Continuing from the previous posting:
Almost two decades back, in a 1989 essay, Francis Fukuyama had declared The End of History (a thesis which he later elaborated in a book titled The End of History and the Last Man). His basic constention was that with the dawn of Liberal Democracy and Free Market Capitalism, mankind had achieved the fundamentally most effective and the final stage of human government and method of organising the economy.
With this achivement, he stated, all competing ideologies have fallen, or will fall. He wrote:
"...What we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such... That is, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government."
Such a momentus claim about the triumph of western (American) politico-economic system made Fukuyama something of a celebrity, and a poster-boy for the neo-liberals...
Recently, however, like Alan Greenspan's self-enlightenment that free-market capitalism is not flawless, Fukuyama too accepted that along with the Wall Street, the utopian vision of capitalism has also collapsed.
Excerpts from his article The Fall of America, Inc. (Newsweek, October 13th,'08)
"The implosion of America's most storied investment banks. The vanishing of more than a trillion dollars in stock-market wealth in a day. A $700 billion tab for U.S. taxpayers. The scale of the Wall Street crackup could scarcely be more gargantuan. Yet even as Americans ask why they're having to pay such mind-bending sums to prevent the economy from imploding, few are discussing a more intangible, yet potentially much greater cost to the United States — the damage that the financial meltdown is doing to America's "brand."
Ideas are one of our most important exports, and two fundamentally American ideas have dominated global thinking since the early 1980s... The first was a certain vision of capitalism—one that argued low taxes, light regulation and a pared-back government would be the engine for economic growth.... The second big idea was America as a promoter of liberal democracy around the world, which was seen as the best path to a more prosperous and open international order....
...But now the engine of that growth, the American economy, has gone off the rails and threatens to drag the rest of the world down with it. Worse, the culprit is the American model itself: under the mantra of less government, Washington failed to adequately regulate the financial sector and allowed it to do tremendous harm to the rest of the society."
Fukuyama goes on to justify that the Reagan-Thatcher revolution of unleashing the "free" market forces was appropriate in that historical context, but does accept that:
"...Like all transformative movements, the Reagan revolution lost its way because for many followers it became an unimpeachable ideology, not a pragmatic response to the excesses of the welfare state. Two concepts were sacrosanct: first, that tax cuts would be self-financing, and second, that financial markets could be self-regulating.
...Reaganomics introduced the idea that virtually any tax cut would so stimulate growth that the government would end up taking in more revenue in the end (the so-called Laffer curve). In fact, the traditional view was correct: if you cut taxes without cutting spending, you end up with a damaging deficit.... globalization masked the flaws in this reasoning for several decades. Foreigners seemed endlessly willing to hold American dollars, which allowed the U.S. government to run deficits while still enjoying high growth, something that no developing country could get away with.
...The second Reagan-era article of faith — financial deregulation — was pushed by an unholy alliance of true believers and Wall Street firms, and by the 1990s had been accepted as gospel by the Democrats as well. They argued that long-standing regulations... were stifling innovation and undermining the competitiveness of U.S. financial institutions. They were right — only, deregulation produced a flood of innovative new products like collateralized debt obligations, which are at the core of the current crisis.
....the downside of deregulation were clear well before the Wall Street collapse. In California, electricity prices spiraled out of control in 2000-2001 as a result of deregulation in the state energy market, which unscrupulous companies like Enron gamed to their advantage. Enron itself, along with a host of other firms, collapsed in 2004 because accounting standards had not been enforced adequately. Inequality in the United States rose throughout the past decade, because the gains from economic growth went disproportionately to wealthier and better-educated Americans, while the incomes of working-class people stagnated..."
Full article is available here
Sunday, October 26, 2008
Continuing from the previous posting:
Thursday, October 23, 2008
Two "free-market" evangilists retracted their beliefs this past week...though slightly too late!
Here is the first one:
WASHINGTON (AP): Former Federal Reserve Chairman Alan Greenspan says the current financial crisis has uncovered a flaw in how the free market system works and that has shocked him.
Greenspan told the House Oversight Committee on Thursday that his belief that banks would be more prudent in their lending practices because of the need to protect their stockholders had proven in the latest crisis to be wrong.
Greenspan said he had made a "mistake" in believing that banks in operating in their self-interest would be sufficient to protect their shareholders and the equity in their institutions.
Greenspan said that he had found "a flaw in the model that I perceived is the critical functioning structure that defines how the world works."
Thursday, October 09, 2008
This week, Tatas drew curtains to their Singur Nano project...
...This being a highly govt-subsidised project (ref: Nano-economics), this withdrwal perhaps also perhaps saved the exchequer (and therefore the taxpayers) around Rs.3000cr
The "public" discourse on this project (which ,unfortunately, has now got reduced to the MSM's rant, and the corporate press-releases) has typically been tinted with a with-us-or-against-us kind of argument, i.e., the terms of debate are: if you don't support this project, then you are against "industrialisation"/development.
As an old adage of public deception says:
"if you get them to ask wrong questions, you will never have to give the right answers."
So since no one has asked this:
"are/were there alternatives to the Singur model of land-acquisition/industrialisation?"
Actually there are a few which I could find:
"For the steel plant at Salboni in Bengal, JSW has offered free shares worth the value of the land over and above full upfront cash compensation.
....Over 700 land owners has received cash as well as free shares of the new company, promoted by JSW Steel, which will build a 10-million-tonne plant over the next 10 years involving an investment of Rs 35,000 crore.
It has often been said that JSW could offer shares because there was only a small parcel of private land at Salboni. But Jindal said a larger number would not deter him in future."
"Rajasthan's Barmer has paved the way for a new formula for land acquisition with the Jindals agreeing to rent the land from farmers for lignite mining rather than getting the government to acquire it.
The power plant at Bhadres will mine 17000 hectares of land for lignite which will fuel the plant according to the new deal once the mining is over.
The Jindals will hand the land back to the farmers... According to a survey the lignite will last for only 43 years and according to the deal once the lignite runs out the mining will stop and the land will be given back to its owners, the farmers."
"Are the blood and tears of the poor a necessary price of ‘development’? Was there no way of making the landholders and sharecroppers in Singur beneficiaries of ‘development’ instead of its victims? There was, but the Tatas never even considered it and took refuge in the legal plea that they were not involved in the acquisition of the land.
To see how easy it would have been to co-opt the landowners and sharecroppers, one needs to ask just one counterfactual question: what would have happened if the Tatas had decided to set aside just one quarter of 1 per cent of their annual sales revenue and distributed it as an annual royalty to the owners and sharecroppers, for the use of their land? With an annual turnover of Rs 5,000 crore (from 500,000 cars), the royalty would have amounted to Rs 125,000 per acre per year to be split between landowners and sharecroppers. To recover this added outlay, the Tatas would have had to increase the price of their car by only Rs 250."
I am still searching for solutions between the "number-driven economic growth" vis-a-vis "models of sustainable development"...
If you have any clues, please help out...
Friday, October 03, 2008
This is bizzaire and hilarious...
The $700bn Wall Street bail-out proposal was defeated in the US House of Representatives last week. One of the criticisms - among many - of the proposal was that it hardly had anything for the Main Street taxpayer.
To be fair, the new version, which was approved by the US Senate later, has several provisions (e.g., disaster relief breaks, better deductions for costs of higher education, relief from the Alternative Minimum Tax, etc.) which will help many ordinary americans...
These new provisions - which also add another $112bn to the bailout plans! - contain some other measures of tax relief, which... err.... well, here are some examples:
As one of the commentator said: "You can't make this stuff up."