Southern Asia: When the world economic crisis makes landfall in South Asia

Fragile governments will be rocked by mass movements of workers and poor

Until recently, the ’emerging’ economies of the BRICS – Brazil, Russia, India, China and South Africa – were still growing at a steady rate. China, in particular, appeared to be defying the economic laws of gravity or those of boom and slump in capitalist economies. There were many who argued that these countries could help keep the world economy afloat as deepening crises afflicted Southern Europe and the US. The dramatic slump in Brazil’s growth rate (from 7.5% in 2010 to 0.9% in 2012), and the massive revolt of the youth and workers in July of this year, have put an end to that illusion.

The current slow-down in China, whose ’turbo-charged’ economy saw it overtake Japan to take second place to the US in GDP, is now a cause of grave concern both to the ruling clique in China and internationally. While China is heavily involved in major capital expenditure in some countries for strategic as well as economic reasons, the shrinking of its exports further afield is already having an effect on economies to which it has out-sourced certain basic manufacturing and from whom it has drawn the raw materials needed to fuel its industry.

India – the third largest economy in Asia and only recently opening up to the world market – has seen its growth rate fall from 10.5% in 2010 to 3.2% in 2012. Malaysia’s economy, heavily dependent on trade with China, has slowed to a 4.1% increase this year.

Many Asian countries initially benefited from the downturn in productive (profitable) investment elsewhere in the world. Large amounts of ’idle’ capital, earning little or no interest in the banks of countries involved in Quantitative Easing, flowed into Asia as speculative ‘investment’.

The Financial Times commented that Asia’s local currency bond markets “have bloomed since the global financial collapse of 2008 unleashed easy money…spilling out of the US and Europe. What happens when interest rates eventually start to rise, particularly in the US? How much of that money will turn around and flee?”. Up to 50% of Indonesia’s government bonds are foreign-owned and about 40% in Malaysia and Philippines.

Will there now be a new ’Asian crisis’ as severe as, or even more severe than, that of 1997-98? Will South Asia’s governments be able to weather the storms to come?

Historical precedent

The 1997-9 “Asian Crisis” saw the currencies of countries like Thailand plunge, and hundreds of thousands of jobs and livelihoods being massacred. Revolutionary upheavals against IMF- imposed policies saw the overthrow of the hated dictator, Suharto, in Indonesia. In Malaysia a mass movement for democratic reform threatened the decades-long rule of the BN (National Front), dominated by the United Malays National Organisation (UMNO). South Korea saw new general strikes similar to those against neo-liberal attacks introduced at the end of 1997.

Last time round, the IMF doled out massive loans to beleaguered countries to prevent collapse and revolution. In the case of South Korea it was a massive $57bn.

None of these movements found a voice and political line that could complete the revolutionary processes that had begun. In Indonesia, some left groupings fostered illusions in the democratic credentials of Megawati Sukarnoputri, who would proceed to rule on behalf of big and international capital in alliance with generals of the old regime. In Malaysia, the popular leader of the ’Reformasi’ movement, Anwar Ibrahim, had been a part of UMNO in government with Mahathir Mohammed. As a US-trained neo-liberal economist, he did not want (and still does not want) a movement which would go the whole way and organise to end capitalism.

The CWI at the time argued for the fullest support for, and involvement in, these movements, fighting for basic democratic rights and freedoms, but also, arguing – along the lines of Trotsky’s writings on ’Permanent Revolution’ – the need to rid these neo-colonial economies of the domination of home-grown and multinational capitalism. Clear socialist policies were needed, based on the understanding that only the working class, with the support of the urban and rural poor, could establish genuine democracy and transform the lives of the overwhelming majority of the population of the region.

As the cold winds of world recession ‘hit landfall’ in Asian countries, similarly tumultuous movements will develop. Given the further inter-twining of the world’s economies, India and Pakistan which escaped the worst of 1997-8 could be engulfed this time. The IMF is unlikely to step in to the same extent as it did then help governments faced with revolutionary upheavals. Initial outbursts of anger and desperation could broaden into generalised movements in which impoverished youth and workers will seek revolutionary solutions. No Asian country at the present time can claim to have a viable, confident and stable government.  

India, for example

India is characterised as “the worst performing emerging market economy since the turn of the year” (Guardian 7 August) with growth coming to a standstill in the second quarter. “Investors fear a re-run of the crisis that hit India in 1991.”

Mass poverty and deprivation is synonymous with India. “Four hundred million Indians have no electricity…Half of all Indians still defecate in the open…Immunisation rates for most diseases are lower than in sub-Saharan Africa. Twice as many Indian children (43%) as African ones go hungry…A pitiful $39 per person per year [is spent on] public health compared with China’s $203 or Brazil’s $483” (Economist, 29 June 2013).

The majority of Indian women suffer untold suffering and hardship. The brutal gang rape and murder last December of a student in New Delhi provoked huge demonstrations and protests internationally, as well as across India. Measures may be introduced to try and deal more harshly with offenders, but violence against women is backed up by many ancient prejudices and practices.

Natural disasters are aggravated by irresponsible environmental destruction, as with the deathly landslides in Uttarakhand this June. Rescue and eemergency services prove woefully inadequate and cause yet more suffering and mortalities.

The gap between the mass of India’s nearly 1.3 billion people and the tiny handful of super-rich grows ever wider. A few individuals from rich family dynasties have amassed vast fortunes. According to Forbes magazine, Mukesh Ambani is worth $20bn and steel magnate, Lakshmi Mittal, $16bn. A new middle class has developed in some cities and provides a certain market for cars and semi-luxury items.

“For the rich, the problem is their waistlines,” comments the Economist (6/7/13). “Ferried about by chauffeurs and absolved from household chores by servants, they have become a corpulent race apart from their skinny compatriots”. (This harks back to the traditional image of the fat capitalist, while in the US it is workers eating cheap junk food whose waistlines are expanding.)

The overwhelming majority of India’s population continues to eke out a squalid existence on miserly incomes in the face of rampant inflation. The middle layers who have benefited from a certain development in the economy, are already finding their expectations thwarted by the slow-down in the economy.

The Congress-led government in Delhi is crippled by indecision and corruption. Its writ does not run across whole regions of the country, where Maoist (or Naxalite) guerrilla forces have made themselves more popular by at least fending off rapacious land-owners and multinational companies. Prime Minister, Manmohan Singh is floundering between the pressures from abroad to introduce neo-liberal ‘reforms’ and the pressure from below in the run up to elections in 2014.

There is now even the possibility of the widely discredited right-wing nationalist BJP returning to power under the leadership of arch-reactionary Narendra Modi. Modi is still loathed by millions as the ’Butcher of Gujarat’, responsible for the communal killings of more than 2,000 Muslims in 2002. In many states his party is also mired in corruption. But as the FT puts it: “If the sense of a government vacuum from the Congress continues, more and more people will just be willing to take a risk with him” (10/6/13).

And this in a country that saw in February the biggest-ever general strike in history – more than one hundred million workers on strike for two days. The demands of the strikers included an end to crippling price rises and a living wage for all. (The Indian rupee plummeted 15% from May to July alone, sharply undermining lready meagre wages.)

The mass ’Communist’ parties retain a certain support amongst workers and even poor farmers. The CPI(M), however, has been badly damaged by its loss of power in West Bengal, where it had ruled for decades. It suffered electorally for its brutal attacks on workers’ and poor farmers’ livelihoods, sacrificed on the altar of both Indian and foreign-based capitalism. It will be hard – though not impossible, in the absence of other mass workers’ parties – for the CPI(M) to regain support there and elsewhere as long as they adhere to the treacherous Stalinist policy of ‘stages’ – establishing capitalism, only later to fight for socialism


The almost permanent crisis that constitutes life in Pakistan illustrates starkly the need for workers to move directly against feudalism and capitalism at one and the same time. Political and personal life is plagued by power cuts, bomb attacks, collapsing services and paralysis in government.

The once mighty Pakistani People’s Party has entered a period of possibly terminal decline. Its corrupt and inept government, under ’Mr 20%’ (earlier just ‘Mr 10%’) Zadari, managed to serve out its full term only due to the inertia of other forces. The military, which controls large parts of the economy and society from behind the scenes, did not move in to take direct control. This does not rule out such a development again in the future, as political and social crises develop.

The PPP, in which so many workers and young people invested their hopes in the early ’80s, has now lost much of its support. The Nawaz Sharif government faces intractable problems – a failing state, a weakening economy, right-wing Islamic terrorism and the powerful centrifugal forces that threaten the break-up of the nation.

The Pakistan economy is dangerously unstable and unviable. A new loan from the IMF of $5.3bn comes with demands for “financial discipline” i.e. no subsidies for the poor. The priority is reform of the electricity transmission sector as power shortages at present cost the economy at least 2% of GDP.

The new government is unlikely to overcome the multitude of intractable problems. Two-thirds of the electorate live in the rural areas where the feudal land-owners hold sway over the daily lives of the rural poor. They also decide the outcome of nearly all elections. The heroic struggle of Malala Yousafzai against the Taliban, who try to prevent girls from getting an education, has evinced an “apology” from them. But the struggle against them and against the authorities who fail to provide a full and free education for boys and girls in town and country is far from over.

Neo-colonialism and weak governments

In most Asian societies, many other basic democratic rights have never been established. The emerging capitalist classes have not been strong enough to carry through thorough-going land reform or clear away the remnants of feudalism. In China, it took the deformed workers’ state of Mao Tse Tung to preside over this task. What was done in earlier centuries by the emerging capitalist classes in the revolutions of England, France and elsewhere, still remains to be completed in most Asian countries.

As in other continents, many of Asia’s nations were artificially created by lines being drawn on maps after (or before) years of murderous plunder and destruction. People were left as oppressed minorities within the borders of Burma, Thailand, Sri Lanka. Only workers’ parties heading socialist governments will be able to satisfactorily resolve the issues of the rights of minority nationalities and the task of setting up mutually cooperative confederations of nations.

Direct rule by imperialism ended decades ago across the whole of Asia. It has been replaced by that of regional powers such as China and India who vie for strategically and economically advantageous ’concessions’ as in Sri Lanka, Burma and elsewhere.

Giant multinational companies still scour the region for markets, for cheap labour and for maximum rates of profit. In most of the world’s poorest countries, multinational monopolies dominate the market for seeds, fertilisers, washing products and retailing. Unilever has 57% of its global sales in ’emerging markets’, Colgate 53% and Proctor and Gamble 40% (Financial Times 29/7/13).

A campaign against Walmart invading Indian retailing, organised mainly by the CPI(M), has been partially successful. It remains to be seen if the delay is permanent. The ’communists’ have sworn to ensure success, but even mass campaigns can achieve only temporary victories as long as the forces of the capitalist ‘free market’ hold sway.

Clothes and footwear giants like Primark, Gap, Reebok and Adidas make huge profits out of Asian labour. Bangladesh receives $20 bn. a year for its exports of garments made by workers who generally receive no more than $38 a month. Outrage at working conditions in places like the Rana Plaza complex in Dhaka, which collapsed killing more than 1,300 workers, has been expressed on the streets in mass demonstrations and strikes.

Internationally, however, crocodile tears are shed and then deals done between retailers, the bosses’ organisations, NGOs and international trade union federations like IndustriALL. Even the moderate ‘War on Want’ organisation complains that such agreements go nowhere near guaranteeing a decent living wage, reduced hours or better working conditions for the hundreds of millions in the garment industry across South Asia. Nor do they allow for genuine fighting organisations of workers to develop.

Some of the world’s best known car giants also have factories in Asia. They push to get their workers to accept wages and conditions that would not be tolerated in other parts of the world. But in the process they have bred a new generation of young class fighters who have organised significant strikes such as those at Maruti in Northern India.

At the expense of millions of poverty-stricken workers at home and abroad, ‘local’ tycoons such as Tata, Mittal and Ambani have done so well over the decades since ’independence’ from colonial rule, that their steel, car and mining conglomerates now straddle the world in their endless search for profits.


A glance at any South Asian country will confirm an enormous, unbridgeable ’democracy deficit’, as commentators put it. A discussion in Britain about the Commonwealth Heads of Government Conference going ahead in Sri Lanka this year (which leaves Sri Lanka chairing the Commonwealth organisation for two years!) has seen comments in the press that the only element of democracy in that country is the holding of elections. It is the most dangerous country in which to be a journalist, according to ’Reporters without Borders’, its military continues to seize and ’settle’ Tamil land in the North and the president’s brother, Defence Minister, Gotabaya Rajapakse, declares that ‘human rights are not for us’.

Sri Lanka’s civil war was drowned in the blood of tens of thousands of Tamils by the Sinhala chauvinist nepotistic dictatorship of Mahinda Rajapakse. Neither of the main powers vying for profitable investment opportunities and political influence in Sri Lanka – China and India – is unduly bothered by the lack of democratic rights in the country.

The first, at least partial, general strike in many years which took place in June this year is a warning to the apparently all-powerful regime. A government confident of its future would not need to rest so heavily on the use of its army, on press censorship or on the hounding of opposition and minority elements.

Even in ’the world’s largest democracy’ – India – votes at elections are bought and sold. Substantial election ’goodies’ like televisions, computers, mobile phones are handed out by state or national governments and even by opposition parties, at election time. State-wide fiefdoms are held by Chief Ministers along with their cronies. The promise of many political leaders to eliminate the iniquitous caste system remains unfulfilled and tribal peoples have their precious land wrenched from them by governments and conglomerates working hand in hand (except where determined mass protests have been able to block their plans).

’Second world’

Malaysia, a South East Asian country sometimes deemed to be part of the ’second’ and not the ’third’ world, encompasses three main racial groups. The ruling BN government, which bases itself on the Malay majority, claims to have won yet another general election in May, though now holding less than the two-thirds majority needed to make constitutional changes.

Chinese voters, a quarter of the total in Malaysia, moved away from the BN in protest at its continuing pro-Malay policies. The majority of Malaysia’s Indian voters have generally voted for the opposition Pakatan Rakyat (People’s Alliance).

In the month or so before the general election there was a $2.6 billion ’deluge’ of social handouts to poor families. Other sweeteners were given to the whole electorate. In spite of this, the ruling BN alliance was almost certainly defeated; it claimed victory, in spite of widespread allegations of vote-rigging. (Even the contract for supplying the identification ink to the election stations had been given to a company owned by an UMNO crony!)

Angry, radicalised youth immediately came onto the streets to declare the government illegitimate; some of their leaders were arrested. The leader of the opposition – the same Anwar Ibrahim who had led the ’Reformasi’ movement of 1997 – condemned the vote fiddling and demanded a court investigation. But he made no call for demonstrations to demand that the government not be allowed to take office. Gradually the youth protests subsided.

A new political force is needed in Malaysia, as elsewhere in the region to channel the anger of youth and workers into a struggle for the socialist alternative. CWI Malaysia in its publication ’Workers’ Solidarity’ has a thoroughgoing list of democratic demands and proposals on wages, housing, jobs for young people, the nationalisation of banks and major industries with democratic workers’ control and management. It is a paper sold on demonstrations, at night markets, outside workplaces, including banks as well as factories, and in workers’ neighbourhoods.

Facing the future

When the economies of Asia are battered by the economic storms to come, all parties will be severely tested. Those who claim to represent workers but who are not prepared to take up an all-or-nothing struggle against capitalist and imperialist domination, will be found lacking. Old parties will be rejected in the heat of the class struggle. The development of a new workers’ force, based on a fighting, class programme, is the over-riding task of socialists in India, Pakistan, Malaysia and Sri Lanka but also in other parts of the region.

Momentous events impend throughout Southern Asia, not least in the smaller economies of Burma, Nepal, Vietnam and Cambodia. All the old ’certainties’ will be challenged and the CWI will have a huge responsibility to develop the fighting capacity of the working class throughout the region.

As Trotsky wrote in the founding programme of the Fourth International, 75 years ago: “All methods are good which raise the class consciousness of the workers, their trust in their own forces, their readiness for self-sacrifice in the struggle”. The ones and twos today who see the need for a thoroughgoing programme of socialist change have been ‘swimming against the stream’. The wave of mass upheavals, in Asia and elsewhere in the world, against capitalism in all its guises, will ‘lift them on its crest’ as Trotsky wrote.

From the wavering Yudyohono in Indonesia, the unstable alliance in Pakistan and the effete government of Singh in India, to the illegitimate Najib Raziv government in Malaysia and the brittle dictatorship in Sri Lanka, none of these corrupt cliques presents a picture of stability in the region. Far from it; the coming storms will see them replaced by not one or two but many governments of crisis, until a party with a programme of socialist change can take the reins of power and inspire a revolutionary wave across Asia, and the rest of the world.

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August 2013