On March 24 the Prime Minister announced a lock down of 1.3 billion Indian citizens. They were forbidden to step out of the boundaries of their homes—their ‘Lakshman Rekhas’—for 21 long days. His announcement rang alarms about disruption of citizen’s lives as well as further damage to the Indian economy. There is great concern about how citizens, especially those who live hand-to-mouth, would survive the 21-day Mahabharata—another analogy the PM has used to rally the nation to wage war against the dreaded virus. In wars to save nations, foot-soldiers are always the largest casualties unfortunately.
When economies are hit by a big crisis, three sets of economic stakeholders suffer.
- The people, especially those who earn little and have precarious livelihoods
- Small and informal enterprises, on which people in most countries depend directly for their incomes and livelihoods, especially in India
- The large corporations at the top of the pyramid and stock-market investors
These are parts of a complex system. They need each other. One theory of improving the health of the system and produce benefits for all, is to reduce corporate and wealth taxes to attract more investments. Also, by changing rules to make it easier to ‘do business’—by giving employees more freedom to fire their employees for instance. A raw-in-tooth version of capitalism would also expect the private sector to use its profit-making skills to provide public services like healthcare and education. Government, in this view, is not the solution: government is the problem.
History is returning. Thirty years ago, Francis Fukuyama declared it had ended. When the Berlin Wall fell in 1989 and the Soviet Union collapsed, he said the history of ideological wars was over. Communist, and by extension socialist, ideas of running economies had been defeated by the ideology of capitalist market economies. Also, authoritarian governments had been defeated by the ideology of democracy.
After the Berlin Wall fell, globalization moved into over-drive. Virtual walls that impeded flows of finance and trade between countries were brought down. Global supply chains became more tangled across national borders. Capital was given more freedom to invest where it wanted and to withdraw whenever it wanted to. Control of elected governments over capital were diluted.
While finance and trade were becoming unrooted, citizens troubled by the dislocations in their lives caused by globalization began reaching for emotional and political security into their ethnic, religious, and national roots. Authoritarian leaders, promising to make their people great again, began winning elections. The announcement of the final victory of liberal democracy was premature.
The power of global capital to fix the rules of the global economy was challenged briefly after the 2008 financial crisis. The ‘Occupy Wall Street’ movement, demanded change. However, it could not breach the walls. Large banks and large companies were bailed-out with the people’s money. They were given grants and loans so that they could stay in business. The money they were given was expected to ‘trickle down’ to the people. Instead, the companies used the money to shore up their balance sheets. Rather than invest in creating more jobs, they bought up their own shares. The wealth of investors and top executives increased. The $2 trillion-dollar package formulated this week by the US government to salvage the US economy from its Covid-19 shock has, however, redirected the hose towards the bottom of the pyramid.
The Indian economy has been limping for a few years even before the corona virus struck. The government has been worried about being labeled as ‘socialist’ because that would frighten investors. A Rajya Sabha MP from the ruling party even moved a resolution in Parliament to have the word ‘socialist’ struck from the Constitution! The Prime Minister declared that wealth-creators must be celebrated. The Finance Minister had sought to assure capitalists that the government was on their side by reducing corporate tax rates. However, investments did not come. Corporations complained that demand was slack. Unless citizens had more secure incomes, they would not spend more. Therefore, something had to be done to increase employment and improve incomes.
The Finance Minister’s announcement yesterday, of a huge Rs. 1.70 lakh crore package for the poor—the Pradhan Mantri Gharib Kalyan Yojana, is a welcome ‘socialist’ move. Socialist institutions established by successive Indian governments will be used to swiftly reach the neediest citizens—the PDS, MNREGA, Ujjwala, Jan Dhan Yojan, the National Rural Livelihood Mission, and PM-Kisan income support schemes. As well as some new policies for workers in small enterprises.
The battle against Covid-19 is not over. Nor the war against poverty. India has a long way to go yet for its tryst with destiny. To achieve ‘poorna swaraj’ for all its citizens. Inclusive and sustainable growth will be achieved only by a ‘build-up’ approach to the economy, not ‘trickle down’. Call it socialism or whatever. As Shakespeare said, ‘a rose by any other name will smell as sweet.’