Wednesday, April 16, 2008

The Party remains unscathed

An interesting article by P.Sainath. Comparing "loan waiver" to Bear Sterns bailout is really "apple vs oranges". The Fed prints bills at the rate of 2billion per day and the US deficit stands over 8.7 trillion. But what is 15billion when compared to our budget deficit? The US economy is vastly different from India's. I give that , although inappropriate, the comparison puts the "loan waiver" in a different perspective. However, 15billion waiver is still fiscal imprudence. Deriding capitalism and promoting socialism is a poor attempt at justifying populism.

The Hindu : Opinion / Leader Page Articles : Between a rock and a hard place
To be fair to the Union Agriculture Minister, he alone has not laid the blame at the door of faceless global forces. Sharad Pawar locates the problem closer home. In his view, south Indians are eating too many chapathis, leading to shortages of wheat. (DNA page 1, April 2, 2008). An entertaining view but there’s a problem with it. Even while dietary changes do affect consumption patterns, these occur over decades. There is little evidence of an outburst of wheat-centric gluttony in the southern States these past six months. (Unless, of course, with great cunning, the southies are hoarding it up for future chapathi orgies.)
Thanks for attacking such nonsense.
And we also exported millions of tonnes of grain — as in 2002 — and 2003. What’s more, we exported at prices cheaper than those we charged poor people in this country for the same grain. The idea was that we had a “huge surplus” of grain and could well afford to export. The truth was that the massive pileup of unsold stock arose from a surplus of hunger rather than of grain.

This is the curious bit. These are the facts:
India exported millions of tons of grain in 2002 and 2003. There was a huge surplus.
From the CBOT data, I see price volatility in 02 and 03 but largely the prices have been better than over the previous years. It is also during these years that the bullish trend kicked in. The international prices were definitely not depressed to force India to undersell.
BJP ruled during 02 and 03.
Over the past 3 years, food stocks have been reducing.
Farmer suicides increased dramatically over the past 3 years.
There was a wheat import scam under the UPA government.
Congress has been ruling since 04. Wheat import: UPA in trouble
There is more trouble for Union Agriculture Minister Sharad Pawar. After the Left, it was the turn of the congress party to distance itself from the government's decision to import wheat at a huge cost.
BBC NEWS | World | South Asia | Is India facing a food crisis?
Stocks have come down over the past three years because of low production and exports.

Sharad Pawar gets the blame and "The Party" remains unscathed. Some are beyond reproach.


Dirt Digger said...

This post shows that Sainath neither has a clue of how the financial markets operate nor how the agricultural commodity crisis was created in the first place.
His response is the common communist credo,
1. blame any heavy capitalist spending as extravagant and unreasonable.
2. Ignore the real facts of how the UPA government with the Left included failed the farmers.

Pilid said...

Sainath's theme is always this: the rich have double standards, one for themselves and another for the poor. And his sarcastic comments are aimed at driving home that point. There has been some criticism of the Bear Stearns deal in the US as well and along the same lines that the bailout was undeserved. But there was a larger purpose behind it, namely, to prevent a complete collapse of what was once a flagship company and thereby bring about a cascading effect in the market. When the collapse began, many feared that letting things slide would herald another recession similar to the great depression of 1929.

Now what exactly is the comparison between this and the current price rise and farmers' distress? Neither of these would actually herald a crisis of confidence in the market. So this is obviously a lot of hand waving.

The other broader point he is trying to make is of course that the free market ideal is only a corporate ruse to deprive farmers, workers and weaker sections of their rights by a state which is however more than anxious to intervene to protect the very same corporations in breach of those free market principles when their future is endangered. The trouble with that argument is that it fails to recognize that the fate of large corporations is tied to the broader issue of public confidence that is central to the success of the market economy. If Sainath sees this model itself as fundamentally wrong (as I think he does) and the State ought to have the principal role in the economic lives of people as against corporations, that is essentially an advocacy of the socialist model which as we have already seen, has its own problems - unlike corporations that are many in number, the state is only one and what does one do if it goes bankrupt like the Indian state did in 1991?

Though I can appreciate the irony of the situation, short of a complete overhaul of the system itself, does Sainath have an alternative to offer on either count? He points to the views of Utsa Patnaik which is something I still need to delve into before I can comment upon.

jujung said...

"Now what exactly is the comparison between this and the current price rise and farmers' distress? Neither of these would actually herald a crisis of confidence in the market."

I think the farmers' suicides for the past few years would be considered a crisis of confidence in the agricultural market. Dealing each problem by its merits would be a good idea instead of looking everything through a rigid ideological lens.

Anonymous said...

It happens even in cartoons

Rajnath Singh( BJP) & Mulayam (SP) are crushed by Mayawati, but the Congress which is crushed is faceless. i.e it is no individual is to be blamed for the poor showing of the Congress party