January 31st, 2012
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Study of Post-War Imperialsim

Book Review/  Thomas Mathews

Book : Imperialism in the Neocolonial Phase

Author:  PJ James

Publisher: Massline Publication

Price: Rs 400/-

imperialism“Imperialism in the Neocolonial phase”, by PJ James, is an in-depth empirical study of the modalities of imperialism with special reference to the post-war period. The analysis starts with the ‘genesis’ of neocolonialism, which is located in the interwar period, particularly attributed to the bankruptcy of European economies in the immediate aftermath of the First World War, which in fact coincided with the Bolshevik revolution and ‘war communism’.

The genesis of neo-colonial theory could be seen in John Maynard Keynes’ theme about “The Economic Consequences of the Peace” written in 1920. As Lenin observed in 1920, ‘the US was the only full beneficiary from the war, which had become a general creditor from being a heavy debtor earlier’.

American finance capital ushered in an era of boom based on export of finance capital and speculation that generated growing deficit and debt burdens of European countries. Repudiation of Tsarist debts by Soviet Union and rising American control of finance capital contributed to European bankruptcy and the Great Depression.

Internationalization of Finance Capital

It is instructive to note that the Comintern characterized fascism as the “terrorist dictatorship of finance capital”. Integration of private fascist armies propped up by finance capitalists has been an inherent trend of state fascism. Even as fascism propped up as a counter to socialism, Keynesianism evolved as an economic response to the socialist challenge and the ‘Great Depression’.

Keynes recognized the lack of effective demand in the imperialist economies as the reason for depression and advocated public investment in welfare, public works and armaments production to create effective demand by generating more employment. While the countries like Germany, Italy and Japan, who were deprived of colonies after the defeat in the First World War, advanced on the lines of fascism and militarism, America, Britain and France adopted the Keynesian policies particularly after the ‘Great Depression’.

The ‘New Deal’ programme introduced by Franklin Roosevelt in US between 1933 and 1939 were based on the Keynesian prescriptions. While the First New Deal (1933-35) created more than six million jobs in civil works and reforestation programmers of the government, the Second New Deal (1935-39) emphasized social security. But the programme as such lost its steam by 1937 itself when joblessness rose from 14.3 percent in 1937 to 19 percent in 1938 and index of industrial production (1923-25 = 100)tumbled from 117 in August 1937 to 80 in January 1938.

As the ‘New Deal’ policies on Keynesian lines failed to stimulate the economy, it was the World War II that infused a new lease of life to the stagnant American economy.” American continent not being a war-scene during the World War II, it was convenient for US to become the biggest supplier of not only arms, ammunition and war material but also food agricultural and industrial goods to the war-torn international economy.

The mobilization of twelve million people into armed forces and near full-employment of the remaining civilian population by the war oriented economy generated the effective demand that wiped out the agricultural surpluses, a phenomenon of the Depression years”. While World War II ravaged the economies of all imperialist powers, for US alone it provided an opportunity to make effective utilization of resources and recover from a decade of depression. As the World War II came to a close, US accounted for almost half of the Gross Domestic Product (GDP) of the world and about three quarters of global gold reserves also moved to America.

Transition to the ‘Neo-liberalism’

While tracing the origins of neocolonialism to the Latin American and Philippines backdrop, its typical evolution is linked to the inter-war period of rise of the socialist challenge and fascist counter-terror. The transition to neocolonialism is historically situated towards the beginning of the Second World War; more precisely at the point of failure of internal Keynesianism and the evolving of International Keynesianism with a paradigm shift from welfare and development to militarization and arsenalisation. The precise point of transition is identified as the adoption of the Atlantic Charter by fifteen advanced nations including the Soviet Union, led by the United States of America in September 1941. After the dissolution of the Comintern in 1943, Soviet Union also became party to the United Nations and participated in the Bretton Woods conference, though refused to join the IMF.

Monopoly finance capital is the key feature of neocolonialism. The salience of financial oligarchies becomes even more significant with global Keynesianism adopting new modalities in the spheres of international mobility and control of labour, capital and commodities alike. The dominant rentier nature of monopoly capital assumes varied forms and dimensions and register phenomenal rise in the sphere of finance market speculation in particular. Rent-seeking activities enter and dominate the sphere of knowledge capital, intellectual property and even intellectual labour.

The Bretton Woods system comprising the IMF and World Bank established the hegemony of US led imperialist powers over global finance and development through a system of international currency exchange bassed on gold or dollar reserves and regulation of credit and aid in the interests of the developed capitalist countries. The General Agreement on Tariffs and Trade (GATT) was formed to regulate international trade to avoid protectionism and restrictive trade policies. The United States emerged as the world banker; and the huge expenditure required for financing the Marshall Plan for reconstruction of the war ravaged, aid programmes and American military expansionism were financed out of the printing of dollar.

Apart from the United Nations Organization and its specialized agencies, the Bretton Woods system and the Marshal Plan, the Truman doctrine and Pax-Americana chartered a programme of military and economic aid to developed and underdeveloped areas as part of the policy of containment of communism.  The Ford, Rockefeller and Carnegie foundations, USAID, USIS, CIA, and above all NATO, became the main instrumentalities of US-led neocolonialism. Even as Germany and Japan remained the main beneficiaries of the Marshall Plan, intervention in Korea and Indo-China as also in the Middle East, Africa and Latin America was accompanied by aid and destabilization aimed at containment of communism, particularly in the Indian subcontinent.

The number of countries with US military presence increased from 39 during the Second World War period to 64 by 1966. Pax Americana resulted in US takeover of political, economic and military control of the world. The objective of the policy framework was unrestricted and unregulated free movement of capital disregarding all values such as democratic rights, ecology and environmental protection, and equitable distribution of the burdens of crises.

Multi – National Corporations (MNCs)

As Lenin visualized, with the phenomenal increase of export of capital and expansion of the ‘spheres of influence’ of the big monopolistic combines, “things naturally gravitated to an international agreement among these combines and towards formation of international cartels”. The number of international monopolies which Lenin had put at 100 in 1910 increased to 1000 by the beginning of the Second World War.

With the global reach of multi- national monopolies in the exercising centralized ownership and control of corporate monopoly  over production, including agricultural production, of goods and services, R&D, technology, knowledge and armaments  as also global trade and commerce, MNCs have merged as the main props of imperialism. So-called decolonization in fact meant only the withdrawal of the militaries and political/administrative control of the erstwhile colonial masters. Military and economic aid together with increased American military presence and armaments trade replaced the old system of colonialism.

As far back as April 1917 Lenin noted that “the concentration and internationalization of capital are making gigantic strides; monopoly capitalism is developing into state monopoly capitalism”. The political, economic and military institutional framework created under American initiative during and after the Second World War put MNCs as the main pillar of global hegemony. As Lenin observed a personal union of industrial and finance capital, the MNCs represented a personal union of finance, industrial, trading and state capital, which combined two distinct segments of welfare/development and policing/military aspects.

Perhaps what we see in the post-war phase is the globalization of Keynesianism and globalization of fascism in a new format. The US-led military industrial complex definitely included the entire NATO countries and OECD countries and even perhaps the entire spectrum of developed Northern hemisphere. Eyebrows may, however be raised, if we suggest inclusion of client states like Israel, India, Saudi Arabia or Pakistan as part of the imperialist military industrial complex.

Neoconservative Paradigm 

The Bretton Woods system collapsed due to the contradictions within the imperialist political economy basically because Europe was not ready to bear increasing burden of American expansionism and global policing. As the US gold reserves dwindled and dollar liabilities increased steadily in the postwar decades, America unilaterally withdrew the convertibility of dollar into gold and accepted the actual depreciation of the dollar and devalued dollar twice, in December 1971 and February 1973.

Prompted by the weakening of the US economy and intensifying Cold War, the Organization of Petroleum Exporting Countries (OPEC) increased oil prices fourfold and aggravated the imperialist crisis, particularly the American crisis. However, the US succeeded in manipulating the OPEC in favor of American finance capital by persuading the OPEC regimes to hold their oil money in dollars in exchange for massive armaments deal between the US and these oil kingdoms. This deal signaled a paradigm shift in imperialist modalities and the comprador regimes got accommodated, one by one, in the imperialist military industrial complex.

In fact, the OPEC move to drastically increase oil prices was aimed at dealing with their increasing debt burden. Other underdeveloped countries of Asia, Latin America and Africa were also caught in the debt trap and considered cartelization of primary commodity producers. Interestingly, America wrecked the Bretton Woods system after waving an olive branch to China too.

India has been the premier site where the ideological tussle between the socialist path and the capitalist roaders unfolded in the very first decade after transfer of power. Even as the Comintern and the Communist party questioned the genuineness of Indian independence and pitched for working class power and socialist planning, the Indian ruling class opted for the Tata-Birla model.

The socialist pretensions and welfare oriented ameliorative policies as also the Mahalanobis model of import substituting industrialization, with a public sector controlling the commanding heights of the economy was very much in the neocolonial frame. As the communist tide could not be stalled even with ‘India-China bhai-bhai’ and indo-Soviet friendship; and the dependence on foreign capital increased beyond control, the planning process itself was abandoned and the Rupee was devalued by 66% at one go,  and the economy was surrendered to American interests.

By the end of the Seventies, the Import substituting industrialization paradigm had run its course in all countries and America had lost the Vietnam War all the underdeveloped countries except the oil kingdoms were in trapped in severe debt crisis. It was in the above context that the Washington Consensus was evolved; emphasizing the imperative of structural adjustment by all debt-ridden countries by shifting production from primary products that are non-traceable in the international market to tradable industrial goods. This so-called neoliberal paradigm involves abandonment of the Keynesian model, particularly the welfare and development aspects of it.

In fact, Keynesianism was meant for developed capitalist economies, which had completed bourgeois democratic revolutions, full employment was the objective of the Keynesian prescription. In the Import Substituting Industrialization (ISI) period in underdeveloped countries such as India, neither the democratic revolution was complete nor were social security, social welfare and social infrastructure ever provided to the vast majority of the people. So the extension of the welfare and social sector public investment did not reach the general population, but selected sections only. However, the abandonment of Keynesianism in the wake of the neoliberal policies not only meant the withdrawal of limited social safety nets, welfare and social infrastructure provision which was available to even the limited sections earlier.

On the other hand in the developed countries, welfare and social security has-been cut down and employment levels have declined. What we have in the underdeveloped countries under the neoliberal regime is denial of even the basic human right to life and basic needs and democratic rights. There is a qualitative difference in the application of Keynesianism in a developed economy and an underdeveloped economy or bourgeois democracies and the nominal democracies such as India. In this respect also a distinction may have to be drawn between underdeveloped countries such as India and countries like China, where the democratic, if not the socialist, revolution has taken place. Again we have to see what changes or development the ISI stage has brought about in underdeveloped countries.

This phase has developed the infrastructure, including social infrastructure sectors of health and education; and monopoly capital invested under the neoliberal regime benefits from the existing infrastructure and the new infrastructure facilities being provided with foreign monopoly capital at the cost of the cost country. This is in addition to the enormous transfer of surplus value on account of the exploitation of highly skilled labour force as also the monopoly profits on account of the ownership and control of technological know how and the domestic market. Speculative profits mopped up in the finance market, in stocks and shares and futures trading also are in addition to the profits for huge armaments and military hardware trade.

Neoconservative paradigm strengthens the operation of all the laws of motion of capital in its moribund monopoly phase. The rules are those of alienation, exploitation, exclusion and extermination. From economic sanctions to drone attacks and starvation deaths to forced suicides apart from wanton wars of aggression and occupation, imperialism is in war against the people of the world and the local satraps are in war against their own people. State in the underdeveloped world has become police and military state, an extension of the imperialist military industrial complex.


In actual fact, it is a moot point whether Keynesianism can be extended to the global level. Keynesian economics is about macroeconomic theory, the “General Theory of Employment, Income and Prices” of a country or a nation state, specifically the economy of a developed capitalist or imperialist country. A global ‘General Theory’ is yet to emerge and that is not possible in the realm of bourgeois economics. James has done the groundwork for developing a critique of the neoconservative phase of imperialism. And such a critique would develop only in the frame work of socialism, envisioned by Marx, Lenin and Mao, as outlined in this book.

Professor James makes a very significant formulation while dealing with the genesis of neocolonialism. He asserts that imperialism always relied on military Keynesianism rather than on welfare Keynesianism. This assertion is fully validated by the results, the course and also the outcome of the most important historic application of the theory to deal with the ‘Great Depression’. As both the ‘New Deal’ programmes failed to create the desired impact, it was the Second World War, which enabled imperialism to overcome the biggest ever crisis. However, while advancing the argument that the so-called post-war boom and golden age could be attributed to application of Keynesianism on the global scale, he seems to underestimate the role of resistance from the working class forces and nationalist movements.

Moreover, Comintern characterization of fascism as ‘terrorist dictatorship of finance capital’ has not been projected to the post-war phase adequately as a concomitant of global military Keynesianism, which imperialism has advanced globally. A related lacuna is the failure to pick up the thread from Lenin’s classic formulation about taking into consideration the political aspects of imperialism, particularly the ideological division in the working class movement between the national chauvinist tendency and proletarian internationalism. How can we afford to miss the infirmities of India’s conventional Left enmeshed in social fascism playing the national chauvinist card in implementing ‘neo-liberalism’ including the Indo-US Nuclear Deal?

Another apparent flaw is the inadequacy of conceptualization of imperialism as a unitary structure instead of persisting with the idea of different imperialist countries and blocks, even after taking note of the integration of global monopoly capital under the centralized edifices of the UN, NATO, World Bank, WTO and the G8 and the OECD. Emergence of militarized global monopoly capitalist state may have to be considered at least at the conceptual level.

Last, but not least, I would like to point out that the conceptualization of neocolonialism does not adequately capture the meaning and essence of classical Marxist-Leninist formulation and characterization of the state and ruling class as semi-feudal/semi-colonial. The basic flaw is that while imperialism denotes the merger, collaboration and connivance of the monopoly capitalist forces and pre-capitalist forces of the colonized country/social formation, the neocolonial formulations apparently miss out that connotation; and all except the compradors and their hangers on are hapless victims of neocolonialism. However, this analysis recognize the connivance of the domestic parasitic classes in the neocolonial project and also flag the vanguard role of proletarian internationalist forces and the rural proletariat and semi-proletarians as well in India’s democratic revolution and resistance to imperialism and fascism.

The author has made an excellent, rather detailed, study of imperialism in the post-war neocolonial phase. The book provides all the relevant data, theoretical tools, concepts, formulations and empirical and historical facts about the development of capitalist imperialism, with special reference to the post-war period. The section on India as a showcase of neocolonialism is particularly illuminating. This is a timely and welcome effort of the CPI (ML) to develop revolutionary theory, practice and consciousness in most challenging times. This is an essential reader for students, academics and activists; and above all for practitioners of revolution. I would recommend an abridged version, particularly in Indian languages for the benefit of mass following of the movement.



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