19 September, 2020


Impoverishment Of The Masses And Their Alienation Leading To Fascism

By Dhanusha Pathirana –

Dhanusha Pathirana

Dhanusha Pathirana

Crowding Out or Bailing Out? Impoverishment of the Masses and their Alienation leading to Fascism – II

Ethnic violence against the Muslims in Sri Lanka and against every other minority under the strategic sponsorship of the state, which still continues to rage with considerable force, needs to be viewed in the context of prevailing social formations. Structure of society is the necessary forerunner of ethno-religious fascisms. The latter becomes the dominant means of self actualisation and emancipation of the impoverished as opposed to class politics and hence the determining factor of political power of the political elite. This is a general outcome springing from the social structure. Or rather, it is more apt to say that class antagonisms manifest itself in the form of ethno-religious fascisms. In this light we request the reader to follow the argument from the first part of this account, although initially it may seem out of context towards an explanation of fascism. This is so because the discussion attempts to initially explain economic conditions which lead to fascism, especially among the down trodden masses. It hopefully arrives there through its progression.

Aluthgama Muslim shopsWe may now break way from the detour we couldn’t avert in Part I of this account and return to our initial discussion on crowding out: The banks may go insolvent in the absence of the mechanism explained earlier (Part I) which shifts loanable capital towards the state from private sector during periods of shrinking private investments. It activates the idle money capital of the banks in particular and the capitalist class in general and converts barren money instantly into interest yielding capital. Hence, although it has brought about a drop in profits of the banking sector in general, the process of rising public debt during periods where private credit growth stagnates has assisted the banks as a whole to remain profitable in the face of rising rate of non-performing loans (NPLs) to 6.5% as at April 2014 coupled with the drop in loans and advances. The rising level of bank NPLs shows the severity of economic distress among the small businesses as well as the corporate class in general.  Hence, the current shift in banking assets towards the public sector is in fact a function of the market mechanism to reach equilibrium between economic spheres (real and monetary) rather than a conscious effort of a particular economic entity as generally held by neoclassicists in their explanation of the “crowding out effect”. The capitalist class in general and banks in particular benefit from this development rather than being crowded out by the government. In fact the local capitalist class will be crowded out by the current flow of foreign direct investments rather than as a result of government borrowing. This is so given that FDIs flow into the same limited spheres in which the local capitalist class is currently thriving. Hence, increasing FDIs will in fact limit the market share that existed for the local investments, crowding out the latter.

Transfer of Incomes from Labour to Capital

Government however, on the other hand, is compelled to cover the ensuing loan repayments by resorting to further borrowing or by increased taxation. Sri Lanka’s fiscality, whose pivot is formed by taxes on the most necessary means of subsistence hence leads to latter’s price increases (rather than as a result of increased demand in the system due to budget deficits as held by neoclassicists). Given that consumer taxes occupy circa 80% of Sri Lanka’s total tax revenue and more than 100% of tax revenue is spent on repaying the debt, would mean that the process under review causes a transfer of aggregate incomes from labour towards that of capital through the unified operation of fiscal and monetary mechanisms in the economy in times of quantitative stagnation in private investments. This is so given that tax increases are mostly directed at financing interest and capital payments of public debt of which over 50% is owned by domestic capitalist class. And the main function of the government rather than anything else appears to be the financing of its debts which is portrayed by debt repayments absorbing more than its total revenue each year. The increase in taxes of virtually every single commodity and service consumed by the masses has everything to do with this almost permanent phase in the trade cycle.

EconomicsUnder this mechanism, the next crucial achievement by capital is the proportional increase of aggregate interest incomes relative to that of aggregate entrepreneurial profits in the economy. This is accomplished at the expense of income share of labour under falling interest rates and increasing tax rates. As we all know domestic interest rates have fallen sharply over the last year while tariffs were raised probably with equal force. And falling interest rate indicates a glut in money capital in the financial system unable to convert itself into its productive form. Hence, taxation and other fiscal instruments are deployed to siphon off the incomes of the mass of the people and it is reconverted into interest incomes of capital during the phase of the trade cycle when capital finds it difficult to realise its surplus product through conversion of money capital into its productive form. Hence, while the living conditions of the mass of the public deteriorate the continuation of the specific class relation between capital and labour is reproduced. The important condition to note in this connection is that class exploitation shifts towards the price system, monetary and fiscal spheres from that of production. This process becomes the main force sustaining the reproduction of the specific class relation between capital and labour, which capital on its own is unable to accomplish during the stagnant phase of the trade cycle.

The stagnation tends to survive longer than its opposite form due to the backward character of capital in the economy indicated earlier. The relentless surge in public debt repayments as a share of public revenue even in the long run bears witness to this phenomenon. This is so given that strain on public debt repayments is relieved only when private investments re-gather its force. However, since stagnation appears to be the normal phase of the trade cycle in underdeveloped economies, the burden of public debt repayments as a share of state revenue tends to grow over the long run as government borrowings was the main mechanism which kept the profit generation process alive during the stagnant phase of the trade cycle. This is to say that the market mechanism prima facie is a servant of the standpoint of capital, however, not in capitals abstract form but in its specific disposition. In the case of underdeveloped societies it hence serves capital in its underdeveloped form.

(In contrast to private investments, government’s borrowing decisions are made partly independent from its immediate profitability and are rather aimed at facilitating the expansion and returns of the private sector than of itself.  Hence, public borrowings and investments could continue despite the absence of immediate or even long term financial returns to the government, a characteristic feature that differentiates public borrowings from that of private sector).

On the other hand, the process indicates under free functioning of market forces interest rates and tax rates in general tends to remain inversely related. The principle is true unanimously across advanced and underdeveloped economies during the phase of the trade cycle we are alluding to i.e., its stagnant stage where money capital as a ratio of utilised productive capital increases. The shift in total profits from entrepreneurial profits to interest incomes is indicated by the sharp increase in government’s withholding tax income against the drop in profit tax in 2013. The shift of incomes from labour towards capital under this process is a posteriori illustrated from the change in the structural composition of bank deposits during the same period. Let us take a closer look at it.

EconomicsThe composition of deposits indicates a clear shift towards fixed deposits from savings and other more liquid and low cost forms of deposits. A similar trend was seen during 2008/09 period.  The relatively higher level of prices of consumer essentials following the depreciation of the currency coupled with tax increases and higher electricity tariffs under a falling rate of interest in the economy leads to a shift in relative incomes in the economy from labour towards that of capital during a stagnant phase of the trade cycle. This is indicated by the depletion of the savings growth of labour while increasing it on the part of the class of capitalists. The shift in deposit composition of the banking sector towards fixed deposits from savings deposits simultaneously with an absolute increase of aggregate deposits in the financial system bears witness to this transfer of incomes (see graphs above). The depleted savings of labour is in turn transformed into sweat-free wealth of capital through the unified operation of taxation, growth in public debt and the shift of financial assets in the system towards government’s debt instruments; it is the multi-sectoral product of the current stagnant phase in the trade cycle.

Alienation and Ethno-religious Fascism

Alienation of the self from itself and from the general form of social relations is the essential product of this gradual impoverishment of the masses. However, their defaced soul or self consciousness by its alienation from and within the social order is treated by declaring its ethno-religious Sinhala-Buddhist identity as standing above the rest of the world. This reintegrates the divided self into the social order, or more importantly with the production mode. It can be understood as a defence mechanism under Freudian sublimation designed to sustain the reproduction of the class relation between capital and labour, which allows the masses to act within the bounds of the current social order despite being alienated from it and alienated within it. Alienation of the self that is stemming from one’s relationship with the productive forces is sublimated through pledging allegiance to fascist ethnicism as a means of venting out social isolation and estrangement. Hence, the impoverished lot seek a curing force to their disease laden reality by embracing ethnicist mythologies in their own volition. Alienation gifts them a reality that’s against itself and remains an imprisoning force over and above them and beyond their control. Hence the soul that was so forced away is restored in a violent realm beyond reality and reason; in so doing masses flee the dichotomies of reality and escapes into the bliss of fascism.

EconomicsThe semi-peasant agricultural basis of the most of the poor provides the fertile groundwork for such illusions to take root and infest their social psyche. For instance, fascism in Germany and in Italy was embraced by the middle and lower middle classes under the economic collapse of the 1930’s, whose class position was deteriorating in the process. They rejected to step down from their presumed position and to join the working class political movement towards socialism and instead embraced fascism. Further, as Professor S. B. D. De Silva points out the rural poor in Sri Lanka does not confront a particular class as their immediate oppressors. Hence their political consciousness remains outside that of class antagonisms and is rather inclined towards sustaining and reproducing dead traditions as a curing force against cultural and material alienation from growing urbanism. (Urban culture in Sri Lanka popular among our middle and upper classes has only absorbed the form of the Western European culture, and not its radical and emancipator content that upholds equality, a sense of openness and critical assessment of things.) In contrast, the peasantry in 18th or 19th century Europe and Russia confronted a class of oppressive landlords as direct exploiters; hence a perception of class antagonism was present within political consciousness in contrast to the local peasantry.

Embracing an ethno-religious identity instead of devising a revolutionary political force that is aimed at annihilating class oppression hand in hand with transformation of living conditions however, has not so much to do with the ideological bombardment of masses by the state with a stirring up of ethnic emotions. It is triggered more or less from the impossibility in imagining and devising an all encompassing political response against the social and economic decadence under backward capitalism. The masses face a certain dilemma when they witness the tremendous advancement of living conditions that is made possible under capitalism by the remarkable improvements in the West and in Asia in recent history. Hence, a movement towards socialism as a cohesive and rigorous political response to capitalism remains illogical to them as much as their enchantment with fascist ethnicism. Despite their impoverishment they consequently reinforce their attachment to the mode of production hoping that it will somehow manage to deliver. The alienation of the self by doing so is sublimated by finding refuge in ethno-religious fascism. Hence, class antagonisms are manifested in the form of fascism.

However, what needs to be understood is that the improvement of relative living conditions and hence taming of forces of alienation achieved in the advanced world was done so under an industrial bourgeoisie and a state which was capable of devising such an outcome. The condition in underdeveloped societies is that instead of a class of capitalists and a state capable of transforming the totality of things it is pregnant with a rentier class that draws its life blood through reproduction of the prevailing conditions. A possibility of transformation towards a classless society under such conditions remains hidden away as the impoverishment and alienation of the masses is not stemming from class led exploitation as an absolute condition but rather from the underdevelopment of the mechanisms of class exploitation, which tends to create a mutilated self conception led by fascism among the down trodden. The path towards a classless society is hence ‘bound up with the recognition of these forces and with social change based on this recognition’ and the answer for ethnic harmony lies hidden there.

The perfect example in this regard would be that all forms of racism based brutality in the world is now concentrated within the underdeveloped regions, while the advanced capitalist nations remain free of its horror. The opposition between the symbolic meanings of the French and the Sri Lankan flag bear witness to this unparalleled backwardness among the underdeveloped nations compared to the advanced capitalist nations. The French flag clad in blue, red and white represents freedom, equality and brotherhood as the binding force of its people. While that of Sri Lanka pathetically endorses and magnify the social division based on races, which above all needs to be discarded with the social formation it represents.

The current resistance and struggles waged by the Sri Lanka’s unionists however, characterised by their typical bombarding of the state with infinite demands, by doing so, avoid confronting this concentrated power that lies at the heart of the establishment. This is none other than to accept systematic hegemony and resist merely its interstices in Slavoj Zizek’s terms. The ultimate option lies not with ‘bombarding the state with infinite demands’ or from anyone per se so to speak, but with the demolition of state’s current form and content all together with the social formation it defends and nurture.

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  • 0

    Poor Pathirana. Srilankan Elite and the Vellalas are not into Economics , Growth Rates and Investments.

    Write something about Gota and the BBS and how the Srilankan army is committing genocide, mass rapes, and grabbing land from Vellalas in the North.

    Ex Captives , who are non Vellalas wouldn’t have their own land with proper titles I guess.

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