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Thursday, May 28, 2015

The Great Indian Capitalist

 

  Editor in Chief of The Young Post

One year has passed under the premiership of Narendra Modi, and, to the disappointment of his prophetic opponents, India has not collapsed into a fiery orgy of violence, death, and backwardness. India has not arisen to the glorious and seemingly inevitable paradise that Modi's fervent endorsers promised either.
Narendra Damodardas Modi, the 15th Prime Minister of the Republic of India, it seems, is, like his 14 predecessors and certainly like all his successors, a man who fills proud optimism in the hearts of some, and bitter scorn in the hearts of others - neither of which is unjustified if one studies Modi's first year in power - a year filled with progress and retardations, order and chaos, great leaps forward, and great leaps back.
Narendra Modi stands to either be one of the greatest and most respected Prime Ministers in Indian history, or another loud mouthed demagogue who shall be relegated to the dustbin of history - labelled a failed experiment in Indian politics.
Regardless, Modi's first year has been anything but dull.

Narendra Modi's first year has been a colourful mixture of Modi planting the seeds of great change in India, and Modi harvesting the planted crops of the former Congress government. He hasn't made an overt effort to distinguish between the two, but the seeds he has planted will yield even greater fruits for India when the time comes.
The most noticeable success of Narendra Modi's first year has been the immense progress India has made in foreign relations. The recently concluded Hanover Messe is, by far, Modi's most impressive achievement - where India, as host country, pitched itself to foreign investors as the ideal manufacturing hub for a wide variety of products - from space to textiles.
The seeds he has planted will yield even greater fruits for India when the time comes.
This is of course in tandem with Modi's Make in India campaign - an ambitious vision to transform India into a manufacturing behemoth that can rival China. Although there are several imperfections in Modi's Make in India vision - such as the point raised by Dr. Raghuram Rajan that emulating a Chinese growth model may not work the same way for India as it did China - the fact that he envisioned it was more than enough to attract valuable foreign capital.
In the realm of international politics too Modi is becoming a giant to be reckoned with, having earned the respect of Barack Obama (who personally penned Modi's profile in the TIME 100 list this year and called him India's "reformer-in-chief"). His state visits to the East Asian tiger economies has also been greatly productive and has opened several avenues for FDI to pour into India.
India has earned greater respect under Modi, and Modi himself commands a fair deal of respect as not just a regional leader, but a world leader.
Economic growth has been stable and rose by nearly three percentage points between Modi's inauguration and the next financial quarter, and Modi's strategy of channelling FDI into manufacturing has not yet failed him despite the warnings of the central bank. All of this can be credited to the fact that Modi is the first Prime Minister since Indira Gandhi to have successfully tied his cabinet to a political leash.

Where Modi failed
It is important to understand that while Narendra Modi will arguably be the greatest Prime Minister of this decade, his government will be one of the worst. While Narendra Modi's vision will lead India to new realms of prosperity, his government's backwardness and conservatism will only pull his vision down into the mud.
Why? Because Narendra Modi's government is not one built on technocratic grounds, but political ones. In other words, his cabinet is not made up of entirely qualified ministers, but merely politically strategic ones - people who will let him carry out his great reforms without interfering and, most importantly, without opposing him. This trend will only continue, as it has with Smriti Irani, an under-qualified but politically strategic member of Modi's cabinet who will never be a contrarian to Modi.
Modi's one man show control of his government this past year has been a double edged sword, because there's only so much a one man army can do before breaking down
To talk about his economic performance would require another piece at another time, but considering that both of Dr. Manmohan Singh's first years as Prime Minister were more economically progressive than Modi's first year speaks volumes. Modi's supporters believe that he cannot work magic in just a year. Well, such generous time considerations were never given to Dr. Singh.
"It seems that only Dr. Manmohan Singh is a robot for not speaking up on important issues, while Narendra Modi is wise and contemplating for his silence."
Modi failed to speak up against increasing state censorship, did not address the question of net neutrality adequately, did not speak on the security threats posed to India by the Naxals this year, failed to advance basic rural programs for food security and women's safety despite launching ambitious rural finance programs, continuously ignored the valuable advice of the RBI governor with regards to investment policy, and has been silent about institutionalising a strong Lokpal system in India despite election promises to do the same in a matter of months. It seems that only Dr. Manmohan Singh is a robot for not speaking up on important issues, while Narendra Modi is wise and contemplating for his silence.
Narendra Modi's greatest failure as Prime Minister after one year, however, is that he cannot speak up against visible injustice and growing religious tension for fear of upsetting his mostly Hindu, mostly North Indian, and mostly male supporters. From the issue of forced conversions by Hindus and Christians, to the question of the Bajrang Dal's growing violence against other faiths, Modi chose to brush it all under one brief statement that promised his government's dedication to secularism.
Nobody can blame him. Very few politicians of his experience and calibre will do something as stupid as cracking down on the Bajrang Dal's unlawful activities after seeking campaigning help from them during the elections. Modi's political acumen is thus both a booster and a handicap to him, because he's too smart to choose the right thing over the most practical thing, which is nothing to be proud of.

A flawed messiah and a great capitalist
In many ways, Narendra Modi is the great Indian capitalist - a man willing to put everything on the line to watch Indian wealth grow, but not ready to accept that there are several dangerous consequences of rapid growth - such as income inequality, religious tensions between richer religious communities and poorer religious communities and the rabid advance of corporate influence in politics.
"Narendra Modi is a secular and liberal Prime Minister carrying the expectations of religious fanatics and conservatives on his shoulders."
Like all capitalists, Narendra Modi sees the ultimate profit - in this case, prosperity for India - as being more important than the gruelling and often difficult decisions that must be taken to reach that profit. To him, the net gain from passing a draconian land acquisition law is greater than the suffering of the farmers that will lose their land to satisfy someone else's model of "development".
And just as every other capitalist does, Narendra Modi will reach a fork in the road, where he must decide if he will choose the path that benefits the economy, or the people who are dependent on the economy. Because at the end of the day, a starving farmer on the verge of killing himself cares little for reforms that will take decades to come to fruition and will mostly benefit the affluent.
Narendra Modi is a secular and liberal Prime Minister carrying the expectations of religious fanatics and conservatives on his shoulders. His is a great burden to bear, and despite his imperfections, he is India's best hope for meaningful change.
Narendra Modi is essentially a flawed messiah - he shall deliver India to great progress, but India shall stumble along the way. In my book, stumbling along is far better than not moving at all.

Monday, May 18, 2015

How Trade Agreements Amount to a Secret Corporate Takeover

    Professor at Columbia University and a Nobel Laureate in Economics

NEW YORK - The United States and the world are engaged in a great debate about new trade agreements. Such pacts used to be called "free-trade agreements"; in fact, they were managed trade agreements, tailored to corporate interests, largely in the US and the European Union. Today, such deals are more often referred to as "partnerships,"as in the Trans-Pacific Partnership (TPP). But they are not partnerships of equals: the US effectively dictates the terms. Fortunately, America's "partners" are becoming increasingly resistant.
It is not hard to see why. These agreements go well beyond trade, governing investment and intellectual property as well, imposing fundamental changes to countries' legal, judicial, and regulatory frameworks, without input or accountability through democratic institutions.
Perhaps the most invidious - and most dishonest - part of such agreements concerns investor protection. Of course, investors have to be protected against the risk that rogue governments will seize their property. But that is not what these provisions are about. There have been very few expropriations in recent decades, and investors who want to protect themselves can buy insurance from the Multilateral Investment Guarantee Agency, a World Bank affiliate (the US and other governments provide similar insurance). Nonetheless, the US is demanding such provisions in the TPP, even though many of its "partners" have property protections and judicial systems that are as good as its own.
The real intent of these provisions is to impede health, environmental, safety, and, yes, even financial regulations meant to protect America's own economy and citizens. Companies can sue governments for full compensation for any reduction in their future expected profits resulting from regulatory changes.
This is not just a theoretical possibility. Philip Morris is suing Uruguay and Australia for requiring warning labels on cigarettes. Admittedly, both countries went a little further than the US, mandating the inclusion of graphic images showing the consequences of cigarette smoking.
The labeling is working. It is discouraging smoking. So now Philip Morris is demanding to be compensated for lost profits.
In the future, if we discover that some other product causes health problems (think of asbestos), rather than facing lawsuits for the costs imposed on us, the manufacturer could sue governments for restraining them from killing more people. The same thing could happen if our governments impose more stringent regulations to protect us from the impact of greenhouse-gas emissions.
When I chaired President Bill Clinton's Council of Economic Advisers, anti-environmentalists tried to enact a similar provision, called "regulatory takings." They knew that once enacted, regulations would be brought to a halt, simply because government could not afford to pay the compensation. Fortunately, we succeeded in beating back the initiative, both in the courts and in the US Congress.
But now the same groups are attempting an end run around democratic processes by inserting such provisions in trade bills, the contents of which are being kept largely secret from the public (but not from the corporations that are pushing for them). It is only from leaks, and from talking to government officials who seem more committed to democratic processes, that we know what is happening.
Fundamental to America's system of government is an impartial public judiciary, with legal standards built up over the decades, based on principles of transparency, precedent, and the opportunity to appeal unfavorable decisions. All of this is being set aside, as the new agreements call for private, non-transparent, and very expensive arbitration. Moreover, this arrangement is often rife with conflicts of interest; for example, arbitrators may be a "judge" in one case and an advocate in a related case.
The proceedings are so expensive that Uruguay has had to turn to Michael Bloomberg and other wealthy Americans committed to health to defend itself against Philip Morris. And, though corporations can bring suit, others cannot. If there is a violation of other commitments - on labor and environmental standards, for example - citizens, unions, and civil-society groups have no recourse.
If there ever was a one-sided dispute-resolution mechanism that violates basic principles, this is it. That is why I joined leading US legal experts, including from Harvard, Yale, and Berkeley, in writing a letter to President Barack Obama explaining how damaging to our system of justice these agreements are.
American supporters of such agreements point out that the US has been sued only a few times so far, and has not lost a case. Corporations, however, are just learning how to use these agreements to their advantage.
And high-priced corporate lawyers in the US, Europe, and Japan will likely outmatch the underpaid government lawyers attempting to defend the public interest. Worse still, corporations in advanced countries can create subsidiaries in member countries through which to invest back home, and then sue, giving them a new channel to bloc regulations.
If there were a need for better property protection, and if this private, expensive dispute-resolution mechanism were superior to a public judiciary, we should be changing the law not just for well-heeled foreign companies, but also for our own citizens and small businesses. But there has been no suggestion that this is the case.
Rules and regulations determine the kind of economy and society in which people live. They affect relative bargaining power, with important implications for inequality, a growing problem around the world. The question is whether we should allow rich corporations to use provisions hidden in so-called trade agreements to dictate how we will live in the twenty-first century. I hope citizens in the US, Europe, and the Pacific answer with a resounding no.
 huffingtonpost