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.

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.

Fiscal Transfers to Capitalists Are Counter-Productive

Prabhat Patnaik | 23 Nov 2024  NEWSCLICK INDIA

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Far from reviving the economy, transfers to capitalists in a neo-liberal regime have the effect of further contracting the economy.

It is common for governments these days to provide fiscal transfers to capitalists, whether through reduced corporate tax rates, or by providing direct cash subsidies, to encourage greater investment by them and thereby stimulate the economy. During Donald Trump’s first presidency there had been a cut in corporate tax rate in the US with this objective in mind.

In India, the Narendra Modi government, as is well-known, has given massive tax concessions with the same objective. Even a minimum knowledge of economics, however, would show that such transfers to capitalists are counter-productive in a neoliberal regime.

This is because such a regime is characterised by “fiscal responsibility” legislation that fixes the upper limit to the fiscal deficit as a percentage of the gross domestic product, and normally the government operates at this ceiling. Transfers to the capitalists, therefore, have to be matched by reductions in expenditure elsewhere, typically in welfare expenditures undertaken for the working poor, or by an equivalent increase in tax revenue garnered from the working poor.

Now, the effect of handing over, say, Rs 100 to the capitalists by reducing transfers to the workers by Rs 100, is to reduce the level of aggregate demand and hence employment and output. Far from reviving the economy, transfers to capitalists have the effect of further contracting the economy. The way in which this comes about is the following.

Investment undertaken in any period is the result of investment orders given earlier, and hence of investment decisions taken in the past; this is so because investment projects have long gestation periods and it is as true of private investment as of public investment. If the tempo of investment is to be stepped up, then a decision for doing so will be taken in the current period and the actual tempo will increase only subsequently. Hence investment in any period must be taken as a given magnitude that does not change during the period in question.

What does change during the period in question is the level of consumption; and here, because the workers consume a higher share of their incomes than the capitalists, any shift of purchasing power from workers to capitalists has the effect of lowering consumption (the same happens if the government reduces its consumption in order to make transfers to capitalists).

What is more, transfers from workers to capitalists (and even from the government to capitalists) have the effect of reducing net exports (that is, the excess of exports over imports), since capitalists’ consumption is more import-intensive. But let us deliberately understate our argument by assuming that transfers to capitalists, that are financed at the expense of the workers, do not change net exports. Since the gross national income, Y, of a country must equal the sum of consumption C, investment I, government expenditure G, and the surplus on the current account of its balance of payments (X-M), that is,

 Y = C+ I + G + (X-M)        ……              (i)   

transfers to capitalists, by lowering C, lower the right-hand side, which depicts the level of aggregate demand.

The equality in the above equation, therefore, can be restored only through a fall in Y, that is, through a reduction in output and employment.

When this happens, the degree of unutilised capacity in the economy increases, which has the effect of lowering the investment decisions of the capitalists taken in the current period and hence their actual investment in the subsequent period. The economy, therefore, far from getting stimulated, actually contracts.

But the story does not end there. Any such contraction in itself, that is, if other things remain the same, has the effect of reducing profits. Thus, while transfers to capitalists as such, have the effect of increasing profits, the fact that such transfers are obtained by reducing the purchasing power of the workers, have the opposite effect, of reducing profits. And under fairly realistic assumptions, these two effects cancel each other out exactly, so that total profits of the capitalists remain exactly the same as would have obtained without the transfers. The assumption under which this result holds is that the working people consume their entire income.

This is a fairly realistic assumption because the proportion of the total wealth of the economy that is owned by the bottom segment of the population is quite minuscule. In India, for instance, the bottom 50% own only 2% of the total wealth of the country. Since all wealth necessarily arises from savings, this only shows that they scarcely save anything at all. Hence our assumption that the working people do not save and that the entire savings in the economy come from the rich, apart from the government, is quite realistic.

Let us, only for a moment, assume that the rich, in this case the capitalists, save their entire income; then private savings equal profits. Since in any economy, total domestic savings must equal total domestic investment minus the inflow of foreign savings, and since government investment minus government savings is what is called the fiscal deficit, this amounts to saying that private savings, and hence profits, in the economy, must necessarily equal private investment plus the fiscal deficit minus foreign savings F coming into the economy during the period; that is,

Profits = Private Investment + Fiscal Deficit – F …(ii)

Since we have argued that private investment and the inflow of foreign savings (which is the just the negative of X-M above) will remain unchanged during the period, as will the fiscal deficit because of the “fiscal responsibility” legislation, profits must remain the same despite the transfers to capitalists.

Dropping the assumption that all profits are saved makes no difference to the above argument. If a proportion α of profits is saved, then equation (ii) simply becomes:

α. Profits = Private Investment + Fiscal Deficit – F… (iii)

If the right-hand side of (iii) remains unchanged, for reasons we have just discussed, then profits must also remain unchanged even if α is not equal to one. Budgetary transfers to the capitalists in short, in a neoliberal regime where the fiscal deficit cannot be increased to finance such transfers and where, therefore, workers’ incomes have to be reduced correspondingly, have the effect not only of precipitating a contraction in output and employment, but of not even increasing the magnitude of capitalists’ income if the workers consume their entire income.

Budgetary transfers to the capitalists in other words cause inequality to increase in an economy without even increasing the capitalists’ income, because they cause an output contraction that negates the profit-increasing effects of such transfers.

They do, however, have one other important effect which is the real reason why the government resorts to them, and that is to change the distribution of profits among the capitalists in favour of the monopoly stratum, away from non-monopoly capitalists. This is so for the following reason. We have seen that total profits remain unchanged despite budgetary transfers to capitalists because while transfers are an addition to profits, the fact that they are associated with taking away incomes from the workers, and reducing aggregate demand, lowers profits to an exactly equal extent; but while this is true in the aggregate, the capitalists who face reduced demand and the capitalists to whom the bulk of the transfers accrue are not the same. In particular, large capitalists are not affected much by the reduction in workers’ consumption demand; but they get the lion’s share of the budgetary transfers. They are, therefore, net gainers, while smaller capitalists whose presence is more pronounced in the market for workers’ consumption goods, become net losers, even when total profits remain unchanged at the aggregate level.

Budgetary transfers to the capitalists are thus a means of aiding what Marx had called “centralisation of capital”, of hastening the replacement of smaller capitals (or even petty producers who produce goods for workers’ consumption) by large capitals. This is what its “crony capitalists” want and the government obliges them. Such transfers are undertaken in the name of stimulating the economy, but they do nothing of the sort; on the contrary they succeed only in contracting the economy, but even in such a contracting economy, they strengthen the position of the monopoly capitalists.

There is some recognition in the media and among Opposition parties that small producers in the country were harmed by demonetisation and the introduction of the Goods and Services Tax. There is, however, less recognition of the harm done to them by the tax concessions and other forms of budgetary transfers made to the capitalists.

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

 INDIA

Defining Socialism: Equality of Opportunities is Pivotal

Prabhat Patnaik | 30 Nov 2024

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The CJI’s observations on socialism are welcome, but a welfare state in the era of neoliberalism and rising privatisation sounds contradictory.

Hearing a petition on November 22 to remove the term “socialism” from the Preamble of the Indian Constitution, the Chief Justice of India (CJI) made two significant observations: first, the term “socialism” in the Preamble of the Constitution is used not in any doctrinaire sense but refers rather to a welfare state that ensures equality of opportunity for all citizens.

Second, “socialism” in this sense is part of the basic structure of the Constitution; it is not just an add-on to the Preamble but rather something that permeates the very essence of what we want the Indian republic to be.

The CJI refrained from giving “socialism” an institutional character. All over the world, the term “socialism” has been taken to mean social ownership of the means of production, at least of the key means of production. But the CJI, defining “socialism” in terms of outcome rather than the institution of ownership, suggested that private enterprise was not incompatible with “socialism”; what really mattered was the creation of a welfare state ensuring equality of opportunity for all citizens.

The institutional definition of socialism, in terms of the ownership of the means of production, is pervasively used because social ownership is considered a necessary condition for ensuring a welfare state with equality of opportunity. The CJI, however, suggested that this outcome could be obtained even without the institution of social ownership.

To be sure, socialism is not concerned only with creating a welfare state with equality of opportunity; its objective is more far-reaching, namely to create a new community by transcending the state of fragmentation into atomised individuals that capitalism brings to a society. 

But the new community must also be characterised by a welfare state with equality of opportunity; the point is whether such a welfare state with equality of opportunity can be achieved even without social ownership of the means of production.

We believe that it cannot; but we shall not, apart from citing some obvious instances of contradiction between private enterprise and equality of opportunity, enter into this debate here. Rather, we would urge the Supreme Court to adhere to the CJI’s commitment to equality of opportunity and examine what a society characterised by equality of opportunity would have to look like.

This becomes important because nobody can possibly argue that the current Indian society, with its increasing concentration of wealth on the one hand, and growing unemployment and nutritional poverty on the other, is moving in the direction of ensuring equality of opportunity; but then the question arises: what are the markers of such a move toward equality of opportunity?

Clearly there can be no equality of opportunity in a world where there is unemployment, or what Karl Marx had called a reserve army of labour. The incomes of the unemployed are much lower than those of the employed, even if the former get an unemployed allowance. The children of the unemployed, therefore, would suffer from deprivations of various kinds that would make equality of opportunity between them and the children of others an impossibility.

Quite apart from the economic inequality arising from unemployment, there is also the stigma of unemployment, the loss of self-worth on the part of the unemployed, which necessarily makes for a traumatised childhood for the progeny of the unemployed. Such trauma can be eliminated, which is a must for equality of opportunity, only if unemployment itself is eliminated.

One way of overcoming the economic deprivation arising from unemployment would be to have the unemployed earning the same wage rate as the employed, that is, making the unemployment allowance equal to the wage-rate. But this is not possible in an economy with private enterprise.

The existence of unemployment acts as a disciplining device on the workers, not just under capitalism, but in any economy where there is a significant private sector. Because of this, the unemployed earning the same wage as the employed, or, put differently, the unemployment allowance being the same as the wage rate, would be unacceptable in such an economy, for it would then remove this disciplining device. The “sack” would lose all its punitive force, as would be the case too if there is actual full employment.

The first contradiction between equality of opportunity on the one hand, and private enterprise on the other, arises, therefore, on the question of unemployment. But whether the CJI would agree with it or not, he must recognise at least that the existence of unemployment is a barrier to equality of opportunity.

The second obvious requirement of equality of opportunity is the total elimination of, or at least a very substantial reduction in, the scope for inheriting wealth. A billionaire’s son and a worker’s son can hardly be said to have equality of opportunity if the former inherits his father’s billions.

In fact, even bourgeois economics which attributes capitalists’ profits, and hence wealth, to their having some special quality that others lack, cannot defend inheritance, for it goes against this very argument of “wealth-because-of-some-special-quality”.

This is why most capitalist countries have high inheritance taxation, the rate in Japan being 55%, and in other major countries around 40%. In India, amazingly, there is no inheritance taxation, which flies in the face of equality of opportunity.

The third requirement of equality of opportunity is that, quite apart from inheritance being proscribed, wealth differences themselves should be minimised. Wealth brings power, including political and social power, and a society where power is unevenly distributed, can hardly be said to provide equal opportunity to all. Hence, quite apart from the fact that wealth should not be allowed to get passed on to children, the effects of wealth in the form of providing an undue advantage to children during the parent’s life-time, must be prevented, for which wealth differences must be minimised. And exactly the same holds for income differences, which should also be minimised if equality of opportunity is to be ensured.

The fourth obvious requirement is that economic inequality must not be allowed to impinge on the educational qualification or the level of skill acquisition of the progeny. This, in turn, requires that the access to education and skill acquisition must be equalised for all, through a public education system that provides training of the highest quality, either free or at an extremely nominal price affordable by all.

Far from the privatisation that has been occurring in the sphere of education in our country and elsewhere under neoliberalism, which makes a mockery of equality of opportunity by excluding vast numbers of students from its ambit, there should be a universalisation of high-quality and fully-affordable public education.

In fact, even when there is such a public education system, as long as expensive private institutions exist there may be a false prestige associated with them that subverts equality of opportunity by favouring recruitment from such institutions. This has to be countered by ensuring that private institutions, if they exist, charge no higher fees than public ones. They can in short only be charitable institutions.

The fifth requirement relates to healthcare, where exactly the same considerations apply. The provision of universal high-quality healthcare, through a National Health Service under the aegis of the government, that is entirely free or demands a nominal price affordable by all, is an essential condition for equality of opportunity.

These are some absolutely obvious and yet minimal requirements for ensuring equality of opportunity. The fact that post-war social democracy, which bult up a welfare state in the advanced capitalist countries, and used Keynesian demand management to keep unemployment down to a minimum (around 2% in Britain in the early 1960s), neither succeeded in achieving genuine equality of opportunity, nor could prove to be a durable achievement (it collapsed because of the inflationary crisis of the late 1960s and the early 1970s) is significant: it shows the impossibility of achieving equality of opportunity in a society that continues to be divided along class lines.

The inflationary crisis that consumed the welfare state was a result of the high employment rate and also of the loss of that complete control over primary commodity producers in distant lands which had been provided earlier under colonialism to the metropolis. These developments intensified class conflict and inflation was the result.

It is only in a society where class antagonisms do not exist because the means of production are socially owned, that there can be genuine equality of opportunity.

But let us not argue on this issue. Let the Supreme Court remain committed to the provision of a welfare state with equality of opportunity. Any steps in that direction, even though short of socialism, should be welcome to all socialists.

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

PSUs: Open Market Entities or Public Good?

Soumya Thakur | 21 Nov 2024

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To view public sector undertakings at par with private enterprises subject to competition laws goes against the grain of their purpose in a socialist democracy.

The central premise of public sector undertakings (PSUs) in India, such as the Steel Authority of India Ltd (SAIL), is rooted in socialist ideology— a vision where the State, through ownership and operation of critical industries, guarantees equitable access to resources and fosters national development.

In such a system, these enterprises are not mere market participants but crucial agents of social welfare and economic justice. Yet, the introduction and application of competition law— most notably, the Competition Act of 2002— gives rise to an essential question, does the regulation of PSUs through competition law undermine their socialist foundation, or can it serve as a necessary check on State power?

Public sector undertakings and the socialist framework

In a socialist economy, the State occupies a central role, controlling industries not for profit maximisation but for social welfare. PSUs were created in this image, to counter the inherent inequalities of the market and ensure that critical resources remain in public hands.

Their purpose is not to compete with private firms but to shield essential sectors— such as steel, coal, or oil— from the volatility of the free market and the pressures of private profit.

In a socialist economy, the State occupies a central role, controlling industries not for profit maximisation but for social welfare.

The State's ownership of key industries in a socialist framework serves specific purposes: addressing market failures, correcting historical regional disparities, and providing employment.

The role of the State here is not a passive one; it actively directs economic growth toward these larger social goals. And yet, the objectives of socialism stand in an inherent tension with the core principles of competition law, which emphasises market efficiency, consumer choice and the dismantling of monopolies.

Competition law’s framework

India’s Competition Act, 2002, was borne out of the broader shift towards liberalisation. It seeks to create a level-playing field by preventing monopolistic behavior, protecting consumer interests and fostering competition.

The Act does not distinguish between private and public enterprises in its enforcement, subjecting PSUs such as SAIL to the same scrutiny as private players. This raises a critical question: should PSUs, whose very existence stems from a desire to avoid market imperatives, be treated as market actors under competition law?

At first glance, the logic seems paradoxical. These entities were created to achieve goals that often require non-competitive behavior— whether it is price controls, employment generation or ensuring universal access to resources.

To subject PSUs to competition law, then, might seem to impose free-market principles on institutions designed to operate outside of those very principles.

The socialist critique of competition law’s application to PSUs

The socialist critique of applying competition law to PSUs begins with a basic premise: public sector enterprises are not just another market participant, but instruments of State policy, created to address market failures and fulfill objectives far beyond market efficiency.

Treating PSUs like private enterprises undermines their ability to act as agents of social justice and economic equality.

The State's ownership of key industries in a socialist framework serves specific purposes: addressing market failures, correcting historical regional disparities, and providing employment.

State monopolies and public interest

A socialist defence of PSUs hinges on the idea that State monopolies are not problematic, as the State— unlike a private firm— is supposed to act in the public interest.

PSUs are intended to deliver essential services, often in sectors where introducing competition would lead to unequal outcomes. For example, SAIL’s role in providing affordable steel domestically could be compromised if competition law forces it to act like a private firm, maximising profit over public service.

Efficiency versus social goals

While competition law prioritises efficiency, it is important to recognise that this goal can conflict with the socialist commitment to equity and national development.

For instance, a PSU might engage in price regulation or employment practices that appear inefficient in a competitive market but serve critical social objectives. Competition law, in targeting such behaviors, risks undermining the purpose of PSUs themselves.

Accountability or overreach?

However, the application of competition law could also be seen as introducing accountability. PSUs, shielded from market pressures, can become inefficient or complacent monopolies that fail to serve the public interest.

In this sense, competition law could prevent PSUs from becoming exploitative or inefficient, but is it justifiable to impose private sector standards of accountability on institutions designed with entirely different mandates?

Finding a balance: Public welfare and market regulation

The Supreme Court’s decision in Competition Commission of India versus Steel Authority of India Ltd (CCI versus SAIL) lays bare the sharp tensions between neoliberal market principles and the socialist foundations of public sector undertakings (PSUs) in India.

Treating PSUs like private enterprises undermines their ability to act as agents of social justice and economic equality.

In CCI versus SAIL, the court unequivocally held that PSUs are not immune from the scrutiny of competition law, ruling that they must adhere to the same regulatory framework as private enterprises and that market fairness, defined by principles of competition law, supersedes the public nature of an enterprise.

This decision, however, calls for a critical interrogation from a socialist standpoint, which fundamentally challenges the market-driven assumptions embedded in the ruling.

Legal details of CCI versus SAIL

In CCI versus SAIL (2010), the Competition Commission of India (CCI) initiated an inquiry against SAIL, alleging that it had abused its dominant position in the market by supplying steel to Indian Railways.

The case revolved around Sections 3 and 4 of the Competition Act of 2002, which prohibit anti-competitive agreements and the abuse of dominance, respectively. The issue was whether SAIL, as a PSU tasked with fulfilling a public interest mandate, should be subjected to the same competition laws as private entities.

The Supreme Court ultimately ruled that PSUs are not exempt from competition law, emphasising that the objective of competition law is to protect consumer welfare and prevent monopolistic practices, irrespective of whether the entity is publicly or privately owned.

The court’s decision hinged on the idea that even State-owned enterprises could abuse their dominant positions to the detriment of consumers and market fairness, thereby justifying their regulation under the Competition Act.

The decision further clarified the procedural aspects of CCI investigations, holding that the CCI was not required to issue a formal show-cause notice before initiating an inquiry under Section 26(1) of the Competition Act.

This marked a significant shift in the way competition law applies to PSUs, reinforcing the idea that public enterprises must be held accountable to market principles in the same way as private firms.

In CCI versus SAIL, the court unequivocally held that PSUs are not immune from the scrutiny of competition law.

A socialist critique: A neoliberal blindspot

At first glance, the ruling seems grounded in sound legal reasoning— competition law exists to prevent the abuse of dominance and State monopolies, much like private ones, could potentially harm consumer interests.

But a socialist critique exposes a deeper, more fundamental flaw in this logic: the assumption that PSUs and private enterprises operate within the same normative framework.

The court's decision, in effect, ignores the fact that PSUs such as SAIL are not merely market actors but instruments of State policy, designed to achieve broader social objectives, including equity, regional development and access to essential goods.

By subjecting PSUs to the same competition laws as private entities, the court risks undermining these very objectives.

The mechanisms of accountability for public enterprises should be distinct from those applied to private enterprises, reflecting the fundamentally different roles they play in the economy.

Erosion of social mandates

PSUs, by their nature, are meant to pursue public welfare, often at the expense of market efficiency. SAIL, for instance, may prioritise ensuring the domestic availability of affordable steel for infrastructure projects over maximising profits.

This is not a market failure but a conscious policy decision aimed at national development. The court’s failure to distinguish between the motivations behind public and private enterprises reveals a neoliberal bias that assumes market efficiency is the only legitimate standard.

But efficiency is not always aligned with the public good. In sectors like steel, energy, or railways, the objective might be ensuring equitable access or employment generation, even if these goals result in practices that appear anti-competitive by market standards.

False equivalence between public and private monopolies

The court’s assertion that State monopolies can be just as harmful as private ones is misleading. It equates the predatory practices of private monopolies— driven by profit maximisation— with the operations of PSUs, which are supposed to operate in the public interest.

The logic underpinning competition law is that monopolistic behaviour is detrimental because it is motivated by profit-driven exploitation. PSUs, however, exist precisely to avoid such exploitation.

Their monopolistic position, far from being inherently harmful, is often essential to their role in safeguarding public welfare, especially in sectors critical to national infrastructure. The decision to subject PSUs to competition law, without acknowledging this difference, fundamentally distorts the purpose of State ownership.

Dilution of State power in critical sectors

The ruling also reflects an ongoing trend of diluting State control over key sectors under the guise of market fairness. In a socialist framework, the State’s role is to intervene where market forces fail to ensure equity, access and employment.

By treating PSUs like private enterprises, the court inadvertently strengthens the neoliberal project of shrinking the State’s role in the economy. This is particularly dangerous in sectors such as steel or energy, where State intervention has historically played a critical role in ensuring that national resources are used for the broader public good, rather than being subjected to the whims of market forces.

The path forward: Socialist regulation, not market competition

The critique of CCI versus SAIL does not imply that PSUs should operate without accountability. Indeed, socialist governance also demands that public enterprises remain efficient and responsive to public needs.

However, the mechanisms of accountability should be distinct from those applied to private enterprises, reflecting the fundamentally different roles they play in the economy.

Rather than subjecting PSUs to the free-market principles enshrined in competition law, a socialist framework might advocate for a different form of regulation— one that ensures transparency, efficiency and public accountability, but does not force PSUs to compete in a market they were never designed to inhabit.

This could involve the creation of a separate regulatory framework that recognises the unique social mandates of PSUs, focusing on public welfare rather than consumer choice or market efficiency.

Such a framework could impose stricter oversight on PSUs to ensure that they remain focused on their public service objectives, while also preventing the inefficiencies and complacencies that often plague State-owned enterprises. But this regulation must be rooted in the socialist ideals that justify State ownership in the first place, not in the market-driven logic of competition law.

Conclusion: Competition law as a tool of neoliberalism

The Supreme Court’s decision in CCI versus SAIL reflects a deeper ideological shift in India’s economic governance— a shift that prioritises market competition over the socialist foundations of public sector enterprises.

From a socialist perspective, this is a dangerous erosion of the State’s ability to protect public welfare through ownership and control of key industries. By applying competition law to PSUs, the court not only ignores the unique role of public enterprises but also accelerates the neoliberal dismantling of State intervention in the economy.

The path forward lies in a more nuanced approach to regulation— one that recognises the distinct social objectives of PSUs and holds them accountable, not to market principles, but to the public good. In doing so, we might reclaim the role of the State as a protector of equity and justice, rather than a mere market participant.

Courtesy: The Leaflet