Mar 12, 2010

Bailout packages bails out the richest

In 2009, when the world was bogged down by economic recession, and some ripples were also felt in India, an estimated $ 20 trillion was pumped in to boost the global economy. India too provided a bailout package, in three instalments, totalling to approximately Rs 3.5 lakh crore.

In February 2010, when Finance Minister was to present the annual Budget, the media had launched an orchestrated campaign saying that the economic bailout package should not be withdrawn. You could see almost every TV channel (and the pink newspapers) bombarding day and night how damaging it would be for the national economy if the bailout package was withdrawn.

I wasn't amused.

In my interventions, I did make it loud and clear (to the discomfort of the economists on the TV panels) that the bailout package was not required in the first instance, and should be withdrawn immediately. Subsequently, I heard the Prime Minister say that only 1.5 lakh jobs were created in 2009 (against the projected 12 million). I guess this statement was used by the industry and business to defend the need for the continuation of the bailout package.

In my understanding, the bailout package was actually a dole to the industry and business to strengthen its bottom line. If you think that the layoffs in the industry was because of the economic recession, you are highly mistaken. Recession was very conveniently used by the industry to go in for labour-shedding, nothing more than that. Ask those journalists who have lost their job recently, and they will tell you they were laid-off not for reasons of economic meltdown.

Nevertheless, the economic meldown provided an excellent opportunity for the rich to amass more wealth. Otherwise there is no way that the world's wealthiest club can grow more wealthy at times of an economic meltdown. The bailout packages came out handy for the rich to accumulate more wealth, and that too in the name of rebuilding the global economy.

According to Forbes magazine, the richest-of-rich club has 49 billionaires from India, up from 24 last year. Isn't it strange that at a time when the sails were fluttering, the number of billionaires from India should actually double? Moreover, the industry could not create more jobs (1.5 lakh in a year is not even a drop in the ocean) but could ensure that its wealth swells. How can that be possible at a time when the chips were down? Common sense tells us that nothing miraclulous happened in 2009 that could bring more fortune to the fortunate. 

What made the wealth of the richest actually multiply were the bailout packages. It is as simple as that. In other words, the world follows an amazing economic prescription. Socialising the costs, privatising the profits. You and me pay for the bailout packages, and the rich pocketed it neatly.

This happens everytime when the world faces an economic crisis (and you can see this turning the tables for the concerned companies in its stock rankings). In 2007-08, when the world was faced with an unprecedented food crisis, the stocks of the food giants swelled to an unprecedented level. The poor went hungry (with the world adding 100 million more to the hungry list) wheras the food companies profitted. More recently, when India was faced with an unprecedented rise in sugar prices, the stocks of nearly 25 sugar companies went up.

Mainline economic thinking has made it much easier (and simple) for the corporates and big business to make more money. You don't have to indulge in any financial swindle, the economists have done it for you, and that too without the world even questioning what in simple terms means committing the biggest crime against humanity.

1 comment:

Pramod said...

Dear Dr Sharma,
It seems India is following the American model of "Socialism for the rich" and Mr Manmohan Singh is only a phone call away to big corporations.
Professors who set the curriculum of universities are sponsored by big corporations, and most of the time are on their payroll, hence "globalisation" is mantra of the century, I am yet to meet a management or economics student who would admit that globalisation and ever popular bail outs have done more damage than good.

Dr Manmohan Singh has studied in one of them institution and even though he knows about the plight of poor people in India, he will not do anything about it as it was not taught to him in the school he attended. He is the one who opened the door to foreign companies and now he is bailing some of his friends out in Mumbai.