Wednesday, January 28, 2009

William F. Warde

Trotsky on the Role of the USA

(July 1951)

Source: Fourth International, Vol.12 No.4, July-August 1951, pp.114-118.
(William F. Warde was a pseudonym of George Novack.)
Transcription/Editing/HTML Markup: 2006 by Einde O’Callaghan.
Public Domain: George Novack Internet Archive 2006; This work is completely free. In any reproduction, we ask that you cite this Internet address and the publishing information above.

Leon Trotsky looked upon the United States as “the foundry in which the fate of man is to be forged.”

This country was marked out for such a role, not because its inhabitants were possessed of unique virtues beyond the reach and ability of other peoples but because of the entire course and tendencies of world development in modern times.

Thanks to exceptionally favorable historical circumstances and natural endowments, the productive forces of modern society and its techniques – which are the mainsprings of progress – had reached their highest levels here.

The wealth and productive facilities of America could supply the material basis for a new social organization which would ensure plenty for all in the shortest time. But the capitalist ownership of industry and the monopolist control of the government stands in the way of using these riches and facilities for the benefit of the American people as a whole and for mankind.

Two Main Contradictions in US

Because its economic and financial strength is locked within the framework of capitalist relations, America finds herself simultaneously impelled in two opposite directions. On the one hand, Trotsky explained,

“... it is precisely the international strength of the United States and her irresistible expansion arising from it, that compels her to include the powder magazines of the whole world into the foundations of her structure, that is, all the antagonisms between the East and the West, the class struggle in Old Europe, the uprisings of the colonial peoples, and all wars and revolutions.”

The United States is thus subjected, externally and internally, to tremendous revolutionary pressures far greater than any other advanced country has had to withstand.

On the other hand, the operation of these same forces produces just the opposite effect, transforming “North American capitalism into the basic counter-revolutionary force in the modern epoch interested in the maintenance of (capitalist) ‘order’ in every corner of the terrestrial globe.” That is why, for all its vast material achievements, the United States has appeared to the rest of the world, not as the trailblazer to socialism, but as the supreme embodiment of its opposite – capitalism.

These words, laying bare the dynamics of -the world role of America, were written almost a quarter of a century ago. They have been entirely confirmed by the course of events.

Trotsky’s First View of America

A Marxist, who understood how world conditions and tendencies dominate the development of every separate nation, Trotsky always took as his point of departure the review and analysis of world economic and political relations. The problem of America’s role in world affairs first preoccupied his attention when he was expelled from France and then Spain for his socialist anti-war activities and came to New York in the third year of the First World War.

Shortly after his arrival in January 1917 he addressed an international meeting of welcome in the following words:

“It is a fact of supreme importance that the economic life of Europe is being blasted to its very foundations whereas America is increasing in wealth. As I look enviously at New York – I who still think of myself as a European – I ask myself: ‘Will Europe be able to stand it? Will it not sink into nothing but a cemetery? And will the economic and cultural center of gravity not shift to America?’”

In one of the New York libraries he assiduously studied the economic history of the United States.

“The figures showing the growth of American exports during the war astounded me; they were, in fact, a complete revelation. And it was those same figures that not only predetermined America’s intervention in the war but the decisive part that the United States would play in the world after the war, as well. I wrote several articles about this at the time, and gave several lectures,” he wrote in My Life (pp. 270-271).

“Since that time the problem of ‘America versus Europe’ has been one of my chief interests. And even now I am studying the question with the utmost care, hoping to devote a separate book to it. If one is to understand the future destiny of humanity, this is the most important of all questions.”

Foresaw World Importance of USA

After his return to Russia, despite his absorption in the Russian revolution or more accurately, precisely because of it, the question of America keeps recurring again and again in his work. In the period between the close of the civil war in the USSR and the outbreak of World War II, the role of US imperialism loomed in his mind as the paramount problem of world economy and world politics.

As early as 1920, in the Manifesto issued by the Second World Congress of the Communist International, he set forth the main considerations on the dynamics of American monopoly capitalism. These guided the outlook of the Communist International in its most progressive years until Lenin died, and Trotsky’s own thinking on the subject over the next two decades.

With its decisive intervention in World War I, the United States had become thoroughly imperialistic, displacing Britain as the master of world capitalism and compelled to pursue an aggressive policy of expansion on a global scale. Henceforward, the needs of the imperialist ruling class and their tool, militarism, would tend more and more to dominate not only American life but the entire course of international affairs.

This perspective was summarized by him as follows:

“The (First) World War has completely dislodged the United States from its continental conservatism (‘isolationism’). The program of ascending national capitalism – ‘America for the Americans’ (The Monroe Doctrine) – has been supplanted by the program of imperialism. ‘The Whole World for the Americans’.” (The First Five Years of the Communist International, p.109)

Perspectives in Europe and America

Trotsky sketched out the book he hoped to write on the interrelations between the Old World and the New in a

number of speeches delivered in 1924 and 1926 to audiences of Russian workers. These were later published by the Soviet State Publishing Mouse under the title: Europe and America. In his speeches Trotsky reviewed the prospects of world development as they appeared in the mid-Twenties. He pointed out how imperialist America was moving out into all world channels and taking the offensive against its rivals.

What did this mean for Europe?

“This means that Europe will be permitted to rise again, but within limits set in advance, with certain restricted sections of the world market alloted to it. American capitalism is now issuing commands, giving instructions to its diplomats. In exactly the same way it is preparing and is ready to issue instructions to European banks and trusts, to the European bourgeoisie as a whole ... This is its aim. It will slice up the markets; it will regulate the activity of the European financiers and industrialists. If we wish to give a clear and precise answer to the question of what American imperialism wants, we must say: It wants to put capitalist Europe en rations.” (Europe and America, p.16)

Following the defeat of the German revolution in 1923, America’s new role in Europe enabled the bankrupt capitalism to be temporarily stabilized there. Trotsky was the only one who emphasized that the intervention of the Almighty Dollar had become the most important factor in European life. The German Social Democracy, the French Radicals and the British Labor Party adapted themselves materially and ideologically to this situation and put forward a new gospel of salvation through the aid of American gold and loans.

These economic and political conditions helped prop up European capitalism at the time and fed the democratic and pacifist illusions of its “leftist” parties. Meanwhile, however, the inexorable pressure of American imperialism upon Europe was disrupting world economic relations and preparing new conflicts. The staggering material preponderance of the United States excluded the possibility of economic upswing and regeneration for capitalist Europe. “If in the past it was European capitalism that revolutionized the backward sections of the world, then today it is American capitalism that revolutionizes overmature Europe,” pointed out Trotsky. America was pushing Europe into an economic blind-alley from which there was no escape except through the proletarian revolution.

Internal Repercussions of New World Role

But this expansion of US imperialism into Europe and Asia was bound to have momentous consequences not only for Europe but for the United States itself.

“The more the United States puts the whole world under its dependence, all the more does it become dependent upon the whole world, with all its contradictions and threatening upheavals ... America is no longer a self-sufficing whole. In order to maintain its internal equilibrium the United States requires a larger and larger outlet abroad; but its outlet abroad introduces into its economic order more and more elements of European and Asiatic disorder.” (Europe and America, pp.68-69.)

The crash of 1929 was the first demonstration of the consequences of this inescapable interdependence.

One of the outstanding peculiarities of American imperialism Trotsky singled out for examination was the mask of democracy and pacifism donned by the American monopolists, no less predatory, dictatorial and ruthless than their European predecessors. This has deceived, as it still continues to do, many people. Thanks to the special conditions of American development, and its relative geographical and political isolation, this pacifist and democratic mask had, so to speak, become glued to the imperialist face making it difficult to peer beneath it and pry it off. This feature has persisted to the present day. But as American imperialism grows more openly militaristic and reactionary in its operations, the discrepancy between the real face and the mask is becoming more apparent, as, for example, the Korean war illustrates.

So long as Lenin lived the basic ideas outlined above constituted an important part of the programmatic position of the world communist movement. It was generally accepted by Marxists that one of the first tasks of the proletarian revolution was the establishment of the Socialist United States of Europe as the only progressive way of resolving the internal chaos of the Old Continent. This slogan was, in fact, formally accepted by the Communist International in 1923.

Stalinism and America’s Role

But in Lenin’s lifetime the world revolutionary movement did not succeed in formulating or adopting a definitive international program. This was not done until 1928 when at the Sixth World Congress, a program drafted by Bukharin and Stalin was finally adopted. The basic ideas of Leninism received only lip service, but were scuttled in action. And among the things that went overboard were all of Trotsky’s scientific expositions of the interrelations between capitalist America and the rest of the world, Europe in particular. The slogan of the Socialist United States of Europe was the very first to be scuttled.

The original draft of the Stalin-Bukharin program did not even contain a reference to the United States by name; this, along with a few other formal references, was included only under the pressure of Trotsky’s criticism, from his exile at the time in Alma-Ata, Central Asia.

To the conservative, narrow-nationalistic Stalinist bureaucracy the state boundaries of Europe represented the same untouchable fetish as to the capitalists. They not only failed to understand the reactionary character of these state boundaries, but as experience was to prove, following World War II, they maintained them intact in Eastern Europe.

They never understood, as Trotsky pointed out in his classic critique of Stalinism, The Third International After Lenin, that “the inevitable further development of American expansion, the contraction of the markets of European capital, including the European market itself, entail the greatest military, economic and revolutionary convulsions, beside which all those of the past fade into the background.” (p.7)

They were blind, as they still are, to the fact that

“the further inexorable pressure of the United States will reduce capitalist Europe to constantly more limited rations in world economy; and this, of course, implies not a mitigation, but, on the contrary, a monstrous sharpening of inter-state relations in Europe accompanied by furious paroxysms of military conflict, for states as well as classes fight even more fiercely for a meagre and a diminishing ration than for a lavish and growing one.”

The culmination of both of the above-outlined processes has been taking place before our very eyes.

Following the crash of 1929 when fraudulent pacifism still remained the official pretense of Washington, Trotsky once again emphasized that precisely the international strength of the US and its tremendous productive capacity, requiring the whole world as an outlet, would impel America’s monopolists toward the conquest and domination of the globe. “The changes introduced ‘by the (first world) war into the American structure have in turn made the entry into the world arena a life-and-death question for American capitalism,” he warned in an article, Nationalism and Economic Life written for Foreign Affairs.

“There is ample evidence that this entry must assume extremely dramatic forms ... Sooner or later American capitalism, must open up ways for itself through the length and breadth of our entire planet. By what methods? By all methods. A high co-efficient of production denotes also a high co-efficient of destructive force.” (Reprinted in Fourth International, September 1945)

Insight on “New Deal”

Six years before the outbreak of World War II in the theses War and Fourth International Trotsky predicted:

“Capitalism in the United States is running head on into those problems which impelled Germany in 1914 upon the road of war ... For Germany it was a question of ‘organizing’ Europe. For the United States it is a question of ‘organizing’ the world. History is taking mankind directly into the volcanic eruption of American imperialism.”

These words were written at the height of the “New Deal” ballyhoo. In his study of US capitalist development – “Twentieth-Century capitalism’s most perfect mirror” – Trotsky set forth the reasons why Roosevelt’s reforms and oft-repeated pacifism would not allay the warlike and dictatorial trends of the monopolist magnates but on the contrary reinforce them and prepare the soil for their open manifestation.

“The New Deal policy with its fictitious achievements and its very real increase in the national debt is unavoidably bound to culminate in ferocious capitalist reaction and a devastating explosion of imperialism.” (The Living Thoughts of Karl Marx, p.25.)

These prophetic words, written in 1938, outline the grim realities of recent years: US participation in World War II, the Truman Doctrine, Taft-Hartleyism, the unbridled witch-hunts, the growth of militarism and the feverish preparations for World War III.

That is the reactionary side of American developments. So far as the revolutionary perspectives are concerned Trotsky originally inclined to the view that the socialist revolution was far closer in Europe than in the United States. But he always qualified this position. In a letter written in 1929 to the first conference of the Communist League of America, the pioneer Trotskyists, he repeated this thought but immediately added that a turn of events was possible that could alter the succession of revolutionary events and pull the United States into the front rank of the revolution as well as the counter-revolution.

Perspectives on Labor in USA

By next year, however, he drastically revised his estimates of American revolutionary potential.

“It is nowhere written,” he then concluded, “and theoretically it cannot be substantiated, that the American workers will perforce have to pass through the school of reformism for a long period of time. They live and develop in another period, their coming to maturity is taking place under different circumstances than that of the English working class, for instance ... It is not at all permanently established that the United States will be last in the order of revolutionary primacy, condemned to reach its proletarian revolution only after the countries of Europe and Asia. A situation, a combination of forces is possible in which the order is changed and the tempo of development in the United States enormously accelerated” (The Militant, May 10, 1930.)

Thirties, Trotsky became increasingly preoccupied with the problems presented by revolutionary prospects in the United States. He was firmly convinced that the very position of the United States as the foremost capitalist power made it impossible for it to escape the effects of the disintegration and decay of world capitalism.

The collapse of the entire capitalist economy which began in the United States demonstrated this. The two chief objective factors required for a sweeping social change were already present: on the one side, the highly developed forces of production which could easily be tripled once capitalist parasitism was eliminated and, on the other, a deepening social crisis.

A revolutionary movement further requires a progressive class interested in and impelled toward a radical transformation of productive and property relations. This too existed in the formidable American working class which embraced the majority of the population and could give leadership to the distressed farmers and oppressed Negroes.

The remarkable organizational capacities of this central social force were dramatically displayed in the battles that gave birth to the CIO, the most important product of the great storms that shook America from top to bottom during this period. The CIO lifted American labor to new heights. This organization of the industrial workers is ordinarily looked upon by superficial observers as nothing more than a change in the trade union movement.

Saw Significance of CIO

But it is far more than that, as Trotsky perceived. The CIO was a colossal mobilization of the vanguard of the industrial proletariat pitted in combat against the corporate giants who rule America, a combat from which the workers had emerged victorious in their immediate objectives. It was a surging, seething rank-and-file revolt, organized and led on picket lines by militant leaders from the shops, mines and mills, democratic in spirit and bold in its methods of struggle.

“The rise of the CIO is incontrovertible evidence of the revolutionary tendencies within the working masses,” Trotsky summarized in 1941. [sic!] He had previously noted in the founding document of the Fourth International:

“The unprecedented wave of sit-down strikes and the amazingly rapid growth of industrial unionism in the United States (CIO) is the most indisputable expression of the instinctive striving of the American workers to raise themselves to the level of the tasks imposed on them by history.”

However, although this new union movement born of the radicalization of the industrial workers was profoundly revolutionary in its potentialities, these did not find means of expression at this first stage. Trotsky analyzed the reasons for this retarded and drawn-out development. He saw the biggest internal obstacle to the progress of the CIO in the conservative character of its capitalist-minded top leadership, seconded by the Stalinists. This leadership did its utmost to keep the insurgent masses within the narrow confines of bargaining with the corporations and collaboration with government boards and mediators. They subordinated the independence of the CIO to the needs of their political coalition with Roosevelt, as subsequently with Truman.

Proposal for a Labor Party

The second obstacle was the immature political and class consciousness of the American workers, their lack of traditions of independent political activity, their illusions about Rooseveltism, which were cleverly exploited by the leadership. Yet there were already signs, such as the setting up of Labor’s Non-Partisan League that the ranks were chafing at their subservience to the capitalist political machines and would enthusiastically respond to a clear call for a definitive break with them.

How could these tendencies be fortified? The CIO as the economic expression of the new stage in the advancement of American labor had virtually overnight become a powerful political factor that could – and should – be able to blaze another political pathway for the entire American people. The growth of the CIO and the deepening decline of American capitalism made the creation of such a new political instrument imperative. “We must put forward a proposal which can enable the trade unions to throw their full weight into the political balance,” urged Trotsky beginning with 1938. Under the given conditions that meant the formation of a national Labor Party.

Such a party need not be reformist and in any case the Marxists should endeavor to make it the most effective agency for solving the problems of the working people. One way was the presentation of a basic program for such a party, a program of transitional demands which could both meet the needs of the current stage of struggle and. lead the workers forward to the conquest of power through a Workers and Farmers Government.

With the economic nosedive of 1937-38 Trotsky expected a sharpening of the social crisis and a rapid radicalization of the labor movement which would open up wide-ranging revolutionary perspectives. Under the impact of this developing crisis, he remarked, “I believe that the change in the mentality of the American workers will come at a very speedy rhythm.” However, the military preparations, and then the war itself, cut across this line of development. But even though the war retarded the further unfolding of the social crisis in this country, it did not and could not alter the fundamental trends or overcome the inner contradictions of American capitalism. When conditions change, so will the mood and mind of the masses, Trotsky kept reminding the American Marxists. Then the workers will quickly discard their conservatism and prejudices and incline toward socialist ideas and the most radical solutions. What is essential at all stages in this process, through all the ups-and-downs of the class struggle, is to build a socialist workers party that will be ready, willing and able to provide the American workers with the kind of leadership they need and deserve. The struggles between capitalist reaction and the advancing hosts of labor can last for a long period “and during this time our people will steel themselves, become more sure of themselves, and the workers will say: ‘They are the only people capable of seeing the path’,” Under revolutionary conditions a party prepared to fulfill its tasks can become the decisive political force within the country in a comparatively short time, like Lenin’s Bolsheviks in 1917.

American Revolution and Soviet Bureaucracy

Nowadays the solicitors of support for the schemes of global conquest projected by the American militarists and monopolists depict the capitalist “free enterprise” system as the sturdy protector of civil rights at home and the carrier of democracy abroad – on B-29’s and flamethrowers. On the other hand, to frighten workers from the road of struggle for socialism, they point to the bogy of Stalinist totalitarianism and declare that such a police state is the inescapable outcome of a socialist revolution.

In an interview given to a St. Louis Post Dispatch reporter in February 1940 Trotsky explained that in reality it was the uninterrupted decay and sharpening crises of capitalism which generated fascist trends and gave rise to police states in the capitalist countries confronted by the demands of the workers for a better life. And that the Stalin despotism which strangled and replaced the working class democracy of the early Russian Revolution had nothing in common with socialism but was a horrible political relapse toward the worst features of class rule, fostered by the backwardness of Russia, the isolation of its revolution and the persistent scarcity of material goods.

Actually the victory of the workers revolution in so developed a country as the United States would remove these exceptional historical conditions and thereby eliminate the material reasons for the existence of any bureaucratic governing caste resting on poverty, scarcity and the scramble for privileges at the expense of the living and working conditions of the masses. The high technological and cultural level of the American workers would likewise guarantee an expansion of genuine democracy under a Workers and Farmers Government. Asked whether the rule of the workers would not necessarily mean the suppression of personal freedom and the surrender of civil rights, as the anti-socialists allege, Trotsky replied:

What a Socialist America Would Mean

“It would be a great mistake to think the socialist revolution in Europe or America will be accomplished after the pattern of backward Russia. The fundamental tendencies will, of course, be similar. But the forms, methods, the ‘temperature’ of the struggle, all this has, in each case, a national character. By anticipation it is possible to establish the following law: The more countries in which the capitalist system is broken, the weaker will be the resistance offered by the ruling classes in other countries, the less sharp a character the socialist revolution will have, the shorter it will be, the sooner the society will be reborn on the basis of a new, more full, more perfect and humane democracy. In any case, no revolution can infringe on the Bill of Rights as much as imperialist war and the fascism it will engender.

“Socialism would, have no value if it should not bring with it, not only the juridical inviolability but also the full safeguarding of all the interests of the human personality. Mankind would not tolerate a totalitarian abomination of the Kremlin pattern. The political regime of the USSR is not a new society, but the worst caricature of the old. With the use of the might of the techniques and organizational methods of the United States; with the high well-being which planned economy could assure there to all citizens, the socialist regime in your country would signify from the beginning the rise of independence, initiative and creative power of the human personality.”

Trotsky himself embodied the “independence, initiative and creative power of the human personality” to an exceptional degree. But he developed these traits through his entire life work as a socialist determined to bring forth conditions in our world which would make possible such a flowering and fulfillment of the human personality, not simply for a favored few, but for the billions of toiling and aspiring mankind. In his outlook the ultimate purpose and supreme justification of all revolutionary activity in our time was not only to liberate the economy from capitalist restrictions so that it could provide abundant material goods to satisfy the needs of all. This was indispensable and preliminary to a higher goal: the creation of a new type of human being cleansed of the abominations bred by class-divided society. The productive facilities of a Socialist America would derive their decisive importance and value from the great part they were destined to perform in the making of a free race of human beings for the first time on our planet.

Monday, January 26, 2009

The Communists and the Building of Capitalism : Prabhat Patnaik

The conception of a communist party being always concerned exclusively and immediately with the ushering in of socialism is theoretically erroneous. Further, to infer from the practical policies of the state governments which are an empirical matter, the theoretical positions of the party, is an inversion of reason.

Does the fact of communist-led state governments operating within a capitalist system and hence playing
host to private investment, necessarily entail that the communists have abandoned socialism? The media reactions to statements
by some West Bengal communist
leaders would suggest that the answer is a clear “yes”. But this is a non-sequitur. It is worth examining the issue theoretically, even if it involves restating
certain bread-and-butter theoretical

A communist party is founded with the objective of achieving socialism. Its raison d’ĂȘtre is to struggle for the achievement of this objective. But the achievement of socialism
requires a social revolution which entails the substitution of private ownership
of the means of production by social ownership, and of the bourgeois state that defends such private ownership by an alternative
proletarian state which is a very different kind of state from all hitherto
existing states, in the sense that it must “wither away” over a period of time. Since the conditions for such a social revolution
take time to mature, all communist parties must work within the capitalist system for long stretches of time, bringing theory to the working class and helping it through its struggles to prepare itself for the task of leading this revolution.

All this however presupposes that the democratic revolution, which the bourgeoisie
had led historically, has been more or less completed, so that a socialist revolution
has come on the agenda. But in societies where the bourgeoisie appears late on the scene, it proves singularly incapable of completing the democratic revolution itself, and instead makes common cause with feudal and pre-bourgeois elements, since it is afraid that any attack on pre-bourgeois property could well encompass an attack on bourgeois property as well. This compromise,
which was evident in the case of
pre-revolutionary Russia, incorporates a compromise with imperialism as well in the context of third world societies.

People’s Democratic Rrevolution

The anti-feudal and anti-imperialist tasks of the democratic revolution in such societies
therefore cannot be completed by the bourgeoisie but devolve upon the proletariat
which must carry the democratic revolution to completion. Its key ally in this democratic revolution is of course the broad mass of the peasantry. This democratic
revolution led by the working class in alliance with the peasantry is called the “people’s democratic revolution”, which third world communists have traditionally seen as the immediate historical task on the agenda.

The people’s democratic revolution is a rich and complex concept. Since it entails a carrying forward of the democratic revolution,
i e, a completion by the proletariat of the task that the bourgeoisie historically had undertaken, its objective is to remove the fetters upon the most thoroughgoing bourgeois development; it creates therefore
the conditions for the most vigorous and the most broad-based capitalist development. At the same time, since it is the proletariat that leads the people’s democratic
revolution, it is not content only to create the conditions for the most thoroughgoing capitalist development, and then sit back and watch capitalism unfold in its full vigour; rather, it unleashes
a historical process where the people’s democratic revolution leads on to the socialist revolution. Once the proletariat
has acquired a “subject” role, it does not withdraw from that role; rather it uses that role to ensure that the people’s democratic
revolution leads on to the socialist revolution over a more or less protracted period of time.

Two important points have to be noted here: first, while the people’s democratic revolution creates conditions for capitalist
development, the nature of this capitalist
development is different from the capitalist development that would have occurred otherwise. “Capitalist development”
is not a homogeneous term. There is capitalism and capitalism. What was developing in colonial India was capitalism;
what the bourgeoisie leading the freedom struggle wanted was capitalism; what the Nehruvian development strategy promoted was capitalism; what neoliberalism is promoting today is capitalism;
and what the working class will create the conditions for, through the people’s democratic revolution, is also capitalism. So, to say that the people’s democratic revolution is meant to create conditions for the development
of capitalism
is only a half-truth; it is meant to create the conditions for the development of capitalism that is different
from the capitalism that would have developed otherwise; it is meant to develop a capitalism
that is the most thorough-going and broad-based, a capitalism that is based inter alia on radical land reforms and a widening of the mass market.

Secondly, the struggle for creating the conditions for the most thoroughgoing and broad-based capitalist development, which the proletariat has to lead in conditions
like ours, does not become an end in itself; it leads on to the struggle for socialism.
The continuity of this struggle was expressed by Lenin in his Two Tactics in the following words: “The proletariat must carry the democratic revolution to completion,
allying to itself the mass of the peasantry in order to crush the autocracy’s resistance by force and paralyse the bourgeoisie’s
instability. The proletariat must accomplish the socialist revolution, allying to itself the mass of the semi-proletarian elements of the population, so as to crush the bourgeoisie’s resistance by force and paralyse the instability of the peasantry and the petty bourgeoisie.” Precisely
because the consummation of the democratic
revolution, the most thoroughgoing attempt at building capitalism, cannot occur in societies like ours under the
aegis of the bourgeoisie, precisely because it can be carried out only under the aegis of the proletariat, the struggle for such development becomes integrated with the struggle for socialism, leads on to the struggle for socialism.

The Immediate Task

It follows then that the conception of a communist party being always concerned exclusively and immediately with the ushering in of socialism is theoretically erroneous. But that is not all. While the people’s democratic revolution
is on the historic agenda in our country,
in the sense that in its absence the democratic revolution would not only not be carried forward, but would actually witness retrogression (such as for instance
the reversal of land reforms, the attenuation of bourgeois democracy, and an even greater integration with imperialism),
it is by no means imminent. The communists in other words have to work within the capitalist system even as they work for the maturing of the conditions for the people’s democratic revolution, let alone a socialist revolution. And this work involves not just work in trade unions,
among the peasantry, on the various
mass fronts, and in the parliamentary opposition, but also as leaders of state governments
in the three states where they are powerful.

Work in the state governments is no different from work elsewhere, though the terrain of work is novel and the conditions
of work constrained by explicit and specific provisions of the Constitution:
its aim must also be to change the correlation of class forces, to prepare the conditions for the people’s democratic revolution by fighting to carry forward the democratic advance of the people and against all slide-backs, retrogression, and counter-revolutionary rolling back of this advance.

In the case of the state governments led by the communists, this requires a correct policy towards the development of the productive forces. This policy too must be informed by the objective of creating
the conditions for the people’s democratic
revolution, forging the class alliance
required for it, raising the level of class consciousness, and strengthening the proletariat as a revolutionary force. Stagnation in the development of the productive forces in these states in comparison
to others, i e, stagnation that is not systemic but specific to such states, can damage this objective by restricting employment generation, and alienating the people from the communists (which indeed is one reason why the capitalists used deliberately to avoid investing in these states earlier); on the other hand, any development that, even while creating
employment in some sectors, destroys employment in others, including in agriculture
through the alteration of the land-use pattern, can also have a damaging

Likewise, while boycott by capitalists, which amounts to an economic blockade of communist-ruled states, can damage the communists and hence the cause of the democratic revolution, any acceding to the demands of the capitalists that results
in a hiatus between the basic classes (i e, workers and peasants) and the party can have an equally deleterious effect. Avoiding these deleterious consequences, striking a correct path based on an all-round appreciation of the situation, making use of investments by capitalists even while not succumbing to their excessive demands, by taking advantage of competition among them, and by building
up the countervailing force of government investment, is not always easy. The exact strategy in each case has to be specifically determined. But the basic criterion for deciding on the correct course of action must be: does it contribute
towards an advance of the democratic revolution?

Struggle on Many Fronts

While applying this criterion however it is clear that there is no reason for shunning
capitalist investment, since within the capitalist system in which the
led governments are functioning,
the investible resources are by definition concentrated in the hands of the capitalists. Of course, such capitalist investment must be treated with circumspection;
it must not be allowed to thwart the advance towards a people’s democratic
revolution; and for that purpose the communist-led state governments must have a counterweight against the excessive
demands of capital; but shunning such investment altogether can also be equally damaging.

Such an understanding clearly does not entail an abandonment of socialism, or an acceptance of capitalism. It only recognises the fact that the struggle for carrying forward the democratic revolution,towards its ultimate goal of socialism, has to be fought on many fronts, in
complex terrains, and in conditions not of one’s choosing. While it is true that in coping with this complexity, the ultimate objective must not be lost sight of, a lack of recognition of this complexity makes the ultimate objective even more elusive in practice.

Party and Government

The critics of the communists are also wrong on a third count, quite apart from their lack of understanding of the concept
of the people’s democratic revolution,
and also of the complexity of the work needed to create the conditions for it. And this relates to a lack of distinction between the government and the party. Party-led governments
are not identical with the party. The party embodies a theory; a government per se does not, even when led by the party. The party works for a revolution; it works through many channels including through heading
state governments. But just as there is a difference between the party and its front organisations, there is a difference between the party and the governments it leads, as indeed between these governments
and the Party’s front organisations.
These governments are formed in accordance with the provisions of a Constitution
which in turn was framed as scaffolding for the structure of a state led by the bourgeoisie. Their practical positions
on a number of issues cannot always
be expected to be coterminus with what the party’s theoretical understanding
dictates. To infer from the practical policies of the state governments which are an empirical matter, the theoretical positions of the party, is an inversion of reason.

There may be reservations about the concrete policies of the communist-led state governments in India, but these are a separate matter; they must not be allowed
to cloud theoretical understanding.
On the contrary, theoretical clarity is essential for assessing the validity of such reservations.

Prabhat Patnaik is at the Centre for Economic Studies and Planning, Jawaharlal Nehru University,
New Delhi, and is a leading Marxist economist.

Courtesy: EPW February 2, 2008

The revolt of 2006

Revolt of the garment and textile workers in Bangladesh

From 20 May to 6 June 2006, nearly 1.8 million garment workers of
Bangladesh concentrated in industrial areas in and around the capital
Dhaka engaged in a series of simultaneous massive wildcat strikes
that took on the proportions of a mass proletarian revolt. During
this period, especially from May 20 to May 24 when garment workers'
revolt was at its peak, workers of nearly 4000 factories struck work.
These workers, and other workers from the industrial suburbs,
continuously demonstrated and blocked highways connecting industrial
suburbs to the capital Dhaka and Dhaka to other cities – Mymensingh,
Ashulia, and Chitgong etc. In the face of this mass revolt, the
bourgeoisie resorted to massive repression. In the first one week, as
per official figures, at least 3 workers were shot dead, 3000 injured
and several thousands were put into prisons. Striking workers
continuously confronted and chased away paramilitary and police
forces deployed to crush their movement. "The capital city appeared
in the middle of a siege, as garment workers took to streets at about
8:30AM", reported New Age, the Dhaka English daily on 24th May
2006. This line was repeated on several days by bourgeois press in
Bangladesh as workers persisted with their struggles. Although by May
25-26, bourgeoisie succeeded in blunting the edge of workers revolt
by massive deployment of paramilitary forces and with the help of
unions, the revolt continued till 6-7 June 2006. Workers in different
Export Processing Zones (EPZ) and industrial areas continued to
engage in wild cat strikes and demonstrations – most garment
factories remained closed. The state proclaimed that factories will
open only from 8th June 2006 once order is fully restored.

Barbaric exploitation of workers in Bangladesh – the real face
of 'outsourcing and boom'

Amid the whole stagnant economy of Bangladesh, readymade garments
sector is the only one the bourgeoisie boasts of. This sector is
entirely export oriented and is composed of above 4400 units – most
of them working for international buyers. Some are owned by
international companies. Most of the garment units are clustered in
industrial areas and Export Processing Zones in and around Dhaka –
Ghazipor, Savar, Ashulia, Mirpur, Tejgaon, Mohakhali, Uttara, Wari
and Tongi etc. The textile and garments export constitute 70% of
total $ 9.3 billion export from Bangladesh.

This sector employs 1.8 million workers, 90% of them are women and
therefore particularly vulnerable to intimidation and repression.
Garment workers constitute 40% of the total industrial workforce of
Bangladesh. Brutality of exploitation of garment workers in
Bangladesh is typical of the conditions of workers in many
sectors 'outsourced' by center of capitalism to third world
countries. Minimum wages are 900 Takka (14$) per month. Even this is
not paid in half of the garment as well as other factories. These
minimum wages were fixed in 1994 and have remained unchanged despite
consumer prices having grown three fold in the last 12 years. After
the recent workers' revolt, it is now being said that the garments
sector, which has thrived due to cheap, slave labor, had consistently
opposed efforts to revise the minimum wage. "Powerful lobbies of
garment owners have been able to keep the government convinced that
if wages in garment sector increase, it will increase production
costs and discourage local and foreign investors from investing in
the burgeoning sector", said Mr. Jafrul Hasan a representative of the
ruling Bangladesh Nationalist Party (New Age, 29th May 2006). Even
boss's top body, BGMEA (Bangladesh Garment Manufacturers and
Exporters Association) is now saying "Owners of the sweater
manufacturing factories, who cheat their workers by paying abysmally
low `piece rates' (…) are to be blamed for igniting the workers'
unrest that focused national and even international interest on the
gross underpayment of the garment workers and inhuman violation of
their rights" (New Age, 29th May 2006).

But starvation wages are not the only expression of brutal
exploitation. A few years ago the legal work week was extended to 72
Hours; actual working day is often up to or above 16 Hours. There is
no weekly time off in the garment sector – mandatory weekly time off
was one of the demands of the revolt. There are no public holidays,
no annual leave. Also bosses "show a reckless disregard for safety at
workplace as deaths of 4000 workers in industrial accidents such as
fire and building collapse point to", (New Age, 24th May 2006). Not
only this, there have been cases of beatings and killing of
workers. "Intelligence sources said some senior staffers of the
factory killed two female workers at Dhaka Export Processing Zone (…)
about one and a half years ago but workers could not protest at the
time for fear", Daily Independent, 2nd June 2006, Dhaka.

Apparently in these conditions of barbaric exploitation the
bourgeoisie dispensed with even a myth of representation - no unions,
even linked to ruling gangs, were allowed in any of the garment
factories. As per an academic in Labor Studies, "only 100 out of
5000-plus garment factories have participation committees'", New Age,
3rd June 2006. This absence of bourgeois tools to control workers
became an element in the strength and violence of the workers

Small beginnings of a mass revolt

As per reports there have been cases of workers struggles in garment
factories in last few months. But these were mostly in individual
factories with demands addressed to individual bosses. FS Sweater
factory, whose events became detonator for the recent revolt, has
been in turmoil since last some months with workers repeatedly
agitating for their demands.

On Saturday, 20 May 2006, as morning shift started at 8.00 AM nearly
1000 workers of FS Sweater factory at Sripur, in the suburbs of
Dhaka, started a sit-in demanding increase in their wages and release
of their arrested colleagues – who were arrested on 18 May for
participating in an agitation for their demands. The bosses of the
company, not willing to tolerate collective resistance from the
workers, locked them in. Amid sweltering heat they cut off drinking
water and power supply to the areas where workers were gathered and
called the police. The police entered the factory at around 11.00AM
and along with private security of the factory started beating the
workers. Police also opened fire on workers inside the factory. Many
workers were injured, at least 12 workers sustained bullet injuries
inside the factory. Six of these wounded workers were arrested and
taken by the police. Attacked by the police and the private security
of the bosses, workers jumped above the walls to come out of the

Enraged workers started gathering on the Dhaka-Mymensingh highway
outside the factory. Workers of FS Sweater factory were joined by
thousands of other workers and their families from neighboring slums
where most of the workers live. By noon the workers blocked the
traffic on the highway and took out a procession for their demands
and against police repression. This procession of workers was
attacked by bigger, reinforced contingents of police force that once
again resorted to beating the workers and opened fire on
demonstrators. Police also went inside the slums and beat up workers
and their families. Workers and their families in turn chased the
police. The traffic on the highway remained blocked till evening.

By the end of the day, one worker was shot dead by the police in
front of FS Sweater Factory. As per official accounts eighty workers
sustained bullet injuries. While the wounded and angry workers went
back to the slums, the news of repression and of death of a worker
spread throughout the industrial suburbs of Dhaka. Next day, 21st
May, was Sunday. Although no major incident happened that day, the
news of police atrocity continued to spread. At this moment the
bourgeoisie did not expect any major trouble on Monday and did not
take any preventive action by way of union, political or police
mobilization. Different leftist factions contented themselves with
issuing some statements 'condemning' the police attack.

A mass explosion of accumulated anger

It is not clear what type of self-organization and co-ordination
developed among the workers that propelled this revolt. But it seems
to be very elemental and rudimentary, essentially informal and among
the workers in the same areas. What united the workers across many
towns around Dhaka and in Dhaka itself was their burning hatred
against brutal exploitation, daily repression and the latest police
atrocities. The depth of this anger expressed itself in generalized
confrontation between workers and repressive forces of the state
everywhere in coming few days. It also expressed itself in burning
down of several hundred factories during this revolt.

On Monday, 22 May 2006 movement erupted at fully fortified Savar EPZ,
another suburb of Dhaka. In the morning, workers of Universal
Garments Limited gathered in front of the factory to demand payment
of their back wages and were attacked by private guards of the
factory. Instead of dispersing, the attacked workers of Universal
Garments went to neighboring factories and called other workers for
support. Together with other workers, they went from factory to
factory calling other workers to join them – at one point more than
20,000 workers are reported to have joined this militant procession.
Hundreds of factories of Savar EPZ and New EPZ had joined the strikes
by the afternoon. The highways going out of Dhaka were blocked.
Striking workers fought back against police and paramilitary forces
sent to attack them. Repressive forces of the state opened fire on
workers in different parts of industrial suburbs and in Dhaka.
Several hundred workers were injured by bullets; more workers were
killed in firing by the forces of the state. Enraged by news of death
of workers, by evening workers in other industrial suburbs were
coming out of their factories.
On 23 May all industrial suburbs of Dhaka were paralyzed by a
generalized revolt – most workers stopped work and took to the
streets demanding end to repression, release of arrested workers,
higher minimum wages, weekly time off, overtime pay for extra work,
public holidays etc. Most highways out of Dhaka were blocked.
Thousands of agitating workers from suburbs and from within Dhaka
paralyzed the capital. There were clashes between the forces of the
state and workers everywhere with paramilitary forces opening fire.
By this time the bourgeoisie had become aware of the gravity of the
situation and set out to mobilize all its political and oppressive
forces. There were calls from bosses to hand over the city to the
Army. By evening of 23 May, Bangladesh Rifles (Border Security Force)
was deployed in huge numbers throughout the industrial suburbs.
The 'central unions' belonging to different bourgeois political gangs
(BNP, AL, Leftists), none of whom has any presence among garment
workers, were brought together and they cobbled together a list of
demands. On the evening of 23rd May this 'union co-ordination' issued
a list of demands. A bourgeois commentator observed, possibly with
some exaggeration regarding the insurrection part, "While an
insurrection was already in process, the unions put forward a list of
demands 'threatening' to go on strike from 12 June (20 days later) if
these demands are not met" (

Despite deployment of the Bangladesh Rifles, factories remained
closed, the city and suburbs remained paralyzed by workers' revolt on
24th May. But government now compelled the bosses' body, BGMEA and
the newly cobbled together 'union coordination' to sit in a meeting.
By evening the Minister for Labor, with BGMEA and Unions Reps on both
sides, declared that bosses have agreed to all demands of the workers
on revolt – increase of minimum pay to 3000 Taka, mandatory weekly
time off and other holidays, 8 hours working day and overtime pay for
extra work etc. "It is now time to go back to work", the union co-
ordination proclaimed. It is another matter that a few days later
once workers revolt ebbed, the BGMEA representatives proclaimed that
they will not honor agreements of 24th May 2006.

While the edge of the workers revolt was blunted from 25th May 2006
their anger and revolt continued to simmer and explode. There was
fresh round of large scale rioting and clashes between workers and
forces of the state from 29th May – 4th June. This renewed wave of
strikes erupted to protest non-implementation of proclamations of
24th May 2006. Between these days one more worker was killed,
hundreds more were injured by bullets. Savar and other EPZ were once
again shut down by striking workers. These businesses were finally
opened from 8 June 2006 with deployment of much bigger paramilitary

The role of the unions

One of the major political weaknesses of the bourgeoisie in
Bangladesh is the fragility of its democratic apparatus and as a
result of democratic mystifications. The current Prime Minister, Mrs.
Khalida Zia, is the wife of assassinated military dictator Zia Ur
Rahman. There have been other military dictators in the short history
of Bangladesh so far. The political process is characterized by gang
wars, killings, and large scale bombings between main bourgeois
factions – Bangladesh Nationalist Party (BNP) of Khalida Zia and
Awami League (AL) of Hasina Sheikh. The reason of this fragility is
perpetual bloody battle between China and India to control
Bangladesh – BNP aligned with China and AL with India.

Due to this weakness of its state structures, bourgeoisie has not
been able to set up a trade union apparatus, especially in the
garment factories. This weakness of the bourgeoisie allowed workers
to develop their revolt and give it such a sharp edge for several
days. But once the bourgeoisie saw the danger of the situation they
quickly set out to redress it. Union coordinations were quickly set
up – mostly at formal level, with no presence in the factories.
Agreement between them and bosses was widely propagated on radio, TV
and newspapers. They were presented as standing up for workers. A
demand for 'union rights' was pushed forward. Although workers have
not been sucked in by these lies – as shown by persistence of workers
revolt till 6th June and unions' inability to control it – in the
absence of major development of workers self-organization, union lies
have not been without influence.

The bourgeoisie itself has seen the danger of its present ways –
especially of absence of unions. This has been expressed in numerous
proclamations by bourgeoisie that if unions have been there,
if 'democratic rights' of workers have been respected, the workers
movement would not have exploded the way it did. "Trade union leader
Mishu said 'if there had been trade unions in factories… the
situation would not have turned violent'" (New Age 3rd June 2006).
Another trade union boss declared, "The absence of trade unions is
very much more dangerous than the presence of active unions" (Letter
from International Textile, Garment and Leather Workers' Federation
to Prime Minister Khalida Zia). There has even been talk to take help
of International Labor Organization in setting up the unions.

Lessons of the garment workers revolt

There is no doubt that garment workers' revolt has been the biggest
and the most militant struggle so far of the working class in the
history of Bangladesh. Despite all odds workers were able to rise up
in revolt against brutal exploitation. They were able to develop
their struggles in a courageous way in the face of violent
repression. The explosion of this revolt and its persistence for
nearly 20 days, despite all the repression, expresses great
determination and will to fight of the working class. It is an
important advance in the development of proletarian challenge to
capitalist exploitation. This is the reason the bourgeoisie
everywhere blacked out all news of this movement.

Experience of Bangladesh shows that physical absence of unions is not
enough. Important thing is the ability of the working class to
consciously reject the unions. Even more important is its ability to
develop its own self-organization. Development at this level has been
very rudimentary, if at all. Although this movement would not have
developed if workers have not stood up to the repressive forces, in
the absence of self-organization the revolt sometime took the
character of rioting. While some of the weaknesses are expression of
the lack of experience of the working class in Bangladesh, they also
point toward the need for appropriating all the experience of the
workers' movement world wide. It is the responsibility of the
revolutionary organizations of the communist left to contribute to
the development of the workers' consciousness of their class identity
and of their historic goal: the communist revolution which alone can
put an end to the brutal exploitation of the working class not just
in Bangladesh but throughout the world.

Communist Internationalist, 13th June 2006

Revolution Betrayed

1947 And Its Place In History
By Rajesh Tyagi

Year 1947 is marked in India's history by the fact that it was the dead end of
our National Struggle, i.e. our common goal as a nation- the goal of
emancipation from domination of Colonialism. Indian Bourgeois, which under
Gandhian leadership hitherto had been putting up a meek resistance against the
colonial rule, took the reigns of power in its own hands, not through
resistance, but with consent of Colonial masters. It came to power, not as a
result of any hostility towards imperialism, but as its agent, willfully
surrendering all posts to the enemy, adapting itself to the neo-colonial regime,
marked by large scale export of capital instead of goods, and economic
domination of imperialism instead of direct political rule. Becoming just
another link in the chain of world capitalism, the renegade Indian bourgeois
ceceded from national struggle, separated itself from the masses of people- the
workers and peasants, who were now to reel under double yoke of capitalism,
domestic as well as global. Indian bourgeois, not only adapted itself to the
global domination of Imperialism, but sheltered under its wings the forces of
local reaction, under domination of landlords in countryside. The 60 years
history of Indian bourgeois is the history of its more and more adaptation to
world capitalism, collaboration with local reactionaries and consequently its
perpetually hostile position towards working people of India. The mission of
complete emancipation from the yoke of imperialism, now renounced by the
bourgeois, ceased to be a national goal, i.e. the common goal of all social
classes and became a class goal, a goal for the working classes. Our common
struggle as a ‘Nation’ against Imperialism, thus came to an end, paving way for
‘class struggle’ waged by working classes, not only against imperialism- global
capitalism, but also against its local lackeys- Indian Bourgeois and landlords,
who had stabbed the national struggle in the back by joining the bandwagon of
1940’s was a decade of unrest, witnessing a big upsurge in the tamper of masses
and was full of radical activity of people. The tide of mass struggles was
rising to unprecedented proportions, acquiring ever new heights and varied forms
of struggle. Old individual terroristic immature methods had already cleared the
way for actions by broad masses of workers and peasants, and the unarmed
protests were spontaneously growing over to armed struggle, here and there.
Despite the ‘pious’ wishes of bourgeois leadership of Gandhi-Nehru, mass
resistance to imperialism was acquiring more and more militant forms. From 322
in 1940, total number of workers’ strikes in 1942 had become 694, with number of
participants rising from 4,50,000 in 1940 to 7,72,000 in 1942. Peasant revolts
in countryside had become very frequent and had a reciprocal effect on the
struggle in urban centres. The ‘August Rebellion’ was offshoot of this tide,
where people on their own had taken to armed struggle, pushing aside the
Gandhian farce. 2,000 perished and 60,000 were taken prisoners, to be put in
special camps for shortage of jails. Such tremendous energy was generated by the
wave of mass struggle. The then leadership of the CPI, treading the path shown
by the Comintern under Stalin, instead of calling upon the masses for forcible
overthrow of British rule and seizure of power, by riding the wave of 1942, held
back the proletariat, openly opposed the ‘August Revolution’ and called for
support to war efforts of British Colonialists against axis powers. This was
done when British Imperial power was already perplexed by the takeover of Burma
by Japan and arrest of Anglo-Indian armies stationed there. Congress was banned,
while ban on CPI was lifted. The working people, prime actor on the stage of
history at that moment were thus pushed back, leaving the field open for
free-play of bourgeois leadership under Gandhi, demeaning the role of working
class and its party.

The bourgeois, thus got the hegemony over the liberation movement. After
comparatively peaceful years of 1943-44, marked on the one hand by famine in
which 50 lakh perished, and on the other by division and disintegration among
the radical forces on the question of attitude towards the war efforts of
Colonial rule, there came another mighty wave of radical upsurge in 1945-46. In
August 1945 armed clashes between workers and the police first took place in
Benaras and were then repeated in Bombay and spread to other regions in the form
of riots. Mass protests then started to mark the opposition of people of India
to the support being sent by British rulers to France and Holland to suppress
their colonies. Porters refused to load the ships destined to Indonesia.
Nationawide protests then took place against award of sentences to officers of
Indian National Army. Mass demonstrations soon developed in general strike,
where broad sections of people took part. Barricades were erected first in
Calcutta and then in Bombay. In 1946, once again Calcutta was barricaded by the
protestors, and the unrest spread to other parts of the country-to towns and
villages. At some places people took to armed struggle against British regime
and their lackeys-landlords. Army was called to suppress the movement and could
suppress it with great violence. During this period both strikes of workers and
peasant rebellions were touching new heights in their magnitude and form of
struggle. Unrest was spreading to armed forces also. A strike of sailors and
porters on warship ‘Talwar’ started with partial demands which were soon
reinforced with political demands. Twenty other warships present in the area
then joined the strike, with Coast guards following the course. Pilots in Royal
Air-force at Bombay Air force Station were already on strike and were joined
first by Calcutta Airmen and then strike spread to other Air Force Stations.
Battleships were sent to suppress the rebellion in Navy, but failed to quell the
rebellion, even after a full fledged gun-battle. The victorious sailors marched
on the roads of Bombay with arms in hands and were joined by workers and
students. General strike broke out in support of strikers on 22nd February.
Congress and Muslim League, both, instead of supporting the rebellion, called
for surrender and sent Sardar Vallabhai Patel as common emissary to persuade the
strikers to surrender. Army was called to crush the rebellion by force. 300
killed, 1700 wounded. Rebellion could be crushed with brute force, but it showed
that the old days have gone forever. 1946 saw more than 2000 strikes in which 20
lakh workers participated and 13 million work-days were destroyed. Peasant
rebellions were also spreading. 11 districts in Tibhaga peasant Struggle in
Bengal, In Layalpur Punjab, Bombay, Hyderabad, Telangana, Kashmir, Basti, Balia
in UP were centres of peasant revolt. Kerala and Tamilnadu were also witnessing
peasant revolts. Similarly, Bombay, Kanpur, Calcutta, Nagpur, Mysore, Madras
were all scenes of workers’ movement.

The active resistance of the working people to the Imperialist rule in India,
growing beyond false preaching of Gandhi and defying the false leadership of
Congress, frightened the British Imperialists, but more than them the Indian
Bourgeois and Landlords. The upsurge of working masses, especially in the fourth
decade of 20th century, forced them to fall into the arms of each other.
Possibility of an imminent forcible overthrow of colonial rule and taking over
of the power by the revolutionary people, was looked upon as a real threat, not
only by the Imperialists but by the Indian bourgeois also, which was hardly
interested in any emancipatory cause of the national liberation movement, but
was eager to take the reigns of power in its hands and integrate itself into the
system of world capitalism.
During the fourth decade, when working people were engaged in life and death
struggle against British Imperialism, the bourgeois-landlord leadership of
Congress and Muslim League, was engaged in hobnobbing with Imperial rulers for
concessions and whatever share in power structures could be grabbed. The
bourgeois as a class was busy to grow itself on the plunder and devastation of
people- first famine and then war. Enriched through extreme exploitation of
peasants, artisans, workers and small producers, during the famine of 1943-44,
the bankers and traders had amassed great wealth and had grown into- capitalist
class. After famine, now World War-II came to their service. The Indian
Bourgeois strove to gobble big contracts for war supplies from colonial regime,
during the World War-II. Further enriching itself through these war contracts,
the Indian Bourgeois was not only becoming shareholder in British joint stock
companies but were opening their own companies. World War-II, led to weakening
of British Imperialism and thus the end of British Imperial monopoly, with
United States emerging as the big gainer out of the war. British Imperial power
was under double pressure. US was demanding re-division of the booty collected
from colonial exploitation, while Indian bourgeois, taking for a ride, the wave
of mass struggle against colonial domination, was contending for more and more
concessions for itself and landlords.

The Imperialists, frightened by the high tide of mass struggle, sent Cripps
Mission, proposing concessions, prime among them the Constituent Assembly, based
upon communal proportion and an Interim Government headed by the British
Viceroy. Bourgeois parties happily conceded. Thereafter, came the infamous
Mountbatten plan- for division of India on communal lines- as an integral part
of the design for transfer of power to it. The renegade bourgeois leadership
eager to assume power in exclusion of working people- capitulated, and thus born
the celebrated ‘freedom’.

The local bourgeois, joined hands with international capitalism to avert the
possibility of a successful social revolution in India. Capitulating to the
British colonialists, the Indian bourgeois with support of landlords, shamefully
accepted the blueprint for peaceful transfer of power, with partition of India
on religious lines, as its core scheme, wherein 27 lakh people perished in
violence. The Indian capitalist class having its origin in cities, joined the
bandwagon of global capitalism, strengthening themselves with support from
landlords in countryside, presenting itself to be contender for political power
as against the growing strength of working people. It assumed power not as an
independent contender for it, but as lackey of world capitalism. It then
co-opted itself and behind it the landlords, to the economic and political
structures of world capitalism, mainly imposed by British imperialism.

This is how ‘1947’ presents itself to the prognosis of history, as a turning
point on Indian Political scenario –i.e. the virtual end of our national goal,
the goal of attaining freedom from the yoke of Imperialism. The slogan of
‘freedom’ became immediately redundant and obsolete, as a national goal, after
the bourgeois and landlords turned their back to the aims of the national
movement and entered into open collaboration with Imperialists.

1947, is marked by advent of bourgeois democracy, i.e. the dictatorship of the
bourgeois and the landlords, totally dependent upon global capitalism. The
dictatorship coming through an agreement between the local and international
bourgeois at the back of and against the struggling people. The national
struggle is stabbed in the back.

However, at the threshold of 20th century, the world capitalism has already
exhausted its revolutionary energies, growing into completely parasitic form-the
modern imperialism, and was reeling under a state of permanent decay. Losing its
revolutionary vigour, the Bourgeois had become incompetent to carry out even the
bourgeois democratic tasks, any further. Resultantly, in all parts of the world,
where democratic revolutions were impending and democratic tasks were yet to be
accomplished, the same could not be done, except through a Proletarian
revolution, supported by peasantry, resulting in dictatorship of the
Proletariat. Where political power was captured by Proletariat, the democratic
tasks were rapidly carried out, but where the power fell to the hands of the
bourgeois, the revolutions were stifled and retarded immediately after initial

This happened for two reasons. Firstly, in all countries, the bourgeois joined
hands with local reactionary elements-the landlords and foreign
reactionaries-the imperialists, as against its own proletariat, adapting itself
to double reaction and thus becoming totally counter revolutionary. And secondly
because the bourgeois in these countries was even weaker to take to development
of productive forces on its own. In fact, there was no room left for independent
growth of capitalism in separate countries, after the era of global parasitic
capitalism has set in. Thus, wherever proletariat failed to capture power for
itself, or did not strive for it and it consequently fell to the hands of
bourgeois, the countries took to the capitalist path of development, resulting
in arrest of productive forces by local reaction at home, and total dependence
outside, thus becoming a link in the world capitalist chain.

India matured for a bourgeois democratic revolution, while confined in the
clutches of British colonialism, very late in time, when British bourgeois had
already lost its initial revolutionary vigour and had entered in the state of
decay. In its own land, it was facing hostility from its proletariat, while in
colonies it was face to face with colonial people, pursuing the barbaric policy
of colonialism. In colonies, under its domination, it bound the masses hand and
foot, depriving them of all benefits delivered by world capitalism, blocking all
avenues of its awakening to the new light generated by the capitalism in its
youthful past, while simultaneously making the colonial people to bear the worst
burdens of it, especially in the days of its overall decay. Colonial rule in
India was based upon adaptation of production relations of medieval ages,
prevalent in India, by the decaying capitalism of Europe.

Theoretically speaking, there could have been two possibilities around 1947.
Either the Working class in conjunction with peasantry could have seized the
power for itself in a revolutionary manner- by forcible overthrow of colonial
regime and in exclusion of the bourgeois-landlords at home; Or the Bourgeois
could have received the power for itself in conjunction with the landlords, not
as a consequence of struggle against colonial rule, but through intrigue upon
the people, bargaining separately with colonial regime. The prospects of first
possibility- the revolutionary seizure of power by proletariat with the aid of
peasantry, were artificially dimmed by 1947, because of the bogus policy of
Comintern in 1940’s to hold back the working people from forcible overthrow of
British power in India, rather directing them to collaborate with it. The flames
of Russian revolution, which had sparked great zeal in National Liberation
Struggle around the second decade, were extinguished by the infamous ‘popular
front’ policy of Comintern, forging an alliance with capitalist parties,
nationally and internationally, mainly British Imperialists, on false pretexts.
Given this policy, no independent and determined offensive could be taken by the
Proletariat to seize power for itself. Taking benefit of the passivity of
proletariat, Bourgeois in collusion with landlords, first established its
political hegemony over the National liberation movement and its main
platform-Congress, in opposition to the working classes, and later after taking
state power in its hands in agreement with Imperialists, grew this hegemony into
its full fledged dictatorship. The second possibility thus turned into a tragic
reality- leading to establishment of the bourgeois dictatorship. The bourgeois
power, thus, came to be established in collusion with Imperialists and in
partnership with landlords. Bureaucracy and standing army continued to be the
mainstay of this reactionary bourgeois power, as before.

Such peaceful transfer of political power, having its ideological roots in the
false preaching of Gandhian path, virtually averted the prospects of a forcible
overthrow of colonial rule in a revolutionary way by the revolutionary masses
rising in armed revolt and further concentrated the power in the hands of
bourgeois class, in exclusion of the Proletariat and peasantry. The bourgeois in
conjunction with landlords happily grabbed this opportunity to seize the state
power for itself in exclusion of revolutionary masses- the Proletariat and
peasantry. Peaceful transfer of Political power was thus advantageous for both
the colonialists and local bourgeois, with implied motive to avert the prospects
of a revolt of masses under the leadership of the proletariat.

What was transferred in 47 was the political power, while the economic network
for neo-colonial exploitation was kept intact in the hands of Imperialism. Even
after transfer of power to its hands, the Indian bourgeois remained connected to
Imperialism with thousand strings and instead of making attempt to resist
Imperialist exploitation and domination, became its permanent ally.
Capitulation, and not resistance to imperialism, has remained its underlying
policy. Even the political Independence which the bourgeois celebrated with so
fanfare was not absolute, but was restricted and deformed and which has
continued to vanish into thin air with passage of time.

Post 47’ scenario is marked on the one hand by increasing mutual adaptation
between the Indian bourgeois and landowning class at home, and with the World
Capitalism on International scale, to exploit and dominate the Indian people,
and on the other by unceasing struggles of the Proletariat and peasantry against
this bloc of reactionaries.
1947, goes in the history of India as culminating point of the anti-colonial
national struggle, fought by different social classes together, against the
British rule. With the cessation of capitalists and landlords from struggle
against Imperialism and establishment of bourgeois democracy under their
domination, the common national goal has come to an end, leaving nothing to be
shared in common between the bourgeois and proletariat.

There are trends in revolutionary movement of today, which do not recognise the
advent of bourgeois democracy in 1947, preaching that no transfer of political
power had taken place at all and the Country continues to be a semi-colony.
These trend, roughly appearing under the banner of ‘Maoism’ prescribing the
‘Chinese path’ as a way out, are desperately searching for revolutionary
sections in bourgeois, with ‘national-bourgeois’ character, deeming them to be
an ally in their so-called ‘New-democratic’ revolution. This misconception
emerges out in the first instance from the incorrect evaluation of character and
growth of modern imperialism in general and secondly by miscalculating the 1947
and its aftermath
1947, did witness the transfer of political power from direct domination of
British colonialists, to the hands of Indian bourgeois, as an agent of world
capitalism, a spoke in the neo-colonial machine. The Indian bourgeois, having
assumed the political power for itself, had continued to collaborate with all
reactionary elements –the landlords inside, the Imperialists outside, and
gradually this collaboration has perfected itself, as against the proletariat
and Peasantry. Indian Bourgeois class is linked to these reactionary elements
through hundred thousand threads. This collaboration of bourgeois with
reactionary forces of feudal society at home and Imperialism abroad, is in the
first instance voluntary, stemming out of the utter political and social
weakness of the Indian Bourgeois, has determined the nature and development of
Indian Capitalism, in Asiatic manner- weak, deformed, capitulationist, growing
only in slow evolutionary process and resulting in an overall degeneration of
economic, political, social and cultural life of the country.
The bourgeois class becoming the master of political power, could not advance
the bourgeois revolution at any notable pace, for two reasons. Firstly, it came
to power at a time when the world had already ushered into an era of proletarian
revolution and general decay of bourgeois class had set in. Secondly, the Indian
Bourgeois finding itself unable to cope with the advent of radical mass upsurge
on its own, colluded from the very beginning with landlords inside and
Imperialists outside. Barring initial few gimmickries by a section of Congress
leadership under Nehru, neither it remained interested in the progress of
bourgeois revolution nor it could have advanced it for its alignment with the
reactionary forces.
As illegitimate heir of the colonial regime, bourgeois has assumed power in
India, as agent of world capitalism, revealing its totally comprador character.
The democratic tasks, which were accomplished in Europe, to a great extent, by
the bourgeois revolutions, (when bourgeois was youthful and revolutionary) thus
could not be accomplished by this degenerated comprador bourgeois class in
India, even after 60 years of transfer of power to its hands in 1947.
The bourgeois revolution was thus consciously hamstrung by none but the coward
and capitulationist bourgeois, who utterly failed to accomplish its historic
mission. It is this special character of 1947 which highlights the contrast
between the advent of bourgeois democracy through powerful bourgeois-democratic
revolutions in Europe, to the meek, capitulationist and retarded emergence of
bourgeois democracy in India, hand in hand with forces of inertia against any
revolutionary advance.

This failure of Indian bourgeois in forwarding the revolution has resulted in
overall decay of the social and political life of the country, leaving the power
in the hands of worst elements of bourgeois and landlords. The rising crime and
rampant corruption, are glaring expressions of the fact that the bourgeois rule
in India has grown in total misrule led by the worst elements of bourgeois
world-the power brokers, smugglers, corrupt and criminals.

Sunday, January 25, 2009

A case against the Tata's Singur plant

A comprehensive analysis on the Tata's Singur project

Farewell to the Tatas: Costs and benefits of the Tata-Singur Project, a detailed dissection of the deal
By Dipankar Basu, Sanhati. (
Open for comments
Summary of findings:
Costs: the total cost of the Tata-Singur project incurred by the exchequer, and hence ultimately the tax payers, will be approximately be Rs. 3000 crores on a net present value basis when we add up the costs pertaining to the land subsidy, the tax holidays, the soft loan, the real estate gift and the subsidized electricity using an interest rate of 11%. This is about 58% of the total realized industrial investment in the state of West Bengal in 2007.
Benefits: Maximum cap of 12,000 direct jobs with 10% unskilled employment, minus employment destruction. The other claim about the Singur project generating prospective investment in the future rests on equally shaky foundations. The question really boils down to whether the Tata plant can attract other major investments and lead to an industrial rejuvenation of Bengal. The example of Jamshedpur in neighbouring Jharkhand should be carefully looked at. Tata’s factories in Jamshedpur did nothing for the overall industrialization of the state of Bihar or now Jharkhand. It remained an enclave of industrial activity, without forging strong forward or backward linkages in neighbouring areas.
Tata’s net worth versus what they demand from tax-payers: If we add up the figures for the Tata Group’s overseas acquisitions, we arrive at a rough figure of $14,062 million, which converts to roughly Rs. 56,248 crore (using an exchange rate of Rs 40/$), and this is not even a complete list of Tata’s recent acquisitions. And, what does all this lead to? It inevitably leads us to the conclusion that a corporation which can invest more than Rs. 56,000 crores for acquisition of strategic foreign corporate assets requires the financial support of India’s impoverished taxpayers, to the tune of Rs. 1140 crores in real terms, to set up a small car manufacturing plant in India!
A discussion of TINA is given.
Cost and Benfits
The Agreement
Land “Acquisition” and Use
Total Cost of the Project
Hidden Land Subsidy
Cost of Circumventing the Law
Soft Loans and Tax Holidays
More Gifts from Santa: Real Estate and Subsidized Electricity
Adding up the Costs
What are the Benefits?
Oh! So Poor Tata
TINA Logic
Agreement between Tata Motors Ltd., Government of West Bengal and WBIDC

Singur stands for many, often contradictory, things. It stands for the model of neoliberal industrialization that the Indian state is trying to push down the throats of it’s citizens at the behest of big capital. It stands for the unprincipled and populist politics of dormant right-wing forces. It stands for the abject surrender of an erstwhile communist party to the dictates of capital, the full flowering of a tendency that surfaced in the Indian political firmament circa 1967. But Singur also stands for the struggle of labour against capital, decidedly in confused and masked manners, but a struggle that has the potential to galvanize resistance against neoliberalism. When the Tata Group, forced by the long-standing struggle of the small farmers and landless labourers in Singur, was reported to be planning a move to Pantnagar in Uttarakhand, there were simultaneous reports of a possible Singur waiting for them in Pantnagar. A Singur in Pantnagar! That is the real significance of the struggle of the landless labourers and peasants of Singur.
Right from day one, the West Bengal government and the mainstream media has been building up the case for the manufacturing plant in Singur on the basis of half-truths and untruths. For a long time, the West Bengal government continued denying the fact that it had “acquired” a large tract of the proposed 1000 acres from unwilling farmers by using coercion, strong-arm tactics and certainly without their consent. Towards the later part of 2006, after considerable protests and a public hearing organized by intellectuals and activists, it had to finally accept it’s own earlier statements as false. Now it is known by all and sundry that 411.11 acres of the total 997.1 acres has been acquired without consent of the relevant farmers. For a long time, again, the West Bengal government continued denying the fact that most of the land that was sought to be “acquired” was fertile and multi-cropped agricultural land. It was only when earlier this year the Supreme Court pointed towards a possible violation of the Land Acquisition Act, responding to a petition filed for immediate halt of the Nano car project, that the West Bengal government finally accepted that it had been willfully misleading the public in this regard for so long; the SC had pointed out that acquiring and using fertile, multi-crop agricultural land for industrial purposes goes against even the Land Acquisition Act, which the West Bengal government was, paradoxically, trying to use to “acquire” that land. Now it has been established beyond any shadow of doubt that the land on which the proposed plant is to come up is, in the main, fertile, multi-cropped agricultural land. Another myth that had been in circulation for some time was the following: the land in Singur could not be used for agricultural purposes for most parts of the year because of water logging. This claim has also been contested and shown to be untrue. Now it is accepted by all serious commentators that the land had, before being fenced off by the West Bengal police, been in constant use throughout the year for growing various agricultural crops, and that it provided livelihood for more than 12,000 families. Even though these and other such claims of the West Bengal government and the mainstream media have been refuted point by point, over and over again, with facts and arguments and lot of patience and care, they keep turning up ever and ever again like bad coins. They will, as long as the social forces whose interest they represent continue their efforts to hegemonize society; and we will continue refuting them point by point, with patience and care and logic and facts.
But even when these particular canards are discounted, there seems to be a larger argument for industrialization that Singur purportedly represents. The West Bengal government and large sections of the mainstream media tend to equate Singur with industrialization and portray any and every opposition to Singur as opposition to industrialization. The apparent strength, or shall we say charm, of this argument becomes obvious when we see even an preeminent thinker like Amartya Sen falling for it. But this argument is deeply flawed. Opposition to Singur is not opposition to industrialization, it is opposition to neoliberal capitalist industrialization. Opposition to Singur is opposition to the conflation of industrialization with neoliberalism, a scenario where the State steps up it’s efforts to subsidize capital and shore up it’s profits while capital externalizes it’s costs onto labour and the environment with impunity. It is this model of industrialization that we oppose.
An alternative model of industrialization, as far as we can see, would operate in an exactly opposite fashion. It would tax capital and not subsidize it, prevent capital from externalizing it’s costs onto labour and the environment rather than facilitating it, intervene in decisions related to the choice of technique to be used in production, force private capital to do proper cost-benefit analysis before embarking on a (socially) costly industrial project, intervene through fiscal and monetary policy to maintain overall levels of aggregate demand and try to ensure full employment with living wages for workers. In the alternative vision, the State would use tax revenues to build infrastructure, provide social sector services and closely monitor and improve the well-being of the people. Singur, and the model of industrialization that it stands, takes us in the exact opposite direction; that is why it needs to be opposed. It destroys livelihoods tied to agriculture without creating compensating jobs in industry, it willfully snatches away fertile, multi-crop agricultural land for industrial purposes when so much fallow (and other unused and misused) land is there to be used, it externalizes the costs of production on the most vulnerable sections of the population and the environment, and all this while the State steps in to massively subsidize private capital even further. If, therefore, due to the struggle of the project affected people the Tata’s finally leave West Bengal, it should call for rejoicing not for middle-class chest-beating that is so much on display these days. For it would be one of the important victories in the emerging struggle against neoliberalism in India.

Cost and Benfits
In this article we will try to study details of the costs and benefits of the proposed manufacturing plant in Singur on the basis of information that is available in the public domain. But a caveat is necessary. This is not a full blown cost-benefit analysis because we shall not venture to quantify the indirect benefits of possible net employment generation and the income that might arise from there. At this point, it is not even clear whether there will be positive net employment generation; it is not at all obvious, in other words, that the employment destruction entailed by the project will be exceeded by the employment generated by it. Moreover, a full cost-benefit analysis would require much more information than has presently been made available by the West bengal government; on the basis of the available information, which pertains mostly to the benfits that the West Bengal government plans to make available to the Tata’s, we shall mainly try to approximately quantify the costs to the exchequer, and ultimately to the people of the state.
A careful study of the details relating to the proposed project in Singur, to the extent possible by the publicly available information, is important for two main reasons. First, it is important to do a dispassionate analysis of the costs and benefits of this project; since the West Bengal government has been continually making largely unsubstantiated claims about the putative benefits of this project, it is high time we carefully analyzed the foundations of this claim. Second, this project is very much in line with the current trend of neoliberal capitalist industrialization in India anchored tightly in the visions of the Special Economic Zones (SEZs); hence a study of this project will highlight, and help us evaluate, many of the important characteristics of neoliberal capitalist industrialization that has been envisioned and aggressively pushed by the Indian state since the early 1990s. Parenthetically, one should also note how acceptance of the logic this project signals the gradual dissolving of social democracy in India: from”managing” the conflict between labour and capital, social democrats are increasingly moving towards “managing” labour for capital.
The main document that we will use for the purposes of this study is the text of the recent “agreement” signed between the Government of West Bengal, the West Bengal Industrial Development Corporation (WBIDC) and the Tata Motor Ltd. (TML) pertaining to the proposed manufacturing plant in Singur. By a careful analysis of the information contained in this document, and complementing this with some more information from other sources we will, hopefully, be able to arrive at a true picture of the costs and benefits of this project. But before we get into the nitty-gritty of the agreement, let us remind ourselves about the severe difficulties that we have faced over the past few years in just trying to get hold of the information that is relevant to this project. Recall that the details of the “deal” wasn’t made public initially because the West Bengal government believed it was a “trade secret”. Once this argument was properly trashed, the government shifted gears. During this period, it wasn’t made public despite repeated Right To Information (RTI) applications because, according to the government, the Tatas didn’t want it to be made public! Finally what has been made public, mainly because of pressure from the standing committee on industry of the West Bengal state assembly, are only parts of the “deal”; this all we have for the purposes of study and analysis. The TML filed a case in the Calcutta High Court and got a stay against the rest of it being made public. What is there in the rest of it? We, and the more than 12000 project affected families in Singur, can only guess. The entire episode, to say the least, is patently undemocratic, and makes a mockery of the intent of the recently passed Right to Information Act. One does not, of course, discern even an iota of concern about this important matter displayed by the “peoples’ government” in West Bengal!

The Agreement
The “agreement” between the West Bengal government, WBIDC and TML is a remarkable document by all means. Starting from the premise that the state of West Bengal must match, rupee for rupee, every fiscal and financial incentive offered to TML by other states like Uttarakhand and Himachal Pradesh, it goes on to lay out the details of the same. This, the agreement states, should be read as the state government’s eagerness to “take appropriate steps for rapid industrialization in West Bengal”. This, to the best of our knowledge, is the clearest admission by the West Bengal government and the “communist” party standing behind it of the acceptance of neoliberalism. By accepting that the road to “rapid industrialization” winds it’s way through huge subsidization of private capital in the form of tax breaks and soft loans with the concomitant costs borne by labour and the environment, the West Bengal government has finally announced it’s participation in the Indian State’s neoliberal industrialization program. We will discuss this issue in greater detail below.
The text of the agreement is also remarkable in it’s enormous onesidedness. Every concrete detail in the agreement refers to what the West Bengal government will do for TML; there is no mention of what TML will do in return! It is as if by accepting to invest in the state, TML has bestowed an enormous favour on the people and it’s government. Overwhelmed by this boundless magnanimity of TML, the West Bengal government has decided to offer everything in it’s power to return that favour. The favours offered to TML come in four concrete forms: (a) subsidized land for setting up the manufacturing plant, (b) loans in the form of tax holidays, (c) soft loans to get started, and (d) subsidized electricity. There is no mention of anything that the state can expect in return from TML. Loans do not require collateral, failure to make timely payments do not require penalties, there is no mention of what employment generation TML’s investment will entail, there is no mention, in short, of anything at all that might inconvenience private capital or hold it accountable to the people. Below, we will look at the each of the components of the favours, what we will quite realistically refer to as costs, and also try to take seriously the claims of the government about the purported benefits of the project, but first, let us briefly remind ourselves about the land “acquisition” and it’s proposed use.

Land “Acquisition” and Use
The agreement - scroll down to read the text of the agreement - states that land “of approximately 1000 acres chosen [by TML] in P.S. Singur of District Hoogly” was finalized as the site for the construction of the proposed plant. Subsequently WBIDC “commenced the process of acquisition of this land”, an euphemism for the veritable terror unleashed on the farmers of Singur to give up their fertile, multi-cropped agricultural land for neoliberal industrial “development”. Using the colonial era Land Acquisition Act of 1894, the WBIDC coerced - with the support of the police and cadres of the ruling party, CPI(M) - several hundred families to give up their land, and according to the agreement, it is now “in possession of 997.1 acres of land”.
Out of this forcibly-acquired 997.1 acres of land, 647.5 acres will be leased to TML to set up it’s proposed plant, what the agreement calls the “Automobile Project”; another 290 acres will be leased to “the vendors to this Automobile Project approved by TML”, the vendors being the ancillary and component manufacturing units. An area of 14.33 acres will be given to the West Bengal State Electricity Board (WBSEB) for the construction of a 220/132/33 KV substation to provide and uninterrupted supply of subsidized electric power to the “Automobile Project”; and the remaining “47.11 acres will be used by WBIDC for rehabilitation activities for the needy families amongst the Project affected persons”. Note in passing that only 4.74% of the “acquired” land has been earmarked for purposes of rehabilitation of the project affected persons.

Total Cost of the Project
According to the details available in the agreement, the total cost to the people of West Bengal of the proposed project in Singur, as we have already pointed out, can be broken down into the following four categories: (a) subsidized land for setting up the manufacturing plant, (b) loans in the form of tax holidays, (c) soft loans to get started, and (d) subsidized electricity. Point 7 of the agreement provides details about each of these. Point 7(a) is about the tax holiday; point 7(b) is about the hidden subsidy in land; point 7(c) is about the soft loan, and point 7(d) is about the subsidized electricity. The sum of these “fiscal incentives”, excluding the subsidy in electricity, add up to what the Uttarakhand/Himachal Pradesh governments offered to TML. How do we know this? From point 7(a) of the agreement which states: “This benefit [i.e., the tax holiday] will continue till the balance amount of the Uttarakhand benefit (after deducting the amount as stated in para 7b and 7c below) is reached on net present value basis, after which it shall be discontinued.” In other words, the sum of the benefits offered by the West Bengal government in the form of (a) subsidized land, (b) tax holiday, and (c) soft loan will equal what the Uttarakhand/Himachal Pradesh governments were willing to offer; the subsidized electricity (and other real estate, as we will see below) are bonuses, which make the West Bengal government’s offer exceed the Uttarakhand/Himachal Pradesh. But this also means that we can indirectly arrive at the total cost of the project in Singur if we can somehow figure out the amount of the Uttarakhand/Himachal Pradesh package.
Point (1) of the agreement mentions that the “incentive package in Uttarakhand/Himachal Pradesh consists of:-
(a) 100% exemption from Excise Duty for 10 years.
(b) 100% exemption from Corporate Income Tax for first 5 years and 30% exemption from Corporate Income Tax for next 5 years.”
How much is this package worth? Let us try to think this through. We have collected some information from annual financial reports of TML in Table 1 that will help us get an approximate figure for the Uttarakhand/Himachal Pradesh package using points 1(a) and 1(b).

Table 1: Financial Position of Tata Motors (Rs. Crores)
Year Gross Revenue Revenue net of excise Excise Profit Before Tax Profit After Tax Taxes Paid Excise/Gross Revenue (%) Tax/Gross Revenue (%)
2005-06 27266.41 23718.17 3548.24 2348.98 1728.09 620.89 13.01 2.28
2006-07 36987.82 32426.41 4561.41 3088.14 2169.99 918.15 12.33 2.48
2007-08 40340.79 35651.48 4689.31 3086.29 2167.7 918.59 11.62 2.28
There are some remarkably stable patterns in the data. TML seems to be paying about 12% of its gross revenue as excise duty and 2.35% of it’s revenue as corporate income tax. If TML were to set up shop in Uttarakhand or Himachal Pradesh, it would be manufacturing about 250,000 small cars per annum. If each car were to sell for Rs. 1 lakh, TML’s gross annual revenue would be approximately Rs. 2500 crores. If the TML would have to pay excise duty, assuming the above ratios, it would pay about 300 crores (12% of Rs. 2500 crores) per annum; if it had to pay corporate income tax, it would have to pay about Rs. 58.75 (3.5% of Rs. 2500 crores) crores per annum. If TML set up shop in Uttarakhand/Himachal Pradesh, according to the agreement, it would not have to pay these taxes as stated in point 1(a) and 1(b).

Summary of the Uttarakhand/Himachal Pradesh package: for the first 5 years, TML gets Rs. 358.75 crores every year (100% excise duty exemption + 100% corporate income tax exemption); and for the next 5 years, it gets Rs. 317.63 crores every year (100% excise duty exemption + 30% corporate income tax exemption). The NPV of this benefit package is Rs. 2062.79 crores (using 11% for calculating NPV).
According to point 7(a) of the agreement, the West Bengal government’s “benefits package” will equal this sum if we compute the benefit coming from subsidized land, soft loans and tax holidays. Let us now look at the different components of the package promised by the West Bengal government.

Hidden Land Subsidy
What are the terms of the rental structure on the land lease agreed upon by WBIDC and TML? Two different set of rules apply, one to the 647.5 acres leased to TML and another to the 290 acres that will be leased to the vendors approved by TML. Both leases, however, will come up for possible renewal 90 years down the line. For the 647.5 acres of land that is leased to TML, the annual rental will be Rs. 1 crore for the first five years, increasing by 25% every five years till 30 years. Thereafter, the annual rental will be fixed at Rs. 5 crore, to be increased by 30% every 10 years till the year 60; the rental from year 61 to 90 will be Rs. 20 crore per year. For th vendors, the rental structure is simpler: for the first 45 years, they will pay an annual rental of Rs. 8000 per acre, and for the next 45 years will pay an annual rental of Rs. 16000 per acre. Since the vendors are leasing 290 acres of land, this means that for the first 45 years, they pay a total of Rs. 0.232 crores per year and Rs. 0.464 crores per year for the rest of the time.

Table 2: Rental Payment Structure over Time
Years Payment per year (Rs. Crore) Payment for the period (Rs. Crore) Cumulative Payment starting from Year 1 Period Payment as % of Total Payment Cumulative Percentage NPV of period payment (@ 11%) Cumulative NPV of Period Payment Cumulative percentage of NPV

1-5 1.00 5.00 5.00 0.58 0.58 3.70 3.7 21.83
6-10 1.25 6.25 11.25 0.73 1.31 2.74 6.44 38.02
11-15 1.56 7.81 19.06 0.91 2.23 2.03 8.47 50.02
16-20 1.95 9.77 28.83 1.14 3.37 1.51 9.97 58.92
21-25 2.44 12.21 41.04 1.43 4.80 1.12 11.09 65.52
26-30 3.05 15.26 56.29 1.78 6.58 0.83 11.92 70.42
31-40 5.00 50.00 106.29 5.84 12.42 1.29 13.21 78.02
41-50 6.50 65.00 171.29 7.60 20.02 0.59 13.8 81.5
51-60 8.45 84.50 255.79 9.87 29.89 0.27 14.07 83.09
61-90 20.00 600.00 855.79 70.11 100.00 0.33 14.4 100.00

1-45 0.23 10.44 10.44 33.33 33.33 2.09 2.09 88.94
46-90 0.46 20.88 31.32 66.67 100 0.04 2.13 100.00
Details of the payment schedule, for both TML and the vendors, is summarized in Table 2. This is similar to, but more detailed than, a table used by Madhukar Shukla for commenting on the Nano project; the main difference is the inclusion of figures on net present values (NPV). What is net present value? It is a conceptual device used to compare sums of money at different points in time, which I explain in greater detail below. Why is NPV relevant here? Because an investment project like the proposed plant in Singur involve costs and benefits flowing in at different points in time. Columns (2) through (6) give the actual payments to be made at various points in time, while the last three columns give the net present value (NPV) of the payments, where NPV has been calculated using an interest rate of 11% per annum (exactly as done by the WBIDC in Annexure II of the agreement). Note in passing that the Annexure where all the computations relating to the project has supposedly bee done has not been made available to the public; all we know is that the NPV calculations used an interest rate of 11%.
To arrive at figures about the costs of “acquiring” the land and the revenue earned from leasing it to TML (and the vendors), we need to remind ourselves that the WBIDC spent anything between Rs. 150 crore and Rs. 200 crore to “acquire” the land from the unwilling farmers. How much will WBIDC get for letting TML use that piece of land? Columns (4) shows that the TML will pay a total amount of Rs. 855.79 crores over 90 years as rental fees for using the land. So the cost incurred by the WBIDC is Rs. 150-200 crore, while revenues will be 855.79 crore. Does this mean that the WBIDC made a good bargain with the TML on behalf of the people of the state? Does it men that the WBIDC is actually making a “profit” in leasing out the land to TML? Let us think about this a little more.
A rupee today is not equivalent to a rupee next year. Why? One can put the rupee that one has today in the bank and earn an interest income at the going interest rate to augment the original sum. If the current interest rate is 11%, then one would have Rs. 1.11 at the end of the year if the rupee were to be invested in an interest-bearing asset today. Put another way, Rs. 1.11 at the beginning of next year is equivalent to Rs. 1 today (at the beginning of this year). Let us go further, and suppose that we let our rupee lie in the bank for two years. How much do we have at the beginning of the third year? Rs. 1.21 (because at the beginning of the second year one has Rs 1.11, and then one earns 11% on that amount to arrive at Rs. 1.21 at the beginning of the third year). Inverting things, we see that Rs. 1.21 two years hence is equivalent to Rs 1 today when the market interest rate is 11%. This logic can be extended to any number of years and is the basis of computing net present values (NPVs). In the jargon of economics, if the market interest rate is 11%, Rs. 1.1 one year hence has a NPV of Rs. 1; and Rs. 1.21 two years hence has a NPV of Rs. 1. Thus, NPV is a device to make sums of money at different points in time comparable to each other. What does this mean for us?
It means that we cannot just add up all the rental payments that TML is supposed to make over the next 90 years (which is Rs. 855.79 crores) and compare it to the cost incurred by the WBIDC to “acquire” the land today (which is Rs. 150-200 crores). To make the stream of rental payments of the TML (over the next 90 years) comparable to the cost of “acquisition” today, we need to calculate the NPV of the rental payment stream. That is precisely what we have done in column (7) in Table 2. Column (8) gives the sum of the NPVs of the rental payments. On the basis of this calculation we arrive at a very striking fact at the end of column (8). The NPV of the rental payments that the TML will make over the next 90 years is Rs. 14.4 crores! The NPV of the rental payments that the vendors will make is Rs. 2.13 crores.

Summary: while the cost to the WBIDC for “acquiring” the land was anything between Rs. 150 crores to Rs. 200 crores, the NPV of the revenue from rental income that will accrue to the WBIDC is Rs. 16.53 crores, sagging the WBIDC with a loss of anything between Rs. 130 crores to Rs. 180 crores! Which is just another way of saying that taxpayers are subsidizing a big corporate entity like the TML to the tune of Rs. 150 crore just in terms of the land that the WBIDC “acquired” for it.

Cost of Circumventing the Law
A moment’s reflection on the time structure of rental payments for TML brings another characteristic of the transaction to the fore. The time structure of payments has been arranged in such a way that the bulk of the rental payments come in later years. From column (6) in Table 2 we see that the TML makes only 5% of it’s total payments in the first 25 years of the lease; in the first 50 years, it pays only 20 percent of it’s total payment commitments. The Comptroller and Auditor General of India (CAG) had pointed out in March 2008 that, according to Government of India laws, long-term leases of 99 years required that the lessee pay 95% of the market value of the land as a one-time premium at the beginning of the lease and pay annual rent at the rate of 0.3% of the market value of the land. The same report went on to note that the agreement between the TML and the WBIDC should have entailed an immediate payment of Rs. 91.88 crore and subsequent annual rents of Rs. 29 lakhs for the next 90 years. As opposed to this, the TML, according to the agreement, would pay nothing upfront and would only pay Rs.1 crore at the end of the first year!
Of course it would have been illegal if the lease was for 99 years. Hence, it seems, the WBIDC cleverly decreased the span of the lease by 9 years to circumvent the letter of the law. In spirit, though, this still amounts to a violation of the law. Why? Because the law states that for long-term leases the majority of the payments should be paid upfront by the lessee; and the WBIDC agreement with TML shows an exactly opposite time structure of payments, with most of the payments pushed off far into the future. Thus, even though in letter the agreement clears legal hurdles, it is obvious that it fails miserably in terms of the idea behind the law. No wonder the CAG faulted the WBIDC on several counts regarding it’s agreement with the TML. But let us pause for a moment and think why the CAG (or the laws) wanted the bulk of the payment upfront.
There are two basic reasons why the law might want to ensure bulk of the payments for a long-term lease upfront. One, large upfront payments for long-term leases increases the NPV of the rental payment stream. Since these long-term leases generally require the government to hand over public land for private use, it makes sense to structure rental payments in such a way that the government exchequer gets a good value in return; that is why a large upfront payment is usually written into lease contracts for long-term leases. The second reason for having a large upfront payment relates to considerations of risk. When a stream of payments has relatively large amounts pushed far away in the future, the NPV of that stream of payments is more liable to change when market interest rates change.
Let us take an example to understand both these points. Suppose, for simplicity, we want to compare two payment streams, A and B. A has Rs. 1 lakh today and Rs 9 lakhs in 10 years; B has Rs 9 lakhs today and Rs .1 lakh in 10 years; note that both entail a total payment of Rs. 10 lakhs over a period of 10 years and are similar in this respect. But they also are very dissimilar. To understand why suppose that the market interest is 10% at the moment. NPV of A is Rs. 4.47 lakhs, while the NPV of B is Rs. 9.39 lakhs. Thus, the NPV of B is much higher than that of B, which clarifies the first point. Now suppose that the market interest rate increase to 15%; this will obviously diminish the NPV of both A and B. But which will fall more? A’s NPV falls by about 39% while B’s NPV falls by only 1.5%! Thus, the risk of loss of revenue that comes from a payment stream (payment of rent for instance) is higher when most of the payments come in during relatively later periods. It is probably because of these two sound economic reasons, among others, that the CAG urged the West Bengal government to reconsider it’s lease agreement with the TML. By structuring the rental payments such that most of it come in during later years, the West Bengal government is not only losing revenue but is also bearing a higher risk of loss of even that minimal revenue.
So, how much is the WBIDC losing in real terms by using the rental payment structure that is summarized in Table 2 instead of the one recommended by the CAG? If TML were to pay Rs. 91.88 crores upfront and then subsequently pay a rental of Rs. 29 lakhs per annum for the next 90 years (as suggested by the CAG ), the NPV of this payment scheme would be Rs. 94.52 crores (using an interest rate of 11% per annum for calculating the NPV). The NPV of the currently agreed upon rental payment scheme (as per the agreement) is Rs. 16.53 crores (sum of entries in column (7) of table 2). Hence, the WBIDC is losing Rs. 77.99 crores due to the chosen rental payment structure.
Summary: the total financial loss to the WBIDC due to the agreed upon rental payment structure, as opposed the one suggested by the CAG, is Rs. 77.99 crores; the WBIDC, in addition, has to bear extra risk arising from possible fluctuations in the market interest rate.

Soft Loans and Tax Holidays
Point 7(c) of the agreement provides information about the soft loan: “The West Bengal Govt. will provide TML a loan of 200 crores @ 1% interest per year repayable in 5 equal annual installments starting from the 21st year from the date of the disbursement of the loan”. This loan, moreover, “will be disbursed within 60 days of this agreement”. Point 7(a) of the agreement refers to the loans that the WBIDC will give to the TML in the form of tax holidays. The tax holiday will continue, as we have already noted, till the sum of the land subsidy, tax holiday and the soft loan equals the Uttarakhand/Himachal Pradesh package.
So, what is the total loss to the exchequer due to the tax holidays and soft loans. There are two ways to arrive at approximate value of this loss. First, if we knew the exact amounts of the loans (in the form of tax holidays) and the exact repayment shedule and interest rates, we could calculate the net present value of the loss. But unfortunately, we do not have enough data in this regard, and so we will adopt an indirect method to arrive at the notional cost of the tax holiday and the soft loans. This second, indirect method, begins by recalling that, according to point 7(a) of the agreement, the total benefits from the land subsidy, taxt holidays and soft loans offered by the West Bengal government will equal the benefits that was offered by the Uttarakhand/Himachal Pradesh govenrment. We have seen above that the total value of the Uttarakhand/Himachal Pradesh package was approximately Rs. 2063 crores on a net present value basis. We have also seen that the cost to the exchequer of the subsidized land was about Rs. 228 crores (Rs. 150 crores for direct subsidy and Rs. 78 crores lost due to the time structure of the rental payment scheme). Thus, the total cost of the tax holiday and the soft loans will be Rs. 1835 crores (which is Rs. 2063 crores less Rs. 228 crores) on a net present value basis. Note that this is a notional cost.
The last part of 7(a) seems even better. It says: “WBIDC will ensure that the loan under this head is paid within 60 days of the close of the previous year (on 31st March) failing which WBIDC will be liable to compensate TML for the financial inconvenience caused @ 1.5 times the bank rate prevailing at the time on the amount due for the period of such delay”. What does this mean? It means that if the WBIDC is not able to make the loan to TML within 60 days of the close of the financial year, it will penalize itself by compensating TML at 1.5 times the prevailing bank rate. So, if the prevailing bank rate is 10%, which is close to what is the case right now, the WBIDC will penalize itself for any delay on it’s part by paying back the TML for the “financial inconvenience” at 15%.

Summary: the cost of the soft loans and tax holidays to the TML by the West Bengal government will be about Rs. 1835 crores on a net present value basis.

More Gifts from Santa: Real Estate and Subsidized Electricity
Industrial development requires infrastructural support from the government, as we all know. And so the West Bengal government displayed it’s commitment to “rapid industrialization” by offering a “virtual gift of 650 acres of prime land to Tata Housing Development Company (THDC) in Rajarhat New Town and in the adjoining Bhangar Rajarhat Area Development Authority for building an IT and residential township along with WBIDC as a partner”. What better way to provide “infrastructural assistance” for the industrialization effort that to hand over prime land for real estate speculation! Some reports suggest that this “gift” to TML will cost the exchequer about Rs. 160 crores.
The West Bengal government has also promised to supply electricity at Rs 3 per kilo watt hour (kwh), which is around half the price charged to high-tension industrial consumers in the West Bengal at the moment. It has also promised to absorb any increases in electricity costs to the TML in Singur. Point 7(d) of the agreement states: “In case of more than Rs. 0.25 per KWH increase in tariff in every block of five years, the Government will provide relief through additional compensation to neutralize such additional increase”. This will mean, at the least, shelling out Rs. 70 crores annually for subsidizing the electricity requirements of the whole project at Singur. The NPV of this subsidy for the 90 year period of the lease would be Rs. 706 crores.
Summary: the cost to the exchequer of the real estate gift and subsidized electricity will be about Rs. 865 crores.

Adding up the Costs
Let us now take a moment to put all this together. The subsidy that TML gets, according to the terms of the agreement, on the land in Singur is anywhere between Rs. 100 and Rs. 150 crore; the subsidy due to the rental payment structure is Rs. 78 crores; the implicit subsidy due to the tax holiday and the soft loan would be about Rs. 1835 crores; the real estate “gift”, also known in WBIDC terminology as “infrastructural assistance”, is worth Rs. 160 crores; and the subsidized electricity will cost another Rs. 706 crores. So, the Tata conglomerate, one of the largest corporate entities in the country, is awarded a “gift” of about Rs. 2928 crore by a “communist” government so that it can be induced to set up a car manufacturing plant in the state and lead it on to the path of neoliberal industrial development. To put this figure in perspective, let us refer to the 2008-09 budget speech of the Finance Minster of West Bengal. Pointing to the emergence of what he called the “industrial potential” of the state, he offered some concrete figures to bolster his argument. In 2005, the annual realized (industrial) investment in West Bengal was Rs. 2515.58 crores, which then jumped up to Rs. 5072.26 crores within the next two years. Thus, a sum close to 58 percent of the total realized industrial investment in the state in 2007 would be the cost borne by the people of the state if the Tata-Singur project too off.

Summary: the total cost of the Tata-Singur project incurred by the exchequer, and hence ultimately the tax payers, will be approximately be Rs. 3000 crores on a net present value basis when we add up the costs pertaining to the land subsidy, the tax holidays, the soft loan, the real estate gift and the subsidized electricity using an interest rate of 11%. This is about 58% of the total realized industrial investment in the state of West Bengal in 2007.

What are the Benefits?
What are the purported benefits of the Tata-Singur project? The West Bengal government has advanced two claims regarding the benefits: employment generation and improvement in the investment climate of the state. These two claims about possible employment generation and future investments need to be looked at closely, because the rationale offered by the West Bengal government for giving the stupendous bonanza to the Tatas rests precisely on these. Both these claims are dubious. Regarding the claims about employment generation, there have been figures ranging from a high of 12000 (2000 in the Nano plant proper, 10000 in ancillary and complementary units) to a low of 750 (some recent local newspapers have put the figure at 650). The upshot of all this is that there is no certainty about the employment generated. However, if we look at a recent BBC report on this matter it becomes clear that 62% of the projected employment in the automotive sector is going to be skilled labour, 28% is going to be management jobs, leaving only 10% jobs for unskilled labour. Now, the displaced population in Singur, if at all they get absorbed in the mother plant or in the ancillary units, would typically be offered employment as unskilled labour. So, the prospect of much employment being generated, especially for the people in Singur, is dim. Moreover, all these calculations ignore the employment destruction that the project will inevitably entail. If we were to properly take both possible employment generation and possible emplyment destruction into account, we could arrive at a figure for the net emplyment generated by the project. At the moment, it is not even clear that the net employment figure will be positive.
The other claim about the Singur project generating prospective investment in the future rests on equally shaky foundations. The question really boils down to whether the Tata plant can attract other major investments and lead to an industrial rejuvenation of Bengal. The example of Jamshedpur in neighbouring Jharkhand should be carefully looked at. Tata’s factories in Jamshedpur did nothing for the overall industrialization of the state of Bihar or now Jharkhand. It remained an enclave of industrial activity, without forging strong forward or backward linkages in neighbouring areas. The other issue to think about, in the context of the claim about TML drawing future investments, is whether other industrialists coming to invest in Bengal would also demand similar bonanzas from the government. Will the government refuse them the goodies that they have offered TML and let them turn away or will it repeat the Tata-like agreements and put further burdens on the exchequer. Either option does not seem to be beneficial from the perspective of the working people of the state.

Summary: while the costs of the proposed Singur-Tata project is obvious, tangible, immediate and large, the benefits seem to be uncertain, residing far away in the future and their magnitudes small.

Oh! So Poor Tata
A few months back, the finance minister of West Bengal presented a budget with a Rs. 2 crore deficit; a net subsidy of about Rs. 3000 crores would certainly be extremely costly for the people of the state; after all it is about 1500 times the budget deficit in fiscal year 2008-09. Given that a small, poor, fund-starved state like West Bengal is making such great efforts to subsidize the Tata’s, it must mean that they (the Tata’s) are in a dire financial situation. But is that true? If we merely cast a glance at the recent international buying spree that the Tata’s have been engaged in, we might be able to understand how far from the truth would be any assertion that the Tata’s require financial assistance from a poor state like West Bengal to start an industrial project.
The Tata Group of Companies, let us remind ourselves, is one of the largest business conglomerates in India with about 100 large companies in it’s fold. With the might of the Indian State firmly behind it, monopoly capital in India has started a move to aggressively acquire foreign assets, what it calls strategic corporate assets. In the last few years, the Tata Group has been leading this acquisition spree on behalf of Indian big capital, making forays not only in Asia and Africa but also in the heartland of world capitalism: USA and Europe. Let us briefly take a look at the record of the Tata Group with regard to foreign acquisitions.
In January 2007, the Tata Group pulled off India’s biggest ever takeover of a foreign company to buy Anglo-Dutch steel-maker Corus for $12 billion; this acquisition made the combined entity (Tata-Corus) the world’s fifth largest producer of steel. In March 2004, the Tata Group acquired South Korea’s Daewoo Commercial Vehicle Company for $102 million; this was followed by the acquisition of a 21 percent stake in Spanish bus maker Hispano Carrocera for $18 million with an option to pick up the remaining stake at a later date. Around the same time, Tata Technologies, another company in the Tata fold, which provides automotive engineering and design services, bought Britain’s Incat International for $53 million.
Tata Consultancy Services, which was earlier a division of Tata Sons and a rising star in the Tata Group, has been among the most aggressive shoppers for foreign companies. It has acquired six companies in the past few, with the net value of the deals close to $100 million; these include FNS of Australia, which was acquired for $26 million and Chile’s outsourcing major Comicrom, which was bought for $23 million. When the Tat Group acquired the former state-run, international telecom carrier, VSNL, a few years ago, it was on it’s way to becoming a major telecom player in the global markets. To enhance it’s position, it acquired undersea cable company Tyco of the US for $130 million, Internet service provider Dishnet’s India division for $64.28 million and international telecom service provider Teleglobe of the US for $239 million.
Following its acquisition of Hindustan Lever Chemicals, Tata Chemicals was on the lookout for a steady supply of phosphoric acid for its newly acquired plant at Haldia, West Bengal. Accordingly, it took over two overseas companies for a total value of $215 million: Indo Maroc Phosphore of Morocco in March 2005 and Brunner Mond Group of Britain in December 2007. Morocco, by the way, produces over 50 percent of the world’s rock phosphate.
In 2000, Tata Tea bought British giant Tetley for a $407 million, and started looking for similar deals to strengthen it’s global position in the tea and related drinks business. This search led to acquisition of 33 percent stake in the South African company Joekels Tea Packers for an undisclosed amount and 30 percent stake in the US-based favoured water manufacturer Glaceau for $677 million, the acquisition of the US-based Good Earth Corp for $32 million and acquisition of the Czech Republic’s firm Jemca for an unknown amount.
India Hotels, the hotel branch of the Tata Group, acquired several hotels abroad for $121 million in the past few years. It is reported to have set aside $100 million for future acquisitions in Europe, the Middle East, Asia and the US. In December 2006, it had acquired W, a hotel at the Woolloomooloo Bay in Sydney; it was followed by the taking over of the management of The Pierre, a luxurious landmark hotel on New York’s Fifth Avenue. India Hotels, which runs the Taj Group of hotels, has 39 hotels in India and 18 worldwide. A recent acquisition of India Hotels was Campton Place Hotel in San Francisco.
If we add up the figures for the Tata Group’s overseas acquisitions, we arrive at a rough figure of $14,062 million, which converts to roughly Rs. 56,248 crore (using an exchange rate of Rs 40/$), and this is not even a complete list of Tata’s recent acquisitions. And, what does all this lead to? It inevitably leads us to the conclusion that a corporation which can invest more than Rs. 56,000 crores for acquisition of strategic foreign corporate assets requires the financial support of India’s impoverished taxpayers, to the tune of Rs. 1140 crores in real terms, to set up a small car manufacturing plant in India! That, in a nutshell, is what we would like to call neoliberal industrialization, pushing which down our throats has become the almost single-minded purpose of the West Bengal Government and the “communist party” that is at it’s helm of affairs.

TINA Logic
But even after all these facts and figures and arguments have been read, understood and absorbed, sympathizers of the West Bengal government will no doubt come up with a supposedly unbeatable argument: TINA. There is no alternative. This argument points to the magnanimous offers made by other states in India to attract private capital, and then goes on to plead the inability of the West Bengal government to follow any route other than to offer even more largesse. Recall that the text of the agreement starts precisely with this argument. It builds up it’s case for the huge hidden subsidies that is offered to TML, and which we have seen in great detail above and which add up to about Rs. 3000 crores on a net present value basis, by emphasizing the incentive package that the States of Uttarakhand and Himachal Pradesh has offered to the Tatas. That is why the West Bengal government must offer more than the value of the offers by the other states if it is to attract private capital, like the TML, to industrialize the state. Since, other states are offering huge tax breaks and soft loans, West Bengal must also do so, the argument goes. West Bengal cannot fight this trend, caught as it is in the competitive struggle between the states of India.
One must begin by acknowledging that there is some truth to this assertion. It is true, in other words, that in the neoliberal set-up private capital has managed to generate competition between political entities, both within nations and between nations, to ensure higher profits on it’s investments. But acknowledging this fact, the fact of the existence of this strong pressure for competition among states, does not mean accepting it as inevitable; it does not mean accepting the logic, championed by the proponents of neoliberalism, that there can be no alternative to the present framework. If the fight against neoliberalism has to be taken forward then this logic must be fought. One cannot succumb to this logic in practice and claim to be fighting against neoliberalism.
And to fight this logic, one must understand what it implies. The competition that capital manages to enforce on political entities (for instance states in India or countries in the global context), one must understand, is akin to a “race to the bottom”. As soon as one state lowers taxes, reduces social sector spending, loosens labour laws, cracks down on political dissent in order to make the atmosphere “conducive” for investments, another tries to outdo the first by reducing taxes even further, reducing social sector spendings even further, making labour even more “flexible” in order to “attract capital”. And thus, as the logic of this competition unfolds in all dimensions, people of all the states taken together lose. Lower tax revenues means lower resources for the State to invest in educations, health, nutrition, poverty alleviation; it means increased misery for the common people, with sub-optimal infrastructure and public amenities. And who benefits from this fierce competition? Capital. Thus accepting this as the only way to industrialize is to accept this “race to the bottom”, with all it’s deleterious consequences for the population, as the West Bengal government seems to have done.
So what can be done? One has to act on several fronts at the same time. First, it is undeniable that fighting the neoliberal logic will require concerted political action at the Central level to thwart moves to implement central-level neoliberal policies; the largest “communist” party standing behind the West Bengal government must shed it’s fears of radical mass political activism and launch, with other like minded political forces, a nationwide offensive against neoliberalism, instead of using all it’s energies in parliamentary antics. It will also mean not succumbing to the pressures of capital at the state level as the West Bengal government has pathetically done. If private capital wants to move out of the state because taxes are high and social sector spendings are growing and the labour laws are favourable for the workers, and the health and educational status of the people are improving, then so be it. The state need not hanker after such capital for, at the end of the day, massively state-subsidized investments of such capital is not beneficial for the people.
Second, one must understand that, if attracting capital is all one wants to achieve, capital can also be attracted in a very different fashion, by reversing the harmful, negative competition between states and instead initiating a “race to the top” to replace the “race to the bottom”. For it is a fact, recently noted by several observers of the Indian economy, that India is very rapidly moving into a regime marked by serious shortages of skilled labour. A state which wants to attract private capital can, therefore, invest massively in building up the education and health system for the workers; a healthy and skilled labour force can be a stronger incentive for capital to set up shop in a state than huge tax holidays. In fact, instead of giving tax breaks to capital, the state will need to tax them aggressively and use the tax revenue to further improve the conditions of the working people. Equally true is the abysmal conditions of physical infrastructure - transportation, housing, power, etc. - in most of the states of India. A state can, therefore, start investing in building up basic infrastructure for the people by taxing capital and citizens in the high-income brackets; solid infrastructure can be as strong an incentive for private capital as soft loans and hidden subsidies. The point of these interventions would be, in the medium and long urn, to initiate reversal of the “race to the bottom” that every state seems to be in the grip of. Unfortunately, the West Bengal government seems hell bent on going the opposite way.
Third, complementing these interventions have to be efforts to revitalize mass political activism at the grassroots level. Imagine, for a moment, a strong, countrywide mass movement against neoliberalism. If Singur in re-enacted in Uttarakhand and Himachal Pradesh and Karnataka, then where will the TML go? Wherever it sets up shop, it will have to do so without the luxury of externalizing the costs onto the working people and the environment. Simple economic logic suggests that forcing capital to internalize it’s costs by an active mass political movement would in fact ensure that the decisions taken by capital will be closer to what could be considered socially optimal. Mass participation in planning and implementation would, further, increase much-needed accountability of both the state and capital. Unfortunately again, the West Bengal government wants to go the other way.

This brief analysis of the details of the proposed Tata-Singur project in West Bengal offers us an unique opportunity to think about the industrialization strategy of the Indian state today. One of the major thrusts of this strategy is to build up so-called Special Economic Zones (SEZs) all over the country. As of August 11, 2008 there were 250 notified SEZs across the country. Since each of these SEZs more or less replicate the policy regime applicable to the proposed Tata-Singur project - with magnanimous tax holidays and soft loans and subsidized power and “flexible” labour laws and absence of all environmental regulations - it would probably not be far from the truth to suggest that each of these SEZs would entail at least the amount of loss that we have calculated above for the Tata-Singur project. This suggests that the total cost to the people of this country of the current neoliberal policy regime would be about Rs. 750,000 crores. How large is this figure? For comparison, consider the fact that the total expenditure of the Indian government was slated to be Rs. 750, 884 crores in budget 2008-09; thus, an amount which is roughly equal to the total expenditure of the Indian government in 2008-09 would be the loss to the nation for embracing neoliberalism. Isn’t it high time we sharpened our struggle against neoliberalism in earnest?
(Comments from Debarshi, Kuver and Partho have substantially improved the argument of this article).

Agreement between Tata Motors Ltd., Government of West Bengal and WBIDC
1. Tata Motors Ltd. (TML) was intending to set up a manufacturing Plant for Automobile Products including “Tata Small Car” to manufacture 250,000 cars per annum on 2 shift basis which could be expanded to 350,000 on 3 shift basis. In addition, it would have several Vendors and act as a mother plant for many aggregates to tune of 500,000 cars. In this connection, TML was considering locating the plant in the States of Uttarakhand/ Himachal Pradesh in view of the fiscal incentive package for the rapid industrialization being made available by the Govt. of India to new Industries in these States which has been attracting a large number of industries to these States. The incentive package in Uttarakhand/Himachal Pradesh consists of:-
(a) 100% exemption from Excise Duty for 10 years.
(b) 100% exemption from Corporate Income Tax for first 5 years and 30% exemption from Corporate Income Tax for next 5 years.
2. The Government of West Bengal (GoWB) is keen to take appropriate steps for rapid industrialization in West Bengal and in this connection wanted to attract some major Automobile Projects to the State. The Government of West Bengal approached TML to persuade them to locate an Automobile Project including the project to manufacture “Tata Small Car” in West Bengal. TML showed interest in locating the plant in West Bengal, provided the State gave Fiscal incentive equivalent to the value of total incentives it would have received by locating the plant in Uttarakhand / Himachal Pradesh. GoWB offered to match the financial incentives in equivalent terms and invited TML to set up the Small Car plant in West Bengal entailing investment of over Rs. 1500 crores by TML. In addition, Vendors supporting the project are likely to make further investment of over Rs. 500 crores.
3. Since then numerous discussions have been held and based on this understanding, GoWB proceeded with identification of various lands for this mega project. Land of approximately 1000 acres chosen in P. S. Singur of District Hooghly was finalized with TML. West Bengal Industrial Development Corporation Ltd. (WBIDC) commenced the process of acquisition of this land. The process was completed with the Declaration of Award under Section 11 of the Land Acquisition Act, and thereafter WBIDC has obtained mutation of ownership in its name in the Record-of-Rights, and conversion of usage of the land from agriculture to factory.
4. WBIDC is in possession of 997.11 acres of land, which has been acquired under the Land Acquisition Act. Out of this, an area admeasuring 645.67 acres will be leased to TML for setting up the Automobile Project including the small car plant, while an area admeasuring 290 acres will be leased to the vendors to this Automobile Project approved by TML (ancillary and component manufacturing units), 14.33 acres will be handed over by WBIDC to WBSEB only for construction of 220/132/33 KV substation and the balance admeasuring 47.11 acres will be used by WBIDC for rehabilitation activities for the needy families amongst the Project affected persons.
5. The terms of lease to TML for the 645.67 acres of land for the mother plant are described below. In addition, WBIDC will provide on lease 290 acres of land to the Vendors selected and approved by TML on payment of Premium equal to the actual cost of acquisition plus incidentals, to be calculated on the basis of the total acquisition cost and other incidental expenses expended by WBIDC or any of its subsidiaries (duly certified by its auditor) averaged over the total land acquired. The lease rental payable per year per acre by the vendors will be Rs. 8000/- per acre for the first 45 (forty five) years and Rs. 16000/- per acre for the next 45 (forty five) years. The initial lease tenure will be 90 years. On expiry of 90 years, the lease terms will be fixed on mutually agreed terms at that point of time.
6. The parties also discussed mutually to finalise the package of incentives required in order to enable GoWB to fulfill its commitment to match in equivalent financial terms the fiscal incentive foregone by TML in Uttarakhand. The Net Present Value (NPV) computation of benefits that the project would have received in Uttarakhand is attached in Annexure I which is agreed to by all the parties. Sample computation of benefits in West Bengal with stated assumptions is given in Annexure II which is accepted by all parties as agreed basis of computation. The NPV is calculated @ 11%.
7. Accordingly, it is finally agreed, in supersession of all previous decisions and agreements in this regard, that for this mega project, the fiscal incentives under Industrial Promotion Assistance in terms of the West Bengal Incentive Scheme (WBIS 2004), assistance towards land cost and interest subsidy in the form of a loan against a quantum of the term loan to be taken by TML for this project will be offered by GoWB as follows:-
(a) WBIDC will provide Industrial Promotion Assistance in the form of a Loan to TML at 0.1% interest per annum for amounts equal to gross VAT and CST received by GoWB in each of the previous years ended 31st March on sale of “Tata Small Car” from the date of commencement of sales of the small car. This benefit will continue till the balance amount of the Uttarakhand benefit (after deducting the amount as stated in para 7b and 7c below) is reached on net present value basis, after which it shall be discontinued. The loan with interest will be repayable in annual installments starting from 31st year of commencement of sale from the plant. The loan availed in the first year will be repaid in the 31st year and the loan availed in the 2nd year will be repaid in the 32nd year and so on. WBIDC will ensure that the loan under this head is paid within 60 days of the close of the previous year (on 31st March) failing which WBIDC will be liable to compensate TML for the financial inconvenience caused @ 1.5 times the bank rate prevailing at the time on the amount due for the period of such delay. TML & GoWB will make best efforts to maximize sale of products from the “Small Car Plant” in the State of West Bengal.
(b) WBIDC will provide 645.67 acres of Land to Tata Motors Ltd on a 90 year lease, on an annual lease rental of Rs. 1 crore per year for first 5 years with an increase @ 25% after every 5 years till 30 years. On expiry of 30 years, the lease rental will be fixed at Rs. 5 crores per year, with an increase @ 30% after every 10 years till the 60th year. On the expiry of 60 years, the lease rental will be fixed at Rs. 20 crores per year, which will remain unchanged till the 90th year. On expiry of 90 years the lease terms will be fixed on mutually agreed terms at that point of time. The benefit on account of land would be calculated as the total land area leased out to TML multiplied by the cost of acquisition calculated in the manner as provided in para 5 less NPV of rent payable during 60 years.
(c) The West Bengal Govt. will provide to TML a loan of Rs. 200 crores bearing @ 1% interest per year repayable in 5 equal annual installments starting from the 21st year from the date of disbursement of loan. This loan will be disbursed within 60 days of signing of this Agreement.
(d) The West Bengal Government will provide Electricity for the project at Rs. 3/- per KWH. In case of more than Rs. 0.25 per KWH increase in tariff in every block of five years, the Government will provide relief through additional compensation to neutralize such additional increase.
8. It is also agreed that the computation of the comparison of benefits in Annexure I and II will be changed if there are any changes in the rates of excise duty and corporate income tax during the next 10 years.