12 May, 1998
Capitalism's new face
By Khalid M. Ishaque
IN economic theory till quite recent times, a share of product or profit was allocated to capital on the basis that it was a factor of production like labour, land, and organization of production. Today, international capital operates in a fundamentally more dominant manner. It does not operate only as 'a source of scarce services which contribute towards valued output' (Everyman's Dictionary of Economics, p.169). Use of capital for purchase of land, machines, raw material and the like is there, but it has a story of its own in terms of sheer exploitation.
Currently, the capital has a new role. In today's contexts vast amounts are internationally contributed as investment in expected gains in the share market. The investor has an eye not on actual enlargement of production but on 'expected rise in the price of shares' or expected fall due to movements in the market or international trends. The market itself is not free from manipulation, national and international.
With very large foot-loose capital available in astronomical figures, entrepreneurs concentrate far less on actual economic production of goods, but far more on critical introduction or withdrawal of capital which causes rise and fall in prices, markets and economies.
What has happened in recent times in the seemingly very prosperous Pacific Rim states of Asia has several important lessons. Money for investment was flowing in those countries in seemingly limitless amounts for almost reckless investment and job creation. Then suddenly it was withdrawn, to cause collapse of banks, monetary institutions, trading houses etc. Whole economies collapsed, because a number of investments were unwise or corruption-ridden, or not profit-oriented. The entrepreneurs and investors collected their profits, and everyone else became a victim directly or indirectly.
How does one differentiate between this form of capitalism, and the one of the 19th century so ruthlessly criticized by Karl Marx? And again from the forms of investment permitted or approved by Islam. If the stock market gains are organized and made without any regard to actual performance of an industry, then it amounts to a one-sided gain without reciprocating gain to the actual investor or producer of goods. Would such manner of doing business not violate the Quranic injunctions against diminishing the value of people's wealth or the injunctions against wagering transactions or injunctions against trade wherein profit is not reciprocal.
In this context, the reckless quest for unbound capital that is reflected in the current economic policies of the Government of Pakistan needs seriously to be reviewed, not only on Islamic principles but also in terms of sound economic policy.
Privatization was propagated and popularized by Western capitalist world, inter alia, to provide openings for introduction of Western capital in the new unipolar world after the collapse of the communist world. The projects that thus became available were large, and were or are key projects in the victim national economies. Cement, banks, highways, railways, electronic communication, media etc. are areas where private control would provide a big clout (far bigger than that of the APTMA in Pakistan) in making and unmaking of national priorities and policies.
The ruling elites would also come under direct influence, (as American legislators are under the influence of the Jewish lobbies) and far more effectively. The power to legislatively intervene in unfair contracts which multinationals impose would progressively diminish.
The directly and indirectly imposed economic policies would progressively force the developing countries to serve the larger economic interests of the capitalist world. Capitalism will effectively re-enslave the world partially freed during the heyday of socialism and liberal democracy. Eternal vigilance is the price of liberty is an old cliche, and it is so precisely because there is a large element of truth in it.
The new capitalism in multinational form is newly and differently constituted. There is no state or states behind multinational ventures to bear the moral blame. Every time a few capitalists, whose main interest is enhancement of their own wealth, join hands with the capitalists of the host countries, and they together start making money from the word go. Through mutual co-operation, over-invoicing, purchase of out-dated technology, and so-called technology transfer, the process goes on. Playing in the share market is the endgame. The interest of the people of the host country does not figure in this game.
The last hundred years show all too clearly that but for the restraining influence of socialism and political democracy, capitalism armed with new technology would have run amok. Socialism was founded on welfare of the workers who constitute the masses. Likewise, democracy was rooted in popular vote where the would-be elected ones would have to prove their eligibility by doing something for the masses-cum-voters.
The current situation is that socialism has fallen even in areas where it was the official creed. And in countries which had devised social policies based on social welfare as a reply to socialism, privatization has been devised as a scheme to dislodge socialistic claims on state resources. Generally statism is in full retreat, and with that all programmes of welfare.
Countries of the Third World need to ask themselves as to what they hope to achieve under the burden of Western interest-bearing loans, economic policies to ease Western imports, dictates of the IMF and the World Bank and Western hegemony under the WTO. Muslim countries need to further ask themselves as to how the ideals of Islam are being advanced in this fashion. In Pakistan the rulers need to ask themselves as to how the current policies and priorities can be reconciled to the promise contained in Article 2 and 2A of the Constitution; the first declaring that Islam shall be the state religion of Pakistan; and the second binding the nation to exercise all power and to use all resources within the limits of Shariat.
Countries that cannot clearly identify or adhere to clear-cut national priorities suffer a decline, as Margaret Thatcher's England has, says Prof. John Gray in his work 'Endgames' (1977- Polity) The utter confusion in identification and statement of national priorities in official speech-making in Pakistan is pathetic. Democracy, political cleansing, human rights, rule of law, economic revolution, control of corruption and of the population explosion, Islamization, literacy and what not, have all been called the first priorities. The vocal thrust is there, but with comparatively little effective follow-up. The phenomenon shows a singular lack of commitment at various levels.
The performance of Asian Tigers had been spectacular by comparison, because commitment to economic development was genuine, collective and comprehensive. The governments were generally corrupt, but most of them shared the windfall wealth with the workers. A typical case is Indonesia. As one critic speaking of Suharto put it, he always gave the first morsel to the people though he thereafter absorbed many himself.
Pakistan's pathetic appeals for more foreign investment would remain largely unanswered for other reasons also because the basic requirements for long-term investment are absent, and they are stability, rule of law and an environment of peace. The struggle for power to loot among the ruling elites is so blatant and shameless that Pakistan has earned on some reckoning the title of one of the most corrupt countries in the world. More speeches, more promises and more committees will not solve the problems. They may placate for the time being like baby soothers but achieve no significant results.
Collectively we must learn to give up the habit of chasing every bright idea as first national priority, and then as quickly moving on to the next one. What happened to Tory Party and its centuries-old moorings at the end of Thatcher administration in the UK is well known, and what is happening in Russia, following the break-up of the Soviet Union provide cases to be studied by the policy makers. (See Russia's Politics of Uncertainty by Mary McAuley (Cambridge 1997).
The recent distancing by intellectual elites of Pakistan from the Islamic moorings must also cause serious concern to well wishers of Pakistan. The ethical force in a Muslim people in time of crises comes from their Islamic commitment. It did so at he time of creation of Pakistan, and again during the 1965 War. The current problems and those likely to follow the firing of Ghauri missile would require that sort of commitment, and sooner than what people expect.
The collective chipping away of the idea of Pakistan, and the preaching of blind secularization are two enterprises which are intrinsically worthless. This fact must be faced. There are useful lessons for study in Judith Devlin's The Rise of the Russian Democrats about the effects and consequences of Elite Revolutions. (E.E. Studies of Communism in Transition 1995).
Even more importantly we must check the mad rush for unconditional loans. The East Asian history of last two decades has important lessons. With the state absent from the field of control of economic enterprise, the corrupt ruling elites within the country in partnership with the multinationals will play havoc which is hard even to visualize. Learning to be modest in what we demand from life, husbanding national resources wisely should be the first priority. By contrast corrupt political compromises in the interest of self-perpetuation must end. Without an ever present moral authority as foundation, the most cleverly crafted constitution in support of total hegemony does not survive long.