[Reader-list] The Plunder Economy

[A. Mani]

THE PLUNDER ECONOMY
- The poor may be vulnerable, but they do not lack intelligence

 Ashok Mitra


One lives to learn — or unlearn. The working head of what passes for
this country’s Planning Commission is unambiguous about it. One
important measure to fight inflation, he believes, is to raise prices.
That is to say, to stop prices from rising, you must first raise
prices. The gentleman has heartily endorsed the recent serial
increases in the prices of petroleum products since such increases
will, in his view, succeed in bringing down prices.

Does not this assertion bring back to mind the startling
pronouncement, some 50 years ago, by the five-star army general of the
United States of America: to save Vietnam, it was, in the first
instance, imperatively necessary to destroy that country? The American
general did not have the benefit of an Ivy League education and fell
back on crude McCarthyism when queried on the rationale of what he had
said. The working head of India’s Planning Commission, on the other
hand, has a background of both Oxbridge sophistry and World Bank
hauteur. He is also a fanatic believer in the archaic Quantity Theory
of Money in the manner of the great neo-liberal guru, Milton Friedman.
The suspect assumptions underlying that theory do not detain him. Any
increase in price, he is cocksure, lowers the overall demand for goods
in the market, since buyers have to spend more on the commodity of
which the price has been raised and now have less resources at their
disposal to spend on other things, the demand for these things will
shrink. In a free market, this will have a dampening effect on the
prices of these goods: inflation will thereby abate. To make even more
explicit what the Yojana Bhavan eminence implies: if, say, the price
of kerosene is hiked, the petty clerk or the poor rickshaw puller will
have to make a larger outlay for obtaining kerosene, and will hence
have less money to buy not just the foodstuff he wants to cook on the
kerosene stove, but other essential goods too. As a sequel, the demand
for foodgrains as well as all those other commodities will decline, in
the process pulling down the general price level.

There should in any case be no lingering doubt regarding the meaning
of meaning. The government, which includes the Planning Commission, is
most anxious to reduce the number of the poverty-stricken in the
country. The subconscious is at work: if some of the wretched poor
have less money to buy food, they will starve and, hopefully, die
without a murmur. That will result in a decline in the percentage of
population below the so-called poverty level. In terms of the Yojana
Bhavan boss’s implicit logic, to raise prices is a holy act which
kills two birds with one stone: it disciplines inflation and at the
same time reduces the number of the infernal poor who are a bit of a
nuisance to Resurgent India.

Spiralling prices, of course, hurt the poor most. In case the
phenomenon persists, the huge multitude below the poverty level,
denied food security, are bound to starve and face extinction. Why
beat around the bush, those currently guiding this nation’s destiny
want to get the poor out of their hair. Inflation is a handy
instrument to fulfil this objective. The deputy god of the Planning
Commission has, however, made a tactical error; he should not have
gone overboard and claimed that a price rise helps to suck money out
of the system and, in consequence, the rate of inflation falls. He has
actually indulged in an inexactitude. When the petty clerk or the
humble rickshaw puller pays the extra money for kerosene — and which
amount he is, therefore, unable to spend on food and other necessities
— that money does not go out of the system, it swells the pocket of
the trader and the coffers of the oil company which processes the
kerosene. It stays in the market and helps the trader to withhold
stocks. Or the extra profit it creates for the oil company exerts
pressure on the market, if not in the food sector, maybe in the luxury
goods sector or the machinery and equipment producing sector. That
apart, the market is hardly free. Even if the poor are compelled to
buy less food, grain prices need not fall, traders and hoarders have
enough clout, enabling them to wangle easy bank credit, which makes it
possible to hold back stocks and avert any drop in grain prices. The
rich peasants and the trading community can also pull the necessary
strings to ensure larger purchases of foodgrains by State agencies and
stem a fall in market prices. India, who does not know, is an
enchanting country where, at one end, people die of hunger and, at the
other end, surplus stocks of foodgrains rot in government warehouses
with the authorities most adamant about not releasing even a minuscule
fraction of the stock for the starving people. To do so, the
admonition rings out, will have an adverse impact on the ‘incentive’
of traders and surplus-raising farmers.

If in a nitpicking mood, one could have also mentioned that the Yojana
Bhavan savant totally ignores the cascading effect of a rise in food
and fuel prices on the structure of costs across the entire system;
inflationary forces, instead of being checked, will rage like wild
forest fire unless controlled by stern regulatory measures. But all
that is beside the point. What is at issue is the class question.
Rising food and fuel prices, if allowed free rein, will in due course
decimate the poor and the lower middle class. Rest assured, prices
nonetheless will continue to soar as per the wishes of quarters that
matter. Fudged economic reasoning is mainly for the consumption of the
gullible. Inflation is a class instrument, it transfers resources from
the poor and the weak to the rich and the strong. This is the ruling
idea at this moment in this country: plunder the poor to augment the
wealth of the rich.

True, the Indian case is not sui generis. It is the same story
wherever neo-liberal imperialism has extended its reach. Greece, a
poor relation occupying a puny corner of the European Union, was
inveigled into giving up its own currency, the drachma, and cross over
to the euro. Its government and central bank thereby lost all control
over monetary policy which became the domain of the European Union and
the European Central Bank. A bunch of tycoons, in cahoots with
fly-by-night investors, had launched a number of industrial and
commercial projects which received the backing of unscrupulous
speculators and supercilious credit agencies. The relevant stocks were
made to zoom. What goes up often comes down. The bubble burst, share
prices of the newly floated ventures plunged, quite a number of
corporate entities went bankrupt, including some which had Greek
government collateral. In the ensuing panic, there was a run against
State securities, the exchequer was rapidly drained, the country
landed in a grim financial crisis. The authorities could only watch
helplessly; they had no control over either interest rates, or capital
movements. The EU, meaning its principals, France and Germany,
advanced a conditional loan which soon got exhausted. They have now
agreed to lend another installment of roughly 40 billion dollars so
that the Greek government can emerge out of the crisis, but the
conditions this time are far severer. These include a steep increase
in taxes heavily loaded against the poor and middle classes,
across-the-board cuts in public expenditure targeting social security
provisions such as old age pension, unemployment allowance and
subsidized education, apart from major slashes in salaries and wages
in all sectors. The working and middle classes will have to go through
acutely rough days, none knows for how long. Such is the writ of the
neo-liberal imperium: the poor have to pay for the sins of the
indolent rich whose pastime is to play with stocks and bonds.

It is class war. The times, the rich have judged, are propitious for
finishing off the filthy poor, no question of showing any mercy. Even
the cruellest of the cruel, though, ought to have at least a minimum
sense of decency. By all means plan the liquidation of the poor by
raising, with extraordinary frequency, prices of foodstuff and fuel,
but, please, do not insult their intelligence, do not pretend that, by
raising prices, you are in fact smothering inflation and thus
ameliorating the lot of the poor.


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Best

A. Mani





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