Why neoliberalism needs Neo-Fascists

Prabhat Patnaik

India provides a vivid illustration of the relation between neo-fascism and neoliberalism. For one thing, the neo-fascist Hindu supremacists that came to power in 2014 never had anything to do with India’s anti-colonial struggle (indeed, one of them even assassinated Mahatma Gandhi). Instead they are arch neoliberals, even more so than earlier neoliberal governments; their entire policy stance, even during the pandemic, is centred around keeping the fiscal deficit in check for fear of offending globalised finance, because of which India has been one of the countries offering the most niggardly government assistance to the people affected by the lockdown. India’s government today is also more eager than ever before to privatize public sector enterprises and to provide assistance to corporations, especially a few favored ones. And it has been more keen than any previous government to ensure corporate encroachment on peasant agriculture and petty production.

Indeed, since the earliest days of neoliberalism in India there has been a tragic spike in peasant suicides—more than 300,000 in the two and half decades following 1991. This is because of growing peasant indebtedness. Debt has exploded in the face of higher costs for privatised essential services and a steep drop in profits for peasant agriculture following the withdrawal of government price support in cash crops and a reduction of such support in food grains. The squeeze on peasant agriculture, a sector that employs almost half the total workforce, has been so drastic that the number of “cultivators” has shrunk by 15 million between two censuses, 1991 and 2011. Some became labourers and others migrated to cities in search of non-existent jobs, swelling an army of unemployed or underemployed workers that weakened the bargaining position of the relatively few unionsed workers. The GDP growth rate has increased, but there has been a reduction—a halving in fact—in the rate of growth of employment, which has brought it even below the natural rate of growth of the workforce.

The massive peasant agitation currently rocking the country is aimed to roll back three farm laws enacted last year by Modi’s government that only further extend this neoliberal regime. The U.S. administration and the International Monetary Fund, while critical of the Indian government’s handling of the agitation, support the thrust of the three laws. Modi’s neo-fascism is thus quite unambiguous in its defence and promotion of the neoliberal agenda.

How stable is this global alliance between neoliberalism and neo-fascism? How long can one expect the prop of neo-fascist othering to shore up a crisis-afflicted neoliberalism? On the one hand, since global finance will not tolerate wars among major or even minor capitalist powers, one might think neo-fascism is here to stay. But on the other hand, neo-fascist regimes are themselves subject to the constraints imposed by the hegemony of globalised finance, and in one respect this limitation is fatally constraining: it vitiates neo-fascism’s ability to revive employment.

Classical fascism revived employment through government armaments expenditure financed significantly by borrowing—that is, by running a large fiscal deficit. It was through such efforts that Japan had been the first country to come out of the Great Depression in 1931 and Germany had been the first European country to generate a business upswing in 1933 under the Nazi government. As a result, there had even been a brief period, between the end of mass unemployment and the onset of the horrors of war, when the fascist governments had enjoyed sizeable mass support.

Contemporary neo-fascism, by contrast, is incapable of ending mass unemployment. It is not just that such a goal requires larger government expenditures, already an object of scorn among neoliberals; those expenditures must be financed by taxing capitalists or by a fiscal deficit—both ruled out under neoliberalism. According to neoliberal doctrine, taxing the capitalists, whether through a profits tax or a wealth tax, is supposed to adversely affect their “animal spirits,” as Keynes would put it—that is, the sum-total of attitudes that promote larger investment by the capitalists. A larger fiscal deficit, on the other hand, is frowned upon by finance, as it undermines the social legitimacy of the capitalists (especially of the financial interests who constitute what Keynes called “functionless investors”).

This situation poses a problem for neo-fascism’s grip on power. Its inability to alleviate the crisis of neoliberalism may lead to its defeat in elections (assuming it does not rig them or bypass them entirely): arguably this is what happened in the United States with Trump’s loss to Joe Biden. But even if neo-fascism loses in the short term, it will remain a strong contender for returning to power so long as successor governments revert to neoliberal business as usual, as has been the pattern for some time. In order to break this cycle, it is essential that a successor government should not simply resume the old neoliberal policies that produce growing inequality, growing poverty, and growing unemployment. There has to be a decisive shift toward a robust welfare state with revived public social services, public goods, and high employment—precisely the policies that the hegemony of global finance has thwarted.

Quantitatively, such a shift is perfectly feasible. In India, it has been estimated that to institute five universal and justiciable economic rights in the country—the right to food, the right to employment (or full wages if employment is not provided), the right to free health care through a National Health Service, the right to free, publicly funded education (at least up to the school-leaving stage), and the right to a living old-age pension and adequate disability benefit—would require an additional 10 percent of the GDP over what is already being spent under these rubrics. In practice, this would require raising additional resources amounting to 7 percent of the GDP, since the rise in GDP on account of these expenditures will automatically garner extra revenue anyway. This 7 percent can be raised through just two taxes, levied only on the top 1 percent of the country’s population: a wealth tax of 2 percent, and an inheritance tax levied on the same group to the extent of just one-third of what is passed down each year. A wealth tax has also gained ground in public debates in the United States following proposals by Bernie Sanders and Elizabeth Warren in the 2020 election season; a few American billionaires even endorsed Warren’s proposal. There is, in short, a general understanding developing across the world that escaping the current conjuncture requires a move toward a strengthening of welfare state measures that have been rolled back during the ascendancy of neoliberalism.

Politically, this shift will be challenging, of course. Attempts to tax the rich will alienate investors and stoke fears of capital flight or insufficient financial inflows to cover the widening trade deficit that would ensue. Sooner or later, the answer must involve control over financial outflows. Such measures do not necessarily spell disaster for the developing world, however. Large, diversified economies can manage the consequences: the short-run difficulties of managing trade deficits—because of a drying up of financial inflows in the wake of such controls—can be overcome, over time, through a diversification of production with the aim of greater self-sufficiency. Small economies can manage by coming together to form local trade blocs. The real cause for concern will be if advanced countries, the “guardians” of globalisation, impose trade sanctions and intervene in other ways against countries trying to escape neo-fascism by adopting such pro-people economic policies.

The neo-fascist assault on democracy is a last-ditch effort on the part of neoliberal capitalism to rescue itself from crisis. To escape this state of affairs, world public opinion has to be mobilised decisively against neoliberalism, and the support of global democratic movements has to be garnered. Only then will this breeding ground for neo-fascism at last be undone.

[(abridged) (source: MR Online)]

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Frontier
Vol. 54, No. 13, Sep 26 - Oct 2, 2021