Safe democracy

Safe democracy

Source: By H.KHASNOBIS: The Statesman

Exercising political power and authority in domestic and foreign policy depends upon the choice of political philosophies. The primary concern of a sovereign state is to ensure territorial security for its citizens, preferably through peaceful means but, if necessary, by military force. This is a rational approach, one that is referred to as political realism. This is the baseline approach and is the minimum that a state is required to do.

On the other hand, political idealism outreaches political realism through promotion of those values around the world. Only a strong nation is capable of pursuing political idealism and this ambition of exercising political authority beyond the confines of nation states has given rise to numerous military interventions. President Woodrow Wilson could not make the world safe for democracy through diplomacy, cooperation and peaceful means. During his second term as US President, America's neutrality was challenged in early 1917 when the German empire started unrestricted submarine warfare despite repeated warnings. The incident forced a reluctant USA into World War I. Even though a military interventionist, history recognized Woodrow Wilson as a crusader of peace and diplomacy and he was awarded the 1919 Nobel Peace Prize for his sponsorship of the League of Nations.

The latter half of the 20th century has witnessed the rise of neo-conservatism as an extension of the doctrine of political idealism. The genesis of neo-conservatism is obscure and the concept is difficult to define. In the opinion of some scholars, the term was coined by socialist thinkers in the USA between the Fifties and the Sixties when they found that there was general endorsement even among liberals of military action to prevent a Communist victory in Vietnam.  Neo-conservatism acquired a new garb after the dissolution of the Soviet Union and the end of the Cold War in the late 1980s. Global unilateralism became its central focus. That started a blueprint for US world dominance in the late 20th century. It has now been realised that the fundamental determinant of the relationship between states rests on military power and the willingness to use it. Neo-conservatism seeks to use military force as the first but not the last option of foreign policy. Neo- conservatives do not regard readiness and willingness to use military force in pre-emptive strikes as a violation of international law. They advocate assertive promotion of democracy. Planning and promotion of the Iraq war is the best example of US foreign policy of neo-conservatism.

There is a strong opinion that neo-conservatism is not about democracy at all, but a veil for making the world safe for multinational corporations and creating conditions for enriching the rich. It is a way of making democracy and capitalism synonymous. The neo-conservatives believe that free economy is ultimately an efficient economy that will maximize revenue through taxes and strengthen the State. The State should act only as a moderator and not an active player in the economy. State corporations are given to abuse and they are inefficient and uncompetitive. This line of economic rationale is not radically different from capitalist principles.

The political philosophies described here have one feature in common ~ that the end justifies the means, whatever means are necessary for whatever ends. The only difference is that in case of political realism, military power comes as the last option. Political idealism is a combination of peace initiative and military power. In neo-conservatism, military power is the first or only option. These philosophies that are widely practised are based upon Machiavelli's liberal imperialism. In the 21st century, they are seen as dangerous political doctrines because in the final analysis they place the power and interest of the State above the rights of those citizens who have entrusted it with their well-being. The view that ends justify means asserts primacy of national security over rights of individual citizens in democratic nations. It may empower the State with draconian laws and subjugate civil liberties.  The question is whether these philosophies can be discarded for a better option.

The strategy, tactics and efficacy of non-violent political action, especially in its use to promote democracy around the world, has gained much popularity and recognition in recent years.  Principled non-violence is the non-violence of those who practise non-violence as a creed or moral principle. Gandhi and Martin Luther King Jr both understood non-violence in this way. It was their way of life. It is now recognized that non-violent action can be practised effectively as a policy without a moral commitment to non-violence, without having to adopt a creed, moral or otherwise. It is a departure from the ideals of Gandhi and King, yet it is non-violence.

Unlike the non-violence of the weak, Gandhi and King did not abandon non-violence in favour of violent tactics simply because certain political goals could have been achieved more decisively, quickly or effectively through violence. They believed that violence could not lead to an effective remedy in the long run. They believed that conflict resolution through violence would create numerous social problems for the unborn generations. They also believed that intentional and sustained use of violence precluded obtaining any morally legitimate goal. This is principled non-violence that Gandhi described as non-violence of the strong. It includes pursuit of justice, elimination of oppression, development of inner peace and constant sensitivity to others. Gandhi viewed non-violence as the law of human race that was infinitely greater than and superior to brute force.

The philosophy of non-violence is based upon coherence of means and ends. Means must be as pure as the ends. Means and ends should be inseparable. The means represent the ideal in the making. In the long run of history, destructive means cannot bring about constructive ends. Immoral means cannot bring about a moral end and so under non-violence, means and ends must cohere.

Political realism, political idealism and neo-conservatism are all prescriptions for realizing certain goals. Unlike principled non-violence, these ends differ from the means. When one set of means becomes insufficient for achieving a goal, another set of means is adopted. Once the goal is attained, the means are discarded. The principle that ends justify means has remained the dominant political philosophy of the last 100 years.

It will not be easy to jettison this path and move to the principled non-violence route for conflict resolution. The world has changed considerably since the days of Gandhi and King. Principled non-violence is a long, tortuous and winding path that requires exemplary leadership skills and support of the people. It is a long-drawn struggle involving infinite sacrifices. The natural tendency will be to resolve a conflict through violence or military action. Promotion of democracy involves a cost. Costs could be starkly different if democracy is militarily imposed on a country as opposed to the country itself taking the initiative.

The good sign is that within the political arena, there is a vast and untapped area suitable for peace studies, conflict resolution and non-violent political action. That is the report of research scholars. Gandhi acknowledged that pragmatic or expedient non-violence can work side by side with principled non-violence. In recent times, the struggles for democracy in Myanmar, Belarus, Tibet and Zimbabwe are examples of non-violent struggles waged against oppressive regimes for worthy goals ~ those of ending tyranny and bringing peace with justice to the people. The concept of modern day non-violence is the expedient or pragmatic non-violence.

Promotion of democracy is a tool to end tyranny and fight terrorism. It is a way to promote stability in troubled regions and a mechanism to increase prosperity in poor countries. There has to be a commitment to understanding and empowering indigenous approaches to conflict resolution as opposed to delivering prepackaged models that are insensitive to context, culture, timing and diversity of local conflict actors. The path is not easy but worthy of pursuit.

Courtesy: http://www.ksgindia.com/study-material/today-s-editorial/8950-31-august-2013.html

Subside subsidies

Subside subsidies

Source: By Yogi Aggarwal: The Asian Age

The crisis in the Indian economy is deeper than it seems. Otherwise the stock markets would not have the violent adverse reaction they did the day after Lok Sabha passed the Food Security Bill with an easy majority. To blame the market's three per cent fall on August 27 on the extra `34,000 crore, which will be needed to give subsidised foodgrains to a majority of the people in the country, is to miss the significance of our vulnerability to international finance capital.

This vulnerability has been allowed, even encouraged, to increase by depending on foreign inflows for the “irrational exuberance“ that has kept our stock markets at unsustainable levels, and led to undue influence of market players on the country's affairs. Various finance ministers, to give the new economic policies the sheen of success, have given every possible incentive to foreign financial institutions (FIIs) to invest in India. They, in turn, have come in droves, putting in some $168 billion in our overvalued markets.

The only year they removed their money was 2008, $14 billion according to Securities and Exchange Board of India (Sebi) the Bombay Stock Exchange (BSE) Sensex crashed from 20,000 levels to 8,000 in less than a year. FIIs now hold a substantial part of the free floating stock in the market and their view of the economy will determine how the market and the rupee fare. This was amply demonstrated in the past month when heavy selling of $10 billion in government securities sent the rupee in a free fall as they repatri ated the money.

Some people, including former Reserve Bank of India (RBI) governor Y.V. Reddy, called for the imposition of Tobin tax to curb volatility in our financial markets, especially in the currency segment. (Tobin tax, named after American Nobel laureate economist James Tobin, is a levy on short-term cross border capital flows.) Unlike foreign direct investment (FDI) in productive assets, which has increased at a brisk clip in the last eight years to $117.5 billion, investment in equities is “hot“ money which can be taken out at any time.

The government is entirely at fault for allowing this situation to develop by not controlling the fiscal deficit and allowing a runaway rise in the current account deficit (CAD). The fiscal deficit could be controlled, not by curbing entitlement progammes for the poor like Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), or those that put additional income and food on their plates, but by targeting subsidies aimed at farmers, the middle class or the corporate sector.

The CAD could have been lowered by coming down on the free import of gold and imposing an import duty of at least 20 per cent, by removing all subsidies on petroleum products to reduce demand, by building a competitive manufacturing base for exports and domestic consumption and by exploiting our ample coal reserves so that this essential source of power generation does not need to be imported.

The fallout of the international financial crisis in 2008 was handled very well by pumping money into the economy and letting the fiscal deficit go up. At a time when the world's economies either had falling growths rates or were in recession, India was sailing at a gross domestic product (GDP) growth of eight per cent.

The momentum carried us through for another couple of years, but then when the slowdown started; instead of tightening our belts we let the fiscal deficit and the CAD bloat. There are no easy choices, but emphasis can vary on which section should take the brunt of the measures. The talk in the media and amongst analysts is that the entitlement programmes of the poor should take the hit.

Despite problems of poor implementation in parts, and of leakages between funds released and those that reach the people they are meant for, these entitlement measures promise hundreds of millions a better life and should not be stopped. This is very different from subsidies given to other sections.

The subsidy and short billing because of power theft is the main reason for the fiscal deficit and the collapse of state power distribution companies. No reliable estimates are available of the loss since the subsidies are granted by each state but are likely to be above `1 trillion (or lakh crore). In agriculture, it leads to power guzzling pumpsets, wastage of water and lowering of the water table to unsustainable levels.

Similarly, the Energy and Resources Institute (Teri) estimates the sub sidy on liquefied petroleum gas (LPG) for the middle class was over `20,000 crore in 2011, but with the depreciating rupee and the rising oil prices due to the crisis in Syria the subsidy would be much higher now. Diesel had a subsidy of nearly `35,000 crore in 2011, but for the same reason would be much more now.

The subsidies that are never talked about are those given to the corporate sector. Among the Budget documents is one called “Revenue foregone under the Central Tax System“. The measures include special tax rates, exemptions, deductions, rebates, deferrals and credits collectively called “tax preferences“ and the document notes that “such preferences can also be viewed as an indirect subsidy to preferred taxpayers.“ The total revenue foregone in 2012-13 was `5.74 trillion, more than the entire fiscal deficit of `5.42 trillion.

According to the the Budget document “Revenue foregone under the Central Tax System“, the break-up of the revenue foregone to the corporate sector in 2012-13 was `2.06 trillion for excise duty; `2.54 trillion foregone and lost as customs duty; subsidy for corporate income-tax was `0.68 trillion, subsidy for personal income-tax was `0.45 trillion. While companies are meant to pay a statutory tax rate of 32.45 per cent, companies with profits of `500 crore and above paid an effective tax rate of just 21.7 per cent. Moreover, a major loss was because of accelerated depreciation amounting to `37,800 crore. The highest customs duty foregone was for gold and diamonds -`61,035 crore or over 20 per cent of the customs duty foregone. From all this it is not difficult to see who the major subsidies are aimed at.

Courtesy:http://www.ksgindia.com/study-material/today-s-editorial/8976-02-sept-2013.html

Smaller states are not the solution

Smaller states are not the solution

Source: By Devendra Kumar Pant: The Financial Express

After Independence, smaller princely states were combined together mainly on linguistic basis. States have been reorganised since then. Andhra Pradesh was carved out of Madras in 1953. In 1956, 14 states and six Union Territories were created. Bombay was split into Maharashtra and Gujarat in 1960. In 1963, Nagaland was carved out of Assam; in 1966, Haryana and Himachal Pradesh were carved out of Punjab. In 1972, Meghalaya, Manipur and Tripura were formed. In 2000, three states were carved out—Uttarakhand from Uttar Pradesh, Chhattisgarh from Madhya Pradesh and Jharkhand from Bihar. The United Progressive Alliance government decided to carve out Telangana from Andhra Pradesh on July 30, 2013.

Generally, regional variation in development has been the major reason for demand for a separate state. Both bigger and smaller states have their own sets of problems. Improved governance is a major argument in favour of smaller states due to the smaller area to be governed. A homogeneous economic environment augurs well for the development of smaller states. However, if the state is not self-sufficient in generating its own resources for developmental needs, its dependence on central government for resources increases. A number of states have problems relating to distribution of river-water. State reorganisation not only aggravates this but also creates complexities with respect to redistribution of power, other resources/assets and liabilities of combined states.

An oft-quoted argument in favour of smaller states is their higher economic growth achievement. Smaller size of operation is not the only condition affecting growth. Initial conditions, proactive growth policies, quality of labour force and governance have a larger role to play in the growth of an economy. A state’s economic growth performance depends on national economic growth performance, which in turn depends on global growth performance. The production structure of a state also weighs heavily on its economic performance. During the global trade slowdown, the states with larger proportion of exports (for example, Karnataka) were adversely affected. The auto sector, at present, is going through a tough time. As a result, the economy of states like Gujarat; Haryana and Tamil Nadu will be more affected compared to other states. Due to different economic regimes, a comparison between pre- and post-state formation economic performance will yield incorrect conclusions.

The state-wise economic growth patterns between FY05 and FY13 throw up some interesting facts. In this analysis, 21 states had been considered. The growth patterns of north-eastern states barring Assam, union territories like Delhi and Chandigarh were not considered in this analysis. The economic growth pattern for all states except Gujarat, Goa, Rajasthan and Kerala is available up to FY13. In order to avoid problems associated with compound annual growth rate, average annual growth rate is used. The states are divided in two groups—small and big. States having more than 2.5% of the all-India area are classified as big states and the rest as small states. To avoid non-availability of FY13 growth numbers of four states, the ratio of average GSDP growth to all-India GDP growth for FY06-FY13 has been computed (for the four states, ratio has been computed on the basis of average growth up to FY12).

If the ratio is more than one, it implies that the state’s economic performance is better than the national growth performance. In terms of average GSDP growth, 11 states performed better than all of India and the performance of the remaining 10 states was lower than the nation’s. However, among the better-performing 11 states, only three are small; the remaining eight have been classified as ‘big’. The list of the ten that performed lower than the nation taken together is split equally under the ‘small’ and ‘big’ classifications. Uttarakhand, Haryana and Goa are the three small states that have performance figures better than the country’s—although some small states did well, the hypothesis that smaller states grow faster compared to bigger states looks untenable.

Another hypothesis put forward in favour of having smaller states is that they perform better than the larger parent states. While Uttarakhand performed much better than its parent state, Uttar Pradesh, in case of Bihar, the parent state has performed much better than the new state, Jharkhand. In the case of Madhya Pradesh and Chhattisgarh, although Madhya Pradesh has performed better than Chhattisgarh, the performance of parent state and the new state is not significantly different. The growth performance of these six states does not provide any conclusive evidence to accept hypothesis that newly-formed states perform better than their parent states.

Income is one of the dimensions of development, not the end result. Even the social performance of the three states carved out in 2000 does not support the hypothesis of better development in smaller states. In case of literacy and infant mortality rate, all three bigger states have performed better than the states carved out of them. All three parent states after division had worse social indicators compared to the newly-formed states, which hints at faster improvement by the parent states. However, in case of household access to safe drinking water, the trend is mixed.

Although small size increases the likelihood of improved governance, this cannot be assumed to be a given. While improved governance may push the growth of the newly-created states’ economies, other factors are more important for sustaining that growth over the years. In India, broader economic policy contours are fixed by the economic policies of the central government. It is the responsibility of the state governments to align their policies in line with the national economic policies. While the global factors have a role in the present Indian economic slowdown, policy logjam, project clearances, environment/forest clearances, land acquisition and infrastructure issues are some bottlenecks to growth. The size of the economy has no role in either fast-tracking or slowing these decisions.

Courtesy: http://www.ksgindia.com/study-material/today-s-editorial/8962-01-sept-2013.html