indirect claims upon government) and these, when resources are being fully utilised, can give rise to speculation-engendered inflation.[8]
 
None of the above considerations justify the "humbug of finance". What they say is that while an increase in the fiscal deficit can increase employment, and should be used for doing so if necessary, there are other ways of increasing employment, through tax-financed increases in government expenditure for example, which might be even better for the purpose. Of course if the latter cannot be implemented easily then fiscal deficit should be resorted to rather than keeping unemployment going.
 
Even these residual objections to fiscal deficit however vanish when the result of the fiscal deficit is to increase not private savings and wealth but those of public sector enterprises. When this happens, there is in effect no increase in the government sector's deficit. What appears as an increase in the fiscal deficit is counterbalanced by a surplus in the rest of the government sector not reflected in the budget, so that the appearance of a fiscal deficit is entirely on account of the convention of making the budget reflect only a part of the government sector's transactions; it has no economic significance. To object to an increase in the fiscal deficit in such a situation is even more theoretically illegitimate than to do so in a situation where there is no public sector. If the objection even in the latter case is the sheer "humbug of finance", then in the former case the "humbug" is, if anything, compounded several-fold. And yet in India there is an objection to an increase in the fiscal deficit even when the consequences of such an increase would accrue as larger surpluses to the public sector, which is why the "humbug of finance" being purveyed in our country today "out-humbugs" the "humbug" attacked by Kahn and Keynes. I shall give three examples of such "supreme humbug" (if I may call it so).
 
                                                           II
 
At this moment there are over 32 million tonnes of foodgrain stocks in the economy. Since 20 million tonnes of foodgrain stocks are considered adequate by the government (for this time of the year) as buffer-cum-operational stocks, it follows that at least 12 million tonnes of surplus stocks are lying idle with the Food Corporation of India. The existence of idle stocks of foodgrains in a country afflicted by large-scale poverty and malnutrition, is so palpably absurd that there have been proposals from time to time within the government itself to get rid of these stocks by putting purchasing power in the hands of the rural poor through a massive expansion in employment-generation schemes.
 
Such an expansion of employment generation schemes will kill several birds with one stone. First, it will bring down unemployment and poverty; secondly it will get rid of the idle stocks which are currently hanging like a mill-stone round the Food Corporation of India's neck; thirdly, if such employment-generation schemes are properly conceived, then they can add to social overhead capital in rural India and improve the quality of life, or augment productive investment and contribute towards a larger output in the future: since the decade of the nineties has seen a decline in per capita foodgrain output in the country, the first decade since independence to have done so, any addition to productive investment effected in this manner, would be quite crucial. It follows, given all these possibilities, that allowing idle foodgrain stocks to continue is extremely irrational; it represents criminal waste in a poor economy like ours.
 
Why is it then that these foodgrain stocks are not being used for employment-generation programmes? The answer is that such expenditure will increase the fiscal deficit! All suggestions, even those emanating from within the government itself, for reducing idle stocks through enlarging employment-generation programmes have been turned down on these grounds.
 
Now, this is "supreme humbug". Let us assume, for simplicity, that employment generation programmes require only labour and that labour spends its wages only on foodgrains. If Rs.100 are spent on employment generation through an increase in government borrowing (i.e. the fiscal deficit rises by Rs.100), then these Rs.100 would be spent on foodgrains and hence (ignoring minor complications like transport costs) the FCI's stocks would go down by Rs.100. The FCI can then repay Rs.100 to the banks from whom it has taken credit for stock-holding. It follows that as the government borrowing increases by Rs.100 for financing employment-generation programmes, it reduces by Rs.100 as a consequence of such programmes, so that the net government indebtedness does not change. What appears as an increase in the fiscal deficit in this case is no actual increase: it is only a consequence of the fact that FCI transactions do not figure in the budget as a matter of convention (indeed they used to figure in the budget until the early seventies). And if there is no actual increase in the fiscal deficit, but only an apparent one, then it cannot conceivably have even the adverse consequences that the protagonists of financial orthodoxy associate with larger fiscal deficits. If nonetheless there is opposition to such a seeming increase in the fiscal deficit, then what else can one call it but the "supreme humbug of finance"?
 
To be sure, I assumed above that the employment-generation schemes required only labour and that labour demanded only foodgrains. But dropping these assumptions only means that in addition to foodgrains there would be some extra demand for non-food wage goods and for material inputs for the employment programmes. Given the fact however that industry too has been afflicted by a demand constraint of late, this would only mean that Rs.100 of spending on employment-generation would clear less than Rs.100 of foodgrain stocks, while creating extra demand for industrial goods, and bringing forth lager industrial output, from the remainder, which can scarcely be frowned upon. True, in this case not all of Rs.100 would accrue back to the government via the FCI; a part would materialise as private savings and hence would entail an increase in the government's net indebtedness. But objecting to this in a demand-constrained system is theoretically illegitimate: it would still qualify, on Keynes-Kahn grounds, as "the humbug of finance".
 
The purveyors of humbug in this particular case often fall back on a second line of defence. This states that the accumulation of surplus foodgrain stocks is only a temporary phenomenon; if one enlarges employment-generation (poverty-reduction) programmes now because of this temporary surplus, then, once the surplus is used up, the poor would be back to square one. Enlarging such programmes, which have got to be sustained, purely on the strength of a temporary foodgrain surplus, would be irrational.
 
There are two immediate rejoinders one can make to this argument. First, if employment-generation programmes are carefully planned, then they can result in sustainable increases in foodgrain output, in which case the temporary surplus can become the means of obtaining a permanent surplus (though not necessarily of the same order) that can effect a permanent reduction in poverty. Secondly, even if this were not the case and that the temporary surplus can only bring temporary relief, what is wrong with temporary relief?
 
Beyond these however there is a more important point. Apart from a brief interlude in 1992 and 1993 when the central cereal stocks, especially wheat stocks, fell below the prescribed "norm" and necessitated some imports, the level of these stocks has been well above the "norm" throughout the 1990s. We are in other words not experiencing any temporary surplus, but a more or less permanent glut, and that too at a time when the per capita foodgrain output has shown a declining trend, and the rural poverty ratio an increasing trend. The economy has been transformed into a demand-constrained one, and it is this context rather than any temporary foodgrain surplus which lends urgency to the plea for an increase in the scale of employment-generation programmes.
 
It is incredible that in the context of this transformation of the economy into a demand-constrained one, with the coexistence of huge foodgrain stocks, large unutilised industrial capacity, reasonable foreign exchange reserves (we shall discuss their adequacy later) and growing rural poverty, the Finance Minister actually claims that reducing the fiscal deficit is the primary task before the government, and that too when the ongoing inflation rate is a mere 2-3 percent! It is even more incredible that he gets away with this claim with not a single dissenting voice in the media. This is indicative of the triumph of the humbug of finance in today's India.
 
                                                      III
 
My second example is logically analogous to the first one. There is an almost unanimous view in government and media circles that India needs foreign capital to develop its power sector. When in response to a High Court ruling on a Public Interest Litigation recently, Cogentrix announced that it would pull out of its proposed power project in Karnataka, it began to be placated with unprecedented ardour. The Supreme Court was pressurised into overturning the High Court verdict, the Central government came up with counter-guarantees that Cogentrix, sensing its chance, started demanding, and the President of Assocham wanted curbs on Public Interest Litigations altogether![9] The clear impression was given that the heavens would fall if Cogentrix pulled out. But the question remains unanswered: why do we need Cogentrix (or Enron), and that too when the domestic power equipment producer, BHEL, has large unutilised capacity owing to lack of orders, when the technology of putting up power plants is well-known to us, and when it is also well-known that the foreign producers inflate their capital costs (owing to the system of guaranteed rates of return) and produce power at a higher cost per unit than can be done with Indian equipment.[10]  
 
The answer cannot be that they bring foreign exchange, since the foreign exchange they bring is to cover the purchase of equipment which they import; if we did not use their equipment we would not need this foreign exchange in the first place. The only possible answer can therefore be that they bring finance, that if they were not entrusted with the task then the government would have to finance these power projects from its budgetary resources, which typically would mean a larger fiscal deficit. In short, power projects are being entrusted to Multinational Corporations in order to avoid a larger fiscal deficit. This once again is an example of what I have called the "supreme humbug of finance" which is even more of "humbug" than what Kahn and Keynes had demolished.
 
Suppose the government borrows Rs.100 and spends the sum on a power project. Suppose for simplicity that the only cost of a power project is equipment cost. Then these Rs.100 would accrue as sales revenue to BHEL, a public sector undertaking. Suppose again for simplicity that the bulk of the cost of power equipment production is in the nature of fixed costs, then these Rs.100 would accrue to BHEL as operating surplus which would be saved during the period, in the form, say, of bank deposits. Now, even though the fiscal deficit appears to have gone up by Rs.100, the net indebtedness of the government has not increased at all: the government on its budgetary account has borrowed Rs.100, but holds these Rs.100 in the form of bank deposits of a public sector undertaking. For the government as a whole the liabilities and the assets have gone up identically, by Rs.100, leaving its net indebtedness unchanged. The higher fiscal deficit therefore is only apparent, a consequence of the convention that the transactions of public sector undertakings are not part of the budgetary transactions. Even by the logic of the votaries of financial orthodoxy therefore the adverse consequences that are supposed by them to follow from higher fiscal deficits should not be visited upon the economy in this instance.
 
No doubt, our simplifying assumptions would not hold in practice, necessitating some increase in government indebtedness, though again, in so far as through the different "multiplier" rounds following the initial government expenditure of Rs.100, the profits, and hence savings, of other public sector enterprises also go up, the net indebtedness of the government would, to that extent, be kept down. Since the different public sector enterprises in India provide inputs to one another (not to mention the fact that FCI foodgrains stock-decumulation provides the additional food demanded by workers when the wage bill goes up), an increase of Rs.100 in power sector investment would largely come back as additional savings of public sector enterprises without any increase in net indebtedness. In short, as long as unutilised capacity owing to deficient demand exists in the power equipment and its feeder units belonging to the public sector, to talk of the government's experiencing a shortage of finance for power investment is "supreme humbug". Even if some of these feeder units are in the private sector, as long as they have unutilised capacity, power investment financed by a fiscal deficit, even though it would raise the government's net indebtedness, would still make perfect sense on the Kahn-Keynes grounds. The opposition to it constitutes the "humbug of finance".
 
The point here is not whether a larger fiscal deficit is the best way of financing power investment. Nor am I suggesting that all of India's immediate power needs can be met through such financing alone.[11] The point being made here is altogether different and can be summed up as follows: first, in a situation of demand constraint, financing investment through a fiscal deficit is perfectly legitimate even when the government's net indebtedness goes up as a result of it; secondly, very often the government's indebtedness does not even go up since the multiplier effects are all within the public sector itself; thirdly, to invite Multinational Corporations desperately for investment in the power sector, on the plea of a shortage of finance, in a situation of demand constraint for power equipment and feeder units, is to be fooled by the "humbug of finance"; fourthly, to do so when these demand-constrained equipment and feeder units are all in the government-owned sector itself is to be taken in by the "supreme humbug of finance". Unfortunately this last case is what fits the Indian government's current policy in the power sector.
 
                                                            IV
 
My last example is slightly different in nature. It relates to the practice followed in recent years of treating the proceeds from the sale of public sector enterprises' equity as being analogous to revenue, and hence using such sales proceeds to "bridge" the fiscal deficit. This practice, based on a confusion between stocks and flows, is manifestly unsound.
 
Consider an example: suppose the government has a fiscal deficit of Rs.100. This must generate private savings worth Rs.100 which would be held in the form, directly or indirectly, of claims upon the government. In a situation of demand-constraint, these savings are generated through an increase in output, employment and incomes. But if the economy is supply-constrained, then these savings would be generated through an inflationary squeeze on real wages. Hence the fiscal deficit can be objected to on the grounds that it would cause inflation (or equivalently, balance of payments problems) by creating excess demand, if the economy happens to be supply-constrained. Now, if the government raises Rs.100 through disinvestment of public sector equity, then, unless the buyers of this equity finance this purchase by reducing their own flow expenditures (and there is no theoretical reason why they should do so), there would be no reduction in excess demand compared to when there was no disinvestment. The inflationary effects of the fiscal deficit would be exactly the same whether it is met by borrowing or through disinvestment. The only difference would be that instead of holding claims upon the government as in the first case, the private savers would be holding titles to actual government assets in the second case.
 
Thus the argument one frequently encounters, namely that the government should sell off some public sector enterprises and use the proceeds for increasing social expenditures, is simply erroneous: the macroeconomic consequences of doing this would be exactly analogous to what would happen if the government increased social expenditure merely through deficit financing.
 
There is a variation of this argument which is equally erroneous. This states that the government should use the proceeds from the sale of public sector enterprises for retiring public debt, in which case its interest payment obligations will go down and it can spend more on social sectors. Suppose the government sells Rs.100 of public sector equity and retires public debt of an equal amount. If the interest rate it had to pay on this debt was 10 percent, then it would be saving Rs.10 per annum from then onwards on interest payments and can therefore spend Rs.10 more per annum on social sectors. But the public sector enterprise whose equity is being sold would have also earned some returns every year. The argument for disinvestment would make sense only if these returns were less than Rs.10 per annum. But if they were less than Rs.10 per annum, then why should any private agent pay Rs.100 for them? With returns less than Rs.10 per annum, their present value, at the same rate of discount as the interest rate on public debt, would be less than Rs.100. It follows that unless the private buyers employ a lower rate of interest for discounting the returns, on the public enterprise they purchase, than the rate of interest on public debt, selling off public enterprises can never improve the government's ability to spend. Since there is absolutely no reason why their discount rate should be lower than the interest rate on public debt (in fact it would be invariably much higher since the rate of interest at which they borrow from banks is generally higher), every such disinvestment, instead of improving the government's spending capacity, actually worsens it.
 
It may be argued that while the level of flow demand might remain unaffected whether the fiscal deficit is met by borrowing or disinvestment, the difference in private portfolio between these two cases would have important secondary effects, in so far as claims upon the government, being more liquid, can exacerbate excess demand-caused inflation, more than the ownership of government property which would be relatively illiquid. But, first of all, this is not necessarily true: government equity is no less liquid than government bonds or term-deposits with banks. Secondly, the degree of liquidity of the private portfolio can acquire relevance only if excess demand-based inflationary pressures are engendered; in a demand-constrained system the question of such inflationary pressures simply does not arise. The belief that fiscal deficits cease to be fiscal deficits if covered by equity disinvestment is therefore doubly wrong: first, its premise is wrong (since the economy is demand-constrained), and secondly, its logic is wrong (since equity is not necessarily less liquid than debt). This premise however is that of the "humbug of finance".
 
                                                       V
 
The protagonists of this "humbug of finance", who frown upon fiscal deficits even when the economy is demand constrained, and even when the savings generated by the fiscal deficit occur within the public sector itself (and who believe that selling public sector equity mitigates the effects of a fiscal deficit), often fall back on two additional arguments. The first states that State intervention in the economy should be eschewed because it promotes "inefficiency". This argument too is "humbug", like the rest of the "humbug of finance". If State intervention in a situation of demand constraint increases total output, then calling it "inefficient" is a travesty of the truth. Propositions such as "State intervention causes inefficiency" invariably assume comparisons between two situations in both of which all resources are fully employed. These propositions become completely meaningless, nay absurd, when the non-State intervention situation is demand-constrained.
 
The second argument runs as follows: the point is not what a fiscal deficit is intrinsically (i.e. in a ceteris paribus sense) capable of doing in a particular situation; the point in today's context is what foreign capital thinks it would do. And if foreign capital is suspicious of any increase in the fiscal deficit, then, even if this suspicion is ill-founded, it would nonetheless ensure that adverse consequences would follow from an enlarged fiscal deficit, in the form of capital flight for example. The effect on the balance of payments in this case would be as real, despite the existence of demand-constraint, as if the fiscal deficit had impacted on it in a situation of supply constraint.
 
This argument has some merit, but it needs to be inverted. If the confidence of foreign capital requires a curb on democracy, then that is no reason for curbing democracy; if foreign capital has more confidence when the Prime Minister is an ex-employee of the World Bank, then that is no reason for limiting the country's choice for the post of Prime Minister only to that set; likewise if workers agitating for their demands dents foreign capital's confidence then that is no reason for banning workers' agitations. In all these cases the better course for society to adopt is to put curbs on foreign capital rather than dance to its tune.
 
                                                         VI
 
Two questions inevitably arise: first, if the "humbug of finance" is mere humbug, then how does one explain its revival more than half a century after it had been buried? This is a complex question relating to political economy, a convincing answer to which requires answering two distinct questions: whose interests does it serve? Have some of the elements whose interests it serves become stronger in recent years?
 
The basic objective behind propagating the "humbug of finance" is to prevent, or roll back, any activity on the part of the State to become a producer, or an active investor, or a controller of capital. This not only opens up more space for capital, not only permits its grabbing hold of State assets at throwaway prices, but ushers in a bout of centralisation of capital in the crisis that follows State withdrawal. It follows then that different elements of capital have an uneven interest in embracing or propounding the "humbug of finance": larger capital has greater interest than smaller capital, and finance capital has greater interest than manufacturing capital (which benefits from the expansion of the market caused by State activity).
 
This is a general picture. Looking at the matter in the context of the world as a whole, it follows that international capital generally, and international finance capital in particular, would be the strongest votary of the "humbug of finance", especially of inflicting it on third world countries. The third world State acted after decolonisation as a bulwark against foreign capital and was used by the domestic bourgeoisie to strengthen itself at the expense of foreign capital. Rolling back the third world State, in particular relatively autonomous and powerful third world States like the Indian State, by imposing the "humbug of finance", represents therefore a major triumph for international (or more accurately metropolitan) capital. It is able to achieve this triumph partly because it has become much stronger owing to the inter-related phenomena of subsidence in inter-imperialist rivalry, and the ascendancy of a new form of metropolis-dominated supra-national finance capital.[12]
 
The second question that inevitably arises is: why should the domestic bourgeoisie in third world have gone along with the propagation of the "humbug of finance"? In part it has to do with the unsustainability of the earlier post-independence trajectory of State-sponsored bourgeois development: having reached a dead end the big bourgeoisie now feels that its future lies in linking up as a junior partner of metropolitan capital. In part, the answer has to do also with the pressures exerted by metropolitan capital itself whose increase in strength in its new incarnation has already been referred to. It follows then that the third world bourgeoisie has had a role reversal. In the new historical conjuncture it can no longer play the positive role of leading the struggle for emancipation of the national economy from the control of metropolitan capital.
 
In this context it becomes absolutely and urgently necessary for all of us, who are not wedded to the cause of the big bourgeoisie or of metropolitan capital, to expose the "humbug of finance" which is being used to justify the decimation of the capital goods sector of the economy and the useless stock-piling of millions of tonnes of foodgrains in a country of starving people.