After many months of travelling across rural India, I have had the opportunity last week to sit down in Mumbai and read the papers. I find many things that are disturbing. I see trends which people had foreseen, and yet they are happening, and that is even more disturbing. This is not about things that happen to 'other people', they concern us, our society, our nation, our earth; they portend the future. It will be worthwhile to see them.
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I gather that the newspapers have now found out that the economy is in trouble, that the financial system is in a mess:
- Foreign exchange reserves at 285 billion dollars, just enough to cover seven months' imports.
- Rupee crashing vis-a-vis the dollar.
- Current Account Deficit (net outflow of foreign exchange) now at 4.8 per cent (of GDP), which is alarming, says RBI.
- Non-stop inflation over the last 18 months, food commodities hit all-time high.
I remember that in 1991, I saw very similar headlines. This is like an action replay, except that things are much worse now, because in the interim period, the nation's economic integrity has been compromised with structural changes, and large parts of the country have been mortgaged.
I also remember that the central characters of 1991 are the same as today: Manmohan Singh, P. Chidambaram and Montek Ahluwalia. It is my view that if any one group has to bear the larger blame for the nation's economic disaster and deep-rooted financial rot, it is this threesome of PM, FM and Chairman of Planning Commission . They have wilfully ignored the Indian reality and have instead bowed to the dictates of the World Bank and the IMF. Since this threesome also does salaam to Sonia, and she is the one with the 'remote control', I suppose she is also answerable for this Gross National Disaster.
- RBI is taking stern steps to suck out liquidity from the system, to try and stem inflation.
- RBI tightens CRR rules, says bank must hold 99 per cent of CRR at all times.
- RBI to Sebi: tighten rules of foreign exchange traders.
- RBI has started scrutiny of nearly 3,000 companies doing illegal finance activities.
This is indeed interesting, and noteworthy. All the mess is created by the government, and then they leave it to the RBI to clean up. It is the government, led by the threesome, which for eight years now has been reckless with borrowings, living beyond its means, and printing more and more notes, causing excess liquidity and inflation. It has pressurised the RBI to lower CRR thereby allowing banks to inject more fictitious money into the market and to play dangerous financial games. It also allowed hot money into our markets and told Sebi to permit foreign exchange trading and speculation. It has burned our hard-earned foreign exchange on unplanned import of petroleum and by allowing corporates to amass and spend in foreign exchange – in the process, it has also allowed industrialists (and politicians) to amass black money both here and abroad.
A cruel example of the government's loot-India economics can be seen in these two media reports:
- India loses 3.2 billion dollars in one week's trading (ending July 12) due to rupee depreciation.
- There is one class of Indian investors which have been cheering the combination of India's depreciating rupee and Wall Street’s bull run - they are making money for themselves amid all this turmoil.
It is strange economics indeed when Indians are profiteering from India's grief; in any other context, this would be seen as an anti-national activity, worthy of shame.
The government and its three musketeers have done all that they have done despite criticism and cautions from the RBI. Even today, RBI governor D. Subbarao is fighting a lone battle, trying to correct all the government's wrong-doing, with the vultures from the finance ministry, investment banks and industrialists constantly on his back, demanding more liquidity, which he is trying to curtail. To understand this we can use the simile of a drug addict whose only demand is the drug irrespective of its effect on his body; similarly, our economic body has been corrupted with the drug of cash (liquidity) and our bankers and industrialists are the addicts crying for more cash, even though the economy will be further crippled by this. Just like the drug addict cannot think like a complete, responsible human being, our businessmen are not able to think like responsible citizens of the nation, they want their fix and their pleasure now, never mind the effects on the economic body of the nation.
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Just like in 1991, the nation's poor economic indicators have brought back the global financial vultures in the form of IMF, World Bank and the US government. Many experts have pointed out that these are not three but just one entity, the US government, the other two are its chelas. Along with the vultures come the familiar key words: reform, structural reform, privatisation and deregulation. We heard all this 22 years ago. We swallowed all those pills, and we are worse off for it. Now that we are seriously ill again, the trio of Manmohan, Chidambaram and Montek, far from being wiser, are bringing us the same firangi World Bank consultants, and agreeing to swallow more of those toxic pills.
As as result, we are seeing the announcements of one suicidal deal after another, for which the nation, i.e., all of us, are to pay a very, very steep price. The government is apparently in a hurry now, allowing foreigners in every sector including defense, removing government regulation to enable 'automatic' permits to foreign companies, announcing the sale of equity of navratna public sector companies like CIL, BSNL, oil companies, etc., and promising, on a daily basis, more and more 'reform' to please their American masters. Now just suppose that our cabinet were a cricket team, and if we found that the top three players are listening more to the opposing team's coach and playing his game, there would be cries of 'match-fixing'. Now that we are losing the economic game badly after appearing to be in a winning position, the questions must be asked, 'are we losing this deliberately?, 'are there any match-fixers?'.
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I see two events of importance, which we must do something about, if we can.
- RBI Governor D. Subbarao to retire in September.
There is no talk of any extension of tenure for this man; his resistance to the finance ministry's shenanigans means he has no political 'mai-bap'. The government is just waiting for him to retire and walk away next month, so that the a 'hand-picked' governor may do its bidding in lowering interest rates to favour banks and businessmen. I feel we need D. Subbarao more than ever now to help steady a sinking ship, and to keep the vultures away. Can we have a citizen's campaign to grant him an extension?
- Government considering applications for Private Banks from Reliance, Tatas, Bajaj, Birla, Shriram, etc.; a total of 26 licence applications.
This will be the death-knell of Indian economic independence. I do not exaggerate. In our insane copying of the U.S. financial system, we are unnecessarily opening the crucial banking sector to big private players. What has happened in the U.S. is that even the Federal Bank (their RBI) has been privatised quietly and the whole nation is in the grip of a handful of banking families. They fund and control elections and legislators, they force economic policy and they are now beginning to dominate the global money game. Countries like India which have a strong government central bank like RBI and robust government-guided public sector banks like SBI are not to their liking. In the name of 'reform', even this most critical area of banking is now being privatised by the threesome of Mannu, Chiddu and Monty. The remote control, too, has not hit the stop button.
Can we pause for a moment to see who it is we are copying? The U.S. financial system has proven itself to be the most scandalous in the world. It has no humane basis; it is a devilish system with no ethics whatsoever. Making money by any means possible is the motto, never mind that the U.S. economy is in danger of defaulting, and its own citizens are suffering a severe social and economic stress. Respected economists have continuously warned against the invention of treacherous financial 'instruments' which are only cunning ways to exploit, with no relationship to actual production economics. Please note that the U.S. is the most indebted nation in the world, its current account balance is worse than India's, and it has more than 50 million citizens living in poverty, i.e., one in six Americans. Out of this, some ten per cent live in extreme poverty, on less than 2 dollars per day. A USA Today report of July 28 also says that “four out of five U.S. adults struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives”. Why should India copy this country?
In today's world economic situation, the nations with the most problems of public debt, inflation and low growth are Turkey, Greece, Italy, Spain, Portugal, Belgium, Zimbabwe, Egypt, and the United States. Now let us see why the U.S. case is different from the other sick nations, why it can get away with its gross economic misadventure. Two reasons: one, it prints the dollar, which the whole world trades in, so it can simply keep printing more of it; and two, it is a bully with its army, attacking any country it wants so as to grab oil, minerals or whatever. India can do neither of this, but more importantly, do we want to be unethical and barbaric? In the USA itself, a majority of its citizens are questioning the unethical and bullying attitude of their government. So why should India copy this country?
Let us look at a little piece of history, since it is being repeated and we are part of it. In the USA, governance got corrupted by the business and banking sectors between 1900 and 1930 (see the documentary film 'The Money Changers'). In the UK, even though business was dominated by the same banks, British governance still retained a liberal and labour-oriented face till the 12-year regime of Margaret Thatcher (see the documentary “The Mayfair Set” which looks at how buccaneer capitalists of hot money were allowed to shape the climate of the Thatcher years). During that period, everything public was taken and given away for private profiteering, and politics came under a vice-like grip of a handful of powerful industrialists. In India, see what has happened between 2004-13, and you can see a repetition of that history – our politics today has become increasingly subservient to business. Can we put the brakes in time, is the crucial question now.
We do not need any more, 'new' banks; the existing ones are well spread out throughout the nation, till the gram sabha level. The new private banks are anyway not meant for the people, leave alone the poor, rural people, it is only to allow the Reliances and Tatas and Birlas to play the game of financial instruments for private profiteering, the same type of dangerous games played by banks like Citibank and JP Morgan in the U.S. When they were winning their game, these banks pocketed the profit, but when they failed, they failed heavily, almost drowning the nation with their debt. Billions of dollars of public money had to then be given to 'rescue' these banks, a plan which President Obama okayed, but how could he not when these two banks had donated generously to his election campaign? (read more about the business and corruption of elections in both the U.S. and India in the previous blog).
We need to stop this. It is only a spirited, citizens' movement that can question such moves that threaten the very economic independence of the nation, especially when the business and political elite are behaving as if India is their colony, and the branded media is no better than a pimp. This is truly a delicate period for the country, indeed for the world itself.
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How does all this affect me, one may well ask.
If you are in group A, it means you have a cushy job and your movements are restricted to the club, pub, mall and multiplex. Even then, you are still affected, because a deeply exploitative economic system builds a deeply violent society; however much you may isolate yourself with comfort and technology, the desire for peace in mind and security in society will be elusive, the tragedy of human suffering will get to you.
If you are in group B, you don't have a cushy job, you are afraid of losing what you have, and you are burdened by rising costs. Obviously then, you are already affected.
If you are in group C, then you are not affected anymore. Because you are a farmer whose back has been broken under the burden of exploitation, and you have committed suicide. This is exactly what three farmers of Vidarbha region in Maharashtra did last week after their genetically tampered cotton crop was washed away in the rains. And this is only the beginning of the season, many more may join group C. It is a continuing story of the last ten years, where more than two lakh Indian farmers have taken their lives because of the 'modern' economic path that we have chosen.
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Our threesome of Manmohan, Chidambaram and Montek do not like to talk about farmers' suicide. They do not like to face the fact that 'reform' and 'suicide' may be closely related. What they did last week, however, was to give us the following 'news':
- Poverty down to 22% in 2011-12 from 37.2 % in 2004-5, claims Montek Ahluwalia, chairman of Planning Commision. “If you spend 27 rupees a day, you are not 'poor',” he claimed.
Many in the media have wondered about what kind of a chap is this Montek to make such an un-knowledgeable, insensitive statement? I cannot answer for his psychological make-up, all I can give you are three facts:
1. Montek started his career with World Bank. He then worked at the IMF. He has also been, for many decades, part of the Group of Thirty, or G30, based in Washington, which is a closed group led by private bankers of the USA, working to influence global finance policy for their own benefit.
2. Montek is a favourite of American politicians. According to US government documents published in Wikileaks, in September 2009, Secretary of State Hillary Clinton sent a cable to her embassy in New Delhi, asking, “Why was Pranab Mukherjee chosen as Finance Minister over Montek Ahluwalia? How do Mukherjee and Ahluwalia get along?”
3. In June, 2012, around the time when Montek first came up with his theory of 'anyone spending over 20 rupees a day is not poor', he undertook a renovation job in two toilets in his office. The media found out how much of public money he spent on it: Rs 35 lakh (3.5 million rupees).
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Shri Amartya Sen has reportedly said that he doesn't want Narendra Modi as Prime Minister of India. I may in all probability not vote for Modi, but I detest the superior and condescending tone of this economist who has spent most of life in western cities. Not only does he not understand this nation, the brand of economics he has studied is destroying the world and is of no use to India. And for that reason, I would certainly not want Amartya Sen in any position in Indian government.
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