People's Democracy

EDITORIAL

Philanthropy Amidst People’s Misery

AT the G-20 Summit meeting in Los Cabos, Mexico, Prime Minister Manmohan Singh turned out to be a global philanthropist, pledging 10 billion dollars to the International Monetary Fund (IMF) to help the Euro zone come out of its current severe economic crisis. This reminds us of a Hyderabadi saying, “baahar sherwani, andar pareshani” (we are majestically dressed to the outside world, only to hide the severe problems confronting us internally).

At the current exchange rate, this pledge translates into Rs 56,000 crore.

This generosity comes at a time when the Indian people are being subjected to growing economic burdens due to the relentless rise in the price of all essential commodities. On top of this, the government has recently hiked the prices of petroleum products in the name of mounting ‘under-recoveries’ of the oil companies. We have seen in these columns in the past what gigantic frauds are being perpetrated on the people by using this pretext for hiking the petroleum products’ prices. Instead of seeking to assist the economically advanced European Union, India could have done well to use this money to spare the already groaning people from further burdens. 

However, we are being told that “the $10 billion India has pledged is enlightened assistance --- help for a key trading partner in distress.” The prime minister’s speech at the gathering of heads of states representing 80 per cent of global GDP, reasoned that this assistance being provided by India was to contribute to the recovery of the Euro zone. The presumption is that as economic growth picks up in the Euro zone, this, like a tide, would also raise the ship of the Indian economy. The prime minister said, “An expansion of investment in infrastructure in developing countries is only possible if they can get access to long term capital to finance such investment. This is difficult at a time when capital flows are disrupted.”

Clearly, the Indian prime minister is hoping that if India contributes to international finance capital, the hope is that the Euro zone’s recovery would create a new financial bubble whose expansion would benefit India by making it larger finances available. Little seems to have been learnt from the current crisis and recession gripping the developed countries. Bubbles always burst eventually, and inevitably, and once this happens, a fresh round of crisis would engulf the global economy, heaping unprecedented burdens and miseries on the vast mass of global population. 

Rather than wait for a recovery of the Euro zone, therefore, the prime minister could well have used the same amount of resources that he has now pledged, for a massive expansion in public investments to build our much needed infrastructure. This would have generated substantial additional employment in the country and would consequently have vastly expanded the aggregate domestic demand in our economy, thus laying the basis for a sustainable growth trajectory. Instead, he has chosen to offer assistance to the EU, which can only be met by imposing greater burdens on the people. Raising these resources can happen either through collecting more money from the people in terms of higher indirect taxes, or, by increasing our already high fiscal deficit. The latter would then be used to press the panic buttons --- thus calling for reduction, if not elimination, of the already meagre subsidies for the people. In either case, it is the people who would be made to bear the burden. 

The prime minister does not seem to employ the same reasoning he offered to the EU, for our own domestic economy. He told the G-20 gathering that, “Austerity in the debt-ridden members of the Euro zone can work only if surplus members are willing to expand to offset contraction elsewhere in the (Euro) currency area.” He was clearly hinting at Germany, the strongest economy in the Euro zone, to stop fearing domestic inflation and loosen up the economy. Germany is, however, far from willing to comply with such gratuitous advice. Instead of expanding the Indian economy through a massive increase in public investments domestically, the prime minister has turned out to be a global philanthropist. But, can India afford such a role by keeping a vast majority of our own people in misery and hunger? This is precisely what happens when the objective is to assist international finance capital rather than our own aam aadmi.

The prime minister often uses the term ‘enlightened national interest’ as the guiding principle for his government’s policies. Does pledging such ‘enlightened assistance’ to the developed countries meet our ‘enlightened national interests’? 

The only way to reverse what appears to be an irreversible downslide of the Indian economy is to concentrate on expanding the domestic demand which will provide the necessary impulse for growth. In the final analysis, India will be counted in the global scheme of things on the basis of the strength of its domestic economy. No amount of philanthropy can meet this requirement. On the contrary, philanthropy at the expense of our own people and the domestic economy is simply unacceptable.  

Further, the hopes that such gracious contributions would help the Euro zone to recover do not carry much conviction. The EU heads of state are slated to meet in the coming week to tackle a growing list of problems. Despite the victory of a centre-right New Democracy Party in Greece that is pledged to the European strategy for its economic bailout, the Greek economy needs to be kept on life support. Despite a Euro 100 billion bailout package, Spain has crossed the Rubicon from solvency to insolvency. A London-based firm that assesses sovereign debt risk said, “The markets are treating Spain’s bank focused bailout as a pregnancy: there is no such thing as a partial one.” The next country to follow suit appears to be Italy. 

In the meanwhile, Germany has ruled out any new aid for Greece. Its Chancellor, Ms Angela Merkel, said at the G-20 summit that “The Greek government will and must follow through on the commitments that were made. There can be no loosening of the reform steps.” These steps mean the raising of 14.7 billion dollars as additional savings by Greece to meet its budget targets for 2013-14. These massive cuts in expenditures are to focus mainly on social, healthcare and military spending, apart from considerably slashing the government payrolls. In other words, further unbearable and intolerable burdens on the Greek working people are in the offing. 

In the absence of any unified understanding on strategy, tensions burst to the surface at the G-20 Summit. President of the European Commission, Jose Manuel Barroso, reminded the gathering that the origins of the financial crisis were in the sub-prime lending market in the US which had contaminated the European banks. He further said that the Europeans had not come to the meeting “to take lessons on democracy or on how to handle the economy.” Only he can know whether he was referring to the advice given by the Indian prime minister! In any case, the Indian economy can improve only if this neo-liberal mindset of following the dictates of international finance capital is abandoned and, instead, such policies are followed as may strengthen the domestic demand and expand our domestic economy.