Mansion

Mansion

For a career politician known for his faithful attention to detail and lack of flamboyance, his unremarkable last days in office as Finance Minister capped a long political career of 43 years. In 1978, it was Mr. Jyoti Basu, the legendary Communist Chief Minister of West Bengal who pitch-forked Mr. Mukherjee to New Delhi and the attention of Mrs. Indira Gandhi.

Mr. Mukherjee’s tenure at the helm of the Finance and other key Union Ministries over the years, and a plethora of Government GOMs, are not, distinguished with any breakthroughs or landmarks. His has been a talent for the balancing act behind the scenes, and the pushing of his Party’s agendas discreetly. For many years when the Congress Party ruled with Left Support, it was Mr. Mukherjee who was the key go-between. It may now account for Mrs. Mamta Banerjee’s hostility to his candidature as President.

Mr. Pranab Mukherjee, with his vast experience and knowledge of the inner workings of the Government, albeit in a rather non sequiturish, Yes Minister manner, should have little difficulty in essaying his new role. That is, as far as the routines and pageantry goes; and following the current incumbent, Mrs. Pratibha Patil, should prove to be a dawdle for him.

Mr. Mukherjee is already a master of procedure, protocol and indeed, the rule book. He knows almost every notable political personality in India today. In addition, his familiarity with the external relations of India and personal rapport with many leaders around the world, will, no doubt, serve the country well in his role as First Citizen.

Mr. Mukherjee is therefore expected to contribute flawlessly and learnedly to the ideas enshrined in the Constitution. But, if his track record is anything to go by, is unlikely to resist any attempts to interpret it, for better or worse, on the part of his political mentors in the Congress Party.

The resistance to the subversion of the Indian Constitution to serve narrow political objectives of the ruling Party, will lie, in its political weakness at the head of a restive coalition and indeed a vociferous Opposition. As for the Congress Party’s penchant to sponsor amendments to solidify its vote banks, it is the inability to muster the requisite number of votes that will protect the Indian people as a whole. And, of course, the ideas of fairness to all enshrined in the Constitution.

However, Mr. Mukherjee, if he stays true to form, is likely to come through with a biased call in the event of any tricky constitutional jugglery required by those to whom he owes his elevation. This particularly as Mr. Mukherjee, God willing, will preside over the coming General Elections in 2014 and the formation of the new, probably coalition Government, thereafter.

To be fair to the man, Mr. Mukherjee has announced his plans to resign from the primary membership of the Congress Party, in addition to laying down his office as Finance Minister and Head of various Committees before becoming the President.

While the “Becket Syndrome”, named after the famous Thomas Becket, Archbishop of Canterbury between 1162 and 1170, because Becket defied King Henry II over the rights and privileges of the Church apropos those of the State; could yet surprise us all; it seems unlikely.

As it stands, Mr. Mukherjee has more in common with those of our former constitutional heads of state who have played hand-maiden to the Government of the day, rather than those who have dispassionately, and “without fear or favour”, upheld the Indian Constitution.

And yet, the apparently malleable Mr. Mukherjee, who acquitted himself with fervour in the implementation of those aspects of the Emergency that fell to his lot, was not thought to be malleable enough to be made Prime Minister; or indeed, at first, President, by the current Head of the Congress Party, Mrs. Sonia Gandhi. The reason may be his only known act of personal indiscretion which revealed an independent and even courageous streak. Mr. Mukherjee made a bid for the Prime Ministership just after Mrs. Indira Gandhi was assassinated, and before another “loyal” President, the late Giani Zail Singh chose Mr.Rajiv Gandhi to take over from his slain mother.

It is in this context also, that the challenge to his election from Mr. Purno Sangma, needs to be viewed. Mr. Sangma, as underdog and one time Sonia Gandhi baiter, is laying great stress on the secret ballot.

Mr. Mukherjee is also attributed with credit for the rise and rise of the Ambanis of Reliance and the decline of certain of its rivals. But, as usual, the favouring, if any, is in the tweaking of Government regulations and the fine print of possibility, rather than any crude exercise of power or the whiff of illegal gratification.

And, at all times, Mr.Mukherjee did no more than follow “his master’s voice”. It was Mrs. Indira Gandhi who was renowned for her inclination to arrange the political and business landscape to suit her own preferences.

  

The trouble with all this is its micro focus on minutiae. Mr. Mukherjee has always shied away from the big idea, probably thinking it was not his place to essay such notions. But the Congress Party culture prefers to attribute all policy to its First Family and its unshakable dynastic moorings.  

This even as the common observer may be forgiven for wanting to see something of Satyamev Jayate style Aamir Khan in scion and heir Rahul Gandhi. But, nature places its ideas in the heads it chooses to, and for the rest it is all tired formula and Party dogma.

India is currently suffering from a lack of bold and visionary leadership. Amongst the Congress Party and its self-seeking allies in UPA II, the burden is one part dynastic and one part Socialism that has long passed its sell-by date.

In the principal Opposition, namely the BJP, powerful in the States, and plagued by its negligible flock, and its so called “communal untouchability” - it is the attack, renewed and fired from a variety of shoulders, to bring down a proven and capable leader like Mr. Narendra Modi.

India is being reduced to the consequences of ideological bickerings on secularism and the evils of reforms, even as we sink lower and lower in every parameter of performance. Once we were the second fastest growing economy in the world. Now, we are a mass of contradictions and thwarted hopes.

A President can be more than the figure head of the Nation. He can lead and inspire. Will Mr. Mukherjee, ever the second man, rise to meet the destiny of the nation as First Citizen?

(1,100 words)

26^th June 2012

Gautam Mukherjee


Published as Leader Edit  on the Edit Page of The Pioneer on 28th June 2012 as "An excellent trapeze artiste" and online at www.dailypioneer.com

Trying to Grow

Trying to Grow

“Break the fever”

President Barack Obama

The recently held G20 Summit in Los Cabos, Mexico, made two notable moves. One was the enhancement of IMF’s coffers, and firewall, to over 500 billion dollars from the erstwhile 430 billion, inclusive of a fresh pledge from the BRICS of 75 billion dollars.

This large promised input from developing countries, led by China at 43 billion dollars, Russia, Brazil and India at 10 billion each, and South Africa with 2 billion, may be, as the BBC reported, the most tangible thing to come out of this summit. It also comes with a demand for, but given the present crisis, not an insistence upon, enhanced voting rights in the IMF allocations and other decisions, for the self same BRICS countries. The world as we know it is shifting gears.

This BRICS money will be lent to the Eurozone, and others who need it to contain the fallout, if the debt crisis warrants; but only after exhausting other financial seams available to it. These  amount to an impressive 800 billion dollars.

The other notable point made was a policy direction- endorsed by all, even austerity advocate Germany, to promote fresh growth and jobs. Germany has been pressured into this stance instead of the radical belt-tightening it has been calling for. It is probably unhappy because it has often had to foot large portions of debt refinancing or outright grants outside its borders. This is an unintended consequence of being the strongest economy in the EU.

The Eurozone crisis is costing a great deal more already, with no signs of abatement, than all the costs associated with the reunification of Germany and the stimulation of the impoverished Eastern region rescued from erstwhile Soviet influence.

Growth in Europe, may however mean reaching out beyond the Eurozone where the demand scenario for their technology and skills is far greater. Los Cabos did, after all, bring together 20 countries that collectively account for 80 per cent of global output.

The fact is, it is hard to grow in situ when all your infrastructure is already developed, and there is little to take care of except operations and maintenance or the renewal of obsolete facilities.

Prime Minister Manmohan Singh may have had something like this in mind when he urged the EU to invest in the infrastructure of developing countries. He may well have had India specifically in mind where the investment funds required to develop just some of the infrastructure gaps run into trillions of dollars. And it did get a mention in the 14 page declaration at the end of the Summit. It wasn’t however, a very pointed point: “We will intensify our efforts to create a more conducive environment for development, including supporting infrastructure investment.” But then, that is the tell-tale nature of denial.

The “consumption”, which has been the driver of growth in Europe in recent times, is a spiralling thing without essential purpose. A bigger house is nice but not necessarily essential. Ditto, better cars, holiday homes and indeed, holidays. But improving one’s lifestyle via taking on more and more debt is seen to be undeniably unsustainable now. However, it is very painful to lose, at the individual level, what has been gained, because of a macro level meltdown. It is a prevailing wind that led all to all the profligacy after all.

For the moment, the summiteers, ensconced in the luxury resort at Los Cabos, began on a good note. They celebrated the reprieve in Greece, the world’s 34^th   ranked economy, with the pro-bailout coalition under formation. It has pipped the far Left challenge by a narrow 2 percentage points in the recent elections held there. Greece will stay put in the EU for now, though the threat to secede remains if austerity or debt servicing terms prove too onerous.

Still, right now, it will not precipitate a crisis of confidence both in the Euro and the EU. The election result from Athens also provides an opportunity to try and put its house in order. As a nation it borrowed to consume, and now it has too big an appetite to go on a drastic diet. But Greece can’t be blamed in isolation for doing exactly what the rest of EU and indeed America has done.

This even as the trillion dollar economy of Spain is tottering on the brink, as is that of Italy. These are the 3^rd and 4^th largest economies in the Eurozone. The regular nostrum of a bailout is going to assume titanic proportions in the event of a collapse. This because all of the IMF lending limit of 800 billion dollars plus the Eurozone’s own emergency funds of another 800 billion Euros would not be enough. Germany too would have to dig very deep into its finances.

A related problem is the lack of an integrated financial system in the EU and so very little control of how the new money would be deployed. Besides, it is indeed hard to bring this about because of each nation’s sovereign needs and wants. Nevertheless the classic stagflation notes are evident already with a high cost economy plagued by flagging demand, and it will inevitably aggravate the intent to promote domestic growth as the way out of this predicament.

So growth, bluntly put, may mean going in to develop Africa, Asia, South America, Arabia, and Eastern Europe; many parts of which are rich in natural resources, vast territory, much of it highly arable and lush, huge reserves of petroleum and so on. Western Europe by contrast is over- exploited and over -developed already, a manufacturing wasteland today, with basic manufacturing outsourced overseas.

The Arabs, who have burned their fingers investing their billions in petro-dollars in US and European blue chips, top flight property, privately owned A listers etc, are seeing the truth of this for themselves. Ditto to some extent for the reserves-rich Chinese, who are snapping up companies like the Indians, but have mostly invested trillions of dollars in US Government Treasury Bonds. And this exposure is making them more than a little uneasy too.

But, at the same time, it must be emphasised, the EU and America has a wealth of expertise in multiple fields, academic excellence and great know-how in futuristic technologies, high technology, formidable research capabilities, and a spectacular military industry. All strengths the less developed parts of the world badly need access to.

Europe and its big brother America, in the very same predicament, must therefore, without further prevarication, joint venture with the countries around the world that need their abilities, but this time on far more favourable terms than heretofore.

The tendency in the past has been to make expensive outright sales of second-rate technology or services, while holding back and reserving the latest developments for themselves. From this exploitative mindset, the EU and the US need to come to the table as fair-minded partners, assuming their share of risk and investment. And without hiding behind the over played notion of  “security risk”.

But this has always been the sticking point, right from the days of the North-South Summits that long preceded the present G series summits. Then however, Europe and America could afford to be smug and patronising. The more equitable space was mostly filled by the USSR, which partnered most of the developing nations on reasonable terms, while at the same time extending their spheres of influence. But that bipolar world too, is gone forever, even as the imperialist hangovers persist.

One does not have to go too far back. Some of the more recent annual Davos Economic Summits in Switzerland exhibited some of this neo-colonial attitude too, but today it is hard for the West to get away with it. Some of the shoe is now on the other foot, as it has always been for the then designated “Third World”.

The developing world has long had to brace itself to maintain some vestiges of its dignity, with “starving millions”, near zero growth, and debt enough to bankrupt them. Today we could affix such labels on the EU and America.

The US and the EU are decidedly broke and understandably bewildered, but are still having trouble getting off their high horses. They find it terrifying that their former “South” is relentlessly pushing to change places at the high table with them.

Their resistance to the changed equation will only lengthen the agony of shrinkage and being driven into genteel poverty if not outright depression, and prolong their years of difficulty. It is, after all, the kind of poverty that comes from not being able to afford the splendour and riches around them anymore.  

There is, as always, a way out. It is evident even in Greece, where the international, globe girding shipping tycoons are doing just fine thank you. They are, along with their international billionaire friends, keeping their heads down, of course, almost embarrassed for being viable, strong, efficient and profitable.

At the G20 Summit, national leaders of leading countries around the globe confined themselves to comments on process, rescheduling debt, vague pronouncements on being determined to revive their economies, other micro statements on coping, but they are still evading the main point, probably from fear of the political fallout.

Growth itself is in surfeit in the Eurozone, as the weak recovery figures show when another wave of crisis has not hit it. The EU has over capacity and high costs ruling everything except cutting-edge technology. And like America, most routine manufacturing of everyday things has long been outsourced to China and other lower cost parts of the world.

The twenty year boom experienced in the West before the bust has been based on consumerism and borrowed money. The curtain has undeniably come down in grief and tears over this model, even as it was once thought to be so much smarter than the earlier earn and spend idea.   

The communiqué at the end of the Los Cabos G 20 summit ran into 85 points. The last two said:

“84. We thank international organizations, including the UN, IMF, World Bank, WTO, FSB, ILO, FAO, and OECD, as well as civil society, for their input into the G20 process. Their reports and recommendations have provided valuable inputs to G20 discussions, in areas ranging from sustainable development to financial regulation.

85. We look forward to the rest of the work that will take place during Mexico’s Presidency until November 30. On 1 December, 2012, Russia will start chairing the G20. We will convene in St. Petersburg, under the Chairmanship of Russia. We thank Mexico for hosting a successful Los Cabos Summit”.

These points reveal the ongoing nature of summitry, and the growing importance of long term soft loaning institutions that are set up to channel the money,  without which many world economies of note are not going to make it.

The Eurozone has been profuse in its promises to put its house in order, but even the leaders may not fully accept, or even be aware that the house itself has changed irrevocably. There will be no going back to fiscal prudence. The madness has already cast everyone on a very different shore. Tomorrow it has to be a new Europe, willing to partner its former dependants and colonies, but in a generous and honourable manner.

Without this, there will be no survival or peace for the erstwhile masters. The subject peoples are fine in comparison, but the masters cannot, any more, survive without their help and collaboration. Thankfully, enough goodwill exists in the heart of the once subordinate. There is little malice harboured despite the many injustices perpetrated in the past.

Meanwhile, Europe is readying Euro 750 billion to rescue itself and a beleaguered Spain and Italy. It may be only the first tranche however. The world is in the process of being reordered. Perhaps this change is what the Mayan prophecy of 2012 actually meant. Not quite the physical end of the world but the beginning of a substantial new order.

(1,999 words)

21^st June 2012


Published as the Cover Story in The Sunday Pioneer, AGENDA Section on 23rd June 2012 as "Reordering the world" and online at www.dailypioneer.com

Gautam Mukherjee and online at www

The Bigger they are...

The Bigger they are…

There are now a slew of films on the “financial crisis”. It has become something of an independent genre in Hollywood and amongst independent film makers trying to make sense of the turmoil. Most of them, despite massive simplification and dramatisation, are still a little dry and difficult for non-financial people to grasp. But, fact is, the prospect of double-dip recession in Europe and America, and its knock-on effect on all parts of the world including India and China, is now omnipresent. This financial hangover will persist for several years to come and profoundly change the way the world takes its decisions.

In 2008, it began with the bail-out of investment bank Bear Stearns followed by the collapse of “Too big to Fail” Lehman Brothers, the 4^th largest bank on Wall Street. The latter, like the former, was brought down by huge real-estate assets on its books which had lost most of its value in the bursting of a long-standing property bubble.

Investment wizard Warren Buffet, the “Oracle of Omaha”, went hunting for bargains, and made some investments on Wall Street. But he was, in his gentle chiding style, critical of a developing culture in which the banks had been taking substantial trading risks using their own money. The scale and multiplier effect of such investments dwarfed the prior system of trading only on behalf of those clients keen on higher than usual returns.

AIG, one of the world’s largest insurers, was the next giant institution to wobble badly from the contagion of the investment banking excesses, and was saved only with the help of massive Government assistance on both sides of the Atlantic.

This was followed by practically every icon on America’s “Main Street”, including the largest property mortgage companies, automobile companies, engineering and appliance companies, high-street businesses, all facing considerable difficulties, even as the US economy slowed to near-negative territory.

But, looking back from 2012, America and Europe, has survived the first onslaught of a financial jeopardy so severe, that it has not been seen since the events that led to The Great Depression of the 1930s. Credit however goes to the Obama Administration in keeping the situation from spinning into a cascade of financial ruin by bold stimulation, swift intervention and nationalisation where necessary.

At the time, and since, the crisis has been portrayed as a consequence of the overweening greed on the part of the financial men which could, and would, be reined in by greater Government supervision. As it turns out, this was not quite the whole truth, because now it is entire countries and regions, including the EU, that are going down.

The entire 17 member EU is in deep financial trouble. In hindsight, it is probably because it is a quasi-financial union with no control over the financial policies and actions of the individual countries that compose it. But now, this weakness cannot be attributed to only certain countries in it that have been irresponsible, because all of them, indeed all of the Western world, has been on a sovereign borrow-and-spend spree ever since massive deregulation was introduced in the 1980s. President Ronald Reagan started the dismantling of “big government” in America and set off the trend elsewhere. So it isn’t just private greed of the finance men chasing ever bigger payoffs for themselves, but the “new normal” of national debt, several, no, many, times the annual sovereign income, that has brought about the global financial crisis.

So much so, that if the situation keeps deteriorating towards a break-up of the EU, the demise of the Euro, or a failure to prevent economic collapse of major financial institutions in Europe; it will also have a catastrophic effect on the American economy. The US, in fragile recovery presently, will also be driven into another recession.

The American presidential elections, due in November, will also be affected by international news of this order. Mr. Obama therefore, has a massive stake in defusing the crisis in Europe before it snowballs out of control. Of course, his success in doing this will be good news for everyone.

But right now, Spain, is the most recent recipient of a first tranche Euro 100 billion bail-out. Greece, Ireland and Portugal, have all received hundreds of billions to prop up their Sovereign debt servicing and banking systems.  Italy may be next in line requesting help. The world no longer even talks of the early collapse of tiny Iceland, in late 2008.

India’s own woes of policy paralysis, immense corruption, high commodity prices, inflation, huge, if not yet alarming national debt, deficits climbing ever higher, poor international trade statistics, and sharp economic slowdown, are about to be compounded further by these global developments. Chief Economic Adviser Kaushik Basu has been recently quoted as saying we won’t be “impervious” to developments in Europe, currently India’s biggest export market.

Domestically, we are threatened not only by poor productivity, stalled reform, bad infrastructure, high interest rates, dependence on imported fuel, and weak economic data; but our policy obsession with an ever growing welfare agenda that we simply cannot finance without worsening our deficits beyond already very high levels.

In addition, coalition partners with great power, such as Mamata Banerjee of Paschimbanga, are demanding a “financial package”; meaning massive aid and grants, plus a rescheduling and part waiver of the state’s accumulated debt from the Centre, just in order to stay afloat.

In the private sector too, many media groups in the TV broadcast space are in financial trouble, and have sold stake in recent months to industrial houses keen on obtaining a foot-hold in the business. The Kishore Biyani led Future Group too is selling non-essential assets and stake in its companies to retire mountains of unsustainable debt. The airline space is replete with examples, most notably Kingfisher Airlines, crippled, not just by difficult regulatory and policy impacts, but its own over-leveraging.

The moralists are fond of saying nothing comes without consequence and history is indeed replete with the playing out of unintended consequence, but the key point of fiscal responsibility cannot be set aside.  It is what has got the world in this mess. Being let off the leash cannot be taken as a licence to run amuck.

After all, regulation is just a way of having the Government play the authority figure. Introducing deregulation was intended to free entrepreneurs to exercise their initiative. Some want to go back to the old ways before all this happened, but since no one is exactly blameless, the best we can aim for is a much greater degree of self-regulation going forward.

(1,097 words)

12^th June 2012

Gautam Mukherjee

Published as "How the giants fell" in The Pioneer as Edit Page Leader on June 14th, 2012 and online at www.dailypioneer.com and in the ePaper. Also archived under Columnists at www.dailypioneer.com, home page.

Chronicle of the Bomb and Pistol Wallahs

BOOK REVIEW

Title: CHITTAGONG    Summer of 1930

Author: Manoshi Bhattacharya

Publisher: Harper Collins Publishers India, 2012

Chronicle of the Bomb and Pistol Wallahs

The author of this painstaking and novelised account of the Chittagong Armoury Raid of 1930, Manoshi Bhattacharya, is a former Indian Navy doctor who continues to practice in the NCR region. She chronicles, replete with a great deal of melodramatic Bengali idiomatic colour, the doings of a schoolmaster who led 65 of his students in an insurgency to sack the police Armoury at Chittagong in 1930.

The idea of the ring leader Surjya Sen, or “Masterda”, was to inspire similar insurgencies elsewhere in British India with a view to hasten the end of the Raj. The Armoury is indeed sacked, but most of the insurgents are tracked down over several years thereafter and either hanged or jailed by the British. And yet, and this is the point of this book, it is incidents and actions such as this, that finally saw the British “Quit India” in 1947. We are presented with dollops of Netaji Subhas Chandra Bose style militancy, complemented by the back drop of Mahatma Gandhi’s difficult to fault nationalism, ahimsa, and diplomacy.

And yet, to read such a book in today’s context is not a very comfortable experience. Terrorism is all too real and unpredictable in our lives today. The Palestinians, for example, cry themselves hoarse that the Jewish State was born out of the most blood curdling terrorism against British administration. This does not stop the State of Israel from playing simultaneous bully and victim with lashings of the Holocaust to bolster its brio.

It is difficult to read Ms. Bhattacharya’s book as history in 2012, though it describes events that took place 80 years ago, when exactly the same justificatory coloration is being applied to the terrorism/freedom movement, depending on your perspective, to the protracted goings on in Kashmir today.

In the Palestinian/Lebanese/Israeli context, long considered to be one of the most dangerous flash points in the globe, probably followed by the India/Pakistan/China theatre, it can be argued that the Hizbollah and Hamas are imitators of the early Jewish bombings of hotels and massacres of villages pre 1948.

So, when we see the tumultuous developments in Iran, Syria (a key backer of the Hezbollah), in Egypt, in Yemen and elsewhere in the restive area, we still don’t find Israel exactly vulnerable.  The US backed military might of Israel is considerable. It has substantial, if undeclared, nuclear weaponry and formidable surveillance and armament building capacities. Iran may, as yet be barking, but Israel can, if it wants, seriously bite.

Today, the Al Qaeda and their satellites and fellow travellers, such as the Lashkar-e-Taiba, or the Taliban, are a menace to the entire Judeo-Christian-Hindu world, with their perpetual insistence on Jihad and their chilling sophistication. Their blood-thirstiness, growing out of fundamentalist religious fervour, is considerable, and seeks to be received as legitimate grievance. It also extends, even-handedly, to all whom  they consider apostate within the Islamic world itself.

But this Chittagong insurgency, described in Ms Bhattacharya’s book, has more in common with a Biggles like derring-do combined with a Hardy Boys innocence, than the calculation and fanaticism of a modern 21^st century terrorist outfit, including the well trained and outfitted Maoist insurgents.

Masterda and his pupils get the guns from the Chittagong Armoury alright, before indulging in some crackling arson, but not, alas, the bullets, which are stacked, cannily enough, elsewhere and out of harm’s way.  And they also don’t get to kill any of the British Officers in town, rushing in on their lair on Good Friday, to find they’ve gone home early.

The prose in Chittagong is a little turgid, suffering from its attempts at fictionalisation. And after the horrors routinely perpetrated in recent times by the LTTE under the late Prabhakaran, the Maoists, the North Eastern Insurgents, The ISI, The Taliban, Al Qaeda and so on; the thesis of the book seems to suffer from a degree of moral hazard. One finds oneself siding with the British, who stand-in for the Indian Authorities in the mind’s eye. And I find myself hoping all the miscreants are rounded up and put out of their misery at the earliest.

Unfortunately,  to further compound the disengagement, there is little or no characterisation of all the dramatis personae , and so no identification with them for the reader. They come on and off the stage as so many clones of each other, fuelled either by a lofty nationalism and frequent, if somewhat creepy bouts of “Anondo” or joy at perpetrating some minor damage.

The British in the book too are faceless caricatures, with their references to “natives” and their impenetrable stiff upper lip. Also, there is absolutely no love interest, or even a woman featured in this book full of would be tragic heroes. Though there is much male camaraderie, hugging, and congratulatory back-slapping, this too is not the stuff of engaging historical fiction.

(805 words)

10^th June 2012

Gautam Mukherjee

Published in The Sunday Pioneer AGENDA Section BOOKS Page on Sunday 17th June 2012 as "Bomb & Pistol Wallahs" and online at www.dailypioneer.com

Capitalism Welfarism Creditism

Capitalism Welfarism Creditism

Capitalism has always been in the natural order of things. Today it may find itself betrayed and debilitated by an excess, almost a paroxysm of noblesse oblige, a misguided attempt to right the wrongs of centuries by institutionalising entitlement. And this is further aggravated by combining with the urges stemming from its innate greed.

This is essentially an unnatural coupling, because all Caesars have ruled in the “name” of the people, subscribing to a lofty concept of common weal for propagandist purposes, while doing very little other than consolidating their own position. And this has not changed with the switching of the label.

Capitalism, in its natural habitat, translates into a few rich men and lots of poor ones. This has the requisite tooth and claw to keep it vital and indeed viable. There have been Kings and Commoners, land-owning Lords, and tenanted, nearly powerless, often landless Serfs.

Later on came the Industrial Barons and their humble, faceless, workers. These are two sides of the same coin in marked contrast to each other, coexisting and jostling for survival, each in its place, and for a very long time now.  The current Information Age has its own heroes and villains, but the major spoils of technological advancement and innovation belong, as always, to the few as opposed to the many.

Wars have been fought over land and territory with its attendant perquisites of rapine loot and pillage. And, of course, subjugation; and sometimes,  the enslavement of the vanquished. Fairness did not enter into it. Might was mostly right and it was believed the many were put on earth to serve the needs and desires of the few.

The pitch however started to queer over pamphleteering notions of natural justice and religion led clarion calls towards a sense of obligation induced in the more fortunate towards their brethren. This softening of stance was considered to be a mark of civilisation that went a long way to soothe the domineering urges of the savage breast, and something to aspire for.

A longing for a new order took over, in which a majority, as opposed to a privileged minority, should be provided the wherewithal to experience a modicum of surplus and disposable income. And also for this hoi polloi to enjoy a basic dignity of livelihood and creature comfort, without discrimination or hindrance or the circumscribing of their aspirations, attained by merit, rather than the so called “accident of birth”.

This sense of natural justice without the exacting and culling natural laws of the jungle, did not however manifest in common transaction for ages, except in terms of occasional philanthropy and whimsical charity, quite often designed to glorify the giver rather than assuage the hurts of the receiver.  A case in point are the grand temples, churches, mosques and synagogues built by the mighty. It is perhaps this that prompted Marx to call religion the “opium of the masses” and attempt to overthrow its hold on the pious. Nevertheless, this long era of denial of opportunity lasted right through the agrarian economy and land-holding based centuries around the world.

The first possibility of a more equitable chance at the brass ring came about with the Industrial Revolution in the West, with its need for millions of production line workers. Notice that the Imperial Age which preceded it did nothing to elevate its own lesser folk, except incidentally, even while it made the imperial and colonial powers very rich at the expense of its subjects and vassals.

But the French articulation of “Liberté, égalité, fraternité” gained momentum after the First World War, when the upper, land-owning classes found themselves decimated. Also, soon after, greater profits beckoned from industry with its mass production values, rather than the traditional non-mechanised growing of wheat and rice, or the rearing of livestock.

Suddenly then, despite the creeping change over the ages, manifested in events such as the Abolition of Slavery, the French Revolution and the American Civil War, a radical change in circumstance came in 1918, after the “Great War to end all wars” as the poignant slogan of the time had it.

And after it passed, it was the turn of the butcher, the baker, and the candle-stick maker in a manner of speaking. And they were joined by the restive independence movements amongst subject colonies around the globe. These worthies were able to make the cut by dint of sheer survival, and numerical strength.

But these uplifted peoples, created thus by war’s bloody circumstance or the struggles for independence, began the institutionalising of entitlement, being both judge and jury in the firmament. It is these inheritors that sanctioned and upheld both Marxism and Socialism depending on where they lived. And where they lived determined whether they were new nations emerging from the clutches of imperialism or former colonial powers cut down to size by the rising winds of democracy and revolution, grown in the crucible of natural justice.

Theorists, from pure Marxists to adherents of the milder Fabian Socialist movement, broadly subscribe to the empowerment of the many, based, not alas, on merit, but a sense of restitution to being poor and deprived.

Inevitably this “commendable” began to warp the engines of devil-take-the- hindmost capitalism. This survival-of-the-fittest caveat emptor world view became likened, in a mocking Hitlerist way, to being essentially fascist and obtusely unfashionable. This, particularly in one-man-one-vote style democracies.

Even as the no-questions-asked feel-goodism of economically unviable welfarism took hold amongst the many, a section of conservatives, keen on balancing budgets and preserving a meritocracy and rule of the privileged never took to it.  But, slowly and surely, political compulsions mutated the old style Capitalism into a centrist, diluted by socialist ideas form, somewhat embarrassed to promote its free market roots.

A great deal of the red ink in the now digital ledgers of the economies around the world is there because of unsustainable welfare schemes. These are not only proving very costly to fund but have turned their recipients lazy and righteous. In Europe and America the spending on such schemes cannot any more be withdrawn or reduced without dire political consequences. And a key country in the EU such as France has recently voted to kick out austerity by electing a Socialist Government for the first time in 16 years.

Countries like Greece, with several others waiting in the wings, on the brink of blatant default on its Sovereign Debt, are almost ready to cut loose from the EU  at the prospect of losing its gravy train of grants and bail-outs.  

 And India too, a mere one trillion dollar economy, is feeling the strain of subsidies it cannot bear and welfare schemes that threaten to turn it into a banana republic. The “Social sector”, if one can call the creation of vote banks by a form of bribery, seems to have run away with itself like the dish eloping with the spoon. We too are facing a disconnect between our ability to earn in terms of our GDP and our spending on uplifting the poor.

Today’s world is such that it isn’t availability of capital, technology or human ingenuity that has put the strain on Capitalism.  It is not even the corruption and scams and bank collapses. It is predominantly the promotion of the “free lunch” mentality whether it has come from easy credit and the recklessness it encourages, or Government subsidy and welfarism.

The crux of the crisis engulfing the world economy, both in the developed world and the emerging nations is the extent of deficit financing ever since the world moved from the Gold Standard to other ways of underpinning the value of its currencies. This is a norm of financial management both at the macro and micro levels now with an enormous and inbuilt potential to spin out of control.

Today, the engines of growth have slowed to such an extent that the debt servicing is proving very difficult. This particularly when inflation and high commodity prices are playing havoc with currency values and earning potentials simultaneously. But since this is our bed we have to sleep in it. There is a way out however. We can lengthen the repayment curve on easy terms and rise thereby above the turbulence of the short term.

At one time, just a few decades ago, it was the “Third World” that needed the long term soft credit offered by august institutions like the IMF, the World Bank, the ADB and other such lending institutions, set up by the West.

But today the Sovereign Debt built up in more optimistic times by most of the EU raft of 17 countries leaves the lending countries, mainly Germany and France more than a little queasy. And Germany and France and their economically lesser brethren in turn are tied to a none too healthy America, with its $ 1 trillion budget deficit and many more trillions of national debt.

In turn, the star economic performer of today’s world, China too is going to be severely impacted if the American economy does not recover sufficiently within a year or two. It is an interconnected world now, in which the leading economies and the emerging ones are all victims of a borrow and spend profligacy that is proving too much to bear.   And so a perpetual repayment crisis seems to loom with its threatened domino effect.

The only remedy seems to be in terms of rescheduling debt on concessional terms and long tenure so that the countries in question can limp into their muted recoveries given protracted periods of time.  The once and still “First World” needs a little “Third World” style help to survive. Fortunately they have a road map of such pilgrim’s progress. They can evaluate the good impact of institutional development funding of large tracts of Africa and Asia and even Europe and South America in the post WWII era.

Of course, it will feel a bit funny to sit in the visitor’s chair. But since the West has a considerable edge both in military and technological terms that could change the game dramatically, besides great pools of expertise it need not worry very much. There are supplicants and supplicants and asking for a loan from a bank you own or fund substantially is none too onerous.

The other notion, promoted by Socialists and guilty Capitalists alike is the ham-fisted idea of punitively taxing the rich and cutting the spend, not on the deleterious subsidies and welfare schemes, but on an undefined other. What might this be? Is it infrastructure perhaps so that we can face future shock after shock? Or is it the size of a bloated Government forever aggrandising its own hew and heft? Or is it just so much empty rhetoric and hot air?

But getting away from this futile blame game let us look at the positives. The fact is that what some people call “creditism”, the leveraging of one’s financial future to access benefits today, may not be the old balance your ledger style of doing things, but it is here to stay. Western Governments have largely rejected austerity with its bone crushing spectres of The Great Depression in favour of a more productive use of resources to create new wealth and jobs.

At the individual level, it is entrepreneurship, technological genius and innovation, perhaps exemplified by the spectacular if maverick doings of Steve Jobs, Bill Gates,  and Warren Buffet that show the way. And the impact of Facebook, Google and Twitter, You Tube, the people behind them, and that of smart phones, on all our lives.

The ability to grow through vision and reinvention shown by our own Ratan Tata, Mukesh Ambani, and NRI heavyweight Laxmi Mittal, the last of whom specialises in buying and developing distressed steel mills etc. long before it came  to be considered smart, who best personify the possibilities. Great fortunes are waiting to be made in an atmosphere of adversity. It is not time, not at all, to write the obituary for Capitalism.  Booms and busts are no more than adjustments in a system best allied to human nature itself.

(2,015 words)

8^th June 2012

Gautam Mukherjee


Published in The Sunday Pioneer as the Cover Story on Sunday 10th June 2012 as "Capitalism endangered" and online at www.dailypioneer.com