Why Capitalism Reproduces Inequality & a Solution

 

Reversing Love Jihad in Kerala

 

E. Sreedharan On Love Jihad to Beef Politics - Inside the Metro-Man's new innings as a BJP politician

 

Why economists kept getting the policies wrong

 Philip Stephens in The FT

The other week I caught sight of a headline declaring that the IMF was warning against cuts in public spending and borrowing. The report stopped me in my tracks. After half a century or so as keeper of the sacred flame of fiscal prudence, the IMF was telling policymakers in rich industrial nations they should not fret overmuch about huge build-ups of public debt during the Covid-19 crisis. John Maynard Keynes had been disinterred, and the world turned upside down. 

To be clear, there is nothing irresponsible about the IMF’s advice that policymakers in advanced economies should prioritise a restoration of growth after the deflationary shock of the pandemic. The fund prefaced a shift last year, and most people would say it was common sense to allow economic recovery to take hold. Nations such as Britain might have learned that lesson from the damage inflicted by the ill-judged austerity programme imposed by David Cameron’s government after the 2008 financial crash. 

And yet. This was the IMF speaking — the hallowed (for some, hated) institution that, as many Brits will recall, formally read the rites over Keynesianism when in 1976 it forced James Callaghan’s Labour government to impose politically calamitous cuts in spending and borrowing. This is the organisation that in the intervening years had a few simple answers to any economic problem you care to think of: fiscal retrenchment, a smaller state and/or market liberalisation. The advice was heralded as the Washington consensus because of the IMF’s location.  

My first job after joining the Financial Times during the early 1980s was to learn the language of the new economic orthodoxy. Kindly officials at the UK Treasury explained to me that the technique of using fiscal policy to manage demand, put to rest in 1976, had been replaced by a new theory. Monetarism decreed that as long as the authorities kept control of the money supply, and thus inflation, everything would be fine. 

The snag was that every time the Treasury alighted on a particular measure of the money supply to target — sterling M3, PSL2, and M0 come in mind — it ceased to be a reliable guide to price changes. Goodhart’s law, this was called, after the eponymous economist Charles. By the end of the 1980s, monetarism had been ditched, and targeting the exchange rate had become the holy grail. If sterling’s rate was fixed against the Deutschmark, the UK would import stability from Germany.  

It was about this time that a senior aide to the chancellor took me to one side to explain that one of the great skills of the Treasury was to perform perfect U-turns while persuading the world it had deviated not a jot from previous policy. This proved its worth again when the exchange rate policy was blown up by sterling’s ejection from the European exchange rate mechanism in 1992. The currency was quickly replaced by an inflation target as an infallible lodestar of policy. 

The eternal truths amid the missteps and swerves were that public spending and borrowing were bad, tax cuts were good, and market liberalisation was the route to sunlit uplands. The pound’s ERM debacle was followed by a ferocious budgetary squeeze, and, across the channel, the eurozone was designed to fit a fiscal straitjacket. Financial market deregulation, we were told, oiled the wheels of globalisation. If madcap profits and bonuses at big financial institutions prompted unease, the answer was that markets would self-correct. Britain’s Labour government backed “light-touch” regulation in the 2000s. The Bank of England reduced its oversight of systemic financial stability. 

The abiding sin threaded through it all was that of certitude. Perfectly plausible but untested theories, whether about the money supply, fiscal balances and debt levels, or market risk, were elevated to the level of irrefutable facts. Economics, essentially a faith-based discipline, represented itself as a hard science. The real world was reduced by the 1990s to a set of complex mathematical equations that no one, least of all democratically elected politicians, dared challenge. 

Thus detached from reality, economic policy swept away the postwar balance between the interests of society and markets. Arid econometrics replaced a measured understanding of political economy. It scarcely mattered that the gains of globalisation were scooped up by the super-rich, that markets became casinos and that fiscal fundamentalism was widening social divisions. Nothing counted above the equations. And now? After Donald Trump, Brexit and Covid-19, it seems we are back at the beginning. Time to dust off Keynes’s general theory.

Rural India can’t be dustbin of history. Three farm laws have shown farmers need a New Deal

Yogendra Yadav in The Print

A historic farmers’ movement is a moment to unveil a vision for the future. Not just for farmers or agriculture, but for rural India, and indeed for the future of India.

This movement has already created history. It has firmly brought back the farmers to the national imagination. You can’t pretend they don’t exist. It has put the fear of vote, more effective than the fear of God, in the mind of the political class. You don’t take panga with farmers. It has shut up market fundamentalists who whisper too-clever-by-half agri-reform recipes to the powers that be. No more corporate plugs masquerading as textbook economics pushing for “reform by stealth”. At least for some time. It has succeeded in pushing the envelope to where years of academic and political debates on agriculture could not.

Yet, it will be a pity if that is all this movement achieves in terms of imagination. It will be tragic if the successful halting of the “agri reform” onslaught becomes a pretext to perpetuate status quo. It will be sad if this pushback to corporate agri-business turns into a push for trade unionism of the better-off farmer. The imposition of the Narendra Modi government’s farm laws must serve to draw attention to the multiple crises faced by Indian farmers, farming and agriculture. These laws are not the starting point of the woes of the farmers. Nor is their repeal the panacea that the farmers need. This great movement must take forward the idea of India that places farmers at the heart of our future.

Indian agriculture faces three intertwined crises. While the current focus is, rightly so, on the economic crisis, we cannot afford to forget the ecological crisis that stares us in the face. Both these crises put together produce what the farmers experience as an existential crisis. Indian farmers need nothing short of a New Deal that addresses these three crises simultaneously. Ideas, policies and politics must come together to design this New Deal. 

Three crises of Indian agriculture

The economic crisis is easy to describe. Although nearly half of our working population (58 per cent of rural households) is mainly engaged in agriculture, farming is not economically viable. Landholdings are small: 86 per cent of farmers own less than 2 acres, based on the agriculture census 2015-16. Average yield is low and highly uncertain. Prices are low too and are kept systematically so. According to my calculations, this yields a meagre monthly income of less than Rs 8,000, including all sources of income. The number of agricultural wage labourers has kept swelling, though farm wages have remained stagnant. No wonder, average monthly consumption is higher than income. More than half of farm families are in debt.

Now, the lazy economists’ formula is to say reduce the population dependent on agriculture. Except they forget to mention the continent where this additional population should be transported. Or to specify sectors of our economy waiting to offer millions of additional jobs, notwithstanding the overall state of joblessness. The challenge is to find decent income for hard-working small farmers.

The ecological crisis is less easily noticed and is even more pressing. Green revolution has come to a dead-end. Superstitious belief in the magic of chemical agriculture and overexploitation of water has left us exposed to degradation of soil health and groundwater depletion at a frightening scale. Add to this loss of biodiversity, shrinkage in seed variety, decline in nutria-crops like millets, loss in livestock economy and deforestation, and you begin to see why ecological crisis is not a hobby horse of some fringe environmentalists.

And now think of the looming challenge of climate change. Soaring temperatures and uncertain monsoon is a recipe for disaster for Indian agriculture, especially for farmers dependent on rains. Incomes of these ‘dryland’ farmers are predicted to fall by as much as a quarter due to climate change. Ecologically sustainable agriculture is a material and pressing concern that we should have addressed yesterday.

Finally, there is the existential crisis that the farmers feel and react to. The oft-repeated story of farmer suicides, over 3 lakh in the last two decades. As agriculture shrinks in the national economy, farmers experience a diminution in their status and a loss of dignity. As the self-respecting cultivator, the farmer is forced to become a labourer, and soon, a migrant labourer. Farmers do not want their next generation to take to farming.

A new architecture

The challenge and the opportunity of the farmers’ movement today is not just to ward off the impending threat of the three laws or to secure some enduring economic gains for the farmers, but to come up with a way forward on the economic, ecological and existential crises that Indian agriculture faces.

It requires, above all, an imaginative leap. Indian leaders, policymakers and thinkers must be able to stand up and say: India is not condemned to relive European history. Indian agriculture will follow an Indian path. Indian farmers are not vestiges of the past. They are here to stay. Agriculture can and will provide dignified livelihood to a substantial population, many times more than it does in Europe or North America. Indian farmers are a repository of relevant knowledge and technology. Village India is not a dustbin of history. Rural India is a land of opportunities, and key to our national future.

This resolve, an article of faith if you will, can open the path for new policy architecture. This will have to be led by the government and backed by a substantially bigger budget. Some of this State support must take the form of higher and more efficient subsidies to the farmers, as our net subsidy so far has been low, if not negative. Some of these resources must be spent on a truly universal and comprehensive crop insurance as well as debt relief and reconstruction. But much of State support must go towards building agricultural and rural infrastructure that facilitates private entrepreneurship, agro-processing, farmers’ cooperatives, animal husbandry, forestry, and so on. Flourishing private initiative in agriculture needs more, not less, State support and initiative.

The design of this new architecture will be around a combination of income support with ecologically appropriate agriculture. The current focus of government procurement on wheat and paddy creates perverse incentives for farmers. Instead, farmers need to be offered price support for a wide range of produce on the condition that they adopt the crops that are suitable for local ecological conditions. Crop loan and crop insurance could be added to this mega scheme. A small top-up component of income support for small farmers, women farmers and other vulnerable farmers could be included in this package. And this will have to be linked to a boost for pastoralists, rural industry and handicrafts, etc. The future of agriculture must be integrated with a big push for decentralised reinvigoration of rural economy.

Will this cost a lot of money? Yes, at current price, we should be looking to spend additional Rs 3-4 lakh crore, around 10 per cent of the Union budget, for this New Deal for rural India.

Can the country afford it? Should this be our national focus? Well, that is a question of political will. The real measure of the success of the current farmers’ movement would be the extent to which it succeeds in creating this much-needed political will.

Covid is forcing economists to look at other disciplines for recovery clues

Larry Elliot in The Guardian

Three times a week an update on new Covid-19 cases is published by the economics consultancy Pantheon. Vaccination rates are monitored by the Swiss bank UBS. The scientists advising the government are in regular contact with the Bank of England’s monetary policy committee – the body that sets interest rates.

Richard Nixon may or may not have said “we are all Keynesians now” after the US broke its link with gold in 1971 but one thing is for sure: all economists are epidemiologists now. And there’s a downside and an upside to that.

The downside is that economic forecasting is currently even more of a mug’s game than usual because even the real (as opposed to the amateur) epidemiologists don’t really know what is going to happen next. Are there going to be new mutations of the virus? Assuming there are, will they be less susceptible to vaccines? Will Covid-19 go away in the summer only to return again as the days get shorter, as happened last year? Nobody really knows the answers to those questions.

The upside is that the pandemic has forced economists to look beyond their mechanical models and embrace thinking from other disciplines, of which epidemiology is just one.

For a start, it is hard to estimate how people are going to react to the easing of lockdown restrictions without some help from psychologists. It is possible that there will be an explosion of spending as consumers, in the words of Andrew Bailey, “go for it”, but it is also possible that the second wave of infection will make them a lot more cautious than they were last summer, when there was still hope that Covid-19 was a fleeting phenomenon.

An individual’s behaviour is also not entirely driven by their own economic circumstances. It can be strongly affected by what others are doing. If your peer group decides after having the vaccine that it is safe to go to the pub, that will probably affect your decision about whether to join your mates for a drink, even if you are slightly nervous. Sociology has a part to play in economic forecasting.

As does history, if only to a limited extent, because there are not a lot of comparable episodes to draw upon. A century has passed since the last truly global pandemic and there is only so much that can be learned from the outbreak of Spanish flu after the first world war. But when Andy Haldane, the chief economist of the Bank of England, says the economy is like a coiled spring waiting to be unleashed, that’s because he thinks there are lessons to be learned from the rapid recovery seen last summer. Back then, the economy followed a near 19% collapse in the second quarter of 2020 with a 16% jump in the third quarter.

Naturally, economics has a part to play in judging what happens next. Millions of people (mostly the better off) have remained in work on full pay for the past year but have struggled to find anything to spend their money on. Millions of others – those furloughed on 80% of their normal wages or self-employed people who have slipped through the Treasury’s safety net – are less well-off than they were a year ago and may fear for their job prospects.

In an ideal world, the better-off would decide that the amount of money saved during lockdown was far in excess of what they needed and would then go on a spending spree: heading out for meals, taking weekend breaks, buying new cars; having their homes re-decorated. That would provide jobs and incomes for those on lower incomes.

But it might not work out like that. If the better-off leave their accumulated savings (or most of them, at least) in the bank, that means higher unemployment for those working in consumer-facing services jobs – such as hotels and restaurants – and an economy with a dose of long Covid.

There are two conclusions to be drawn from all of this. The first is that precise forecasts of what is going to happen to the economy over the next year, or even the next few months, should be treated with caution. Assuming the vaccination programme continues to go well, assuming that there are no further waves of infection, assuming restrictions are lifted steadily from early March onwards, and assuming that people come out of hibernation rapidly and in numbers, then the economy will start to recover in the second quarter. But there are a heck of a lot of assumptions in there: it might take until the third quarter for the bounce back to begin; the recovery might prove weaker or stronger than the consensus currently expects.

The second conclusion is equally obvious. If, as is clearly the case, the existence of so many imponderables makes precision forecasting more difficult than normal, it makes sense for economic policy makers to act with caution. For the Bank of England, that means no dash to embrace negative interest rates, which won’t be necessary if Haldane’s bullishness proves to be justified; and for the Treasury it means extending financial support and ignoring calls for higher taxes, especially those that might lead businesses to collapse or cut back on investment.

It would appear that Rishi Sunak has reached the same conclusion. There has been far less talk from the chancellor recently about the need to reduce the UK’s budget deficit, a process that has now been delayed until the second budget of 2021 in the autumn. By that stage, it might well once again by Sunak rather than the epidemiologists running the economy. Well, perhaps.

Distorting Narratives for Nation States

Nadeem F Paracha in The Dawn

In the last few years, my research, in areas such as religious extremism, historical distortions in school textbooks, the culture of conspiracy theories and reactionary attitudes towards science, has produced findings that are a lot more universal than one suspected.

This century’s second decade (2010-2020) saw some startling political and social tendencies in Europe and the US, which mirrored those in developing countries. Before the mentioned decade, these tendencies had been repeatedly commented upon in the West, as if they were entirely specific to poorer regions. Even though many Western historians, while discussing the presence of religious extremism, superstition or political upheavals in developing countries, agreed that these existed in developed countries as well, they insisted that these were only largely present in their own countries during their teething years.

In 2012, at a conference in London, I heard a British political scientist and an American historian emphasise that the problems that developing countries face — i.e. religiously-motivated violence, a suspect disposition towards science, and continual political disruption — were present at one time in developed countries as well, but had been overcome through an evolutionary process, and by the construction of political and economic systems that were self-correcting in times of crisis. What these two gentlemen were suggesting was that most developing countries were still at a stage that the developed countries had been two hundred years or so ago.

However, eight years after that conference, Europe and the US, it seems, have been flung back two hundred years in the past. Mainstream political structures there have been invaded by firebrand right-wing populists, dogmatic ‘cultural warriors’ from the left and the right are battling it out to define what is ‘good’ and what is ‘evil’ — in the process, wrecking the carefully constructed pillars of the Enlightenment era on which their nations’ whole existential meaning rests — the most outlandish conspiracy theories have migrated from the edges of the lunatic fringe into the mainstream, and science is being perceived as a demonic force out to destroy faith.

Take for instance, the practice of authoring distorted textbooks. Over the years, some excellent research cropped up in Pakistan and India that systematically exposed how historical distortions and religious biases in textbooks have contributed (and still are contributing) to episodes of bigotry in both the countries. During my own research in this area, I began to notice that this problem was not restricted to developing countries alone.

In 1971, a joint study by a group of American and British historians showed that out of the 36 British and American school textbooks that they examined, no less than 25 contained inaccurate information and ideological bias. In 2007, the American sociologist James W. Loewen surveyed 18 American history texts and found them to be “marred by an embarrassing combination of blind patriotism, sheer misinformation, and outright lies.” He published his findings in the aptly titled book Lies My Teacher Told Me.

In 2020, 181 historians in the UK wrote an open letter demanding changes to the history section of the British Home Office’s citizenship test. The campaign was initiated by the British professor of history and archeology Frank Trentmann. A debate on the issue, through an exchange of letters between Trentmann and Stephen Parkinson, a former Home Office special adviser, was published in the August 23, 2020 issue of The Spectator. Trentmann laments that the problem lay in a combination of errors, omissions and distortions in the history section pages, which were also littered with mistakes.

Not only are historical distortions in textbooks a universal practice, but the many ways that this is done are equally universal and cut across competing ideologies. In Textbooks as Propaganda, the historian Joanna Wojdon demonstrates the methods that were used by the state in this respect in communist Poland (1944-1989).

The methods of distortions in this case were similar to the ones that were used in various former communist dictatorships such the Soviet Union and its satellite states in East Europe, and in China. The same methods in this context were also employed by totalitarian regimes in Nazi Germany, and in fascist Italy and Spain.

And if one examines the methods of distorting history textbooks, as examined by Loewen in the US and Trentmann in the UK, one can come across various similarities between how it is done in liberal democracies and how it was done in totalitarian set-ups.

I once shared this observation with an American academic in 2018. He somewhat agreed but argued that because of the Cold War (1945-1991) many democratic countries were pressed to adopt certain propaganda techniques that were originally devised by communist regimes. I tend to disagree. Because if this were a reason, then how is one to explain the publication of the book The Menace of Nationalism in Education by Jonathan French Scott in 1926 — almost 20 years before the start of the Cold War?

Scott meticulously examined history textbooks being taught in France, Germany, Britain and the US in the 1920s. It is fascinating to see how the methods used to write textbooks, described by Scott as tools of indoctrination, are quite similar to those applied in communist and fascist dictatorships, and how they are being employed in both developing as well as developed countries.

In a nutshell, no matter what ideological bent is being welded into textbooks in various countries, it has always been about altering history through engineered stories as a means of promoting particular agendas. This is done by concocting events that did not happen, altering those that did take place, or omitting events altogether.

It was Scott who most clearly understood this as a problem that is inherent in the whole idea of the nation state, which is largely constructed by clubbing people together as ‘nations’, not only within physical but also ideological boundaries.

This leaves nation states always feeling vulnerable and fearing that the glue that binds a nation together, through largely fabricated and manufactured ideas of ethnic, religious or racial homogeneity, will wear off. Thus the need is felt to keep it intact through continuous historical distortions.