“Blessed is the nation that doesn’t need heroes" Goethe. “Hero-worship is strongest where there is least regard for human freedom.” Herbert Spencer. "My 80% friend isn't my 20% enemy" Ronald Reagan.
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Sunday 13 December 2020
China pulls back from the world: rethinking Xi’s Belt and Road Initiative
It has not taken long for the wheels to come off the Belt and Road Initiative. As recently as May 2017, China’s leader Xi Jinping stood in Beijing before a hall of nearly 30 heads of state and delegates from over 130 countries and proclaimed “a project of the century”.
Saturday 12 December 2020
Ideological Positions and Economic History
My response to Shekhar Gupta's video
Dear Mr. Gupta
I believe your thesis on economic history is flawed when you argue that Japan, Korea, Taiwan and Singapore have grown because of economic freedoms i.e. I presume you mean free market practices. I have often heard you say that India too should follow free market practices to achieve similar heights. In the above process the elephant in the room i.e. how China rose with state intervention, has also been ignored.
Kindly permit me to state a few historical facts extracted from 'Bad Samaritans The Guilty Secrets of Rich Nations...' by Ha Joon Chang
1. When Robert Walpole became the British Prime Minister in 1721 he launched a Swadeshi* policy aimed to protect British manufacturing industries from foreign competition, subsidise them and encourage them to export. Tariffs on imported foreign manufactured goods were significantly raised while tariffs on raw materials were lowered. Regulation was introduced to control the quality of manufactured goods so that unscrupulous manufacturers could not damage the reputation of British products in foreign markets. Walpole’s protectionist policies remained in place for the next century, helping British manufacturing industries catch up with and then finally forge ahead of the counterparts on the Continent.By the end of the Napoleonic wars in 1815 British manufacturers were firmly established as the most efficient in the world and it was then that they started campaigning for free trade.
2. The US too followed similar protectionist policies, espoused by Alexander Hamilton, which included protective tariffs, import bans, subsidies, export ban on key raw materials, financial aid...until the end of the Second World War (WWII). It was only after WWII, with its industrial supremacy unchallenged, that the US started championing the cause of free trade. Even when it shifted to freer trade, the US government promoted key industries by another means; namely public funding of Research and Development (R&D). Without government funding for R&D the US would not have been able to maintain its technological lead over the rest of the world on key industries like computers, semiconductors, life sciences, the internet and aerospace.
3. In Japan the famous MITI (Ministry of International Trade and Industry) orchestrated an industrial development programme that has now become a legend. After WWII, imports were tightly controlled through government control of foreign exchange. Exports were promoted in order to maximize the supply of foreign currency needed to buy up better technology. This involved direct and indirect export subsidies as well as information and marketing help from JETRO the state’s trading agency.
4. Even Korea has not been an exception to this pattern. The Korean miracle was the result of a clever and pragmatic mixture of market incentives and state direction. The Korean government did not have blind faith in the free market either. While it took markets seriously, the Korean strategy recognized that they often need to be corrected through policy intervention.
5. Singapore has had free trade and relied heavily on foreign investment, but even so, it does not conform in other respects to the neo-liberal ideal. It used considerable subsidies to MNCs in industries it considered strategic. It also has one of the largest state owned enterprises which supplies housing and almost all land is owned by the government.
To conclude, I feel that Mr. Gupta’s advocacy of free markets is based on a fundamentally defective understanding of the forces driving globalisation and a distortion of history to fit the theory. Free markets and trade was often imposed on rather than chosen by weaker countries. Virtually all successful economies, developed and developing, got where they are through selective strategic integration with the world economy rather than unconditional global integration.
Regards
Girish Menon
Tuesday 8 December 2020
Milton Friedman was wrong on the corporation
What should be the goal of the business corporation? For a long time, the prevailing view in English-speaking countries and, increasingly, elsewhere was that advanced by the economist Milton Friedman in a New York Times article, “The Social Responsibility of Business is to Increase Its Profits”, published in September 1970. I used to believe this, too. I was wrong.
Saturday 5 December 2020
Mandated ‘respect’ for others’ opinions hurts free speech
If you wander down Trumpington Street in Cambridge, you will find yourself at one of the birthplaces of the English Reformation. It was here, at The White Horse Inn, that scholars secretly met to debate the smuggled works of Martin Luther. By preaching Luther’s heretical belief that ordinary people should read the Bible for themselves, and not just accept the word of priests, Cambridge was one of the places that helped to transform European thought. So it is especially sad that the University of Cambridge is now pushing proposals which could undermine free speech.
Thatcher or Anna moment? Why Modi’s choice on farmers’ protest will shape future politics
Has the farmers’ blockade of Delhi brought Narendra Modi to his Thatcher moment or Anna moment? It is up to Modi to answer that question as India waits. It will write the course of India’s political economy, even electoral politics, in years to come.
For clarity, a Thatcher moment would mean when a big, audacious and risky push for reform, that threatens established structures and entrenched vested interests, brings an avalanche of opposition. That is what Margaret Thatcher faced with her radical shift to the economic Right. She locked horns with it, won, and became the Iron Lady. If she had given in under pressure, she’d just be a forgettable footnote in world history.
--Also watch
Anna moment is easier to understand. It is more recent. It was also located in Delhi. Unlike Thatcher who fought and crushed the unions and the British Left, Manmohan Singh and his UPA gave in to Anna Hazare, holding a special Parliament session, going down to him on their knees, implicitly owning up to all big corruption charges. Singh ceded all moral authority and political capital.
By the time Anna returned victorious for the usual rest & recreation at the Jindal fat farm in Bangalore, the Manmohan Singh government’s goose had been cooked. Anna was victorious not because he got the Lokpal Bill. Because that isn’t what he and his ‘managers’ were after. Their mission was to destroy UPA-2. They succeeded. Of course, helped along by the spinelessness as well as guilelessness of the UPA.
Modi and his counsels would do well to look at both instances with contrasting outcomes as they confront the biggest challenge in their six-and-a-half years. Don’t compare it with the anti-CAA movement. That suited the BJP politically by deepening polarisation; this one does the opposite. It’s a cruel thing to say, but you can’t politically make “Muslims” out of the Sikhs.
That “Khalistani hand” nonsense was tried, and it bombed. It was as much of a misstep as leaders of the Congress calling Anna Hazare “steeped in corruption, head to toe”. Remember that principle in marketing — nothing fails more spectacularly than an obvious lie. As this Khalistan slur was.
The anti-CAA movement involved Muslims and some Leftist intellectual groups. You could easily isolate and even physically crush them. We are merely stating a political reality. The Modi government did not even see the need to invite them for talks. With the farmers, the response has been different.
Besides, this crisis has come on top of multiple others that are defying resolution. The Chinese are not about to end their dharna in Ladakh, the virus is raging and the economy, downhill for six quarters, has been in a free fall lately. Because politically, economically, strategically and morally the space is now so limited, this becomes the Modi government’s biggest challenge.
Also read: Shambles over farmers’ protest shows Modi-Shah BJP needs a Punjab tutorial
Modi has a complaint that he is given too little credit as an economic reformer. That he has brought in the bankruptcy law, GST, PSU bank consolidation, FDI relaxations and so on, but still too many people, especially the most respected economists, do not see him as a reformer.
There is no denying that he has done some political heavy lifting with these reformist steps. But some, especially GST, have lost their way because of poor groundwork and execution. And certainly, all that the sudden demonetisation did was to break the economy’s momentum. His legacy, so far, is of slowing down and then reversing India’s growth.
Having inherited an economy where 8 per cent growth was the new normal, now RBI says it will be 8 per cent, but in the negative. It isn’t the record anybody wanted in his seventh year, with India’s per capita GDP set to fall below Bangladesh’s, according to an October IMF estimate.
The pandemic brought Modi the “don’t waste a crisis” opportunity. If Narasimha Rao and Manmohan Singh with a minority government could use the economic crisis of 1991 to carve out a good place for themselves in India’s economic history, why couldn’t he now? That is how a bunch of audacious moves were announced in a kind of pandemic package. The farm reform laws are among the most spectacular of these. Followed by labour laws.
This is comparable now to the change Margaret Thatcher had dared to bring. She wasn’t dealing with multiple other crises like Modi now, but then she also did not have the kind of almost total sway that Modi has over national politics. Any big change causes fear and protests. But this is at a scale that concerns 60 per cent of our population, connected with farming in different ways. That he and his government could have done a better job of selling it to the farmers is a fact, but that is in the past.
The Anna movement has greater parallels, physically and visually, with the current situation. Like India Against Corruption, the farmers’ protest also positions itself in the non-political space, denying its platform to any politician. Leading lights of popular culture are speaking and singing for it. Again, there is widespread popular sympathy as farmers are seen as virtuous, and victims. Just like the activists. Its supporters are using social media just as brilliantly as Anna’s.
Also read: How protesting farmers have kept politicians out of their agitation for over 2 months
There are some differences too. Unlike UPA-2, this prime minister is his own master. He doesn’t need to defer to someone in another Lutyens’ bungalow. He has personal popularity enormously higher than Manmohan Singh’s, great facility with words and a record of consistently winning elections for his party.
But this farmers’ stir looks ugly for him. His politics is built so centrally on the pillar of “messaging” that pictures of salt-of-the-earth farmers with weather-beaten faces, cooking and sharing ‘langars’, offering these to all comers, then refusing government hospitality at the talks and eating their own food brought from the gurdwara while sitting on the floor, and the widespread derision of the “Khalistani” charge is just the kind of messaging he doesn’t want. In his and his party’s scheme of things, the message is the politics.
Thatcher had no such issues, and Manmohan Singh had no chips to play with. How does Modi deal with this now? The temptation to retreat will be great. You can defer, withdraw the bills, send them to the select committee, embrace the farmers and buy time. It isn’t as if the Modi-Shah BJP doesn’t know how to retreat. It did so on the equally bold land acquisition bill, reeling under the ‘suit-boot ki sarkar’ punch. So, what about another ‘tactical retreat’?
It will be a disaster, and worse than Manmohan Singh’s to the Anna movement. At the heart of Modi’s political brand proposition is a ‘strong’ government. It was early days when he retreated on the land acquisition bill. The lack of a Rajya Sabha majority was an alibi. Another retreat now will shatter that ‘strongman’ image. The opposition will finally see him as fallible.
At the same time, farmers blockading the capital makes for really bad pictures. These aren’t nutcases of ‘Occupy Wall Street’. Farmers are at the heart of India. Plus, they have the time. Anybody with elementary familiarity with farming knows that once wheat and mustard, which is most of the rabi crop in the north, is planted, there isn’t that much to do until early April.
You can’t evict them as in the many Shaheen Baghs, and you can’t let them hang on. Even a part surrender will finish your authority. Because then protesters against labour reform will block the capital. That’s why how Modi answers this Thatcher or Anna moment question will determine national politics going ahead. Our wish, of course, is that he will choose Thatcher over Anna. It will be a tragedy if even Modi were to lose his nerve over his boldest reforms.