SLEEP WALKING - Economic reform is meaningless without intellectual revolution

By Swapan Dasgupta

P.V. Narasimha Rao, 1992

In these troubled times for the global economy, it may be worth narrating a story about the mentality of Indian politicians.

When the Congress returned to power in the summer of 1991 after the Janata Dal interregnum, the cabinet of Prime Minister P.V. Narasimha Rao was presented a note by the ministry of finance advocating dramatic reforms that included the deregulation of the economy. The note was greeted with predictable scepticism, if not outright hostility by the cabinet.

Looking for a way out of the logjam, Rao despatched a young aide to one of Indira Gandhi’s trusted confidants for advice. The hard-nosed veteran read the finance ministry note and then offered his suggestion. Wouldn’t it be more advisable, he asked, to preface the document with appropriate passages from Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi? It would, he suggested, definitely enhance the comfort level of the cabinet to know that the proposed measures were in conformity with the scriptures.

The wily Rao didn’t hesitate to accept the sage advice. A reworked cabinet note was circulated and this time, the opposition melted away, giving the prime minister the mandate to pursue liberalization as the highest stage of Nehru and Indira’s socialism.

This delightful story may well be true, partially true or plain apocryphal. What is remarkable, however, is not the revelation that the Congress party is made up of dinosaurs, but the extent to which orthodoxy takes hold of the political imagination to resist change. This is, of course, true of India but it is also a global phenomenon.

In her autobiography, The Path to Power, Margaret Thatcher spelt out the insidious hold of the post-War consensus on the British political imagination: “By 1964 British society had entered a sick phase of liberal conformism passing as individual self-expression. Only progressive ideas and people were worthy of respect by an increasingly self-conscious and self-confident media class.” Thatcher may well have been talking of India.

Nominally, India may have travelled a long way from the days when inefficiency and sloth were regarded as economic virtues and when personal rates of taxation for the highest slab touched 97 per cent. What is significant, however, about the massive economic shifts that were first brought in by Manmohan Singh’s 1991 budget is the remarkable extent to which change has been ushered without fanfare and, more often than not, by stealth.

It required the 1991 balance of payments crisis and the emotional trauma of the physical mortgaging of some of India’s gold reserves to begin the assault on the licence-permit-quota raj. Likewise, it required the Western sanctions against India in the aftermath of the 1998 Pokhran-II blasts to lift many of the curbs on foreign capital and rid Atal Bihari Vajpayee of his party’s accumulated swadeshi baggage.

As 2011 draws to a close, India is at a similar crossroads. The economic downturn in the United States of America and the Eurozone crisis has left no economy untouched. Complemented by what is called the ‘governance deficit’, India’s economic indicators have moved southwards. The gross domestic product projections are down from nine per cent to seven per cent; the already-large fiscal deficit is expected to breach the budgeted five per cent level and touch more than six per cent of the GDP; inflation has been hovering around 10 per cent for nearly a year and shows little sign of coming down despite 13 interest rate hikes since March 2009; the sensex has lost 22 per cent since January and foreign direct investment inflows have virtually ceased after touching a record $29 billion in 2010; in the preceding quarter, the profitability of Indian companies fell by an average of 30 per cent; and the Indian rupee, now blessed with a distinctive symbol, has lost some 15 per cent of its value in barely three months, thereby making imports prohibitive and adding to the inflationary spiral.

Middle India’s overall comfort level with Prime Minister Manmohan Singh rested on two beliefs: first, that he was a man of integrity and innate decency and, second, that he had the requisite skills to manage the economy. On both these counts, Singh’s reputation is in tatters. No one accuses the prime minister of being personally dishonest, but the sheer scale of the corruption charges before the courts have put question marks on his ability and willingness to tame his roguish colleagues. Worse still, there is complete consternation at the prime minister’s inability to ‘fix’ the economy. That he doesn’t possess the proverbial ‘magic wand’ is conceded by all reasonable Indians. What strikes them as odd is that the senses of urgency and purpose that should have accompanied the economic slide are missing. The government appears to have simply given up. Particularly disturbing is the extent to which a beleaguered political class seems ready to fall back on the ideological shibboleths that many imagined had been steadily discarded since 1991. The approach to the fiscal deficit is a classic example of a government that seems unconcerned.

There is a stalemate in the US over the failure of the White House and the Republican-controlled senate to agree on measures to reduce a trillion dollar deficit, and in both Britain and the Eurozone, the deficit is at the root of a political and diplomatic stand-off. Yet in India, fiscal consolidation has been deleted from the vocabulary of the ruling party and its allies. The hugely expensive and inefficient Centre-sponsored welfare schemes are not merely regarded as holy cows but there are moves to expand the net. So whimsical is the sop culture that last week the commerce ministry announced a Rs 3,844 crore ‘package’ for weavers in eastern Uttar Pradesh because Rahul Gandhi demanded it. No wonder Mamata Banerjee believes that handouts are her birthright too. In Europe, it is said that ‘austerity is the new normal’. In an economically fragile India, fiscal profligacy is the norm — the preferred Rahul alternative to beggary. India is living beyond its means but no one seems to care.

In most of the countries gripped by the downturn, the trend is towards removing as many obstacles to growth as possible. In Britain, for example, stringent planning norms have been relaxed to facilitate a growth in housing. In Italy, the new ‘technocrat’ prime minister has announced a series of measures that include fiscal prudence, welfare cuts and the dismantling of restrictive practices. In India on the other hand, there are moves to add a statutory premium on land acquisition for housing, industry and public utilities. Additionally, limited progress has been made in enlarging the scope of foreign investment in insurance and retail because of the government’s failure to secure agreement within the ruling coalition.

India, it would seem, is sleepwalking its way into an economic disaster zone. Yet, there are two remarkable features of this death march. First, there is no widespread realization that the troubles aren’t confined to inflation and price rise but affect the nerve centres of economic growth. Second, there is the presumption that statist intervention and a more rigid regulatory regime (that deters private sector corruption) is the way out.

Nehru, it must be said, did a remarkably good job in turning progressivism into common sense. Even two decades after liberalization transformed India and heralded far wider levels of prosperity, India has not yet turned its back on the belief structures of the bad old days. Economic reforms, it would seem, become meaningful only when accompanied by an intellectual revolution.

The Telegraph, November 25, 2011

FOR WHOM THE BELL TOLLS - The West needs props to cling to its sense of entitlement

By Swapan Dasgupta

Meddlesome priests, especially those blessed with exaggerated self-righteousness, have always been the butt of jokes. In a society where the quest of the material has easily outstripped the spiritual void, the Church of England in particular has struggled to retain its relevance in an increasingly irreverent land. Once a pillar of the Establishment, the Anglican Church has, like the monarchy and the Conservative Party, suffered from the post-War remaking of England. Nominally it has kept its toehold as the established national Church of England, with the Queen at the pinnacle, but its ability to epitomise the Christian consensus has eroded.  Plagued by theological bickering, over issues that range from gay priests to women clergy, it has yielded its Christian certitude to the Church of Rome and the newly-emergent evangelical churches. The slightly dotty, parish priest who used to be as central to local communities as the local squire and the Women’s Institute is almost facing extinction in the 21^st century.

Last month, the Church of England flickered back to life briefly, courtesy the Occupy the City movement that arrived in Britain as a spin-off from the Occupy Wall Street movement in New York. Originally conceived as an expression of revulsion against the unbridled greed of fat cats in the financial world, the movement has so far left the proletariat unmoved. However, it did strike an emotional chord among those on the fringes of ‘respectable’ society—those committed to ‘fair trade’, organic food, justice for the Third World, anti-globalisation and environmentally sustainable living. Some saw in the Occupy Wall Street stir an answer to the Tea Party movement but its self-image was never so overtly political.

The anti-greed protests embraced three distinct types. There were the remnants of the hippie movement tempered by feminism—the type of protestors who made a lifestyle statement by camping outside the US Air Force base in Greenham Common for nearly three years in the mid-1980s. Then there were the professional anti-globalisation protestors that are drawn to every meeting of the G-20 leaders and World Trade Organisation summits. And, finally, there were the professional Leftists, usually from fringe organisations that have made a virtue of their own irrelevance. In the 1980s, the satirical weekly Private Eye, dubbed them the ‘Sparts’, after a slightly bizarre left-wing sect that bore the name of Rosa Luxemburg’s old Sparticist League. I am happy to see that the usage of the term has been revived.

The picketing of St Paul’s Cathedral in London, arguably Anglican England’s most spectacular basilica, by this rag-tag bunch should have ideally attracted modest attention. Protests of this sort are dime-a-dozen in democracies and the law enforcement agencies are well equipped to get them to move on with a minimum of fuss and violence. Unfortunately, this is when the meddlesome priests stepped into the scene.

Unable to countenance the authorities clearing the area to prevent the protesters being a public nuisance and posing a fire hazard, Reverend Dr Giles Fraser, the Canon Chancellor of St Paul’s Cathedral, resigned from his post. He was so overwhelmed by the Christian piety of the protestors that he proclaimed “I could imagine Jesus being born in the camp.” He also declared that it was fitting
that a tented community had sprung up around St Paul’s because the
Saint had been a tentmaker in real life. In the index of woolly-headedness, Dr Fraser had few equals.  

Dr Fraser’s curious resignation and his depiction of the protestors as noble, pure souls whose voices had to be heard was the signal for the most spectacular display of humbug since the Abdication of 1936. The Church of England went all weak in the knees and the Archbishop of Canterbury declared that the “Church of England is a place where the unspoken anxieties of society can often find a voice, for good and ill.” In an article in Financial Times, Dr Rowan Williams went on to endorse a “Robin Hood tax” of 0.05 per cent on “share, bond and currency transactions and their derivatives, with the resulting funds being designated for investment in the ‘real’ economy…” The tax, which has the backing of the G-20 and the likes of George Soros, Warren Buffett and Bill Gates, is expected to yield around $410 billion globally—maybe enough to bail out Greece and Italy.

On his part, Leader of the Opposition Ed Miliband chipped in with the discovery that there was “a gap between people’s values and the way our country is run”—an observation that was endorsed, among others, by the Army chief who spoke of a loss of the nation’s moral compass. At this rate, an endorsement of the Robin Hood tax by the Duchess of Cambridge or even Wayne Rooney wasn’t out of place.

The Church, as the representative of Christ on earth, is naturally expected to attend to the “anxieties” and concerns of its flock, presuming, of course, that those who camped in the City were loyal and devoted members of the congregation. If the congregation is agitated by the fiscal crisis that all responsible economists say is upon the West, it therefore follows that the Church must intervene, just as it did during the wars of empire and subsequently.

However, in the process, the important distinction between rendering unto God what is God’s and unto Caesar what is Caesar’s stands in danger of being blurred. The Church can ideally wish less hardship on its flock but to actually endorse a fresh tax is about as relevant as advocating a tithe on the commercial corporations. For all its insights into the spiritual life of the faithful, the clergy’s insights into economic remedies for the nation seem suspect. What is beyond the ken of Swami Ramdev in India can hardly be said to be among the Archbishop of Canterbury’s core competence.

Actually, the Church’s meddlesome ways mask its desperate desire to gloss over some hard choices that need to be exercised. The advanced capitalist societies in the West have hitherto enjoyed standards of living that are out of proportion to the actual generation of wealth in these societies. The welfare state which was built on the ruins of a war-damaged Europe could sustain itself for five decades because the West controlled the levers of the world economy. This, unfortunately, is no longer the case. The West is increasingly looking patchy in its performance. Against the innovative efficiencies of a Germany, a Switzerland and even California and Texas, is the laggardness of Italy, Portugal, Greece and even France—economies that are spending much more than they earn and living beyond their means. Today’s crisis is Europe and, indeed, in the US has been triggered by the reluctance of the people to adjust to a lesser standard of living. Capitalism was OK as long as the West was top dog but it has to be humanised once it is apparent that the centre of gravity has shifted eastwards. This is what the European Union (Germany apart) is resisting and the sense of entitlement has been conferred a moral halo by the modern Church.

There was a time, some centuries ago, when the Church attended to people’s miseries and played the role of a palliative. Today, Christ in Europe is increasingly being made to play the role of a saviour of a community that wants to cling on to untenable privileges. At the risk of repeating a discredited Marxist formulation, it seems a case of spreading ‘false consciousness.’ The message from the East to the Western churches should be unambiguous: get real. 


The Telegraph, November 11, 2011

West's collapse a warning to India

By Swapan Dasgupta


When the main news of the day happens to be the unnecessary
cancellation of a pop concert in the National Capital Region and
speculation over the likelihood of Anna Hazare reshuffling the
so-called Team Anna, you can be assured that India is still recovering
from its annual Diwali celebrations. The momentary respite from the
over-hyped and occasionally contrived celebration of politics is well
and truly welcome. Indians too need to re-focus on facets of life that
are truly meaningful and move away from the purposelessness of
mid-season politics.


The weariness, fortunately, is not confined to India alone. In Europe,
the seemingly endless bickering over the future of the Euro is on the
verge of completing its present season—the drama will doubtless
reappear after Christmas and the New Year. In the US, the comical
facet of the presidential primaries is on show courtesy an
advertisement of Republican challenger Herman Cain that shows an
aide—yes, wait for it—smoking a cigarette! I wonder which is worse for
the morally vulnerable: a flamboyant dictator being dragged out of the
gutter and then getting his brains blown out by his own golden pistol,
or some unknown guy smoking a cigarette. Is hate more acceptable to
the legions of the politically correct than a self-indulgent smoke?

It is probably an ethical question which defies a single answer.
However, you know that things aren’t as bad as they seem when society
becomes agitated thinking about the number of angels that can be
accommodated on a pinhead.

The allusion is to a puerile movement called Occupy Wall Street that
began with thousands of angst-ridden trumpets blowing in the US and
now seem to be on its final stages—hardly surprising because camping
out is not terribly comfortable as autumn gradually gives way to
winter. In many places, the OWS has fizzled out, in other places a
gentle nudge by the authorities has been sufficient to clear public
spaces, and in some of the remoter outposts of capitalism the
protestors are still being egged on by subversive clergymen.

Actually, the London version of the OWS has proved to be the most
interesting since it has produced an exotic khichdi of economics and
Christian theology. Reverend Dr Giles Fraser, the Canon Chancellor of
St Paul’s Cathedral, resigned from his post because he could not
countenance the idea of using either force or the law to evict those
who earnestly believed that pitching their tents and blocking access
to the Cathedral would—as the banners demanded—“End Capitalism.”

Rev Fraser is a sanctimonious simpleton. He was so overwhelmed by the
Christian piety of the protestors that he proclaimed “I could imagine
Jesus being born in the camp.” He also declared that it was fitting
that a tented community had sprung up around St Paul’s because the
Saint had been a tentmaker in real life—a factoid that should answer
why the BJP feels it has St Paul’s on its side.

Most practicing Christians obviously disagree with Rev Fraser’s
misplaced benevolence. The OWS hasn’t captured the public imagination
in the same way as the anti-Vietnam protests did. In fact, even
compared to the Tea Party movement against high taxes and federal
intrusiveness, its impact appears to be minimal. The pious
proclamation of a Warren Buffet that he should be taxed more hasn’t
endeared him to those ordinary people who believe that bloated
governments, far from resolving problems, actually prevent individuals
and communities to empower themselves financially.

There is obvious concern in the West that the logic of capitalism is
displacing them from the top of the pile and shifting the centre of
gravity eastwards—to China, to India and even to Australia. But this
unease hasn’t been sufficient to create a revolutionary movement
against advanced, as Karl Marx hoped it would. The West has just too
much to lose by allowing an economic system that it helped nurture to
go out of control. This is why the focus in Europe is over how to
prevent countries with responsible government such as Germany from
being dragged down by the profligate spending habits of countries such
as Greece.

The tremors in the world’s financial and capital markets have precious
little to do with yearning for the true Christian spirit or nostalgia
for 1950s style socialism. There is an awkward truth that is
manifesting itself all over the world: societies can’t go on living
beyond their means indefinitely. Sooner or later the non-viability of
high debts begins to be felt.

The West is concerned that its economies are no longer generating the
wealth that is needed to sustain a standard of living it become
accustomed to. Some are trying to meet the challenge by upgrading
skills and by attracting capital with the assurance of rule-based
societies. Yet others are unwilling to tolerate even temporary
hardship and see their salvation in silly protests such as OWS that
simultaneously help people salvage their conscience.

India doesn’t have too many moral dilemmas. This Diwali saw a downturn
in consumer offtakes but didn’t dampen the overall celebrations.
That’s because the people have a long history of adjusting to
temporary hardships. They know that corruption isn’t a moral issue but
a practical one involving fiscal adjustment. The Government, however,
thinks differently. This is why it should open its eyes to what is
going on in the world before undertaking pre-election splurges with
yours and my money.


SUNDAY PIONEER, OCTOBER 30, 20111