Microsoft 'disappointed' with hold back on retail FDI - Headlines India, Dec 28 2011
What is capitalism?
Thus, the employee gets the means of production, increasing his or her overall productivity while the capitalist gets incentives to rent resources to employees and get a share in their production. This leads to an overall increase in production as workers get access to vast resources that enhance their means of production. For example, before the establishment of large mining agencies, coal mining used to be done by the process of ‘rat hole mining’. In this process individual miners got their minerals by going into small ‘rat holes’ to procure minerals. This was a slow and tiresome process. This changed with the coming of large companies, which could afford expensive mining equipments which greatly increased the productivity of a labourer and hence boosted the economy
Implications for democracy
At first sight it looks like a win-win situation for everybody as overall productivity has increased. However it is to be noted that we are creating very powerful entities in our midst. We have large corporations with turnovers exceeding GDP's of entire nations. For example, Tata Steel (a mere subsidiary of the Tata group) has an annual turnover of Rs. 1.03 trillion [1]. While India, which is the second largest country with more than 1/7th of the world population, has a GDP of Rs. 68.865 trillion (2009)[2]. Now money is power, even if it is not used illegally. With money it is possible to buy and hence control labour, which is the basic measure of all value [3]. It is also possible to exert a greater influence on the market, for example, large corporations will find it easier to crush small competitors, as happened in the case of Thailand where 38% of the retail market was taken up by 3 big retailers within 13 years [4]. Power when illegal actions are taken into account is limitless...
Thus within our ideals of democracy we encourage the growth of very powerful entities who are not responsible to the people. We want them to be free, no matter what the implications are for the people. These corporations are ‘power without responsibility’, no different from pre-democratic tyrants, just that they are more numerous and probably more powerful.
Foreign Direct Investment
This employer – employee relationship can also exist between societies and nations. Consider an auto manufacturing company based out of country A. This company has invested in various countries P, Q and R. Initially, the investment was beneficial to countries P,Q and R as it generated employment and increased their GDP’s. It also supported various small parts suppliers from whom it bought various components for the manufacturing. But this is not the same as countries P, Q and R having ‘native’ companies, as the company is headquartered in country A. This means that it probably has its highest paid employees (managers, researchers etc.) in country A. It would also be paying taxes to country A’s government and would be listed in country A’s stock market. All these mean that country A has a higher money circulation, and GDP due to company A, partly contributed by P, Q and R’s labour and raw materials. Thus a sort of employee-employer relationship sets in with country A being the ‘employer’ and P, Q, R the ‘employees’.
This is harmful, as with time, the larger company will be able to outcompete any smaller competitors in countries P, Q and R. Also, as the employer-employee relationship gets deeper and deeper with more and more people being employed by MNC’s, country A starts getting money without doing any ‘real’ work. They only have to administer, ensuring that they get their profits. This will make country A richer and more powerful. Finally it may reach a stage where A is able to entirely control P, Q and R’s ‘wages’ to finally obtain political control over P, Q and R, resulting in a second colonisation. This time the coloniser’s foundations will be based on stronger economic basis and might not need much force to maintain control.
Thus, it is possible to conclude that while encouraging FDI may be beneficial in the short term, it can lead to long term disaster within the capitalist framework, which itself is flawed.
References
1. http://www.daytradingshares.com/diversified_section/2011/10_largest_companies_in_India.html
2. http://devdata.worldbank.org/AAG/ind_aag.pdf (Exchange rate taken as Rs 50 = 1$)
3. Wealth of Nations – Adam Smith
4. Shekhar Swamy - The Pitfalls of FDI in Multi-Brand Retailing in India
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