A Reordering Of The Fates
Men of destiny, like prime minister Narendra Modi,
seem to be carried about through the attending tumult, held aloft by the fates,
and deposited on safe perches, from where they can make further advances on
their agenda and vision.
This even as internal potential rivals, party
dissidents, both overt and covert, are being hoisted on their own petard,
leaving Modi, head and shoulders, clear, over them.
The media, particularly the melee that passes for TV
debate, is, of course, howling for Modi’s response, lusting after his
involvement, outraged at his silence, baying for a defence or explanation,
demanding blame be laid, and the rolling of heads. There is quite a list of
defendants after all, a variety of alleged wrong-doings, involving union
ministers, chief ministers, MPs and MLAs.
Some people gain involuntarily in such adverse
conditions, and Modi himself certainly
has. One could miss the silver lining quite easily however, given the loudly voiced threats to the credibility and
future of the Modi government. All of it however, refuses to come to terms with
the fact that the reckoning of substance will not come till 2019, irrespective
of the, possibly exaggerated, short term consequences.
So much clamour then, even as his detractors from
within are routed, as if by the hand of God, without Modi himself having had to lift a finger. In fact, battered
and bruised as they are, their continued political survival is contingent on
the prime minister’s support.
German political scientist Friedrich Hegel, thought
it was the bailiwick of certain nations, but only when their time had come, and
at particular times in history, to lead the world, that comity of nations, and
give structure to the collective ‘march of destiny’.
It was, to the political theorist, a process of
passing the baton, perhaps as the
ancient Greeks did, to the Romans in hindsight. In a less complicated
world of nation states, in a 19th century dominated by Europe, this
idea, difficult to understand as it is for its mysticism, appealed to the more
imperial-minded.
But even if this were to be still so today, like an
axiom; a nation, like a company, is only animated and brought to life by its
leaders, and also, to some extent, by its contenders.
Narendra Modi then, is climbing his metaphorical
mountain, attempting to usher in a great
prosperity without it sullying him, somewhat like a latter day Vivekananda in
politics, and restructure the rules by which Indian governance is conducted. It
is not easy for him to push this through, but neither is it easy for the
opposition’s calumny and mud to stick.
So, Modi is headed towards the light, helped always
by the fates. China, the biggest power in Asia, chooses this moment to start
falling apart. China, that aspires to dominate the narrative of
today’s world, a country that dwarfs India with its riches and might, is in
sudden and steep decline. Its rate of growth is halved, making it difficult for
its storied superstructure to thrive and its flag to keep fluttering on high.
This, causing panic selling in its bourses, may well send on some investment dollars into our
own stock markets, but that is actually the small expected gain. The big one is
that China will have to deal with India on a more equitable basis.
That is why Modi can make repeated polite demands of
Xi Jinping, on the border issue, on its support for the renegade Lakhvi, on
other matters, and receive a patient hearing. That is why Xi came to visit in
the first place, and why Modi returned the call on. There are protestations of
a new high in the Indo-Chinese relationship to boot, on the side lines of the
BRICS meet.
This circumstance of China weakening perceptibly,
has come about relatively early on Modi’s watch, even as he has been struggling
with Chinese incursions on the borders, a huge trade imbalance, and pressure
via a perpetually sabre-rattling Pakistan.
But, with growth rates of just about 6% per annum ,China
is down to numbers it has not seen for thirty or more years. It is not enough
to keep things going, and half of what it took to make it a massive $ 10 to $
12 trillion economy.
China’s highly speculative and opaque stock market,
cannot sustain the illusion of continued growth anymore. The rumours of a
highly stressed banking system, idle infrastructure, empty housing estates,
inadequate domestic demand, state owned
companies with red ink writ large, an artificially valued currency, has been, of
course, doing the rounds for quite some time.
Still, at its present size, China’s economy is
second only to that of the US, and its rapid shrinkage will have profound
impact in the global economy.
RBI Governor Raghuram Rajan recently predicted a
possible global great depression unprecedented in its severity. He based it on
the trend of competitive ‘quantitative easing’ or QE or fiscal stimulus in the
West, which he said was a false growth chase, fuelled by money alone. It is
unclear whether Rajan included China in his calculations.
But now, other analysts are saying, with Lehman it
was a bank that couldn’t fail, but did. What happens when the second biggest
country in economic terms begins to fail? After all, it is a debt trap once
again that is responsible, just as it is in the EU as well.
China’s collapse cannot be total for now given its
immense reserves, but even a great stumble will set off a tsunami alright. As
one of the biggest importers and consumers of oil, for example, when China
further moderates demand, in a petroleum market scenario already suffering from
gluts and sharply declining prices, what exactly happens? Will a barrel of
crude sell for $ 25? What will that do to the petroleum exporting countries?
What will happen to the global currency markets? And to metals and commodities?
India will benefit from lower prices all around, but just how badly will it
affect other countries?
Today, it is being said by experts, that the threat
of economic turmoil from Greece and other highly indebted economies such as
Spain, Portugal, Italy, Ireland etc. in the EU, is dwarfed by the implosions
being experienced in China.
In three weeks just past, China has lost 30% of the
value of its stocks represented by over $ 3 trillion; and 50% of its listed
stocks have suspended trade, even after a massive government bailout was put in
place. Bloomberg says Chinese stocks are being sold off wherever in the world
they are listed. Chinese millionaires are moving themselves and their money out
of China.
Meanwhile, Hegel’s Europe is truly crumbling, albeit
backstopped by a tremendous backing from the US. America, on its part, is going
to be recovering from the crash of 2008 for quite some time yet, and there goes
its plan to raise interest rates based on its nascent revival. But having to
nanny Europe, for decades to come, with a meagre larder at home, is a daunting
prospect for it.
Given the changing circumstances, the US has been
forced to be more willing than ever before its short history, to share power
with others. It is making up with Iran for example, even in the teeth of Saudi
and Israeli objection.
It will, and is, treating a well behaved In dia, even though it is just a $ 2 trillion
worth of emerging economy, with tender care and respect, mostly shorn of past
prejudices. After all, India is tagged on with the fastest growth rate in the
world, very significant now that China
is faltering.
India, eager to join the developed world, has a new
found leverage via recent geopolitical trends, and it will therefore have
recourse to funds and technology like never before. Its
ambition to grow at double digits will not only fructify, but also sustain for decades
to come, fuelled by pent up demand, particularly for infrastructure and massive
domestic consumption needs.
Indian wages too are attractive, compared to those
of China and other places, at the watershed of their development curves. India
has a great deal of young and cheap trainable labour, and simultaneously a
highly educated workforce at the top levels. It is seen to be capable of making
sophisticated goods and components without too much supervision. It also speaks
good English and has a highly sophisticated capacity to ramp up digitally and
in IT software terms.
China’s formidable manufacturing, exporting and
infrastructure building abilities will increasingly go a-begging, except
perhaps in India, a country capable of paying its bills.
But we are
just one country, growing from a low base, and so, the way things stand, it is
only a matter of time before the overhanging avalanche continues down the
slope, burying China’s dreams of world domination, at least for now.
If there is to be an Asian century in the 21st
, going forward, who will it properly belong to? At present the jury is out,
but by 2019, it may have come to a decision.
The calculus elsewhere too is changing inexorably.
Putin’s Russia, truncated from the omnibus USSR, sensing the decline and fall
of the once impregnable West, is asking for respect, with a steely view to
securing it in reality.
The time for dictation and one-sided perceptions of the
political situation has almost passed.
The fates are reordering the world, and India under Modi stands to benefit.July 9th, 2015
Gautam Mukherjee
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