SEZS: Behind the Curtain

“Few cities anywhere have created wealth faster than Shenzhen, but the costs of its phenomenal success stare out from every corner: environmental destruction, soaring crime rates and the disillusionment and degradation of its vast force of migrant workers”

–“Chinese Success Story Chokes on Its Own Growth”

The New York Times, December 19, 2006.

Within the short span of a few decades China has become the envy of the world. Corporate managers across the globe lose sleep worrying about “the China price”. Real wages and working conditions rivaling those of industrializing, pauperizing Britain two centuries ago have enabled the country to leave far behind any global competitor who has to worry about such inconvenient matters as labor laws and environmental regulations. Thus has accelerated the inter-national race to the bottom that has generated fear since the early days of this phase of corporate globalization. The labor force in the global economy doubled overnight in the early 1990s (from 1400 to 2900 million) when China, India and the Eastern Bloc nations joined it after the fall of the Berlin Wall, under Bush I’s “New World Order.” If real wages and the share of wages in national income have fallen sharply in recent times, and if inequalities have risen dramatically at the same time, the answer to the riddle lies in this quiet accretion, cashed in on by China-based corporations who have set the pace. The logic of capital has inveigled the entire world into a race of totalitarianisms–which inevitably enrich the few and pauperize the many in every country.

Democracy is a nuisance for capitalism. The success of China should demonstrate even to the most ardent of liberals that capitalism works most efficiently under despotic conditions. If capitalism coexisted with democracy in the Western world for some decades, the rise of China shows it up for what it was: a coincidence of history brought into relief by the fight for freedom and human rights by large sections of the working population of the West since the early days of 19th century British Chartism. The gains of working classes were consolidated by the institutionalization of the welfare state since Bismarck’s Germany first brought in social legislation in the 1880s. They took a big step forward with the implementation of Roosevelt’s New Deal in the US in the 1940s. Much of this was made possible, needless to say, by the spoils of war and imperialism, which enabled Western elites to maintain labor aristocracies within their own geographical boundaries. A prosperous domestic social peace was arranged on the ample backs of Third World super-exploitation of labor–and maintained internationally through arm-twisting “multi-lateral” agencies like the IMF, the World Bank, GATT and the WTO. And when they failed to work covert or military operations were always on the cards to ensure the desired outcome for Western elites (a practice that continues unabated).

One of the big historical gains of working classes in the West was universal adult suffrage–the cornerstone of modern democracies. By 1964–thanks mainly to the heroic efforts of the Civil Rights Movement under Martin Luther King–even the United States had it. After a while it became all but natural for commentators across the political spectrum to associate capitalism, in some umbilical way, with democracy and freedom. “History suggests that capitalism is a necessary condition for political freedom,” the anointed public intellectual of the day, conservative economist Milton Friedman declared in 1962.

What history is revealing now is something altogether different: that far from being the precondition for political freedom, capitalism may be the growing thorn in the flesh of democracy, a thorn that democracy nourishes in the very core of its body-politic, a juggernaut of tyranny, remorselessly hungry for power both within and outside the country, without which its appetite for profits, growth and expansion cannot be met. As capital has had to bare its fangs, the dove of freedom and democracy has flown out of the window.

The Indian predicament

It is in this global context that India is having to chart its economic course.

In order to stand any chance of success in a global field where China sets the bottom-line and the long-understood practices of ruthless capitalist competition hold sway, Indian policy-makers have no option but to fall in line with the heartless rules of the game. It is vain to expect our leaders to then champion democracy–except when they are in the opposition just before elections. To subscribe exclusively to the growth imperative is to be necessarily forced to sideline all other social or political goals and sign on to the charter of (global) corporate tyranny. The private interest–the hunt for ever higher profits, justified by the promise to grow, invest and employ–is the public interest. No need to distinguish between the two any more. Thus, unsurprisingly, as the unfolding logic of capital has revealed its despotic character, even liberalism has lurched feebly towards a quiet grave.

The situation is further worsened by the fact that India’s policy-making elite since 1991 has all but willingly had its hands tied by its acquiescence in the plans of global capital. Policy-making has been conducted under the close scrutiny of the IMF, the World Bank and the WTO. This involves many things. To please the IMF, social spending has had to be slashed and the government openly expresses guilt in performing economic functions which it is constitutionally bound to carry out. To keep the World Bank happy the government has to open the door to “development” projects of doubtful social value and destructive environmental effects. To find the ear of the WTO it has had to sell the rural poor down the river, allow subsidized Western imports of foodgrains, remove price supports for farmers and dismantle the public distribution system, thus (especially given the collapse of rural public investment in infrastructure, one of the consequences of IMF-diktat) making it ever more likely that more and more people will find agriculture an unviable option over a period of time–and will be willing to sell their land to corporations or the government.

This has meant that the government has effectively receded from any promise of economic welfare or development, indeed from any economic participation, which does not place corporate interests at the very centre of the public agenda. According to The Times of India there is public money to help Tata in its purchase of Corus, but none to expand the employment guarantee scheme.

The meaning of the Indian SEZ phenomenon

“When I expand, it is always in a capital-intensive, and not in a labor-intensive direction.”

– Dinesh Hinduja, to Edward Luce of The Financial Times.

It takes only a little imagination to sense the despair among Indian policy-makers today. They have had to actually believe their own rhetoric–meant otherwise exclusively for public consumption. Thus, despite mounting facts to the contrary, it has become a virtual article of faith–with them as much as with the politicians and the media–that trickle-down economics actually works: that the only way to achieve economic development is via corporate-led industrial growth which will generate employment. Never mind that the modern sectors of the economy are destroying jobs.

That employment in India was growing more rapidly in the 1980s, when the economy was growing much more slowly than it is today, is of little account. That the entire private organized sector of the economy has generated fewer than a million jobs during the past 16 years (and still employs less than 9 million people), when over 12 million people are getting added to the Indian workforce every year should make our policy-makers worried whether we will be a sustainable society at all in the future–whether we will not dissipate ourselves in a welter of frustrated social violence, the kind that Star TV had the misfortune of experiencing in Mumbai the other day. None of this seems to alarm them.

And yet, how could it not? 22-year-olds fed on the dreams of unabashed consumerism are not going to sit idly and watch the rich race past in their speeding cars. Thus, it was not surprising when an ex-Union Minister was so taken by a 2000 visit to Shenzhen, China, where a Special Economic Zone has generated huge amounts of unprecedented wealth during the past generation. 20-30% has been the annual rate of growth, sustained over a quarter century. Over 10 million people have found employment in an area the size of Jaipur. The city has generated 14% of China’s exports. Who wouldn’t want to be like it?

Or is it? Listen to The New York Times correspondent after he returned from a field visit:

“among Chinese economic planners, Shenzhen’s recipe is increasingly seen as all but irrelevant: too harsh, too wasteful, too polluted, too dependent on the churning, ceaseless turnover of migrant labor. “This path is now a dead end,” said Zhao Xiao, an economist and former adviser to the Chinese State CouncilAfter cataloguing the city’s problems, he said, “Governments can’t count on the beauty of investment covering up 100 other kinds of ugliness.” As the limits of the Shenzhen model have grown more and more apparent, other cities in China’s relatively developed east are increasingly trying to differentiate themselves, emphasizing better working and living conditions for factory workers or paying more attention to the environment. “Some inland cities have started to provide migrants social security, including pension and other insurance,” said Wang Chunguang, an expert in class mobility at the Chinese Academy of Social Sciences in Beijing. “In Chengdu, in Sichuan Province, residency controls are loosening up and education for migrant children is getting more attention.””

The province of Guangdong, where Shenzhen is located, recorded 10,000 protests last year–in what is known to the world as a totalitarian society. It appears that in China at least, SEZ is an idea whose time has lapsed. So why is it that in India it is an idea whose time has arrived?

The answers are to be found in the peculiarities of the Indian situation and the utterly odd world in which our corporate and policy-making elites find themselves today. The economy has been growing at a internationally impressive 8-9% for about 5 years now. Indian corporations have become globally mobile units, locating themselves in Eastern Europe and China, Bolivia and Equatorial Guinea, acquiring companies in Europe and North America, mines and oilfields in Africa, Latin America and Australia.

However, there is immense corporate frustration–still–right here at home in India. Some of the cheapest labor in the world is at their command. And yet, because of the inconvenience of democracy they can’t be hired and fired in sync with the impulses of the business cycle, as it happens in China. Some of the most readily accessible natural resources are at their disposal. Except that there is the nuisance of bureaucracy in the shape of clearance of industrial projects by pollution control boards and the Union Ministry of Environment and Forests. They have firm control over the hearts and minds of politicians. But, from their point of view, there are still too many taxes to be paid. There is infrastructure in the country, but it is either in the city and already burdened or it is near fertile agricultural land (and must be somehow acquired: the reason that the conflict between agriculture and industry is arising in SEZ land acquisition in the first place). And so on.

SEZs offer a relief from this entire nettle of hurdles. All that can’t be attempted in the civilized world outside will be the norm in SEZs. American corporations routinely abuse labor and the environment in Shenzhen in ways unacceptable to the Western world (though no one seems to mind the cheap shoes and clothing). In India, SEZs will provide a profitable refuge from the Indian Constitution, an effective waiver from democracy. The Development Commissioner and the SEZ Authority will have overwhelming powers, making local, provincial, national and international laws all but irrelevant. “Little Chinas” and Shenzhens can be developed. Soon, after their nominal success (inevitable, given the enormous range of concessions) is visible to all, the clamor for more such spots would be heard. And will be heeded. Unlike in China. Nandigrams and Kalinganagars will happen from time to time, but so long as they don’t all happen simultaneously, and too close to an election, one could “move forward” in a stop-go pattern to accommodate the formal requirements of an electoral democracy.

This is the plan.

What else does it mean? Recent concessions (like the liberalization of foreign direct investment in real estate), the rush of builders and developers to acquire SEZ land, the fact that only 50% of the area under an SEZ has to be dedicated to processing (whose definition is stretched liberally to include everything from mining to agriculture), the fact that industrialists are all too often being granted land well in excess of their production requirements (whether Tata in Singur or Reliance in Dadri) all point in the direction of an engineered real estate boom through SEZ growth. Huge amounts of capital are pouring into the real estate market, both from within India and abroad. Returns of 30, 40, even 100 per cent in many segments of the market are becoming common–making Indian real estate markets one of the most attractive places anywhere to invest for global finance capital.

And the political implications of SEZs? Far-reaching and monstrous. A real-time pilot experiment in corporate totalitarianism is being launched through the high offices of the nation-state which, if successful, will reduce the latter to a mere clearance window between the corporate superstate in Washington and the emerging archipelago of fiscally autonomous post-modern city-states strewn across the country. As flags are raise once again in rajwadas and princely states, the long-slumbering glories of Indian feudalism may once again rise from the ashes under newly coined corporate brands, fitting snugly into the needs and imperatives of global finance, shoring up what would otherwise appear nakedly as capitalist stagnation worldwide.

With private airports, luxury housing, super-deluxe hotels, world-class shopping malls and multiplex plazas, SEZs offer us a window into the world of corporate consumer dreams. They also portend the end of effective democracy in this country.

The surrounding sea of human misery and squalor is bound to give rise to repeated and violent rebellions. Which is why the private armies of security guards are being trained and readied for approaching inevitabilities.

There are a thousand alternatives to this impasse. But to discover them and forge the collective imagination and will to develop them in practice will require a thriving public culture of democracy–precisely that which SEZs are being created to undermine. Globalization, far from bringing freedom to the world, is taking it away–in the name of freedom.

ASEEM SHRIVASTAVA is an independent writer. He can be reached at