In the first two parts of this series, it has been seen that the stock market is an important avenue for speculative profits in the hands of giant finance capital companies. Speculative capital is invested in the stock market, as also in real estate and in some commodities that are traded widely in the world for earning very high profits. The stock market is an instrument for facilitating and accelerating concentration of capital in fewer and fewer hands, thereby intensifying the yoke of monopoly capital on the majority of working people in the country. This concluding part brings out the all pervasive influence of speculative capital on all spheres of economic activities today, how it is exposing savings of working class to grave risks and the role Indian state is playing to support imperialist ambitions of Indian bourgeoisie.

Gambling with people's fate to pursue imperialist ambitions of the big bourgeoisie

Capitalism is resting on an increasingly weak foundation. Speculative capital has become a major means for capitalists to achieve higher rates of return.  It was estimated that in the early 1970s about 10 percent of the capital in international exchanges was for speculation and about 90 percent of it was related to the real economy, for investment in productive capacity and for trade. By the 1990s, those figures were reversed – 95 percent was for speculation and never meant to be invested in raw materials, or factories, or transportation systems, or for trade.

A large part of the speculation is through trading of financial instruments (such as foreign currencies, stocks, bonds, and various financial derivatives) with the goal of making money. The amounts involved are staggering. Over $25000 billion (Rs 10,00,00,000 crore) in currency moves through the world financial markets every day. Investors gamble on changes in the prices of financial instruments minute to minute basis.

The neo-liberal policies adopted by governments since the early 1980s have enormously boosted the profits of corporations and finance houses, at the same time increasing the share of the wealth going to the monopoly capitalists. The deregulation and globalisation of international financial markets has provided endless opportunities for super-profits. Twenty years ago there were 140 billionaires according to Forbes magazine. Today there are 793 billionaires (102 joining their ranks in the last year alone). The wealth of each one of them is more than Rs 4,000 crore and the richest among them has the wealth of more than Rs 2,00,000 crore.

In the USA, financial companies now account for 30-40% of total US corporate profits (over 50% if the financial activities of industrial and commercial companies are included), compared to 10-15% in the 1950-1960s.

Many finance capital institutions like pension funds and insurance were created primarily to protect the savings of people for future and for emergencies. They were expected to invest their money only where it was completely safe. These institutions have now become one of the largest source of speculative capital. Savings and pensions of millions of workers are at risk now. The value of the savings will now wildly swing up or down depending on the market. While speculative investments have the potential to generate high profits for investors, they also carry risk of big losses in case of a sharp downturn or crash in the market. The tragedy suffered by the workers of Enron Corporation of USA should be a lesson for all pension fund investors. Enron Corporation workers pension fund trustees invested a large part of the funds in shares of Enron Corporation itself as its share price was steadily rising. When Enron Corporation went bankrupt due to its nefarious acts, its employees were the worst affected as they lost a large part of their hard earned pension fund. Yet, at the end of 2003, nearly half of retirement savings totalling over $10,000 billion (Rs 4,00,00,000 crore) were invested in stock market. 

Speculators, moreover, have taken full advantage of abundant, cheap credit (loans) - they don't even have to speculate with their own money. Major capitalist governments, like Japan from the 1980s and the USA after 2000, cut interest rates to zero or near-zero levels in an effort to avert financial crises and to stimulate growth.

During the last two decades, finance capital has evolved its own financial instruments, known as derivatives, and does not even need money on credit to speculate. The value of total derivatives in circulation in the world today is staggering $ 220,000,000 million (Rs 88,00,00,000 crore) which is many times more than total money in circulation in the world. These financial instruments are relatively new to Indian finance capital and yet daily trade through derivatives in Indian stock market is already three times more than trading done through cash. Central banks of each country are supposed to regulate the total money in circulation but they have no control on the amount of these new instruments in use. Only finance capital institutions and big companies use these instruments for speculation.

Excessive flow of capital into stock market and real estate inflates their price as more money chases limited number of shares and real estate properties. A flood of foreign investment into shares on Indian stock exchanges, for instance, also encourages local capitalists to join the speculative binge. As a result, share and real estate prices are pushed up far beyond any rational estimate of what returns they would produce from company profits or rental of real estate.

This is how the notorious stock market and real estate ‘bubbles’ are created. The more the speculative capital flows in as investment, the bigger the ‘bubble’ gets. People with small savings, but not familiar with the devious ways of finance capital, also get encouraged to invest in growing bubbles. Bubbles inevitably burst. Small investors are completely wiped out but finance capital institutions are invariably rescued by the government by giving out public money to make up for the losses suffered by them. The argument given is that the collapse of these huge finance capital institutions will hurt the whole economy so they must not be allowed to collapse. This is the classic example of how capitalism privatizes the profits but socializes the losses.

Starting in the 1980s and more aggressively in the 1990s, markets in India have been opened up for all capitalists of the world, including the market for shares in ownership of capital. Now the Indian bourgeoisie and its state want to restrain anonymous investors and speculators from participating in the Indian capital market. This is to ensure that the controlling shareholding of Indian companies does not ever pass into hands of unfriendly investors. The bourgeoisie has no problem in opening up the assets of India to the world’s biggest gamblers, as long as the identity of the biggest players is known!  

While the Government of India is talking about some minimal regulation of foreign players in the Indian stock market, it wants to further open up the pension and insurance funds to international finance capital.  The Indian working class has been rightly opposing this deregulation agenda, which threatens life savings of working people in the form of life insurance, pension, provident fund, etc.

Directly or indirectly, every manipulation of money capital to expand speculation is at the expense of the small investors who are largely members of the working class. The interaction between speculative capital’s world of “making money from money” and the real world of the people who live by selling their labour power – who have to return their loans, pay bills and buy commodities in order to survive – always leaves people bearing the brunt. The capitalist state invariably rescues finance capital in case it suffers any unusual loss but remains indifferent to the pain suffered by people when they incur losses due to speculative acts of finance capital institutions. This, according to them, is the price to be paid for the greed of people but the greed of finance capital, in the eyes of the capitalist state, is perfectly justified and legitimate!

The alternative to the debilitating stranglehold of speculative capital is to get rid of the capitalist system which gives birth to such parasitical activities in the society. All illusions of reforming this system have to be given up. Only its replacement with an economy oriented to the welfare of the majority of the people of the society will satisfy the needs of people and safeguard their interests.