Expect nothing, live frugally on surprise.

Tuesday, October 28, 2008

Economic Crisis: Lets Look with in

A number of Indian politicians, academics and mediapersons have expressed a lot of self-satisfaction, justified no doubt under the circumstances, that India did not proceed with its economic reform programmes to the extent that the US and Western European countries had done. Consequently, they argue, the Indian economy is not likely to be affected as much as the western economies by the ongoing turmoil. The situation in the western financial markets is attributed to the unregulated greed of some sections of the financial world. That is no doubt an unchallengeable observation. But are we in a position to rush to the conclusion that the Indian way is more virtuous and that our system is more effectively regulated? The Indian economy is no doubt still under a degree of regulation — of the licence-permit-quota raj variety, which a number of economists and businessmen consider excessive. While many economic reformers in India would not favour the extent of deregulation that obtained in the West till recently, they would also point out that part of the problem arose out of the failure of authorities to enforce the regulations that were in place. While in India there is a lot of crowing about our economic regulation, what about our political, judicial and administrative regulation regimes? They operate reasonably well in the US and in the West but they are very close to a state of dysfunction in India. That would appear to indicate that the Indian politician, judicial office holder or administrator is not any more virtuous than the greedy US financier. When there is an opportunity to exploit, the average Indian is no different from his American or European counterpart. Compare the orderliness, regulation and efficiency of western legislatures, judicial institutions, law enforcement procedures and governance with the corresponding areas in India. Most of our legislatures, starting with the Lok Sabha and Rajya Sabha, are cases of regulatory failures. Underlying the American economic failure is the US interest in maintaining an extravagant consumerist lifestyle for its population at the expense of the savings of the rest of the world. In the case of India, underlying the legislative, judicial, law enforcement and administrative failures is the greed of many of our politicians to abuse power for their parochial ends. Not only does this country lack adequate economic reforms, it has also failed to implement legislative reforms to discipline unruly legislators, judicial reforms to deliver justice, law enforcement reforms to ensure better security to the citizenry and administrative reforms to provide good governance. After 60 years of independence it is shameful that the country is still functioning under laws of the British Crown. It would appear that the imperialists had a better sense of responsibility for good governance than our democratically elected legislators who have by and large wasted six decades of independent rule. Under these circumstances, it would appear that our politicians and public intellectuals talking about the greed of westerners is a case of the pot calling the kettle black. “Power corrupts, absolute power corrupts absolutely,” said Lord Acton. That applies to the financiers of the West, the political class in India and the Communist Party of China, which holds US Treasury bonds worth billions of dollars but will not pay arrears to the toy factory workers thrown out of their jobs because of the economic slowdown in the West. Whether it is economic, legislative, judicial or media freedom, it can be exercised meaningfully only when there is some basic regulation. One person’s freedom ends where the next person’s freedom begins. Laws and regulations are needed to define this. Those (Reaganites and Thatcherites) who argued that the market will be self-regulatory and has its own corrective mechanism are as much at fault as the Indian politicians who argue that their conduct within the legislatures does not need to be regulated and that they have unlimited freedom including that of disruption of the institution. In India, the concept of reasonable restrictions to make the freedoms and rights guaranteed by the Constitution meaningful has been accepted but needs to be reiterated. In the US, the extent of regulation of economic freedom was a subject of debate at the time of the New Deal, the last great economic crisis recalled at this juncture by many. The presidential elections next month in the US will no doubt help in deciding the extent of economic regulation that has to be brought in to prevent a repetition of the present scenario. It is obvious that the present economic turmoil is a point of discontinuous change in the international balance of power. That change is bound to be a subject of an international debate. There is ground for reasonable optimism that there will be some interim economic regulatory solutions which would revive the economies of industrial nations in the next three to four years with emerging economies playing the role of engines of growth. How about regulating the state of affairs in our country other than in the economic arena, caused by the greed of our political class? The economic greed of US financiers is one of the issues in the US election campaign. Can the greed for power of our politicians be made an issue in the upcoming general elections here? But who is to bell the cat?

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