Deepening crisis of capitalism

The capitalist system is in deep crisis, on the world scale and in India. This is leading to the sharpening of all the major contradictions in society. In spite of repeated claims by various political leaders that recovery is around the corner, productive activity has not regained the momentum which was there prior to the crisis of 2008.

The capitalist system is in deep crisis, on the world scale and in India. This is leading to the sharpening of all the major contradictions in society.

Worldwide crisis

In spite of repeated claims by various political leaders that recovery is around the corner, productive activity has not regained the momentum which was there prior to the crisis of 2008. Production is not growing in most capitalist countries of Europe and North America. It has significantly slowed down in China and India. Lakhs of workers have lost their jobs in both these countries in recent years.

The growth rate of international trade has fallen to its lowest level in the past 10 years. It has been negatively impacted by the unilateral actions of the United States in recent years. The US has walked out of several international trade agreements and imposed sanctions on Iran, Russia, Turkey, China, etc.

The crisis in global capitalist system has been further deepened on 9 March 2020 when Saudi Arabia, the world’s second largest crude oil producer suddenly slashed the price by over 30% due to contradictions between Russia, USA and Saudi Arabia related to oil price and production. The oil demand is expected to shrink in 2020 for the first time since 2009.

Global capital flows have declined. Foreign direct investments declined to $1.3 trillion in 2018, down from $1.5 trillion in the previous year. It was the third successive annual decline.

The economic downturn is primarily the result of the shortage of purchasing power in the hands of working people. It has been aggravated by the US sanctions and tariff war as well as other factors, including the high degree of speculation and the recent shock of the coronavirus.

The aggregate debt owed by all governments put together climbed to the record level of 230% of aggregate GDP in 2018. In January 2020, the World Bank warned of fresh global debt crisis.

Too little of the surplus produced by human labour is being put back in productive investments. Those who pocket billions of dollars as profit are not putting back into production because they are not sure of pocketing maximum profits from productive investments. Massive amounts of capital in the hands of the richest persons on earth are being deployed largely in speculation in different kinds of assets, and in financing of wars and weapons production.

The parasitism of the system stands nakedly exposed.

Capitalism, at its highest imperialist stage, is destroying the productive forces on a massive scale. It is destroying both human productive forces and material means of production. More jobs are being destroyed than the number of new jobs being created. Machines lie idle because of the lack of demand in the market. Monopoly capitalists are finding it more profitable to gamble in the stock market, real estate market, commodity and currency markets, than to invest in production.

Indian economic crisis

In our country, growth in production has been slowing down in recent years. The downturn has now reached a point when industrial growth has turned negative. Industrial production in December 2019 was lower than it was a year ago. Capacity utilization in manufacturing industry has fallen to its lowest level since 2008.

Industrial production has fallen because there is not enough capacity to purchase what has been produced. There is not enough purchasing power in the hands of workers, peasants, artisans and small shopkeepers, who have all been exploited and robbed to the bone for many years at a stretch.

It is a crisis of capitalist overproduction – that is, a crisis which takes place only in a capitalist economy, where the relations of production are based on private ownership of the means of production and exploitation of workers, who have nothing to sell except their labour power.

In addition to the constraint of consumption demand, there is also too little demand being generated by investments to expand productive capacity in the country. The rate of capitalist profit has declined in recent years. So has the level of fresh investment. Growth in export demand for Indian industrial products has also slowed down and stopped growing.

The first major symptom of the economic crisis appeared in the form of bank loans turning into “non-performing assets”. This problem has grown bigger year after year in recent times. The central state has been taking steps to impose the burden of these massive capitalist loan defaults on to the backs of the entire people. Huge amounts have been spent from the central budget to finance waiver of such loans, in the name of “recapitalisation” of banks.

Savings of people in banks have been endangered in a number of public and private banks due to bad loans and frauds. The fourth largest private bank, Yes Bank is being rescued from the verge of collapse using public money by forcing State Bank of India to acquire it. A number of public sector banks in crisis have already been merged with other banks.

The BJP led government succeeded in expanding the space for some monopoly capitalists to reap maximum profits during 2014-18. The Note Ban of 2016 brought big profits for those selling digital payment services. Introduction of GST improved the profitability of big companies which supply to the all-India market. Both measures led to the destruction of large numbers of small and medium-scale enterprises, which supply to the local and regional market.

The standard of living of employed workers has grown from bad to worse. Their wages are lagging behind the galloping consumer prices. Official data from the Labour Bureau, which is now available until November 2019, show that the real wages of agricultural workers have declined by 1.8% compared to the previous year, while those of non-agricultural workers have fallen by 2.1%.

No official data is being released on the growth or decline in employment. Unofficial data compiled and published by the Centre for Monitoring Indian Economy (CMIE) confirm that more jobs are being destroyed than the number of new jobs being created.

Starting in the 1990s and until 2008, capitalist growth in India accelerated. Lakhs of new jobs were created in several fast growing sectors including automobiles, telecom, IT and BPOs. Recent years have witnessed large number of workers getting thrown out of jobs in these vary same sectors.

The capacity of wage earning families to purchase industrial goods has come down because of the large-scale destruction of jobs and decline in real wages, which have together reduced the aggregate quantity of consumer goods and services bought by the working class. In recent months, high inflation in food prices has further squeezed the capacity of working families to buy industrial goods.

Those who till the land and produce food for the population have been devastated by capitalism and the so-called reform program of the big bourgeoisie. Their net incomes have declined. They face heightened insecurity as a result of the globalisation of agricultural trade and the growing role of private monopoly companies in input supply and output purchase. The State has reduced its share of procurement of food grains, for the benefit of the private trading companies, Indian and foreign. Decline in procurement prices to below the cost of production has driven crores of peasants to ruin or to unbearable levels of indebtedness. Those unable to repay bank loans face the prospect of losing their land.

Indian capitalism is unable to solve the agrarian problem and lift society out of poverty and crisis. The ruling class is unable to prevent the economy from falling into an extremely severe overproduction crisis. The ruling class has no solution to the crisis except to let productive forces get destroyed further, until it becomes profitable once again for Indian and foreign monopoly capitalists to make productive investments in the country.

Indian monopoly houses are impatient to rapidly expand their markets and spheres of influence abroad, in rivalry with China and in strategic alliance with the US. They are desperately looking for sectors in which they can invest their capital and be confident of reaping maximum profits. One of the sectors they are eager to invest in is the production of arms and ammunition.

The monopoly capitalists do not care that arms production does not add to material wealth or improve the well-being of the majority of people. They are not bothered by the fact that militarization will increase the degree of parasitism. What the Tatas, Ambanis, Birlas and other monopoly houses care about is that militarization has the potential to give a boost to industrial demand in the short-term. It can give a boost to capitalist profits, at public cost. Driven by the greed for maximum profits, Indian capitalist monopoly houses are collaborating with arms monopolies of US and other countries. They want to develop an Indian military-industrial complex.

The Indian Armed Forces are being modernized, not just with modern weapons, but with changes in organization. The three wings of the armed forces are being brought under one integrated command. The integrated armed forces are being reorganized to serve three major theatres of war: (i) Pakistan, (ii) China and (iii) the seas and oceans of the Indo-Pacific. The Indo Pacific region stretches from the east coast of Africa, through the Arabian Sea and Bay of Bengal, to the west coast of Australia and to the South China Sea.

Sharpening of contradictions in India

Contradictions have become acute in Indian society, both between the exploiting and exploited classes and within the exploiters.

The resistance on the part of workers and peasants to the capitalist economic offensive has been growing over the past decade.

The united struggle of the working class reached a peak in 2003. It suffered a deterioration in the period 2004-08, when leaders of CPI and CPI(M) sat alongside Congress Party leaders in a “National Advisory Committee”, helping them to allegedly give a “human face” to the capitalist reform program. Since that time, more and more sections of the working class have understood that the program of globalisation, through liberalisation and privatisation, is a program of maximum monopoly capitalist exploitation and plunder of land and labour. They have understood that it is not possible to give a human face to this inhuman program.

Many large contingents of the working class, including the workers of Indian Railways, airlines, telecom, energy, banks, insurance and other large-scale industries and services have been waging a persistent struggle against privatisation in recent years. User organisations, such as rail passengers’ associations, have united with the workers in fighting against privatisation.

Teachers and students of public universities have been opposing privatization of higher education. They are opposing the policy of hiking fees and inviting foreign capital to penetrate and dominate Indian higher education. Doctors, nurses and other employees in government hospitals have been opposing privatization of medical education and health services.

Workers in the automobile sector, mobiles and communications sector, chemicals and engineering sectors are all fighting against the increasing resort to hiring workers on temporary contracts. Workers in sectors that have grown most rapidly in recent decades, including IT and auto sectors, are fighting for the right to form unions of their choice. Anganwadi workers and other social scheme workers are fighting to be recognised as workers.

Over 200 peasant organisations have come together under a common banner demanding implementation of a public procurement policy and waiver of farm loans from banks. These demands of peasants have been included in the Charter of Demands adopted by the central federations of workers’ unions who jointly issued the call for the General Strike of 8th January, 2020.

Apart from the workers and peasants, there are definite regional bourgeois interests in our country, which are coming into contradiction with the agenda of the big monopoly houses. They oppose measures taken to further centralize taxing and financial powers, such as GST.

The sharpening of inter-capitalist contradictions is also seen in the infighting within various institutions of bourgeois rule, such as the parliament, bureaucracy, judiciary and the monopoly controlled media. Partisan polarization in such institutions is leading to the shattering of illusions about their supposed “independence” from the executive power.

Recently, the drop in monopoly capitalist profits has led to intense infighting among the monopoly houses. According to the Reserve Bank of India, aggregate profits pocketed by about 2700 non-financial capitalist corporations in July-September 2019 was less than half of what it was in the same quarter of the previous year. Several monopoly houses have been virtually wiped, including those of Anil Ambani and the Jaypee group. Some groups have been considerably weakened, like the Ruias.

There are numerous examples of the judiciary being used to settle scores within the capitalist class and justify blatant attacks on the people’s rights. Judges who do not support whatever the ruling party wants get summarily transferred.

Central agencies such as the Intelligence Bureau, Central Bureau of Investigation, Enforcement Directorate and National Investigation Agency are being used to target rival capitalist groups and their political representatives.


The basis for the upheavals and political conflicts we are witnessing today, in India and all over the world, lies in the crisis of the capitalist economic system.

The root cause of the deepening crisis of capitalism lies in the contradiction between socialised production and private appropriation of the products of social labour. Only the resolution of this contradiction will put an end to crises once and for all and open the path for uninterrupted social progress. To resolve this contradiction means to convert the principal means of production from private into social property.

In India, the capitalist economy is caught in an overproduction crisis, which is further aggravated by the worldwide decline in imports and exports. The economic crisis is affecting all classes in society. It is leading to the sharpening of contradictions, both between the exploiters and the exploited, and within the exploiters. Apart from the growing resistance of workers and peasants to their intensified exploitation and robbery, there are regional bourgeois interests which are resisting the opening up of all sectors to foreign and Indian monopoly capital. Cut-throat competition has become acute between rival monopoly houses, resulting in some monopoly houses going out of business.

The ruling class is continuing with the liberalisation and privatisation program, to further intensify the exploitation of labour and robbery of small-scale producers. It is militarizing the economy and strengthening the Indo-US military cum strategic alliance. Far from addressing the problems of the economy, this course increases the danger of even deeper economic crises in the future, as well as the danger of India being drawn into unjust imperialist wars in Asia.

The only way to put an end to recurring economic crises in our country is by depriving monopoly capitalists of the “right” to make decisions about how the surplus created by the toil of workers and peasants gets deployed. Decision-making power must be brought into the hands of the workers and peasants. The principal means of production and exchange, which are now the private property of monopoly houses, must be brought under social ownership and control. The economy can then be reoriented to fulfil people’s needs, from being oriented to fulfil capitalist greed.


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