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Wednesday, December 9, 2009

Neither Communism, nor Capitalism;

By Tushar Bhatt

Sometimes we are so intent on the trees that we miss the forest altogether. In the thunder of heated arguments ,mostly heard in seminar halls and drawing rooms,over whether or not the policy of globalization is desirable for India, the meek voices of dissent are getting drowned.

Economics has been sometimes derisively dubbed as witchcraft because to a common man it appears that no hard and fast formulae for the economic growth are available. Add to this, the dense fog hanging over the entire spectrum of Indian polity because standard bearers of different party flags, ranging from the Congress to the Bharatiya Janata party are groping in the dark. Have we given up the cherished objective of eradication of poverty as the touchstone for our policies? Politicians still pay a lip-service to poverty removal as the goal, but to the ordinary people they sound hollow.

Politics and Economics are like twins who shape each other’s destiny. Economists can see through the thick layers of platitudes, clich├ęs and rhetoric of politicians more quickly than others. For the average politico , economics remains elusive. Their perceptions can be compared with several blind men’s description of how does an elephant look like. Each one has touched a different part to speak about, but none has seen the whole beast.

The Congress had some elements of an economic policy but lost them in the post-Indira Gandhi era, heralded by none other than the present Prime Minister who was then the union Finance Minister,Dr. Man Mohan Singh.The reluctant manner in which he packaged the policy has forever remained in the vogue. The tsunami generated by the globalization and liberalization policies was supposed to sweep away the license-quota-permit raj. It did not do so.

But . it swept away the remains of Gandhiji’s tenets of Hind Swaraj, the Nehruvian model of economic development, Indira Gandhi’s Garibi Hatao call and venomous opposition to industry, the crown prince of the Capitalism.

An unspoken but obvious stress on Luxury Badhao call is implicit in the market blitz for selling cars and other consumption goods to an over-eager and voluble middle class. Politicians like to hear flattering noises from the chattering middle class. It provides sustenance to sagging self-confidence about one’s continuing prosperity. Sadly, this class is not in a majority which should account for electoral upsets. The media, especially the TV channels failed in correctly guessing the mood of the electorate during the last Lok Sabha elections because like newspapers the TV channels to are city-centred and unable to read the villagers mind. The bureaucracy too comes in this category but it escaped notice as it is customary to blame the “inept politicians” for every wrong.

It is the loss of their raison d’etre that bothers the political parties.

An ideological vacuum in our polity is discernible and this is at the root of all the confusion seen in government policies. Steps to globalize the economy cannot go hand-in-hand with ideals of a welfare society, visualized by our Republic’s Founding Fathers. Earlier, politicians wanted to come to power with a promise to work for larger good of society. Now they have to seek popular mandate for a lethal mix of laissez-faire and the right of the State to intervene for the larger good (read: for the protection of the down-trodden .

At the other end,in the world at large, the Communist bloc collapsed. All the carefully worked out equations among the Capitalist bloc of the West, the Socialist bloc under the tutelage of the Soviet Union and the Non-aligned bloc of India and other developing nations hoping to play a decisive role in the emerging world order, were thrown to the winds. As a result, the United States of America got by default the role of the economic and political policeman of the globe. It is a tough job, especially when America wants everybody to give primacy to the interests of the world’s wealthiest country.

The changing political paradigm has a relevance to what happens in the economies of populous countries like China and India. In the wake of the breaking down of the Berlin Wall, just 20 years ago, the unification of West and East Germany took place. Gradually, the Communism got dismantled in as many as 17 countries.

This rapid march of freedom for all was expected to lead on its own to new opportunities for an equitable distribution of wealth in the world. Unfortunately, this has remained a chimera.

If the Socialist ideals seemed to be on their death-bed, the notions of Capitalism being a natural growth engine were also terminally ill. Recent reports showed that people living in the former East German part of the country were able to face economic difficulties of the recession better than the residents in the West German territory. The reason was that the east German citizens were more disciplined.
Economic crisis is staring in the face of the 17 former Communist economies; some have a food shortage too. Some people have started wondering if the switch-over to the western model of governance was a wise step. One might wonder which side would win if the choice was between vote and lot (flour).
In India too price rise in essential goods and commodities such as food grains was causing concern even as luxury market did brisk business. It is interesting to note that computers, TV sets, air-conditioners, refrigerators and cars are becoming better and cheaper, the prices of vegetables, gur, sugar, food stuffs were not showing any signs of a fall.
Some experts argue that electronics goods were benefiting from better technological improvement almost every week. On the other hand,not only has the population increased,there has been no new addition of any higher-yielding variety in major food crops like wheat and rice. There has been a stagnation in farm research.

What are the implications of all this ? Is there a real recession in our country? Does our data collection give an accurate reflection of the reality? After all, all figures can lie and all liars can figure!

Whether they have an insight into economic policy or not, politicians do have a strong nose for sniffing the rising of an evil wind. The political hierarchies of different parties are all agreed upon a feeling that something is wrong.

Of course, they still do not have any clue to what to do to wither it and this adds to their fearfulness. Some conflicting points have emerged.They realize that even the half baked new economic policy package has led to a smart industrial growth and the export-import balance has improved. The stock markets have generally been favourable to investors. The entry of the private sector has improved infra-structure facilities like roads.

But, this is only one part of the story. Industrial development is still incapable of any large-scale jobs generation. Modern industry is not employee-intensive. Take an industry like a petroleum products refinery which may cost several thousand crores of rupees but will give direct employment to less than 5,000 people. In fact, outside services like truck-tankers will employ four-fold more persons, who will get a fraction of the refinery operators, all highly skilled.
Yet, all the States including West Bengal’s Marxist have been wooing industrialist with ardour.Even the polit buro,the high command of CPM expressed its disappointment when Mr Ratan Tata decided to shift his Nano car factory out of WB because of hostility of Miss Mamta Banerjee’s Trunmool party.
Mr Narendra Modi was hailed as great persuader when he cajoled Tatas to locate Nano at Sanand in Gujarat. One CPM leader of south India was so much impressed that he asked leftist-ruled State to emulate Mr. Modi. He was thrown out, not because of his pro-capitalist views but for praising the Gujarat chief minister.

The leftist leaders were out to win and influence industrialists, something that would make both Mao and Marx turn in their graves. The industry tycoons were having best of both the worlds. They were ready to negotiate best terms without worrying about their host government’s ideology because they knew ideology did not matter a damn.

The Nano episode and Mr Tata mirrored this “secular” attitude admirably. He has had no trouble with the CPM and the BJP. He had to quit West Bengal because of a small regional party hell-bent on ending the 33-year-old rule of the CPM dominated government. What was more interesting is the reality that Miss Mamta Banerjee’s tiny personal political formation is an ally of the Congress which now runs the government at the Centre, not averse to Tatas at all. The irony is that yet the mercurial Mamta is a minister in the union cabinet. It is apparent that an ideological chaos prevails now in our polity.

The stock markets have been highly volatile but on balance generally favourable. But one might wonder if the notional spurt resulting from incessant trading adds anything to the primary capital formation. The gains in wealth of various crorepatis based on notional increase in their momentary worth in share prices is doubtful at best and comparable to Mungeri Lal Ke Sunhare Sapne. It attracts more international players to domestic market but this is good or bad depends on which end of the binoculars you are looking from.

A side effect is worth noting. Lured by the prospect of a quick buck, many small investors have entered the market, at the cost of small savings. Banks and finance authorities have fanned this trend by cutting down on interests payable on bank deposits. Clearly, the government is encouraging bigger spending by the people instead of savings. Are we now followers of Charvak who advised one and all to make merry even by selling off household goods like utensils to buy ghee for the rice? He did not clarify what was to be done when all the utensils had been sold and there was no money even to buy rice,let alone ghee.


There is one more crucial area where the promise of a welfare state has taken a big knock. Labour laws ,ensuring welfare of staff, have been given an unceremonious burial. Following the US model, companies have introduce ten-hour work days,cut down on the privilege leave,sick leave and even casual leave. Hiring and firing is a common happening now.Once hated, farming out of jobs to contractors whose workers are lower-paid is now widespread in the fancy name of out-sourcing. Opportunities for women in the upper echelons of society may have brightened, but in the case of women of the poor, the job opportunities are shrinking.

On the other hand, agriculture is still not picking up. The pace of urbanization has spectacularly quickened because jobless poor, especially the landless and marginal farmers are flocking to the cities.In Indian cities urbanization has been marked by a rapid growth of slums and deterioration in the quality of life. The stupendous growth of Surat in the past two decades is an eye-opening example. It sounds like a joke, but it is true that living conditions in the slums themselves have worsened as a result of the flood of new migrants. The situation in backward,poorer areas of Andhra Pradesh,Jharkhandand Maharashtra saw an upsurge in the violent movements such as Naxalism. Neither the Centre nor the States have been able to tackle the menace

The demographic composition of cities is also undergoing a sea-change.The Suratis have been grumbling over that non-Suratis or outsiders leaping towards a majority. The term outsider apply generally to people from other States such as Rajasthan,Punjab,Bihar and Orissa.
The term non-Suratis include people from other state and other regions like Saurashtra which within Gujarat.
The spurt in urban population automatically leads to a pressure on civic amenities like water,roads, housing, public transport and environment.Cities like Surat which are in the vanguard of growth may become industrial slums.
It is pertinent to note that while countries like India hope to hasten their growth rate, rich countries like the U.S.A. are also keen that we follow the policies of globalization. Why?

For the same reason that made Columbus set out for discovering a sea route to India or for which the British set up East India Company. The British ambassador who landed at Surat on way to Delhi to meet the Mughal Emperor did not come to found the British Raj. They merely wanted permission to start trading. The British flag, symbolizing power followed later and that too for protecting their trading interests and ended up ruling much of India.
The West, some people guess, has been operating an informal New East India company to advance its trading. The logic, which critics of this formulation say is that the collapse of what a president of the USA called the Evil Empire of the Soviet Union removed the need to maintain military levels of confrontation high. It led to cutting down of money of armaments and transport. Tank manufacturers started making tractors and so on. This cutback in industry operations may have sown the seeds of the current recession in America. They can produce all right, but….
Who will buy these goods?
For some quaint reason the two major Colas, Pepsi and Coke, have been considered a proof of open door policy. Along with them, other junk foods like pizza also arrive, wiping out local foods and colas, though there is nothing wrong with Locha Khaman in Surat and Fafda in Ahmedabad, or the soft drinks made by Parle products before the American cola invasion.
This is creating an artificial demand for the trivia.It is not too aggravating to imagine what will happen if multi-nationals were given a free-run in the
Dairy sector where the Anand-pattern of co-operative dairying has carved out a name for itself. Given a chance, multi-national entities can deliberately flood the Indian market with dairy products at prices half of our dairies’.to conquer the market. The loss would be huge but the multi-nationals can sustain the deficit for a longer time, undermining the existence our local dairies which do not have resources to survive the competition. It will not happen tomorrow, but it is plausible. What happened to an Indian company producing corn flakes? It got wiped out with the entry of an American firm, which later raised price to recoup losses suffered initially.This is just an appetizer.

One result of the liberal policy is slow death of our products. Foreign brands are aggressively marketed,sold at a low price initially and when indigenous competition is finished ,there inevitably will be a jacking up of prices.I ndia has a huge middle class-some say as many as 15 crore people or more than the population of Europe.

Think of a scenario in which India and China become sources of cheap man-power and raw materials suppliers and purchasers of goods and services ranging for junk food to jet planes,toys and tractors, machines and medicines—a vassal State..

Of course, this is an extreme view, but it needs to be kept in mind,lest we forget. Let us hope for the best but remain mindful of the worst too.

Even without considering such frightening spectres, we need to hasten slowly, carefully. Even though the current polity is sans a socio-economic ideology, in a country like India where the poor will remain in a majority for a long time to come, no political party can hope to survive in the race for power if it ignores the have-nots. Whether they are leftists like the Communist Party Marxist or the rightists like the BJP, everybody has to think of the poor in their policy making.

This a hurdle that tripped the Vajpayee government and is haunting the Congress. The age of making promises and give false slogans to clinch an election is gone.The parties need to find a way to forge a policy that will have plus points of globalization amalgamated with the policies of the State intervention such as food subsidies and protection of the poor as well as dovetailing expenditure on social sectors. Education has been privatized in a variety of fields, f rom play groups to self-reliant university education. Self-reliant is a deceptive description. Really speaking, it is nearer to the concept of pay and use at well-maintained public conveniences.
All it means is that your sons and daughters can study in such institutions even without good marks if you cough up money. This amount is normally beyond the reach of a common man who ends up taking a loan.
The same goes for toll-paying express ways. If you cannot pay, you can’t travel.
It has been forgotten that road network is also a social sector. Thousands of villages benefited from the State Transport buses plying between towns and villages, carrying boys and girls to schools and colleges, employees to work places, vegetables, milk and other perishable commodities traveling to market place.
The sector that stood to suffer the maximum damage is health. Hospitals owned like hotels by entrepreneurs charge fancy money, much above the capacity of an average Indian. The government-run health service is ill-equipped.

On top of it all is the rampant corruption. The prime minister has been repeatedly and publicly complaining about it even as Karnataka , Andhra Pradesh and Jharkhand States have been in political turmoil instigated by businessmen and mining lobbies. Mr Singh said that these were examples of poor governance in the States.

It would appear that the failure of both the Capitalism and Communism has left the political class globally bewildered. They badly need a third way and not the globalization of the economy. Throughout history, economic compulsions have always dictated political action.

The present time is no exception.Gandhi gave a vision of Swaraj, mainly inward looking. Jawahar Lal Nehru experimented with the proposition of a mixed economy with public sector at the commanding heights.

India and the world now need a Third Way that would provide a fusion of both the ideas plus the dynamism of a free market economy. As the Mahatma aptly said, there is enough in the world to meet everybody’s need, but not for everybody’s greed. A new world order is needed,

It is a tall task. But that does not mean it is impossible.

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