Capital and Imperialism: Theory, History, and the Present

by Utsa Patnaik and Prabhat Patnaik

$17.00 – $89.00

Those who control the world’s commanding economic heights, buttressed by the theories of mainstream economists, presume that capitalism is a self-contained and self-generating system. Nothing could be further from the truth. In this pathbreaking book—winner of the Paul A. Baran-Paul M. Sweezy Memorial Award—radical political economists Utsa Patnaik and Prabhat Patnaik argue that the accumulation of capital has always required the taking of land, raw materials, and bodies from noncapitalist modes of production. They begin with a thorough debunking of mainstream economics. Then, looking at the history of capitalism, from the beginnings of colonialism half a millennium ago to today’s neoliberal regimes, they discover that, over the long haul, capitalism, in order to exist, must metastasize itself in the practice of imperialism and the immiseration of countless people.

A few hundred years ago, write the Patnaiks, colonialism began to ensure vast, virtually free, markets for new products in burgeoning cities in the West. But even after slavery was generally abolished, millions of people in the Global South still fell prey to the continuing lethal exigencies of the marketplace. Even after the Second World War, when decolonization led to the end of the so-called “Golden Age of Capitalism,” neoliberal economies stepped in to reclaim the Global South, imposing drastic “austerity” measures on working people. But, say the Patnaiks, this neoliberal economy, which lives from bubble to bubble, is doomed to a protracted crisis. In its demise, we are beginning to see—finally—the transcendence of the capitalist system.

Praise for A Theory of Imperialism (Columbia University Press, 2016):

The ideas outlined in A Theory of Imperialism are central to understanding the construction of the unequal global system in the past and in the present.”

—Samir Amin, author, The Liberal Virus: Permanent War and the Americanization of the World

Utsa Patnaik is professor emerita and Prabhat Patnaik is professor emeritus at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. Utsa’s books include The Agrarian Question in the Neoliberal Era and The Republic of Hunger and Other Essays. Prabhat’s books include Accumulation and Stability Under Capitalism, The Value of Money, and Re-Envisioning Socialism.

PRIVATIZATION PUTSCH
Can India's privatization push revive its economy?

Moves to privatize India's public services are being met with strong opposition.

However, proponents of the plans say privatization can streamline services and boost the economy.


Government-owned carrier Air India was finally sold after several attempts over the years


The Indian government's deal to sell its flagship Air India was touted by supporters as a landmark move in a drive to privatize the debt-laden airline, and other public services.

Critics say privatization could mark a decline in the quality of government-supported organizations.

Air India's privatization drive had been in the works for about four years. However, past attempts to offload the loss-making airline hit several roadblocks, including government insistence on retaining some shares in the airline, and political backlash from left-wing parties.

Ultimately, it was Tata group, India's oldest conglomerate, that agreed to pay $2.4 billion (€2.1 billion) for the carrier in October 2021, with the sale expected to close in December.
Push for privatization

The government's most determined push for privatization came during Finance Minister Nirmala Sitharaman's budget speech in February, in which she unveiled an ambitious plan to sell large state-owned companies.

The minister announced that with the exception of four strategic sectors, the government would either privatize or close all public sector enterprises.

These strategic sectors include atomic energy, space, and defense; transport and telecommunications; power, petroleum, coal and minerals; and banking, insurance, and financial services.

However, even in these four strategic sectors, the government would retain "a bare minimum" number of firms, Sitharaman said.

As elsewhere, privatization in India has become a politically sensitive issue. It was one of the key reforms in 1991 when the government opened up the Indian economy, saving it from the brink of collapse.

It gained fresh momentum around 2000 under the right-wing government led by the Bharatiya Janata Party (BJP).

But divestment has courted political and legal controversies.

"The fear among the political class is that when the public sector enterprise is privatized, a lot of the jobs are lost," said Shankkar Aiyyar, a political economy analyst and author of "The Gated Republic: India's Public Policy Failures and Private Solutions."

"But what they are unwilling to accept is that 100% of the jobs are lost when the company has sunk into the ground," Aiyyar told DW.

Successive governments were hesitant to pursue privatization until it was revived by the current government.

"Every political party, when in government, promotes privatization — and opposes it when in the opposition," Aiyyar said. "This 'Jekyll and Hyde' personality of Indian politics persists."

"If enough jobs were being created elsewhere in the economy, privatization would not have so much resistance and pushback," he added.

Oil and energy are considered by the government to be a strategic sector

The case for privatization

The underlying rationale behind privatization of government-run companies is that they would perform better in private hands.

Proponents of the plan also argue that selling large companies would raise billions of dollars that could bolster the government's resources.

"We need to have success in liquidating some of these companies, closing them, selling the land and the assets. This we have yet to achieve," said Ajay Shankar, a retired senior bureaucrat who led the government's Department of Industrial Policy and Promotion.

The proceeds could fund new infrastructure and replenish government finances battered by the coronavirus pandemic, Shankar argued.

Privatization proponents argue that selling off public companies could help finance infrastructure projects

Profit not the only goal

Opponents of privatization say public sector enterprises were formed with all kinds of objectives, and profit-making is not among the primary goals.

Prabhat Patnaik, a Marxist economist and former professor at New Delhi's Jawaharlal Nehru University, argues that even if a public company is not profitable, this is not necessarily a symptom of inefficiency.

"Some of these companies were formed to develop technological self-reliance, others to tap the mineral resources of the country and make sure that the proceeds of the resource come to budget," he told DW.

On the other hand, a foreign company in India could be highly profitable, but still not bring value to the Indian economy, he pointed out.

Patnaik described privatization as akin to handing over the nation's wealth to a "bunch of private oligarchs" in the name of reform.

Government ownership of companies usually promotes an underlying commitment to public welfare.

In many cases, public sector enterprises maintain prices for their goods and services that are affordable to the general public.

Yet economists have long called for reform within public sector enterprises.

"The government can give financial autonomy and streamline the functioning of these companies, but it cannot simply hand over public sector enterprises for a song," said Patnaik.

"The amount that the government is getting in every case is just a tiny fraction of the assets of the company."

Divestment rather than privatization?

As the government faces a fiscal deficit and a slowing economy made worse by the pandemic, the need to raise funds has become more pressing.

But Patnaik argues that from a macroeconomic standpoint, privatizing an asset is the same as a fiscal deficit.

"Handing over a public enterprise means putting equity into the hands of a private buyer," he said.

"Fiscal deficit means putting bonds into the hands of a private buyer. The macroeconomic consequences of the two are exactly the same."

"The whole argument that selling private companies gives the government resources is a false one," Patnaik added.

The government, according to officials, is expecting 500 billion rupees (€6 million or $6.7 million) in dividends from public sector companies in the current fiscal year.

Many have called for divestment as an alternative. This would mean that the government sells some of the shares and assets in its companies, transferring control to the private sector without a change in ownership.

Supporters of this alternative additionally argue that a public-private partnership would attract the best professional managers from the market to publicly funded companies.

"There is every reason for the government to own what it owns, but there is not enough justification for it to manage what it owns," Aiyyar said.

"Ultimately, the fewer economic entities managed by politicians, the better it is for the economy," he said.

Edited by: Leah Carter

Measuring Poverty or ‘Prettifying’ Neo-Liberalism?

Prabhat Patnaik | 19 Oct 2024 | NEWSCLICK

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The new measure of “multidimensional poverty” by World Bank et al is conceptually flawed.

Several international organisations are now engaged in the business of measuring what they call “poverty”. The World Bank has been in it for some time, but now we have a new measure of “Multidimensional Poverty” brought out by the United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative (OPHI). Neither of these measures, however, actually measures poverty; they typically end up “prettifying” neo-liberal capitalism.

In fact, according to the World Bank’s estimate, the proportion of the world’s population that lives in “extreme poverty” (that is, below a daily per capita expenditure of $1.90 at 2011 purchasing power parity exchange rate) has gone down from over 30% in the late 1990s to less than 10% in 2022, suggesting that under neo-liberal capitalism “millions have been lifted out of poverty”. Let us see why this much-quoted World Bank’s measure is conceptually flawed.

There are three basic problems with the World Bank’s measure: first, it makes no reference to a person’s asset position but only to that person’s income position. Second, it takes expenditure as a proxy for income. And third, for measuring real expenditure, it uses a price-index that grossly understates the actual increase in cost of living. The figures it gets, therefore, are grossly erroneous. Let us examine each of these points.

Any meaningful measure of poverty must have a “flow” dimension covering, say, income, and a “stock” dimension covering asset ownership. Both dimensions are important. For instance, if persons have the same real income between two dates but have lost all their assets by the later date, then it would be a travesty not to see them as having become poorer.

For one, the World Bank’s measure, however, makes no reference to the asset position of persons, which is a particularly glaring omission under neo-liberal capitalism, when the process of primitive accumulation of capital, that is, of the dispossession of individuals from their assets, is rampant. To say that “millions have been lifted out from poverty” when such rampant dispossession is occurring, constitutes supreme irony.

Second, even real income is not covered by this measure, since income data are not available in most countries, including India; besides, “income” is a conceptually complex entity. Typically, therefore, expenditure, on which data are more easily available and which is a conceptually simpler entity, is taken as a proxy for income.

But this makes the ignoring of a person’s net asset position even more unforgivable. Even when the income of persons goes down, they can maintain the earlier level of expenditure by running down assets or by borrowing. To conclude from this that the persons concerned have not become poorer because their expenditure has remained unchanged, would be quite absurd. In fact, both in flow terms, namely income, and in stock terms, namely net assets, these persons have become unambiguously poorer, but the measure based on expenditure would show the persons to be at the same level as before.

Third, the measurement of real expenditure even for countries like India, where we have money expenditure data for households through careful sample surveys carried out periodically, is grossly erroneous, since the price-index used for deflating such nominal expenditure understates the actual rise in cost of living.

The price-index used is a weighted average of individual price relatives for a bunch of commodities consumed in the base year. This is erroneous because important changes take place in the composition of the consumption basket following the base year owing to the non-availability of base year goods; the effects of such changes go unrecognised.

Under neo-liberalism, for instance, the privatisation of a range of services, such as education and healthcare that were earlier provided by public institutions, is a common phenomenon, which raises greatly the cost of these services to the people; but this is not captured by the price-index.

For instance, if a surgery in a public hospital which used to cost Rs 1,000 in the base year, costs Rs 2,000 now, then the price-index will take healthcare costs as having doubled; but the fact that the number of surgeries carried out in the public hospital has remained unchanged or even declined, because of which people are now forced to go to private hospitals, where the same surgery costs Rs 10,000, is not captured by the price-index.

The actual cost of living, in short, has increased to a far greater extent than shown by the price-index that is used to deflate nominal expenditure for obtaining “real” expenditure. Deflation by the official price-index, therefore, exaggerates the improvement in people’s living standards and hence seriously underestimates poverty.

Whenever people are squeezed by cost-of-living increases that make it difficult for them to make ends meet, they adjust in at least two distinct ways: first, by running down assets or running up debts, and second, by changing the composition of their consumption such that items considered “essential” are given priority over other items considered less essential.

The rise in the cost of meeting healthcare, or of children’s educational needs has caused both these adjustments in India: there has been a significant worsening of the net asset position of Indian households, especially in rural areas; and there has also been a skimping on household nutritional intake in the (mistaken) belief that economising on the nutritional intake does not matter much.

The All India Debt and Investment Survey of 2019 (which gives information as on end-June 2018), when compared with the AIRDIS for 2013 (which gives information as on end-June 2012), shows the following (all comparisons are of “real” as opposed to nominal figures, which have been deflated by the wholesale price index): first, 11% more rural households were indebted on the latter date; second, the average amount of debt per indebted rural household increased by 43% by the latter date; third, the average value of assets per cultivator household declined by 33% between the two dates and for non-cultivator households by 1%.

The picture is broadly similar for urban India. There was a decline in the average value of asset per household (29% for self-employed households and 3% for others); and while the percentage of indebted households remained more or less the same as before, the average amount of debt per indebted household increased by 24% between the two dates. It is an indubitable fact, in other words, that the net asset position of the bulk of Indian households has declined significantly.

The second kind of adjustment has also been occurring. The proportion of the rural population that does not have access to 2,200 calories per person per day has increased from 58% to 68% between 1993-94 and 2011-12; the proportion in urban India not having access to 2,100 calories (the corresponding benchmark used by the erstwhile Planning Commission) increased from 57% to 65% between these two dates.

The 2017-18 results of the National Sample Survey were so dismal, showing decline in real spending on all goods and services, that they were quickly withdrawn from the public domain by the National Democratic Alliance government.

From whatever data were available prior to this withdrawal (and assuming that the real food cost per unit of nutrients remained unchanged), it turns out that while the urban percentage was more or less the same as in 2011-12, the rural percentage had increased to well over 80%. (These figures are taken from Utsa Patnaik’s forthcoming book on poverty).

In contrast to this grim reality, the World Bank’s “extreme poverty” measure which, as already mentioned, takes a daily expenditure of less than $1.90 (at the 2011 purchasing power parity exchange rate) as its definition, shows a decline for India from around 12% in 2011-12, itself a gross underestimate, to just 2% in 2022-23.

Incidentally, the World Bank’s yardstick of $1.90 implies a poverty line in rupee terms of about Rs 53 per day for meeting all expenses. The World Bank’s yardstick is itself derived as an average of what several governments of the poor countries themselves use (invariably under Bank guidance) in their estimation of the poverty line; it is not a separate measure independently calculated. It suffers from exactly the same defects, such as underestimation of the cost-of-living increase in the price-index used for deflating nominal expenditure, that the official poverty estimates of these countries suffer from. The World Bank, in effect, gives an imprimatur to the propaganda of several Third World governments about how they have reduced or eliminated poverty.

All the talk about “millions being lifted out of poverty” is thus no more than a cruel joke. Unfortunately, one is likely to hear more such talk in the coming days as countries start vying with one another to show how they have been meeting the Sustainable Development Goals (SDGs) set by the United Nations.

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

The Absurdity of World Trade Arrangements

Prabhat Patnaik | 06 Jul 2026

The US is holding a gun to the heads of countries to make adjustments, insisting on a favourable deal for itself.

Consider a very simple picture, of a world in which there are only two countries that are engaged in trade. One of the two has a current account surplus while the other, by definition, has an identical current account deficit. It is reasonable to assume that since the surplus country is obviously more successful as an international competitor, it would be close to full capacity-use in a regime of free trade, while the deficit country that is weaker in its competitiveness would have much larger unutilised capacity.

Now, suppose the surplus country enlarges its domestic absorption of goods by increasing, say, the consumption of its workers; since it does not have much unutilised capacity, this larger absorption would entail a reduction in its exports and hence in its current account surplus. Since its surplus must be identical with the deficit of the other country, a reduction in it must mean a reduction in the second country’s current account deficit.

The mechanism through which this would occur is the following: as exports of the surplus country into the deficit country get reduced, the domestic producers in the latter can now get access to larger domestic markets, and hence produce more by utilising their unused capacity. The output, employment, and hence domestic consumption in the deficit country, therefore, will increase as a consequence of an increase in workers’ consumption in the surplus country.

Put differently, if the surplus country is forced to “adjust”, that is remove the current account imbalance between the two countries, then taking the world as a whole (which in the present case consists of only two countries), there will be larger output, employment and consumption, even as the current account imbalances are removed. 

It stands to reason, therefore, that the removal of current account imbalances must be sought through “adjustments” by the surplus country, since it leads to a better outcome for all concerned.

The current international trading arrangement, however, is just the opposite of this: it forces not the surplus country but the deficit country to make the adjustment by reducing its domestic absorption of goods and services. The argument here is that a reduction in domestic demand in the deficit country will mean a reduction not just in its domestic output but also in its imports, which would reduce its current account deficit (and ipso facto the current account surplus of the first country) and thereby achieve the desired adjustment. In the process, however, demand in the world economy goes down, and with it, world output and employment; and needless to say, the level of consumption in the world economy gets reduced by such adjustment.

We thus have two possible ways in which adjustment to eliminate current account imbalances can be made: if the surplus country is made to adjust then world output, employment and consumption increases, while if the deficit country is made to adjust, then world output, employment and consumption falls.

The rise in world consumption incidentally must occur in the first case, even if the increase in domestic absorption in the surplus country is not effected through a rise in workers’ consumption; since the output and employment in the deficit country increases, total world wage-bill and world consumption increases, no matter how the surplus economy increases its domestic absorption.

Amazingly, however, the world trading arrangements are such that the inferior mode of adjustment is carried out whenever there are imbalances, and not the superior mode of adjustment. This is the irrationality of the world trading arrangements under which we live.

When the Bretton Woods system was being set up in 1944, economist John Maynard Keynes had mooted the idea of making surplus countries also undertake some adjustment. But the US those days was an economy with a persistent current account surplus and opposed the idea of making surplus economies undertake adjustment: it preferred holding claims on other countries which gave it power over them, compared to increasing domestic absorption, the most obvious way of doing so being by raising workers’ consumption. A capitalist economy in any case would scarcely prioritise raising workers’ consumption.

Much, of course, has changed since 1944 when the Bretton Woods conference was held; the US which had been a surplus country then and for a long time after the war, started posting persistent current account deficits from the mid-1970s. Why, it may be wondered, did the US not start asking for adjustment by surplus countries when it stopped having surpluses itself?

There are three obvious reasons one can cite why it did not do so. First, having a deficit is something that the “leader” of the capitalist world would have to accept as part of the duties of “leadership”; for instance, the “leader” has to maintain a string of military bases around the world for its counter-revolutionary activities, which entail incurring expenditures abroad and hence a current account deficit. The US, therefore, was not unduly shocked or surprised by the current account deficits it started experiencing.

Second, since the US dollar played the role of being de facto “world money” which the rest of the world was willing to hold in almost unlimited amounts, the US had no problems in financing its deficit by making dollars (and dollar-denominated assets) available to surplus countries, and hence felt no need for any adjustment on its part or on the part of the surplus countries, at least no urgent need for any adjustment.

Third, much of the exports being made to the US by the surplus countries, in East Asia for instance, were produced by American capital itself relocating its manufacturing activities to these countries. Insisting on a reduction in the surplus of these countries therefore might mean hurting the interests of American capital which obviously no US administration would do unless urgently required.

For all these reasons, despite the changed international situation that saw the US incurring persistent current account deficits, there was no immediate demand on the part of the US to bring about any change in the world trading arrangements.

The US was content to let dollars and dollar-denominated assets pour into the world economy as the means of settling its current account deficit. Matters, however, have taken a different turn of late. With China moving away from holding dollar foreign exchange reserves, and with the threat of de-dollarisation looming on the horizon (however distant that threat may be as yet), the US now feels the need to reduce its current account deficit; but it is not concerned with altering the world trading arrangements in a way that would benefit the world economy as a whole. The recent Trump measures testify to that.

The Trump measures are not meant to overcome the irrationality of the world trading arrangement that we discussed above; they are meant only to ensure that the US does not suffer from its deficit position, that it overcomes its predicament of being a deficit country without making the usual adjustment involving a reduction in its domestic demand that a deficit country is supposed to do. Indeed, on the contrary the Trump measures are meant to reduce the US deficit even while increasing its domestic output and employment. Let us see how.

The two basic weapons used by Trump are: punitive tariffs, and unequal trade treaties imposed on trading partners (of which India is the first instance); these unequal treaties stipulate the exact amounts that a country is supposed to import from the US (without stipulating anything in the opposite direction). In fact, punitive tariffs are used as the punishment inflicted on any country that does not accept the unequal treaty; and countries accept the unequal treaty as the lesser of the two evils.

As the trade deficit narrows through such coercive means, the demand for domestic goods increases within the US and hence domestic output and employment too. But this does not amount to any alternative trading arrangement for the world economy as a whole that would be universally beneficial and hence constitute an embodiment of rationality. It is the US holding a gun to the heads of countries and insisting on a favourable deal for itself.

In fact, with a better deal for itself, it will join with even greater gusto in enforcing the irrational world trade arrangement that forces deficit countries to undertake adjustments, an irrational arrangement that the US itself had been instrumental in imposing on the world.

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

 

Why is India Supplying Arms to a Genocidal Regime?

Prabhat Patnaik | 10 Aug 2026

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Between October 7, 2023 and November 30, 2025, India made at least 2,596 shipments of small arms, ammunition and military vehicle components to Israel for such aggressive purposes, as per Amnesty’s report.

Amnesty International has just published an investigative report titled, Made in India: The Supply of Weapons and Ammunition to Israel, in which it details India’s arms supplies to Israel at a time when that country was perpetrating a genocide in Gaza. Amnesty International carefully excluded from its purview all shipments carrying items for civilian use; likewise, it even excluded weapons and ammunition that are likely to be used as part of anti-missile defence technology that defends civilians from indiscriminate attacks. In other words, it was careful to focus exclusively on arms shipments from India that would be used for aggressive ends by Israel.

According to this report, between October 7, 2023 and November 30, 2025, India made at least 2,596 shipments of small arms, ammunition and military vehicle components to Israel for such aggressive purposes. Among the articles supplied were 564,970 parts of explosive ordnance (such as 155 mm high explosive artillery shells and drone warheads), 390, 516 military grade small arms parts, and 298 military vehicle components.

There can be no doubt whatsoever that these weapons and ammunition were actually used by Israel in Gaza. In fact, missile fragments labelled “Made in India” were found in a UN-run school in Nuseirat in Gaza sheltering displaced Palestinians, after an Israeli raid on it that killed 33 persons. By supplying arms to Israel which many advanced countries like Spain and Canada have refused to supply, when it is engaged in carrying out genocide, India is becoming complicit in genocide. Spain, in fact, had even denied entry in May 2024 into the Spanish port of Cartagena, to a vessel named Marianne Danica that was carrying 27 tonnes of explosives from Chennai to Israel.

Among the arms suppliers from India are not just private sector firms, including, above all, Adani Defence and Aerospace that has joint ventures with Israeli arms manufacturers like Elbit Systems and Israel Weapon Industries, but also several government-owned firms.

It is significant that the government of India has not responded to the report by Amnesty International. A Ministry of External affairs spokesman was quizzed about it while he was briefing presspersons about something else, and he just breezily asserted, without going into any details, that India’s trade relations with Israel were in total conformity with international law.

Now, this is an absurd assertion for two obvious reasons. First, even if this was correct, it does not absolve India from the moral responsibility of being complicit in the mass slaughter of thousands of Palestinians in the Gaza strip. After all countries, like Spain or Canada, have not ceased supplying arms to Israel only because they fear that doing so would be an illegal act. So, legality cannot be, and has never been, the sole determining factor in a country’s decision-making when the matter concerns the lives of thousands of innocent civilians. This point is specifically pertinent in the case of India which has been always until recent years, a beacon against inhuman acts of oppression against the people of the Third World, and which has always been in the forefront of opposition to such acts.

Second, India is also culpable even in legal terms, for the mass slaughter of Palestinians that Israel has carried out and is still in the process of carrying out, can be legally called genocide; and under the Genocide Convention, complicity with genocide by any state that is a signatory to it is a punishable act.

The Genocide Convention came into being on December 9, 1948, through a decision of the UN General Assembly. India signed the Genocide Convention on November 29, 1949, and formally ratified it on August 27, 1959. Not only is complicity in genocide punishable under it, but signatory countries are enjoined that they “must prevent and punish acts of genocide in both peace and war time”.

Of course, the government of India would hide behind the fig-leaf that Israeli actions in Gaza have not yet been legally declared as genocide; but this excuse simply would not do. South Africa had approached the International Court of Justice in December 29, 2023, with the plea that Israel’s actions in Gaza be declared as a genocide, for which the South African foreign minister and her family had received threats and online intimidation at the time. Subsequently, nearly 20 other countries, including Brazil, Spain and Mexico, intervened in support of South Africa, while only three countries, the United States, Hungary (under the neo-fascist Victor Orban who has since been defeated in elections) and Fiji have publicly opposed South Africa.

The ICJ has not given its final ruling (which in any case takes years) but has ordered legally-binding provisional measures to prevent genocidal acts and to allow humanitarian aid. The fact that Indian arms were used by Israel in the massacre of 33 Palestinians taking refuge in a school at Nuseirat, which constitutes a genocidal act in violation of the ICJ’s provisional directive, would make India legally culpable for complicity in genocide. The Indian government’s stand, therefore, is not just morally reprehensible; it cannot even stand legal scrutiny.

But that is not all. Two UN bodies, the UN Special Committee to Investigate Israeli Practices which submitted its report in November 2024, and the International Commission of Inquiry on the Occupied Palestinian Territories set up by the UN, which submitted its report on September 16, 2025, have come to the conclusion that Israel has committed genocide in Gaza.

The Special Committee accused Israel of using deliberate starvation as a weapon of war against the Palestinian population of Gaza, which, incidentally would violate the ICJ’s provisional directive on allowing humanitarian aid to the besieged population. The International Commission not only listed mass killings which amounted to genocidal acts, but concluded that the top Israeli leadership had been engaged in incitement to commit genocide.

Since these UN bodies had eminent jurists among their members, their verdicts have a juridical status that is of great significance and cannot be brushed aside.

Exactly the same can be said of the resolution of the International Association of Genocide Scholars, which consists of 500 of the world’s top experts specialising in the study of genocide. This Association whose membership includes lawyers, historians, political scientists and human rights activists, passed a resolution which stated that the government of Israel had committed systematic and widespread acts constituting crimes against humanity, war crimes and genocide.

In view of this overwhelming evidence, including weighty legal opinion, supporting the conclusion that Israel has been committing genocide in Gaza, signatory countries to the Genocide Convention like India should be acting to “prevent and punish” Israel; to supply arms to it instead so that it can continue with its genocidal acts against the Palestinians, constitutes a moral and legal affront to humanity.

By acting thus in a manner that constitutes an affront to humanity, the Narendra Modi government has brought shame to the country. Not only is there a moral hollowness at the heart of this government’s domestic policies, there is also a moral hollowness at the heart of its foreign policy.

What is more, supplying arms to Israel when it is engaged in a genocidal offensive against the Palestinian people, is not even logically consistent with this government’s own stand on the Palestinian issue. Prime Minister Modi has time and again reiterated his government’s support for a “two-state” solution to resolve this issue. Israel today rejects this “two-state solution”. In this respect it has gone back on its own position at the time of the Oslo Accords, which had recognised a Palestinian Authority with limited powers. Today, it wants the whole of Gaza under its own control, and the purpose of its aggression is to achieve that end. To aid and abet that aggression, therefore, directly contradicts India’s own vision of what should be happening in Gaza.

Supplying arms to the Israeli genocidal regime, it follows, quite apart from being morally reprehensible and legally culpable, goes against the Modi government’s own explicitly articulated stand on the Palestinian issue; but that is of little concern to this government.

As far as the Modi government is concerned,  cosying up to Donald Trump, and promoting the interests of cronies like the Adanis, who profit hugely from arms sales to Israel, takes precedence over the country’s legal obligations, its moral responsibility, and even its credibility among nations.  

 

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

Multiplier Effects of ‘Bubbles’ Under Neo-Liberal Capitalism

Prabhat Patnaik | 28 Oct 2025

When the ‘AI bubble’ bursts, as it inevitably will, there will be a substantial rise in unemployment rate in the US.

Neo-liberal capitalism has an immanent tendency toward stagnation, which arises because of the operation of two factors: the first is the growth in income inequality that it continuously spawns. Since the poor consume the bulk of their incomes while the rich “save” (that is, do not consume) most of it, consumption demand, and hence overall aggregate demand, tends to fall below the growth of producible output, resulting in a rise in unemployment and unutilised capacity that drives the economy down.

This continuous tendency toward a rise in income inequality arises from the fact that, owing to the mobility of capital across country borders, wages across the entire world have to suffer the baneful consequences of the massive Third World labour reserves; and the relative size of these reserves does not diminish despite such relocation of capital from the Global North.

On the one hand, the withdrawal of State support from petty production and peasant agriculture forces distressed producers from these sectors to move to towns in search of employment, thereby increasing the number of job-seekers; on the other hand, the rise in the rate of growth of labour productivity that is enjoined upon all countries because of trade “liberalisation”, via the adoption of new processes and products, keeps down the number of new jobs being created. Real wages across the world, therefore, fall behind labour productivity, causing a rise in the share of economic surplus in the output of each country and in world output as a whole; the observed rise in income inequality is an empirical manifestation of this phenomenon and constitutes the basic reason for the tendency toward stagnation under neo-liberal capitalism.

The second factor that underlies the realisation of this tendency is the inability of State intervention to rectify this deficiency of aggregate demand relative to producible output. Such state intervention is what John Maynard Keynes, the foremost bourgeois economist of the 20th century, had pinned his hopes on.

But since State intervention to yield results must mean larger State expenditure financed either by a fiscal deficit or by taxing the rich (the other alternative, of taxing the working people and spending the proceeds does not entail an increase in aggregate demand since the working people consume the bulk of their income anyway), and since both these means of financing State expenditure are disliked by globalised finance and hence ruled out, the Keynesian remedy ceases to work. The tendency toward stagnation arising from over-production relative to demand under neo-liberal capitalism has, therefore, no effective counterweight in the normal course.

But this is where “bubbles” come in. Speculation in the market for assets or claims to assets pushes up their prices sky-high which encourages extra investment in those sectors (because of the ease of raising finance) and extra consumption by the holders of such claims (who feel extremely wealthy and hence consume more, even though much of this wealth is actually fictitious). Hence even though the asset price bubble is primarily a financial phenomenon, it has an effect on the real economy. And such bubbles play the role of providing a temporary counterweight to the tendency toward stagnation under neo-liberal capitalism.

Such bubbles do not negate the tendency toward stagnation; they do not introduce a long-term growth trend. They occur from time to time, and introduce a temporary wave around the growth trend before dying out.

During the upward surge of the bubble, there would be some improvement in the performance of the real economy, just as when the bubble collapses, and a financial crisis ensues, the performance of the real economy would receive a setback.

Of course, a bubble does not arise entirely out of the blue; it is typically associated with the introduction of some new technology, in the form of some new product (or process). The euphoria generated by the new technology translates itself into a bubble that then gets metamorphosed into a speculative phenomenon, where the focus is no longer what the new technology would fetch, but on how other speculators would behave.

The Austro-American economist Joseph Scumpeter had rightly seen technology being introduced in such waves, but had erred grievously in not recognising the phenomenon of deficiency of aggregate demand and the consequent tendency toward over-production, and how that, in turn, affects the shape and nature of the wave through which technology gets introduced.

One consequence of this was Scumpeter’s vision that the economy is always at full employment (the wave caused by the introduction of new technology affecting only prices rather than employment), so that when the wave is finally over and dust has finally settled, the workers are decidedly better off owing to the higher labour productivity that the new technology has brought, whose benefits accrue to them in the form of higher wages. This idyllic picture, alas, does not hold, a point whose significance we shall presently see.

Such a temporary reprieve from the tendency toward stagnation under neo-liberal capitalism, had been provided by two such bubbles earlier, both occurring in the US: the dotcom bubble of the 1990s and the housing bubble that followed almost immediately afterwards (such immediate succession being deliberately engineered to an extent by Alan Greenspan, the then chairman of the Federal Reserve Board, which is the US central bank).

After the collapse of the housing bubble, the world economy sank into a prolonged stagnation, aggravated in its initial phase by the after effects of the collapse of this bubble. Not surprisingly, the growth rate of the world economy during the decade 2012-21 (that is, after the pandemic-induced drop had been reversed), was lower than the growth-rates during the previous three decades -- 1982-91, 1992-2001, 2002-2011-- which themselves were lower than during the decades of the post-war period.

There is an impression that the Artificial Intelligence (AI) bubble currently underway will not only offset the tendency toward stagnation for the present, but will also do so on a more sustained basis. This perception, however, is completely erroneous. While the size of the AI bubble in financial terms is quite significant, its impact on the real economy is not. Indeed, two points have to be noted about the impact of the AI bubble on the real economy.

First, its impact on the totality of the real economy within the US itself, though positive, is quite marginal. According to the US Bureau of Labour Statistics, the youth unemployment rate in that country in July 2025 was 10.8%, which was not only high in itself, but represented an increase over July 2024 when it was 9.8%. In other words, the boost to the level of activity in the real economy provided by the AI bubble today is not significant enough to cause a fall in the year-on-year youth unemployment rate.

What is more, and this is the second point to be noted, when this bubble bursts, as it inevitably will, there will be a substantial rise in unemployment rate in the US. This would be so for three reasons: first, the effect of the bursting of the bubble (and even if there was no speculative bubble, but just the introduction of technology in a wave, the effect of the ebbing of that wave), which would be in the nature of a cyclical downturn in employment. Second, the effect of AI itself in reducing employment even in normal times (that is, even if there were no cyclical downturn).

And third, the effect of reduced incomes of the employees as a whole (since wages would not be rising while employment falls) on aggregate demand and hence on the level of activity (this is what economists call the “multiplier effect”).

Even when the first of these effects has waned, the second and the third will continue, and will ensure that the net long-term consequence of the introduction of AI would have been a vastly increased permanent level of unemployment, which will further accentuate the tendency toward stagnation of neo-liberal capitalism.

Nothing demonstrates more clearly than the introduction of AI, the irrationality of capitalism as a mode of production and the unquestionable superiority of socialism over it. A technological breakthrough that in a socialist economy would be absorbed through increased leisure for everyone without any fall in real wages, and would in addition enhance human capacity, is causing reduced employment directly, reduced real wages because of it, and is accentuating both these reductions (in employment and real wages) through their multiplier effects via reduced aggregate demand.

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

 

Speculation, US Tariff Threat, and Working People

Prabhat Patnaik | 25 Nov 2025

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The hallmark of a neo-liberal regime, like India, is that the real living conditions of millions of working people are left to the whims and caprices of international speculators.

The fact that speculation can exacerbate a basic situation of shortage of a commodity by encouraging its hoarding, or even cause a completely artificial shortage of it when no basic shortage exists, and thereby play havoc with the lives of the working people, especially when the commodity happens to be a necessity, has been well-known. There is no doubt, for instance, that the basic situation of excess demand in the foodgrain market, owing to deficit-financed war expenditure on India’s Eastern front, that caused the death of three million people in the Bengal famine of 1943, was exacerbated by the hoarding of grains. But the neo-liberal regime of today does something more: it makes the cost of living of the working people directly dependent not just on speculative behaviour in commodity markets, but on speculative behaviour in the currency market as well.

With controls on capital flows, including financial flows, lifted under a neoliberal regime, and with the exchange rate being determined in the market, any tendency on the part of speculators to take funds out of the country in the form of, say, US dollars, causes an exchange rate depreciation, which raises the price of imports in local currency. When these imports include essential inputs, like oil, this has a cost-push effect on the economy as a whole, which causes an inflation that necessarily leads to a fall in real wages, or more generally on the real incomes of the working people.

Indeed, such a cost-push inflation, in a world where profit mark-ups are given, can only come to an end through a compression of the real incomes of the working people; this squeeze on real incomes occurs by virtue of the fact that their money incomes are not indexed to prices. The hallmark of a neo-liberal regime, therefore, is that the real living conditions of millions of working people are left to the whims and caprices of a bunch of international speculators.

It may be thought that just as any tendency toward a financial outflow causes a squeeze on the living conditions of the working people via an exchange rate depreciation, any opposite tendency, towards an inflow of finance (in excess of the autonomously determined current account deficit in any period) should have the opposite effect of appreciating the exchange rate and hence lowering the cost of living, to the benefit of the working masses. This, however, does not occur; there is an asymmetry between the effects of a financial inflow and those of a financial outflow.

When finance flows in, if the exchange rate is allowed to appreciate, then domestic production becomes uncompetitive vis-à-vis imports; production contracts while imports increase, and the increase in imports would, in the absence of any intervention by the central bank, have to be large enough to absorb the extra financial inflow. In such a case, the country would have become indebted to foreigners in order to finance its own “de-industrialisation”, which would have been a patently absurd development. To avoid such an absurdity, the central bank in a Third World country intervenes to prevent the exchange rate from appreciating, by holding on to the extra financial inflows in the form of foreign exchange reserves; this is what the Reserve Bank of India has been doing.

The asymmetry between financial inflows and financial outflows, therefore, lies in this: while outflows cause the exchange rate to depreciate and hence the real incomes of the working people to be squeezed through cost-push inflation, inflows are simply held as additional reserves without any effect on the exchange rate.

True, the holding of such reserves serves as a cushion against financial outflows, so that when such outflows occur, reserves are decumulated to prevent a depreciation of the exchange rate. But since the decumulation of reserves serves to strengthen expectations of a depreciation of the exchange rate and hence causes a further outflow of finance, the central bank typically does not wish to run out of reserves; it does not completely prevent an exchange rate depreciation. There is some depreciation and some decumulation of reserves, resulting on the whole in a squeeze on the real incomes of the working people, as has been happening in India in recent months.

The basic asymmetry, and hence the validity of the basic proposition, therefore, remains unimpaired, namely, that financial outflows cause the exchange rate to depreciate and hence squeeze the real incomes of the working people, while financial inflows are simply held as reserves at the prevailing exchange rate without any opposite effects.

This asymmetry shows itself over a period of time as a secular decline in the exchange rate, which is exactly what we have been witnessing in India under the neo-liberal regime.

On November 10, 1990, when the Chandra Shekhar government had taken office just prior to economic “liberalisation”, the exchange rate was Rs 17.50 against one US dollar. Today, November 15, 2025, the exchange rate is Rs 88.50 against $1; a huge depreciation of the rupee during the neo-liberal period. The extent of this depreciation, by over 400%, is in contrast to a mere 33.3% depreciation over the entire preceding period, from Independence in 1947 to 1990.

All this relates to the immanent tendency of a neo-liberal capitalist economy in the Third World. There is, however, a second way in which a Third World economy becomes vulnerable to import-cost-push inflation within a neo-liberal arrangement, and that is evident today in the face of US President Donald Trump’s tariff aggression. Trump is imposing punitive tariffs against India on the grounds that India is violating the unilateral sanctions imposed by the US and other imperialist countries against Russia by buying Russian oil.

Since India’s achievement of self-reliance has been undermined by the adoption of a neo-liberal regime, and since the Narendra Modi government does not wish to reverse neo-liberal policies and also lacks the backbone to take any counter-measures against the US, it has totally caved in to US pressure and agreed to stop buying Russian oil. This is not admitted by the Indian government, but Trump has announced it in no uncertain terms, and there is no reason to disbelieve him.

India’s ceasing to buy Russian oil will push up oil prices within the country for two distinct reasons. The first is that Russian oil is cheaper than the oil that will be substituted for it, so that not buying from Russia will push up India’s oil price even at the prevailing international oil prices.

The second reason has to do with the fact that if Russia is cut off from supplying oil, then the international oil price itself will go up, for it will mean a lower overall supply relative to demand in the world economy. This will further increase oil prices within India.

A rise in oil price within the country will have a cost-push effect on the economy, which will come to an end only through a compression of the real incomes of the working people. India’s succumbing to American pressure by ceasing to buy Russian oil, therefore, will have exactly the same effect on oil prices as an exchange rate depreciation; and it will squeeze the incomes of working people of the country in an exactly analogous manner.

US sanctions against Russia are imposed not just for political strategic reasons, but also for increasing the size of the market for the more expensive American oil. Europe has already fallen in line, and committed what can only be described as economic hara-kiri, by substituting more expensive American energy for cheaper Russian energy.

Germany is well on its way to becoming deindustrialised by such substitution, and German workers have already suffered the rigours of one cold winter. Now the working people in Third World countries, like India, are also being made to suffer in order to enlarge America’s energy market.

It speaks volumes on America’s imperialist arrogance that it openly demands sacrifices from the working people all over the world in order to promote its own economic interests by enlarging the size of its energy market. It also speaks volumes on the current Indian government’s total helplessness when faced with American imperialism’s arm-twisting. This government is willing to sacrifice the interests of the Indian working people for the sake of placating a US administration that is promoting American interests.

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