Relevancy and Importance of Production Struggle in Consolidating Capitalist Revolution led Economic Prosperity

1. Introduction

After historical shift of the working policy by the UCPN (Maoist) through its 7th Party Congress\\\', a big debate and discussion intensified throughout the country from different angles which is continuing today also. Ranging from rightists, revisionists to ultra leftists are trying to interpret the working policy of production struggle adopted by the Congress on their one way. Some of the rightists are trying to argue that the proposal to form production brigade is an attempt to revive the state controlled economic system that was practiced in socialist countries in the past but without successes. The emphasis on cooperative movement laid down in the working policy is also put under the same category by them. The revisionists, on the other hand, are trying to portray that the working policy discourse that has been adopted by the UCPN (Maoist) is the same that they are either advocating or pursuing since long. The ultra leftists are criticizing on the ground that now with such a new working policy, the UCPN (Maoist) has almost abandoned the revolutionary path which must be grounded on the class struggle. In this backdrop, this short paper based on the main features of the working policy tries to show that all such allegations, claims and criticism are simply unfounded and additionally exhibits that how this would have epoch making contribution to the successes of capitalist people\\\'s revolution which has passed through some ups but many downs. Below, at first, the basic characteristics of the Nepalese economy and contributing factors have been briefly discussed to show that in what way continuity with neo-liberalism led economic policy regime by violating the agreed transformational discourse is contributing to inhibit the development of productive forces, perpetuate underdevelopment and aggravate crisis in the Nepalese economy. This has been followed by brief discussion on the political economy of neo-liberalism led contemporary global capitalist system and its key features particularly to exemplify how such a policy discourse has become devastating to the working of the global economy in general and countries like Nepal in particular amidst deepening crisis in the capitalist system. In the next section, main features of the production struggle and its relevance and importance have been briefly discussed following political economy approach. In the same section, some country experiences have also been additionally cited to show that how the production centric policy discourse accompanied by critical role of the state has been instrumental to the structural transformation, advancement and prosperity of their economies. Last section is devoted to draw some conclusions.

2. Main Characteristics of the Nepalese Economy

As well known, along witn long people\\\'s struggle followed by abolition of monarchy, the roots of the feudalistic system have been abolished to a greater extent. As an offshoot, a gradual development of non-agricultural sector in general and transport, communication, banking and finance etc in particular has also taken place leading to some structural changes in the Nepalese economy, from agriculture to the non-agricultural sector. Changes in the employment structure are also taking place with the reduction in the agricultural dependency from 91 percent some decades ago to less than 66 percent now. Apparently, these indicate that a process of capitalistic production relations has augmented leading to the strengthening of capitalist path to development, a progressive course toward structural transformation. But when the growth and its pattern, capital accumulation processes and its characteristics and above all the basic features of the economy are observed, completely a very different trend is noticed.

 In addition to very low growth rate at around 4 percent in the last thirty five years, the growth pattern shows that in the liberalization period that began in 1990, the services sectors like transport, banking and real estate expanded albeit at a faster rate but primarily at the cost of stagnation in agriculture and decelerating in the industrial sector with manufacturing and electricity\\\'s growth decelerating at a rate of 1 and 0.4 percent during the period 2001 to 2010. As such, the reduction in the share of agriculture GDP has been very fast in recent years and has reduced to almost one third in total value added where as the share of households engaged in the agriculture still remains 76 percent indicating worsening purchasing power of the average farmers amidst very low average holding at 0.7 hectare added by skewed land distribution pattern. Likewise, a sharp fall in the share of manufacturing has taken place with its share going down to as low as 6 percent of GDP which is regarded to be the key in structural transformation of the economy including generation of employment opportunities.

The main problem is that the investment has not only been urban centric but it has gone primarily to unproductive areas including non-tradable activities amidst huge inflow of massive remittances accompanied by flourishing of informal economy in general and parallel economy in particular. It is ironical that out of the total banking sector investment almost 60 percent is concentrating in capital city and in that also 40 percent of this is overtaken by limited families. Another phenomenon is the increased inflow of resources from rural to urban areas for the obvious reasons of lacking facilities or opportunities. Another parallel phenomenon is that out of the total government expenditure, the capital expenditure share has now almost reduced to 12-14 percent. In this also a particular development region absorbs more than 60 percent of total government expenditure.

 As an offshoot, out of the total labor force, more than 90 percent is engaged in informal sector without job security. More than 61 per cent in agriculture are self—employed without pay. The most worrisome phenomenon is the very high under and disguised unemployment. Among the employed persons, 32 percent workers work less than 40 hours in a week. Out of 30 percent classified as underutilized, 49.9 percent in urban and 26.9 percent in rural areas are under utilized in which the share of youth population is predominant (CBS, 2009). This is the reason for more than 1500 youths leaving the country every day in search of jobs.

Despite consumption based estimates showing both poverty and inequality reducing considerably overtime, the income and deprivation based estimates which represent ground reality in exclusionary societies to some extent indicate that they are in the neighborhood of 0.51 ( ratio) and 44.2 percent respectively (Khanal, 2011 and UNDP, 2012). These both ratios are one of the highest in terms of international comparisons. These are corroborated by many other studies and reports as well. A study by Asian Development Bank shows that during the period 1996 to 2004, the rate of growth in inequality in Nepal was highest compared to other countries of Asia and Pacific region (ADB, 2007). The human development indices also shows that, despite some improvements over the years, the rate of change or increment has slowed down considerably in recent years. The Human development index for 2012 is 0.463, one of the lowest in South Asia and once inequality is adjusted it reduces further by one third reconfirming high inequality. Disaggregated data by caste and ethnicity show that HDI is very low at 0.383 for a highly disadvantaged group compared to privileged group above 0.61. A deeper analysis by UNDP shows that education and income gaps by caste/ ethnicity, accessible and remote areas are very high (UNDP, 2009).

 There are various secondary data sources which additionally indicate that the distributional gain has been in favor of haves not have not\\\'s2. The factor returns indicators show that the share of compensation of employees in total value added has gone down to 38.1 percent in 2011 from 46.7 percent in 2001 (CBS, 2011). The Nepal Living Standard Survey (NLSS) results also show that in 1996 the share of wage earnings in total household income was 54 percent. This ratio reduced to 47 percent in 2004 and 38 percent in 2011. Al these reinforce that exclusion in the form of class, gender, ethnicity, geography very pervasive in Nepal.

 Amidst all these, the external vulnerability resulting from excessive external dependency has heightened in an unprecedented way. The trade deficit as a share of GDP has surpassed 28 percent of GDP and hence even the massive remittances inflows are not adequate to cover the gap between exports and imports (NRB, 2013 and CBS, 2011). This is an alarming situation and is hardly seen anywhere in the other countries which are in the same stage of development like Nepal.

Thus, the foremost and very distinguishing characteristics of the economy is that not only the long term growth is very low but also it is jobless, urban centric, exclusionary, inequality and external dependency enhancing. Another distinguishing characteristic is that the changed structural pattern is opposite to the pattern of structural transformation that took place in both advanced capitalist and newly industrializing countries. This means that major policies including investment environment and accompanying structural and institutional set ups and arrangements at both superstructure and economic bases are facilitating trade and finance induced capital accumulation process of the nature discussed above and hence its basic characteristic is bureaucratic and comprador capitalistic in nature which again by design or default serves the interest of the external monopoly capitalists. Now in the agriculture sector also such a capitalistic tendency is mounting as the increased exploitation of both producers and consumers indicates. The most worrisome phenomenon of all these is that unless reversed, there is a danger of converting Nepal into economic colony. Needless to add, this is happening despite enormous potentialities in Nepal as the biodiversity, abundant water resources, tourism prospects and so many other areas of competitive advantages indicate. Therefore, while discussing the appropriate policy discourse shaping the economic system it is necessary that they are grounded on these realities and take agreed political discourse into account for ensuring the coherency in their direction, likely outcomes or broad ramifications.

3. Political Economy of Neo-liberalism and Its Ramifications

It is ironical that contrary to the commitments to New Nepal, the roots of the economic policy are still grounded on neo-liberalism. But the main feature of the neo-liberalism is such that it downplays the role of political and economic institutions in shaping the policies and their differential outcomes. Based on classical and neoclassical thinking and presumptions, politics is considered as obstacle to the expression of agents\\\' rationality, and, therefore, often termed as disturbing factor or element. By treating economics in isolation, it argues that only a principle of getting the prices right through the interplay of market forces freely can ensure allocative efficiency of the resources leading to enhancing of both productivity and growth and thereby reduction in poverty including new opportunities creation through spill over and trickle downing effect. From the same token, both historical and contemporary societal factors perpetuating inequality, exclusion or more broadly underdevelopment are overlooked on the assumption that technical factors are sufficient in the efficient working of an economy. It in deed derecognizes that in the real world not competition but monopoly has prevailed or intensified which has been the major cause of deepening crisis in the capitalist system and intensifying crony capitalism in many newly advancing countries.

It is well known that the failure of the Keynesianism to tackle stagflation of the 1970s provided a new ground for the revival of the new classical principles based neo-liberalism. The Neo-liberal policies took the form of Reaganism and Thatcherism in the North and structural adjustment in the South. The policies of monetarism, deregulation, liberalization and privatization were first introduced in North followed by South although with some time intervals. The Washington Consensus jointly evolved by the World Bank and the IMF in 1995 pushed liberalization and open up policies further. The establishment of WTO in 1995 contributed to intensify the trade liberalization led globalization. In a short period, most of the developing countries eliminated quantitative restrictions on imports, lowered tariff barriers, and reduced the dispersion of tariff rates (Rodrik 2004). It is interesting to note that the introduction of these programs almost coincided with the deepening or looming crisis in the capitalist economies as timing of introducing ESAF and Washington Consensus indicate (Bello, 2008, Beams, 2008 and Khanal, 2010).

But the intensification in neo-liberalism ted globalization and more interestingly financialization continued in search of alternative quick profits, a precondition for either overcoming from crisis or sustaining capitalism. However, as an inherent character, contradiction between the material developments of the productive forces, which the system was promoting and the way very unequal or unjust social relations within which it was augmenting triggered more and more leading to deepening of crisis in one form or another. This was also partly due to the contradiction betv.een the global forces under capitalism and the nation-state system under which the political power had to be grounded or grabbed. Thus, despite globalization contributing to integrate semi-capitalist, non-capitalist, or pre-capitalist countries and areas into the global market economic system, this was not sufficient to cope with mounting crisis one after another especially due to growing wealth and capital concentration amidst stagnating purchasing power of the masses. In the process, the capitalist economies faced overproduction of capital and under consumption of goods and services (Bello, 2008).

It is evidently clear that the financialization led bubbles encouraged by, among others, loose monetary policy in US had created technology-stock bubble in the late 1990s which collapsed in 2000 and 2001 leading to the recession. Again with the collapse of technology bubble, attempts were made to counter a long recession by cutting the prime rate to a 45 year low of one percent in June 2003 accompanied by excessive reliance on deficit budget which also additionally contributed to fuel trade deficit leading to another bubble that originated at first from the housing and real estate sector in the US. Ultimately there was burst in 2008 leading to great: financial crisis with too much contagion effect which in turn generated deep recession throughout the world. Although trillions of dollars of bail outs and fiscal stimulus packages contributed to overcome from the financial meltdown and recession for a while, the excessive deficit finance means utilized augmented debt led crisis. The peripheral European countries were most sufferers of it which are yet to overcome from deepening crisis. Moreover, the strong austerity measures pursued to control unsustainable debt level without addressing structural problems including rising inequalities emanating from the policies consolidating the power of the financial oligarchic amidst unprecedented rise in unemployment is continuously posing a bigger threat of long term stagnation or recession in these economies with continued adverse effect globally. Although some fragile recoveries are noticed in the US after the policy of quantitative easing by enjoying undue advantages of dollar being an international reserve currency, now many fast growing economies are in the trap of currency depreciation, widening current account deficit, rising prices and slow down in the economy amidst declaration of terminating quantitative policy by the US. Following beggar thy neighbor policy by the US without taking any responsibility to the crisis despite dollar being international reserve currency has generated problems of many countries today. Amidst growing crony capitalism, such problems are threatening the deeper crisis in these economies. At the same time, the structural problems are intact in capitalist countries including the US. Today these countries are confronting with: a.    Growing gap between accumulated fictitious capital and production and productivity in real sector as a result of speculation led bubble and bust inducing policies continued or intensified to safeguard or rescue financial capitalism from collapse,

b.  Augmentation of stagnation in the real sector and jobless low or negative growth amidst no new innovation and productivity enhancement leading to deepening of structural problems, and

c. Phenomenal rise in inequality and deceleration in the purchasing power of the masses amidst over production and under consumption.

 The important lessons to be taken is that by inducing the accumulation of speculation led fictitious capital, today\\\'s financial capitalism is contributing to widen the gap between such a capital and growth in the real economy leading to aggravation of crisis one after another. In a globalized world dictated by the financial capitalism, today many developing countries are facing the similar problems. The adverse effect has primarily driven by the extent of exposure to such a policy discourse. As highlighted above, Nepal is also one of the classic examples. Needless to add, this evidently underscores the importance of production sectors in the sustained growth and development.

4. Political Economy of Production Struggle and Its Main Features Advanced by UCPN ( Maoist)

As is well known, the philosophy of political economy was advanced by Karl Marx in a more scientific way despite some initial thoughts forwarded by Adam Smith and Ricardo. According to Marx, political economy is a science that studies the social relations that evolve between people in the process of production, distribution, exchange and consumption of the material benefits. Marx discovered the two aspects of social productions that are inextricably connected with each other: productive forces and the relations of productions. The unities of these two interdependent elements constitute the mode of production which at the same time is dictated or influenced by the superstructure\\\'. Therefore, political economy which has again been further advanced in subsequent writings by many teaches us on the need of deeper understanding on the pre-existing and contemporary set ups and arrangements that have or are shaping the social relations which, again, are reflected in property relations, class structure and social system. This is where the political economy of production struggle comes to the forefront.

Simple explanation distinguishing politics and economics may help to clarify on the importance of production struggle. In the political science literature politics is defined as the study of power and authority, and the exercise of power and authority. On the other hand, economics is commonly defined as the study of the optimal use of scarce resources and therefore it implicitly entails on the need of exploring alternative optimal policy choices. But any such decision at the highest political level is constrained or guided by the conflict of interests. They are also governed by not only existing institutional framework or arrangements but also by the design or structure of political institutions. Therefore, whether decisions represent society at large or serve certain interest group depends on the nature of political institutions and the processes through which decisions are made. More specifically, the entire decision making processes and its implications are associated with rules of the game (i.e., the institutions —state, political, economic, social etc including formal and informal) and the distributive conflict (i.e. gains to one class or group in society compared to or at the cost of other class or group of people as result of one set of policy or program choices under the dictate of rule of the game or superstructure) (Khanal et al, 2005 and Quis and N.va de, 2003). This means that both institutional set ups and arrangements and economic base shaping the production and distribution relations are mutually inclusive.

 Unlike the parliamentary political parties derecognizing the need of corresponding reforms and changes in production and social relations at the economic base amidst half heartedly accepted state restructuring and accompanying institutional reforms at the superstructure, the UCPN (Maoist) has come forward with the alternative agenda of production struggle by recognizing that without full concentration in production neither productive base of the economy will be augmented nor the accumulated capital will enhance reproduction process which in turn could contribute to the development and unleashing of productive forces, a precondition for overcoming from underdevelopment and thereby enhancing socio-economic transformation rapidly. It lays emphasis on the use of country\\\'s tremendous potentials existing in the form natural, physical, financial and human resources. Unlike the top down development course perpetuating exclusion, inequality and deprivation of opportunities, it stresses on the essentiality of involving people in both processes and outcomes in a non-discriminatory way for abolishing exploitation or discrimination in the form of class, gender, ethnicity and geographical location. More broadly, based on the document, five pronged institutional setups and arrangements are found to be envisaged for bringing about momentum in the production system in a way that could strengthen new production and social relations contributing to consolidation of capitalist revolution:

 a. Involvement of all leaders and party cadres in production works not only to resolve daily hand to mouth problem but also to contribute to institutionalize a political culture of engaging entire party organizations in productive activities as part of contribution to nation building. For such a shift, establishment of production brigade and units from centre to the grass roots in the form of cooperatives and wherever viable and appropriate establish agro-and other processing, manufactured and services industries as well,

 b.  Motivate and guide people to establish production cooperatives and preferably operate in a value chain basis for ensuring not only production but also exchange and marketing and thereby ensure production incentives. Based on viability encourage them to establish agro, manufactured and other services industries in their vicinity,

c.  Encourage entrepreneurs and business community to come forward more decisively to contribute to augment production base of the economy by taping tremendous potentialities that exist in the country. Depending on the viability, prospect and level of required investment, encourage to promote private-public partnership including partnership with people,

d.  Pursue government to drastically change policy discourse in a way to ensure shift in investment from unproductive to productive areas and lead, facilitate and coordinate production centric development agenda, and

e.  Attract foreign investment in the areas of comparative advantages and nation\\\'s interest to meet resource gap required to accomplish double digit growth and rapid economic transformation. In the process, encourage with priority joint ventures among others.

As the emphasis indicates, the agriculture, agro based industries, construction, energy and tourism which have high level of competitive strength will be the major priority areas of production concentration. The important point to be added is that unlike the criticism it envisages very candidly the catalyst, complementary, partnership and coordinated role of government, private sector and cooperatives.

Needless to add, above production centric organizational and institutional discourse should not be considered in isolation. The building block will be the proposed agenda of state restructuring and accompanying progressive and forward looking political and economic discourse that is advocated and championed by the UCPN (Maoist) uncompromisingly since long:

a.  A federal state structure, inclusive and proportional representative democratic set ups ensuring the decisive say and representation of have not\\\'s and most deprived in the state governing system accompanied by guarantee of economic and social rights in the areas of land assets, food security, health, education. shelter and employment,

b.  An overhauled policy discourse that removes structural and other impediments for ensuring access of poor and deprived to physical, human and financial resources among others and guarantees such a facility to them in a priory basis,

c.  Prudential regulatory system and other arrangements in place that contain malfunctioning and other distortion type practices in the market and check illegal business and other economic transactions,

 d.  A progressive tax system that along with providing of sufficient incentive to engage in production and related productive activities prevents resource diversion in non-tradable and unproductive activities and at the same time protects people from high tax incidence,

e.  An overhauled government budgetary and planning system to be compatible with federal system added by complete restructuring of government expenditure that helps to augment productive capacity of the economy and ensures balanced and equitable development,

 f.  In order to facilitate the strengthening of production struggle from grass roots, devolution of economic power and authority to the local governments, and

 g. Overhauled bureaucratic structure for ensuring transparent and accountable governance system that could guarantee non-discriminatory, equitable and effective delivery of the public services system in a time bound but automatic manner, among others.

 The production struggle, thus, is grounded on whole gamut of changed policies, institutional and structural arrangements. It aims to bring about compatibility in the economic base with the proposed changes in state system and governing institutional structures for unleash of productive forces in a way to bring about economic prosperity in a equitable and sustained way. It is neither grounded on business as usual principle of neo-liberalism as championed by liberal bourgeois and left revisionists nor it discards the class struggle as often charged by the ultra leftists. As explained exhaustively in the political document adopted by the 7th Party Congress of the UCPN (Maoist), it is , in deed, grounded on the deeper analysis of the historical facts and emerging challenges to the socialist revolution in the 215t century amidst some miracles in the areas of science and information technology amidst augmentation of globalization. It also indirectly draws the experience of countries like socialist China and capitalist South Korea which have succeeded to augment rapid structural transformation through production and productivity centric development.

Unlike the myths and wrong propaganda, the ground reality shows that dynamic gains of activist government policies sometimes at the expense of static allocative efficiency with a standard set of relatively constant policies played the crucial role in economic transformation in South Korea. Therefore, studies point out that the East Asian governments \\\"governed the market\\\" in critical ways. The priority on human resource development, stable macroeconomic environment with less distortionary policies and massive industrialization drive with balanced export orientation with technological advancement played a key role there in which land reform was instrumental to that process.

 In China the four modernization drive that began in 1978 was grounded on relatively well developed infrastructure and educational advancement. Beginning from contractual family responsible system by replacing commune in the agriculture followed by massive township and village enterprises development program to integrate rural and semi- urban and urban economy the modernization drive was augmented. The open up policies attracting foreign investment by establishing export processing and free economic zone accompanied by massive restructuring of public enterprises, creation of market institutions, dual track system to price and exchange played a key role in accomplishing economic miracles. In that state driven appropriate institutional setups and arrangements, prompt decision making processes to remove structural and governance related bottlenecks played a key role. Now China is refocusing on internal demand induced economic advancement in place of export led growth and development which in the crisis prone global capitalist system is viewed highly unsuitable and risky. These experiences again reinforce the importance of production centric internal capacity driven growth and development in countries like Nepal which are possessing big potentials as already pointed out.

5. Main Conclusions

 Nepal\\\'s experience shows that in the past no genuine efforts to tap Nepal\\\'s potentials for the prosperity of nation and people have been made. Contrarily, encouragement to some quick benefit yielding policies and programs grounded on neo-liberalism has eroded the productive base of the economy leading to deepening of multiple crises. Ironically, despite broad agreement at the political level to enhance inclusive and equity driven socio-economic transformation, the entire discourse is obsessed by business as usual tactics. Thus, the agenda of state restructuring and new political discourse is seen by the status quo forces that as if the economic discourse is separate and independent. In essence, they are making every effort to safeguard the interest of bureaucratic and comprador capitalist in general and external monopoly capitalist in particular. They see based on their class outlook that the ongoing course could prevent their eroding grip in the political front as well. It is in these contexts, the role of production struggle comes to the forefront. There is no alternative to this working policy if we are determined to overcome from deprivation, hunger and bring out prosperity in short span of time by utilizing the tremendous potentials that Nepal possesses. The experience of many other countries additionally corroborates this.

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