Sep 26, 2011

A big question mark hangs over the future of globalisation

What has happened to Prime Minister Manmohan Singh? No, I am not talking about the political confabulations that he is holding to save his colleague Home Minister P Chidambaram from falling into disgrace.  In case you missed it, what I am referring to is his speech at the 66th session of the UN General Assembly in New York. "Till a few years ago the world had taken for granted the benefits of globalisation and global interdependence,” the Prime Minister said. “Today we are being called upon to cope with the negative dimensions of those very phenomena.” [Grim globalisation sermon by Singh, The Telegraph, Sept 24.].

It seems wisdom has finally dawned upon the elderly economist. After being in power for over seven years, and having initiated the process of economic liberalisation in India in 1991, Manmohan Singh probably is now being arm-twisted to sign on the dotted line. Only he would know how tough and harsh it must be for him to blurt it out at the UN General Assembly. Enough is enough, he seems to be conveying.

This reminds me of another historical statement that India's first Prime Minister Jawaharlal Nehru had made from the ramparts of the Red Fort in New Delhi on Aug 15, 1955. He had said: "It is very humiliating for any country to import food. So everything else can wait, but not agriculture." I have often said in my presentations that only Nehru would have known how much humiliation he had to undergo to receive food aid. Similarly, I think only Manmohan Singh can tell us, if at all he ever picks up the courage to confide with the nation, how humiliating it has been for him to not only sing songs in favour of globalisation but to also bring in policies that would eventually go against the national interest.

The Telegraph report further states: In a clear indictment of free market policies and deregulation which have brought the world to its present financial meltdown, Singh said: “Economic, social and political events in different parts of the world have coalesced together and their adverse impact is now being felt across countries and continents.” The economist Prime Minister warned that “the world economy is in trouble”. As one of the leaders who is party to the Group of Twenty (G-20) efforts to revive the global economy after the meltdown three years ago, he lamented that “the shoots of recovery which were visible after the economic and financial crisis of 2008 have yet to blossom”.Making a grim prediction for the future, the Prime Minister, in fact, said: “In many respects the crisis has deepened even further.”

This is what happens when you read too much from the textbooks. The proponents of economic liberalisation had simply followed the book rules and had gone on defending whenever signs of failure would appear. These rules were designed in the west, and Indian economists (most of whom are on a kind of sabbatical from the western universities) had the onerous task to ensure that India does not deviate from the path of privatisation and neoliberalism. Using the mainline media to their advantage, I must say these economists had done a remarkable job in creating the illusion of economic growth. We have been simply seduced by the power of GDP, and somehow made to believe that we can all realise our dreams to be stinkingly rich before we die.

I think the Prime Minister's exasperation stems from the diktats he has been lately receiving from the G-20 and the World Trade organisation (WTO). Take a look at the recent review of India's trade policy by the WTO (which in reality was more of a US review of India's trade policies). WTO hit where it would hit the Prime Minister most. Already under fire from the political opposition, media and the public at large for his inability to control inflation, WTO actually directed India not to restrict food exports at any cost. India must export, and when it needs to meet its domestic needs it can import. Such a directive, if India decides to follow, will only add to Manmohan Singh's woes. [WTO slams India's trade policy on farm items, Economic Times, Sept 15, 2011,]

Another crucial policy that he is being directed to adopt, and in fact he is being repeatedly asked to explain as to why he has not been able to implement is the approval for FDI in big retail. As per the G-20, India was supposed to have cleared all the obstacles in allowing unhindered approval for FDI in retail by November last year. As the coordinator on behalf of G-20, IMF was to monitor the implementation for FDI in retail across the G-20 countries. It is not that Manmohan Singh didn't try. He had in fact created a fast track approval process as a result of which all discerning views were put on hold. But then politically it has not been possible for him to appease the G-20. 

These may be just two of the irritants. But the writing of the wall is clear to any sensible person, provided he is not a mainline economist. The 2008 economic meltdown was in reality an economic collapse. If the governments across the globe had not joined hands to pump in US $ 20 trillion to save the economy, the neoliberal economic model would have collapsed by now. This year too it is once again showing its ugly head. There is panic all around. The crisis of PIGS countries is now heating the Eurozone. The US is already faced with its worst economic crisis, partly being sustained by printing more currency notes. Everyone know it can't go on for long. 

Nevertheless, Manmohan Singh must now be familiar with the imminent collapse of the global economy. As the head of the State he must be trying to emerge clean so that he can say: Look, I warned you.."   

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