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It’s time to rid India of the GDP disease

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A woman in the Aravalli hills of Rajasthan carries home a headload of field straw. India’s National Accounts Statistics is completely ignorant of the biophysical economy.

On 5 January 2017 the Central Statistics Office of the Ministry of Statistics and Programme Implementation, Government of India, issued a note titled “First advance estimates of national income, 2017-18”. The contents of this note immediately caused great consternation among the ranks of those in business and industry, trading, banking anf finance, and government who hold that the growth of India’s gross domestic product is supremely important as it is this growth which describes what India is and should be.

In its usual bland way, the Central Statistics Office said that this was “the First Advance estimates of national income at constant (2011-12) and current prices, for the financial year 2017-18” and then proeeded, after a short boilerplate explanation about the compilation of estimates, delivered the bombshell to the GDP standard-bearers: “The growth in GDP during 2017-18 is estimated at 6.5% as compared to the growth rate of 7.1% in 2016-17.” [pdf file here]

To me, this is good news of a kind not heard in the last several years.

But India’s business and financial press were thrown into a caterwauling discord which within minutes was all over the internet.

An example of one out of the many messages in a daily barrage delivered by the Government of India’s ‘GDP First’ corps. This is from what is called the Make in India ‘initiative’ of the Department of Industrial Policy and Promotion, Ministry of Commerce. “Make in India is much more than an inspiring slogan,” the DIPP says. “It represents a comprehensive and unprecedented overhaul of out-dated processes and policies.” For this childish GDP rah-rah club, environmental protection, natural reserves, watershed conservation, handloom and handicrafts are all outdated practices and ideas.

‘GDP growth seen at four-year low of 6.5% in 2017-18: CSO’ said the Economic Times: “Most private economists have pared the growth forecast to 6.2 to 6.5 percent for this fiscal year, citing the teething troubles faced by businesses during the roll out of a goods and services tax (GST).”

‘7 reasons why FY18 GDP growth forecast should be viewed with caution’ advised Business Standard: “The fact that growth will be 6.5% is significant as it is even lower than the Economic Survey assumption of 6.75-7.5% for the year. Hence, it is not expected to be higher than the base mark which means that it would be lowest in the past three years. The effects of demonetisation and GST have played some role here.”

‘CSO pegs FY18 growth at 6.5%; why forecast is an eye-opener for Narendra Modi govt’ said Firstpost: “The healthy uptick in volumes displayed by many sectors in November 2017, is expected to strengthen in the remainder of FY2018, benefiting from a favourable base effect and a ‘catch up’ following the subdued first half. Accordingly, manufacturing is likely to display healthy expansion in volumes in H2 FY2018, which should result in a substantial improvement in capacity utilisation on a YoY basis.”

‘GST disruptions eat FY18 economic growth; GDP seen growing at 6.5%, lowest under Modi government’ huffed the Financial Express: “For a broad-based recovery the rural economy needs to recover and we can expect the upcoming budget to focus on alleviating some of the stress in the rural economy and concentrating on measures to augment the flow of credit in the economy. Overall growth is likely to improve in the coming year and possibly move up beyond the 7% mark in FY19.”

‘India’s GDP growth seen decelerating to 6.5% in 2017-18 from 7.1% in 2016-17’ said the Mint: “The nominal GDP, or gross domestic product at market prices, is expected to grow at 9.5% against 11.75% assumed in the 2017-18 budget presented last year. This may make it difficult for the government to achieve the fiscal deficit target of 3.2% of GDP in a fiscally tight year.”

‘India Sees FY18 GDP Growth At 6.5%’ observed Bloomberg Quint: “Growth in gross value added terms, which strips out the impact of indirect taxes and subsidies, is pegged at 6.1 this year, versus a revised 6.6 percent last fiscal. Both GDP and GVA growth were marginally below expectations. A Bloomberg poll had pegged GDP growth at 6.7 percent. The RBI had forecast GVA growth at 6.7 percent at the time of its last policy review in December.”

‘India’s FY18 GDP growth estimated at 6.5%, says CSO data’ said Zee Business: “Real GVA, i.e, GVA at basic constant prices (2011-12) is anticipated to increase from Rs 111.85 lakh crore in 2016-17 to Rs 118.71 lakh crore in 2017-18. Anticipated growth of real GVA at basic prices in 2017-18 is 6.1 percent as against 6.6 percent in 2016-17.”

So great is the power of the School of GDP and of its regents, who are as priests of the Sect of GDP Growth, that the meaninglessness of GDP is a subject practically invisible in India today. Just as it has no meaning at all to the woman in my photograph above, so too GDP has no meaning for all, including the 2.7% (or thereabouts) who pay income tax.

This tweet shows us the scale of the problem. An article by Klaus Schwab of the World Economic Forum (a club of powerful globalists) is posted on the website of Prime Minister Narendra Modi ! The head of the ruling BJP’s information unit broadcasts it.

India’s National Accounts Statistics presents every quarter and annually, estimates of the size of the country’s GDP, of the rate of GDP growth, of the size of ‘gross value added’, to which GDP is bound in ways as complicated as they are misleading. There are wages, interests, salaries, profits, factor costs, net indirect taxes, product taxes, product subsidies, market prices, industry-wise estimates and producer prices to juggle.

For the most part, these are prices and costs alone, upon which various kinds of taxes are levied and whose materials and processes may qualify for subsidies. All these are added and deducted, or deducted and added, and finally totalled show a GVA which then leads to a GDP. The prices are arbitrary and speculative, as all prices are, the arbitrariness and speculative nature being attributed to something called market demand, itself a creation of policy and advertising – policy to choke choices and advertising to spur greed. On this putrid basis does the School of GDP stand.

The GDP and GDP-growth frenzy in India spares not a minute for a questioning of its fundamental ideas, which in certain quarters had begun to shown as hollow and destructive in the early 1970s, when the effects of the material and consumption boom in Europe, North American (USA and Canada) and some of the OECD countries after the end of the Second World War became visible as environmental degradation.

Over 30 years later, sections of those societies inhabit and practice what are called ‘steady state’ economics, ‘transition’ economics (that is, transition to low energy, low consumption, recycling and sharing based ways of collective living) and ‘de-growth’, which is a scaling down of economic production and consumption done equitably and to ensure that a society (or groups of settlement and their industries) strictly observe the bio-physical limits of their environment (pollution and pollutants, land, water, biodiversity, etc).

But the Central Statistics Office of the Ministry of Statistics and Programme Implementation, Government of India, is ignorant of such critical thinking. It is just as ignorant of the many efforts at swadeshi living, production, cultivation (agro-ecological) and education (informal learning environments instead of reformatted syllabi lifted wholsesale from countries whose exploitative economies installed globalisation as the default economics mode) that are visible all over India today. The CSO and MoSPI are not entirely to blame for this abysmal blindness, because the Ministry of Finance (like every other major line ministry of the Government of India, and like every state government) has decided to be even more blind.

To read the insensate paragraphs disgorged every quarter from the CSO (and Ministry of Finance, likewise the Niti Aayog, the chambers of commerce and industry, the many economy and trade think-tanks) is to find evidence to pile upon earlier evidence that here is an administration of a very large, extremely populous country which cares not the slightest about the indubitably strong correlations between ‘GDP growth’ and more forms of environmental damage than have been reckoned.

The GDP-GVA-growth fantasy cares not the slightest about energy over-use and CO2 emissions, about the effects of widespread atmospheric and chemical pollution on the health of the 185 million rural households and 88 million urban households (my estimates for 2018) of India, and about the terrible stresses that the urban households in more than 4,000 towns, district headquarters and metros are subject to as a result of their lives – through mobile phone apps, banks, the food industry, the automobile industry and the building industry – being micro-regulated so that an additional thousandth of a per cent of GDP growth can be squeezed out of them.

The GDP asura has brought ruin to India’s environment, cities, farms, households, forests, rivers, coasts and hills. Let 2018 be the year we burn the monster once and for all.

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Taxing knowledge and nature

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The success of GST cannot come at a cultural cost to India. A well-informed tax system must widen the dialogue finance has with handicrafts and hand weaves. [This article has been published by The Pioneer, New Delhi.]

On 15 September, in a notification about the Central Goods and Services Tax (GST) Act 2017, the Central Board of Excise and Customs exempted “casual taxable persons making taxable supplies of handicraft goods” from requiring to be registered under the Act. The previous day, a similar exemption was given for the Integrated GST, and which concerns the inter-state supply of handicraft and handloom goods, a traffic that contributes a substantial livelihood to many crafts households.

There are a few conditions explained in the stilted language such notifications employ, such as value of sales, the need for craftspeople and artisans to obtain a Permanent Account Number (PAN) and fill out an e-way bill.

Yet these corrections to GST, made by the Ministry of Finance, are the first signals that the entreaties made to the Government of India by craftspeople and artisans are at last being heeded and responded to. They were made, and took shape in the form of a representation, titled “A plea for reconsidering GST rates for the crafts sector” and was submitted in July 2017 to the Prime Minister’s Office.

The reason this representation had been discussed, compiled and delivered was the ruinous effect on the handicrafts and handloom sector of the Goods and Services Tax (GST), which came into force on 1 July 2017 under the slogan, “the single biggest tax reform in the history of the nation”. The representation to the PMO pointed out that this single biggest tax reform had been drafted, passed and was being implemented without a single consultation with the largest national number of craftspeople and artisans in the world.

The representation went on to explain that the GST consultations had not included or even recognised “the widespread existence of crafts people, practices and products based on centuries old histories and skills, which give India a unique place in the world and brings economic benefits to dispersed rural artisans”.

Handicrafts and hand weaves provides employment and livelihood which is, in terms of numbers, next only to agriculture (indeed the two are concomitant, being based on nature and the application of knowledge). While many crafts and artisanal products are seasonal, estimates are that over 110 lakh persons are so engaged, with more than 43 lakh in the handloom sector alone.

Click for a pdf file of this article (courtesy The Pioneer).

The GST crisis for handicrafts and hand weaves has shown that this sector is constantly on the defensive. It can only proceed by causing the recognition in economy that this sector (cultivation and its ‘arts and local manufactures’ included) does not produce only food, it also produces feed for animals, fuel (both traditional fuels and biofuels) and fibres and grasses and woods, the minerals and clays, the colours, for artisanal (and industrial) production, and that the maintenance of the bio-economy – that is the service of balancing our ecological habitats upon whose gifts we base our lives, a balancing brought about by the application of uncountable streams of local knowledge – is fundamental to the well being of the country’s peoples.

“One would assume that natural materials, organic cultivation, reduction of plastics and other synthetic materials, and recycling would figure in the Centre’s approach to policies across the board,” Jaya Jaitly has observed. As president of Dastkari Haat Samiti, the conceiver of Dilli Haat and the initiator of several of India’s most innovative programmes to return dignity and viability to craftspeople and artisans, her expectation of policy coherence is well warranted.

Both dignity and viability are important, and for as long as handicrafts and hand weaves were held in high esteem by the ruling administrations of ancient and medieval, colonial and independent India, both were assured. In the 1951 Census, the first of independent India, among the list of industries and occupations according to which the working population was described were herdsmen and shepherds, beekeepers, silkworm rearers, cultivators of lac, charcoal burners, collectors of cow dung, gatherers of sea weeds and water products, gur manufacture, toddy drawers, tailors and darners, potters and makers of earthenware, glass bangles and beads, basket makers.

The liberalisation and ‘market reform’ which swept through the country from the early 1990s brought with them a view of both macro- and local economics that became more distant from ‘arts and local manufactures’. India began to pay more attention to GDP and less to the meanings which handicraft and hand weaves represented. By the middle of the decade of the 2000s, biodiversity, carbon, ecosystem services, and even cultural services had begun to be discussed and considered. Terms and ideas such as ‘externality’ and ‘social costs’ began to be used to describe the changes to society and environment that were under way, visible but never acknowledged, which weakened and sickened both.

Such discussion rarely recalled quiet efforts that had been made in the same direction only a little earlier, such as in the report of the Steering Committee on Handlooms and Handicrafts for the Twelfth Plan, which had observed that “these two sectors constitute the only industry in the country that provide low cost, green livelihood opportunities to millions of families, supplementing incomes in seasons of agrarian distress, checking migration and preserving traditional economic relationships”.

‘Green livelihood’ made a quiet entry into planning vocabulary then. Now, ‘livelihood’ has been replaced with ‘economy’, which is quite a different idea, and the recent loud calls in favour of a ‘green economy’ for India have helped shelter a variety of very ungreen enterprises and practices. Perhaps in the notifications of 14 and 15 September we are seeing the first admission from the central government’s financial and planning authorities, that there is no need for a new ‘green economy’ (especially one based on expensive finance and fickle technologies) when we have had one for all the ages that we can enumerate.

The notifications are a worthy start, and I submit to the Ministry of Finance that these can and should lead it to consider anew how incentives and encouragements in the form of taxation instruments can do much to renew, revive and strengthen a ‘green economy’ that is the only genuinely grassroots activity India has and can have.

Some aspects that still require consultation and an extra-financial view are that crafts and weaves are not commodities and should not therefore be fitted by force into the Acts’ labyrinthine system of HSN codes, that the imposition of taxes higher than 5% on handicrafts and hand weaves discourages both sustainable production and consumption (at a time when such practices are gaining international currency), and that a well-informed system of taxation must include an understanding of the continuum of natural material, habitat, and the knowledge streams that use and transform nature’s materials into craft and fabric.

A new agenda for India’s agriculture

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Home, cattle, farming household and essential biomass in a hill village, Himachal Pradesh. Photo: Rahul Goswami 2014

Home, cattle, farming household and essential biomass in a hill village, Himachal Pradesh. Photo: Rahul Goswami 2014

Three weeks before the presenting of annual budget 2015-16 to the country (that is, us Bharatvaasis) and to the Parliament, the NDA-BJP government needs very much to recognise and respond sensibly to several truths. These are: that most Indian households and families are rural and agricultural, that the macro-economic fashion that has been followed since around 1990 elevates a uni-dimensional idea of economic ‘growth’ above all other considerations, and that several important factors both external and internal have rendered this idea of ‘growth’ obsolete.

Concerning the interaction of the three points – there are 90.2 million farming households households in Bharat – the analyst and commentator Devinder Sharma has reminded Arun Jaitley, Jayant Sinha, Rajiv Mehrishi, Arvind Subramanian, Ila Patnaik, H A C Prasad and other senior officials of the Finance Ministry that there is a continuing crisis which needs specific attention.

Sharma has outlined eleven points for the Ministry of Finance to take note of in its preparations for annual budget 2015-16 and I have summarised these points hereunder, and added four adjunct points to elaborate his very thoughtful advice.

Called ‘An 11-point agenda for resurrecting Indian agriculture and restoring the pride in farming’, Sharma has said: “Indian agriculture is faced with a terrible agrarian crisis. It is a crisis primarily of sustainability and economic viability. The severity of the crisis can be gauged from the spate of farm suicides. In the past 17 years, close to 3 lakh farmers reeling under mounting debt have preferred to commit suicide. Another 42% want to quit agriculture if given a choice. The spate of farmer suicide and the willingness of farmers to quit agriculture is a stark reminder of the grim crisis.”

Item 1. Providing a guaranteed assured monthly income to farmers. “Set up a National Farmers Income Commission which should compute the monthly income of a farm family depending upon his production and the geographical location of the farm.”

Item 2. No more Minimum Support Price (MSP) policy. This has historically been used to ask about its impact on food inflation. “Move from price policy to income policy. The income that a farmer earn should be de-linked from the price that his crops fetch in the market.”

Item 2.5. About 44% of agricultural households hold MGNREGA job cards. Among agricultural households, depending on the size of land held, non-farm income is significant. The need is to strengthen rural employment sources and income reliability as a major plank of local food security.

Item 3. Strengthen immediately the network of mandis (market yards) in all states and districts which provide farmers with a platform to sell their produce. “Leaving it to markets will result in distress sale.”

Fruit and vegetables being sorted in a village collection centre, Himachal Pradesh. Photo: Rahul Goswami 2014

Fruit and vegetables being sorted in a village collection centre, Himachal Pradesh. Photo: Rahul Goswami 2014

Item 4. Provide a viable marketing network for fruits and vegetables (horticultural produce). “I see no reason why India cannot carve out a marketing chain (like the milk cooperatives) for fruits, vegetables and other farm commodities.”

Item 4.5. ‘Market’ does not mean ‘mandi’. The thrust of the ‘reform’ demanded in the Agricultural Produce Marketing Committee (APMC) Acts is to “remove deterrent provisions” and “dismantle barriers to agriculture trade”. This effort will ruin smallholder farmers and must be halted.

Item 5. Cooperative farming must be encouraged including with legal support to make cooperatives more independent and effective. “Small cooperatives of organic farmers have done wonders” which be replicated for the rest of the crops.

Item 6. Villages must become self-reliant in agriculture and food security. “Shift the focus to local production, local procurement and local distribution” throughout the country for which the National Food Security Act needs amendment.

Item 7. Green Revolution areas are facing a crisis in sustainability. “With soil fertility devastated, water table plummeting and environment contaminated with chemical pesticides and fertiliser, the resulting impact on the entire food chain and human health is being increasingly felt.” We need a country-wide campaign to shift farming to non-pesticides management techniques.

Item 7.5. The agro-ecological approach to cultivation under decentralised planning (panchayat cluster) must be promoted. This has long been identified as the primary rural guide: “In the Indian development strategy, self-reliance has been conceptualised … in terms of building up domestic capabilities and reducing import dependence in strategic commodities” (from the Seventh Five Year Plan, 1985-90).

Item 8. Agriculture, dairy and forestry should be integrated. “Agricultural growth should not only be measured in terms of increase in foodgrain production but should be seen in the context of the village eco-system as a whole.”

Item 9. The government must not yield to pressure exerted via free trade agreements signed and stop food imports. “Importing food is importing unemployment.” The government must “not accept the European Union’s demand for opening up for dairy products and fruits/vegetables by reducing the import duties.”

Item 10. Climate change is affecting agriculture. Don’t look “at strategies only aimed at lessening the impact on agriculture and making farmers cope with the changing weather patterns, the focus should also be to limit greenhouse gas emissions from agriculture.” Reduce chemical fertiliser/pesticides in farming.

Item 10.5. The area-production-yield metric for agriculture is as outdated as ‘GDP growth’ is to describe a country. By adopting the principles of responsible and ecologically sound self-reliance, the whole system demands of agriculture need to be assessed with district planning being incentivised towards organic cultivation (expressly banning GM/GE).

Item 11. Localise the storage for foodgrains. In 1979 under the ‘Save Food Campaign’ grain silos were to be set up in 50 places. Localised and locally-managed foodgrain storage must be at the top of the agenda.

This is an agriculture and food agenda for the NDA-BJP government, to guide the strategies and approaches so that India does not compromise its food self-sufficiency, self-reliance (swadeshi) and return our farming households to dignity and self-respect.

Occupy Everywhere

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The Occupy Wall St movement is spreading quickly across the USA. Mother Jones magazine has put together an interactive map on where the protests are spreading to, and at last count there were over 60 locations!

An Occupy Wall Street protester yells at police officers as they make arrests in New York, Wednesday, Oct. 5, 2011. Protesters in suits and T-shirts with union slogans left work early to march with activists who have been camped out in Zuccotti Park for days. Photo: Seth Wenig

The ‘Occupy’ demonstrations are the blowback – long overdue – of the foreign-plus-financial policy of a great power which has for long dampened criticsm and fair a representative politics at home.

The ‘Occupy’ demonstrations express a broader public understanding that the basic source of the crisis facing millions of people lies in the social interests of the sprawling and powerful global financial system – of which Wall St is one symbol; a powerful symbol but nevertheless one amongst many similar symbols.

Dogged by debt and haunted by ever newer forms of deprivation, the American protesters have ‘taken’ Wall St to call and end to the reign of the giant banks that dominate the US and world economy. Their politics is determined not by the popular will, but by the interests of a cunning financial aristocracy ruthlessly absorbed with defending its wealth by impoverishing the majority of their fellow citizens.

The answer – Occupy Everywhere!

Mother Jones has provided a very useful timeline of the Occupy Wall Street movement:

The New York Observer has 50 portraits of people who have been in on the action in New York City. The Nation‘s Greg Mitchell is blogging “Occupy USA” developments daily. The Guardian is also producing ongoing coverage.

How the Occupy Wall Street movement uses social media:

  • Live footage of Zuccotti Park can be found at the protest epicenter’s viral webstream, Global Revolution.
  • The #occupywallstreet hashtag (as well as #ows and #occupywallst) has been the main engine on Twitter.
  • OccupyTogether.org supplies a range of DIY downloadable posters.
  • There is an Occupy Wall Street social app called The Vibe, which allows demonstrators to communicate anonymously.
  • An Occupy Wall Street publication was launched on Kickstarter, originally asking for $12,000 in seed money to get the publication rolling. The project surpassed its funding goal and has now raised over $40,000.
  • A Tumblr account, We Are the 99%, allows users to post personal anecdotes and stories about why they consider themselves part of the economically disaffected majority.

Occupying Wall Street

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The immediate area around the New York Stock Exchange, “Wall Street,” has been closed to the public and protestors who are encamped at a nearby park, chanting, singing and dancing along with marching and bugling on surrounding streets accompanied by phalanxes of cops and motor scooters, to cheers and thumbs-up from tour buses and hand shakes from passersby and street workers.

There has been no sign of the commercial media. Mainstream media in the Asia-Pacific region have ignored the historic occupation entirely, not because of their failure to see the beginning of an American democratic awakening, but because the channels of cross-holding and control are now well-established.

These mercantile cables are tightly wound around the “emerging economies” and their growing middle class populations whose consumption patterns are seen as replacing those to be lost by social movements such as this in the West.

“On the 17th of September, we want to see 20,000 people to flood into lower Manhattan, set up beds, kitchens, peaceful barricades and occupy Wall Street for a few months. Like our brothers and sisters in Egypt, Greece, Spain, and Iceland, we plan to use the revolutionary Arab Spring tactic of mass occupation to restore democracy in America. We also encourage the use of nonviolence to achieve our ends and maximize the safety of all participants.”

According to their website, the mission of the leaderless resistance movement is to flood thousands of people into lower Manhattan, set up beds, kitchens, peaceful barricades and occupy Wall Street for a few months in order to persuade President Barack Obama to establish a commission to end “the influence money has over representatives in Washington.” Demonstrators gathered to call for the occupation of Wall Street, Saturday, Sept. 17, 2011, in New York.

Occupy Wall Street is a leaderless resistance movement with people of many colors, genders and political persuasions. The one thing we all have in common is that We Are The 99% that will no longer tolerate the greed and corruption of the 1%. The original call for this occupation was published by Adbusters in July; since then, many individuals across the country have stepped up to organize this event, such as the people of the NYC General Assembly and US Day of Rage. There’ll also be similar occupations in the near future such as October2011 in Freedom Plaza, Washington D.C.

This is from their statement:
“We agree that we need to see election reform. However, the election reform proposed ignores the causes which allowed such a system to happen. Some will readily blame the federal reserve, but the political system has been beholden to political machinations of the wealthy well before its founding. We need to address the core facts: these corporations, even if they were unable to compete in the electoral arena, would still remain control of society. They would retain economic control, which would allow them to retain political control. Term limits would, again, not solve this, as many in the political class already leave politics to find themselves as part of the corporate elites. We need to retake the freedom that has been stolen from the people, altogether.”

How the OECD dislikes poor Indians but covets their economy

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No you don't. Get your destructive sophistry away from my village and my community.

The OECD (Organisation for Economic Cooperation and Development) has just released its Survey of India, and has said that “India now has the opportunity to move towards sustained and socially inclusive double-digit growth if the right policies are put in place”. The OCED survey said India’s economy has ranked among the best performers over the past decade, and poverty has been falling faster than in many other emerging economies. Pending a detailed reading of the report I can’t see how “best performer” and “falling poverty” can be applied to India, but the social and environmental dimensions of India’s so-called eocnomic growth may not be within the OECD’s scope in such a survey.

OECD Secretary-General Angel Gurría presented the Economic Survey of India in New Delhi and there said: “Policymakers are to be commended on the remarkable catch-up achieved in recent years, making India one of main driving forces of the global economy. The priority given to more socially inclusive economic growth is appropriate and further reforms are needed to achieve it.” There are more such conceptual conundrums here – catch up with who? And for what? What “socially inclusive” growth is Gurria talking about – India has the world’s largest population of malnourished children and the world’s largest population of hungry people. This has been so for the entire period that the OCED said India was “catching up”.

To ensure strong growth continues and is sufficiently inclusive, the government needs to target public expenditure better on the poor, the OECD has said. “Although high growth has reduced poverty, progress could have been faster. Hundreds of millions of people still live below the official poverty line. Malnutrition and poor health are still widespread.” Evidently the OECD India Survey 2011 team saw no contradiction between what they have praised and what exists. Against this backdrop, the report advocates a strengthened welfare system and improved access to health care. “Government spending on health is only around 1% of GDP – among the lowest rates in the world. Private health care provision is increasing but quality is highly variable. Better regulation and oversight is needed.” This is true, but the Survey’s objectives lead all solutions away from more and better public healthcare.

The irrelevance of the GDP squiggle to most Indians goes unnoticed by the OECD

The report said that around 9% of GDP is spent on energy and other subsidies, most of which fails to reach the poor, and that diesel subsidies should be phased out. For other energy products, such as kerosene and LPG, susbidies should be transformed into cash payments targeted to the poorest people in society. The government needs to ensure that its plan to shift kerosene and fertiliser subsidies into direct cash transfers is implemented quickly. Here the roll-out of a Universal Identity Number will help ensure payments go to the right people.

The recommendations in this para are full of threat. A quick look at the full Survey itself shows that there is special mention made of the fuel subsidy and the targeted public distribution of foodgrain. If the free marketeer reformists were to have their way, these would both be scrapped overnight, to be replaced by a weekly or monthly dole, transferred electronically and validated by a new national identification number which is in theory supposed to prevent fraud and exclusion. This is dangerous for the poor, because it makes them directly vulnerable to the worst symptoms of profiteering and corruption – already rampant despite safeguards – and because it removes the responsibility from the state for providing good quality and cheap social services and provisions of daily living. In this, the OECD Survey sounds exactly like the IMF.

So tell me, OECD boys and girls, what do you know about guavas and cane?

The OCED report has otherwise welcomed the planned introduction of a nationwide goods and services tax and suggested that in order to keep the overall rate low, the base should be as wide as possible (there go more paisas from the cash transfer to the poor). “Further fiscal consolidation is also called for, making more funds available for private investment” – which means more cutting of the health, education and rural development programmes. “Cutting red tape for businesses and further lowering barriers to trade and investment will help both companies and households. The report also notes that while progress has been made to improve infrastructure, even greater investment in this area is necessary to boost growth.”

The Survey has said that strengthening the financial system and promoting access to financial services is essential for strong and inclusive growth. (We’re quite sick and tired of hearing about ‘inclusive growth’ when the Indian government and its foreign advisers do all they can every single day to prevent it.) The report noted that many Indians still lack access to bank accounts although microfinance is improving opportunities in many communities. “The financial sector proved resilient during the global downturn but there remains scope for greater competition.” Hear, hear.

The Survey has said that education has been given high priority by India’s central and state governments and enrolment continues to grow fast – we call them degree factories for the globalisation mill. The report recommends more effective government regulation and funding. Incentives and professional development opportunities for teachers need to be strengthened while student loans for higher education should be more widely available.

Now I expect the usual round of endorsement, referencing and studious quoting to begin. Within a few months, the recommendations of the OCED India Survey 2011 will assume an oracular hue, never mind the reactionary and anti-poor real nature of its advice. The multilateral lending institutions – the World Bank, the IMF and the Asian Development Bank – will cite the Survey repeatedly. So will state governments in India and the central government. The armoury of those who assault the poor and the marginalised of India has been strengthened by a new weapon – this is the OECD contribution to the people of India.

The stranglehold of finance capital over the state

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Women collect coal scraps from an overburden dump for a nearby open pit coal mine. Overburden is the fertile soil (formerly used for agriculture) that has to be removed to get at the coal underneath. In the process small pieces of coal are also picked up which are scavenged by local villagers to be sold for cash. Photo: Panos Pictures/Robert Wallis

Is ours the age of the struggle between the state and the market? Or is it the age in which the state bowed to financial control over it? From a perspective which integrates labour, environmental stewardship, cultural safeguarding and a just human development, the state is firmly in the grip of finance and its liberalisers.

What has come to be called neo-liberalism is in short the expression used to describe the relentless and growing control of resources of every sort, be they mineral, human or environmental. If there has been a problem of neoliberalism it is that it failed to increase the rate of profit consistently and never achieved levels comparable to those of the ‘Golden Age’ between 1948 and 1973. The series of ‘booms’ of various kinds, which caught the attention of investors, bankers and speculators, have had much to do with the seeking to replicate the conditions of those years (in Deutschland they called the period ‘die Fette Jahre’, the fat years).

Boys carry large lumps of coal that they have scavenged from an open pit mine near Dhanbhad. They will carry this coal several kilometres to sell in a local market. As mining has displaced agriculture, scavenging for coal on the edge of mines has become one of the means of survival for those who have been displaced from an agricultural life by mining. Photo: Panos Pictures/Robert Wallis

The essence of financial liberalisation, seen in its totality, is to ensure the stranglehold of finance capital over the State, Prabhat Patnaik has explained in a commentary in People’s Democracy (the weekly organ of the Communist Party of India Marxist). This may appear paradoxical at first sight: as the term ‘liberalisation’ appended to ‘financial’ suggests, the basic aim of the process is to liberate finance from the shackles of the State, ie, to ensure not the control of finance over the State but the negation of the control of the State over finance. But the remarkable aspect of financial liberalisation consists precisely in this: what appears at first sight as the liberation of finance from the shackles of the State is nothing else but the acquisition by finance of control over the State.

In his short essay, ‘Neoliberalism: From One Crisis to Another, 1973-2008’, Neil Davidson has explained that these booms were the result of the following factors which he enumerates as under:

The first and most fundamental was simply greater exploitation of the workforce, by increasing productivity on the one hand (making fewer workers work harder and longer) and decreasing the share of income going to labour on the other (paying workers less in real terms).

The second was the expansion of private capital into two new areas: first through the expropriation of the remaining ‘commons’ in the Global South, releasing value which had previously been embedded in nature and hence unavailable for the purposes of accumulation; then through privatising state-owned industries and public services, providing resources which-potentially at least-could be used directly for production rather than in the process of realisation or as part of the social wage.

The third was the emergence of new centres of capital accumulation outside the established core of the world system in East Asia and above all, in China, which contributed to a partial restoration of profitability as a manufacturer of cheap consumer goods for Western and, above all, US import markets, and as the source of loans to the US through Treasury Bonds, which are then loaned again to American companies and consumers.

The fourth, itself a result of profit rates failing to consistently reach what capitalists considered acceptable levels, was a fall in the proportion of surplus value being invested in production and the rise in the proportion being saved, to the point where the latter became greater than the former. The need to find profitable uses for surplus capital, where productive investment was insufficiently attractive, tended to draw industrial capitalists towards financial speculation. This did not mean that industrial capital became subordinated to financial capital – rather, their interests converged.

A series of murals painted by the Tribal Women's Artist Collective from Hazaribagh. The collective attempts to keep tribal artistic traditions alive in the face of population displacement from tribal areas due to the spread of mining and the conflict between the India army and Maoist guerillas. The designs and styles are unique to each individual artist and were traditionally passed down from mothers to daughters through the generations. Photo: Panos Pictures/Robert Wallis

The turn to finance had implications beyond a shifting focus of investment, which tends to be compressed into the term ‘financialisation’. But among all the complexities of arbitrage, derivatives, hedge funds and the rest, there are two essential points about financialisation which need to be understood. One is that, financial speculation, like several of the factors discussed here, can increase the profits of individual capitalists at the expense of others, but cannot create new value for the system as a whole. The other is that, in so far as profits were raised, one aspect of financialisation became more important than any other and consequently needs to be considered as a factor in its own right.

This, the fifth and final factor, was a massive increase in consumer debt. Credit became crucially important in preventing the return to crisis only after the post-1982 recovery had exhausted itself. In so far as better-off working class people have spent borrowed money on commodities which are above the minimum needed to reproduce their labour, it is a response to their situation under neoliberalism. But the main reason for increased debt has been the need to maintain personal or familial income levels.

Men transporting baskets of coal onto railway carriages at Sauanda railway yard. Most of the workers have migrated to work in the area having been displaced from their traditional livelihoods in the countryside. Lacking title deeds for land on which they have farmed and hunted for millennia, the rural adivasi communities are being displaced to make way for new industrial developments planned to capitalise on the land's mineral wealth. Photo: Panos Pictures/Robert Wallis

The points that Patnaik, Davidson and several others have been making, with increasing urgency in recent years, is that the freeing of finance capital from all social obligations like priority sector lending targets and differential interest rates, not only increases its profitability, even while pushing petty producers and small capitalists deeper into crisis, but also allows it to pursue its own profit-seeking ways over a global terrain, which has the effect of subjugating the State to the thralldom of internationalised finance capital.

In short, financial liberalisation is the process through which a fundamental change is enforced on the bourgeois State: from being an entity apparently standing above society and intervening for the ‘social good’, which means keeping in check to some extent the rapacity of big capital, even while promoting it and defending its monopoly privileges, the State becomes exclusively dominated by financial interests (with which big corporate interests are closely enmeshed) and loses its relative autonomy vis-a-vis such interests. We have not the ‘rolling back’ of the State as neo-liberal ideologues suggest, but State intervention in the exclusive interests of finance capital.

[‘Neoliberalism: From One Crisis to Another, 1973-2008’, Neil Davidson, Senior Research Fellow at the University of Strathclyde and a member of the Editorial Board of the journal International Socialism.]

India’s ‘growth’ and the lifting of showboats

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The doctrine of growthism as the best tonic for India has been given new impetus by Jagdish N Bhagwati, Senior Fellow for International Economics at the Council on Foreign Relations, an American think tank.

The CFR has reprinted an article written by Bhagwati titled ‘India’s Reform and Growth Have Lifted All Boats’, originally published by the Financial Times (available here if you have a subscription).

Bhagwati’s paean to an economy judged by whether it does 8% or 9% per quarter is the latest argument in a season of several, from economists and heads of industry, from policymakers and international finance experts.

What is different about Bhagwati’s short article is that it very quickly hits out at those he has called “the reform naysayers” in India. “Such voices present India with a double challenge: they misrepresent the successful way growth has cut India’s poverty, but more importantly their critiques stand in the way of a much needed new wave of reforms, which would further benefit India’s poorest.”

Bhagwati has said that India’s liberal reforms actually pulled 200 million out of poverty, that had these reforms only started earlier more would have been pulled out, that improvements are shared by nearly all underprivileged groups and that, most important for him, “being poor is now seen by India’s underprivileged as a removable condition”.

This trend, typified by Bhagwati’s recent article, of pointing to impressive quarterly growth rates and inferring their impacts on the poor and on wage labour by citing a few studies, needs to be understood and countered.

Writing in People’s Democracy (02 January 2011) C P Chandrasekhar pointed out that “India is a country still plagued by hunger with among the highest rates of malnutrition in the world” (‘Growth for Whom?’). Deprivation in other forms such as lack of access to clean drinking water, sanitation, basic health facilities and school education still afflict a large proportion of the population.

Chandrasekhar has said that the benefits of high growth for the best part of a decade must be accruing to a small minority, resulting in increased inequality. Unfortunately, data of a kind that helps us track inequality is difficult to come by. Surveys of consumption expenditure do not cover the rich and therefore tend to underestimate the extent of inequality.

It is such shortcomings in our ability to measure patterns of consumption that allow the trend, displayed by Bhagwati, to prosper. However, there are signs enough of increased inequality in India.

The first is that the high growth of the last few years has been accompanied by a sharp rise in the gross savings rate, Chandrasekhar has said, of 5.5 percentage points to 29.1 per cent between 2001-02 and 2004-05. The rate rose by another 4.2 percentage points between 2004-05 and 2007-08. “Since it is the richer sections that have incomes that are substantially in excess of their consumption needs which can be saved, this sharp rise in the savings rate points to an increase in incomes among the richer classes.”

This is but one among the many substantial realities whcih the proponents of growthism for India cannot reconcile with their arguments for more reform.

OECD-FAO Agricultural Outlook 2010-2019

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OECD-FAO Agricultural Outlook 2010-2019The OECD-FAO Agricultural Outlook 2010-2019 has just been released. A major joint document, this follows the regular, roughly ten-year wide focus series followed by both organisations on global agriculture. The new release has sections on food price volatility and the impact of commodity markets, and so will be of interest to the research and practitioner community looking at the finance-food-policy interfaces.

The Outlook says that demand for cereals for food and feed is projected to rise by one-third to 3 billion tons by 2050, and possibly higher due to a growing liquid biofuel market. Net cereal imports into the developing countries would increase almost three-fold to nearly 300 million tons by 2050, some 14% of their total cereal consumption. Demand for more income-responsive vegetable oils, meats and dairy products are expected to rise even faster. Livestock is one of the fastest growing sub-sectors in agriculture with over 80% of the projected growth in the next decade taking place in developing countries, particularly in Asia and the Pacific (especially China) and Latin America, outpacing growth in the OECD area by a factor of 2:1 over the next decade.

To support the necessary expansion in output in developing countries, FAO estimates the required average annual investment in primary agriculture and necessary downstream services (e.g. storage, processing) at USD 209 billion in 2009 prices (or USD 83 billion net of depreciation), much of which would come from private sources. Still, this amount represents a 50% increase from current levels and does not include the public investments required in such areas as roads, irrigation, electricity and education. In general since the 1970s, those countries with higher net investment per agricultural worker have been more successful at reducing hunger.

I’ve extracted three of the more interesting points from the Overview which prefaces the Outlook:

1. Average crop prices over the next ten years for the commodities covered in this Outlook are projected to be above the levels of the decade prior to the 2007/08 peaks, in both nominal and real terms (adjusted for inflation). Average wheat and coarse grain prices are projected to be nearly 15-40% higher in real terms relative to 1997-2006, while for vegetable oils real prices are expected to be more than 40% higher. World sugar prices to 2019 will also be above the average of the previous decade but well below the 29-year highs experienced at the end of 2009.

2. Developing countries will provide the main source of growth for world agricultural production, consumption and trade. Demand from developing countries is driven by rising per capita incomes and urbanisation, reinforced by population growth, which remains nearly twice that of the OECD area. As incomes rise, diets are expected to slowly diversify away from staple foods towards increased meats and processed foods that will favour livestock and dairy products. Also, with increasing affluence and an expanding middle class, food consumption in these countries should become less responsive to price and income changes, as is currently the case in OECD countries. This implies that larger changes in price and incomes will be required for consumption to adjust to any unforeseen shocks.

3. National and local emergency stockholding of key food security commodities, for food emergencies, particularly for low-income food importing countries, may increase confidence in the access to food in times of crisis and help stabilise local markets. Increased research, capacity building, and sharing of best practices to improve the functioning of emergency stock schemes are required. Whatever actions governments consider taking, it is always important to keep in mind the full set of policy measures, risks and possible responses for the targeted population.