Why the Budget has Come as a Surprise to the Corporate Sharks?

IT WAS amusing to watch the free fall of sensex on the budget day even as Finance Minister Pranab Mukherjee was going ahead reading out his pro-poor, pro-welfare proposals. It was amusing the corporate sharks were so disappointed with the budget, as they were expecting the earth and heavens this time.

I think there was another reason too for the disappointment with the Government and the sensex reaction on the budget day. From the day the Manmohan Singh Government was known to have won the poll, there was a concerted effort on the part of the corporate media and its in-house intellectuals and opinion-makers to present the victory as the vindication of the neo-liberal, pro globalization policies of the Government.

In fact, there was an effort to run down the pro-poor policies that the Government had undertaken as of no consequence. In fact some of these policies, mainly the National Rural Employment Generation programme, were written off as a concession to the left parties who were supporting the Government. Since the Government had received sufficient numbers this time, they had no reason to seek left support and so it was time to go for a an all out, no holds barred free run for the capital, it was argued. They had even set an agenda for the Government and I remember some of the national channels spent a lot of prime time promoting this special agenda of their choice.

But the budget proposals give out the clear message that the Congress has a leadership which is more sensible and more down to earth than some of our corporate media chaps could ever imagine. In fact, the Government has proved two things:

First, that the Congress would actually claim the goodwill that the past pro-poor actions has generated and would continue to keep on this line because it is a sure vote winner at least for the time being.

Secondly, it would not allow the left to arrogate the pro-poor image that they had enjoyed so long and claim credit for all the pro-poor actions that the past government had undertaken. It is evident that Pranab Mukherjee has gone further in this budget even without the much hyped prodding from the left this time.

And the consequence of this is very serious: The left on the one hand, is losing the constituency they had among the poor with their actions like land grab and violence on the poor in places like Singur, Nandigram and Lalgarh, while, on the other, the Congress generally has been able to steer clear of such violent confrontations. They are emerging better managers of political and economic crises while the comrades seem to have lost themselves with no clear policy framework.

Bill Gates: A new Messiah for Philanthropic Capitalism

This is my note on Bill Gates’ speech at Davos, submitted to creativecapitalismblog, which discussed the speech and his ideas for reinventing capitalism:


BILL GATES is now the philanthropic messiah and his speech at Davos where he elaborates on his new concept of creative capitalism is his manifesto. It could enthuse people and it could perhaps even solve many of our problems with the help of corporate do-gooders.

Having worked in and reported on economic and development issues of some of the poorest parts of the world, I feel the devil could always be in the details. Once former Indian prime minister Rajiv Gandhi, whose youthfulness and commitment to the cause of the poor reminds me of the Bill Gates of today, had pointed out that of every 100 rupees the government spent on the welfare of the poor only 15 actually reached them. The rest disappeared into some black-holes that divided the governments/philanthropists/ NGOs and international aid agencies from the really needy people who lived far away.

So what seem to be the real problems is not the lack of resources or lack of willingness of the rich to pay for the benefit of the poor. It is the sheer chasm that divides both these worlds, quite unbelievable but absolutely true.
Bill Gates speaks about a number of projects launched by the corporate world for bringing better resources and benefits to the poor of our world. One of the projects he speaks about is the new initiative for bringing the African coffee growers in direct contact with the major corporations in the business so that their returns would be doubled.

I am not familiar with the African scenario, but I have seen the life and experiences of Indian coffee growers, mainly in Wayanad, a district which has seen the largest farmer suicides in Kerala, a south Indian state afflicted by widespread farm distress in recent past. During 2002-2006, this tiny district had reported as many as 179 farmer suicides, according to the Economic Review 2007, released by the Government of Kerala.

Coffee has been a major crop here, most of the plantations started by the British planters who came here in 19th and early 20th centuries when India was a British colony. Now the major plantations are owned by big companies while there are a large number of small and medium growers who solely depend on coffee for survival.
As a journalist, I went to the place during November-December 2007 to find out what went wrong with their life and why there were so many suicides in those villages. It was a distressing situation: coffee is highly dependent on global market prices and small and medium scale farmers who cultivate it in a few acres of land, find it hard to withstand price dips and they have no resources to wait till the prices recover. They have to sell out even at huge losses because they are, in most cases, heavily indebted to banks, money-lenders, etc.

Here is the economics of coffee production for small growers:

Malana James, a grower with 2.65 acres of coffee in Kaniyampatta panchayat, Wayanad, got 30 bags of coffee beans in the 2007 season from his plants. Each bag contains 54 kg of beans and when processed he got 30 kg of coffee kernel from each bag. And the amount he got for one kg of coffee kernel in 2007 was just Rs. 70.

He sells in the open market, and agents for major global corporate companies procure it. The prices keep fluctuating every year, every season: it was as high as Rs. 120 for a kg in 1994-95 and then it dropped to as low as Rs. 16 in 2002-03. He said last year he lost around Rs. 60,000 on his small plantation.

At the same time the value-added coffee sells in the markets, at prices astronomical compared to the prices farmers get. Nestle India’s Nescafe Classic, a premium brand, is sold at Rs. 68 per pouch containing 50 grams.

I have experienced similar situation in most of the crops that depend on global markets. There is an obscene level of price differences, the small growers being fleeced like anything. But the corporate firms failed to ensure even minimum price stability for the growers, even in the days of acute farm distress and mass suicides. It was the federal and state governments who did some fire-fighting operations with the institution of a debt relief commission and higher budget outlay, etc, and taking over the debts of those who committed suicide so that their families need not keep running from pillar to post to pay off the debts left behind by their dead bread-winners.

I am not ruling out that corporate firms may have a say or a role, but can they really bring about any change? I doubt it, because their philanthropic role has always been conspicuous by its absence where it really matters: that is among the most backward parts of the world where people are committing suicide because of debt, destitution and lack of any support at the time they really need some.

(Courtesy:www.creativecapitalismblog.com)

Capitalism, Socialism and the Way Forward for the World: A Global Debate

I WAS involved in a heated global debate on these issues at the creativecapitalismblog, launched to discuss global efforts to bring a better life to the people in the poorer counties, following the famous Davos speech by Bill Gates. These discussions took place following a few interesting posts made by Martin Wolf, an eminent economist and associate editor of Financial Times, London. There are references to some posts from a few others from various countries, like an economist-investor from Germany, who identifies himself as fh, and an entrepreneur-economist from the United States, Tracy W, in the following edited version, which mainly trace my own line of argument:

N P Chekkutty:

Martin Wolf writes: But the biggest destruction of capital in the last century, in peace time, occurred in the Soviet bloc.

Is it right to compare the command economy of the Soviets or China with the democratic system where the market economy has been in full flow?
Perhaps it would be more correct to describe the destruction and wastage in Soviet bloc as creative destruction because in the past decade Russia has grown at least ten fold compared to the time Putin took over. The growth should seem impressive in the light of the kind of problems they faced at the time of the collapse of the earlier system.

Same should be the case with East Germany. It was a mess when integration took place but we do not hear the same complaints we used to hear in the mid-nineties about the economic costs of integration. So perhaps, there is much substance in what fh says, that the US, in spite of its clear advantages, is making a mess of things for themselves and others.

Martin Wolf:

Russia hasn't grown anything like 10-fold since Putin took over. Real growth has been about 6 per cent a year, if I remember correctly: so you can do the maths easily. Actually, for what it is worth (not very much, I agree), Russia's measured GDP is just about back to where it was in 1990. I think you may be confusing real growth with growth in nominal dollars. But that merely reflects the fact that the rouble overshot downwards massively in 1998 and 1999.

I really don't think that a 74 year detour, from which Russia emerged a basket case, can be called "creative". It is worth remembering that Russia was the fastest-growing large economy in the world immediately before WWI. So if it had not been for the Soviet experiment, Russia would almost certainly be a rich country today, which it is not (particularly if you ignore the oil and gas windfall). This also ignores the gigantic human and political costs of the Lenin-Stalin experiment with totalitarianism, from which Russia has not, alas, recovered. It may never do so.

Also, no, I don't think fh is right on the US. The US has always been a boom-bust economy and it still is. It is after all a capitalist country. Just as it is senseless to expect Germany to become the US, so it is senseless to expect the US to become Germany (as I discuss above). But the US has been the preponderant source of global economic innovation since the late-19th century and particularly since WW II. Among large countries, it also has much the highest average income per head. The US is the global economic frontier. One has to be blind not to see that it has been astonishingly successful.

N P Chekkutty:

Fh writes: The German AWG (Aussenwirtschaftsgesetz) should be coming into force very soon. Broadly speaking, that law is designed to make it much more difficult for foreigners to take over German firms.

Fh, Can I take it that this is a major step in the direction of insulating the German economy from the global one? Put it more clearly, is it an indication of the German aloofness or maybe, a new surge of protectionism in one of the most important economies in the rich world?

And one more question: Exactly against whom are these measures aimed at? Is it the rest of west which has always been an alley since the Second World War, or is the new forces from the developing world that the law would try to keep out? I have seen quite a bit of parochialism in some European countries of late, like when an Indian steel firm, Mittal, made an effort to buy up the French steel-maker, Arcelor.

Fh:

Why the AWG, NP? Well, Germans have seen the UK economy become a "hollowed out" one -- the auto industry, shipbuilding, hardly exist any more; GEC (once the No. 1 firm in the FTSE) no longer exists. ICI (Imperial Chemical Industry) another huge UK company shrank massively and was sold off to ...Norway?

And the once great civil engineering company Wimpey is now reduced to a house-builder, suffering from the construction slump in the UK.
When German managers look at the US auto industry, they have nightmares at the thought that such a fate could overtake German car giants like VW, BMW. That's why Porsche and one of the German states (Länder) fought tooth and nail to acquire the VW majority and will never let it go. The same applies to many other large German companies.

P.S. Yes, Mittal - but in my opinion, he acted just in time to get Arcelor.
I think Sarkozy has also tightened up against outside takeover attempts. I know Mittal Steel from the time when it bought a steel mill in Temirtau (in Khazakhstan)...

N P Chekkutty:

MW writes: Russia hasn't grown anything like 10-fold since Putin took over. Real growth has been about 6 per cent a year, if I remember correctly: so you can do the maths easily.

I am not going into an argument with a veteran economist like Martin Wolf on the figures with regard to Russia's growth. But I find that my figures were correct, on cross checking.

According to a report published in the major Indian newspaper, The Hindu, dated August 4, 2008, the Russian economy which was at $200 billion ten years ago, crossed $1.4 trillion in 2008. its per capita GDP quadrupled to $7000 in this period.
Of course this growth includes its oil and gas revenue too. But why should Russia count this revenue out while all others including the US count their oil revenues in GDP?

Martin Wolf:

As I said, the huge rise in Russian dollar GDP is mostly because of the nominal appreciation of the rouble, not real growth. The appreciation was itself largely the inevitable consequence of the overshooting after the 1998 devaluation, plus the benefit of large oil and gas revenues. Figures for changes in national income in a foreign currency (the dollar) don't mean anything very much. As I said, you are confusing real growth with growth in nominal dollars.

N P Chekkutty:

MW writes: If I were fh, I would worry a bit more about Germany and a bit less about the US.

This, I am afraid, does not actually answer the point raised by fh. He was referring to the failure of the US in meeting some key social responsibilities of an economy, like health care and professional training. If an economy fails to take care of these basic social demands, I do not know how far it's worth to speak of.

So it is welcome when someone speaks of socialism. The pre-90s model has been a disaster, but that does not rule out socialism as a way out for the future. This could be much more important for the third world, as without an effective public policy and state intervention, ensuring a semblance of decent and equitable distribution there could prove to be next to impossible.

And the search for non-Anglo American models, like the German social market, expands the scope of finding a better way out for the world because so far the entire debate has been monopolized by the Anglo-American model of free market. Why not look elsewhere too for a workable solution?

Martin Wolf:

If a country wants to be export world champion (a silly aim!), then somebody has to buy the products and if a country wants to run huge current account surpluses, somebody has to run the deficits. I make this simple point in a forthcoming book.
I agree there should be many models. That has been one of the points made in my various posts.
Anyway, that's it.

Fh:

The American type of capitalism is too exclusive, in my opinion. Racial prejudice, lack of access to a good education, even living in the "wrong" state all combine to deny many Americans the chance of a better life.

N P Chekkutty is right, we can learn from other socio- economic models, seek out and analyse the reasons for others' successes and failures.

@ MW: Being Exportweltmeister just means that Germany is producing goods and services that other countries need or want to buy, at a price the latter are willing to pay.

Tracy W:

There's no reason to believe that socialism is necessary for a semblance of a decent and equitable distribution.

Why oh why are people so attracted to the idea of socialism that despite its massive failure, they still think it should be kept alive? Do they also advocate bringing back the Spanish Inquisition? And how about the habit of doctors going straight from autopises to attending childbirths without washing? Perhaps they spend their evenings plotting to blow up sewage treatment plants so we can check the theory that contaminated water causes cholera?

N P Chekkutty:

I think I need to explain why I still feel socialism needs to be taken once again into serious consideration.

I will try to do it later on, but right now let me tell you that when I speak about socialism, I do not mean the state capitalist system that Soviet Union experimented with disastrous consequences. Ever since the world War, there has been quite a bit of debate about what we do mean by socialism in a democratic polity.

N P Chekkutty:

Tracy W asks: What is the attraction of the word "socialist" that you, and other writers, find so valuable that you are willing to keep the word...

A considered analysis calls for a major attempt to understand modern history, politics and economics which is beyond the scope of this debate. I will confine myself to the limited scope of this forum where the primary idea was to locate which model is the best one to help those at the bottom of the pyramid.

I begin my search from where Martin Wolf left out in this note. He said, "that many social goals can only be met through political action. That is also where they ought to be met."

This leads us to which kind of politics. The contemporary experience, mainly in poor countries, make it plain that you will have to work with the poor and working class people to find a sensible way for human liberation.

I say this from a study of Marx and his concept about dialectical and historical materialism, a philosophical innovation from Hegel and enriched by the various strands of political and economic thought in Europe and elsewhere in the 19th and 20th centuries. In our times there has been a series of debates which enriched this world view and one cannot forget people like Antonio Gramsci, Mao, Deng Xiao Ping and Ho Chi Minh who gave new inputs. The fact is socialism is not just a few Russians who bungled their state control; it goes beyond to experiences in China, Viet Nam, and many newly independent countries like India where the communists and socialists helped develop and enrich political theory and practice. It also goes to the German, French and Italian left movement also which has a great history and tradition.

Look at the developing world: The contribution of socialist and communist parties to parliamentary democracy is immense. They helped bring in much more people friendly legislations, more equitable distribution and more public participation in governance.

Martin Wolf:

The view that communist regimes are responsible for the deaths of 100m people is not a cliche. The figure comes from "The Black Book of Communism: Crimes, Terror, Repression". It is controversial (since we don't really know how many died in China and there is dispute over whether the famines in the Soviet Union and China were deliberate, or not). But it is not unreasonable.

Tracy W:

Look, I agree that it is important to remember socialism. But it seems odd to focus merely on the failures of history and ignore the successes. And really really odd to pick the name of something with such a horrible history to call your new idea by. If the only reason you favour the name socialism is that it contributed to a series of debates, why not pick the name of a philosophical idea that also contributed to the same series of debates but didn't lead to millions of deaths, like libertarianism, or capitalism? (I would still prefer you to pick a name that was new, to avoid confusion, of course.)

N P Chekkutty:

What is in a name, after all? Right.

But it is not so easy or historical to forget the history and experiences of our times. Without a proper understanding and possibly appreciation of the contribution of the left politics, both socialist and communist, to the modern world I am sure we would never able to move on, to anything new and more meaningful for human endeavor.
Dear Tracy, let me say that there are some degree of unity of views between us, and some areas of profound differences. As far as I can see, the unanimity is about the value of capitalism as a vehicle for wealth production; but there is divergence over distribution or redistribution. You seem to think that the market would take care of it because it has its own means to ensure that wealth trickles down to every pore, to every nook and cranny of our universe. For me, we need special efforts to ensure that it reaches to large parts of humanity.

Now the question is how to ensure this? There were so many ideas including a direct transfer, say issuing cheques to all of them, to making things available at low cost, etc.

For me, all these are peace-meal and half-hearted. They are half remedies discussed half heartedly and without conviction. If we want to help poor, we need to empower them and empowerment takes a lot of social and political involvement and intervention, which has been the main idea Martin Wolf finally came up with.

I believe, and I have observed, that the forces that can act most effectively in this area are the political parties and other formations that belong to the poor people and working class. (Remember, I am talking about the developing countries now.) I belong to South Asia and in this region, (like others in other parts) I know that the political parties from the left have made immense contribution (you realize this when you contrast them with bourgeois parties) in bringing a better life to these people. (See for example, the National Rural Employment Guarantee Act in India, which helped millions survive in the days when thousands committed suicide in farm sector. There are many examples, but I can't write about all of them here.)This Act is the contribution of Manmohan Singh Government with the communist parties putting pressure.

But why can't we call them by some other name?

This involves the history of the left movement. In Communist Manifesto, Marx and Engels describe their political view as scientific socialism, to distinguish itself from the earlier utopian socialists. Unlike in Europe, where the Euro Communists in 70s abandoned their flag and name, in third world you can't be so utopian, to use Marx's own terminology. You need a strong and united working class movement to see that these sections are able to fight on for their rights. Once they reach the developed world's levels of growth, I am sure they may not need the red flag any longer. But that would take many many more years to come.

Tracy W:

Chekkutty, why are you saying this? What did I say that gave you the impression that I wanted to forget socialism? I said, in the comment you are replying to:
"I agree with you that we should not forget socialism. Just as we should not forget that hot things burn and that contaminated water can lead to cholera outbreaks. I hope that we can learn from history what not to do. "

I don't know how you can read that as a call to forget the history and experience of our times. Is there anything else I can say that can convince you I am entirely in favour of remembering socialism?

You say, Once they reach the developed world's levels of growth, I am sure they may not need the red flag any longer.

The Asian Tigers appear to have managed very well without the red flag.

And just to repeat myself, I am utterly convinced that we must remember socialism. I think the history of the left movement should be studied in schools. I just don't understand why you want to call your system "socialism". Why not call it "feudualism" or "slavery" or "religious intolerance"?

N P Chekkutty:

Memories do differ. And what you remember may not be what I would like to remember. As for those deaths of people, I agree terrible mistakes have been made. All sensible people say this. But which system has not been responsible for similar crimes? Who dropped an atom bomb on the people of Hiroshima after the Red Army had entered Berlin?

As for the dictionary definition of socialism, let me tell you I go by what the theoretical definitions of these terms are in the writings from Marx to contemporary Marxists and the party programs of various communist parties with which I am familiar.

Asian Tigers appear to have managed very well...

Asian Tigers? hahaha
Do you know how big are these places and who rule them? Fine examples for the victory of capitalism proper!

(This is an edited version of the debate. Courtesy:www.creativecapitalismblog.com)

Capitalist Do-gooders and the People of Bhopal

THE CREATIVE Capitalist entering the social sector for the benefit of the poor in expectation of public recognition as a reward is a good idea.

Only if it works in the field.

The suggestion for effective checks and balances is to go for continuous evaluation, and publish reports for assessment in a transparent way.

Grand ideas indeed. Will ensure some good work for those experts too.

But let me try to give the example of a small project I had seen in a school in my home town: They were producing vegetables in the organic way and the students and teachers were involved in this humble project which ensured the school kitchen received good vegetables at affordable cost.

Then came the government into the scene: a minister landed with his entourage, news cameras and a big ceremony of digging, cutting ribbons, ceremonial planting of saplings, etc, was organized and the next day when the students went back to their garden what they saw was a place that looked as if it had been run over by a thousand elephants in heat...

I do not blame the minister who came with an army of hangers-on to the fragile garden. For him the public glow was the essential part of the show, because he thrived on it. And I do not blame a CC do-gooder doing the same, descending on a small project somehow being run by a small grassroots group with all their limitations, but also with some limited success and applauded only by those local people who are benefited out of it and without much media glare. But when a powerful international group enters the scene with its immense media control, money power and resources, and puts up such shows with an eye on the public glow, then it would be doom for those small grassroots level movements that are slowly seem to emerge in many parts of the world, caught in this whirlwind.

So what is the way out? I would suggest to identify ways how not to trample upon the small shoots, how to be careful and culturally sensitive; how to help local people do these things themselves. But can the global capitalist powerhouses be so sensitive? I am not sure, going by our past experience.

It is around 25 years since the people of Bhopal,India, were gassed by a global company but no one from this philanthropic, crocodile-tear-shedding giants in the West cared to teach a lesson to this particular company and stand up for those victims who suffered for so many years.

Child Labour, Sweatshops and the West’s Crocodile Tears

This is in continuation of the debate on creative capitalism, an idea made popular by Bill Gates. For earlier inputs see tag: Capitalism.

Tim Harford writes:

My final worry about recognition is that we do not always recognize behaviour that will truly help the poor. A simple example: a friend
of mine recently bought shoes made in Italy rather than shoes made in Romania, specifically because she was worried (in a rather vague way) about encouraging sweatshop labour.


I am a bit worried about this 'concern' for the poor in other parts of the world expressed through the market place. It could backfire on the poor person in most cases.

Let me try to explain this through an example:
Sometime ago while I was working in Delhi, we used to get tea, coffee, etc, from the Indian Newspaper Society's building in Rafi Marg, a stone throw from Parliament House, served mostly by small children from Nepal. I asked the boy why he was serving in the canteen instead of going to school like all other kids do.
He said he would like to. But things were bad at home, and his father had no way but to send him to India where he could find some work. He said once things are better and he earns a little money to help his parents, he would go back and get into a school one day.

I knew child labor was a crime but what could I do? Report him to the police? I could only pray that things would get better for him, and perhaps now that his country is a republic he may be able to go back and enter a school.

I was trying to say, there are moral choices in this. Avoiding goods for fear of aiding sweatshops even inadvertently might harm a family somewhere, who are dependent on this little money for their survival. Those little ones in the sweatshops in those far-away dreary places too have their parents who had to make a moral choice too, and it is difficult for any parent to send the kids to these work places instead of schools. But they have no option in most cases.

I do not say the world should keep a blind eye to the extremely poor working conditions in the poorer parts of the world. By no means. It should always be concerned, it should agitate, put pressure on governments, and try every which way in which it could help them.

But paying a higher price for the goods of same quality from a developed country to avoid something suspected to be tainted by the sweat of a child from a poor country can't be the right answer to this moral question. Perhaps it boosts one's self esteem, but surely it would not help bring in a better world for any one of us.
Posted by: n p chekkutty | July 26, 2008


Stephen Landsburg writes:

Undermining the anti-sweatshop movement would be an excellent place to start.


This is an excellent proposition because one of the first things the West can do to help the poor in the developing world is to dispel the sentimental nonsense revolving around this concept about 'sweatshops' in those countries. The fear of sweatshops and the 'conscientious' objection to the products from these countries is a virus fast spreading all over the developed world and I am sure, it would hurt the poor of our world much harsher than any other steps the West can take, say the protectionist legislations or even the the refusal to help with aid.

A few days ago in response to a post by Tim Harford, I had made the following observation: "Avoiding goods for fear of aiding sweatshops even inadvertently might harm a family somewhere, who are dependent on this little money for their survival."

I feel that since Prof Landsburg has made a scathing criticism about the way the West is dealing with this issue, it is necessary to look at it from the standpoint of those countries and people who are likely to be hurt by such measures.

First let us accept that the working condition in most of the developing world is not as comfortable as the workers in the developed world enjoys. But the crucial aspect is that while there may be choices for the workers of the developed world, there is precious little choice for those living in these parts of the world. The less choice, the less bargaining power you have. Hence exploitation of the labor is at a much higher level in these parts, no doubt about it.

So what to do? Leave them to the care of God and disallow their products from the Western shops? And thereby deny them the daily meal, if at all they are able to afford a meal by all these exertions? I have seen hundreds of kids who work in road projects, small workshops, mills, canteens, etc, and then go to school to build their lives. By refusing to buy the products that may have their sweat on it, what we actually do is to deny them the only chance to hold on to a better life, stonewalling the only glimmer of hope they may have.

The best way here is to put pressure on the governments, the factory owners and the business community in these parts of the world to improve working conditions, to go for stricter law and enforce labor standards. Here the trade unions and political parties who are deeply involved with the poor people's lives could be of immense help. So what we need to do is to think of building strategic tie-ups with the political establishment, say the trade unions, political parties, etc, and enforce change. But the Gates Foundation memo never even speaks of such a strategic initiative as they do not think the political society in the third world can be a valuable ally in the effort to promote creative capitalism. I think this is a fundamental mistake on their part. They speak of Prahalad and the gains to be picked up at the bottom of the pyramid. Fine. But unless you have somebody alive at the bottom how can you pick up anything from there?
Posted by: n p chekkutty | August 04, 2008


A response to a query from Jessica Haussler, Frankfurt:

Jessica,

My objection to the campaign against 'sweatshops' now gaining ground in the rich countries not because I do not want the working conditions there to improve. I do certainly want the difficult conditions in which people work in many companies who are suppliers to the global chains to improve. Naturally, any consumer pressure that would force the corporate firms to take actions to get the situation improved would be welcome. But that can be done not by diverting production units, shifting locations, or cutting back orders. But through forcing their collaborators to go for better standards, by persauding the local governments to enact much stricter laws, and ensuring decent working conditions do exist in those countries also.
But the problem with a blanket campaign and boycotting of such products simply on the basis of a suspicion that it involves child labour can be disastrous to those people who depend on them. Possibly they work in abominable conditions, but refusing to buy their products would only mean denying them their daily meal. I suppose no conscientious consumer can ever think of doing it.
Posted by: n p chekkutty | August 06, 2008

Capitalism& the Poor World: A Response to Jagdish Bbhagwati, Abhijit Banerjee and others

EMINENT ECONOMIST from Colombia University, Dr Jagdish Bhagwati writes: Typically, the rich in Ahmedabad spent moneys on people's education, on health, and (believe it or not) even on agricultural extension and dry farming experiments.

I am not sure whether Dr Bhagwati visits his home town oftener these days. But I find things are slightly different at the grassroots from the rosy picture he paints.
I don't deny the rich Gujaratis did spend money on philanthropic efforts. They did and they even supported the Indian national movement even when their business interests went against their nationalist sentiments.

But these days how do the rich Gujarati's spend their money?

It is a fact that the anti-minority pogroms that made Gujarat notorious in recent past were funded and supported by these same sections who have plenty of money to spare and they nourished the politics of hooliganism with their riches. Now all over the world the Gujarati diaspora speak of a new Gujarat and this Gujarat is something terribly different from the one the old Rajkot-wallah, Mohandas Karamchand Gandhi, lived in and died for. It is a place where the other, the poor Muslim who lives in the slums of Ahmedabad and Baroda, has no place.

This is the experience all over the country. As a journalist, I find that the rich NRIs are the major supporters and financiers of a highly virulent kind of nationalism -- a nationalism that is more likely to divide this country again -- that promotes bigotry, hatred and jingoism. They are the people who, from their safe havens in the west, want India to make N-bomb and possibly send its neighbors to the stone age. Read their blogs and comments in newspapers and you are flooded with such sentiments, expressed quite openly and unabashedly.

So perhaps we need to rethink what money can do to a person and a nation. Uncontrolled riches can play havoc too.

Posted by:n p chekkutty | July 21, 2008

Dr Abhijit Banerjee gives a few examples from India, and most of them about the way the country failed to make any mark in beneficial social interventions.
But I had occasion to see the agency of the government actually at work, in a beneficial way. He speaks about the recent budget provision of Rs. 75,000 for the assistance of farmers in distress (to which many economists were not enthusiastic,) following the large number of farmer suicides in various parts of the country, from Vidharbha in Maharashtra to Wayanad in Kerala.

I visited a few villages in Wayanad hit by farmer suicides in the recent past and found that two major steps taken by the state and federal governments, the debt relief commission set up by the Kerala Government and the debt write-off program announced by the Federal Government, did help ease the situation on the ground. During 2002-2007 there were regular reports of farmer suicides from all parts of rural India, but in the past few months they are rare, though not fully subsided.
Wayanad gave me an example of how it works. The debt relief commission, which had received over four lakh petitions in the first three months, had held a few sittings there and I saw many people, most of them with small amounts of loans from various sources, had approached it for help and they were able to provide them in most cases.
The Kerala state's Economic Review 2007, released by the Planning Board headed by Dr Prabhat Patnaik, an eminent economist, reported that by the end of 2007 the state was able to put an end to the widespread farmer suicides in the region.

As a journalist working in this region, I know that this is not 100 per cent true, but to a large extent this claim is factual. The suicides have markedly come down and the government efforts did play a major role in this gain.

In fact, Kerala can be considered a model for the public intervention ensuring a better and even equitable social order: Its human development indexes are almost comparable to the first world, and recent studies seem to say that even the economic growth, which was extremely poor in the past, is now picking up as shown by the experience of recent years.

Posted by:n p chekkutty | July 22, 2008

In response to Eric Werker:

Elsewhere Prof Abhijit Banerjee has expressed reservation about the concept of a weak state, what does exactly it mean. Any lack of a proper understanding or a definition of what is a weak state could be problematic, since there are talks about pressuring, funding and even making use of 'economic smart bombs' to keep them in line.

Being a person from the South which the new 'socially responsible corporates' are determined to reform and revive, I am extremely worried and concerned of what goes on here. I do not say there is any kind of conspiracy here to subdue the poor South making use of new concepts, new ideas and the monopoly over economic and intellectual resources and technological advances the West still enjoys, as many others in the South do believe, but let me point out that the muddled understanding about the people who are not known to those policy-makers can really do much harm.

I am not going into the details about what were our experiences with the World Bank and IMF in the past but in the countries of South, say in my own country India, there has been a great debate on it for a long time. Looking back, it is clear that there was a not-so-subtle element of putting pressure, arms twisting in most of their policy dictates/formulations with regard to many countries in our part of the world.
So let us try to understand what is a weak state? Is the United States a 'strong state' perhaps? Is it the yardstick for the whole world to emulate? Then I think many would not think of anything but 'shock and awe', something too mean for any civilized nation to speak about. So let us drop the use of terms that eerily remind about military tactics, often applied in the past, and in many cases eve now in operation and for some others, still in the pipeline.

Or are we talking about the United States a model strong state in economic terms? I don't deny that the US still has an advantage in science, technology,trade, etc, but is it in the same dominant position as it used to be, say just a few years ago? What is going to be its position in another ten years, after this Iraq war accounts are due to be settled and possibly another from Iran too comes in for payments? It does not look rosy at all and as Fareed Zachariah seems to argue, the US is not declining but that the others are also rising. Well, it's a matter of speculation and I feel when others are rising fast and the US is unable to rise to balance or even out, then what we will see is the decline of the empire.

Here I would agree with the author that may be this new sudden urge to help out without properly looking at the world we are going to reform could do more harm than good. It is not only the dictators or commission agents who i am talking about. They are only an ephemeral phenomenon as people in those countries can take care of them in due course of time. What worries me is that any misguided and impatient approach could harm the nascent, slowly evolving democratic institutions in many parts of these countries that are trying to cope with difficulties, learn to walk, to solve their problems in their own unique ways.

Perhaps what they require from the West is simply a proper hearing, a respectful understanding and may be some little help here and there in making themselves useful; both to themselves and to the world.

Posted by:n p chekkutty | July 24, 2008

Will Global Giants in Search of Public Glow will Trample us Underfoot?

This is in continuation of the debates on the idea of creative capitalism gaining ground, after the Bill Gates speech at Davos:

THE CREATIVE Capitalist entering the social sector for the benefit of the poor in expectation of public recognition as a reward is a good idea.

Only if it works in the field.

The suggestion for effective checks and balances is to go for continuous evaluation, and publish reports for assessment in a transparent way.

Grand ideas indeed. Will ensure some good work for those experts too.

But let me try to give the example of a small project I had seen in a school in my home town: They were producing vegetables in the organic way and the students and teachers were involved in this humble project which ensured the school kitchen received good vegetables at affordable cost.

Then came the government into the scene: a minister landed with his entourage, news cameras and a big ceremony of digging, cutting ribbons, ceremonial planting of saplings, etc, was organized and the next day when the students went back to their garden what they saw was a place that looked as if it had been run over by a thousand elephants in heat...

I do not blame the minister who came with an army of hangers-on to the fragile garden. For him the public glow was the essential part of the show, because he thrived on it. And I do not blame a CC do-gooder doing the same, descending on a small project somehow being run by a small grassroots group with all their limitations, but also with some limited success and applauded only by those local people who are benefited out of it and without much media glare. But when a powerful international group enters the scene with its immense media control, money power and resources, and puts up such shows with an eye on the public glow, then it would be doom for those small grassroots level movements that are slowly seem to emerge in many parts of the world, caught in this whirlwind.

So what is the way out? I would suggest to identify ways how not to trample upon the small shoots, how to be careful and culturally sensitive; how to help local people do these things themselves. But can the global capitalist powerhouses be so sensitive? I am not sure, going by our past experience.

It is around 25 years since the people of Bhopal,India, were gassed by a global company but no one from this philanthropic, crocodile-tear-shedding giants in the West cared to teach a lesson to this particular company and stand up for those victims who suffered for so many years.

Will Corporate Do-gooders Save the World and its Poor?

BILL GATES is now a philanthropic messiah and his speech at Davos where he elaborates on his new concept of creative capitalism is his new manifesto. It could enthuse people and it could perhaps even solve many of our problems with the help of corporate do-gooders.

Having worked in and reported on economic and development issues of some of the poorest parts of the world, I feel the devil could always be in the details. Once the former Indian prime minister, Rajiv Gandhi, whose youthfulness and commitment to the cause of the poor reminds me of the Bill Gates of today, had pointed out that of every 100 rupees the government spent on the welfare of the poor only 15 actually reached them. The rest disappeared into some black-holes that divide the governments/philanthropists/ NGOs and international aid agencies from the really needy people who live far away.

So what seem to be the real problems is not the lack of resources or lack of willingness of the rich to pay for the benefit of the poor. It is the sheer chasm that divides both these worlds, quite unbelievable but absolutely true.

Bill Gates speak about a number of projects launched by the corporate world for bringing better resources and benefits to the poorer sections of our world. One of the projects he speaks about is the new initiative for bringing the African coffee growers in direct contact with the major Corporations in the business so that their returns would be doubled.

I am not familiar with the African scenario, but I have seen the life and experiences of Indian coffee growers, mainly in Wayanad, a district which has seen the largest farmer suicides in Kerala, a south Indian state afflicted by widespread farm distress in recent past. During 2002-2006, this tiny district had reported as many as 179 farmer suicides, according to the Economic Review 2007, released by the Government of Kerala.

Coffee has been a major crop here, most of the plantations started by the British planters who came here in 19th and early 20th centuries when India was a British colony. Now the major plantations are owned by big companies while there are a large number of small and medium growers who solely depend on coffee for survival.

As a journalist, I went to the place during November-December 2007 to find out what went wrong with their life and why there were so many suicides in these villages. It was a distressing situation: coffee is highly dependent on global market prices and small and medium farmers who cultivate it in a few acres of land, find it hard to withstand price dips and they have no resources to wait till the prices recover. They have to sell out even at huge loss because they are, in most cases, heavily indebted to banks, money-lenders, etc.

Here is the economics of coffee production for small growers:

Malana James, a grower with 2.65 acres of coffee in Kaniyampatta panchayat, Wayanad, got 30 bags of coffee beans in the 2007 season from his plants. Each bag contains 54 kg of beans and when processed he gets 30 kg of coffee kernel from each bag. And the amount he got for one kg of coffee kernel in 2007 was just Rs. 70.

He sells in the open market, and the major corporates procure it. The prices keep fluctuating every year, every season: it was as high as Rs. 120 for a kg in 1994-95 and then it dropped to as low as Rs. 16 in 2002-03. He said last year he lost around Rs. 60,000 on his small plantation.

At the same time the value-added coffee sells in the markets, at prices astronomical compared to the prices farmers get. Nestle India’s Nescafe Classic, a premium brand, is sold at Rs. 68 per pouch containing 50 grams.

I have experienced similar situation in most of the crops that depend on global markets. There is an obscene level of price differences, the small growers being fleeced like anything. But the corporates failed to ensure even minimum price stability for the growers, even in the days of this acute farm distress and mass suicides. It was the federal and state governments who did some fire-fighting operations with the institution of a debt relief commission and higher budget outlay, etc, and taking over of the debts of those who committed suicide so that their families need not keep running from pillar to post to pay off the debts left behind by their dead bread-winners.

I am not ruling out that corporates may have a say or a role, but can they really bring about a change? I doubt it, because their philanthropic role has always been conspicuous by its absence where it really matters: that is among the most backward parts of the world where people are committing suicide because of debt, destitution and lack of any support at the time they really need some.