Reformed Capitalism, a Pipedream

Prabhat Patnaik | 15 Jun 2026

There is no alternative to socialism, but care must be taken to ensure that immanent tendencies of capital, such as centralisation of capital, are kept under strict check.

Progressive Liberals, and Social Democrats in general, have this common belief that capitalism can be “reformed” to become more humane and acceptable to society, and that this can be done by the use of State power which can be acquired through elections in a political democracy; this state of reformed capitalism can be institutionalised for ever, which makes any struggle for socialism unnecessary.

The theoretical basis for this belief was provided by the economics of J M Keynes (who himself had drawn upon the reformist intellectual tradition of the Cambridge School of Economics). Keynes had called his philosophy “new liberalism”, the pre-fix “new” being added because it advocated not the absence of State intervention as liberalism traditionally had done, but, on the contrary, effective State intervention to achieve full employment and greater equality in income distribution.

In post-war Europe, the Keynesian agenda had been adopted by several Social Democratic governments that came into being in order to usher in high levels of employment and welfare State measures; their idea was to build “capitalism with a human face”.

Yet, within a few years of this post-war experiment, neo-liberalism had overtaken Europe. State expenditure for increasing employment, which, to be successful, had to be financed either by a fiscal deficit or by taxes on the rich, had become impossible because of the opposition of finance; and the welfare State measures that had been put in place, though not exactly withdrawn, had been run down.

A clear inkling of this changed scenario was provided when Francois Mitterand was elected President of France against the background of rising unemployment, and adopted standard Keynesian measures to increase employment. But instead of employment rising, finance flowed out of France, the French franc fell on the foreign exchange market, and Mitterand had to withdraw his Keynesian measures in order to restore the “confidence of the investors”, which is just a euphemism for appeasing a bunch of speculators.

Instead of the State intervening to “improve” capitalism, the State itself had become a prisoner of globalised finance capital, willy-nilly doing its bidding. “Reformed” capitalism had proved to be a chimera, belying the high hopes reposed in it by the liberal-social democratic intellectual-political circles.

The vision of a controlled capitalism, however, was not confined only to the advanced countries in the post-war period. In many countries of the Global South, where the national, patriotic (as distinct from comprador) bourgeoisie had been sizeable, and had been a part of the anti-colonial front, the economic policy regime that came into being after decolonisation envisaged a role for the capitalists even as the country was embarking on a public sector-led “socialist”-oriented development path.

In India, for instance, the objective of development was described as the building of a “socialistic pattern of society” and the presumption was that the island of capitalism that remained within the economy as it was moving towards this goal, would help in developing the productive forces, while being amenable to control so that the achievement of this ultimate goal would not be sabotaged.

And yet today, India has a level of income inequality higher than at any time in the previous hundred years, and one of the highest in the world. What is more, this sharp rise in inequality represents a reversal of the trend that existed till the early 1908s: the top 1% of the population that had around 12% of the national income at the time of Independence (1947), had seen a decline in its share to 6% by 1982. Since then, this share has climbed to 22.6% by 2022-23 under the regime of neo-liberalism (these figures are taken from the World Inequality Database).

The question arises: why has the vision of a controlled, and by implication reformed, capitalism turned out to be a chimera? Even if in countries of the Global South, the re-assertion of spontaneous capitalism became unavoidable, once such re-assertion had already occurred in the metropolitan economies, the question still remains: why did the latter see such re-assertion? The answer to this question lies in the very nature of capitalism.

Keynes had only half understood the nature of capitalism. What he had seen clearly was that the aggregation of individual decisions in this system, even when each such decision is taken on the basis of some “rational” calculations, does not add up to a “rational” outcome. Put differently, the system is subject to anarchy. Keynes recognised this anarchy and wanted the State to intervene to overcome this anarchy.

Anarchy, however, is only one of the features of capitalism. There is an additional property of capitalism, apart of course from its exploitative nature; and that is its being a spontaneous or self-driven system. Individual agents act in the ways they do because they are compelled by competition to do so, and the overall functioning of the system which is independent of the will and consciousness of the individual economic agents, is characterised by a set of spontaneous tendencies.

One such tendency that Marx had talked about was the tendency toward centralisation of capital, that is, the formation over time of larger and larger blocks of capital. But an immanent tendency of capital that is not much discussed, is that capital seeks to overcome or by-pass whatever constraints are placed upon it.

This is exactly akin to the tendency of capital to introduce new processes and new products. In one case the drive is to overcome State-imposed constraints, for whoever does so first, gets an extra profit. In the other case, the drive is to overcome the technologically-given production constraints, for whoever does so first, earns an extra profit.

Capital may not succeed, of course, in by-passing the constraint placed upon it by the State at any given time. But over time, since centralisation keeps increasing the size of capital, the ability of capital to overcome or by-pass this constraint also increases, as larger capital is better able to overcome such a constraint than smaller capital. Hence, even though some constraints upon capital may be binding in any given period, or over a succession of periods, these same apparently binding constraints of today would tend to get by-passed tomorrow as centralisation occurs over time.

Controlled capitalism, it follows, is unlikely ever to be a permanent state of affairs. Even if controls hold for a time, and controlled capitalism appears to have become a frozen state of affairs for a time, the centralisation occurring all the time acts to undermine it over time.

This is not just speculative talk. The undermining of Keynesianism occurred exactly in this manner. Among advanced capitalist countries, those needing temporary balance of payments support, found it convenient to accept short-term funds from other countries. Such short-term funds in the beginning did not interfere with the ability of the State to intervene in the economy to maintain high levels of employment and the tempo of welfare expenditure.

But as centralisation of capital occurred and the short-term funds coming into an economy increasingly belonged to large agglomerations, such as pension funds, whose withdrawals too would be on a much larger scale, State policy became geared toward preventing such withdrawals; and it did so by pursuing policies approved by globalised finance.

Put differently, the autonomy of the nation-state to pursue policies that it considers to be in social interest, an autonomy that Keynesianism had assumed, which was not off the mark in the beginning, got subverted over time. This was not accidental; it was immanent in the nature of capitalism.

If capitalism, unlike what is taught in text-books, does not meekly accept whatever constraints are placed upon it, if it forever attempts to overcome such constraints and becomes more and more capable of doing so over time because of centralisation of capital, then any vision of a reformed capitalism, or welfare capitalism, becomes a chimera. Any such vision must entail a degree of control over capital by the State; and if such control by the State, exercised by placing constraints upon capital, gets subverted over time, then such a vision obviously becomes untenable.

It is this simple truth that also underlies the current crisis of social democracy, why it is increasingly losing ground to neo-fascism. Its political crisis, in other words, is the expression in the sphere of politics of its theoretical crisis, arising from the undermining of Keynesianism.

Welfare capitalism being a chimera, there is no alternative to socialism; and if in the transition to socialism, small capitalist enterprises are allowed to exist, care must be taken to ensure that immanent tendencies of capital, such as centralisation that produces ever larger blocks of capital, are kept under strict check.

Prabhat Patnaik is Professor Emeritus, Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. The views are personal.

What Does Hindu Rashtra Mean?

Prabhat Patnaik | 20 Jun 2026

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A Hindu State, unlike what its name suggests, is nothing else but a dictatorship of monopoly capital, which is being unabashedly promoted by Modi.

Indian Prime Minister Narendra Modi with leading industrialists of the country.

The objective of the Rashtriya Swayamsevak Sangh (RSS) is to establish a Hindu state (“Hindu Rashtra”) in India. But what exactly does a Hindu State mean? The obvious and immediate answer would be that instead of the present Constitutionally-guaranteed equality for all citizens irrespective of religion, there would be in such a State a superior status of the Hindus compared with those belonging to other religions, especially the Muslims who constitute the largest religious minority in the country.

Such an inequality, however, cannot be sustained without a specifically repressive State; all states in a class-oppressive society are repressive but a state that institutionalises inequality in this manner would have to be even more specifically repressive. Would a Hindu State then mean a dictatorship of a collectivity, called the  Hindus, exercised over those belonging to other religions?

The moment this question is posed, the answer is obviously “no”. A rickshaw puller would remain a rickshaw puller no matter what his religion in a Hindu state; a peon would remain a peon no matter what his religion in a Hindu state; a gig-worker would remain a gig-worker no matter what his religion in a Hindu state.

The so-called Hindu State does not promise and would not achieve any change in the material condition of life for the majority of the Hindus; then in whose interests would the dictatorship, the form with which such a State would necessarily be associated, be exercised? The obvious answer is: in the interests of monopoly capital. A Hindu state, unlike what its name suggests, is nothing else but a dictatorship of monopoly capital.

There would, of course, be a veneer of Hindu rituals and Hindu religious practices before State functions, and there would no doubt be a preference for Hindus compared with others in selections for jobs; but new jobs themselves would not just be as non-existent as they are today, but there would even be a disappearance of existing jobs owing to the introduction of Artificial Intelligence (AI) by the corporates. While the Muslims and other members of religious minorities would face severe and multiple oppressions, the Hindus would not experience any alleviation of their oppression.

The class whose power would be greatly strengthened is monopoly bourgeoisie, and even within this class the new group of monopoly bourgeoisie. A Hindu State, in other words, would be a State lorded over by the Indian big corporates in general, and the Adanis and the Ambanis in particular.

This is reminiscent of the situation in Germany in the 1930s where the Nazis claimed to be giving effect to “Aryan superiority” by victimising “non-Aryan” populations like the Jews (the Nazis considered it impossible for a person to be an “Aryan Jew”) and the Gypsies (an “Aryan Gypsy” was likewise considered impossible).

The Nazi State, however, was not an “Aryan state”. The dictatorship it set up was, in the words of Georgi Dimitrov, President of the Communist International, at its Seventh Congress in 1935, the “open terrorist dictatorship of the most reactionary, most chauvinistic and most imperialist elements of finance capital”.

The description of the State by those who lead it does not necessarily correspond to its reality; the question to ask is: which is the class that is using the State to further its own interests, and all States that claim in contemporary times to be furthering the interests of some ethnic or religious or linguistic group by scuttling democracy and reducing other groups to the status of second-class citizens, are in reality furthering the interests of monopoly capital by instituting its dictatorship and seeking to divide the working people along ethnic, religious or linguistic lines. The imposition of a sectional State in a modern, multi-sectional society amounts in reality to a dictatorship of monopoly capital.

The question may be raised: since even the existing “secular” State is already dominated by monopoly capital, why should monopoly capital need, and hence aid the coming into being of, a new, and altogether different, Hindu-supremacist, State that embodies its dictatorship? The need for such a change obviously arises only when the earlier form of the State faces a serious threat; and that happens in a period when the economy runs into stagnation and greatly increased unemployment. The current move toward a dictatorship of monopoly capital, under the guise of a Hindu State, reflects the dead-end of the neo-liberal regime that has brought stagnation to the economy, and greater unemployment and acute distress to the vast mass of the working people.

Democracy provides greater scope for resistance and struggle to the working people, because of which in any period of crisis efforts are made to attenuate democracy, so that the threat to the hegemony of monopoly capital is kept in check; but when the crisis is protracted and the threat to its hegemony is persistent, monopoly capital adopts more extreme measures. It forms an alliance with whatever force is most capable of dividing the people, in order to generate an alternative distractive discourse, to prevent the working people from launching a united fight, and to justify the scuttling of democracy in the name of instituting a sectarian State, which in the Indian context is the promised Hindu State.

The distractive nature of the RSS-BJP discourse is absolutely obvious at present. When the country’s workforce, especially its youth, is weighed down by unemployment, when the incidence of educated unemployment is extremely high, the country’s rulers have not a word to say on this pressing problem; instead, they are crying hoarse about infiltration from Bangladesh! Ironically, since by the BJP’s own reckoning a nation’s per capita gross domestic product is the index of its progress, Bangladesh, which according to the IMF has a higher per capita income at present than India, should be considered more advanced than India; how then can the BJP explain such massive infiltration as it claims from a more advanced to a less advanced country?

Liberal opinion has been trying to explain for some time why there has been such an upsurge of Hindutva in India of late. But it fails to notice that the rise of Hindutva in India is part of an upsurge of neo-fascism all over the world, because of which no India-specific explanation of this rise would be adequate. The rise of Hindutva in other words is not a sui generis phenomenon; to a significant extent it is orchestrated by monopoly capital through financial and media support, in India, as elsewhere in the capitalist world from Argentina, to the US, Italy, France, Germany, and the UK, in the context of the dead-end that neoliberal capitalism has brought to the world economy.

The RSS recently celebrated its centenary; the fact that it suddenly finds itself ensconced in power while for a hundred years it had been nowhere near it, and can boast today to be the “richest political party” in the world, is to be attributed to the massive support it receives from monopoly capital at present.

But it is not only monopoly capital that has become well-disposed toward Hindutva. The Hindutva elements, too, have changed their attitude toward monopoly capital. The main support base of the RSS had originally been among shop-keepers, small capitalists and the urban middle class, and it had enjoyed the financial backing of certain feudal elements. It had never, of course, adopted an anti-monopoly rhetoric, unlike, say in Germany, where the Nazis had adopted an outwardly anti-monopoly stance before coming to power; but the RSS had not been exclusively pro-monopoly capital either. There had been alternative voices within the Hindutva camp regarding economic policy, though economic policy itself had not been explicitly an area of great concern to the Hindutva forces.

The contribution of Narendra Modi has been to change all this. His importance in the Hindutva hierarchy arises because he became an architect of the corporate-Hindutva alliance; and it is by forming this alliance that Hindutva came to power. Indeed, the very idea of promoting Modi as the Prime Minister of the country was mooted at a gathering of capitalists at an “Investors’ Summit” in Gujarat when Modi was the Chief Minister of that state. And Modi became an unashamed, no-holds-barred, promoter of monopoly capital, especially of the newer elements within it.

In the process he also became a promoter of international finance capital with which Indian monopoly capital had become integrated in the neo-liberal era. In the era of stagnation of neo-liberal capitalism, Modi with his neo-fascist agenda has become a particularly useful asset to Indian monopoly capital.

The writer is Professor Emeritus, Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. The views are personal.

Should RSS be Accountable to People of India?

Ram Puniyani | 19 Jun 2026

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The time has come to give importance to our Constitution and Indian nationalism and demand registration of not only RSS but all such organisations that take donations and spend hugely.

After the Rastriya Swayamsevak Sangh (RSS)-trained pracharak (propagator) Nathuram Godse pumped three bullets in to the lean chest of ‘Father of the Nation’, Mahatma Gandhi, because Gandhi held that the nation belongs to people of all religions, Godse and his parent organisations, RSS-Hindu Mahasabha held that the nation is only for Hindus.

A hate propaganda was spread against the Indian national movement and Gandhi, leading to his assassination at point blank range. Due to this Sardar Vallabh Bhai Patel, the Deputy Prime Minister and Home Minster, banned the RSS. “All their speeches were full of communal poison,” he wrote after banning the Sangh in 1948. As a final result of this poison, the “country had to suffer the sacrifice of the invaluable life of Gandhiji." The ban on RSS was lifted after it gave an undertaking that it will have a written constitution and will work only as a cultural organisation.

As a matter of fact, RSS became a “supra political” organisation in the garb of culture. It had already founded Akhil Bharatiya Vidyarthi Parishad (ABVP) and was later instrumental in the formation of Bharatiya Jansangh, the predecessor of Bharatiya Janata Party or BJP, which is currently in power at the Centre and many state governments.

The RSS claims that it is run by money from ‘Guru Dakshina’, collected on the day of Dasara festival. The Income Tax tribunal somehow has exempted this source of income from taxation. However, RSS has been spending infinite money in its programmes, running shakhas (branches) even on public land. The expenses involved in its route marches are not disclosed. The value of the RSS head office in Delhi is reported to be above Rs 100 crore. All these massive expenditures are above State scrutiny.

This ‘cultural organisation cover’ was accepted by the State and people at large at face value and it has been merrily expanding itself to lakhs of shakhas and lakhs of swayamsevaks. Nehru had understood the nature of RSS quite early. But till a few years ago no political party, including the Indian National Congress (INC), raised any questions on the issues such as how this organisation has been enjoying a free ride, ignoring the laws and morality of the State.

But better late than never, from the past few years, the INC and Rahul Gandhi, in particular, has been raising logical and legal questions on RSS. Rahul Gandhi had stated that it was RSS people who had killed Mahatma Gandhi, for which he is facing a legal case.

In the line of confronting RSS, now Priyank Kharge, the Home Minister of Karnataka, has ask RSS to get itself registered and be accountable to the State of India.

In a letter (June 13, 2026) to RSS supremo, Mohan Bhagwat, Kharge sought details on the organisation’s legal status, finances, office-bearers and tax compliance. The Karnataka Home Minister also details and type of activities, which has RSS officially claimed that it had over 60,000 shakhas and crores of swayamsevaks across India and abroad.

Kharge outlined in this in his publicly released communication, saying that registration was not simply a legal requirement but also a moral issue. He wrote, “It is precisely because of this scale, influence and reach that the RSS must be held to the highest standards of transparency, accountability and constitutional compliance.”

In response to this letter, the RSS Sarsanghchalak, Mohan Bhagwat, said that he was ignoring the letter and would not reply to it. This smacks of Bhagwat thinking that he and his organisation are above the law and Indian Constitution.

As such, RSS does not believe in the Indian Constitution. Three days after the Indian Constitution was implemented, the RSS mouthpiece, Organiser, in its editorial, stated that this Constitution coming from the Indian Constituent Assembly and drafted by Babasaheb Ambedkar was not fit for our country as the glorious values of Indian holy books were not there. RSS chief Rajendra Singh had said that it should be scrapped.

K. Sudarshan, another RSS chief, went on to say that this Constitution was based on Western values, so it should be replaced by the Constitution based on an Indian holy book. Changing the Indian Constitution was one of the undercurrents of BJP’s slogan of ‘400 paar’ in the 2024 general elections.

Bhagwat’s feeling that his organisation is above the Constitution may also be stemming from the fact that though he does not hold any official position in the government of India, he enjoys security on par with the the Prime Minister.

In response to Priyank Kharge, Bhagwat said, “We are not secretive; we are working on open ground. We are calling people and telling them about us. This is politics, and all kinds of gimmicks are being tried… Hindu Dharma is not registered, and many other entities are not registered.” So, did they discuss the demolition of Babri Mosque in the open?

One recalls that the United States Commission on International Religious Freedom (USCIRF) recently recommended that the US government impose targeted sanctions on RSS. The proposed measures include freezing the organisation's assets and denying visas to its members.

One of the arguments proffered by Bhagwat for non-registering is that even Hindu religion is not registered! This statement equating Hinduism with RSS is an insult to Hindu religion in a way. Hinduism has many streams of thought-- Nath, Tantra, Shaiva, Siddhanta and Bhakti. The Hinduism which RSS projects is Brahmanism, the one based on caste and gender hierarchy. This argument does not hold water in the least.

The surprise is not that the demand for registration of RSS is coming up. What is surprising is why this demand did not come up earlier. Many officials sympathetic to Hindu nationalist ideology are there to protect the RSS. But the simple rule of donations and expenditure needs to be the major reason for registration. Similarly, political activities in the name of culture need to be admitted. Also, how RSS is violating the commitments it gave while requesting for lifting of ban need to be kept in mind.

The time has come to give importance to the Indian Constitution and Indian nationalism and demand registration of not only RSS but all other organisations fulfilling such conditions.

The writer is a human rights activist, who taught at IIT Bombay. The views are personal.

US Hegemony and West Asian War: A Political-Economic Intervention

Dhruv Golani | 07 May 2026

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The world needs an alternative structure of accumulation, beyond neoliberalism, if US hegemony is to be decisively challenged.

The West Asian war is well into its second month, with the purported ceasefire hardly materialising. The war is seen by several geopolitical scholars as a pivotal moment for the post-war global architecture. The global security cover of the United States has been viewed as dominant since 1945, and almost invulnerable since 1991. Although geopolitical strain with Russia, starting with Vladimir Putin’s 2007 speech at the Munich Security Conference, already indicated cracks in this order, and escalating with Russia’s interventions in Ukraine and Syria starting in 2014, it is the current West Asian war which has initiated a serious crisis of US global military domination.

By imposing inordinate costs on the global economy in a war initiated by the United States, Iran has exposed cracks in the accumulation strategies of world capitalism as well as called into question the United States’ institutional role as the headquarters of this global economic structure.

In particular, Iran’s ability to challenge the feasibility of the current maritime trade arrangement, render U.S. military bases in the region dysfunctional, and force the question of withdrawal of all US combat forces from the region onto the negotiating table, is genuinely remarkable.

Over the past century, West Asia has been a critically contested space in world capitalism due to the abundance of energy resources and trade chokepoints in the region. Since the culmination of the First World War, it has also been the centre of an epic conflict between imperialist domination and nationalist resistance.

The stability of metropolitan capitalism depends on the condition of the cheapening of the supply of primary commodities, which ensures that accelerating inflation can be avoided while rewarding the essential classes of metropolitan capitalism with both oligopolistic super-profits as well as stable real wages. 

Second, the spectre of inflation is particularly an anathema to financialised capitalism, which has been the dominant mode of accumulation since the 1980s, as inflation erodes the real value of financial assets. Energy prices remain the single most important factor in inflation volatility in the United States. Recent reports of Iran’s adoption of toll payments in the Chinese renminbi have also called into question the dominance of the vaunted petrodollar, which is said to underlie US financial hegemony since the breakdown of the gold-dollar link in 1971 and the subsequent tumultuous years of the first oil shock.

In light of these developments, it is important to move beyond mere geopolitical analysis of military supremacy to pose critical political-economic questions about US hegemony today.  The following analysis attempts to provide a brief description of the structure of contemporary world capitalism (which, of course, remains the dominant mode of production), and to locate the United States’ role within it.

Comparisons will also be drawn between the role of the United States and its nearest rival, China, for reasons that shall become clear by the end of this essay. The analysis will be formulated across the following dimensions: production and trade, finance, and technology. These are deeply symbiotic dimensions, and no question of hegemony can evade their interrelations.

Before we venture into this inquiry, there is an important caveat. This is not a discussion about the absolute sizes of these economies or the tempo of their development. Rather, it is about their international role within the structure of global accumulation. Studies which merely compare the two economies proliferate in the field of comparative development. Rather, this inquiry places at its heart the particularity of the role of the hegemon in the capitalist world-system.

Production and Trade

Beginning in the early 19th century, the international division of labour of industrial capitalism concentrated manufacturing activities in the Global North. This in turn led to a “great divergence” of incomes between the North and the South, as manufacturing both provides increasing returns to scale and also exhibits a higher elasticity of demand (i.e., as global incomes rise, a greater share is directed to purchasing manufactured goods).

This international division of labour broadly survived till the penultimate decade of the 20th century. In 1990–92, the Global North accounted for 75.4 percent of global manufacturing value added. By 2018–20, this share had fallen to 43.8 percent. North America’s share reduced from 23.7 percent to 18.1 percent in the same period. Meanwhile, China’s share in global manufacturing value added increased from 2.2 percent to 28 percent.

There is reason to believe these changes are paradigm-shaping. However, to understand the shift, one must understand a still more fundamental shift in international production structures. In traditional trade theory, such as the Hecksher-Ohlin model, capital is assumed to be internationally immobile. It is in the context of low international mobility of capital that the division of labour in the period was primarily expressed in specialised trade.

However, with the offshoring of several activities to developing countries, international production became dependent on interlinked tasks divided among different countries. These interlinked processes of value addition constitute the Global Value Chain.

In the GVC, an increasing share of value began to accrue to pre-production activities (such as patents and design) and post-production activities (such as marketing and other services). This distribution of value is commonly referred to as the “smile curve.” Thus, an international division emerged between “headquarters economies” and “factory economies.” Between 1997 and 2022, the share of manufacturing in global GDP dropped from over 19 percent to under 16 percent. In 2024, the GVC participation rate (i.e., GVC-related trade as a share of total trade) stood at 46.3 percent. GVC-related trade amounted to $15.18 trillion in the same year.

The share of intangible assets in value added of global manufacturing trade rose from 28 percent in 2001 to 32 percent in 2007. Some estimates suggest that as early as 2007, intangible assets may have already represented up to two-thirds of the value of big firms. Cross-border intellectual property receipts were estimated at $539 billion in 2024, compared to just $30 billion in 1990. 

Despite China’s steady rise, intellectual property receipts are dominated by the developed countries, including tax havens such as Ireland, Luxemburg, the Netherlands, Singapore, and Switzerland (despite their paltry share in world GDP). The United States maintains net exports of almost $87 billion while China maintains net imports over $40 billion. The tax havens are even more dominant in payments related to foreign intellectual property. Thus, the growing share of intangible assets is also intertwined with a variety of profit-shifting activities for the purpose of tax avoidance. In 2014, headquarter functions constituted over 64 percent of the labor share in high income countries’ export value added in manufacturing GVCs. The corresponding number for headquarter functions in China was only 38 percent.

Eighty percent of world trade is controlled by transnational corporations (TNCs), whose annual sales equal around half of world GDP. In 2025, over two-thirds of total profits recorded by the top two thousand TNCs accrued to TNCs headquartered in developed countries. The United States’ share alone accounted for 41 percent, while China’s stands at 15 percent. Over the past decade, the share of the United States has only increased (from 37 percent to 41 percent), while China’s share has marginally declined (17 percent to 15 percent). Thus, despite the fact that China accounted for almost 16 percent of world merchandise exports in 2024 (almost double the United States), the GVCs are still largely anchored in the dominance of the Global North.

There is a particular reason why this relationship between the North and the South is not merely one of inequality. GVCs are dominated by “lead firms” which enjoy monopsonistic power. Lead firms are able to directly control suppliers’ overheads, shifting responsibility for meeting delivery times and abiding by flexible production requirements onto the subordinate firms, and imposing other costs of compliance.

Moreover, lead firms’ position in the GVCs gives them a panoptic knowledge of the whole chains, giving them significant informational advantages through which they optimise systems and minimise competition. Control over knowledge presents potentially infinite returns to scale. The higher mark-ups then are utilised to inflate stock prices through dividend payments and share buybacks.

Global production networks are deeply intertwined with control over technologies as well as global financial structures. We shall turn to these questions in the following sections. While a significant contestation is apparent in global technology relations, it is really in the discussion regarding the global financial structure in which we can fully uncover the dominance of the United States.

Technology

Together with control over finance, dominance over technologies constitutes the superior position in global value chains. As discussed, what is at stake is not just IP-related receipts, but the very position of lead firms in value chains. As such, it is interesting to see how U.S. dominance shapes up in this field today.

Among the influential technology indices and reports, we witness the following: in the 2024 UNCTAD Frontier Technology Preparation Index, the United States maintains its top spot while China ranks twenty-first (although it is gaining quickly). The top ten spots are exclusively occupied by Northern countries. In the WIPO Global Innovation Index (GII) 2025, the United States occupies the third spot while China occupies the tenth spot. In the ASPI’s Critical Technology Tracker 2025, China is reported to have taken the lead in sixty-six of seventy-four critical technologies between 2020 and 2024, while the United States leads in the rest.

The ASPI’s tracker focuses specifically on the top 10 percent most-cited publications in each technology. The UNCTAD Frontier Technology Preparation Index is concerned solely with 17 “frontier technologies.” The index includes a cumulative of sub-indices like information and communications technology (ICT), skills, R&D, industry, and finance. China holds the first position in R&D and outperforms the United States in industry, but lags significantly in ICT and skills, thus dragging down its score. The GII comprises eighteen indicators ranging from those related to R&D and technology outcomes (such as robots, electric vehicles, and high-speed rail), to broader economic indicators such as labour productivity, poverty, life expectancy, and global warming.

The United States leads in late-stage venture capital deals, global brand value, global corporate R&D investors, “unicorn” valuations, software spending, and intangible asset intensity; China leads in creative goods exports, utility models, trademarks, and industrial designs.

It is also important to look at how R&D investments are mobilised today. In 2022, just one hundred companies constituted over one-third of business-funded R&D, with 2,500 companies responsible for 86 percent of such investment. Among the one hundred largest R&D investors, 49 are headquartered in the United States, 13 in China, 12 in Germany, and eight in Japan.

Technology is thus becoming an increasingly contested space between the two leading countries. As mentioned above, the United States still maintains a significant lead in IP receipts, and IP assets remain concentrated in the United States. However, these are increasingly legacy assets, as China is taking a lead in publications (particularly high-impact publications) and international patent filings.

On the other hand, US lead firms still appear to mobilise the bulk of R&D investments (though investments and outcomes can of course vary), which is tied to their dominant position in GVCs. In technology absorption, China’s results are more mixed; in certain domains, such as high-speed rail, the country has characteristics of an industrial superpower, while in others it appears almost indistinguishable from other developing countries. Nonetheless, as far as GVC position is concerned, we can expect increasing contestation in the medium term, as Chinese intangible assets grow thanks to advances in research.

Finance

Global production networks and the global financial structure are complementary in many respects. While the extraction of markups by lead firms and the shifting of profits provide surpluses which are recycled into financial markets, it is the financial structure which facilitates privileged positions in payment commitments, profit realisation, and storage of value in the form of financial wealth. Global production networks require access to dollar-denominated financial markets, both for direct investment and for the provision of working capital.

A wide variety of financial institutions and instruments facilitate such arrangements (which become necessary for honouring payment commitments). These thus allow US banks to expand their balance sheets. To protect against fluctuations in foreign exchange markets and financial risks, demand for derivatives increases as well. Derivatives have a self-reinforcing logic, as they allow for both hedging and boundless speculation. Simultaneously, the requirements of profit shifting also create demand for investment vehicles. The combination of these phenomena contribute to significant depth in dollar-denominated financial markets, and make the United States the natural home of global finance.

International financial markets have seen multiple phases of infusion of massive liquidity since the 1970s, when the gold-dollar link was severed. First, the oil shocks of 1973 and 1979 enabled the accumulation of large dollar-denominated oil surpluses, which left commercial banks flush with liquidity. Second, the growth of inequality during this period and the retreat of the State from social services has allowed the accumulation of surpluses, as well as a broad demand (including from the middle class) to subscribe to financial funds, both of which end up being recycled into financial markets.

Third, central banks of developed countries have followed easy-money policies since the early1990s, in the aftermath of Black Monday of 1987 (the famous “Greenspan put”). Of course, these easy money policies have continued until recently with the adoption of multiple rounds of Quantitative Easing after the Great Financial Crisis of 2007–08 (including during the COVID-19 pandemic).

Fourth, in the aftermath of the East Asian Crisis of 1997–98, several central banks now accumulate foreign exchange reserves to be able to intervene effectively during sudden periods of capital flight. These reserves end up being recycled into the financial markets of developed countries, particularly the United States.

The removal of the gold-dollar peg in 1971 put an end to a period of fixed exchange rates and capital controls (the latter being a sovereign right of countries under Article VI of the IMF Articles of Agreement). These new conditions created exchange rate fluctuations, and hence, demand for financial instruments to hedge against such fluctuations. Successive deregulation has allowed for the proliferation of foreign exchange (FX) derivatives. In June 2025, the notional value of OTC FX derivatives alone stood at $150 trillion. These remain heavily dollar-denominated.

The prioritisation of monetary policy since the Volcker Shock of 1979 has also created fluctuations in interest rates, as well as significant spillovers of the same in capital markets around the world. This in turn drives significant demand for interest rate (IR) derivatives. In June 2025, the notional value of OTC IR derivatives was more than three times that of OTC FX derivatives. The cumulative notional value of OTC derivatives in June 2025 stood at an astounding $846 trillion, almost seven times world GDP. In April 2025, the daily turnover of OTC FX derivatives stood at $9.6 trillion per day. For comparison, the total volume of global trade in 2024 was $32.2 trillion. Thus, daily turnover in OTC FX derivatives is almost one hundred times the volume of average daily trade. These are in large part speculative markets, which depend overwhelmingly on dollar financing.

Strategically speaking, it is doubtless true that a country’s ability to exercise sovereign autonomy is determined in part by that country’s position in international trade. However, it is really financial markets which make or break balance of payments, by orders of magnitude.

The dollar remains overwhelmingly dominant in financial markets. Despite their growing share in world production and trade, Global South countries actually represented a smaller share of global finance (i.e., combined value of stock market capitalization and fixed-income securities) in 2024 than in 2007, decreasing from 31 percent to 25 percent, respectively.  Meanwhile, the dollar’s share in foreign exchange derivatives has largely remained stable, at over half the total notional value, and has in fact marginally risen as well (to around 55 percent), over the past twenty-five years. In international debt securities, the dollar and euro combined constitute over 86 percent of debt securities, with the dollar alone accounting for about 60 percent. In global investment and borrowing, the dollar’s share has increased from 45 percent of liability positions to 48 percent between 2000 and 2024, and from 50 percent of asset positions in 2000 to 52 percent in 2024. The United States alone continues to represent 50 percent of the global equity market and 40 percent of global debt stock, figures which have remained stable over the years. 

The structure of global asset holding and returns can be seen in the following: between 2016 and 2024, the G7 countries maintained a positive annual average net primary income, equivalent to 1.1 percent of GDP, while China’s annual average net primary income was -0.5 percent of GDP (the loss is much greater for other countries of the Global South).

However, there are a few countervailing developments which should be noted. The dollar’s share within the currency composition held by central banks has seen a gradual decline since 2000. From a 70 percent share of the currency composition in 2000, it fell to 56 percent by 2025. However, there has been no demonstrable acceleration of this trend in recent years. What has instead happened is an increase in the share of gold held by central banks. From less than 20 percent of the total reserves in 2022, gold’s share surpassed 25 percent by 2025. Although central banks themselves increased the volume of gold held only by small amounts, the speculative rush towards gold in the financial markets, partly enabled by news of central banks diversifying their reserves, and partly enabled by the increased global volatility in 2025 due to the incumbent U.S. administration’s tariff measures, significantly increased the price of these holdings.

What explains this dominance of the dollar? This can best be understood through the concept of liquidity preference applied to international currency markets. International markets, particularly financial markets, are dependent upon constant liquidity, which is necessary to keep meeting payment commitments. Any disruption of liquidity would cause highly speculative assets to turn illiquid, destroying their value.

Liquidity of this kind may not be as necessary in trade, as valuations are less vulnerable to fluctuations, but it is absolutely vital in financial markets. Thus, financial markets are not predisposed to multi-currency systems. The dominance of one stable currency whose issuers are committed to ensuring global liquidity both protects the value of financial assets from erosion due to liquidity disruption and ensures the stable denomination of assets in a single currency.

More recently, uncertainty surrounding US tariff wars and the invasion of Iran have put the safe-haven status of the dollar into question. In response to tariffs, both equity and bond markets weakened, the latter even in relation to other preferred sovereign bonds. And in the first month of the West Asian war, while U.S. treasury yields again increased (although less than most other major treasury bonds), Chinese bonds emerged as a relative safe haven, with only marginally reduced yields.

Despite these disruptions, the depth of US financial markets explains their continued dominance. Unlike product and factor markets, financial markets are vulnerable to significant revaluations, as the solvency of firms often depends upon their ability to access liquid funds to honour their payment commitments. Failure to do so can quickly turn their assets illiquid and thus vulnerable to downward revaluation, which can have spiralling effects across markets.

Thus, the depth of US financial markets makes the dollar the preferred currency in which to secure contracts. Its reserve currency status also ensures that it can always be used to honour payment commitments even when other assets turn illiquid, creating all but infinite demand for access to dollar financing.

The same logic applies to other currencies, with the ability to honour payment commitments determining their “liquidity premium.” The lower the premium, the higher the yield required for assets denominated in that currency. This makes debt servicing costly for several developing countries, which effectively require asset-price bubbles to attract financial inflows.

The larger point is that, in the current conjuncture of global capitalism, growth models around the world are linked to several levers of financialisation. States become susceptible to volatile financial flows and thus reorient policies to maximise returns for investors as well as to immunise the latter from risks (which includes, in the final analysis, converting private debt to public debt during times of crisis).

Fiscal policies grow more conservative and central banks take charge of monetary policy. Central banks begin holding large volumes of reserves, which in turn forces them to undertake sterilisation operations to enable commercial banks to expand their balance sheets, both issuing and holding more securities. Due to the short maturities of such transactions, commercial banks also shift away from industrial credit to retail credit. Non-financial companies grow more dependent on holding securities, accessing market funding, and adopting practices such as share buybacks and increased dividend payments to maximize shareholder value.

Due to weakened social security systems, the middle classes are incentivised to save more. Their security becomes more dependent on subscribing to financial funds and perceived wealth through asset price inflation.

Lastly, the expansion of subprime loans ensures that the working classes grow dependent on credit to sustain their consumption levels; the resulting debt then serves as an asset for further securitisation, and so on. Add to this the inherently weaker position of peripheral countries, which occupy lower positions in global value chains, may still be dependent on primary commodity exports, and carry low liquidity premiums on their financial offerings. As this becomes the pattern of accumulation throughout the capitalist world, the importance of the financial hegemon becomes even more central to the sustenance of such accumulation.

Can there be an alternative hegemon within the structure of neoliberal accumulation? It appears not. Beyond all the turbulence that such a transition would necessarily entail, another important reason is that the only significant challenger, China, is exceedingly cautious about internationalising its currency. The renminbi is not freely convertible, and China continues to maintain twelve of the thirteen IMF classifications of controls on its capital account. Thus, even to the extent that there may be an increase in the share of global trade invoiced in renminbi in the emerging system, the question that concerns us is whether an alternative currency can support a large share of financial transactions around the world. Since the financial system asymmetrically rewards liquidity, it simply cannot sustain itself in the same way without the hegemony of the dollar.

The Nature of Hegemony Today

The economist Charles Kindleberger once argued that world capitalism requires a hegemon to stabilise it. In his view, the hegemon serves three purposes: (a) maintaining a relatively open market for distressed goods; (b) providing countercyclical long-term lending; and (c) discounting in crisis. It was Kindleberger’s view that these functions of the hegemon prevent crisis from worsening. In the neoliberal period, the United States has served each of these functions. Its large trade deficits provide markets to exporters; its hegemonic position in the IMF and several multilateral banks provides countercyclical long-term lending; and in the context of global financial crisis, the US Federal Reserve emerges as the global lender of last resort. Only in the domain of countercyclical long-term lending is the United States encountering a stiff challenge from China, and even in this case, much lending remains dollar-denominated.

However, the role of the United States far transcends that of a mere stabilizer, and instead serves as the pivot for the entire structure of global accumulation. Even as fiscal conservatism becomes a necessary policy orientation embedded in this structure, the United States itself is able to flout the principles of fiscal conservatism due to the special status of the dollar.

Thus, countries around the world, lacking the fiscal levers to sustain growth, turn to the United States, which runs large trade deficits, allowing its demand to boost economic activity around the world. The accumulated trade surpluses of different economies are deposited in US Treasuries, giving enormous depth to US financial markets. This in turn enables significant financial innovation in the United States, which allows for the expansion of retail credit, which in turn boosts demand, which in turn leaks out to the rest of the world through US trade deficits. Thus, the cycle sustains itself.

Naturally, this financialised growth cycle has several stress points; the world witnessed the consequences during and after 2008, when countries were forced to double down on fiscal austerity, further weakening global accumulation.

Moreover, the traditional paradox of the United States’ unique position in the world economy, articulated famously by economist Robert Triffin, retains its relevance. But today, instead of being tied to gold assets, it takes on a more multidimensional scale. The value of the dollar remains linked to U.S. dominance over production networks and intangible assets, as well as to U.S. military supremacy. Trade deficits exist in an uneasy tension with such dominance, as they plausibly weaken the country’s position in production and trade, while creating the material conditions wherein countries with effective industrial policies, like China, can pose a significant challenge to the hegemon’s control over knowledge assets in the medium to long term. This tension explains much of the turbulence in geopolitics over the past decade.

In the final analysis, however, the value of the dollar continues to hinge on the position of US financial markets, which are structurally central and irreplaceable for neoliberal accumulation, whose turbulence will inevitably increase. The world needs an alternative structure of accumulation, beyond neoliberalism, if US hegemony is to be decisively challenged. Given that the current system is already teetering on the edge of crisis, bringing this question to the centre of global discourse may not be as far-fetched as it appears.

Dhruv Golani is Research Associate at the Centre for Development Studies, Trivandrum, Kerala, India. The views are personal.

Courtesy: MRonline

Imperialism’s Strategy to Escape a Dead-end

Prabhat Patnaik | 08 May 2026

Neo-liberalism has created a crisis and has exhausted its potential for even promising an improvement in the living conditions of people.

Neo-liberalism has brought world capitalism to a cul-de-sac. The reason is the following. The willingness of capital to relocate production from the Global North to the Global South, which has been a hallmark of neo-liberalism, has kept wages down in the Global North, by making the workers there compete against the much lower-paid workers of the South.

At the same time, such relocation does not exhaust the vast labour reserves of the Global South, since the rate of growth of labour productivity in the South increases greatly under neo-liberalism, because of which the wages of the southern workers continue to remain at an abysmally low level. There is, therefore, little increase in the level of real wages across the world, even as labour productivity increases everywhere, resulting in an increase in the share of economic surplus in output in the world economy as a whole, and also within every individual country.

Since a larger proportion out of a unit of income is consumed by the working people than by those to whom the surplus accrues, such a rise in the share of economic surplus has the effect of reducing consumption demand relative to output, and hence the level of aggregate demand, The rise in the share of economic surplus, therefore, gives rise to a tendency toward overproduction, which manifests itself through economic stagnation and higher levels of unemployment (though such unemployment is often camouflaged through a reduction in workers’ participation rate). This is precisely what has been happening to the world economy, since the collapse of the housing bubble in the US.

The stagnation and higher unemployment, however, are not per se the symptoms of the cul-de-sac; it arises from the fact that the State can do little to overcome this situation. The Keynesian remedy that was supposed to provide a cure for all such situations, is utterly incapable of doing so under neo-liberalism.

This is because for larger State expenditure to raise aggregate demand, it must be financed either by a fiscal deficit or by taxes imposed on the rich. If larger State expenditure is financed by larger taxes on the working people, who consume the bulk of their incomes anyway, then there is hardly any increase in aggregate demand. Larger State expenditure of, say, $100, if financed by an equal amount of taxes on the working people, would not raise aggregate demand. Since the working people would have consumed these $100 anyway, all that would happen in this case is a change in the nature of demand, away from workers’ consumption toward what the State demands, but no increase in aggregate demand, and hence no relief from stagnation and unemployment.

Finance capital, however, is opposed to both fiscal deficits and larger taxes on the rich (within whose ranks the financiers figure prominently); and since the State remains a nation-state while finance capital is globalised under neo-liberalism, the State must listen to the dictates of finance, for otherwise there would be an outflow of finance from the economy, inducing   a crisis.

Thus, the only way that State intervention can overcome the predicament to which neo-liberalism has brought national economies, is foreclosed by neo-liberalism itself, owing to the unrestricted cross-border financial flows that it entails. The cul-de-sac, therefore, consists in this: neo-liberalism has created a crisis that cannot be overcome within neo-liberalism itself.

The way that capitalism has dealt with this cul-de-sac until now is by promoting neo-fascism, by bringing about a corporate-fascist alliance that produces a distractive discourse by “othering”, and creating hatred against a religious or ethnic minority. This seeks to keep the working people divided and hence prevent any challenge to the hegemony of monopoly capital within countries afflicted by stagnation and higher unemployment. Even neo-fascism, however, cannot bypass economic issues forever; sooner or later it must be seen to have an economic agenda. And US President Donald Trump clearly has such an agenda.   

Liberal opinion makes several assertions: it denies any crisis; it does not see any connection between the crisis and the emergence all over the world of Trump-like neo-fascists; and it dismisses Trump’s actions entirely as the deeds of an unbalanced person. The point at issue, however, is not whether Trump is unbalanced or not; the point is how we see his actions in the context of the cul-de-sac in which neo-liberal capitalism is caught.

Trump’s strategy envisages the US extricating itself from the neo-liberal regime while forcing the Global South to remain entrapped within it. This is clear from his tariff aggression, and the trade treaties he is pushing down the throats of countries, such as India, with this aggression. The treaty with India, for instance, stipulates not only that the US would be charging higher tariffs on Indian goods compared with what prevailed earlier, while India charges much lower tariffs than earlier on imports from America, but also that India would be obliged to buy specified, and much larger, magnitudes of American goods by specified dates.

Neo-liberalism that apotheosizes the “market” should in principle be inimical to fixing such targets for import amounts; by fixing them. Therefore, Trump is going beyond neo-liberalism as far as the US is concerned. But there is no similar target fixed for the magnitude of imports that the US should be buying from India by any specific date; that is a matter left to the “market”. The trade treaty, therefore, amounts to an agreement whereby the US is not obeying any neo-liberal diktat while India is. And exactly the same holds with regard to the differential tariff rates proposed within the treaty, that India should be open to virtually free imports of American goods while the US would protect itself through tariffs against Indian goods.

The purpose of this trade strategy is to shift the location of certain economic activities from India, and other countries of the Global South that would be subject to similar treaties from the US, to the US itself. It seeks, in other words, to overcome stagnation and higher unemployment in the US by exporting such stagnation and unemployment to countries of the Global South. It thus seeks to pass the burden of the crisis onto the shoulders of countries of the Global South.

Such unequal treaties are reminiscent of the colonial era. Trump’s strategy, therefore, can be seen as re-enacting a colonial scenario, or as an attempt at recolonising the world. Exactly the same can be said about the current US attempt to take control of the mineral resources, including in particular the oil resources, of the Global South.

Political decolonisation in the wake of the Second World War had been the precursor of the far more difficult process of economic decolonisation in countries of the Global South, by which they had sought to take control of their natural resources; the success they had achieved with regard to economic decolonisation had been due in no small measure to the support of the Soviet Union. If neo-liberalism had started a reversal of this process, the Trump strategy seeks to complete this reversal. The US assault on Venezuela (which has the second largest oil reserves among countries) and on Iran are indicative of this attempt at reversing economic decolonisation.

This attempt explains why the rules-based international order is being subverted by the US. Of course, an attempt at recolonisation can occur even within a rules-based international order, such as, for instance, what the neo-liberal regime had signified. But if the cul-de-sac caused by the neo-liberal regime is to be overcome through a jettisoning of neo-liberalism in the US (and other countries in the Global North) while its application in the Global South continues apace, then going beyond the rules-based international order becomes absolutely necessary for imperialism.

This imperialist strategy for overcoming the cul-de-sac of neo-liberalism betrays at the same time its inability to usher in a solution that can promise to benefit all. It amounts, in other words, to an admission that the system has exhausted its potential for even promising an improvement in the living conditions of all, that no going beyond neo-liberalism is possible for the system as a whole; some countries can go beyond neo-liberalism, but only by subjecting others to even greater thraldom under it.

The question that immediately arises is: why do governments of the Global South agree to such unequal trade treaties and the recolonisation that such treaties typify? The answer lies in the fact that while the working people, the petty producers and even the small capitalists in the Global South would suffer because of such recolonisation (the Indo-US trade treaty, for instance, would be particularly harmful for the Indian peasantry), the monopoly bourgeoisie that is closely integrated with metropolitan capital will not.

On the contrary, it is likely to be a beneficiary; and governments in the Global South, including and in particular the neo-fascist ones, cater to its interest. The project of recolonisation, in other words, becomes possible because of a fracturing of the earlier anti-colonial class alliance that had brought about decolonisation.

The writer is Professor Emeritus, Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. The views are personal.