The article titled, ?US ponders: How deep is economic abyss?? by Rachel Beck and Erin McClam, Associated Press Writers, is the most lucid article I have read so far on the ongoing, global economic water torture. ?Then came Bear Stearns. One of the five largest U.S. investment banks nearly collapsed in a single day before the government propped it up by backing emergency loans and a rival stepped in to buy it for a paltry $ two per share.?
Rachel Bech and Erin McClam call it a water torture because the globe has been subjected to ?a maddening drip of bad news about jobs, gas prices, sagging home values, creeping inflation, the slouching dollar and a stock market in bumpy descent.? Drip, drip, drip, the super cop'shigh consumption economy built on borrowed money is taking its toll on poor Indian farmers, all 650 million of them.
When America sneezes, every part of the globe catches a cold. This is the global economic order.
What should swadeshi enthusiasts do?
Economists and financial pundits may debate about recessions or non-existent recessions in America, about capitalist economies and about the State controlling the commanding heights of the economy without allowing individual citizen'sintiatives. But, the harsh reality of Indian economic situation is that while GDP is tom-tomed (even by renowned economists like the former Reserve Bank Governor, now economic adviser to GoI) to grow at more than nine per cent per annum, agricultural sector has, in fact, grown only at 2.3 per cent during 2007. This is a shocking state of affairs, directly related to the global economic water torture taking its toll on the already impoverished Indian farmer. Mere eye-wash announcements of loan-waivers for farmers will not suffice. The farmers should be given the resources for improving soil health and assured of 24X7 water supply to provide for upto four crops per year in every nook and corner of the nation with the potential to create nine crore acres of wet land with assured irrigation to potentially benefit nine crore poor rural, farmer families, at the rate of one acre of new cultivable land distributed per family which should be the first priority of the National Water Grid Authority which should be put in place immediately, only for the reason of stopping the outrage of farmer suicides occurring in tens of thousands all over the nation.
The policies of the State have aggravated this impoverishment since the focus of policy-brass has been on pampering vote-banks such as those in Sahakari banks controlled by the Union Minister of Agriculture, Sharad Pawar. He has also paid little attention to a component of the agriculture sector which is often foot-noted merely as ?Fisheries?. The potential that this foot-note possesses is not even acknowledged because the coastal/marine people do not constitute a cohesive vote-bank and are diffused in small settlements along the long coastline of India. The former President APJ Abdul Kalam presented his vision of PURA (Provision of Urban facilities in Rural Areas). These have remained mere power point slide shows, not even seen and not even deliberated upon by learned Agricultural Commission experts. There is little concern even to implement the crucial item of the ruling coalition'sCommon Minimum Programme: creation of a Peninsular Water Grid (even though the inclusion of this item in CMP was heralded as a victory of the Dravidian party which is a UPA coalition partner).
From a situation reported by the late Dharam Pal, it is seen that as late as 1750, Indian manufacturing industry accounted for a quarter of the world'stotal Output (Paul Bairoch, ?International industrialisation levels from 1750?1980?, Journal of European Economic History, 11, Fall, 1982.) ? resulting in European tariff barriers against it. Indian agriculture was capable of producing crop yields which outstripped any other nation'sand sustained dense population levels in an expansive domain of over six lakh villages. (Prasannan Parthasarathi, ?Rethinking wages and competitiveness in the eighteenth century: Britain and South India?, Past &Present, 158, 1998; K. N. Chaudhuri, Asia before Europe: economy and civilisation of the Indian Ocean from the rise of Islam to 1750, Cambridge: Cambridge University Press, 1990.) [loc.cit. ?India in the early modern world economy: modes of production, reproduction and exchange? by David Washbrook, Journal of Global History (2007) 2, pp. 87?111 ?London School of Economics and Political Science 2007 doi:10.1017/S1740022807002057]
For one, there should be a clear understanding of the nexus between finance and state power. All the balance of payments surpluses that China has accumulated, and all the petro-dollars accumulated by the oil cartels simply end up as money parked in the American financial system. This is finance.
Since America is the only super-cop of the globe, no one who has parked moneys in the American financial system can create a run on this system (by withdrawing the investments) simply because, there is no where else where these moneys can be parked. Added to this pathetic situation faced by dollar currency accumulations, is the fact that America can renege on its international debt obligations by simply mounting Iraq-type military adventures. This is state power.
State power dictates the absence of a financial system that Keynes envisaged when he thought up the IMF and other instrumentalities. Now, the free-market wheeler-dealers have invented a plethora of financial instruments creating real ?paper? money beyond the printing of currency notes from security presses of the world.
What should swadeshi enthusiasts do with this situation of finance-state power nexus?
One adage is: if you can'tbeat them, join them. This is a soft option which many nations have opted for, aligning with the avaricious super-cop who is sitting pretty with the only world financial standard: US $. Gold has become just yet another paper standard, excepting in India where this is purchased, stocked and re-cycled with glee. If Indians decide to junk all the gold they possess, there will be nowhere to park the US $ realised from the sale. All the gold held will just be junk, mere adornments as jewellery with little value for abhyudayam of the nation.
What should swadeshi enthusiasts do?
The option to cut oneself off from the global financial labyrinth is a non-option.
But what can be done is a series a incremental steps to soften the blow created by the might of the US $ and the US super-cop operations. The good news is that the cop cannot fight simultaneously in more than two fronts. For e.g., Uncle Sam cannot take out Iran'snukes and break up China into three pieces, at the same time.
Some suggested steps are:
Stop fund flows through financial instruments such as index funds, insurance covers of options and puts, into the Indian financial system.
Cap the quantum of fund flows allowed for trades through the Indian Stock markets.
Slowly switch over from stock market foreign institutional investor (FII) fund flows to direct capital investments in specific projects and only for technology components which India does not possess. (For e.g. if India has to buy uranium, allow NSG to directly supply uranium to specific, designated nuclear power plants; if high-tech pipes from US General Electric have to be purchased, purchase only the required quantities without allowing GE to create an MNC operation in India).
Review the possibility of pre-closure of loans committed to be taken from institutions such as World Bank and Asian Development Bank and evaluate the possibility of using judiciously the foreign exchange reserves to offset for such pre-closures impacting ongoing development projects.
There could be more such steps which should be deliberated upon by swadeshi enthusiasts.
One such step is to launch major, indigenous, self-reliant initiatives. Set up a National Water Grid Authority and start putting the Grid in place within the next five years. This will create a veritable Blue Revolution and empower rural India and create a renaissance to increase the forest cover of the nation, provide the potential for increasing agricultural production (and agricultural incomes of farmer families) four-fold within three years. Take steps to create an Indian Ocean Community actively promoting Trans-Asian Railway and Trans-Asian Highway. Create Marine Economic Zones along the 8118 km. coastline of India to extend into a 200-km. Exclusive Economic Zone authorised under the Law of the Sea, from the coastline of India to create the potential for earning foreign exchange per annum of upto Rs. 40,000 crores per annum; thus initiating a new opportunity which will make India earn more Foreign Exchange and build up more FE reserves as China has done.
created by the US sneeze as Keynes turns in his grave. It takes peoples? will and hard work. There has to be a political climate which does not indulge in fundamental rights claptrap but emphasizes fundamental responsibilities. This is also known in Indian tradition as abhyudayam defined as Dharma, an abiding order which will sustain the samajam.
(The writer, Director, Sarasvati Research Centre, former Director Asian Development Bank, can be contacted at [email protected])