[The essence of neoliberalism is to promote classical capitalism
and remove the State from its role as regulator and controller, and
create a huge increase in income and wealth inequality. ]
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FROM NATIONALISATION OF BANKS IN 1969 TO PRIVATISATION AGENDA NOW  
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Prabhat Patnaik
July 24, 2021
News Click
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_ The essence of neoliberalism is to promote classical capitalism and
remove the State from its role as regulator and controller, and create
a huge increase in income and wealth inequality. _

,

 

On July 19, 1969, as many as 14 major banks were nationalised in the
country. Today, after 52 years, there is some talk again of
privatising the nationalised banks, which naturally raises the
question: why were banks nationalised at all?

The answer to this question is usually given in terms of the specific
advantages of bank nationalisation. This is correct and appropriate,
but what needs also to be kept in mind is the overall perspective
underlying bank nationalisation. This is important because the issue
of privatisation of banks today cannot be discussed without reference
to this perspective.

Bank nationalisation was neither a socialist measure, as many
progressive Congress men claimed at the time, nor was it some minor
routine measure of trivial importance that made so little difference
to the capitalists that they couldn’t care less, as many critics of
it belonging to the extreme Left had suggested then.

True, Rudolf Hilferding, the well-known Marxist economist and author
of _Der Finanzkapital_, a work that was extensively used by Lenin in
developing his theory of imperialism, had argued that the
nationalisation of half a dozen top German banks would break the back
of German capitalism; but that was just unwarranted optimism. Unless
the nationalised banks are used differently from the way they are used
under capitalism, simply nationalising them would not break the back
of capitalism; and for that to happen the programme of nationalisation
would have to be far more sweeping in scope, much beyond just taking
over six banks.

From this fact, however, it is erroneous to conclude that it makes no
difference to the capitalists whether banks are nationalised or not:
impairing the ability of monopoly capitalists to use the enormous
financial resources garnered by banks is clearly a setback for them
that they fiercely resist.

In the Indian context, bank nationalisation was an integral part of
the dirigiste strategy that India, in common with several other Third
World countries, had followed after decolonisation. The dirigiste
strategy, in fact, had grown out of the anti-colonial struggle in
countries where the leadership of the bourgeoisie over this struggle
could not be shaken off.

The post-decolonisation development strategy, therefore, was not aimed
at building socialism but at building capitalism that was relatively
autonomous of imperialism, and, for that reason sufficiently
broad-based domestically. For this, it had to protect, and promote to
a degree, peasant agriculture and petty production, instead of
encroaching upon them and destroying them as is the usual practice
under capitalism.

In other words, while this development strategy was not aimed at
building socialism, the capitalism it was helping to build was not
classical capitalism either. The chief hallmark of this strategy was
relative autonomy from metropolitan capital and a degree of protection
of petty production and peasant agriculture against encroachment from
the capitalist sector existing outside of it, even as a capitalist
tendency consisting of an admixture of peasant and landlord capitalism
develops within it.

For effecting all this, a significant involvement of the State was
entailed in the process of development as an investor, regulator and
controller. Because of its difference from classical capitalism,
various names were used for this strategy, from Jawaharlal Nehru’s
term “building a socialistic pattern of society” to Michal
Kalecki’s term “intermediate regime”.

The Left critique of this strategy was not that it was not different
from classical capitalism, but that it could not be a sustained
phenomenon, that it would sooner or later get transformed into
classical capitalism (as indeed is taking place).

The crucial point is that any move towards classical capitalism would
have entailed a sacrifice of the relative autonomy of the development
strategy vis-à-vis metropolitan capital. It would have meant a
grossly inegalitarian trajectory, closely enmeshed with imperialism,
which would have sabotaged the process of nation-building that was a
desideratum of the anti-colonial struggle.

Bank nationalisation, though effected somewhat later than the
enunciation of this strategy, was crucial for it. Since credit
represents command over capital, the social, geographical and sectoral
distribution of credit is a key determinant of the nature of the
development trajectory that a country is following. Under a dirigiste
regime, therefore, as distinct from classical capitalism, since the
State has a crucial role in regulating capitalism, and petty
production and peasant agriculture are protected while relative
autonomy is maintained vis-à-vis metropolitan capital, the control
over credit disbursement becomes a key policy instrument which can be
wielded only with the nationalisation of banks. The government of
India, in fact, experimented with “social control over banks” for
a while as a means of regulating the distribution of credit, but the
ineffectiveness of such “social control” persuaded it to
nationalise banks as the only effective means of regulation.

The bank nationalisation of 1969, followed later by a second round of
nationalisation of smaller private banks, had a profound impact: it
made institutional credit available to agriculture and petty
production, loosening the hold over the peasantry of the old
moneylenders; it spread the network of banking all over the country.
And it sought to build a wall between production and speculation,
thereby ensuring that credit was not used for speculative activities
as is common under classical capitalism.

True, the better-off sections of the peasantry got the lion’s share
of the credit; but the social distribution of institutional credit
became much wider than before, in fact wider than anywhere ever in the
capitalist world. And the Green Revolution, which, whatever
reservations one may have about its ecological consequences, freed
India from the clutches of “food imperialism” practiced by
metropolitan powers, could not have occurred without it.

The dirigiste strategy, however, was undermined by the global
ascendancy of international finance capital, with which the Indian big
bourgeoisie got closely integrated and abandoned its project of
following a trajectory relatively autonomous of the metropolis.

With the adoption of a neoliberal policy regime, a chorus grew for
privatising the nationalised banks, which was led by US imperialism
(through emissaries like Larry Summers and Tim Geithner) and whose
local supporters started raising questions about the profitability of
nationalised banks, questions that were completely illegitimate as the
whole point of nationalisation was that the nationalised banks should
behave differently.

The essence of neoliberalism is to promote classical capitalism with
its spontaneous immanent tendencies. This means encroachment upon
petty production and peasant agriculture, a removal of the State from
its role as regulator and controller, and an immense increase in
income and wealth inequality.

The massive peasant distress reflected in a spate of peasant suicides,
the withdrawal of the State from its role as provider of essential
services, like education and healthcare, and the rise in the share in
national income of the top 1% of the population from 6% in 1982 to 22%
in 2013-14 (the highest in a century) are all indicators of this. The
demand for privatisation of banks is a part of this agenda.

As neoliberalism has advanced, its agenda has become more and more
explicit and brazen. The attack on labour rights carried out under the
cover of the pandemic reflects this, as do the three farm laws, whose
net effect would be to decimate peasant agriculture by opening it up
to capitalist encroachment.

In fact, every major economic step taken by the Narendra Modi
government, from Goods and Services Tax, to demonetisation, to the
farm laws, has been aimed against the petty production sector and has
sought to carry forward the process of primitive accumulation of
capital, in accordance with the neoliberal agenda.

The privatisation of banks will play exactly the same role, of
withdrawing whatever little institutional credit was going to
agriculture (the denial of such credit to agriculture has been going
on for some time anyway under the neoliberal regime), and of ensuring
that the process of decimation of peasant agriculture gathers
accelerated pace.

The effects of such decimation will not remain confined to the
economic sphere alone. We mentioned earlier that the dirigiste regime
was integral to the project of nation-building that was conceived as
part of the anti-imperialist struggle. In countries like ours,
classical capitalism, while inflicting primitive accumulation of
capital will never succeed in absorbing the displaced petty producers
into the active army of labour. Even in Europe this had not happened,
but mass emigration to the “New World” had prevented a social
crisis.

Opposition to this process of primitive accumulation of capital, which
must include opposition to the three farm laws and to the
privatisation of nationalised banks, is of paramount importance, if
India is not to join the ranks of “failed” post-colonial States
queuing up as supplicants before their former imperial masters.

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