Time to rewrite reforms, bring in a desi version.

Pic Courtesy: Deccan Herald

At a time when there has been enough of eulogising and back-patting to celebrate the 30^thanniversary of the 1991 economic reforms, former Prime Minister Manmohan Singh, the main architect of these reforms, has in a statement said: “It is not a time to rejoice and exult but to introspect and ponder. The road ahead is even more daunting than during the 1991 crisis.” 

Coming at a time when just two of the global studies -- the first being the first instalment of the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) sounding a ‘code red’ warning for humanity, with the UN Secretary General Antonio Guterres categorically stating: “The evidence is irrefutable; greenhouse gas emissions are chocking our planet and placing billions of people in danger.” What the crucial report fails to however acknowledge is how neoliberal economics, treating GDP as a measure of growth, has literally heated up the planet. Or else, how can one explain that the world’s top 1 per cent add twice the amount of emissions that half the world generates.  

The warning is to ensure that the world doesn’t breach a temperature rise of 1.5 degrees Celsius in another 20 years. But considering that 1.1 degree Celsius increase has already been recorded, I don’t know how many more years it takes to drum up heat by another 0.4 degrees. Nevertheless, the way the world has heated up resulting in the climate going topsy-turvy in the years of industrial growth shows there is something fundamentally flawed with the way the economic growth design was laid-out. 

The second of the global study is the successive rounds of inequality reports presented by the international charity Oxfam at the World Economic Forum clearly bringing out how the rich have become richer, and the poor getting poorer -- a strong pointer to the immediate need to rethink reforms. If the top 1 per cent in India holds a wealth that is equivalent to more than four-times the wealth held by 73 per cent of the population, the role economic liberalisation played in exacerbating inequality cannot be glossed over. If Jeff Bezos, who recently took a space flight, can earn $ 8 billion a day and still pay less tax than a stenographer it tells us how the global model of economic reforms have helped the super-rich to amass wealth. In India, like elsewhere, easy money and economic stimulus have gone into the stock market. No wonder, the stock markets are booming at a time when the global economy is struggling. 

Inequality is bad economics, and accumulation of vast wealth by a tiny group of people is clearly an outcome of some inherent flaws in the growth prescription. As the advocacy group Public Citizen tells us that the collective wealth of CEOs of US Big Tech companies, which had reached $ 651 billion in 2021, was enough to wipe out global hunger, get rid of malaria, vaccinate the world with Covid shots, and end homelessness in America. And these billionaires would still be left with enough to splurge. 

In India, a tiny fraction of the huge wealth that the top 1 per cent has accumulated should have been enough to wipe out poverty and make hunger history. Economist Surjit Bhalla had some time back stated that Rs 48,000-cr can eradicate poverty for one year from India. If that is true, and considering that hunger is a dimension of extreme poverty, I don’t see any reason why India be ranked at a dismal 94 in a list of 107 countries in the Global Hunger Index 2020. And that too at a time when food stocks have been overflowing for several years in a row. Add to it the growing unemployment; and the continuing agrarian distress, amplified by the farmers’ protest around New Delhi; the time is ripe not for deep reforms but to bring in a humane set of reforms that measure up to the growing needs of public health, education, agriculture, environment protection and reducing economic disparities. 

A healthy and dignified life depends on various factors, including a healthy environment. According to the 2020 Environmental Performance Index (EPI) India ranks at a lowly 168 among 180 countries for which the index is prepared. The report says that the countries that ranked higher “generally exhibited long-standing commitments and carefully constructed programmes to protect public health, conserve natural resources and reduce greenhouse gas emissions.” Not that the rich countries have achieved these social and environmental protection goals as would have been required, considering that just 90 companies as per a study have collectively spewed 63 per cent of the emissions since the beginning of the industrial age. This only shows the need for Indian economists and policy makers to work out a more sustainable and inclusive pathway. 

This is something that the chest-thumping original proponents of economic reforms should have focused on, but their sloppy understanding of the phrase - reform -- seen only as an euphemism for privatisation, has pushed us in the same flawed IMF-led global trajectory. Instead, the policy imperative should have been to ensure that the majority population at the middle and bottom of the pyramid too earns more, thereby creating a huge rural demand, and in the process revitalising the rural economy. 

Indian policy makers missed a historic opportunity to look beyond the well-orchestrated ‘Washington Consensus’ design and layout a desi model of economic reforms that was built treating agriculture as the second engine of growth. Instead of pushing people out of agriculture, the emphasis should be on converting this sector, which continues to be the largest employer, into a powerhouse of economic growth. 

It is possible even now. Learning from the devastation that industrial agriculture has brought to the farming landscape in the rich countries, and the huge agrarian distress that globally free markets have resulted in, the key lesson is to redraw reforms bringing in tenets of an economically viable, profitable and ecologically-sustainable food farming systems where farmers receive an assured income by way of an assured price, and consumers get safe and healthy food. #

Source: Reforms must reduce economic disparities. The Tribune. Aug 13, 2021. https://www.tribuneindia.com/news/comment/reforms-must-reduce-economic-disparities-296772?fbclid=IwAR3OuQCXbXk0Cz65ssLgAAQUyI2RQGv5MDN43e5dSG2nNjy0yTP5CMHpURw

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How the rich become richer, and the poor are driven to the wall

Ever since the first wave of coronavirus pushed countries into a lockdown, the central banks, mainly in the rich countries, printed US $ 9 trillion of surplus money. Well, the underlying objective was to infuse this surplus money into the pandemic hit economies, which had been left gasping for breath.

According to economist Ruchir Sharma, Chief Global Strategist at the Morgan Stanley Investment Management, this pandemic stimulus in turn made the rich add on to their wealth. “Much of that stimulus had gone into financial markets and from there into the net worth of ultra-rich,” he wrote (Financial Times, May 16). The total wealth of the super rich has increased in the same period to somewhere between $ 5 trillion to $ 13 trillion. No wonder, markets are awash with money, while countries are struggling to pull economy out of slump.

The sad irony is that what appears to be an ingenious way to indirectly transfer wealth from public coffers into the pockets of the ultra-rich happened at a time when Brookings estimated that an additional 144 million people globally, in 2020, slipped below the stringently kept poverty line. Using the World Bank and IMF poverty estimates, the calculations show that India has surpassed Nigeria when it comes to having the largest population of people living in extreme poverty. India added another 85 million poor to its existing huge numbers that have somehow been surviving below the poverty line. The devastating second wave of Covid-19 may leave a still bigger dent in poverty estimates.    

But perhaps what we do not realise is that all it requires to eradicate extreme poverty from the globe is US $100 billion, a tiny fraction of the pandemic stimulus that was pumped in to revive the global economy and instead ended up rewarding the billionaires by helping them to amass more wealth. This is not the first time that such astonishing amounts of surplus money have been pumped indirectly into the hands of the super rich. For quite a number of years, central banks in rich countries have been printing surplus money. However, what remains unexplained is how come there is all the money for the rich, but the world is still unable to find enough money to fight poverty.

If only a fraction of the pandemic stimulus had gone to where it was needed -- to remove poverty, the world would have been a much better place to live.

Meanwhile, the pandemic has further widened income inequality taking it to obnoxious levels. In America, the Institute for Policy Study says the combined wealth of its billionaires increased by 44.6 per cent during the pandemic. During the same period an estimated 80 million people lost their jobs. In any case, top 50 super rich in America hold as much wealth as the bottom 165 million. In India, the income inequality is no less glaring. Just to give you an idea, the average farm income as worked out by 2013 National Sample Survey Office (NSSO) report, for roughly 50 per cent of the population dependent largely on farming, stands at a paltry Rs 6,426 per month (roughly half of it coming from non-farm activities). That is why protesting farmers have been demanding an assured income by way of an assured price for their produce.

Compare this with what an Oxfam’s ‘Inequality Virus Report’ brings out. The combined wealth of India’s billionaires has risen by 35 per cent during the pandemic, and to explain how the increase would translate in simple terms, the report states that the rise in wealth of just top 11 billionaires alone is enough to pay for MNREGA work for ten years. In any case, the top 1 per cent holds four times the wealth that the bottom 953 million has.  

To understand how an increase in income works wonders for the poor, look at the outcome of this experiment on the feasibility of universal basic income. Two years before the pandemic struck, in early 2018, Foundation for Social Change, a charitable organisation, along with the University of British Columbia in Canada gave $ 7,500 Canadian dollars (or US $ 6,206) to 50 homeless families in the Vancouver region. A year later, during which time the charity kept a tab on how the money was being utilised, the results that emerged were not only astounding, but equally encouraging. More or less same results have been achieved in almost similar kind of studies conducted elsewhere.

Contrary to the public perception wherein it is generally believed that the poor don’t know how to handle money, the results clearly brought out how wisely they made use of the limited financial support, spending it on necessities like food, clothes, housing and other utilities. According to news reports, while the consumption of basic food needs went up by 37 per cent; the poor had actually cut down on drug and alcohol by 39 per cent. By moving fast into housing, these homeless actually worked to ensure a roof over their head. What the study therefore conclusively established is the significance of roti, kapda and makaan for the poor households everywhere in the world, and their strenuous efforts to work towards attaining it. In other words, such petty cash transfers have the potential to uplift the poor from the clutches of poverty.

Instead, we see more money being routed to the rich by way of tax concessions, economic stimulus packages, bank write-offs, bailouts and massive subsidies in the name of incentives for growth to bolster corporation profits with the faulty assumption that some of it will trickle down to the poor and needy. When it comes to giving poor their share, the argument is that by giving surplus money directly into the hands of the poor everyone will have more to spend, and that will lead to higher inflation.  

The economic growth model therefore has been very cleverly designed to help widen income inequality, and make the fat cows still fatter. The poor are expected to fend for themselves. #

Growth should take the poor into account. The Tribune. May 22, 2021 https://www.tribuneindia.com/news/comment/growth-should-take-the-poor-into-account-256674?fbclid=IwAR3OX6dgsHwmg3kBgPxtksZkQKxPaSjOxe9v10eK0wxIlMXZskwip2RXvAE

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