Special
Economic Zones -
Neoliberal "Enclosures" In India
By Soumitra Bose
17 May, 2007
Radical
Notes
Specially
Enclosed Zones for forming Capital through production or servicing within
a nation-state and without the encumbrances of law of the native land
is what gets called as Special Economic Zone (SEZ). What speciality
of Economy this zone is going to provide is hazy not only from the content
point of view but even from every angle of view one looks at it. Can
a nation state, by definition, have multiple "economies" within
its territorial boundary? Can an "Economy" be quantified through
any stretchable definition of qualification as one co-existing with
"others"? Is the usage of "Economy" over determined
by factors other than "Economy" or if not then where is the
line drawn to distinguish the exchange mechanism or production process
or even production relation with the regulating rules relating to human
rights, social benefits and even simple polity of the nation-state?
The concept of enclosed space
has changed its point of incidence. Marx saw an enclosed space as a
catchment basin from where cheap labour will be evicted and culled in
to work in industries. Labourers from not specialized but specially
charted out areas will be brought in to the most "advanced"
type of production relation or that is what will be touted. In reality
it will never be the most advanced type of production relation but will
have the most advanced type of surplus extraction from the labourers.
In Marx's days, the entire nation-state territorial space was the hearth
of the Capital, spaces were enclosed and insulated to juice out the
labour power, evict them, make them readily available for the Capital
sector- today in SEZ the enclosed space is the special sector of Capital,
whatever we have outside is the area from which labour power will be
uprooted, evicted and made available for the "enclosed spaces".
This very specific nature of the transposition requires a huge space
or innumerable middle range spaces to be declared as the SEZ where the
"advanced" Capital will establish the most advanced form of
labour extraction, rent extraction and super-profit extraction. This
would be the most "advanced" form of not production relation
but of extraction relation. That too let us harbour no illusion that
advanced might mean sophisticated. Sophistication would have brought
in more organic composition of Capital that in turn would have meant
advanced organic composition both in Fixed Capital and in variable capital..
In addition to adding more machines in the production process more technical
composition of Capital would have to be brought in the personal skills
of the labourers and daily tools used by the labourers. Let us be very
clear that no such thing is going to be the essential part within the
case study of the production process within SEZ. We must also not overlook
that the SEZ may not have any production coming out at all. It could
be a simple centre for hospitality, and centre for entertainment. We
might call that as production, but no one will deny that no Capacity
will be built up. No means of production may be produced. Special Economic
Zone would therefore attain some credential in its description because
it is a different kind of animal of economy that is going to be garnered
here, one that does not require that profit and super-profit comes out
of the Capital invested in some or the other production process.
Primitive accumulation of
Marx's description has essentially come back and is active. Capitalism
has created within itself sub-sectors and shows partiality on one over
the other. At this day today, agriculture is not outside the Capital
project, nor is small scale industries or even what gets called as the
Sunset or traditional industries. Capital is moving towards a regime
of a different and a more restricted kind of Capital formation in one
or two preferred sub-sectors at the cost of her other sub-sectors. Moribund
nature of Capital is still a convincing proposition because the project
of Capital has therefore become more skewed, focussed and living off
itself. Agriculture had just started to form Capital with the newer
machines and factor inputs. Agricultural produces then were just getting
forwardly linked to other processed products and even giving rise to
large scale mass consumer products. Agro-industry had a possibility
of taking a dangerous turn through GM food industry [cash crop] but
could equally have taken a rather desirable route of developing retail-food
consumer industry. Retail industry in India has been very conservatively
poised to be flourishing up to Rs 28 billion in the next two to three
years based on the present production capability. The huge potential
of the augmented production and processed production would have transgressed
even into the so-called traditional near-static realm of the security
food production. Cereal too had shown all signs of becoming a viable
and very important cash crop. Economy based on the agricultural showed
the promise of becoming the most spread out and most popular industry
and yes, even heavy industry there too. The agricultural equipment building
up capital industry, the storage industry, the preservative industry,
the processing mills industry, the distribution and Just-In-Time supply
chain all these had the possibility of being the best optimized network
in the human history. Capital, and especially Capital in the third world
had chosen to ignore that route and go for what it perceives as a faster
track of building up SEZ on some low graded low skill assembling industry
and hospitality industry. It has chosen to ruin down even all present
capabilities of agricultural and agro-industries and for the sake of
realty industry- this is the famous python eating off its own tail.
That is the very specific nature of the accelerating rate of moribundity
of Capital.
"Primitive Accumulation
process" had accumulated Capital through accumulating the sources
of Capital that is labour, in turn labourers had to be provided, that
created more jobs and more distributed income and therefore more small
savings. The present day SEZ-patterned neo-modern primitive capital
or what we may term as predatory capital is evicting producing farmers
to snatch their land, render them jobless and provision less and skill
less gradually. The only thing that is extracted of them in this SEZ
is the cheap labour without any strings attached. The whole logic of
enclosing the other way around has come up simply due to this narrow
objective of extracting the cheapest possible labour without bothering
about the provisions given to them for keeping them alive and work-worthy
for the next day. The traditional definition of wage comes into question
here. What therefore the labourers in SEZ would get is a diminutive
form of wage that is destined to go down progressively. This downward
shift in wage or remuneration may be in real terms or in nominal terms
(in absolute terms or in terms of inflation adjusted basis), but the
lowering down of the wage down the tenure is a fact nonetheless. The
Enclosing is done also to avoid the competitive wage war between different
companies within one industry - that is why it is predatory. The enclosure
ensures physical insulation from intra-industry competition, intra-market
vagaries and cross-industry side effects. Enclosure establishes a corporate
fiefdom on the production process and is eked out to be isolated from
the general society or the production environment of the surroundings
and the nation-state in consideration. This is the crux of the benefit
that globalised Capital gets from any SEZ - regardless of the ontological
position of the industry, its standard, organic composition, technical
composition, labour law, democratic polity, comparative advantage or
disadvantage or general labour market, any enclosed zone can be prepared
with the exact desired level of input-mix and then packet it as one
single product exactly right for maximum profit extraction. The entire
process of production is now a product and a package. SEZ is the one
package comprising the product that is sold in the market (service,
solution or material product), service that goes along with it. The
market however is usually not the open market; it is a specific market
in a distant territory or a link in the forward chain of an end product.
The market therefore does not have the immunity to withstand on its
own as an independent product and is solely dependent on a parent firm
in some distant metropolitan region. The product is the optimized output-mix
with the lowest variable capital or labour involved. SEZ abhors among
other things any kind of normal market competition. Here comes the specific
import and necessity of SEZ distinct from any producing firm. The enclosure
then extends to every aspect of life for the labourer and gets in or
out of the enclosure as per the profit consideration of the owner of
the SEZ. Labourers may pour in the SEZ every day and pour out at the
end of the work or they may be interned.
Colonisers colonised the
native land through gradual occupation of cities and then moved on to
the feeding base for those city markets and eventually the whole territory.
SEZ is a mechanism very similar to that kind of project with the only
difference that every SEZ is different from the other and for all other
life carrying activities it has to depend on the unenclosed area - the
"other". Capital is a social relation is what Marx opined
and went further to say that it transforms every human relationship
into itself. SEZ does the same thing with a more wholesome form.
This phenomenon brings us
to the perusal of the business model of SEZ. The entire all-engulfing
market lies "outside" the SEZ - it lies out there, out in
the "other". Even if for hypothetical consideration we consider
there are infinite numbers of individually insignificant SEZs, individual
SEZ is not capable of changing the nature of the overall SEZ scenario
within a nation state. There is a proposal to visualize the whole of
India as a conglomeration of SEZs - then there would be a virtual SEZ
market where each individual SEZ would be a product by itself. In that
condition each individual SEZ would not need any protection or special
insulation from the others, it could have competed with the other SEZs.
Well! That is the paradox, here. So SEZ cannot be innumerable in numbers,
it has to be limited and thus it has to survive by primitive accumulation
of the labour power from the "other" sector - or the normal
nation-state economy sector. This is the reason why the great Capitalist
China moving with a firm double digit GDP has now restricted the number
of SEZ into only 6 big ones and are now slowly tightening the leash
through promulgating more and more restrictive laws. Latin America has
abandoned any concept of SEZ and it is only India and especially the
so-known Indian parliamentary left that is full agog with SEZ concept.
The dependence of SEZ on the "other" for its sustenance is
not only the limiting factor in its sustenance and growth but it is
also the nemesis. The growth rate in an SEZ project is bound theoretically
to go down and eventually (not asymptotically) reach the zero level
and head towards being negative. SEZs are bound to turn red in various
time tenures, but by that time it will take down along with the entire
neighbourhood, the ecology, the producing potential, and aggravate chaos
and anarchy exponentially. SEZ is a fast loosing proposition in any
medium to long term. A product lasts only its life cycle. Even if it
is insulated from the competition and general market obsolescence, the
life span of a product can only be extended but doom it will! An SEZ,
as it depends on one product or one service or one type of solution
or a few collections of it, has to face the same track history of that
of a product. SEZ in a long term is nothing but a bankruptcy generating,
devastating device creating social, political, cultural and demographic
land mines. After a couple of bouts or life cycles of a set of SEZ,
the whole land, labour will lose its recycle ability and desert will
it render. And right here in this consideration the future value of
the Capital is loosing. Every marginal productivity unit measure of
unit Capital will fetch progressively lower and lower value. The short
term apparent gain will be for the nation-state a gradual drain in the
pent up wealth that human civilization has kept on providing all these
years- it is therefore a project plan with a diminishing return. SEZ
baffles the country's statistic and metric by short-term spurts but
just like administering steroids it kills slowly the country in any
middle to long-term tenure - it is Capital de-formation on a longer
tenure- a bad proposition!
The entire concept of bundling
up of the ancillary industries with the production unit of the principal
product is a loosing proposition. Had this business case been successful
then from the profit point of view the forward integration would have
been more profitable and then again the conglomerate behemoth model
of the mid twentieth century would come back. The separation of core
production unit from the ancillaries brings success only when the ancillaries
cater to various competitive firms within the same industry. SEZ organization
inhibits that. Even if it allows such outward journey of intermediate
products the transportation advantage will not be achieved and the concept
of optimum supply chain will not be achieved. The concept of down stream
production chain can never live long by supplying to one or a few pre-ordained
customers. Any change in the order pattern would jeopardize the organization
and sustenance of the ancillary firm and would turn it red. With the
bringing down of the feeders the main firm will go red- this is an over
determined process of doom and bankruptcy.
SEZ is an enclosed space
subsidized by the government and exempted from paying the excise duties
and various other normal taxes. If the number of such SEZ units grows
then the nation-state will be loosing the potential income, whereas
the financial institutions and private or public venture capital concerns
will invest money in those. With every additional SEZ in the country
the marginal productivity of one invested dollar loses its comparative
sheen after the number of SEZs had reached a critical number. A country
cannot sustain that as the public funds will soon be depleted of its
operating generated own fund from domestic operations. They will have
to borrow in money from financial institutions beyond the nation-state
boundary. This fund comes along with interest tags. The interest money
that will be paid is nothing but the portion of the super-profit generated
from regular Capital operations. With the increase of tenure and amount,
the super-profit will turn into a rent and will be siphoned off the
nation-state boundary dipping the nation-state into perennial economic
and thus political in-sovereignty.
SEZ needs a continuous inflow
of Capital unless all its products are to be bought back. In the case
of being bought back the firm loses the freedom of the market price
and is bound to move towards a decelerating growth rate and faced with
the inflationary nation-state economy this plateaued out growth rate
would be in real terms go down over a longer period. In the case of
no such obligation of being bought back the firm has to depend on the
outside market and the cost of acquiring new business would be going
up as more and more SEZ firms throughout the world would pour in products-
in this case too the rate of return is diminishing and the entire advantage
of protection and subsidy dies off. Please note this is not the general
neo-con logic of free market because in an SEZ the only UPS of the final
product is the cheap labour that does not grow in quality or value.
Going down the value chain never fetches any medium to long-term guarantee
to the producing firm. In a normal nation-state competing market protectionism
at the inception hours helps stabilize the company through giving it
enough fail-over during which it hones on to the value proposition and
becomes capable of fighting with the external open market- that is the
interest pursued by the nation-states in building up its own army of
competing industries. In an SEZ case the native nation-state subsidizes
revenue and does not build up any value proposition. It remains dwarf
and always dies outside the incubator.
In any nation-state economy
then walking over to the international market place, revenue earned
strengthens the native currency against the international basket of
standard currency of the SDR (Special Drawing Rights). This is simply
because the repatriation is inward within the native state. In SEZ it
is mostly repatriated abroad or the revenue earned is used to import
foreign goods. Hard currencies bob up the countries reserve for a very
short while and depletes that again as fast as it came. The foreign
direct investments come in a normal market as well as in an SEZ with
strings attached. As long as the domestic market is not very strong
and demanding for finished industrial products FDIs are always traps.
Companies will only come to the native country when they find very higher
marginal returns to their dollars that again entails their getting lured
by the strength and volume of the native-market. The entire credit money
of the WEST would require a producing economy outside the credit capital
or debt capital generating sector that can SERVE the credit offered-
this is the monetary aspect of the primitive accumulation. The (M3-M1)
of the WEST will be served by the M1 of the EAST.
The FIIs extract interest
that gets compounded. The serving potential of a native country's operative
profit goes down with every additional native dollar earned through
one more unit of labour spent in the native economy. With all these
the metropolitan market or the market in the west uses the native space
as a space sub-serving its main product that is either produced or designed
within the WEST and the biggest chunk of the sales revenue minus the
operating cost goes over to the Western owner either through patents,
or through owning intellectual property or through design consultancy
fees. The smaller portion that comes to the native country goes to pay
for the labour and the acquisition cost. With every such unit sales-revenue
the differential of the Western and the Eastern allocation yawns up
more and more creating an ever skewed distribution. The absolute value
of the production-sales-repatriation cycle looks exciting from the native
stand point in the beginning years and then figures out that it is loosing
the relative value proposition competing with the WESTERN peer or the
WESTERN co-producer. The value game becomes, if not war but definitely
a contention of attrition.
What is the benefit of getting
into SEZ then? If it is so gloomy then why all comprador corporates
of the native nation-state are rushing towards this obvious doom? Yes,
there is some gain; however effervescent, however fleeting there are
some thrills there, but they are there as long as the overall picture
is not paid attention to, as long as the collective is not taken into
consideration, as long as the individual rivalries enthral the individual
players without any heed to the collective doom. The euphoria of chaos,
the ecstasy of anarchy, the elixir of crossing interests and the moto
of contention of killing others to survive, living for a short while,
for a fast buck and for cravenness for speed is what SEZ would offer-
it is the same attitude that goads homo sapiens to consumerism, to over-accumulation
and needless possessiveness. People frenzy as if there is no tomorrow,
and Capital leads human and every relationship generating from humans
into a simulacrum of no-tomorrow! Capital is the only tomorrow!
The faster a third world
producing and thriving economy would SEZise itself the longer would
the WEST survive and the better would it. We saw the vaporising of the
Asian tigers with only surplus reserves into basket cases and tourism
destinations slipping down to providing solace to worn heels of the
WEST. We experienced how famous industrial centres of countries like
India (Durgapur-Asansol-Ranigunge belt, Gaziabad belt, Old Mumbai belt,
Steel plant colonies) turned from high skilled settlements into almost
deserts within the last 4 decades or so, we experienced how new and
promised lands lost their crown to newer up-comers. We also saw how
producing economies and sectors are giving way to service sector and
entertainment gizmos and eating away the best of the brains and wisdom
into brain and skill drain.
The SEZ offers its owners
a nice prelude to the Capital flight they would carry along and stash
in the financial institutions abroad, to have a nicer life for may be
one life time (without any consideration to their progeny) comparable
to their western compatriots before the native-country ever dreams to
have a convertible currency regime. The owners do not want to take any
chances, if the native country sinks they are afloat transmigrated and
transmuted into citizens of the world and in particular of the western
world. If the country shores up for a while then they will come back
to reclaim their ancestral rights as sons and daughters to the soil,
they will then enjoy a cheaper economy and again the moment the signal
turns amber they would take the next flight out. SEZ is that space ensuring
a safer proposition of Capital flight off the native land to the promised
metropolitan. Who paid for all these? Don't even dare to ask - of course
those half clad, half fed, lesser children of native land, those who
never could wake up to comprehend their rightful claim. Here speed is
the Mantra - the faster you can fly befooling the producers the smarter
you are! SEZ is that smart contraption that takes the owner places and
takes the producer-labour for a song!!!
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