Apr 6, 2013

The rise of market fanaticism

From communalism to economic polarisation, the trend is worrying. While every sensible person decries communalism, I am equally worried at the growing fanaticism not only over political ideologies, but more and more over market fundamentalism. For most economists, academicians, market analysts and business journalists, economic reforms (an euphemism for privatisation) has become a religion. The moment you point to a flaw in the system, you meet an angry uproar that can go to any length to defend the system howsoever flawed it may be.

This is a worrying trend. And it is no less destructive than communalism. 

The same happens on the twitter. You say something that is not palatable to the two warring camps -- lead by Rahul Gandhi and Narender Modi -- and be ready to face a volley of well-orchestrated pot shots. Similarly, if you question for instance the motive behind postponing implementation of General Anti-Avoidance Rules (GAAR), which effectively allows tainted money to flow into the country, you are sure to meet an angry (and often illogical) outburst from noted economists and some of the TV analysts you see very often (Read my earlier blog post: GARR deferred. Investors, stock markets, industry and media celebrate induction of black money http://devinder-sharma.blogspot.in/2013/01/gaar-deferred-investors-stock-markets.html). 

They rise in defence as if their religious feelings have been hurt. 

Yesterday, newspapers all over the world carried an exposure on where the world's richest people hide their wealth. In a report, a study by McKinsey was quoted saying an estimated $32 trillion is stacked in offshore havens. The International Consortium of Investigative Journalists (ICIJ), which includes Washington Post, The Guardian, BBC, have unearthed a treasure trove which runs into hundreds of billions. This is obviously the tip of the iceberg. The ICIJ will soon be publishing the details. (This is where the richest people hide their money, The Daily Beast, April 4, 2013. http://thebea.st/10fhEzt). 

Reading this news report, I am reminded of a recent lecture delivered by Dr Raghuram Rajan, Chief Economic Advisor to Prime Minister. Speaking at the 38th Convocation of the Indian Institute of Management, Bangalore, he said: "To the extent that the rich are self-made, and have come out winners in a competitive, fair and transparent market, society may be better off allowing them to own and manage their wealth while taking a reasonable share as taxes." The Indian Express had this report on its front page under the headline: Lack of chances can hit free enterprise: Rajan http://www.indianexpress.com/news/lack-of-chances-can-hit-free-enterprise-rajan/1096450/).

I thought Rajan should have known that the rich are not the product of a competitive, fair and transparent market. First of all, there is no such thing as transparent markets. Market is not a season that nature has created. It is the outcome of a manipulative system. In all fairness, let us accept that markets are designed. Secondly, and more worrisome is his argument that the society may be better off allowing them to own and manage their wealth while taking a reasonable share as taxes. I wonder what his suggestion will be after reading the latest exposure about the massive wealth stacked in the offshore havens. These super-rich are not even willing to pay the reasonable taxes that he espouses. I don't think the taxes that the super-rich have to pay in India for instance are punitive, and yet we know tens of billions have been stacked abroad.

I had expected mainline economists all over the world to rise in unison demanding the end to tax havens, and asking for retrieving this ill-gotten wealth for the welfare of the society. But did you notice the complete silence, and the calm that prevails across the oceans? Isn't this a conspiracy of silence? Aren't the economists and analysts part of this conspiracy? Shouldn't they be asking for an urgent and massive correction in the way wealth is being generated and then hoarded? 

It is therefore quite obvious that mainline economists go to any length to defend the clearly visible wrongs. Well, isn't this what the religious fanatics also do? Why then we only blame them? When will we start questioning market fanaticism? 

Another report that I would like to draw your attention is based on a study by the Harvard School of Public Health, and presented by the American Heart Association. Published on March 24, 2013, the report says "soft drinks, sodas, 'sports' drinks and 'fruit juice' are associated with 180,000 deaths every year (Soft Drinks Cause Around 180,000 Deaths Every Year, Research Findhttp://bit.ly/YnUGq0). Just because these drinks are the products of business enterprises, some of them too big to be pushed out, no economist or a media house internationally raised concern. Nor did any of the G-20 heads who spare no opportunity to swear in the name of market reforms dared to even mention this report. 

A building collapse in Mumbai, burying 52, has evoked anger from all, and rightly so. How come the death of 180,000 people does not even merit a TV discussion or an article by the same breed of economists and analysts who otherwise try to shout down every sensible voice? 

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