The country that is more developed industrially only shows, to the less developed, the image of its own future –Marx, Capital, Vol I
An epitome of beauty, serenity and colonial charm… –An advertisement for The Carlton, a luxury hotel created by the Rahejas in Kodaikanal, Tamil Nadu
Land, development and displacement has once again become the central point of debate in India. Curiously the debate is on industrial development ostensibly, under capitalism. Suddenly it has dawned upon the learned Prime Minister Manmohan Singh and his policy experts that land and agriculture cannot be the main basis for the economy of a country like India that is marching ahead in the 21st century. The often erudite, soft spoken PM has even gone to the extent of calling all those, who oppose the present road map of prosperity and growth laid out by his government, anti-development and hence anti-national. The Prime Minister has equated the present policy prescription for growth tempered by the diktats of the World Bank and IMF with the ‘national interest’. Dr. Manmohan Singh is not alone in his concern about the future of the so-called ‘second generation reforms’, otherwise known as Liberalisation, Privatisation and Globalisation (LPG).
He is joined by the likes of Dr. Amartya Sen who is always ready to ‘grade’ the ‘performance’ of the Indian economy. In one of his interviews to The Telegraph while trying hard to pull the CPM-led West Bengal government out of the ignominy of Nandigram and Singur the Nobel Laureate has made it loud and clear that whatever is happening in the form of Special Economic Zones throughout the sub-continent is development through industrialisation that India badly needs. And make no mistake. This development package will inevitably have to exploit land that was / is fertile or otherwise. Gone are the days when agriculture alone could provide to the developmental needs of the Indian economy which as per Sen the economist is poised for a growth of more than 9 percent, mainly propelled through foreign direct investments. At best, it is nothing but Sen and the art of consensus building. Incidentally, when the people of Singur was protesting against land being taken from them against their will, Telegraph had carried photographs of CPM cadre moving in hordes on motorcycles in Singur with red flag and the life size portrait of Ratan Tata trying to ‘educate’ the people about the virtues of the TATAs as the harbinger of industrialization in post-47 India. Perhaps both, the Nobel laureate and the lumpen brigade of the CPM, were conveying the same, albeit, in different ways.
It’s official now. Agriculture cannot be the main provider of employment for the vast sections of the masses abounding rural India. In fact, the first official warning came in the form of an innocuous survey of the NSSO—about which the government had made a song and dance, not to mention the media that had gone overboard—proclaiming that about 40 percent or more of the peasantry in India would want to rid their lives of agriculture.
Yet in the maze of this publicity blitzkrieg by the proponents of LPG, what is carefully ignored is the question of development itself. The question as usual is deliberately posed in a manner where the pertinent aspects on the ramifications of a development model—that is totally reliant on foreign capital / dependent on imperialism—for the vast sections of the masses of this country hardly gets any mention.
What is argued is that displacement is inevitable in development. The rest of the arguments are just a logical corollary of this initial refrain. Since the peasantry cannot provide labour opportunities through agriculture anymore for the bulk of the masses as required by the circumstances coupled with the diminishing returns for the farmers with a high input cost and low market price / support price for the output, there is no more incentive for them to continue in the same productive activity.
Amidst all this effort of consensus building are the shocking and gripping accounts of violence and repression from the killing fields of Kashipur, Kalinganagar, Nandigram, Raigada, Jagatsinghpur and Singur. When this is being written the CPI (M) has resorted to the worst carnage in Nandigram which even the die hard supporters of CPI (M) itself have shockingly compared it to the worst genocide that followed the post-Godhra riots in the state of Gujarat in 2002. The scope of this article does not permit to deal with the entire happenings in Nandigram. It may be dealt in a separate piece.
Is displacement due to development or the development of displacement an inevitable thing like ones own shadow, a necessary evil that has to be lived with when one thinks about development? Or is there a possibility of a development which is free of any form of displacement; any form of violence on the people? Is this phenomenon of displacement due to development a new feature in the trajectory that India followed post-47? These are vital questions we cannot shy away from if we are serious in fighting the four dreaded Ds—Displacement, Destruction, Destitution and Death, especially in a social reality like South Asia and that too at a time when private capital—foreign and domestic—is considered as the main vehicle of implementation of the policies of LPG.
Towards an understanding of the politics of development
A concrete understanding of the present phase of LPG of the Indian economy and its implications in the South Asian sub-continent, calls for the need of an approach toward development from the point of view of the vast sections of the masses. It then becomes pertinent to disentangle the maze that has deliberately been created on the question of development through a dialectical approach the politico-economic rationale of the path of development which India has been / is embarking. Any attempt to talk about the future of the path of development that India should embrace should flow from a perspective informed by the past and an understanding of the present rooted in the past enlightened by a theory that is in the interest of the vast sections of the masses. It is the effort of this paper to look at the present phase of policy initiatives—termed as the second generation reforms of LPG—in a continuum since post-47 India. It is argued here that any attempt to theorise the history and nature of development in post-47 India cannot escape the larger structural and causal elements within and without the Indian sub-continent which contributed and sustained the Indian state. In essence it is the mapping of the trajectory of interests that have contributed towards the forging and implementation of a model of development that is essentially an expression of the interest of the dominant class of that state.
Poverty of critique or Poverty of the critique of poverty
In their critique of displacement due to development, many of the activists, academics and social commentators consider the present phase of development (initiated through the second generation reforms of LPG) as the main cause of ruin of gains of the Nehruvian era. The main lacuna of this approach among other things is the obfuscation of the real nature of the politics of development that was unveiled soon after the transfer of power in India from the British. In this perception of development it becomes natural that despite the best efforts of the planned economy in the Nehruvian period certain people, certain communities, still remain out of the loop of the ‘fruits’ of development. Neither development could reach these people nor do people embrace development. Development thus becomes a neutral category. No matter which class or state is promoting it, development needs to take place. It also flows from the same argument that development, it does not matter who is getting benefited from it, should be promoted as it will ultimately make the country prosper, stable and secure for everyone. At the end of the day, commonsense has it that the ‘fruits’ of development will reach—trickle down to—everyone, irrespective of caste, class, nationality, religion and region. In this context, what Amartya Sen has to say, celebrates the commonsense that is shared in the above mentioned paragraph:
When people move out of agriculture, total production does not go down. So per capita income increases. For the prosperity of industry, agriculture and the economy, you do need industrialisation. Those in effect preventing that, either by politically making it impossible for an industrialist to feel comfortable in Bengal or making it difficult to buy land for industry, do not serve the interest of the poor well. … The market economy has many imperfections… But it also creates job and income and if the income goes up, government revenues go up, so there is money available for education and healthcare and other things.
Amartya Sen’s sophistry with the language of the market fails to locate the dynamic of the process of development in the interests of the classes that is promoting it. For Amartya Sen, logically those who lose out their jobs in the agrarian economy should get their labour in the industrial economy. And they are not getting jobs as there are no industries. And the way out is to bring in private capital—foreign / domestic—to start industries which will generate jobs. In other words industrial development cannot happen without capital generation. And hence private capital becomes inevitable. As to what kind of industry and what kind of jobs and the quantum of job creation—all these are immaterial. Any protest of the peasantry and the landless agricultural labourers against the loss of their livelihood becomes politically motivated opposition for him. He takes it for granted that there is forward and backward correspondence between the rural and the urban, between the agrarian and the industrial production in post-47 India. In other words, for Amartya Sen the shift of priorities from the agrarian to the industrial is a smooth exercise. Those who have lost their livelihoods will gain through jobs in the industrial scenario. The dynamic of development moves as a neutral category for him through time and space. The circularity of the logic is quite revealing when one looks at what the professor is saying: To start with, why was Five Year Plans important for capital formation during the planned economy period? For development. Why was Green Revolution important for capital formation in agriculture? For development. Why was land reform in agriculture important for capital formation? For development. Why was disinvestment in Public Sector Undertakings important for capital formation? For development. Why is privatisation of the social sectors important for capital formation? For development. Why is corporatisation of agriculture important for capital formation? For development. Why is concentration of land important for capital formation? For development. And why is mass use of agricultural land for industrialisation displacing the livelihoods of lakhs and lakhs of people important for capital formation? Again, for development. Reading between the lines will have Sen the economist telling us that development brings crisis, devastation, destitution, death, destruction, because of development and the only way out of this crisis is through development!
Close on the heels of the above notion of development is the contention made by many that all was well till the mid-80s of the last century and things started deteriorating ever since then. Central to this argument is the nostalgia of the good old days of Nehruvian planned economy with Public Sector Undertakings (PSUs), Five Year Plans and Nationalisation being the hallmark of development planning during this period. This perception, which is shared by the socialists, Gandhians, the CPI, CPM and their ilk in the parliament again exalts development to the status of a neutral category, shorn off the real interest it represents in space, time and structure.
Development is thus possible in the urban centres because there is availability of capital, market, and also income so as to consume the products that are available in the market. Conversely there is no or little development in the rural, tribal areas as in these social realities there is little income generation to match the parity of the products available, besides low income / low capital formation has resulted in a skewed or total absence of the market in these social formations. Thus development gets reduced to presence or absence of capital, market, income . People become less important in this model. Thus it becomes natural in this model of development to come up with programmes like poverty alleviation / amelioration, Food for work, Rozgar Yojana, National Rural Employment Guarantee Schemes, etc. as externally induced initiatives to reach those sections who are out of the loop of the above mentioned model as if these schemes or concepts are in itself external to the notion of development.
Not only those people who become targets of these schemes are reduced to lifeless things, to be worked upon so as to be uplifted, even the onus of responsibility of not being part of the model of development promoted by the state falls on their shoulders. Thus moribund capital leaves the imprint of its own parasitic nature on those people who are easy targets of its logic of surplus maximisation. Thus it becomes easy for the cabinet minister to dismiss the shocking instance of tribals consuming poisonous roots or grass to keep them alive as a ‘natural’ ‘cultural’ attribute of these people not in the habit of eating rice which is being provided to them by the government. The fact that they are left out of the loop of the model of development imposed on them by the State and hence they are starving to death due to lack of opportunities to survive as a people becomes politically motivated interventions of those who are anti-development and primitive in their vision.
A deeper investigation into the period of Nehruvian planned economy would prove beyond doubt that what is being implemented today by the likes of Manmohan Singh in the form of LPG is yet another unfolding dimension of the politics of development in the present phase of imperialist exploitation of the world economy. It becomes pertinent then to look into the articulation of the planned economy of the Nehruvian era, how it was befitting the post-47 arrangement, the re-division of the world market after the World War II that emerged as a consensus among the erstwhile colonial powers and the emerging ruling classes in the erstwhile colonies, most of whom emerged in the anti-colonial resistance.
The Legacy of 1947
The transfer of power in the Indian sub-continent also was when the Second World War had come to an end. The Indian big bourgeoisie, who had developed under the protection of British colonialism, emerged as one of the key forces that had to ensure the reproduction of a new division of market and resources as part of the imperialist division of the world. The comprador Indian big bourgeoisie in alliance with the big feudal landlords had emerged as the ruling classes of post-47 India . These classes lacked the political will to usher India through a self-induced development that would generate growth through the mutual correspondence between the rural and the urban, through the promotion of local innovation which can easily be absorbed by the vast section of the masses thus creating the way for large scale employment opportunities. A cursory glance into the state of the newly formed Indian economy would give the indications towards what were the major factors that had defined the logic of state building in post-47 India.
In 1948-49, agriculture accounted for 49.1 percent of the total national income. This comprised of stock breeding and auxiliary activities, forestry and fisheries. The total work force in the agrarian economy rose from 69.4 in 1901 to 73.7 in 1951 . In 1950-51 less than two percent of the total working population was employed in the factory and its share in the national income was a mere 5.8 percent. Thus the main concerns of the emerging state were to manage the unfolding contradictions within the economy and society in the form of the demands of the people buoyant with the spirit of anti-colonial resistance and also the needs of a middle class that had a role to play as opinion makers in the formulation of the policies.
The disparities between the rich and the poor were so wide.
The overall stratification in the agricultural sector was also not encouraging. Less than 3 percent of the total agricultural population were non-cultivating landlords, around 63 percent cultivators (owners or tenants) and around 32 percent were agricultural labourers . The land was concentrated in the hands of the less than 3 percent agricultural population.
The scenario is succinctly summed up by Charles Bettelheim: …the absence of the labour market in a large part of the rural sector; the personal subservience of the immediate producer to the landowner; the excessive importance of land rent; the underdeveloped marketing system resulting in little social division of labour, a low rate of accumulation, and the use of produce mainly to satisfy immediate needs .
He further characterised the economy as “semi-feudal”. The comprador ruling classes in Indiaعد had to address two vital problems that were confronting the economy as bottle necks in domestic planning and development: (1) A low industrial base which will force the domestic economy to spend large sums of money (foreign exchange) to import all manufactured goods. (2) The much needed foreign exchange could be earned only through primary commodity exports to the developed capitalist countries. These exports were always subjected to wild fluctuations in demand and reduced purchasing power.
Displacement is inevitable in the present model of development
Given the subservient class nature of the Indian big bourgeoisie-feudal landlord alliance, an independent, self expanding capitalist development that could successfully address the above mentioned impediments was totally ruled out as that would threaten the very class basis of the emerging post -47 India. But at the same time they had to negotiate with the growing internal pressures from the domestic economy failing which would have been a grave danger to their expansionist dreams.
This low industrial base and a relatively low rate of accumulation forced the comprador bourgeoisie-landlord alliance to agree for an economy with the Public Sector Undertakings (PSUs) as one of the principle sources of capital mobilization. The technology for the core industries such as steel, heavy engineering, mining etc. was obtained through foreign collaboration. Whatever efforts that were made to reduce dependence on foreign exchange (as the continual lack of foreign exchange was perceived as the main source of dependence) to the minimum proved counterproductive.
Despite all the nationalist pretensions of the likes of Nehru—thus the coinage of the term Nehruvian socialism—the logic of imperialism prevailed over in a strategy conceived as Import-substitution Industrialisation. All the effort to reduce the import of manufactured goods to minimise the burden on foreign exchange by replacing the same through enhanced domestic production had faded into oblivion overwhelmed by the real image of imperialist development’s future in the sub-continent as it started reproducing itself in the multiple local specificities (multiple modes of production) of the less developed Indian economy. As the mass of the Indian population remained poor tied to the land for survival, incapable of providing a market for goods, the efforts to produce domestic manufactured goods did not translate into production of mass consumption goods. Thus there was hardly any correspondence—neither forward nor backward—between the agrarian and the industrial realities that unfolded in post-47 India.
The development that was promoted by the Indian State created islands of prosperity amidst a sea of humanity languishing in poverty and destitution unable to find them worthy of anything in a model that was subservient to the imperialist interests of maximisation of the surplus. This model could only benefit a few in the Indian economy, those who form the dominant class/caste in this society whose interest was congruent to the needs of imperialist capital and it was only possible by holding back the productive capabilities of the Indian economy by not letting the majority partake in their role as active producers of use values. At best what these people would be of use is as cheap labour to perform the least skilled of labour that would further dehumanise them. This model could only degrade the labour by pushing them further down the pyramid of hierarchy that was maintained to produce and reproduce the status-quo. It was not necessary that the landless agricultural labourer who had lost his/her opportunity in the agrarian economy would end up as labour in the factories at the urban centres. What this model has perpetuated is the violent displacement of the opportunities of toiling sections in the countryside to convert them into pavement dwellers or squatters who are struggling to eke out an existence as these people have become misfits in the urban scenario.
It would certainly be not at the risk of exaggeration, if one says that imperialism, which has become the way of life of capitalism, has lend its image of the future in the form of ‘development’, in less developed countries like India. Thus the realisation of the image of the future of imperialism in less developed countries like India as a model of development is a replication of the status-quo where the money lender-trader-landlord nexus hold the political power, while sharing the benefits of surplus generated in the economy with imperialism. The persistence of this model in a semi-feudal, semi-colonial reality cannot be ensured without total reliance on imperialism. Needless to say, displacement is inevitable in this model without which it cannot replicate itself. Greater unevenness, widening regional disparities, increasing impoverishment of the people etc. are necessary evils in this model. This is diametrically opposite to an alternative model which would move towards a structural change in the economy with redistribution of land and a thoroughgoing shift in political power in favour of the toiling masses. This model envisages mass participation, with the needs of the masses forming the propellant factor giving a sense of direction to the industries resulting in the production of items that are useful for the everyday life of the people, for leading a dignified meaningful existence. This would necessitate the orientation or the choice of capital that is sensitive to the resource base of the economy and indigenous technology. And such a model of development where people are an asset and not a burden to the economy and their physical, mental well-being is what development is all about will be detrimental to the interests of the landlord-money lender-trader alliance which is holding power in the economy. Let us now look into how imperialist logic or the reproduction of the future of imperialism gets articulated in a semi-feudal, semi-colonial reality like India.
Five Year Plans—the Emperor’s New Clothes
The eve of transfer of power in 1947 also overlapped with the crisis of food shortage in India almost akin to famine conditions. In the post World War II scenario it was US imperialism that was better placed to invest in the new markets of the erstwhile colonies. At the same time it was not an attractive proposition for the US private capital to invest heavily in the Indian economy. Indian economy did not have the necessary infrastructure at that time to attract private capital from foreign countries. Another factor that was looming like a spectre was the success of the Chinese Revolution which the ruling classes and imperialism feared would incite the imagination of the toiling masses. The Telangana armed struggle which was raging the fields, forests and villages of the Telangana region had fully developed into a movement of the peasantry and the landless agricultural labour. The remarks of Chester Bowles the then US Ambassador to India, is quite reflective of the emerging picture:
We have a critical choice: we can help and guide the economic and social upheaval now sweeping Asia, Africa and Latin America into constructive, peaceful channels. Or we can sit back nervously and ineffectually, while the revolution of rising expectations in Asia, Africa and Latin America slips into the hands of reckless extremists who despite everything we stand for—and a succession of Red Chinas and Red Cubas comes into being.
Amidst the rhetoric of the American tradition and moral bound duty of defending the free world to lead its own existence was to push India into a development path which would, in the first place consolidate the power of those classes who were vying for their position in the new republic. True to the parasitic, moribund nature of the capital that was being pledged to India in the form of US aid, what US—and other imperialist powers who had swooped down on the South Asian market including the erstwhile Soviet Union—was looking for was the same parasitic classes in the Indian economy that would carry forward the dynamic of surplus extraction in alliance with imperialist interests while retaining the Indian economy in the same old backward conditions of low technical know how and capital formation.
It was in this context that India inaugurated the Community Development Programme which had later become an integral part of India’s Five Year Plans. Two agreements were signed between the government of India and the US on 31 May 1952 setting out detail the road map of the implementation of the programme. The programme was totally conceived and developed under the initiative of US ‘experts’ and agencies. Funds were provided by the Ford and Rockefeller foundations, the US Aid for International Development (USAID) and the US Department of Agriculture who all worked in tandem with ‘experts’ brought from the US to ensure the implementation of the project. These included Wolf Ladejinsky and Professor Kenneth Parsons, both US experts in land policy . In effect the Community Development Programme further consolidated the rural power structure without unleashing the productive potential of the vast sections of the rural masses. It facilitated the extraction of the surplus in the agrarian economy under the garb of community development through the labour of the landless and the poor peasant while the middle and rich landowners and the moneylender remained as they are. The aid and the programme as well as various policies promoted by the Indian State resulted in benefiting and consolidating the richer sections of the rural community. It further inculcated an unproductive outlook or reinforced the parasitic nature of the landlord-moneylender-trader combine in the agrarian economy of rural India.
The Draft Outline of First Five Year Plan also envisaged the above mentioned consolidation of the rural class/caste configuration conducive for introducing the so-called ‘cooperative farming’. It had its necessary sanction of the Nagpur session of the Congress in January 1959. In the sophistry of the language of Planning Commission, “the entire land of the village” will be regarded as “a single farm” while maintaining the ownership rights and compensating “through ownership dividends to be paid at each harvest”. For the utilisation of the labour of the landless and the poor peasantry, it was mentioned that the “management of the land and resources of the village should be organised so as to provide maximum employment…” Community Development Programme, Cooperative farming and the attendant state policies had further deepened the bond between the comprador ruling classes and US imperialism.
Quite evidently, the dynamic of development that was set in motion was externally induced propelled fundamentally by the needs of imperialist capital rather than an internally induced self expanding dynamic which would have primarily responded to the needs of vast sections of the masses and that being the main source of its strength. The self induced / internally induced development is an inclusive model which cannot be implemented without unleashing the productive potential of the masses. Without land reforms, without distributing the land to the tillers this was not possible. Land reforms were a pre-requisite for this model. Besides, this model also gave an impetus for local innovations. The direct implication of going for an internally induced development was to undermine the existing class / caste hierarchy which was holding back the economy. Such a development which would have successfully addressed the question of possible ways of avoiding displacement or lack of participation or lack of opportunities for the vast sections of the masses was not in the interest of the ruling classes of this country. Displacement was inevitable in their pro-imperialist model of development where moribund, parasitic capital only looked for the maximisation of surplus while retaining the local regressive structures of the domestic economy which would facilitate this process.
The Myth of Nehruvian Socialism
The Indian state under Nehru’s leadership solicited the assistance of US land-grant universities and the Rockefeller Foundation in setting up Indian agricultural universities and agricultural research institutions. The then Planning Commission Secretary even urged the Ford Foundation to establish centres of applied economic research throughout the country to provide adequate data inputs and expertise towards policy making by the Planning Commission. At hindsight, one can say that the grounds for the policy package of the so-called ‘Green Revolution’ (implemented in the third five year plan) was already set when the close partnership among the Indian Statistical Institute, the National Council of Applied Economic Research, the Delhi School of Economics and the Gokhale Institute in Pune with the Massachusetts Institute of Technology was facilitated with full blessings from both sides as the Ford Foundation provided funds for cementing the collaboration.
Amidst this smokescreen of ‘socialist planning’ was the calculated foreign aid from the US and other imperialist countries. From 1952-59 (1952 being the year of signing of the first Indo-US agreement which has already been mentioned), India received a variety of assistance from the US in the form of grant and loans—the loan being payable at 4 percent interest or 3 if paid in dollars. The single largest grant of assistance for India was under Public Law 480 which was to the tune of $ 915 million.
From 1958-62, India topped the list receiving 12.3 percent of the total US aid disbursed. She was placed only second to South Vietnam with 8.4 percent of the total aid dispersed in the period 1963-68 while India was placed in the fourth position with 2.9 percent of the total aid dispersed during 1969-74. India topped in the above mentioned two phases receiving 14.8 and 13.9 percent of the total US economic aid while being placed second in the last phase with 4.9 percent of the share.
It becomes evident that there was a close correspondence between the development path charted by the Indian ruling classes and the interests of US imperialism which was the prime force after the WW II. It is significant to note what the US had to say about this development assistance pledged to countries like India to “help them help themselves” (to quote Chester Bowles). The then US Secretary of State Dean Acheson while submitting the case for the need for an Act for International Development to the Senate Foreign Relations Committee had this to say:
In a very real sense it is a security measure… Economic development will bring us certain practical material benefits. It will open up new sources of materials and goods we need, and new markets for the products of our farms and factories.
Regarding the improvement of the lives of the people in the least developed countries,
Its purpose is to encourage the exchange of technical skills and promote the flow of private investment capital.
One of the principal architects of PL 480, the Agricultural Trade Development and Assistance Act of 1954, Harold Cooley recalled after several years that the prime motive behind conceiving such an act was to enable way to “a surplus disposal program—a program through which we thought we would be able to expand our foreign markets.”
Thus it was inevitable for foreign capital to cross its national boundaries in search of huge markets like India. The post WWII boom that was visible in the US economy and the aggressive aid packages for post war reconstruction in Western Europe and Asia along with the assistance offered to newly ‘independent’ countries like India had a dynamic that was set in motion from the domestic US economy itself. The essence of expansion under imperialism—propelled by the relentless search for surplus value—and its nuanced articulation in the specific local material conditions of countries like India, to realise the extraction of surplus, as a necessary condition to maintain the pace of accumulation for imperialism to perpetuate itself. To paraphrase none other than Lenin: “The necessity for exporting capital arises from the fact that in a few countries capitalism has become ‘over-ripe’ and …capital cannot find ‘profitable’ investment.” Moreover, “The more capitalism is developed, the more the need for raw materials is felt, the more bitter competition becomes, and the more feverishly the hunt for raw materials proceeds throughout the whole world…”
Catching up with the West
It becomes pertinent here to grasp the central aspect: the primary drive behind the export of capital is to utilize the possibilities where profitable opportunities exist. Hence it becomes necessary for imperialism to get behind tariff walls; the need to control supplies of necessary (present and future) raw materials, (which explains extractive investment and loan capital to assist the construction of infrastructure); the development of large-scale institutions for mobilizing capital; and the growth of monopoly and competition among monopolies (or oligopolies) for raw materials, markets, and profits in general, facilitated by a world-wide division of labour.
As have been mentioned in the beginning, the initial efforts towards an import substitution industrialisation saw India resorting to an ambitious project of big hydel power projects in the form of Bhakra dam I Punjab, Hirakud in Orissa, Sharavathi project in Karnataka all with foreign assistance in the form of aid and expertise. The International Bank for Reconstruction and Development had granted loans amounting to $ 62.5 million primarily for agricultural and power projects and for purchase of locomotives. The Sharavathi project had the assistance of the US. A total of Rs. 233 crores was envisaged in the First Plan for expanding the private sector which was double the money set aside for the public sector. This period also witnessed the initiation of the “system of joint enterprises” under which a lot of foreign concerns had established industries in the country in collaboration with Indian businessmen. The second five year plan saw the setting up of steel plants with foreign collaboration. The first steel plant was set up at Bhilai with the technological assistance of the USSR . It should be noted that Soviet Union under Stalin had approached the People’s Republic of China with technological assistance for setting up steel plants. But the Chinese under Mao’s leadership had rejected the proposal and had embarked on a drive of initiating and promoting small scale enterprises with stress to local know how as the cornerstone of the Chinese policy of self-reliance and massive production of steel. Thus Mao had decisively rejected the slogan of “catching up with the West” which was also being promoted by the then Soviet Bloc. Moreover, it was this policy of catching up which later got translated under the leadership of Khruschev of Soviet Union as the slogans of “peaceful co-existence” and “peaceful competition” with US imperialism—the culmination of revisionism and the full blown expression of Soviet Social imperialism.
The other steel plants soon followed at Rourkela (West Germany), Durgapur (British). Despite the public sector producing the locomotives for the Indian Railways it was deliberately discouraged in favour of the Tata owned TELCO which sold the product at higher prices and never met the deadlines. Despite giving the private sector tax concessions, interest free loans, state guarantee for all loans taken from abroad, rebate on imports and development rebate it miserably failed to improve the position of machine tools—pointed out by the Government Expert Committee in 1954—as it was found that over two lakh light machine tools had become out of date. Indian private enterprises had also mooted an agency called the Industrial Credit and Investment Corporation of India (ICICI) to channel foreign investment into India. The participating countries in this agency were India, Britain and the USA.
Parasitism of the Private Sector: the exploitative vehicle of the Comprador bourgeoisie
Even the Indian parliament could not shy away from the severe parasitic nature of the Indian industry promoted by the comprador bourgeois is so evident from the following extract from the Lok Sabha annexure. It is important to quote this as it is a telling example of the nature of industrialisation that was ushered in by the comprador bourgeois:
…take the case of Jamshedpur Engineering and Machine Manufacturing Company Ltd. Replies to questions in the Lok Sabha in 1958 …certain broad facts emerge. The Government encouraged this firm to secure foreign technical collaboration, since the manufacture of chilled iron rolls was a specialised line. The main electric furnace was imported by the company at the end of 1955 and four long years later was it erected. By then it was found that ancillary and auxiliary equipment required for operating the furnace had not been installed! The government made inquiries more than once about the delay and even a “show cause” notice was issued. It was reported by the firm that important cables were missing and by the time the new cables were received the foreign erectors had left India. It was later said that the electrical furnace would go into production, but it would not satisfy more than 5 percent of the demand. Meanwhile, the government decided to put up in the public sector the Central Foundry Forge Project at Ranchi (with Czechoslavak collaboration)…
Moreover, in the Lok Sabha debates, MPs noted with anguish the sudden conversion of more than 350 public limited companies into private concerns in a span of two years up to April 1958. There was even the tall talk of considering amendments to the Companies Act . Further a large number of industries in the private sector got a surfeit of concessions, relief and financial aid from the government. Also the government guaranteed all kinds of loans taken from abroad by the private sector companies. Still there were other kinds of benefits and incentives such as rebate on import and development rebate which as per TN Singh, the then Chair of the Lok Sabha Public Accounts Committee was unique in the world. He himself agrees to the fact that many of these companies owed much of their success of expansion programmes to this development rebate scheme. And this meant huge loss to the government exchequer .
In 1948 the book value of outstanding foreign business investments in the private sector in India was Rs. 2646 million. It had increased to Rs. 12306 million by the end of March 1967. According to another source, of the 2200 foreign collaboration agreements approved between 1948 and 1964, 1900 of it were effected between 1956 and 1964.
In a Table that maps the performance over a span of period starting from 1950 to 1967, along with countries such as Australia, Canada, Japan, UK and USA, India came at the bottom as a country wherein the share of the Public Sector in the total national expenditure was the lowest. It should be noted that all the other countries cited along with India in the Table are all capitalist without any inkling towards any declared principles of Socialism. While the share of the public sector in National Expenditure was an abysmal 8.3 percent in 1950, it slightly climbed up to 12.7 percent in the year 1967. In the gross fixed capital formation the near insignificant role of the public sector exploded all myths of state control on capital formation for the greater common good. Perhaps in the table only US was an exception with even lesser control. In 1950 if was only 2.9 percent, by 1967 it slithered up to 7. This shows beyond doubt the near total lack of government control over the means of production in the Indian economy.
Green Revolution: Pockets of uneven growth
A much more technology driven response was the package of the fertiliser-pesticide-high yield variety combination celebrated under the magic slogan of ‘Green Revolution’. This package which was termed as “primarily a fertiliser scheme” by John D. Mellor, the then chief economist for the USAID made possible the newly irrigated areas under canal irrigation as captive markets. The rich peasant who owned the land in these areas was totally dependent for the fertiliser, pesticide and the HYV seed on the agribusiness and fertiliser corporations of the US. That the more prosperous farmers have got the lion share of the benefits of ‘Green Revolution’ was accepted by one of the key architects of the same policy, Wolf Ladenjinsky, who significantly, is a close confidant of Nehru and also a ‘rural expert’ from the US specially called in by Chester Bowles, US ambassador to India in the late forties and early fifties. Not only did ‘Green revolution’ failed to address the target of self sufficiency in food grains but also it aggravated regional income disparities by virtue of raising incomes in the technologically affected areas. Further there has hardly any change in the status of food grain imports to India despite all the euphoria about ‘Green Revolution’.
Another concrete aspect that reveals the hold of the landlord-moneylender-trader nexus on the Indian economy and how their interests are served by a pro-imperialist development model is evident from the fact that the proportion of land revenue and agricultural income tax collected by the States to national income from agriculture had steadily declined from 1.63 percent in 1960-61 to .85 percent in 1970-71. Thus planning was nothing but to give a free hand for the rich and the big landed while cutting the pockets of the poor and the toiling through indirect taxation as the proportion of national income through indirect taxation had increased three fold from 4.2 percent to 11.0 percent during the period 1950-51 to 1970-71.
Increasing inequalities, increasing disparities: the most violent form of displacement
The study undertaken by PD Ojha and VV Bhatt for the Reserve bank of India on the pattern of income distribution brings out a key dimension of the nature of surplus accrual and mobilization in the Indian economy. This study shows that the degree of inequality in income distribution had increased in India with the initiation and implementation of the planned economic development. During the period covered for the study—1953-54 to 1956-57—they found that the top ten percent of households obtained up to 28 percent of total personal income. On the other hand they have also shown that the urban low income group as a whole has suffered a decline in it’s per household income. They also point out that direct taxes have not affected the pattern of changes in personal income. As a pointer to the direction in which the Indian economy is moving towards in the sixties, the degree of inequality of distribution in income, they indicate, has been more or less due to a substantial increase in the per house-hold income of the high-income non-salary earner (capitalist and landlord classes) group.
The pretensions of ‘Nehruvian Socialism’ or ‘Mixed economy’ or ‘Socialist patterned society’ all fall flat when the concrete facts speak, unequivocally, what was actually becoming of the Indian economy under the smokescreen of the above slogans or empty rhetoric that was part of the electoral speeches or tall talk in the parliamentary debates of leaders of the various political parties. Today the situation that is prevalent in the Indian economy is no less different from what has been mentioned above—a situation that was way back in the early 70s of the last century. We will come to that later.
The resulting imbalances—or the lack of forward and backward linkages—between industry and agriculture had put the economy under severe strain. As has been discussed before what industry produced could not meet the needs of mass consumption let alone erect the necessary support structure towards enhancing production in agriculture and manufacture in general. Public Law 480, the massive food import from the US was the first manifestation of the tremors set in motion by the imbalance between industry and agriculture. It was followed by the IADP (Intensive Agricultural Development Programme) again sponsored by the American institutions which concentrated more on the rich peasants supplying them with subsidized inputs, generous credits, price incentives, technical advice and marketing facilities.
But none of these measures could address the real problems facing the people of India. Rather all measures were meant to consolidate the domination of the exploiting classes over the exploited—the nexus of the moneylender-landlord-trader grip on the Indian economy. Since 1950-51 the Indian economy went through several ups and downs, mainly due to the good and bad harvests that the agricultural sector recorded. This also shows the centrality of the agrarian sector as the mainstay for capital and foreign exchange required for the so-called industrialisation that was heavily dependent on foreign technology and equipment. There was continuous drain of the surplus from the agrarian sector towards feeding the industries in terms of ensuring a steady supply of machinery which were highly capital intensive. It was in the interest of imperialism that agriculture the mainstay of the economy received the least share in all the first three plans. As has been mentioned before it is in the same period that the US interest in investment in rural sector has come in the form of PL 480 and several other programmes targeted to bolster the surplus maximization capacity of the parasitic landed and comprador classes.
By 1966-67, the big picture of Indian economy was bleak as it pulled along a stagnant industry unable to provide employment or produce goods of mass consumption. The overall stagnation in the economy was due to the decline in purchasing power of the masses and the shortage of foreign exchange with the spiralling demand for abnormally high imports of food grains and raw materials. After twenty years of planning, by 1971, the unemployment figures had more than trebled. During the Third Plan foreign aid represented 23 percent of the total investment. Although since the First Five Year plan the domestic saving rate which was 5.5 percent had gone up to 9 percent by 1969-70, this had always been less than the investment rate. The investment-saving gap was bridged with the help of foreign aid. With the growth in population, after twenty years of planning the plight of the average Indian had worsened as his/her access to agricultural land, housing, water, medical facilities and transport had in many cases deteriorated.
This is nothing but displacement inherent in an economic system that is subservient to the needs of imperialism in process breeding more and more inequalities. In other words, we have to locate the prime motivating factor of displacement in the matrix of the production relations and productive forces that is the fulcrum of any economy. India is primarily an agrarian economy with vast sections of her people dependent on agriculture. It is the surplus generated in the agrarian sector that is being extracted to run the economy including the so-called industrial sector. This has created an economy with huge disparities; wealth getting concentrated at the urban centres and massive impoverisation of the rural sector. This in itself is displacement with a whole lot of people unable to utilize their productive capabilities held as captives under the confines of a skewed market in the rural sector. This development model creates disparities between the urban and rural, between agriculture and industries, big industries and small industries, big capital and small capital, big labour and small labour and finally mental and manual labour. As have been mentioned before there will pockets of ‘growth centres’ while the rest of the regions suffer from lack of opportunities and impoverishment. Men, women, young and old, none are left out of the ambit of this development menace.
The central role of foreign aid: planning for the rich
As regards the role played by aid in boosting the Indian economy the hand out of one of the key policy advocacy bodies of the State itself eloquent:
Out of the total non-food aid received and utilised about 86 percent was devoted either to strengthening the infrastructure or to augmenting the output of producers’ goods. Of the remaining 7.6 percent went as investment into consumer goods industry, 3.6 percent as capital goods into education and research, and 2.8 percent into unspecified uses… It would appear, therefore that the present use structure of foreign aid in India provides only marginal possibilities, if at all, for reducing the amount received without direct damage to development.
On the one hand in all the policy documents of the government and public pronouncements of the Prime Minister and various other leaders there are always repeated pleas with a visible impatience to rid of the dependence on foreign aid as one of the main sustenance for development planning in India. But on the other the government documents and advocacy bodies of the State indulge in their artful dodge to finally stand firm behind the need for foreign aid to meet the demands of the industry as well as to stave off the balance of payment crisis. India, like many of the Third World countries that had embarked on the path of ‘catching up with the West’ had a serious balance of payment crisis as it was not able meet its requirements of maintenance imports through its export earnings. And it was also widely shared in the officialdom that this situation is going to stay for a while.
Thus what these agencies of the state do is to turn upside down the logic of self-reliance itself. By now what has been elucidated in this write up is the systematic erosion of self-reliance of the people of this country by making them more and more indebted and impoverished. On the contrary what these experts argue is that for attaining self-reliance we have to give fillip to industrial production for which the kind of technical know how that is needed cannot be brought in without foreign aid as most of the industries in India are capital intensive and dependent on foreign technology. Hence foreign aid will boost industrial production bringing with it effective employment and boom in the market finally making us less dependent on foreign aid. In this twist of logic, they conveniently shy away from the fact that the present crisis was triggered off due to dependence on foreign aid. Thus what they were effectively doing is using the same thing that was the reason behind the crisis to stave off the crisis itself! It is also carefully hidden that what was the necessity to go all out for getting foreign aid. We stress once again that without foreign assistance it would have been impossible for the ruling classes to maintain their dominance and hold over the Indian economy.
And it is also very clear as to how crucial was the concern of US imperialism to ensure the perpetuation of this state as there were many factors of convergence than of divergence which is manifested in the extensive aid packages that it provided throughout the various Five Year Plans. From Rs. 380.3 crores in the First Plan foreign aid to India had steadily increased to Rs. 2731.3 crores in the Second and Rs. 3937.8 crores in the Third plan. The share of grants in overall external assistance fell off sharply after the first plan period and by 1970-71, had diminished to 5.5 percent Most of the foreign aid was country tied. This implied that loans from a particular country have to be utilized for imports from that alone. So, for a country like India, to buy from the cheapest markets possible was not a choice that she could exercise as she was bound by the loan contract. This was a severe disadvantage when it came to repayments which had to be effected in fully convertible foreign exchange. Further loan financed imports had to be procured in the donor countries regardless of price and other servicing considerations. Thus loan aid was nothing but giving money to a recipient country—which should be paid back over a definite period with principle and interest—to purchase imports from the donor country so as to promote its own market in the recipient country! The external debt situation of India was showing alarming trends in the same period. In 1970-71, the debt service burden of the Indian economy was as much as 28 percent of the country’s exports and more than 55 percent of the new commitments of foreign aid.
Ironically it was under the guidance of the World Bank, and as a result of its ‘tied’ aid that India chose to go for foreign collaborations for giant fertiliser plants in the late 1970s. This is despite the fact that the public sector in India had acquired the basic expertise of fertiliser technology. The result was the total dismantling of the public sector enterprises dealing with fertiliser production and the initiation of projects with highly inflated capital costs. Thus the capital costs of fertiliser plants had risen to some multiples of the actual costs that would have been incurred if the government chose to rely on the locally available technology notwithstanding its shortcomings. This had pulled up the costs of the fertiliser thus hitting the farmer badly.
The acute crisis that had gripped the economy had its political fall out with increasing discontent from the masses. It was at the same time that the clarion call of the Naxalite movement that emerged in the late 1960s reverberated throughout the length and breadth of the subcontinent. The rising spectre of unemployment, the acute shortage of food due to severe drought and the crisis that had rocked the ruling classes and their pro-imperialist politics all had its reflection in the call to revolution exhorted by the Naxalites. In fact this was the first movement since the transfer of power in 1947 that exposed the façade of the Nehruvian planned economic development. And it was also the first time that the debate on land was brought back violently into the political lexicon of India. This movement also declared that there can not be a development free from all forms of exploitation without fundamentally doing away with all the structures that was holding back the economy of this country in the service of imperialism. It was also the time when the country was forced to debate on the path of development it had been embarking on.
Need for a new strategy
The challenge that was facing the Indian big bourgeoisie was enormous. Firstly, in most of the Third World Countries like India, the bourgeoisie had to grapple with the crisis which was of their own making. They had to find a way out of the strategy of Import Substitution Industrialisation which contrary to their claims had driven the economy into further dependence to the external market and capital. Given the precarious condition of debt bondage with a major share of the earnings from exports resulting in only debt servicing and not the principle amount of the loan the ruling classes had to push for more exports. This also meant further dependence on the external market.
At the same time there were also a situation emerging in the international scenario with the capitalist world led by US imperialism also giving an impetus to the Third World countries to resort to a new strategy of export led industrialisation. Imperialism had a valid reason to press for such a strategy which meant a new trend of international subcontracting by the multinational corporations. One of the major reasons for international subcontracting was the growing internal class pressures and struggles. In the US by the mid 60s capitalists were no longer able to maintain high profit margins with the rising demands of the working class for better wages and political gains. The international economic pressures like large balance of payments deficits and domestic economic pressures such as inflation, full employment and profit squeeze led the US capitalists to a dead end where profit margins could not be successfully restored through continued price hikes. One way of restoring the profit margin through reducing the costs of production and combating full employment pressures at home was by getting into the cheap labour markets of the Third World. Thus international subcontracting for more direct production for the US market unleashed a new international division of labour.
It was also possible for the capitalists in the industrialised imperialist countries to think in terms of subcontracting with the development of new labour intensive manufacturing industries like electronics and light manufacturing joining older labour intensive industries like clothing and shoe manufacture. As many of the products in the industrialised West have become standardised being sold in mass markets it is easy to subcontract such products. The advancement in these product lines by new technological innovations in transportation and communication has also made possible the international subcontracting of such products easier due to their quicker, cheaper and safer dispatch its products and components. Yet another factor that contributed to this dynamic of the international division of labour was the inter-imperialist rivalry. Post WW II US was the dominant capitalist power investing in the Third World. Only US multinationals were investing in the Third World markets with the sole purpose of securing those markets. Most of such investment was in the Latin American countries with sizable domestic markets. By the mid-60s the emergence of Germany and Japan from the ashes of the WW II gave the US stiff challenge to its control over the international market. To meet the export led economies of these countries with the advantage of relatively cheap labour, more government assistance and more modern plants and equipment, US trans-national capital met this challenge partly by means of international subcontracting. Through this strategy, US protected her markets while also forcing Japan and Germany into a similar strategy.
The Impact on India
The pressures from within and without the Indian economy was visible in the mid-60s itself as can read between the lines from the policy pronouncements of the various government national advocacy bodies.
“For the rest [industries] they should undertake to earn the requisite foreign exchange through exports. It is possible that diversion of a part of the output to exports may involve some decline in the profit rate for the industry… The second measure, which is not entirely independent of the first, is to earmark certain plants/industry to be specifically devoted to exports. These plants could be treated for the purpose of taxation and other matters, even freight charges, on a different footing from other plants in the same industry. The special treatment would, of course, ensure that the unit does not suffer any loss as a result of exporting instead of selling in the domestic market.”
Besides there were also efforts to increase the target of iron ore production in lieu of the expected increase in demand in the European market in the mid 1970s. Among other possibilities of exports in the mineral field was that of coal, magnesite and other refractories, ilmenite and steatite; glass sand and dimension stone. The NCAER study also pointed out the loss due to transportation costs of exporting the Kiriburu iron ore from Orissa through Vishakapatnam in Andhra Pradesh Instead it pointed out the need to develop the Paradeep port which would foot a cheaper bill for transportation. Further, the possibilities of exploring the vast hydro-electric potential of the Indravathi river basin in Chhattisgarh region for profit maximisation through cheaper smelting of the iron ore produced in the Korba region was also being stressed in the document. No wonder, the profit hungry multinationals are up for grabs for all these areas, which are abundant in natural resources, in the present policy initiative of Special Economic Zones, mega hydel projects and mining operations.
Export Processing Zones—Precursors of SEZs
In tune with the above parameters set by the policy makers taking into consideration the new international dynamic as well as the domestic imbalances Export Processing Zones took off as way of more foreign exchange to beef up the needs of the industrial sector and to stave of the balance of payment crisis.
Thus, the precursor to the SEZs were the Export Processing Zones (EPZs) that were set up in Gujarat, Kerala, West Bengal and Andhra Pradesh. In Gujarat, the first Export Processing Zone was set up in the late sixties. It was followed by the EPZ in Santa Cruz in Mumbai in 1973. In the early 80s another four EPZs were established at Kochi in Kerala, Falta in West Bengal, Chennai and Vishakapatnam in Andhra Pradesh. In the overview to Special Economic Zones the reasons for setting up EPZs were justified as necessary in order to “overcome the often repeated shortcomings on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India.” But there is hardly any review of how much the policy of establishing Export Processing Zones have helped correct the “unstable fiscal regime”.
India set the first special EPZ in Kandla, Gujarat, as early as in 1965. Santa Cruz Electronics Export Processing Zone (SEEPZ) followed becoming functional in 1973. Four more zones were set up by the Central Government in 1984 at Kochi (Kerala), Chennai (Tamil Nadu), Falta (West Bengal), and NOIDA (Uttar Pradesh). And also another one in Vishakhapatnam (Andhra Pradesh).
SEEPZ in Mumbai had eaten up the labour intensive small scale industries—most of them of the cottage industry status—by displacing it with a highly mechanized jewellery industry which accounted for more than 55 percent of the total jewellery exports in 2002-03. The collaboration of the Tatas with Burroughs an American company, 1977 in SEEPZ saw the beginning of India’s exports in software and peripherals.
Citibank established a 100 percent foreign owned export oriented, offshore software company in SEEPZ in 1985. The first private EPZ started operations in 1998 in Surat, Gujarat. All these eight EPZs, including the one at Surat, have since been converted to the new SEZ scheme.
Foreign Direct Investment (FDI) to the total investment in EPZ was a low at 16.7 percent. Despite all the hype and expectations the share of EPZ in the country’s export was a mere 5 percent in 2004-05 accounting for 1 percent of employment in the factory sector and 0.32 percent of factory investment. This also indicates that India is yet to come out of its traditional resource based exports. This is also a reflection on the incapability of the big bourgeoisie who is not able to carve out in the international race of subcontracting and also near incapability of the former in developing a market based on manufactured industrial goods on his own as his interests are fundamentally tied with the ups and downs of the imperialist market and capital.
Thus in the 70s, Mexico, Brazil, Argentina and India accounted for over 55 percent of all the Third World industrial production though this was mainly exports based on traditional resource base as these countries had a large natural resource endowment. Many of these exports comprised of products made from foodstuffs, tobacco, wood, textiles and leather. India specialized in textiles, leather and footwear and clothing.
Special Economic Zones: The image of the future of imperialism in the third world
The present analysis of Special Economic Zones (SEZs) will be confined to the geographical location of India from Punjab to down south as in the state of Kerala. The analysis of the entire region of various nationalities known as the North East and the region of Jammu and Kashmir need specific detailed analysis. That is beyond the scope of this present article. It would confine at the moment with a broad overview of the political economy of Special Economic Zones in the former category. Here again it is stressed that the present analysis is limited in its scope. If the contours etched out in the present article can be extended into specific area wise or state wise analysis followed by in-depth case studies can provide much more insights—empirical as well as conceptual—into the serious ramifications that this policy initiative will have on the future of the lives and livelihoods of the various peoples of the sub-continent.
The Special Economic Zones (SEZs) Policy was announced in April 2000 offering more lucrative incentives/benefits for private investment. During the period 1 November 2000 to 9 February 2006 SEZs functioned under the provisions of the Foreign Trade Policy with all existing zones being converted into SEZs. Statutes to formalize the fiscal incentives became operational subsequently.
The Special Economic Zones (SEZ) Act, 2005, was passed by Indian Parliament without much debate—which should not be a matter of surprise—in May, 2005 receiving the Presidential assent on the 23 June, 2005. The SEZ act, supported by SEZ Rules, came into effect on 10 February, 2006. The new SEZ law covers activities limited not only to manufacturing, but also services and trade, and has the much simpler objective of generating exports and earning foreign exchange, with no predetermined value addition component or minimum export requirements.
SEZs will be notified as ‘industrial townships’ under Article 243Q of the Constitution which exempts them from the provisions of Part IX of the Constitution that provides for elected local governments. An Industrial Township Authority is constituted with the same powers and duties as a municipal body. The Development Commissioner along with the Developer effectively replaces local democratic institutions centralizing powers with every arm of the state such as public services, police, judiciary and local governance coming under the control of the Development Commissioner, the Developer and the Central Government.
The judicial and policing functions are altered with ‘No investigation, search or seizure shall be carried out in a Special Economic Zone by any agency or officer’ without the permission of the Development Commissioner under Section 22 of the Act with the exception being only in the case of ‘notified offences’, notified by the Central government under section 21 of the Act, which are also to be intimated to the Development Commissioner. Special courts are provided under the Act in SEZ’s for both civil and criminal matters who alone can try and adjudicate any civil dispute within an SEZ or any trial of a ‘notified offence’. Ordinary criminal trials of non-notified offences can take place in ordinary courts, but investigation of such crimes is not possible without the authorization of the Development Commissioner. Appeals from the special courts will lie directly with the High Court of the State. These provisions produce a system of a separate judiciary for the SEZ with the Development Commissioner playing a key role. The net effect is the transfer of power over resources, governance and people within the Zone to big business and investment capital, and the creation of a new economic, geographical and political reality.
Workers are told that they could not organise trade unions because of the ‘zone’ status which are declared public utility services, a designation under the Industrial Disputes Act, 1947. Labour inspectors are reportedly issued orders by the Commerce Ministry not to visit the zones without prior permission from the Ministry. There is also the unemployment caused due to land acquisition or change in land use in and outside SEZ. The long term impact such as impact of pollution and change in land use in the surrounding areas could be colossal if one is to go by past experience.
With favoured position and pampering along with relaxation of regulatory mechanism, SEZs could become the hub of economic offences. For instance, the 33rd Report of the Parliamentary Standing Committee on Finance found that show cause notices had been issued for more than Rs. 3,400 crores between 2002-2003 and 2004-2005 for fraud in Export Oriented Units (EOU’s) and some other export schemes.
A whole range of incentives and facilities are offered under the Act including duty free import/domestic procurement of goods; 100% Income Tax exemption on export income; exemption from minimum alternate tax, Central Sales Tax, Service Tax and State sales tax and other levies, customs/excise duties, and dividend distribution tax; external commercial borrowing up to US$500 million in a year is permitted without any maturity restriction; provision of standard factories/plots at low rents with extended lease period, and infrastructure and utilities. Most taxes and cesses are not applicable to goods procured from the Domestic Tariff Area. The fifteen year income tax holiday consists of total exemption for the first five years, 50% for the next five years, and 50% on reinvested export profits for the following five years, while Developers get a 10 year 100% tax exemption. Electricity taxes and duties are to be removed for electricity that is to be used within the processing area.
The incentives dished out to SEZs will create a tilted playing field between SEZ and non-SEZ investors. Given the incentives, SEZs, rather than start new initiatives, would simply attract existing enterprises to relocate themselves from the domestic economy to SEZs to avail of the incentives in order to maximize profits. This would amount to a mere shift in existing investment from the outside to the SEZs rather than new investments. Of the SEZs notified, IT/ITES constituted the bulk of them with single sector IT SEZ forming the majority. This is followed by Textiles/Apparel/Wool and Pharma/chemicals. It looks that the relocation process is in effective swing as can be noticed by the exceptional number in the IT sector. The government in November 2006 itself decided to stop further in-principle approval of IT SEZs. The Software Technology Parks Initiative, the main scheme is also scheduled to end by 2009. The majority of SEZ investment is from the private sector. Real estate sector applicants form the majority in the private sector followed by IT companies forming nearly three quarters of non-public sector approvals. IT and multi product SEZ’s, form the bulk of all applications by real estate companies. Real estate development rather than export generation is a factor to reckon with.
As indicated earlier, relocation of industries from outside to the SEZs to take advantage of the relative advantage would simply mean mostly the translocation or migration of existing labour than generation of new employment. In addition, the likely negative impact of SEZs on manufacturing outside the SEZs could spell a decline in employment outside. Between 1998 and 2003, while investments grew by 73%, employment growth showed only a 13.7% rise in EPZs. Net increase in employment, considering the growth in employment in SEZs, would therefore be actually far low.
Objections to the SEZ raised by the government
The objections to the SEZ are multifarious. Each wing of the government has a different reason to be circumspect of the feasibility of the project. The finance ministry and the Reserve Bank of India are unhappy with the SEZ policy on grounds that the policy offers excessive exemptions which will lead to revenue loss and spur real estate speculation. The loss to the government on account of SEZ is incredible. In 2004 – 2005, the government already incurred a loss of Rs. 41,000 crores – a staggering 72% of customs revenues and 23% of total indirect tax revenue of any kind. The Finance Ministry estimates that Rs. 1.75 lakh crores will be lost over the next five years.
The IMF and the Asian Development Bank have criticized the tax exemptions being provided making SEZ ‘business friendly’ rather than ‘market friendly’, inherently violating market principles and market reform which they ardently promote.
The Rural Development Ministry objected to the large-scale acquisition of agricultural land threatening spinning off further food insecurity. The establishment of SEZs, and a large number of them, requires substantial land to be acquired or purchased by developers. About 2 lakh hectares are required for establishing the approved and in-principle approved SEZs. The notorious Land Acquisition Act 1894 has been used to acquire lands in many cases whether the developer is a public sector or private sector, at a price well below market prices not taking the dependants of the land as an affected party in the acquisition normally. Land can be acquired under this Act only for ‘public purpose’ which are defined in Section 3(f) of the Land Acquisition Act and does not include companies. However, the judiciary has deftly reinterpreted the law to say that once the government has acquired a land, the government can sell, dispose or transfer rights of its land at will to whomsoever it wants to, irrespective of the original intent of acquisition. In effect, land acquisition by the State has made a decisive shift from ‘public purpose’ to also ‘private profit’. But with militant resistance, the developer purchasing land directly from the owner without the mediation of the state is a proposed remedy.
Acquisition of prime agricultural land became a major issue with all its serious implication which is now attempted to be restricted with restriction of acquisition on single crop agricultural land alone beside waste and barren land. Double cropped agricultural land, if necessary, is to be limited to 10 percent of the total land. More over such areas have powerful farming interests and is at the heart of agricultural economies. That the category of waste and barren land most often constitute survival resource base for the most marginalized in vast numbers is ignored. Land acquisitions, or alternatively land purchases, are therefore to increasingly focus on the marginal and tribal areas. Official rehabilitation schemes rarely work satisfactorily, be it by the state or the private sector. However, holding the state responsible is easier than the private purchaser in a democracy. The proposition to take the land on lease is also floated to ostensibly ensure permanent income to the oustees.
Already in Kakinada in Andhra Pradesh, the government’s oil refinery and SEZ that is to be built along with the Oil and Natural Gas Corporation on 10,000 acres has run into problems, with farmers in the area refusing to give up their fertile land.
The lands are invariably located in close proximity to raw materials, urban centres and transportation facilities. At least 35 percent of the acquired land is to be used as processing area while the rest could be for residential and recreational facilities. The acquisition bypasses and belittles local self-governance institutions of the panchayats. The SEZs moreover become the nodal points for speculation fuelling large scale real estate activities around the Zones with the emergence of powerful land mafias in connivance with authorities to dispossess people of their lands in the surrounding areas driving land prices up within SEZs and around it. The attraction to SEZs is likely to vanish in due course defeating the main attraction of low cost SEZ. Almost as though recognizing this reality, the Reserve Bank of India has asked the banks to treat SEZ lending as real estate business and not infrastructure.
Now the SEZs will be required to at least use 50 percent of the land for processing unit as compared to the earlier 35 percent so that the real estate component would be lower. Finally, the export requirement has been made more stringent compared to earlier.
Among the many concessions being offered to the developers of the SEZs, one is cheap land close to cities and new highways. Land is being allotted much in excess of the requirement of industries. The implication is clear that land is being seen as urban real estate where huge profits can be made. While Singur is not an SEZ, the Tata group is being given about a 1,000 acre of land when they only need perhaps 70 acre for the car factory. Since the land in Singur is at the intersection of two important highways, it is prime land. This kind of consideration is clearly important for many of the planned SEZs.
There is another reason for the rush to set up these huge estates. In the last three years, the corporate sector profits have been growing at an average of 30% so that they have a lot of cash to invest. Real estate is a good proposition to park their funds in. Thus, we are witnessing the creation of a large number of new landlords.
Given this past experience, what is the guarantee that land acquired by industries for the SEZs would only be used for specified purposes and not for speculative purposes as real estate. The example of DLF and others in Gurgaon and other places comes to mind. They acquired advance information as to which areas are likely to be urbanised around the new NH 8 and acquired that land from farmers at literally throwaway prices (market prices for that time). They have then released the land slowly over the last 20 years keeping prices artificially high all along and benefiting enormously. Land prices in this period have risen almost 500 times. Far higher than any other index of prices.
A Planning Commission study has shown that 73 per cent of the cultivable land in the country is owned by 23.6 per cent of the population. With more and more farmers being displaced through land acquisitions, either for SEZ or for food processing and technology parks or for real estate purposes, land is further getting accumulated in the hands of the elite and resourceful. With chief ministers acting as property dealers, farmers are being lured to divest control over cultivable land. Food security and food self-sufficiency is no longer the country’s political priority.
Ashok Kumar Bhattacharya, an independent analyst, managing editor of the ‘Business Standard’ newspaper, says that the new provision– cutting to 50 percent the land area in a SEZ that could be used for non-commercial purposes — was a reaction to “a group of smart, rent-seeking industrialists seeking to acquire large tracts of land for real estate development in the name of establishing industrial or commercial ventures.”
Baviskar, a sociologist who works on issues relating to the impact of land acquisition on the environment and development, said the Indian government’s policy so far had been akin to “land reforms in reverse” whereby rights to land had been transferred from underprivileged sections to affluent business elites.
SEZs will aggravate regional disparities. Over three-quarters of all approved SEZs are located in six States – Andhra Pradesh, Gujarat, Haryana, Karnataka, Maharashtra and Tamil Nadu. Maharashtra and Andhra Pradesh alone account for more than a third of all approvals. These states are all relatively well developed States with high industrial capacity. These are also highly urbanized with the partial exception of Maharashtra. Obviously investment is channelised to areas of high levels of industry and investment which further propels these states to showcase their ‘success’ further.
Further, given the concessions, much of the investment in SEZs is likely to be at the expense of the investment in the rest of the economy. Finally, some may even close their units in the rest of the economy to shift to the SEZs. Due to these three factors, the net investment will turn out to be much less than what would be the gross flow of investment to the SEZs. In fact, because the price of output from SEZ is likely to be lower than that in the rest of the country, a lot of smuggling will take place and the output in the rest of the economy will be adversely affected. This will further affect employment.
Further, due to smuggling of cheap goods from SEZs to the rest of the country, there will be further loss of tax collection. When smuggling takes place easily from outside the guarded borders, it is not difficult to imagine that this would be easy from the unguarded SEZs. The resultant revenue losses will aggravate the deficit in the budgets and will result in cut back in expenditures to fulfil the FRBM Act requirements. Most of the time these cuts tend to be in the social sectors which will worsen the situation for the poor.
There would be enclave development and disparities would rise. Migration to urban areas will rise and they will face further collapse. The excess land being allotted to the SEZs will result in the creation of new landlords. Government is creating new landlords 60 years after independence and long after it was thought prudent to end landlordism in the country. Reports suggest that some large SEZs being set up by the corporates will be known as “…desh”, like, Bangladesh, where the well off will live in style.
If the overall gains from SEZs are so unclear and the government is going ahead with the scheme, then it can only be because it wants to give concessions to certain sections (who are pushing for it). The central government is playing the same role as the World Bank and IMF do in making nation states to compete for capital and give concessions to it. The SEZ policy is making the states compete with each other to get capital. Those states that do not go for SEZs will suffer because others will go ahead and attract investment.
The long journey of the republic from Nehru’s “cooperative farming” in the early 50s of the last century to Manmohan’s “corporate farming” after 60 years of the transfer of power has the same theme: increasing parasitism of the comprador bourgeois-landlord-money lender-trader on the Indian economy with the vast sections of the toiling masses struggling to eke out an existence. Without doubt development planning and its implementation in India have taken place till date under the watchful eyes of Imperialism. Today this development model has reached a flash point from where the only way out for it is through a violent restructure of the existing economy in favour of a much more brutal exploitation of the people and the resources.
Integrated Struggle against Displacement of all Kinds is the Need of the Hour
The need of the hour at this juncture is to focus our attention on building a people’s resistance movement against SEZs, against the entire agenda of imperialist globalisation and its ideology. The resistance should be planned in such a way that we challenge the present model of development and in the process simultaneously initiate a model of development with the human being at the centre.
A formidable resistance is possible across the country if all the genuine resistance movements against displacement can be brought together without any narrow-minded short term benefits for any individuals or organizations involved in this process. The broadest and lofty goal of this process should be to build boundless resistance and solidarity among the fighting forces as it is clear for all of us that the Indian rulers and their imperialist masters are determined to use the worst brutal repressive mechanism to suppress the movements against land acquisition for the implementation of their projects.
A united resistance struggle at the sub-continent level should be initiated by bringing together all struggles against all kinds of displacement, though we can gather the largest support possible by focusing on SEZs at the beginning.
The integrated movement against displacement of people from their natural habitats due to the large scale intrusion of the Industrial monopolies of the imperialist countries should have certain clear demands before the people of the country. Some of the points of immediate interest are:
- The Special Economic Zones regime should be done away with by repealing the SEZs Act, 2005. Wherever land is acquired should be returned back to the farmers with adequate compensation for the period of time the land is held away from the farmers.
- The Land Acquisition Act, 1894 should be repealed. The concept of ‘eminent domain’, which gives unlimited power to the rulers to exercise control over people and their resources should end.
- No big dams should be built. The river-interlinking project should not be taken up. Only small scale irrigation projects which do not displace the people and impact the environment adversely should be built after proper consultation with the people.
- No mining projects should be opened without proper evaluation of the use of minerals underneath for the use of people in the country. Mining of minerals should not be given to any monopoly company–foreign or domestic. Large scale mining which displaces local people and degrades environment should not be taken up.
- The displacement of people in the urban areas in the name of beautification and restructuring the cities and towns should be immediately stopped.
Displacement and Rehabilitation Policies
The uncompromising principle of our fight should have at its centre the slogan of ‘a big NO to displacement’. Similarly, a big NO to rehabilitation packages, however progressive it may sound. No compensation whatever the magnitude it maybe should be acceptable for all of us. The total rejection of displacement-and-rehabilitation frame should be the central motto of such resistance movement.
However, we should demand for the just and proper rehabilitation of all those millions of families and people who have been displaced since 1947 as a result of mining, mega-projects, dams, industries, etc. Displacement as a concept should be removed from the notion of development. Displacement is an exclusivist principle which is central to the present model of development. Any policy of rehabilitation is used only to divide the people who oppose the imposition of sacrifice on them for the benefit of others who benefit from the projects. For example, after 1947, there has been no project or dam where at least a sizeable population is rehabilitated. Rehabilitation is an impossible scheme, no matter whatever the progressive nature of the rehabilitation package/policy is, in this model of development. We must understand that rehabilitation means throwing some crumbs of leftovers. We should also realise that no just rehabilitation can ever be made possible.
The only way that Development can be
“Cheshire Puss [asked Alice]
Would you tell me please, which way I ought to go from here?”
“That depends a good deal on where you want to get to”, said the Cat
“I don’t much care where,” said Alice.
“Then it doesn’t matter which way you go,” said the Cat
—Lewis Carroll, Alice Adventures in Wonderland
A pro-people model of development can be built only by smashing the present model of development which is subservient to imperialism and in turn serves it. This model of development is a people-centred model based on a self-reliant economy which is free from all kinds of imperialist control and subjugation. This model of development allows the natural resources of the country to be used in a way best suited for the needs of the masses of people, not for surplus generation for the capitalists and imperialists or for the extravagance of a decadent, parasitic class, feudal in existence and colonial in taste. This would move towards a structural change in the economy with redistribution of land and a thoroughgoing shift in political power in favour of the toiling masses. The direct implication of going for an internally induced development was to undermine the existing class/caste hierarchy which was holding back the economy. Such a development which would have successfully addressed the question of possible ways of avoiding displacement or lack of participation or lack of opportunities for the vast sections of the masses was not in the interest of the ruling classes of this country.
Pro-people development could only be built as part of the large-scale resistance of the people to the present exploitative model of imperialist development. The resistance struggle of the people against the present model of development cannot be successful without destroying all the pillars of this semi-feudal, semi-colonial State that perpetuates exploitation, oppression, mistreatment and violent denial of the right of the human being to lead a dignified existence. To put it differently the present pro-imperialist model of development displaces reduces the human being to the subhuman where every possible dimension of his existence becomes meaningless. Any alternative against this murderous, beastly existence cannot escape the movement to move the centre of development from capital generation to the innumerous productive potential of the human being to make and remake the world in his/her own image—where the mental and manual labour have broken the shackles imposed on it by the exploitative society and have merged to create a new world free from all forms of exploitation.
In the place of the present exploitative development, indigenous industry that generates employment and displaces none from their natural habitats should be developed. Not only protecting labour rights should be the policy while building the indigenous industry be pursued, but the industry should be run and managed by the workers themselves. This kind of an alternative model of development is possible only when we start from below by depending and developing agriculture sector through distributing land to the landless peasants. The agri-based industry which serves the purpose of absorbing the agrarian produce and surplus labour from the rural sector should be developed. This model should develop with an aim to drive towards ‘community ownership and individual right to use land and industry’. Land should not be allowed to concentrate in the hands of a few nor should it be allocated to build large and mega industrial complexes. The infrastructure projects should in fact concentrate on building people’s health care and education systems instead of building super high ways or mega malls. Protection of environment, developing regeneration methods of natural resources should be integral part of this alternative developmental model. Industry and business that aims at super profits could never address this question. It’s only by smashing the concept of surplus generation in the hands of a few people that one can build towards environmental regeneration. People take the decision-making power into their hands in this developmental model. Reproduction of everlasting methods of equitable distribution of resources and produces should be ensured.
This model envisages mass participation, with the needs of the masses forming the propellant factor giving a sense of direction to the industries resulting in the production of items that are useful for the everyday life of the people, for leading a dignified meaningful existence. This would necessitate the orientation of an economy sensitive to its resource base and indigenous technology; an impetus for local innovations that would destabilise the present hierarchy of production relations with the ‘expert’ at the top. The self induced / internally induced development is an inclusive model which cannot be implemented without unleashing the productive potential of the masses. Without land reforms, without distributing the land to the tiller this becomes impossible. Land reforms are a pre-requisite for this model.
The initiative of the masses of Dandakaranya is a definite step in this direction. The Indian state is quick to dub them as terrorists, anti-national. Organised under the CPI (Maoist) they have fought the efforts of the state to implement the pro-imperialist model of development in their immediate social formation which is primarily a tribal economy.
In this mode of production, pro-imperialist model of development had its imprint in the form of the local contractor who had come to collect kendu leaves, the forest officials denying the tribals the right to their natural habitat, the mining corporations who have come to extract minerals and also big hydel power projects. The resistance that started against the forest officials and the contractors for better price for the kendu leaves soon had to face the repression from the forest official-contractor nexus who had brought goons from outside. The resistance also had to deal with opposition from within in the form of tribal chiefs or youth who enjoyed special favours from the contractor/forest officials. It was thus a resistance that constantly interrogated the social reality from within and without. The fight against the exploitation by the contractor/officials also had thrown open the need to fight similar tendencies of oppression and exploitation within the tribal social formation. Thus women fought against forced marriages, sexual exploitation and an equal role in the everyday affairs of their society. The need to resist exploitation of forest wealth and tribal labour for the profit maximisation of capital also provoked them to organise themselves into a settled community that would not only take care of themselves but their future generations as well. Thus evolved the practice of shared agriculture that would share seeds; bio-fertilisers that will renew the soil. Cooperatives were also created. Since the soil and the seed were not uniform the crops and cropping patterns also used to differ. Also the tribal peasant who had more land than the one at the lowest bracket or the clan that was better placed than other due to historical reasons could perform better because of their social location in the economy. This could have created imbalances and inequalities within the economy. But this also had inspired the people there to device ways and means through which surplus could be redistributed.
All this could not have been possible without the mobilisatioan of the tribal masses into an organised force ready to defend the gains that they have made in the process of transforming into a new being.
It is this potent threat of a resistance in the form of a peoples’ model of development—the only way that development can be conceived—that has forced the Indian state backed by imperialism to clamp down on this people through a Salwa Judum. But then any form of practice that defies the logic of imperialism, of moribund capital is bound to face a violent response which is essentially the characteristic of predatory capital. Any resistance that would want to build a new world with the human being at the centre cannot shy away from the fact of defending it. It is that what the call of Naxalbari had given. It is that the heroic struggles of the people of Nandigram, Kalinganagar, Kashipur, Jagatsinghpur, Lohandigudi, Koel Karo etc.
Towards a United Struggle
What do we mean by displacement? Does it only comprise of the people displaced due to the construction of dams? Of Super highways? Of mining? Of big industries? We have to move beyond the conventional way of looking at displacement. Then only can we find the root cause of the reasons of an economy that promotes displacement as the fundamental principle of its reproduction; its perpetuation; its survival strategy i.e. to benefit a few at the cost of many. In that sense the fundamental necessity of a development that engenders displacement is the common running thread when one talks about Special Economic Zones, dams, mining, super highways, urban beautification, retail marketing by monopolies and so on. Here we have to grasp the point that all these forms of displacement are intertwined so as to reinforce each other in realizing the fundamental axiom of imperialist globalization—that of value and profit maximization. The strategy is to retain all regressive structures within the sub-continent economy that would facilitate and perpetuate this process while weeding out all possibilities within the economy that can generate a dynamic of resistance primarily in the form of development while not ruling out other forms of resistance.
The enormity of the crisis that is gripping the ruling classes is getting manifested in various forms. The initial inference is the readiness of the state and its various arms to break the law of the land. The manner in which the repressive machinery of the state is being mobilised to brow beat the people into submission by violating constitutional guarantees and other norms and procedures of a democratic polity speak volumes about the need of the ruling class to some how go ahead with these policies. At the same time the state is also enacting new laws to clamp down all forms of dissent. The state is tying to divide the people fighting against various forms of displacement. The struggles against various kinds of displacement should be integrated taking into consideration the underlying commonality of the issue that is confronting the various sections fighting against displacement. This can only ensure a mighty stream of struggle that can ensure an alternative not only as empty slogan but also as a reality. The people in their local areas have been building valiant struggles all over India against various projects displacing millions of people from their local habitats. These projects have been either under way or are in pipeline through MoUs signed by the Union Government or state governments. The variety of projects that have been planned to massively uproot the people include Special Economic Zones, mega projects, super highways and other infrastructure schemes, big dams, urban renewal and beautification, corporate agriculture, national parks and sanctuaries, etc.
These struggles waged at the local areas of displacement which erupt at different spells of time are being crushed by the governments using the police and paramilitary forces along with local goons, ruling party henchmen, and the good old divide and rule tactics of the private company involved in the project. A network of people’s struggles at all India level or let us say the sub-continent level is the need of the hour so that these diverse grass-root movements are expanded by collectively facing the onslaught of state repression.
Friends, we have broadly yet with a perspective discussed the contours of the direction in which the Indian subcontinent is moving towards. There are definite indicators without doubt that show a clear direction. While this is being concluded the news from India is that more than 10000 people are rendered homeless in planned carnage of the people of Nandigram by the West Bengal government with its fascist cadres notoriously called the harmads. Hundreds of women have been raped by the goons of the CPM while the state police force stood by as mute witnesses. All the houses of the defiant masses have been burnt down for refusing to give away their lives and livelihoods for the setting up of a Chemical Hub and for fighting tooth and nail the repressive fascistic tactics of the CPM cadres.
Not far away from West Bengal, the people of the Jharkhand state have united against all kinds of policies that would bring large scale displacement for them. There have violent protests in the state against such policies. The state has not been successful so far in putting up a vigilante force like salwa judum in Jharkhand under the banner of Nagarik Suraksha Dal (Citizens Protection Force) due to the stiff resistance of the masses. In Orissa the people are up against the massive displacement in Jagatsinghpur, Kalinganagar, Kashipur etc. In the Neighbouring state of Chhattisgarh the state is fighting a bloody battle with the Maoists under the shade of the vigilant gang called salwa judum. In Andhra Pradesh the people are up against bauxite mining in Vishakapatnam and the mega dam at Polavaram which will displace more than 200000 tribal people. This shows a clear pattern that is emerging in the days to come. With people on one side and the brutal state repressive machinery in service of imperialism on the other. And this is going to be turbulent days. And as I have pointed out this struggle cannot be successful without having a comprehensive vision which would decisively move away from all the pillars that are propping up the imperialist beast in our country, the sub-continent. And I believe none other than Rockefeller would agree with me as to what the truth really is when we dig deeper. Let me quote from the letter that he had written to President Eisenhower of the US :
“To put the problem in a nutshell—our policy must be both “global” i.e. embrace every part of the world and also “total” i.e. include political, psychological, economic, military and special methods integrated into one whole. In other word the task is to hitch all our horses in a single team…” (Para 9)
We should not ignore the vital fact that virtually all of our natural rubber, manganese, chromium and tin, as well as substantial proportions of our zinc, copper and oil and a third or more of the lead and aluminium we need comes from abroad, and, furthermore, that it is chiefly drawn from the underdeveloped areas of Africa and Asia, which are in the orbit of one or other of the military alliances built by the US. This is also true of a major part of our “super strategic material” (uranium ore, in particular).” (Para 19)
“The government should make use of and encourage private investors, seeing that many political objectives can be secured with their help. In the long run such private investments should allow us to eliminate or neutralise any disloyal opposition or resistance to our policy, and to put increased economic pressure on any local business interests which show uncertainty or hesitate to support us. At the same time economic support for those strata of the local business community which are ready to cooperate with the US should be increased, and the necessary conditions should be created for businessmen of this type to be put in key economic positions and accordingly for their political influence to be increased.” (Para 25)