When I look at the fallout of the Greek Tragedy on the global economy, including India, and at the same time try to make a sense of the economic crisis by sitting in front of the Business TV channels, I must admit I am left baffled. At a time when Sensex has gone below 16,000, and the Indian rupee has slid 22%, hitting a new low, and Finance Minister Pranab Mukherjee mulls austerity measures, what intrigues me is to find the land prices soaring, consumer spending increasing manifold, sales of cars and automobiles increasing amidst reports of 84% Delhiites planning a beach holiday this summer, there is something that I cannot understand.
First let us take a look at the fears emanating from the prospect of Greece quitting the Eurozone. Greece President Karlos Papoulias has already termed it as 'fear that could develop into panic'. In the last 24 hours (May 16), roughly Euro 700 million has been withdrawn from the banks. This has created a scare. I can understand how the stock markets will play this up, but I wonder why no one is talking of doing away with the wasteful expenditure that European Union indulges in year after year. Well, I am talking of the annual budget of EU, of which nearly 50 per cent or Euro 60 billion goes for what is called Common Agriculture Policy (CAP). Much of the remaining 50% budget also goes as subsidies for building infrastructure. Even at times of the 2008-09 economic crisis, and the emerging chaos, no one has ever mentioned the damage done by CAP. As if this is not enough, the proposal is to further enhance the spending under CAP in 2014-20 to Euro 400 billion.
If withdrawal of Euro 700 million from Greece banks can cause panic, I have failed to understand why the European heads cannot stop subsidising its agribusiness companies (my estimates show that more than 90% of the total spending under CAP goes to MNCs and top agribusiness companies). So in a way the state coffers are being emptied for the rich corporates and the austerity measures that are being spelled out would hit the middle class and the poor. It is here that I find the French President Francois Hollande's poll promise of 75% tax on the income of the rich makes terrible economic sense.
Now look at India. The same virus afflicts the Indian policy makers. Yesterday I sat watch the NDTV Profit channel, one of India's leading business channels. At a time when everyone is talking of tightening the belt, the channel had a programme on where to make the investments in real estate in Bangalore. The anchor talked of three real estate options -- each above a package of Rs 1-crore -- where you could invest. Similarly, when you surf the channels, you find programmes which talk of hot commodities where investments could be made, the increasing investments in gold despite its price going through the roof, and so on. Whether it is gold or real estate, the prices have not come down despite the slump that is feared. Why?
Economic disparity that has been created over the years by neoliberal economics is actually the bane of the present crisis. The rich have become richer and the poor have been driven against the wall. Not only the bank executives, lavish pension and perks are being given to Presidents, Prime Ministers and parliamentarians (former French President Sarkozy is to receive lavish post-retirement perks, and the salary/perks of Indian parliamentarians have gone up manifold), As unemployment soars, mainline economists and policy makers suggest strong austerity measures, which in simple words means withdrawing social security nets.
I think the time is ripe for a radical overhaul of the economic structures. Politicians know what needs to be done, but it is the business leaders and the economists who will not let them use the axe.