CPI-ML New Democracy


Sujan Bose

Corona pandemic has spread around the globe like a rapid-fire since the first case was detected in China last December. The policy of lockdown and social distancing along with extensive community testing for contact tracing which has been formulated to control the spread of virus, has failed. But leaving aside the health-related problems, this policy has also brought the world economy to a standstill. This is a nightmare for the Capitalist States which doesn’t have the means to feed the entire population which is supposed to stay back home ensuring complete lockdown. The net outcome is a varied global response ranging from some rich countries announcing trillions of dollars as bail-out package, while the rest has left to the fate and wishful thinking of developing herd immunity as a measure to control the virus spread. But such disparity in approach is not entirely related to the issue of ‘affordability’, but also about ‘intent’. That is why countries with high GDP per capita like US have not only failed to control the spread of virus and provide adequate healthcare resources, but also have failed to provide economic relief to the majority. Overall, the majority population of the world continues to suffer because of such half-hearted approach to provide necessary source of livelihood for bare-minimum survival.


Capitalist State can afford such public expenses including bail-outs by means of either tax or debt. Taxes on income (personal or corporate) and property are supposed to be more equitable and democratic i.e. taxing the rich more and poor less. But blanket sales and import duties puts higher burden on poor. To bridge any budget deficit, State adopt debt-financing i.e. the State continue to borrow from either other countries, or from various domestic resources like retirement trust funds and can sell bonds and public assets to people who are Super-rich. But the natural outcome of tax policies since 1980s including giving tax-cuts to the Super-rich (top 0.01%) individuals and the Big-MNCs to incentivize private investment led to speculative expansion of wealth in the main.

Meanwhile, the same evade tax by hoarding trillions of dollars in tax havens and minimize liability of any welfare in return of the capital earned in production or consumption services rendered by the working class of that country. This results in a loss of an estimated $500 to 600 billion a year as corporate tax revenues worldwide.1 Out of which some $200 billion comes from low-income economies. This is a sum larger than $150 billion received by such countries each year as foreign aid. The Super-rich individuals have also stashed another $8.7 trillion2 (while some estimates suggest much higher figure of $36 trillion) adding-up to another $200 billion a year individual tax losses to the corporate total of $500 to $600 billion.3 Part of such money even to incentivize the political cronyism to secure favorable tax policies and even fund the public-debt itself (due to diminishing tax-returns) by buying debt-bonds of countries. This has resulted in gradual tax deficit and transfer of almost all public wealth into private hands, especially in rich countries, leaving behind the State with a huge burden of public debt, thus in effect, shifting the major part of the public-debt liability on the shoulders of the rest who are anyhow paying taxes on income.

These so-called ‘neutral’ tax-havens are in fact, the real power-centers of finance capital, controlling world market dynamics by acting as a conduit to divert the surplus capital from poor countries to rich ones. Such round-about financial arrangement not only made the poor countries further dependent on IMF regulated foreign aid from rich countries in return of free-trade access facilitating extraction of Global S-N imperial rent, but in turn actively funded the vicious cycle of ‘financialization’, thus expediting the monopolization of ‘finance capital’. This was a win-win situation for the Global North which promoted the mushrooming of such tax-havens since 1980s. These tax havens were the escape route which keeps the finance capital driven capitalist engine running during each financial crisis. This capital owned by the few Super-rich has no patriotic affiliation to any specific country i.e. capital jumping from one country to other, bargaining the best possible deal from the States. Central Banks in sync continue to bail-out the financial sector again and again, maintaining the monopoly of such handful of oligarchs worldwide at the expense of the rest.

Overall, the global debt burden (public + private) led by G7 countries and China touched an all-time high of $257 trillion in January 2020, leaving behind the Capitalist States with very little resources to maneuver in this sort of humanitarian crises. Japan with a gross debt of 235% of GDP in 2018 lead the pack, followed by 132% in Italy, 104% in US, 98% in France, 90% in Canada and 87% in UK. That means countries are rich, very rich, but almost all of the wealth is private. The public capital is in fact running a negative balance in rich countries like US and Japan (i.e. public debt over 100% of national income) and 10-20% positive balance in EU countries like Germany, France.

Post- 2008 Financial Crises

Central Banks of US and Europe, in sync are forced to buy majority of the debt bond issued by the State, to bridge the State budget deficit and bail-out the economy once again since the 2008 financial crises. That means, Super-rich investors and foreign lenders are losing confidence on State potential to prop-up the financial market again and are not buying such State issued debt-bonds. This process of creating credit out of thin air (i.e. like printing new money) is called debt-monetization. Such debt-monetization has kept the US benchmark interest rates near zero while Europe and Japan are trading at negative interest rates (i.e. return would be less than the principal) since the 2008 financial crises; this rate reflects the base rate of return on capital investment. That means, taking into account the public-debt, population growth and inflation, the GDP growth rate is close to zero since mid-1990s i.e. ‘permanent stagnation’. That means this is like borrowing from future wealth that should be created by our next generations. The higher base rate in India is just a reflection of their still prevailing backward market relation in terms of capitalist development. But the nature of such growth is very much dependent on US driven financial world order, which stands still.

The central idea was to convert such public-debt into private debt by providing easy credit through private banks. But due to such stagnation in real-production, big corporations are avoiding the laborious process of actually creating share-value in real-production with this borrowed money, and instead manipulating the profits in their favour through own share buybacks. Higher equity prices pushed for more collateral and still more borrowing, pushing the stock prices higher, and so forth. So, in due time, excessive credit not backed by actual wealth creation in stagnating real-production results in mass-default on debts, often referred as ‘credit crunch’. The rich who own majority of private capital actually initiate this bubble by financing the part of the debt itself. US debt and asset valuation data for the quarter 3, 2019 suggests that richest 1% own more than half of stocks (54.2%) and 4.6% debt, next 9% own 33.9% stocks and 20% debt, and bottom 90% own 11.9% stocks and own 75.3% debt.4 Bottom 90% in fact, have negative wealth (i.e. debt exceeds asset value) because of huge rise of mortgage debt since 1998, a reminder of dot.com bubble. During credit crunch, the Super-rich (top 0.01%) in the main begins to sell-off their stocks in a hurry before they become toxic as the ‘real’ value of stocks (actual money lured into speculation) gets redistributed in their hands. Financial crises sets-in as stock market crashes and all of the ‘virtual’ money vanishes in an instant, while ‘real’ money had exchanged hands. Thus, the credit system becomes the major modern lever for the finance capital to extract wealth from the masses, escalating the social and economic disparity between rich and poor to a level never seen before. To sum-up, stagnation of investment in real-production punctuated by Central Bank sponsored virtual-credit fuelled repeated financial boom-bust cycles has just managed to keep the world economy afloat.

Real wealth (value) can only be created when money is invested in real-production, which completes the cycle of debt repayment and results in more equitable distribution of wealth in terms of labor wages. But ‘speculative capital’ just leads to redistribution of circulating wealth as no ‘real’ value is added to the society. Thus, this debt will never be paid back in future by taxations since the money is not trickling down to common man in terms of wages and employment by means of real-production. Meanwhile, most of this tax-payer wealth will further depreciate, as Super-rich will become Super-super-rich during the next financial crises, with this money belonging to the future generation. Between 2009 and 2018 itself, the number of billionaires it took to equal the wealth of the world’s poorest 50% fell from 380 to 26. US heads the list on such disparity as top 1% hold 42.5% of US national wealth. This is while 40% of the total 330 million population lives below poverty line in the richest in the world.

Post-Covid Response

Since 1970s, at least 15 such incidents of financial crises had taken place due to non-payment of debts. The last one coincided with Covid-19 pandemic as it created the perfect smokescreen to cover-up this credit bubble which was anyways due to go bust since 2017-18 as market cap to GDP ratio had exceeded 150 since then. The stock markets collapsed as tax-payers’ trillions of dollars were again siphoned-off by the Super-rich to off-shore accounts. Central Banks of US and Europe, in sync have started to buy majority of the debt bond issued by the State to bail-out the financial banks once again, as start of 2020 saw the overall global debt per capita climb to at around $32,500 i.e. 3.2 times that of annual world output.

Based on such debt-monetization, G7 countries have announced the biggest bail-out packages as the global debt continues to climb higher during this Covid pandemic scenario like never before.5 Trump has announced the biggest stimulus package of over $2.8 trillion (13% of the GDP). Out of which 25% of the money is going to bail-out the big MNCs and 19% for small businesses. That means 44% of the total tax-payer future generation money is used to bail-out business houses. This money is again diverted towards speculative expansion of wealth as a huge gap is opening-up again between actual corporate earnings and their equity values. This is in desperation to keep the US financialization process afloat, and start another boom-bust cycle so as to save US dollar from imminent collapse. Meanwhile, the same corporate continue to lay-off millions of workers leading to unprecedented unemployment rate as direct account transfer accounts for just 30% of the total bail-out money and is grossly inadequate to sustain a decent living.


Modi Government had also announced a Rs 20 lakh crore (10% of the GDP) bail-out package. Out of just Rs 1.7 lakh crore is kept aside to make provisions for free food grains and cash to poor and elderly. Meanwhile, the rest of the money is supposed to make way for easy cheap business loans as RBI continues to slash interest rate. This is in sync with the global policy of bailing the Super-rich business interests (i.e. the finance capital) with the tax-payer’s money and leaving the rest majority at the mercy of free-market dynamics.

But debt-ridden Indian State (like US) cannot print money to fund the budget deficit (unlike US). Taxing the Super-rich is the only way-out to reduce the fiscal deficit since taxes don’t add to the debt-burden i.e. no need to repay. But instead State is selling profitable public assets (including natural resources) to the big private sector at dirt-cheap prices and reducing social expenses to bridge the fiscal deficit, and make-up for the fall in tax revenues. Public-wealth ratio to national wealth has hence gone-down to 100% in 2012, and continues to depreciate at a faster rate. That means, the same distressed bottom 90% are getting deprived of social subsidies in all fonts including education, health, rural development, and social welfare, to accommodate the large tax-cuts given to the Super-rich, who are meanwhile busy indulging in self-speculative expansion of existing wealth due to lack of potential foreign and domestic market purchasing capacity. Recent State social subsidies in fact have either faced restriction and disruption (e.g. due to Aadhar linkage)6 or have got diluted including the National Food Security Act.

On the whole, Government is placing the entire public capital (by selling profitable public assets at dirt-cheap prices) and the surplus private capital (in the form of cheap bank loans) into the hands of the big corporate and begging them to start production. But without effective demand in the market, major part of the capital is getting diverted into speculative expansion of stock values i.e. share buy-backs, and then handing huge payouts as dividend to share-holders. This in effect, results in net transfer of such public and private capital to the top 0.01%, even without rolling a dice. Part of this surplus capital (i.e. profits) is siphoned-off to tax havens. IMF estimates that more money has left developing countries since the 1970s, than has received in foreign direct investment and foreign aid combined. Taxes earned from such illicit money since 1970s could have paid all the debt of the developing world. This is while bottom 99.9% end-up shouldering the resultant public debt-burden as RBI continue to slash bank interest rates to accommodate the loss (and is inching towards zero, just like US, Japan, and EU), while confronting mass layoffs or wage reductions due to stagnation in real production in the face of declining State social expenses.


The GDP per capita of the world in 2019 was projected around $11,464 in nominal terms (per capita income in terms of purchasing-power parity is 1.64 times greater than nominal).7 That means enough surplus money to feed all the population. Still people are starving to death worldwide, not due to population over-growth, but due to gross unequal distribution of such income, making this data look absurd. This economic disparity in capitalism takes the shape of a pyramid with less and less people at the top (i.e. concentration of capital in fewer hands) and more and more people sliding towards the bottom. Overall, net private capital growth in developed countries went-up from 200-350% to 550-800% of the national income between 1970-2015 period. This is the natural outcome of the financialization mediated speculative expansion of wealth since 1980s which hastened the skewed distribution of wealth in the last 40 years to such an extent that at present, 40% of all private wealth is held-up in the hands of top 1%. Out of which, the top 0.01% and 0.1% wealth rises faster than the rest top 1%. This continues to get polarized further as in 2019, it took just 26 Super-rich people to match the wealth of the poorest half of the world, down from 43 in 2017.

This all have taken place at the expense of super-exploitation of bottom 90% population and environmental destruction. That is to sustain such over-consumption of top 10%, whereas poorest of poor at the rock bottom of the pyramid end-up empty stomach, not due to food scarcity caused by over-population, but due to their inability to afford. World Bank estimates that out of the total 7 billion people living worldwide, the bottom 40% are left with less than 5% natural resources and bottom 20% are left with less than 2% natural resources to consume. In contrast the top 10% consume 59% of natural resources. Moreover, the top 1% are left with so much surplus (even after over-consumption) that over $100 trillion dollar is just sitting idle in bank accounts worldwide, evading taxes and doing nothing due to low ‘rate of return’ in real-production, triggering higher risk in speculation.8

Such capitalist exploitative relation with labour and nature is not an anomaly but a byproduct of the competitive drive of accumulation driven by the constant need to overcome the ‘tendency of falling rate of profit’ caused by such large-scale anarchy of production. This endless expansion of production driven by technological growth and media enhanced massive sales effort to stimulate human over-consumption of top 10%, independent of basic human needs (e.g. need to replace old functioning mobile with a new one every year) has now come into direct conflict with the limitations of nature. It is manifesting as either shortage of ‘sources’ of raw materials or natural resources such as groundwater, fossil fuels, minerals, etc. or as lack of ‘sink’ to absorb industrial waste causing pollution, global warming, ocean acidification, etc., both inter-related. Constant conflicts surrounding oil rich areas in Middle-East and South China Sea are a gentle reminder of such impending scarcity of natural resources. The global warming caused by such environmental destruction has also begun to take toll in the form of natural calamities (e.g. floods, cyclones, tsunamis) coming at much frequent intervals. Current Covid-19 pandemic is a gentle reminder of such man-made excesses toward nature.


The shadow fight between the large trading nations continues on a global scale within the ambits of US imposed economic sanctions and trade-war to survive at the expense of the rest. The capitalists are in fact waiting for large scale destruction of means of production once again like the WW-II which helped capitalism overcome the ‘crises of relative over-production’ for some time. But until then, left with no other option, the States are still not taxing the top 1%, but debt-funding to stimulate consumption by creating credit out of thin air, and in turn reducing social expenses at expense of rising austerity of rest 99% living on this planet.

Marx believed that capitalism contained the seeds of its own destruction. This failure to address the real issue of deprivation of masses in causing such lack of sufficient market for the surplus value to realize profit has reaffirmed this fact. Keynesian fallacies over the last 40 years have only led to growing debt and such huge claim on future production and has exposed the contradictions arising out of such inevitable ‘crises of relative over-production’ once and for all, pushing the world economy into a no-exit mode. Corona virus pandemic has in fact, just given an insight to what actual stagnation will look like in future. Super-rich in turn, seek to seclude themselves from the masses in their own islands of power and privilege as the world becomes a much poorer place for the working class. Public expenses (food, health, education) and social welfare funds (e.g. pension funds) will become non-essential for the State. The world will suffer further deterioration of living standard including that of US and Europe. Overall life expectancy continues to decline as the question of food security and starvation engulfs our very existence of life on this planet. This has given rise to fertile grounds of dissent and clamor for more equitable distribution of income is growing worldwide so as to restart the world consumption-engine in general (and not over-consumption of select few). But in the end, it is the political discourse of world working class which can decide on such future action caused by such inhuman consequences of capitalism.

1 Crivelli, de Mooij, and Keen, 2015; Cobham and Jansky, 2018

2 Estimated by Gabriel Zucman, 2017, an economist at the University of California at Berkley

3 Economist and lawyer James S. Henry, 2016

4 Federal reserve distributional financial accounts,

5 Institute of International Finance (IIF) data based on Bank for International Settlements and International Monetary Fund figures

6 Khera, 2017; Muralidharan, et al., 2019

7 Data taken form IMF, 2019 published report

8 World Bank, 2008 World Development Index, 4, http://data.worldbank.org.

Note: World Bank staff combined measures of inequality within countries with measures of inequality between countries (using producer price parities) to derive estimates of the share of consumption by world income deciles.

From ND, August 2020