Finally the cheering news. Swaminathan Aiyar, the cheerleader for economic reforms, which in reality is an euphemism for privatisation, has admitted that the world is sliding into a new recession (see Bad news: World sliding into a new recession TOI. He calls it bad news. I can understand why he says so. Not satisfied with $ 20 trillion that were pumped in after the 2008 economic meltdown (it was actually an economic collapse, and not meltdown. But to keep the predatory economic system alive, it was called meltdown), in the days to come you will see the demand for a still bigger bailout package will become louder and louder. As someone said, it tantamount to "privatising the profits, and socialising the costs." To ensure private profits do not dip, we will be forced to pump in huge amounts of public money.
In my understanding, there can be nothing more cheering than the news that world is sliding into a new recession. At a time when global warming is taking the world closer to the tripping point; when the oceans and air have been tremendously polluted, the groundwater ruthlessly mined and contaminated, and the natural land resources exploited to the hilt, the news of an impending economic recession couldn't have come at an more appropriate time. If in the last 60 years or so global poverty has only increased, hunger and malnutrition has grown (including in the US, Canada and EU), disease and squalor has multiplied and above all economic disparities have multiplied with each passing year, what is the use of that economic system.
What started off as the Eurozone crisis (which we all know has its roots in the US economy) is now likely to spread far and wide. At the Rio+20 UNCSD conference held at Rio, what amazed me was that poverty eradication should still be the world's top most economic priority. At G-20 summit, held a few days earlier in Mexico, the leaders of the world's top 20 economies however did not focus on poverty, but on economic growth (and on how to bailout the four PIGS countries reeling under a tremendous recession). If only these leaders had ensured that the $ 20 trillion economic bailout package given primarily to erring banks in 2008-09 was instead used to fight poverty and hunger, I can bet poverty and hunger would have been history by now. Of the $ 20 trillion, at least $ 10 trillion could have been spared to create additional employment.
Whether we like it or not, world's entire economic thinking and approach is being determined by the Corporates. All governments, whether democratic or dictatorial, are simply pawns in the invisible (and sometimes visible) hands of the Corporates. Academic institutes and the mainline media have also been bought over by the Corporates. Together -- the executive, academics and the media -- have unleashed a propaganda in favour of policies that only add to the profits of the Corporates. Speculation, financial misappropriation, monopoly control, free trade, future trading in food and natural resources are some of the ways to worsen the global plight. While the poor continue to suffer as a result, the rich go on expanding their wealth in a geometric proportion. Consolidation of wealth in the hands of a few helps increase GDP, and it is shown as if the per capita income of the every national is going up. In India, where 77 per cent population is unable to spend more than 0.50 dollar a day, the per capita income is on a steady rise !
Such a flawed economic system must go. I know it is easier said than done, but history does create conditions making it suitable for a change. I think that stage is fast approaching. If we fail this time, we fail for ever. But if we make a concerted effort -- bringing together all global movements, be it Occupy Movement, Anti-corruption wave, farmers movements and the people's struggle the world over against the usurping of natural resources -- I think we can make a dent. The public discourse must shift to the inability of the present economic system to sustain the world. After all, how long can the poor go on bailing out the rich? How long can we go on tolerating the theft and robbery of our natural resources in the name of development? How long can we live in hunger and poverty to ensure that a handful of people world over live in perpetual luxury? It is time we, the people decide.
Food stamps: How the US benefits the Corporations
So as to ensure that food reaches the needy and the hungry across the country, the government has launched a series of steps to streamline the public distribution system (PDS). Among several initiatives being planned, especially in the light of the National Food Security Act under preparation, a scheme to provide food coupons is being tested on a pilot basis in Delhi, Bihar and Uttar Pradesh.
Several researchers had supported the idea. Kaushik Basu, Chief Economic Advisor to Government of India, had also backed the proposal saying “the subsidy should be handed directly to the poor household instead of giving it to the PDS shop owner with the instruction it is transferred to the poor. This can be done by handing over food coupons to BPL households, which they can use as money to buy food from any store. The store owner can then take the coupon to any bank and change it back for cash.” On the face of it, it looks to be a more sensible and effective mechanism to deliver food to the hungry. But is it really so?
Basu’s thesis was based on the American experience with food stamps. In fact, food stamp is an idea which originated from the United States, and is now being followed in several other countries with varying degrees of success. India too is trying to borrow the scheme from America, as an answer to the massive pilferage of foodgrains from the PDS. Several studies have shown that more than 40 per cent foodgrains meant for the poor are pilfered on the way. Much of the foodgrains finds its way to neighbouring Nepal, Bangladesh and Burma. Rampant corruption in public distribution erodes the very basic purpose of ensuring food and nutrition security.
Much has been said and written about the efficiency of the food stamp programme in the United States. I am not sure on what basis were these studies compiled, and whether someone had really gone and closely scrutinised the food distribution programme. The Supplemental Nutrition Assistance Programme (SNAP), as it is called in the US, uses food stamps to reach 46 million hungry – one in every seven Americans. And this year, like everywhere else, the US government too has slashed the financial allocation for the food stamps programme by $4.5 billion.
Nevertheless, what we are looking here is how effective has the food stamp programme been in ensuring nutritional security. California-based organisation ‘Eat, Drink Politics’ has in a recent report come out with some startling revelations providing an insight into how the hunger programme adds to the profits of some of the big corporations and banks. Several giants like Coca-Cola, General Mills, Wal-mart and banks like JP Morgan Chase have reaped windfall from the food stamps programme.
Several researchers had supported the idea. Kaushik Basu, Chief Economic Advisor to Government of India, had also backed the proposal saying “the subsidy should be handed directly to the poor household instead of giving it to the PDS shop owner with the instruction it is transferred to the poor. This can be done by handing over food coupons to BPL households, which they can use as money to buy food from any store. The store owner can then take the coupon to any bank and change it back for cash.” On the face of it, it looks to be a more sensible and effective mechanism to deliver food to the hungry. But is it really so?
Basu’s thesis was based on the American experience with food stamps. In fact, food stamp is an idea which originated from the United States, and is now being followed in several other countries with varying degrees of success. India too is trying to borrow the scheme from America, as an answer to the massive pilferage of foodgrains from the PDS. Several studies have shown that more than 40 per cent foodgrains meant for the poor are pilfered on the way. Much of the foodgrains finds its way to neighbouring Nepal, Bangladesh and Burma. Rampant corruption in public distribution erodes the very basic purpose of ensuring food and nutrition security.
Much has been said and written about the efficiency of the food stamp programme in the United States. I am not sure on what basis were these studies compiled, and whether someone had really gone and closely scrutinised the food distribution programme. The Supplemental Nutrition Assistance Programme (SNAP), as it is called in the US, uses food stamps to reach 46 million hungry – one in every seven Americans. And this year, like everywhere else, the US government too has slashed the financial allocation for the food stamps programme by $4.5 billion.
Nevertheless, what we are looking here is how effective has the food stamp programme been in ensuring nutritional security. California-based organisation ‘Eat, Drink Politics’ has in a recent report come out with some startling revelations providing an insight into how the hunger programme adds to the profits of some of the big corporations and banks. Several giants like Coca-Cola, General Mills, Wal-mart and banks like JP Morgan Chase have reaped windfall from the food stamps programme.
I am therefore not surprised to see the Ministry for Food and Consumer Affairs trying to push for inclusion of private companies in public distribution in India under the garb of public-private partnership. Sooner than later, we will see private companies getting into food distribution on the American pattern in India. It is therefore important to know how the private companies, and that includes Affiliated Computer services, a subsidiary of Xerox, have exploited the hunger programme to its benefit.
According to the report, “States are seeing unexpected increases in administrative costs, while banks and other private contractors are reaping significant windfalls from the economic downturn and increasing SNAP participation. Although a full national accounting of these contracts is not available from the US Department of Agriculture (which administers SNAP), we know that a handful of corporations fight doggedly for these deals, and they are not in the charity business.” The worst part is that the profits these companies reap is kept hidden from the public.
In just one year, Wal-mart received more than $ 33 million for nine supermarket centres in the province of Massachusetts, which is four times the money spent at farmers markets across the nation under the same programme. It also got half of the $1 billion spent in Okhalama state. ‘Eat, Drink Politics’ was unable to obtain data of the total money claimed by Wal-mart for feeding the entire country. JP Morgan Chase has been one of the biggest recipients of the financial allocations. In Florida alone, Chase has a five-year contract worth $ 83 million.
The US Department of Agriculture did not divulge how much money was paid to Coca-Cola and General Mills. But the researchers conclude that food corporations and industry giants have been lobbying hard to include junk foods like candy and soft drinks in the supplemental nutrition programme. Despite nine states restricting junk food purchases, these giants have been exerting pressure to allow the sales of unhealthy products.
Isn’t it therefore amusing to learn that Kaushik Basu had even provided details of the approaches needed to plug the loopholes in the coupon distribution and had suggested its integration with UID programme. If in the US, the food stamp programme ends up adding profits to the corporate balance sheets, isn’t it time that India looks at how to make it more effective in own ingenious way rather than blindly aping the US experience? Whether it is the PDS or the food stamps programme, what has become crystal clear is that it is either big business or the corrupt middlemen in the distribution chain who laugh all the way to the bank.
When farmers are convicted. The strange case of an American farmer.
At a time when the entire economic growth model is built on greed, you cannot expect the farmers to be left behind. In their quest to make quick money, and harbouring aspirations like anyone else to join the ranks of the high-net individuals (HNIs), they too resort to unlawful activities. In India, farmers have sprayed crops with dangerous pesticides cocktails and other harmful chemicals often drenching their standing crop with pesticides. They know this is not permissible, and goes beyond the recommendations. The heavily pesticide-laden crop is for the market. But for their own consumption, they keep the plot free of pesticides and even chemical fertiliser. Isn't that morally and ethically wrong?
Some call it as 'moral hazard'.
But often this goes far. How do you explain when some farmers inject oxytoxin hormone to get a much healthier (and big in size) looking veggies? How do you explain when some dairy farmers (and middlemen) adulterate milk with urea, caustic soda and detergents knowing well it is extremely harmful? What about those farmers who throw buckets of water on to the paddy heaps in mandis to add on to the weight of the produce? Such instances are not rare. These are surely 'moral hazards' that the farming community continues to grapple with. I am not blaming the entire farming community, but you will agree there are elements who do all this and still get away with. It is very rare that you find the law swooping on them and holding them accountable. Even in such cases where a conviction is made, the court case continues to drag for years.
This does not happen only in India. It happens also in the United States and elsewhere. But the difference is that in the US the chances are that the convict will get immediate punishment.
I bring to you a shocking and perhaps an interesting case (depends on how you want to view it) from the United States. Daryll Ray and Harwood Schaffer of the Agricultural Policy Research Cenre at the University of Tennessee have quoted this in their latest Policy Pennings #620. Here it goes:
According to an article in the Asheville Citizen-Time, “[Robert Gardner] Warren, 64, was convicted in July 2004 of conspiracy to defraud the Federal Crop Insurance Corp. [FCIC] and conspiracy to commit money laundering. He was sentenced the following year to 76 months in federal prison. His wife, Viki Warren, pleaded guilty to conspiracy to defraud the FCIC and mail fraud and got 66 months….
“The Warrens owned R&V Warren Farms, which at one time was the largest vine-ripened tomato grower in the eastern United States and employed about 200 people….
“Warren Farms filed fake crop reports claiming losses that never happened. Prosecutors said employees threw ice cubes onto a tomato field, beat the plants with sticks and photographed the results to simulate hail damage to back up insurance claims. 'The employees also threw ice cubes into the air while other employees took pictures to support the claim of a hailstorm,’ an indictment stated.
“The Warrens began the scheme in 1997 to defraud the FCIC and insurance companies reinsured by the agency of millions of dollars, obtaining crop insurance by creating false records purporting to show a history of high tomato production.”
Wow ! Isn't that amazing. Some farmers surely can be imaginative. But what is significant in this particular case is that the law was quick and firm. This farmer was convicted in July 2004, and the following year he was sentenced to 76 months in jail. His wife was sent to jail for 66 months. When do we see the judicial system in India becoming so pro-active?
Some call it as 'moral hazard'.
But often this goes far. How do you explain when some farmers inject oxytoxin hormone to get a much healthier (and big in size) looking veggies? How do you explain when some dairy farmers (and middlemen) adulterate milk with urea, caustic soda and detergents knowing well it is extremely harmful? What about those farmers who throw buckets of water on to the paddy heaps in mandis to add on to the weight of the produce? Such instances are not rare. These are surely 'moral hazards' that the farming community continues to grapple with. I am not blaming the entire farming community, but you will agree there are elements who do all this and still get away with. It is very rare that you find the law swooping on them and holding them accountable. Even in such cases where a conviction is made, the court case continues to drag for years.
This does not happen only in India. It happens also in the United States and elsewhere. But the difference is that in the US the chances are that the convict will get immediate punishment.
I bring to you a shocking and perhaps an interesting case (depends on how you want to view it) from the United States. Daryll Ray and Harwood Schaffer of the Agricultural Policy Research Cenre at the University of Tennessee have quoted this in their latest Policy Pennings #620. Here it goes:
According to an article in the Asheville Citizen-Time, “[Robert Gardner] Warren, 64, was convicted in July 2004 of conspiracy to defraud the Federal Crop Insurance Corp. [FCIC] and conspiracy to commit money laundering. He was sentenced the following year to 76 months in federal prison. His wife, Viki Warren, pleaded guilty to conspiracy to defraud the FCIC and mail fraud and got 66 months….
“The Warrens owned R&V Warren Farms, which at one time was the largest vine-ripened tomato grower in the eastern United States and employed about 200 people….
“Warren Farms filed fake crop reports claiming losses that never happened. Prosecutors said employees threw ice cubes onto a tomato field, beat the plants with sticks and photographed the results to simulate hail damage to back up insurance claims. 'The employees also threw ice cubes into the air while other employees took pictures to support the claim of a hailstorm,’ an indictment stated.
“The Warrens began the scheme in 1997 to defraud the FCIC and insurance companies reinsured by the agency of millions of dollars, obtaining crop insurance by creating false records purporting to show a history of high tomato production.”
Wow ! Isn't that amazing. Some farmers surely can be imaginative. But what is significant in this particular case is that the law was quick and firm. This farmer was convicted in July 2004, and the following year he was sentenced to 76 months in jail. His wife was sent to jail for 66 months. When do we see the judicial system in India becoming so pro-active?
Behind the economic sob story: RBI Governor calls the bluff.
It is heartening to see Reserve Bank of India governor D Subbarao calling government and industry's bluff on rupee depreciation as well as inflation. By doing so, he has categorically exposed the faulty assumptions behind which the Prime Minister, Manmohan Singh, the chief economic adviser, Dr Kaushik Basu, and several chieftains of the Indian industry have been hiding their own failures. Prime Minister and the chief economic adviser have repeatedly blamed policy paralysis (under Coalition compulsions) to be the reason for the slowing of the economy, while the PM goes to shift the blame even to the Eurozone crisis.
"Europe alone cannot be blamed for the rupee's woes and inflation isn't merely due to supply-side constraints but has a structural element to it. I don't think this blame game can go on," Dr Subbarao on Tuesday addressing the Indian Merchants Chamber in Mumbai (RBI guv calls govt's bluff on Re, inflation http://bit.ly/NPZjG8). This is a significant statement coming from the RBI chief who should know what he is talking about. What upsets me more is that even the business journalists, who I thought were knowledgeable enough, refrained from coming out with the truth. None of the Business TV channels (and of course the business papers) had the courage to call a spade a spade. Except for an editorial or two, the business media only echoed what the industry wanted.
Prime Minister Manmohan Singh used the G-20 platform to reiterate what he has been saying earlier. "Our growth rate in 2011-12 declined to 6.5 % from the level of 8.4% in the previous year. This may look like a reasonable figure, given growth rates being experienced in the rest of the world, but or public is impatient for a return to high growth and faster jobs creation," he said at the Los Cabos in Mexico. Interestingly, RBI governor D Subbarao demolishes this argument. The Times of India says Subbarao struck out at those who argued that India at 6.8% was faster than the West. "We must remember that we are a low-income country with a per capita income of less than $1500. India is a supply constrained economy and should grow faster to bridge the income gap."
Well, the PM will need another smokescreen to hide.
Moving away from the growth rate obsession, I would also like to draw your attention to a misleading headline that I find are splashed across the media. 'Global investment seem less bullish on India after a series of policy flip flops by the government sapped confidence', reads the introduction to a news report (see Times of India, June 20, 2012: FDI inflows dip 8% this year). It is misleading because it very cleverly blames policy paralysis for the decline in FDI during the period Jan-April 2012. The RBI data shows that FDI had actually increased, compared to last year, in Jan and Feb, and thereby declined in Mar-April. Overall, against the inflow of $8.5 billion in 2011, it is $7.8 billion this year. But what remains hidden is that the decline in Mar-April is because of the Eurozone crisis when the entire world is witnessing an investment decline. It is not because of any policy flip flop within the country.
Nevertheless, what is not being mentioned is that between Jan-March 2012, India Inc had invested $ 8 billion overseas. This massive outgo is not because of policy mismatch within the country but the favourable conditions created by RBI allowing these companies to invest abroad. They have gone to greener pastures overseas. Therefore what is the use of crying over falling FDI when our own companies are investing heavily abroad? Mischievous reporting, isn't it?
I am glad RBI governor has made clear his views on inflation. He talked of the 'structural elements' that result in a higher inflation. This is what I have been stressing for several years now. At a time when there is no drop in agricultural output, including nutritious commodities like milk and eggs, I see no reason why the prices should be on an upswing. Huge cartelisation in the wholesale markets, followed by rampant exploitation by the retail traders, in the absence of any checks and control, has actually led to the present crisis. No economist wants to point out to this structural anomaly because any effort to bring the wayward trade under control would go against the tenants of the market economy, which they swear by. Also, they are paid to support the proposal of allowing FDI in retail, and so they go on singing the chorus. This is rather unfortunate. But that's how the realities are.
"Europe alone cannot be blamed for the rupee's woes and inflation isn't merely due to supply-side constraints but has a structural element to it. I don't think this blame game can go on," Dr Subbarao on Tuesday addressing the Indian Merchants Chamber in Mumbai (RBI guv calls govt's bluff on Re, inflation http://bit.ly/NPZjG8). This is a significant statement coming from the RBI chief who should know what he is talking about. What upsets me more is that even the business journalists, who I thought were knowledgeable enough, refrained from coming out with the truth. None of the Business TV channels (and of course the business papers) had the courage to call a spade a spade. Except for an editorial or two, the business media only echoed what the industry wanted.
Prime Minister Manmohan Singh used the G-20 platform to reiterate what he has been saying earlier. "Our growth rate in 2011-12 declined to 6.5 % from the level of 8.4% in the previous year. This may look like a reasonable figure, given growth rates being experienced in the rest of the world, but or public is impatient for a return to high growth and faster jobs creation," he said at the Los Cabos in Mexico. Interestingly, RBI governor D Subbarao demolishes this argument. The Times of India says Subbarao struck out at those who argued that India at 6.8% was faster than the West. "We must remember that we are a low-income country with a per capita income of less than $1500. India is a supply constrained economy and should grow faster to bridge the income gap."
Well, the PM will need another smokescreen to hide.
Moving away from the growth rate obsession, I would also like to draw your attention to a misleading headline that I find are splashed across the media. 'Global investment seem less bullish on India after a series of policy flip flops by the government sapped confidence', reads the introduction to a news report (see Times of India, June 20, 2012: FDI inflows dip 8% this year). It is misleading because it very cleverly blames policy paralysis for the decline in FDI during the period Jan-April 2012. The RBI data shows that FDI had actually increased, compared to last year, in Jan and Feb, and thereby declined in Mar-April. Overall, against the inflow of $8.5 billion in 2011, it is $7.8 billion this year. But what remains hidden is that the decline in Mar-April is because of the Eurozone crisis when the entire world is witnessing an investment decline. It is not because of any policy flip flop within the country.
Nevertheless, what is not being mentioned is that between Jan-March 2012, India Inc had invested $ 8 billion overseas. This massive outgo is not because of policy mismatch within the country but the favourable conditions created by RBI allowing these companies to invest abroad. They have gone to greener pastures overseas. Therefore what is the use of crying over falling FDI when our own companies are investing heavily abroad? Mischievous reporting, isn't it?
I am glad RBI governor has made clear his views on inflation. He talked of the 'structural elements' that result in a higher inflation. This is what I have been stressing for several years now. At a time when there is no drop in agricultural output, including nutritious commodities like milk and eggs, I see no reason why the prices should be on an upswing. Huge cartelisation in the wholesale markets, followed by rampant exploitation by the retail traders, in the absence of any checks and control, has actually led to the present crisis. No economist wants to point out to this structural anomaly because any effort to bring the wayward trade under control would go against the tenants of the market economy, which they swear by. Also, they are paid to support the proposal of allowing FDI in retail, and so they go on singing the chorus. This is rather unfortunate. But that's how the realities are.
Kaushik Basu's useless suggestions to prop up the Indian economy.
I was dismayed to read the lead article in The Times of India today (TOI, June 16, 2012). The article: Let's not overreact by India's chief economic advisor Kaushik Basu (available here: http://bit.ly/KzAhKA) in reality makes a fervent appeal to allow FDI in retail. To bolster the sagging economy, he has only two suggestions: 1) to open up for FDI in retail, and 2) to cut bureaucratic red tape. And both are useless suggestions.
First, let us look at one of his flawed arguments. He praises Indian policy makers for providing the enabling environment for FDI outflow. He says: "India has in recent times become a fairly large exporter of investment. Historically, we placed severe restrictions on the outflow of FDI. Up to the early 1990s, overseas investment by companies was restricted to a paltry $2 million in a block of three years. This made global investment by Indians unviable. In two important policy moves, in 1995 and 2002, this was liberalised. And Indian entrepreneurs have been quick to seize the opportunity. In terms of value of net overseas purchases, Indian companies now rank fifth in the world, after USA, Canada, Japan and China."
On the one hand, policy makers, economists and business journalists are blaming the prevailing 'policy paralysis' for the flight of capital from India, here is Kaushik Basu appreciating the move that allows India Inc to invest abroad. In fact, as I said earlier in one of my blogs, the Reserve Bank of India has allowed India Inc to take out as much as 200 per cent of their economic worth for investing overseas. More sops/concessions are to be thrown in. This is happening at a time when most TV anchors rue over the declining foreign investments. I don't understand the economic justification for luring FDI and FII investment by providing national treatment to foreign companies, while at the same time allowing Indian money to be invested abroad.
It clearly shows that India Inc has no preference for India. When the Indian economy is in doldrums, I would expect the Indian companies, slush with liquidity, to invest in India. Whatever the neoliberal economists might say, nationalism has to be imbibed in economic thinking. The tragedy is that whether it is Greece or Spain or India, the rich industrialists have no interest in saving their own country from a virtual collapse. The reason is simple. They know for sure that the bailout money too would be to their advantage. Any disaster is a business opportunity for them. Corporates are always looking for an economic disaster, with many of them responsible for the economic crisis (2008-09 has amply shown how the economic meltdown was triggered).
Having said that, I had expected Kaushik Basu to come out with some plausible suggestions as to how to ensure food for 320 million people who go to bed hungry, and at the same time ensure drastic reduction in the levels of malnutrition. Economic reforms unleashed in 1991 haven't been able to make any dent on poverty and hunger (poverty too has grown) despite the claims of the Planning Commission. What is the use of the economic reforms if the population of hungry and malnourished continues to grow? Can any economist justify this?
Regarding FDI in retail, I would like to draw the attention of Kaushik Basu to two of my presentations. Let him answer my analysis: Allowing Retail FDI in India: Lies, lies and damn lies ( here is the link: http://devinder-sharma.blogspot.in/2011/11/allowing-retail-fdi-in-india-lies-lies.html), and if possible also view this video: http://www.youtube.com/watch?v=SPElhVyOJM8&feature=youtu.be There are several others who have challenged the claims made by Kaushik Basu and others, but perhaps India's chief economic advisor's commitment is towards bailing out the American economy.
Talking about bureaucratic red tape, I am amused to see him quoting the US defence secretary Leon Panetta. It is the US which has ensured that the WTO Agreement on Agriculture is so designed that it does not open up the US domestic sector to imports. After arm-twisting the developing countries to accept the final draft, it now wants more market access. It is the US which has refused to cut down on huge agricultural subsidies. In fact, after losing the WTO dispute on cotton subsidies to Brazil, it has provided US $ 147 million of subsidies to Brazilian farmers. This is a bribe paid to by US to Brazil so as to ensure that Brazil does not take countervailing steps. More than worrying about bureaucratic red tape, if Kaushik Basu had raised the issue of level-playing field in WTO Agreement on Agriculture, Indian economy would have easily looked up. Studies show that if US was to remove its Green Box subsidies, its agriculture would drop by 41 per cent or so thereby enabling developing countries to export food and food products to America. India would be a gainer.
First, let us look at one of his flawed arguments. He praises Indian policy makers for providing the enabling environment for FDI outflow. He says: "India has in recent times become a fairly large exporter of investment. Historically, we placed severe restrictions on the outflow of FDI. Up to the early 1990s, overseas investment by companies was restricted to a paltry $2 million in a block of three years. This made global investment by Indians unviable. In two important policy moves, in 1995 and 2002, this was liberalised. And Indian entrepreneurs have been quick to seize the opportunity. In terms of value of net overseas purchases, Indian companies now rank fifth in the world, after USA, Canada, Japan and China."
On the one hand, policy makers, economists and business journalists are blaming the prevailing 'policy paralysis' for the flight of capital from India, here is Kaushik Basu appreciating the move that allows India Inc to invest abroad. In fact, as I said earlier in one of my blogs, the Reserve Bank of India has allowed India Inc to take out as much as 200 per cent of their economic worth for investing overseas. More sops/concessions are to be thrown in. This is happening at a time when most TV anchors rue over the declining foreign investments. I don't understand the economic justification for luring FDI and FII investment by providing national treatment to foreign companies, while at the same time allowing Indian money to be invested abroad.
It clearly shows that India Inc has no preference for India. When the Indian economy is in doldrums, I would expect the Indian companies, slush with liquidity, to invest in India. Whatever the neoliberal economists might say, nationalism has to be imbibed in economic thinking. The tragedy is that whether it is Greece or Spain or India, the rich industrialists have no interest in saving their own country from a virtual collapse. The reason is simple. They know for sure that the bailout money too would be to their advantage. Any disaster is a business opportunity for them. Corporates are always looking for an economic disaster, with many of them responsible for the economic crisis (2008-09 has amply shown how the economic meltdown was triggered).
Having said that, I had expected Kaushik Basu to come out with some plausible suggestions as to how to ensure food for 320 million people who go to bed hungry, and at the same time ensure drastic reduction in the levels of malnutrition. Economic reforms unleashed in 1991 haven't been able to make any dent on poverty and hunger (poverty too has grown) despite the claims of the Planning Commission. What is the use of the economic reforms if the population of hungry and malnourished continues to grow? Can any economist justify this?
Regarding FDI in retail, I would like to draw the attention of Kaushik Basu to two of my presentations. Let him answer my analysis: Allowing Retail FDI in India: Lies, lies and damn lies ( here is the link: http://devinder-sharma.blogspot.in/2011/11/allowing-retail-fdi-in-india-lies-lies.html), and if possible also view this video: http://www.youtube.com/watch?v=SPElhVyOJM8&feature=youtu.be There are several others who have challenged the claims made by Kaushik Basu and others, but perhaps India's chief economic advisor's commitment is towards bailing out the American economy.
Talking about bureaucratic red tape, I am amused to see him quoting the US defence secretary Leon Panetta. It is the US which has ensured that the WTO Agreement on Agriculture is so designed that it does not open up the US domestic sector to imports. After arm-twisting the developing countries to accept the final draft, it now wants more market access. It is the US which has refused to cut down on huge agricultural subsidies. In fact, after losing the WTO dispute on cotton subsidies to Brazil, it has provided US $ 147 million of subsidies to Brazilian farmers. This is a bribe paid to by US to Brazil so as to ensure that Brazil does not take countervailing steps. More than worrying about bureaucratic red tape, if Kaushik Basu had raised the issue of level-playing field in WTO Agreement on Agriculture, Indian economy would have easily looked up. Studies show that if US was to remove its Green Box subsidies, its agriculture would drop by 41 per cent or so thereby enabling developing countries to export food and food products to America. India would be a gainer.
The Great Indian Gene Bazaar
It has taken the civil society years of struggle to ensure that the plant genetic resources (PGR), which is essentially the preserve of farmers, are not passed on freely into the hands of multinational corporations/seed companies. After the Convention on Biological Diversity (CBD) was signed in 1992, and plant varieties were for the first time accepted to be a national sovereign resource, the battle to seek control over PGR had of course intensified. Several agreements were signed at subsequent international treaties, including material transfer agreements that ensured no IPRs were taken on plants that the private seed companies collected from the public sector gene banks.
While the focus remained at the global level, I was startled to read a news report in the Wall Street Journal captioned: India Institute Seeks Expertise in Global Seed Business (see link: http://on.wsj.com/Mxebas) quoting the deputy director general (crops) of Indian Council of Agricultural Research who appears more than keen to sell off India's massive collection of plant resources to MNCs. "Mr Datta said collaborating with MNCs would be hugely profitable ... We really wouldn't mind taking a small share of profits. What would be more important is if we could use such collaborations to bring high-yielding seeds to our farmers at 50% of the cost."
According to the news report, ICAR has sought the approval of Ministry of Agriculture.
What is shocking is that while the effort globally is to preserve and protect the plant genetic resources under public sector, despite several attempts to seek private control, India somehow seems oblivious of the threat. Some years back, the NGO community has opposed the induction of Syngenta Foundation in the board of the Consultative Group on International Agricultural Research (CGIAR), which governs the 16 international agricultural research centres. I was a member of the CGIAR NGO Committee Plus that had enmasse resigned in protest. Our objection primarily was the access that seed giant Syngenta would get to these international collections.
Before the resignation of the CGIAR NGO Committee, there had been uproars over attempts by private companies to take control over these resources. The entire global collections (estimated to be around 700,000 plant accessions) in public sector were earlier brought under the UN FAO. It was then said that FAO is merely a custodian of these genetic resources, which actually belong to farmers from across the world. Prior to this, when Margaret Thatcher sold off the Plant Breeding Institute at Cambridge (UK) to Unilever, these collections were shifted to John Inn's Centre in Norwich.
As a member of the CGIAR's Central Advisory Board on Intellectual Property Rights, I had witnessed the attempts by seed industry to seek easy access over these collections, and also bring them under IPR control. Several attempts were thwarted, and I am quite sure the seed industry never liked my presence in this crucial decision making body. But what shocks me still further is the ease with which ICAR seems to be determined to sell-off 3,77,000 plant accession that lie in the National Gene Bank being managed by the National Bureau of Plant Genetic Resources in New Delhi. India is one of the mega-diversity regions in the world, and it is believed that India's collections are very diverse and unique.
The day I got to know, I was speaking at a conference in Bangalore. I took the opportunity to comment on the destructive proposal (Indian Gene Bank up for sale. http://bit.ly/MMrO1s). This is a precious resource, and I don't think any sensible government would take the extreme and idiotic step of selling these collections. By doing so, it will make all agreements pertaining to farmers rights redundant, and will bring agriculture completely under the yoke of MNCs.
That brings me to another question. If ICAR thinks MNCs can help us breed improved varieties, I wonder what is the world's second-biggest research infrastructure supposed to do. Isn't it time we shut down the plethora of agricultural universities and specialised national institutes? India's economy is already in doldrums, and saving the expenditure on ICAR year after year will surely bring some relief.
While the focus remained at the global level, I was startled to read a news report in the Wall Street Journal captioned: India Institute Seeks Expertise in Global Seed Business (see link: http://on.wsj.com/Mxebas) quoting the deputy director general (crops) of Indian Council of Agricultural Research who appears more than keen to sell off India's massive collection of plant resources to MNCs. "Mr Datta said collaborating with MNCs would be hugely profitable ... We really wouldn't mind taking a small share of profits. What would be more important is if we could use such collaborations to bring high-yielding seeds to our farmers at 50% of the cost."
According to the news report, ICAR has sought the approval of Ministry of Agriculture.
What is shocking is that while the effort globally is to preserve and protect the plant genetic resources under public sector, despite several attempts to seek private control, India somehow seems oblivious of the threat. Some years back, the NGO community has opposed the induction of Syngenta Foundation in the board of the Consultative Group on International Agricultural Research (CGIAR), which governs the 16 international agricultural research centres. I was a member of the CGIAR NGO Committee Plus that had enmasse resigned in protest. Our objection primarily was the access that seed giant Syngenta would get to these international collections.
Before the resignation of the CGIAR NGO Committee, there had been uproars over attempts by private companies to take control over these resources. The entire global collections (estimated to be around 700,000 plant accessions) in public sector were earlier brought under the UN FAO. It was then said that FAO is merely a custodian of these genetic resources, which actually belong to farmers from across the world. Prior to this, when Margaret Thatcher sold off the Plant Breeding Institute at Cambridge (UK) to Unilever, these collections were shifted to John Inn's Centre in Norwich.
As a member of the CGIAR's Central Advisory Board on Intellectual Property Rights, I had witnessed the attempts by seed industry to seek easy access over these collections, and also bring them under IPR control. Several attempts were thwarted, and I am quite sure the seed industry never liked my presence in this crucial decision making body. But what shocks me still further is the ease with which ICAR seems to be determined to sell-off 3,77,000 plant accession that lie in the National Gene Bank being managed by the National Bureau of Plant Genetic Resources in New Delhi. India is one of the mega-diversity regions in the world, and it is believed that India's collections are very diverse and unique.
The day I got to know, I was speaking at a conference in Bangalore. I took the opportunity to comment on the destructive proposal (Indian Gene Bank up for sale. http://bit.ly/MMrO1s). This is a precious resource, and I don't think any sensible government would take the extreme and idiotic step of selling these collections. By doing so, it will make all agreements pertaining to farmers rights redundant, and will bring agriculture completely under the yoke of MNCs.
That brings me to another question. If ICAR thinks MNCs can help us breed improved varieties, I wonder what is the world's second-biggest research infrastructure supposed to do. Isn't it time we shut down the plethora of agricultural universities and specialised national institutes? India's economy is already in doldrums, and saving the expenditure on ICAR year after year will surely bring some relief.
When bankers become thieves, the economy crumbles.
Swedish Prime Minister Fredrik Reinfeldt terms the Eurozone economic crisis 'serious' and has been quoted as saying: "In reality, we're talking about one of the greatest financial rescue operations the world has seen." He was responding to a question by Swedish Radio after it was known that Spain may be the 4th member of the 17-nation Eurozone to seek outside help. It is expected that Spain would be seeking $ 100 billion from IMF to rescue its banks reeling under toxic real estate loans. To understand more, I looked into the work of Paul Krugman, who thinks no lessons have been learnt (The EurpTARP Cometh -- http://nyti.ms/KrjgeN).
I found an interesting letter among the comments to Paul Krugman's blog. Someone wrote, and I tend to agree, "Spain now gets $ 100 billion for pumping into banks that won't lend, won't create jobs, not even invest any amount into any part of the Spanish economy." Well, this being true, I don't understand why is the Spanish government or for that matter IMF bosses unable to stop the intended bailout of Spain banks. As another blogger wrote: "An unemployment rate of nearly 25% combined with negative GDP growth should be treated as an economic emergency. All of the focus should be on addressing unemployment and boosting economic growth, not on bailing out banks." (http://www.disequilibria.com/blog/?p=216)
Bailing out defaulting banks has become the standard solution to the economic crisis. It happened in 2008, when close to $ 20 trillion, were pumped into the global economy. Much of it went to service the bank debts, and we have all read disturbing reports of how millions of dollars were given as bonuses to the erring bankers -- people who should have been in jail were awarded with handsome financial packages. This did not prop up the American economy either, which is once again in the throes of an unforeseen crisis. The American economy is on an artificial ventilator -- using 'quantitative easing' to survive before it can muscle developing countries to open up for US goods and services, and also arm twist countries like India to allow FDI in retail and insurance.
What will happen if we allow the Spanish banks to collapse. Will Spain turn into a beggar? Or will the Spanish people flee to other countries? I don't think any such thing will happen. Instead, the bailout package should be used to create more jobs. And that in turn will boost the economy. The same prescription holds true for other major economies. India, for instance, should focus more on creating jobs and feed the 320 million people who go to bed hungry. China, which is also in the midst of a recession, now becoming more obvious, should shift focus to creating more domestic demand and create more employment opportunities by turning agriculture profitable. The lure of population from the rural to the urban areas, and the thrust on rapid (and often environmentally destructive) industrialisation has already ruined the national landscape and has turned the country into a large export factory. This is unsustainable in the long run, and once the bubble bursts it will all be doom and gloom.
I had always thought that copying is the prerogative of only those who infringe on proprietary rights. But now I realise that governments all over the world have been merrily copying the economic model of growth from the US/EU. No wonder, every nation is in soup. Perhaps, the world would have been safe economically if the US had used its muscle power by bringing in provisions like Super 301 to stop other governments from copying its terribly flawed economic model, which has now brought the world to a brink. It isn't too late. But as many others agree, the world hasn't drawn any lessons. They continue to allow the banks to rob the national exchequer. As another commentator said: "Bankers have become the biggest thieves in the history of the world...the global economy will never recover while it is being bled to death to rescue the fantasy balance sheets of the institutions and individuals who pyramid paper, buy governments and equate theft with economic production."
I found an interesting letter among the comments to Paul Krugman's blog. Someone wrote, and I tend to agree, "Spain now gets $ 100 billion for pumping into banks that won't lend, won't create jobs, not even invest any amount into any part of the Spanish economy." Well, this being true, I don't understand why is the Spanish government or for that matter IMF bosses unable to stop the intended bailout of Spain banks. As another blogger wrote: "An unemployment rate of nearly 25% combined with negative GDP growth should be treated as an economic emergency. All of the focus should be on addressing unemployment and boosting economic growth, not on bailing out banks." (http://www.disequilibria.com/blog/?p=216)
Bailing out defaulting banks has become the standard solution to the economic crisis. It happened in 2008, when close to $ 20 trillion, were pumped into the global economy. Much of it went to service the bank debts, and we have all read disturbing reports of how millions of dollars were given as bonuses to the erring bankers -- people who should have been in jail were awarded with handsome financial packages. This did not prop up the American economy either, which is once again in the throes of an unforeseen crisis. The American economy is on an artificial ventilator -- using 'quantitative easing' to survive before it can muscle developing countries to open up for US goods and services, and also arm twist countries like India to allow FDI in retail and insurance.
What will happen if we allow the Spanish banks to collapse. Will Spain turn into a beggar? Or will the Spanish people flee to other countries? I don't think any such thing will happen. Instead, the bailout package should be used to create more jobs. And that in turn will boost the economy. The same prescription holds true for other major economies. India, for instance, should focus more on creating jobs and feed the 320 million people who go to bed hungry. China, which is also in the midst of a recession, now becoming more obvious, should shift focus to creating more domestic demand and create more employment opportunities by turning agriculture profitable. The lure of population from the rural to the urban areas, and the thrust on rapid (and often environmentally destructive) industrialisation has already ruined the national landscape and has turned the country into a large export factory. This is unsustainable in the long run, and once the bubble bursts it will all be doom and gloom.
I had always thought that copying is the prerogative of only those who infringe on proprietary rights. But now I realise that governments all over the world have been merrily copying the economic model of growth from the US/EU. No wonder, every nation is in soup. Perhaps, the world would have been safe economically if the US had used its muscle power by bringing in provisions like Super 301 to stop other governments from copying its terribly flawed economic model, which has now brought the world to a brink. It isn't too late. But as many others agree, the world hasn't drawn any lessons. They continue to allow the banks to rob the national exchequer. As another commentator said: "Bankers have become the biggest thieves in the history of the world...the global economy will never recover while it is being bled to death to rescue the fantasy balance sheets of the institutions and individuals who pyramid paper, buy governments and equate theft with economic production."
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