Authors: Dr Neha Arora& Rishika Nayyar*
The COVID-19 crisis is a challenge never witnessed before and many economies are bound to shrink as a result of demand and supply shocks. It is expected that COVID-19 crisis could have a far more devastating impact on the world economy than the global financial crisis of 2008-09.Like any other crisis, the present one has exposed the vulnerabilities of existing structures and practices, forced the change in status-quo and, at the same time, opened new window of opportunities.
The Medium, Small and Micro Enterprises (MSME) sector is the most vibrant and crucial industrial sector for the Indian economy. The sector provides employment to over 130 million people and contributes to nearly 30% of GDP. The MSMEs contribute nearly 45% to manufacturing, forming the backbone of the Indian manufacturing economy. MSMEs have contributed significantly towards domestic employment generation, increased revenues and have boosted international trade. Over the years, MSMEs in India have transitioned from manufacturing low-tech labour-intensive goods to medium-tech capital-intensive products and have also entered the services sector in recent past.
The significant contribution of MSMEs to the Indian economy on one hand, and the hard blow that the sector has received from the present crisis on the other, have called for a renewed and carefully thought-out focus on the situation of MSME units. In this background, the present article highlights the pertinent role that a vibrant and dynamic MSME sector can play in helping India capitalize on the opportunities thrown open by the pandemic and aid the process of economic recovery. It also suggests a three-pointer action plan that focuses on technology adoption, rural cluster development programme and strategic partnership development programme to bolster the MSME sector.
Opportunities for India
Supply chain restructuring: An opportunity to be the next global production hub
The COVID-19 crisis has caused widespread and significant disruptions and exposed vulnerabilities in the global supply chain, especially for countries who were excessively dependent on China for sourcing of raw materials, intermediate and finished goods. Over the past two decades, China has played a dominant role as the ‘factory of the world’ for industries such as electronics, automotives, apparel and plastics. However, escalated trade tensions in 2019 between China and the US, in addition to rising labour cost and declining productivity, dimmed the country’s significance as a global production hub. While the relocation of production facilities was already setting in, the current pandemic fueled this fire. Many countries around the world, including the USA, UK, Japan and South Korea, have been incentivizing their companies to move production facilities out of China with a view to reconfigure their supply chains and reduce reliance on China. This initiative to reduce dependence on China has become a matter of national priority for some countries, like the UK.
The reconfiguration of global supply chains has opened up a window of opportunity for India to present itself as a business-friendly nation and an attractive, alternative investment destination for companies looking to relocate their production facilities. According to the Reshoring Index released by consulting firm Kearney, because of the COVID-19 crisis,“companies will be compelled to go much further in rethinking their sourcing strategies—indeed, their entire supply chain.” It is this compulsion and urgency that India needs to act upon. If exploited at the right time, this opportunity could provide the much needed boost to Indian Government’s flagship program -Make in India- which has now culminated into the aspiration of making in India for the world.
In a bid to attract foreign companies, the Indian government has rolled out various plans such as developing a land pool of 461,589 hectares (twice the size of Luxembourg) to supplement easier availability of land, improve hard infrastructure through huge investment in national infrastructure pipeline project, and soft infrastructure (i.e. institutions) through implementing business reforms. The Government has also handpicked ten sectors – electrical, pharmaceuticals, electronics, heavy engineering, solar equipment, food processing, chemicals and textiles – as spotlight areas for promoting manufacturing suggesting a much focused approach than earlier.
The MSME sector can be used as an catalyst to exploit the opportunity and realize the dream of making India a global production hub in three ways. First, MSMEs act as complimentary entities by providing intermediate goods to large businesses (both domestic and foreign) in India. They also help them achieve economies of scale by facilitating outsourcing of functions, specifically in labour-intensive activities. Second, they also play a pivotal role in promoting resilience to sector-specific shocks and fluctuations in international markets by diversifying the industrial sector. Lastly, MSMEs are the harbinger of entrepreneurship and innovation which are important pillars for lifting the nation’s capacity in shifting towards the manufacture and exports of sophisticated high tech products, and help move up the global value chains. Thus, to build and sustain competitive manufacturing enterprises, both large and small, and realize the vision of Make in India for the world, MSMEs need to be strengthened and supported.
Self Reliant India- A shift from excessive dependence to embracing self sufficiency
For the last three decades, Indian economy, like any other open economy, has embraced the benefits of globalisation. Forces of globalisation, including production and trade, based on national comparative advantages have given rise to geographically-spread value chains. In normal situations, the global value chains work as a well-oiled machinery leading manufacturers and nations to be oblivious to the extent of dependency on other nations. A recent article published in Harvard Business Review provides evidence that most of the companies are not as up to speed about the structure of their supply chain. Covid-19 has given a blow to these companies as they struggle to keep a track of which site, parts, products, and suppliers are located in affected areas, leading to a complete halt of production. Automobile industry is a perfect example of this blowout.
Another, and in fact, more appropriate account of globalisation-driven dependence can be seen in the case of India’s Pharmaceutical Industry. Third largest in the world (in terms of volume), Indian pharmaceutical industry imports 90 percent of active pharmaceutical ingredients (APIs) or bulk drugs, with two-thirds of total coming from only one source- China. Despite being alarmed about the overdependence on China as a national security threat in 2014, only half-hearted measures were taken by the policymakers to make industry as self-reliant as it was in the 1990s when it actually exported APIs and was ahead of China. The stricter regulatory requirements on Indian firms manufacturing APIs, coupled with strong state support given by China’s government to their indigenous manufacturers, resulted in widening of the gap between the cost competitiveness of Indian and Chinese companies- a cause of increased dependence.
While several other examples of products other than APIs, such as computers, mobile phones, medical devices, toys can be given here, the one that boldly underlines India’s dependence in the manufacturing sector is the fact that it struggled to be self-sufficient in the production of something as simple as plastic dispensers for hand sanitizers. The current pandemic has given a wake-up call not only to corporations but also to governments across developed and developing economies.
From the agenda of reducing dependence on foreign imports, including those from China for APIs and other supplies, to the initial steps in ramping up the production of essential gear like personal protective equipment (PPE) kits, masks, testing kits, alcohol based sanitizers, dispensers, Indian Government’s vision of making India self reliant is echoed in the five pillars of its Aatma Nirbhar Bharat Abhiyaan- Economy, Infrastructure, System, Demography and Demand. The initiatives (present and planned) under each of the five pillars are aimed at getting the economy back on its feet. Needless to mention, focus on strengthening the manufacturing sector is and has to be the centerpiece of any course of action directed to make India self-reliant.
In realizing the vision of self-reliant India, two things will play a determining role. First is the identification of sectors and/or areas, products, in which the Indian industry is capable of replacing foreign imports and can quickly scale up production, such as textile components and basic medical devices. One sector that is recently identified by the Government is the toy industry. A renewed focus on such sectors implies a renewed focus on MSME units that have the capability to scale up effectively and efficiently. The second and a related requirement is creating a supportive ecosystem, of which MSMEs are not only viewed as an important part (in the capacity of a partner to big businesses) but also, more importantly, as beneficiaries. So, for instance, while toy MSMEs are going to play a direct and quintessential role in reducing India’s unduly excessive reliance on imports as well as making her self reliant, it is unachievable without a supportive ecosystem that protects innovative and creative works, and streamlines the procedure of obtaining quality certification.
Reverse Migration- An opportunity to boost rural entrepreneurship
The covid-19 situation has worsened the situation of unemployment in India. The stalling of economic activity has forced businesses to lay off workers.. According to the Center of Monitoring Indian Economy (CMIE), the rate of unemployment in India has risen to over 23 percent as of April 2020 (25 percent in urban areas and 22 percent in rural) up from 7 percent (10 percent in urban areas and 6 percent in rural) in the beginning of the year (January 2020). Even as lockdown restrictions continue to ease, businesses in both formal and informal sectors, including construction, manufacturing, restaurants, travel and housekeeping are facing severe shortages of workforce due to reverse migration from urban to rural areas. According to an estimate by the Confederation of All India Traders traders’, the capital city has already witnessed an exodus of over 60 to 70 percent of its labor force. A similar situation has been reported from other major states for migrant workers such as Maharashtra, Tamil Nadu, Gujarat, Andhra Pradesh and Kerala. The extent of reverse migration is estimated to be at least 23 million migrants moving back to rural India. The consequences of such an extent of reverse migration are being clearly highlighted and voiced by businesses across urban areas as they grapple with shortages of workforce. However, more concerning aspects of this situation will be faced sooner than we realize as a significant proportion of migrants would be reluctant to return back to cities due to fear of the coronavirus, which is expected to haunt mankind for at least a year, uncertainties and related economic and emotional distress. As migrant workers seek safe haven back in their villages, the already widespread unemployment in rural areas is bound to skyrocket. While some of them would rely on agriculture as a means of livelihood, the sector is not without challenges – low productivity and small size of land holdings – to name a few. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is another alternative but the guaranteed days of work is restricted to just 100 in a financial year and the wages are meager. Perhaps, employment under MGNREGA is generally viewed as a work avenue in the off or lean agriculture season rather than a primary source of employment. Such a scenario, however, is an opportune moment to direct efforts towards rural industrialization through promotion of rural MSMEs. The process of rural industrialization through rural MSMEs will act as a catalyst to spur the generation of employment and income in the rural areas. A plethora of opportunities can be tapped by MSMEs not only in the agriculture and allied sector, but also in food processing, other traditional sectors such as khadi and village industries, handloom, handicraft and coir. In fact, the present crisis offers enormous potential for rural MSMEs to revive India’s artisan traditions and handicrafts which is in line with the Government’s latest “Vocal for Local” initiative. Setting up such units and making them operational might take some time and require coordinated support and policy initiatives by private enterprises as well as the Government at center and state level. However, promoting rural industrialization through MSMEs is the most viable option for sustained employment and income generation in rural areas that are home to 66 percent of India’s total population (as of 2018) to foster balanced regional growth, and keep a check on future migration to urban areas thereby decongesting and alleviating pressure on cities.
Three pillars of action to support, strengthen and scale MSMEs
It is unarguable that MSMEs are going to play an increasingly important role in enabling India to exploit the opportunities thrown open by the pandemic at both national and international level, and to put her on the path of economic recovery. However, it cannot also be refuted that MSMEs are the worst hit by the pandemic, with many of them struggling to survive, and would probably die down by the time things normalize – partly owing to the absence of any direct support for them in the Government’s 20 trillion stimulus package. For units that will survive the pandemic, a coordinated action plan consisting of support from Government (centre and state), industry associations, as well as strategic agility of units themselves, would be pertinent. Therefore, we suggest three action plans that could help reap the potential of MSMEs by making them more productive, efficient, and competitive.
- Technology Adoption
- Rural Cluster Development Programme
- Strategic Partnership Development Programme
As the world embraces the fourth industrial revolution, automation and digitization of business processes has become an absolute necessity for businesses’ survival and growth. According to a recent survey by SME body- India SME Forum -only 7% of MSMEs surveyed (1,29,537 MSME respondents) reported the adoption of technology beyond the use of digital tools to communicate with key stakeholders such as customers, employees, and suppliers. The adoption of technology could play a non-trivial role in overcoming numerous challenges and issues that plague the productivity, competitiveness and profitability of MSME units in India. The potential benefits from adoption are expected to be realized across the value chain and/or network – from procurement of resources, to automation and use of robotics in manufacturing processes, customer engagement, supply chain management, sales force management, integration of business processes etc.
An action plan to increase the rate of technology adoption amongst MSMEs must keep into consideration two important factors- perceived usefulness and perceived ease of use (Davis, 1989). The intention to use (adopt in this case) the new technology depends on the users’ attitude towards it which is influenced by, in addition to the external forces, the belief that the use of it would result in the improvement of performance and is free from effort. A Government initiative along with industry body CII, in the form of CII TechSaksham, is a step that underlines the belief about usefulness of technology in improving MSMEs performance (profitability and global competitiveness) and, in turn, their contribution to the Indian Economy. The three-year long comprehensive project is also aimed at addressing the issues revolving around the “perceived ease of use”. The “perceived ease of use” is reported to be a major blockade in MSMEs attempt at technology adoption.
A staggering 70 percent of MSMEs that were surveyed by India SME forum cited lack of knowledge, guidance, skilled manpower, and cost of investment, as impediments to technology adoption. While initiatives like CII TechSaksham can provide a platform to overcome the knowledge barriers, real beneficiaries would be those MSMEs that move swiftly in formulating an effective strategic plan for technology adoption that furthers three As necessary for promoting the “perceived ease of use”- awareness, agility, and adaptability. It is essential to give strategic priority to technology adoption and carry out the implementation in a phased manner. For units facing cost issues and manpower crunch, a viable and cost effective solution is to avail of technology as a service. These services provided by third parties include “Software as a Service (SaaS)”, “Infrastructure as a Service (IaaS)” and “Platform as a Service”, and can go a long way in overcoming the challenges associated with technology adoption by MSMEs.
Rural Cluster Development Programme
India has a rich history of rural entrepreneurship and, to support the growth and build-capacity of Rural MSMEs, the Government should focus on developing industrial clusters specifically designed for MSMEs in and/or around rural areas. By virtue of its support to industrial activity in rural areas, rural industrial clusters can promote employment generation, which is the need of the hour now since the coronavirus pandemic has resulted in reverse migration of labourers (not just labourers, other blue collar workers as well). According to a recent report, livelihoods of a large percentage of around 40 million internal workers has been severely affected by Covid-19.
In order to combat the impact of Covid-19 pandemic on livelihoods of millions of migrant workers, a model similar to Special Economic Zones (SEZ) could be replicated in rural areas and districts to enhance the industrial capacity of MSMEs by providing them credit, technical know-how and market support. Additionally, following a cluster development approach towards industrialization efforts in rural areas can help tackle several challenges faced by MSMEs in terms of production, quality control, testing and marketing. For instance, in Indonesia, the government has adopted MSME clustering approach as an important aspect of Rural economy development as the success rate for development of manufacturing SMEs lies in strong inter-firms linkages in clusters and competent external networks and not direct government support. Thus, this could be an ideal time to give support and shape to these rural clusters and come with a workable action plan to encourage formation of clusters in villages.
Strategic Vendor Development Programme
The need for building strategic vendor development programmes stems from the complementarities that multinational corporations (MNCs) and MSMEs can derive from each other. MSMEs constitute an important part of the supply chain as providers of low value-added products, intermediates and components to be used in final production. It is in the interest of foreign MNCs to invest in the upgradation of the capabilities of their supply chain partners in order to ensure the quality of the final product. In order to facilitate that, MNCs often impart training on modern production techniques to the employees of MSMEs and engage in transfer of technological and managerial know-how.
Looking ahead, MSMEs must consolidate and extend relationships with MNCs to leverage their existing capabilities such as superior knowledge, technical know-how and established processes. One way to achieve such competencies is through formation of Vendor Development Programme wherein MNCs can provide training and guidance to MSMEs on how to meet quality standards, reduce costs, deliver on time and thus become reliable vendors for them. A successful example of such a vendor development programme is the Ethiopian flower cut industry. Strategic relationships between local vendors (flower growers) and Dutch foreign investors (Dutch Development cooperation) played an important role in the development and growth of the sector.
However, Indian MSMEs face challenges and obstacles in developing strategic tie-ups with large MNCs for at least two reasons. First, there are many Government-regulated performance parameters such as mandatory sharing of critical technologies and stringent rules for local content requirements that discourage foreign MNCs from entering into contractual relationships. Second, the absence of domestic intermediaries that could act as links between foreign MNCs and local MSMEs hinder the capabilities of the former to select the right vendor or partner and exploit the complementarities.
In order to overcome these constraints, there is a need to reduce regulatory bottlenecks and establish organizations that act as intermediaries (brokers) or connecting links between foreign MNCs and local MSMEs. The presence of such intermediaries will play a vital role in overcoming the information voids that characterize emerging markets like India, reduce the cost, effort and time involved in searching for the right vendor and/or partner (in the form of MSMEs) and facilitate the formation of mutually beneficial relationships. The formation of linkages or strategic tie-ups with multinationals from developed countries would go a long way in uplifting the competitiveness and capabilities of Indian MSMEs to serve both domestic and global markets.
To make the best of the opportunities arising from the biggest challenge of this century, Indian economy needs a thriving MSME sector. The substantial contribution that the sector has made to the economy has got it to be acknowledged as the “backbone”. It is also true that this backbone has been hit severely by the COVID19 pandemic and as the economy tries to stand up on its feet, strengthening of the backbone assumes an imperative task ahead for the Indian government.
The article has listed out the three essential pillars of an action plan that involves coordinated efforts from industry associations, policymakers and the MSME units themselves. While infusion of liquidity could help the distressed MSMEs recoup the losses in the short term, in order to really hit the ground running and help the economy realize its potential, strategies and policy actions with a long term vision in mind need to be enacted urgently. The focus has to be widened from the survival in the short-run to building up a productive and competent MSME sector for the future.
*Rishika Nayyar is an Assistant Professor at the University of Delhi. She has submitted her Ph.D thesis in International Business to International Institute of Foreign Trade, one of leading B-schools in India.
Democracy in decline and its fate after the crisis: Why will the big crisis kill liberalism with or without the demos
Being praised as never before, democracy was in crisis. The reality of the economic problems of 2008-2020 led to a new critical moment. All this makes us think about the meaning of the word “democracy”, about the economic logic of history and much more.
Twilight of a new big crisis
The countries of the core of capitalism had to face a new big economic crisis in 2008. In semi-peripheral and peripheral countries, democracy was outwardly similar to the central, with the difference that it was much more formal, implicated in falsifications and did not exclude coups and turmoil, though formally they started as a struggle for fair elections. Neoliberalism in a broad sense had no alternative and could only be mitigated in some countries. Therefore, due to its strength and rootedness, the encounter with the crisis was delayed and turned out to be completely unpleasant. In 2020, this story has not yet been concluded.
Neoliberal doctrine and ideology brought market and commercial freedom to the forefront, while public interests were pushed to the background. Under the pressure of neoliberal reforms, the social structures supporting democracy, as known in the 20th century, weakened, mass participation in them declined. People resorted to private life and the elites boldly practiced manipulations. The protest became anti-globalist with faith in social networks and a growing mistrust of “rotten parties.” The criticism of neoliberalism and the democracy that it subordinated, namely liberal democracy by the “stars” of anti-globalism was spectacular. It was not effective, as its countercultural pathos did not prevent it from fitting into the mainstream.
Not everything looked unequivocally gloomy in the era preceding the 2008–2020 crisis. When Bill Clinton came to power in the United States and Tony Blair in the United Kingdom a considerable number of ordinary people felt a certain turn. In France, such a feeling was created later by the victory in the elections of socialists led by Francois Hollande. In Greece by the election of the party “Syriza” and Alexis Tsipras. In practice, the turn did not occur, everything turned into manipulative simulations, convenient for continuing the old course. They undermined faith in the seemingly existing democratic mechanisms. Might the opposition have found a solution to the neoliberal mainstream? Wasn’t there an alternative to the “outdated” base organisations of trade unions and parties, the idea of network organisation? In the 2000s it was widely cherished in Europe and America.
Alas, the networks did not become the basis for the revival of “genuine democracy,” and faith in them only helped conserve the opposition of neoliberalism. In these networks it rotted, telling itself from time to time not to follow the way of old parties, they were all evil, they killed the egalitarianism of a genuine popular movement and not to suggest designs instead of the people and for the people (all these congresses, committees and commissions) for in this way the true spirit of democracy will be completely ruined. As a result, the “genuine spirit” existed only in imagination.
When the time of social networks on the Internet came, it showed how much they enable the control over individuals and how little horizontal connections of individuals mean to them. With such networks it was easy to organize a wave of protests and after a change of power (a coup by order of the United States or the Eurocracy) to return the mass participants to their places.
Democracy in an era of crisis once more in crisis
In 2008, the time of sustainable financial globalisation ended and the great global economic crisis began. The waves of crisis came one after another until 2020. And then it finally became clear that the seeds of the anti-globalist alternative give rotten seedlings even in the United States: Bernie Sanders withdrew from the elections at the most dramatic moment for his people in the 21st century. Before that there was a series of unsuccessful attempts by society to influence the process in Europe. It turned out that he has no structures and understanding of the mechanics of their work and personal work in them, lacks solidarity and understanding of the situation. As a result, the liberal elite retained dominance over “democracy”.
But liberal political constructs have become an obstacle in the fight against the crisis. And if in Russia and China the shift from neoliberalism to a new practice neo-mercantilism started from above, without the help of republican mechanisms set in motion by the people (the starting point were the problems of economic development), the situation was different in the West. The manipulative liberal democracy preserved the crisis, blocking attempts to change politics. Even Trump, with his conservative transformation plan, came up against the resistance of liberal forces from the Democratic Party and its adherents in the power system. He could not overcome the checks and balances.
An extensive programme about which my colleagues and I in the Department of Political Economy and the History of Economic Science of the Plekhanov Russian University of Economics spoke in the report “Donald Trump and the Economic Situation” back in 2016. In another report, entitled “A Society Without Opposition,” prepared with my participation in the Institute of the New Society, many vices of the left were revealed that prevented them from acting as the main force of transformations. One of the problems lies in the desire to apply ready-made schemes to new historical conditions and the belief that capitalism cannot have anything new in itself, nothing that would not have happened before.
“Revolution or reform?” and myths about the ways
The disappointment in democratic mechanisms brought the old question, which in 1918 was included by Rosa Luxemburg in the title of her pamphlet “Reform or Revolution”, back to life. Reforms over the past 40 years have been neoliberal, and therefore the word “reform” often evoces negative emotions in people. In Russia, it is difficult for many citizens to accept the fact that the socio-patriotic reforms that are taking place in the country are not liberal, they are not shattering, but strengthening society. Therefore, the question remains valid.
But this question is false. However, it seems logical to many, as since the 1980s it was suggested that there are two ways that contradict each other: a seemingly tough and a seemingly soft one (identical to liberal democracy). In another interpretation: a progressive and an opportunistic, destructive or reactionary. Neoliberal reforms inspired the latter understanding, as they were destructive and antisocial in nature everywhere. However, under the influence of the global crisis of 2008-2020 at its very end, that is presently, reforms of a different type are now becoming possible. They are associated with the need to overcome the protracted era of economic crisis and the resumption of a sustainable growth and development. Naturally, they should increase the stability of the states in which they are implemented and, as a result, make them stronger in international rivalry.
Reforms of a new type and dictated by the new era became possible. In Russia they have already begun and with them another social reality started to form. But what about cliches? And what about the vulgar, but in practice voluntaristic understanding of revolutions based on disappointment in liberal democracy?
In the book “Capitalism of crises and revolutions how formation epochs alternate, new long waves are born, restorations die and neomercantilism advances” I devoted many pages to the complexity of such a phenomenon as the great modernisation revolution, as well as the Great Russian revolution. Here there is a unity of both revolutionary, evolutionary and reformist stages (not methods!). Voluntarists of “revolution” will never understand nor accept this. For them, all sorts of reforms of Russian or other capitalism will be a deception of the masses, and their support will be a betrayal of the “cause of the liberation of the working people” or a reactionary measure. There is no dialectic in such a vision of history. That is why voluntarists, adherents of maximalist phrase, are not related to real social revolutions with their complex diverse consequences.
In the United States, Britain, Western Europe and Japan, the situation is special. There neoliberalism has gone far in influencing society. From manipulations with the help of liberal institutions, it proceeded to the destruction of the basic norms of morality and relations, not centuries-old, but largely cultivated in the 20th century. Nuclear family was attacked as “slavery of the patriarchy”, trade unions as fetters to the market, the right of the majority to laws in its interest as the anti-democratic egoism of white men, discriminating minorities. Minorities themselves were nurtured and helped to fragment a society in which, as the events of 2008–2020 showed, no forces were found to overturn neoliberalism from the bottom in a left, reformist or more radical way.
Without being defeated, neoliberalism will die from the fact that its time has passed. This is already evident in some parts of the world, but not obvious in others. However, the impossibility of overcoming the crisis on the basis of neoliberal policy is the absolute proof of this thesis. And then what about democracy?
Neo-mercantilism is approaching
Left-wing intellectuals love to write phrases like this one: the struggle for social and cultural reforms, for another world with opportunities for every person to creatively find themselves, to be free, to control power and not be afraid to be poor, will continue and lead the world to success. In parallel, they can criticize the national conservatism of the “right”, and talk about the benefits of diversity in society, without which there can be no democracy. But truth requires adding at this point the story of Socrates. Athenian democracy did not at all tolerate his liberties and forced him to drink poison. His disciple Plato was forced to behave more carefully with the people. In modern realities, we must be prepared for a democratism that is conservative in spirit.
Neoliberalism has created a moral opposition in society, the foundations of which are considered traditional. The liberal left is indignant about this unrighteous, in their opinion, way of denying globalisation and the ideas of “free trade” in all spheres of life. However, conservatism is very limited here. It is not very religious, since society in countries with developed markets is not very religious, and the protection of family values and the importance of marriage is more like the defense of the Soviet understanding of relationships and lifestyle; it should be borne in mind that the emancipation of the 20th century is irreversible, universally recognised and inseparable from society, and these are not “patriarchal mores,” but the product of modernisation. Though this modernisation took place not so long ago. Therefore, anti-neoliberal conservatism does not at all refer to old morals, and only because of the love of religious justification of its position can be called right. However, there is also a reference to the national values and interests of nations, opposing the interests of global financial structures. And here it is important to finally accept the fact: neoliberalism hit the organised working class, the old class and left structures (including their structure) so hard that it left only a limited number of means to eliminate itself. The dismantling of neoliberalism is not a socialist act, but a bourgeois measure ensuring the further development of society. Another thing is that in the process in some countries a revival of the social state is possible.
The era of globalisation has taught many people to view democracy as something universal. Neoliberalism has replaced the dictatorship of modernisation in the countries of the semi-periphery and periphery of world capitalism. There was not much personal freedom and public freedom in them. But with neoliberalism, the local elites were able to cover up their rule with the word “democracy”. The plans of the elite of the countries of the centre did not include the transformation of part of the countries of the production periphery into new centres of development of capitalism, as candidates to play part in the core of the global economy. It was not part of the plans of the old centres that the local top officials should search for support in the “lower strata”, largely due to the rejection of the neoliberal course and reliance on social and patriotic measures. And the bold and independent behaviour of the highest bureaucracy, grand bureaucracy, is absolutely perceived in Washington and Brussels as a riot.
But it is precisely this rebellion that sets the limit to neoliberalism politically. Leaning or trying to rely on the majority of the country’s population (especially in Russia), it is democratic in its own way, reflecting the demos’ requests for social policy, the revival of national pride and the growth of prosperity based on the patronage of the state to its market, production and its mass buyer. This turn from neoliberalism, however, is not a turn created from below, that is, formally democratic, organised not under the pressure of society, but by society itself. In this regard, it is necessary to acknowledge the failure of attempts to end neoliberalism from below in many countries. With a firm commitment of the “upper strata” to this policy, it is not eliminated from above either. Even the split of the upper strata in the United States with the advent of Trump to the White House did not lead to such a development of events, the processes were blocked. Therefore, neoliberalism has not yet completed its history, it simply has lost economic efficiency and cannot be the basis for the exit of certain countries from the era of the great crisis. But this is not its complete end.
Democratism instead of democracy?
Nevertheless, the end of neoliberalism is inevitable. In some cases it will come in the form of a conservative in shade, and a socio-patriotic in form turn. In another case, problems in the economy will bring about movements that can either be such as in countries claiming to be new centres (Eurasian countries), or society will be able to move from an unstable and weak in content movement like the French “yellow vests” to something stronger and more productive. Finally, there is a scenario where popular intervention in politics will be like an outbreak such as in Argentina in the early 2000s. But in this case, progressive shifts will be the fruit of a new grand bureaucracy, simply not neoliberal.
All these paths are not easy. Democracy in them will probably be expressed not in procedures, but in mass support for the new agenda. It is hardly to be expected that the “lower strata” will restore the forms of organisation and practice that were characteristic of the 1930-1970s. In this sense, the prospect of the triumph of “pure democracy” soon seems doubtful. Republican procedures and structures will live, as society is agitated everywhere. However, even overcoming neoliberalism from above to a greater extent than from below will become a common scenario for overcoming the era of the great crisis, it should be taken into account: economic growth and social development in general will work for future democracy.
Formal Republics, where development does not stop and degradation does not happen (which is possible for some countries) will become more social. Relying on social unity, on the construction of nations and their associations, for example, during the Eurasian integration process, administrations will awaken reformist activity in society. As a result, formal Republics will move towards real Republics, where people influence processes not only through expression of mood. This will be the beginning of a new revival of democracy.
Here it is necessary to summarise. It was said enough by virtue of what economic processes neoliberal democracy (the right format of ideas and practice) found itself in a crisis, and was unable to provide a mechanism for leading the countries of the old core of capitalism out of the crisis and ensuring a change of power in Russia, China and other Eurasian states, claiming to be new centres of capitalism. There, the neoliberal “democrats” at the top are increasingly oppressed by the neo-mercantile grand bureaucracy. It can restart the growth of economies and this growth will continue for about 25 years. The big crisis will end and a new upward wave of development will begin; only shortly will commercial crises interrupt it, none of which will be similar to the era of 2008–2020. The establishment of a non-mercantile economic reality in the world launches a mechanism for mastering the practices and ideas of democracy in the conditions of strong national states of Eurasia, solving the tasks of continental integration and rivalry with the old global leaders. How the process of democratisation or the revival of democracy will develop is not yet clear. But economic recovery will be a better environment for this process than the last big crisis.
On the whole, the history of democracy is not only incomplete, but by and large is just beginning. And if in most countries in the era of neoliberalism democracy was a pure imitation, in a different era everything will be different.
From our partner International Affairs
 Report of the Department of Political Economy and the History of Economic Science of the Plekhanov Russian University of Economics “Donald Trump i ekonomisteskaya situatsiya: strategiya kandidatov v presidenty i Vroraya volna krizisa v SSHA” // Institute for globalisation and social movements. – URL: http://igso.ru/trump_situation/ (publication date: 28.10.2016; reference date: 27.08.2018).
 Report of the Institute of the New Society “Society without Opposition: the crisis of the left in the era of neoliberalism and afterwards”// Institute of the New Society. – URL: http://neosoc.ru/%d0%be%d0%b1%d1%89%d0%b5%d1%81%d1%82%d0%b2%d0%be-%d0%b1%d0%b5%d0%b7-%d0%be%d0%bf%d0%bf%d0%be%d0%b7%d0%b8%d1%86%d0%b8%d0%b8/ (publication date: 28.10.2016; reference date: 27.05.2020).
New trade rules vital to protecting the planet
As satellites from NASA zipped over the planet Earth yesterday, they saw what they have seen every day for months: fires, hundreds of them, tearing through virgin rainforest and other vital ecosystems.
Many of the blazes, which come at the tail end of a devastating fire season, are believed to have been set by farmers eager to clear land and sate the booming global demand for beef and soybeans.
A new United Nations Environment Programme (UNEP) report, jointly produced with the International Resource Panel, says that type of unbridled international trade is having a damaging effect not only on rainforests but the entire planet. The report, which called for a raft of new Earth-friendly trade rules, found that the extraction of natural resources could spark water shortages, drive animals to extinction and accelerate climate change – all of which would be ruinous to the global economy.
“The economic fallout of COVID-19 is just an overture to what we would see if the Earth’s natural systems break down. We have to make sure that our global trade policies protect the environment not only for the sake of our planet but also for the long-term health of our economies,” said Inger Andersen, Executive Director of UNEP.
The environmental toll
The new report, titled the Sustainable Trade in Resources, was unveiled Monday by UNEP Executive Director Inger Andersen at a meeting of the World Trade Organization.
It found that in 2017, 35 billion tonnes of material resources, from oil to iron to potatoes, were extracted from the earth specifically for the purposes of trade. While that helped create millions of jobs, especially in poor communities, the report found it had a profound effect of the planet. Resource extraction was responsible for 90 per cent of species loss, 90 per cent of water stress and 50 per cent of greenhouse gas emissions in 2017.
With the demand for natural resources set to double by 2060, the report called on policy makers to embrace what is known as a “circular” economic model. That would see businesses use fewer resources, recycle more and extend the life of their products. It would also put an onus on consumers to buy less, save energy and repair things that are broken instead of throwing them away.
The benefits of going green
Those changes could pay big dividends for the planet, the report found. By conserving resources, humanity could slash its greenhouse gas emissions by 90 per cent.
While the circular model could have “economic implications” for countries that depend on natural resources, it would give rise to new industries devoted to recycling and repair. Overall, the report predicts, a greener economic model would boost growth by 8 per cent by 2060.
“There’s this idea out there that we have to log, mine, and drill our way to prosperity,” said Inger Andersen. “But that’s not true. By embracing circularity and re-using materials we can still drive economic growth while protecting the planet for future generations.”
Some countries, both in the developed and developing world, have embraced the concept of a circular economy. But the report said international trade agreements can play an important role in making those systems more common. It called on the World Trade Organization, which has 164 member countries, to take the environment into consideration when setting regulations. It also recommended that regional trade pacts promote investments in planet-friendly industries, eliminate “harmful” subsidies, like those for fossil fuels, and avoid undercutting global environmental accords.
“Re-orienting the global economy isn’t an easy job,” said Inger Andersen. There are a lot of vested interests we have to contend with. But with the Earth’s population expected to reach almost 10 billion by 2050, we need to find ways to relieve the pressure on the planet.”
Democracy in decline and its fate after the crisis: Economic waves and democratic procedures
An economist and historian specializing in economic crises from ancient times to the epochs of commercial and modern industrial capitalism. Head of the Institute of a New Society, Lecturer at the Plekhanov Russian University of Economics. In early 2008, he gave a surprisingly accurate analysis of the current crisis, a long-term painful fracture, a major crisis transforming the world economy and the life of society. The forecast of changes caused by the crisis continues to be realised, confirming the theory of cyclicality of big crises. Koltashov headed the drafting of numerous analytical reports. In his book The Crisis of the Global Economy (2009), he spoke about the logic of the first wave of global instability, warning that the crisis will return. In 2013, at the beginning of the second wave of the crisis, the author returned to Russia after six years of analysing the economic catastrophe in Greece. In the same period, he began to study the connection between major crises and the great modernisation revolutions of the era of capitalism. Thus, for the first time, an economic and socio-political analysis of such phases as the restoration and glorious revolution was carried out.
In the 21st century one could observe the rise of democracy. In the 20th century for a long time it also seemed that democracy was developing steadily moving from the formal to the real. However, the big crisis of 1973-1982 led to a historic turn in its fate. Everything turned out to be more complicated than previously thought.
A brief pedigree of democracy
The emergence of democracy was associated with the development of the Greek polis economy. This happened after the “dark ages” that followed the great economic crisis of the 12th century BC. The old economic system collapsed whereas the new system had not formed yet. It took several centuries of decline and degradation for it to occur. Another great crisis in the 3rd century dealt a severe blow to the municipalities of the Roman Empire with their democratic practices stemming from earlier city states. In history the great and big economic crises (they appeared after the great crisis of the 14th century) had a huge impact on social structures and relations, which are usually associated with the concept of “democracy”. The era after World War II is no exception. From that time to the present, democracy as a form of power and organisation of social structures has undergone enormous changes.
The concept of “democracy” is used widely, but is very controversial. It would be much more accurate to speak in most cases about the republican form of state, party and other structures, public consciousness and relations. But the word “democracy” always remains in fashion in politics, even if it is not created by the social “lower strata”, but the “elite” of nations or even the nomenclature of parties. The rejection of its widespread use will cause misunderstanding, although it would be right to treat it with extreme care. Finally, the anarchist extreme is also harmful: the belief that genuine modern government could exist in modern and even earlier socio-economic realities, not burdened by either bureaucracy, professional politicians, or oligarchs (the USA, for example, is an oligarchic republic) nor by faith in leaders and missions.
Democracy in the 21st century, no matter how contradictory this concept is, will eventually bloom. However, its current state and immediate prospects can be estimated only after analysing all the changes that have befallen it. And one should start with the crisis of democracy itself, the way the world knew it in the 20th century. It was in crisis when citizens of the former USSR saw it in its US-European liberal format.
The way 20th century democracy worked
In 1989-1994 alternative elections of heads of state and assembly of deputies, freedom of speech and press seemed the universal rules of democracy to many people in Eastern Europe. They were seen as Western standards, characteristic of a free, open, and pluralistic society. Western Europe and North America themselves seemed standards of freedom, where states flourished in democracy. Have not peoples fought here for broad public freedoms since the 18th century? Did not this struggle have results so attractive to residents of the Eastern bloc countries?
In fact, in the West, as they say in Eastern Europe, a necrosis of what is commonly called representative bourgeois democracy was taking place. No one formally abolished freedoms, like no one abolished many political freedoms in the USSR, but democracy became more and more liberal, even neoliberal, almost one-party, but most importantly, increasingly pushing the “bottom” away from decision-making. This is not to say that the “lower strata” did not cut themselves off from participating in governance, supporting neoconservative professional politicians. But most of all, they were cut off by processes in the economy. They reduced industry and the concentration of workers. But was this the only thing? Did only the dispersal of workers weaken their structure?
The concepts of “liberalism” and “democracy” have a weak connection. Democracy emerges as the power of a large number of people, while liberalism was largely an elitist trend of supporters of political freedoms, which should not be used by the “lower strata”. Therefore, it was not the power of the liberals that gave the world universal suffrage. It is known that Otto von Bismarck used universal (male) suffrage against liberals. Previously, Napoleon III had done this in France. However, the growth of industry gave rise to the development of trade unions and parties of the Social Democratic type, and later of the Communists. They made up the structures that ensured the flourishing of democracy in the West, that is in North America and Western Europe. With their help, the “lower strata” received not only the universal right to elect and be elected, but also the opportunity to have their own deputies. At least, as was the case in the United States, workers’ organizations participated through their superiors in transactions with non-worker’s parties and candidates.
Some called these deals beneficial to the working class and they actually improved its material and political position. Others called them rotten opportunism, and the masses perceived them as less and less interesting maximalists. This reformism in old industrial countries was based on the will of the working people themselves and not on deception on the part of left-wing leaders, which was remarkably shown in the book “Marxism and the Polyphony of Minds” by Andrei Koryakovtsev and Sergei Viskunov. However, everything has its limits.
The crisis of 1973-1982 and a neoliberal turn
The “world revolution” of 1968 should probably be considered as the peak of the onset of democracy and social reforms. Then, students, not yet subordinated to the logic of capital by virtue of their student status, as Herbert Marcuse noted, rose to the struggle.
Many professors in the USA, Great Britain, France or the Federal Republic of Germany remembered the amazing wave of political activity of those who previously spent more time at their desks. Students demanded and sought participation in the management of universities, freedom of assembly in them and other rights. However, it would be a mistake to see in this a culmination of the struggle of employees. They often did not know what to do with the radicalism of the young. This is remarkably reflected in the film directed by Elio Petri “The working class goes to heaven” (1972): the working people solved economic problems, while the young maximalists demanded much more from them. For some time, the two streams merged and this led to an increase in wages in France and other countries. Of particular importance here was the struggle against right-wing dictatorships in Portugal, Spain and Greece. The success of these revolutions was part of the general upswing of the end of the era of economic growth of the 1950-1979s, when much seemed possible.
Finally, society was satisfied with what was achieved and the “revolutionaries” got tired. How fatigue accumulated in them is perfectly shown in the modern film “Something is in the Air” (2012). They were disappointed in the workers. Notes of this disappointment are heard in John Lennon’s sad song “Hero of the working class”. It is not difficult to see it in the transition of the hero of the Paris barricades of 1968 the anarchist Daniel Cohn-Bendit to the ranks of adequately systemic environmental parties in France and Germany. Now in the cohorts of “green” there are many critics of the neoliberalism of the 2000s. The most striking figure here is Canadian journalist Naomi Klein, the author of the book “Shock Doctrine” that denounces neoliberalism. Though, this was later… In the 1980s many parents were happy to see their “wised up” children in the ranks of office staff, among buyers of new cars, homes and aspiring to a corporate career. Hippie’s long hair was cut, and the recent criticism of parents for their commitment to the “consumer society” was forgotten.
The turnaround did not happen overnight. In the years 1973-1982 the world experienced an acute economic crisis. In the book “Capitalism of crises and revolutions how formation epochs alternate, new long waves are born, restorations die and neomercantilism advances” I dwell on its essence in great detail. My colleagues from the Department of Political Economy and the History of Economic Science of the Plekhanov Russian University of Economics repeatedly pointed out in analytical reports that: the current crisis is very similar to that crisis. It was also emphasised in the report “Donald Trump and the Economic Situation”, where in 2016 it was shown how difficult it is to overcome such a crisis. But the crisis of 1973-1982 according to the apt expression of the French historian Fernand Braudel was similar to a flood, and did not resemble the hurricane crisis of 1929-1933. This was due to the fact that the state struggled against the manifestations, but not the causes of the economic crisis.
Almost a decade of economic crisis was enough to launch serious changes. The time had come for financial globalisation, the transfer of industry to the Third World countries and the growth of financialisation of Western economies. There industry contracted and the service sector expanded.
How the crises decide instead of us
People often look at democracy as a product of their own activity. In this sense, its development is perceived as the result of smart agitation and the rational organisation of collective interaction, and weakening as the result of incorrect actions. But history has laws and these laws are primarily economic laws. One of these laws concerns the change of long waves by Nikolay Kondratiev. These waves of development last for 20–25 years and are replaced by particularly severe, major crises. Such crises appeared after the great crisis of the 14th century. However, their regularity can be traced from the 1770s, when under the influence of the great crisis, an industrial revolution took place in England.
The development of the economy of capitalism is wave-like and can also be called cyclical. The Great Crisis of 1973-1982 is on a par with the crisis of 2008–2020, to which the analytical report “The Crisis of the Global Economy and Russia” was devoted. The report was written under the guidance of the author and reflected his understanding of processes in the world economy. This report was released in early June 2008. It contained a predictive analysis of events, which were subsequently confirmed in many ways, and most importantly confirmed the correctness of the concept of big crises, an area of my research. Such crises existed before. Their full range is: 1770-1783, 1810-1820, 1847-1850, 1873-1879, 1899-1904, 1929-1933, 1948-1949, 1973-1982 and 2008-2020. In Figure 1. their place in the development process can be seen.
Figure. 1 Large economic crises before and after the industrial turn of 1770-1783.
Rallies, demonstrations, strikes, occupation of campuses and slogans at lectures in the name of democracy everywhere and always all this remained in the past by the end of the crisis-era of the 1970s. The turn was painful, difficult and most importantly (it always happens) there have been such shifts in the global economy, and then in technology that weakened the old industrial regions of the West. The removal of industry to peripheral countries, the growth of office facilities in the old centres of capitalism meant a change in the sphere of social relations and ideas.
Neoliberal withering of democracy
Immanuel Wallerstein could write volumes about the “1968 revolution,” but big business was the real winner. But its victory was dictated not so much by a clash with the “lower strata” as by failures during the years of the crisis of 1973-1982, which showed the need for fundamental changes in economic policy. Keynesianism has used up its historical resource.
With changes and for the sake of change neoliberal forces came to power, demanding the market to be unchained to complete freedom and the role of the state in regulation to be reduced. The main idea was simple: let the central banks rule with the help of monetary instruments. From the point of view of democracy, this means abandoning an extremely important sphere out of public control. Later, the United States will impose on countries the independence of central banks from the authorities, and Naomi Klein in the book “The Doctrine of Shock” will devote many pages to uncovering the negative consequences of such changes.
If central banks are independent or almost independent of the government, they are very little dependent on society. But did this mean that Western democracy shrank like the shagreen skin from Honore de Balzac’s work only due to this? In the 1980-1990s the importance of trade unions declined and the importance of left-wing parties simply collapsed. Being very serious during the crisis of the 1970s, with the collapse of the USSR they turn into parties on the political sidelines or adopt neoliberal programmes. From that moment on, all influential forces can be divided into open liberals and those masquerading as socialists, social democrats and even communists. The Green are a special type of disguise, a very effective one. The masses lose confidence in parties and the parties often lose their mass origins. They do not lose touch with their clientele, they even develop it, but they cease to be agents of the “lower strata” in the political system. The party nomenclature is adjusted to the time politically and the “lower strata” economically.
All this undermines the foundation of the very bourgeois democracy in which the propertied classes were forced to take into account the demands of the masses, since these masses had strong agents. The masses themselves were their strength. With the decline in the industrial organisation of the “lower strata,” their role in public life also deminishes. Now they are required to vote in the elections, the procedural instance of procedural liberal democracy, having even lost the indirect and largely formal power of the “demos”. But this “demos” seems to betray its former self. It follows neoliberal ideas and forces, turning away from radical left or national-conservative preachers.
When procedures prevail
Without taking into account the fact that the majority of citizens of industrialised countries followed neoliberals, such as Margaret Thatcher in the UK and Ronald Reagan in the USA, it is impossible to understand the causes of the crisis of Western democracy and its basic structures. Of course, one can believe the version that the “lower strata” were insidiously deceived, blindly followed the masters of hypnotic phrases and therefore lost faith in their own strength, the strength of their structures and in the chance of democracy. However, the truth seems different: the working class abandoned democracy and the basic working structures following the temptation to leave its class.
In those days, it was about turning people into owners of state and municipal housing (privatisation), creating small business, corporate careers, or just working in an office, which was very different from working in a factory. The temptation included the ability to dress in business style, dine in cafes and restaurants, and generally increase consumption. Many were not concerned about democracy. They did not turn against it, but its transformation into procedural democracy was not stopped.
It is amusing, but the Western working class surrendered its democratic and highly conditional dictatorship to bourgeois political management almost as quickly as the working class in Soviet Russia in 1918-1919 in a deal with party nomenclature exchanged its democratic dictatorship for new opportunities. They also included vertical mobility for some: opportunities to go up the social ladder. As a result, in the West the model of liberal democracy was established, a procedural democracy and much more formal than the form that preceded it. And if the electorate could choose parties or candidates at will, they would still get the same result, since ideologically the elections had almost no alternative. And the liberal spirit of this “democracy” was most expressed in this.
From our partner International Affairs
 Koruakovtsev A. Viskunov S. Marxism i poliphonia razumov – Ekaterinburg, «Kabinetnyi uchenyi», 2016 – p. 663.
 Koltashov V.G. (2019). Kapitalizm krizisov i revolutsii: kak smenyautsja formatsionnye epohi, rozdautsja dlinnye volny, umiraut restavratsii i nastupaet neomercantilizm, M.: “RuScience”.
 Report of the Department of Political Economy and the History of Economic Science of the Plekhanov Russian University of Economics “Donald Trump i ekonomisteskaya situatsiya: strategiya kandidatov v presidenty i Vroraya volna krizisa v SSHA” // Institute for globalisation and social movements. – URL: http://igso.ru/trump_situation/ (publication date: 28.10.2016; reference date: 27.08.2018).
 Braudel F. Materialnaya tsivilizatsiya, ekonomica i kapitalizm XV-XVIII . Vol. III. Vremya mira — М.: «Progress», 1992. — p. 76-77.
 Report of the Institute for globalisation and social movements. (IGSO) «Krizis globalnoy economiki i Rossiya» // Institute for globalisation and social movements.. – URL: http://igso.ru/world_crisis_and_russia/ (publication date: 09.06.2008; reference date: 28.01.2020).
 Klein Naomi. Shock Doctrine: The Rise of Disaster Capitalism – M.: «Dobraya kniga», 2009, p. 890.
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