Sandalwood, or Srignadha in Kannada is so much associated with Karnataka the land, the culture and of course Kannada cinema. The state is also called the ‘citadel of Sandalwood’ or Gandhaga Gudi. It is something found in every Kannadiga Hindu homes as it is one of the most important ingredients in the process of pooja. I was indeed taken aback to read that Australia is currently the largest cultivator/producer of ‘Indian’ sandalwood. What a disgrace.
Historically speaking, the entire ‘spice route’ trade revolved around spices and aromatics like Sandalwood. Rich Romans coveted for exquisite Sandal fragrance along with Musk. Musk of course is long gone, we have indeed killed all the poor creatures. Musk Deers as dead as Dodo in today’s India, we who grew up post liberalisation were too late even to understand and appreciate the mention of ‘Musk’ in poems. Looks like our children will feel the same way about Sandal wood.
I remember, we had a couple of Sandalwood trees in our farm long back. One sombre night, smugglers chopped the trees away in minutes using an electric saw. The incident was rather surprising because we had never heard of an electric saw. Felling big trees like those meant a full day’s work, not something a few unemployed kids could think of doing. The trees were not mature enough to be harvested. The adults in the house kept cursing the smugglers, because the trees were at least 20 years from maturity. It would have probably served for the one of the daughters’ wedding! May be may be not.
It was then that I can came to know Sandalwood was not like any other tree. My uncle had to go to the police station to register a complaint about the tree smuggling. That is because, we had reported the existence of the tree to the forest department and technically all the sandalwood trees were owned by states, that we had to inform the state about the smuggling. Hmmm. Where did all these regulations lead us to?
There were so many restrictions on cultivating, trading Sandalwood. Individuals could not cultivate Sandalwood with the government owning all the known trees and being the sole agency to sell the harvested trees as well. So where is the incentive for people to start investing in Sandalwood cultivation? There is none. People did not even bother to replace what ever was being stolen. This is a classical case of misplaced inceptives.
Of late however things have slightly improved. The government of Karnataka has liberalised the cultivation of Sandalwood that is there is no need to procure license to cultivate Sandalwood, therefore enabling the possibility of large scale plantation of tree.
The question however is whether liberalising cultivation is just an incentive good enough to prop up production of Sandalwood even though the trade of Sandalwood has not been liberalised. It is still not convincing! Why should an enlightened democracy act like a medieval monarch demanding all the luxuries of the land unto himself? Why is that there should not be a free market for Sandalwood and it’s derivatives? If there can be a free market for Gold, Silver, Diamond why not for Sandalwood. If there is a free market, there will be certain price signals which will determine if it is worth taking the pains of growing a crop with a gestation period of 40-60 years, risking smugglers et al? If it does not look attractive, we are just good importing all of our demand from Australia, after all they still do not have smugglers and Veerappans out there. If certain investors feel they can make money in the long term and it is a good idea to be planning Sandalwood saplings, let them by all means.
If a market – a mandi for trade in Sandalwood is established, it would just be as commercial a crop as say coconut. What is required is not the absolute regulation of the sandalwood trade, but a framework where such a trade is seamless and fair, just like any other commodity market. What is the need for the special privilege even though the privilege does not seem to have worked out. It is time we act otherwise we might permanently loose out on the market to Australia.
Tuesday, January 20, 2009
Tuesday, January 6, 2009
Food prices- Take II
Second take on the food price issue. I was just browsing through wiki and came across the documentation of the food price rise issue. Surprisingly, after all that has been said and done, the article still mentions, India and China’s middle class as one of the most important causes for the rise!! The claim has been refuted by the World Bank, FAO and other non-partisan research institutions. Not surprisingly the claim has been upheld by groups fighting for self-interest including the Renewable Fuel Association. There are a few questions that arise in the context of falling prices in the recent days.
1) Not long ago, analysts and consulting reports on Wall Street devoted reams and reams of paper on the commodity story. How crude oil production had peaked and how it might hit $200 (Goldman Sachs). Same with agriculture commodities, how bio-fuels especially corn based fuel was going to be the next big thing, after all with $200 a barrel crude oil, corn based bio-fuel looked very lucrative. What happened to all that? Why is crude oil having a free fall?
2) What about the growing demand for meats in
3) President Bush pledged a $770 million international food aid. While the
4) Besides,
Now for the answers
1) Yes Goldman Sachs et al were right when it said oil was going to hit $200. After all they were sitting on cash piles, the stock markets were weak, and emerging markets started showing signs of trouble, so how to make ridiculous profits? Play a game, not very different from that of roulette at Foxwoods! Looking to make money on assets, they started probing the commodities markets. A few reports here and there warning of dooms day scenario and upcoming incredible increase in prices was just a story they all needed. So smart fellow wrote the first report, and the analyst herd follows and lo behold, a lot of money, own and borrowed went into commodity trading. When prices kept edging up and up, those who had prophesised the price rise profited. They made a lot of money. It was self-fulfilling just like the run on a bank. The recipe is very simple… something like this
· Buy crude on commodity exchange
· Write reports on how crude prices will increase, create market hysteria. (Not difficult for market biggies, herd mentality, we all follow them)
· Keep buying till others start buying leading to increase in prices of the commodity already brought
· Once the price is high enough, start selling for a profit; you created a bubble and made profits from it.
· If smart you will stop right there, if not you will keep buying hoping to sell later at a even higher prices, only to loose everything
· Because bio-fuels and crude are substitutes, demand for bio-fuels expected to go up and an identical speculative bubble forms
· Corn and food grains are substitutes, and transmission of price hike to food grains.
Bingo another bubble created. This last bubble turned out to be pretty dangerous, because it affects very survival of millions across the globe. While there were food related riots in
Now what is happening now?
Recession: It is incredible that these intelligent people at Wall Street are waking up to thoughts of recession so late? It is obvious that during recessionary periods the demand for crude is so much lesser given the slow down in industrial production, slow down in transportation etc. So there was bound to be a price reduction and its transmission through to food grains. Were they who wrote all these reports and created this hysteria, not aware of the impending recession? Everyone knew about the recession right in the beginning of 2007, were not we? The only question back then was when we will bottom? So the demand they were forecasting was phoney. Their ‘ceterus paribus’ could not have worked and in all probability they knew it very well. What remains is greed, to make as much as possible before it gets worse. Make as much hay when the even as the sun sets. That is what happened. Thankfully crude did not hit $200, I wonder how much the wall street made and lost just on the crude trade. Hand in glove with crude were corn and its bio-fuels. Bio-fuels naturally became the next big thing. Because corn is a food grain and most food grains are substitutes, the price bubble of corn, quickly spread into other food grains and a vast array of food products including edible oil. Unfortunately, all those people at the helm of the fiasco will naturally go scot free. They have always been unaccounted for and will remain so.
Increased consumption of food in emerging markets: So how did all of a sudden, folks in
Free Markets! What a joke. It is a situation of ‘Trishanku Swarga’
Those who want to profit will invariably do it whether it is a free market or a restricted market. Just that in a free market, it is legal to do what would probably be legally punishable in a restricted market. It is just this resignation that there are scores of people, here there and everywhere who are easily the victims for no fault of theirs that makes me feel, nothing actually matters….
Tuesday, December 9, 2008
Pakistan and terror
Reading a respected Pakistani daily for a couple of weeks, starting with the Mumbai bomb blast, has giving me a much wider perspective about the nation and its citizens. Pakistanis are much more disadvantaged than us Indians. They do not have a functional democracy, their society is still constrained by feudal setup, politicians are even more shameless than ours and are even more corrupt. Inflation is raging high, economy in shambles and people are worried. This Bakri-id was not a good one for many of them, in fact lot many people toned down their celebrations because they could not afford to buy the animal for sacrifice. (I wonder if this is the festival for which Camels are brought down to South India from the northern parts of India and there will be routine articles in the paper about cruelty on animals and stuff..)
More from the captured terrorist, Like most of them he has very little education, hails from a very poor family and the easiest option for him to earn respect in society is to join these killer-organisations and pretend to be saving a religion, kill some people and gain entry into ‘paradise’. No wonder Pakistan is a hotbed of terror. One thing it has managed to export despite the global slowdown is –terrorists! The problem of the nation is so much akin to the underdeveloped tribal regions in our own backyard that is a Naxalite hotbed. So much for Jinna’s dream and so much for Iqbal’s “Sare Jahan Se Accha”; every thing ultimately remained on papers.
What ever the historical reasons are, for me, the whole problem of terror is due to underdevelopment, more economic than it appears. If people had opportunities to lead a decent live, ensure that their children went to school and were promised better things in life, why would they want to die a violent death? If things are just depressing, if meeting ends is tough and there are no other option but to become a foot soldier of terror earning so much more than ever possible on the right path to livelihood, why not? If only Pakistani rulers has a little more sense than their India-phobia, nipped the Frankenstein’s monster of terror in the bud, and spent the money they eventually did on public expenditure, they would have been a lot better. They have the geographical advantage. They were in the land of five rivers, the breadbasket of the sub continent. They were a smaller nation so should have been far easier to manage. They did not have as much diversity as we have. But where did they end up? And where are we today? We are in a position to inject a stimulus package and they are going around beseeching for aid. I should say it is just the misfortune of the Pakistani people.
I was reading Pervez Musharraf’s autobiography. One thing, like all dictators, he is an egomaniac. The book was full of I, me, me and more me. A good autobiography should never been an overdoes of Is and me’s.. All that came out of the book was the dubious glorification of Pakistani armed forces, a claim of the force being far more superior to Indian forces and of course the assertion that Mujahiddin were behind the Kargil war, even after India proved that the Mujahiddin were none other than Pakistani army regulars, with identity cards and badges. The army was indeed so great that they had to thing twice to accept the remains of their fallen soldiers. So how great can be an army that does not honour the remains of its fallen soldiers? The book was evidently an eye wash intended to keep the Pakistani people in a state of ‘imposed’ suspension of disbelief, just a continuation of school text book that speaks of Indian atrocity but does not mention the number of Prisoners of War released unconditionally by India in the aftermath of second Indo-Pak war. This is where the problem begins and may be ends- the power of Pakistani army and its generals have over Pakistani people and society. It appears Pakistani army can go a better job at governance than securing its citizens, after all they are used to it. Even if these dubious claims are discounted, why is that Pakistani army occupying such a big space in the policy-public-media domain? Army should do what it should, protect the citizens from external aggression and secure its borders. This army is more interested in creating disturbance in neighbouring countries, is unable to secure its western borders and has willingly supported extremist factions and pulls the strings ultimately. So it is like the Army deciding what to do the money with the exchequer? Buy food for the poor, build schools or buy arm and ammunitions? What could be the tendency of an institution like army? Naturally buy arms and ammunitions. Where will that lead to? Into the quagmire of underdevelopment and associated frustration, the frustration can be expressed in many ways, farmer suicides (as in the case of Maharashtra, Karnataka and Andhra Pradesh), the Naxalite movement (as in Orissa, Chhattisgarh, Jharkhand) and religious extremism and related violence. Where will it lead to but here, a bloody, society marred by violence?
At this juncture, the role of CIA and USA is conspicuous. Back during the Zia-ul-haq days the Americans had the ability of persuade Pakistani rulers, they could have used their power to act more responsibly. All they managed to do was create another fear psychosis that Russians wanted Pakistani warm waters and that India being Russian ally wanted the same. They funded these Jehadis to fight against the Northern Alliance, but could not for see what the monster – a Bhasmasura they create would do after they had attained their goal of winning the cold war? They woke up only after their ego was hurt right in their own back yard. Suddenly all their friends became their enemies. What Pakistan has started in Punjab and Kashmir never assumed importance till 9/11. So what is the price we pay for the selfish American game of promoting Jehadis and strengthening Pakistani ISI and Army? Die like flies when a young man just out of his teens sprays bullets in a crowded railway station.
If only people both in India and Pakistan were at the centre stage, allocating national budget to high priority issues like education and health care rather than on embarking on an arm’s race. If only we common people had our ways, and we could see things more clearly that things would have been better for both countries and for the larger world. For, common people on both sides of the Radcliff line life is but a struggle, (of different proportion though), in all its sense- economy, national security and social.Till that happen, peace and stability is just a pipe dream.
More from the captured terrorist, Like most of them he has very little education, hails from a very poor family and the easiest option for him to earn respect in society is to join these killer-organisations and pretend to be saving a religion, kill some people and gain entry into ‘paradise’. No wonder Pakistan is a hotbed of terror. One thing it has managed to export despite the global slowdown is –terrorists! The problem of the nation is so much akin to the underdeveloped tribal regions in our own backyard that is a Naxalite hotbed. So much for Jinna’s dream and so much for Iqbal’s “Sare Jahan Se Accha”; every thing ultimately remained on papers.
What ever the historical reasons are, for me, the whole problem of terror is due to underdevelopment, more economic than it appears. If people had opportunities to lead a decent live, ensure that their children went to school and were promised better things in life, why would they want to die a violent death? If things are just depressing, if meeting ends is tough and there are no other option but to become a foot soldier of terror earning so much more than ever possible on the right path to livelihood, why not? If only Pakistani rulers has a little more sense than their India-phobia, nipped the Frankenstein’s monster of terror in the bud, and spent the money they eventually did on public expenditure, they would have been a lot better. They have the geographical advantage. They were in the land of five rivers, the breadbasket of the sub continent. They were a smaller nation so should have been far easier to manage. They did not have as much diversity as we have. But where did they end up? And where are we today? We are in a position to inject a stimulus package and they are going around beseeching for aid. I should say it is just the misfortune of the Pakistani people.
I was reading Pervez Musharraf’s autobiography. One thing, like all dictators, he is an egomaniac. The book was full of I, me, me and more me. A good autobiography should never been an overdoes of Is and me’s.. All that came out of the book was the dubious glorification of Pakistani armed forces, a claim of the force being far more superior to Indian forces and of course the assertion that Mujahiddin were behind the Kargil war, even after India proved that the Mujahiddin were none other than Pakistani army regulars, with identity cards and badges. The army was indeed so great that they had to thing twice to accept the remains of their fallen soldiers. So how great can be an army that does not honour the remains of its fallen soldiers? The book was evidently an eye wash intended to keep the Pakistani people in a state of ‘imposed’ suspension of disbelief, just a continuation of school text book that speaks of Indian atrocity but does not mention the number of Prisoners of War released unconditionally by India in the aftermath of second Indo-Pak war. This is where the problem begins and may be ends- the power of Pakistani army and its generals have over Pakistani people and society. It appears Pakistani army can go a better job at governance than securing its citizens, after all they are used to it. Even if these dubious claims are discounted, why is that Pakistani army occupying such a big space in the policy-public-media domain? Army should do what it should, protect the citizens from external aggression and secure its borders. This army is more interested in creating disturbance in neighbouring countries, is unable to secure its western borders and has willingly supported extremist factions and pulls the strings ultimately. So it is like the Army deciding what to do the money with the exchequer? Buy food for the poor, build schools or buy arm and ammunitions? What could be the tendency of an institution like army? Naturally buy arms and ammunitions. Where will that lead to? Into the quagmire of underdevelopment and associated frustration, the frustration can be expressed in many ways, farmer suicides (as in the case of Maharashtra, Karnataka and Andhra Pradesh), the Naxalite movement (as in Orissa, Chhattisgarh, Jharkhand) and religious extremism and related violence. Where will it lead to but here, a bloody, society marred by violence?
At this juncture, the role of CIA and USA is conspicuous. Back during the Zia-ul-haq days the Americans had the ability of persuade Pakistani rulers, they could have used their power to act more responsibly. All they managed to do was create another fear psychosis that Russians wanted Pakistani warm waters and that India being Russian ally wanted the same. They funded these Jehadis to fight against the Northern Alliance, but could not for see what the monster – a Bhasmasura they create would do after they had attained their goal of winning the cold war? They woke up only after their ego was hurt right in their own back yard. Suddenly all their friends became their enemies. What Pakistan has started in Punjab and Kashmir never assumed importance till 9/11. So what is the price we pay for the selfish American game of promoting Jehadis and strengthening Pakistani ISI and Army? Die like flies when a young man just out of his teens sprays bullets in a crowded railway station.
If only people both in India and Pakistan were at the centre stage, allocating national budget to high priority issues like education and health care rather than on embarking on an arm’s race. If only we common people had our ways, and we could see things more clearly that things would have been better for both countries and for the larger world. For, common people on both sides of the Radcliff line life is but a struggle, (of different proportion though), in all its sense- economy, national security and social.Till that happen, peace and stability is just a pipe dream.
Friday, December 5, 2008
Mumbai Terror 2
Continuing from the last post….
The political circus continues with more resignations even as the anger of common man boils over onto the streets of Mumbai. I wish I were there at the anger march screaming my lungs out. Yes, politicians are intelligent deaf; they cannot hear things they don’t want to. So such cases we need to scream even more loudly.
Bomb blasts and such violence has become more or less a routine in
During all the violent incidents before the Mumbai episode, my anger would be straight at terrorists and their backers at
I guess this is actually where my anger is bubbling from. May be this is the reason why rest of my fellow citizens are anger as well.
The second development is a change in political orientation. I have always been a supporter of BJP. I have admired Sri Vajapeeji and some very efficient people in his cabinet like Col. Khanduri and Arun Shourie. This time too I would have been sympathetic to the party but then the full page bloody advertisement begging for votes even as people lay there dying, was something that spoke volumes about the current leadership. They wanted to derive maximum political millage here. That was truly grouse. Now Advani just seems to be another power hungry politician at the dusk of this career trying to be the prime minister he always dreamt of. What crap! I will not get into this thing. Never. I will never vote for either BJP not Congress. Congress I have never voted for chances are that I will never vote for them even in my entire life. For all the 1.2 billion, they just need the Gandhi’s to lead them. Even if it means someone who is a Gandhi by marriage and the other is so reluctant and uncomfortable being a politician. This is what I think I need to do, much better if we all could do.
1) Demand for better service as tax payers. Government after all is just another player here and they should realise we the tax payers are their boss, not the other way round.
2) Make sure our voice is heard. One great thing about American democracy is the voice. Voters demand that candidates debate each other and then they make up as to whom they did be voting for. Along with these debates there are civil society institutions, think tanks that analyse, debate and influence public policy and of course out comes in elections. Such think tanks are much helpful when media is bias and inefficient as it is in
3) Keep the pressure up. Lets not forget that this year alone the toll related terror related violence has been close 3000.Let us not forget everything as time goes by. Let us keep reminding it to ourselves, and keep asking question and make sure our so called leaders provide us with satisfactory answers.
Despite everything, I cannot but stop myself from sympathising with the Hindu right wing. After all, may be it is just the Bhajarang Dal, and people like Purohit and Sadhvi who actually care for us and wants to make a difference in our lives. They have risked their lives (if they indeed did) and they are doing something which we are not. May be supporting them is definitely not a bad idea even though I do not want them to kill anyone (except the terrorists and may be some unwanted politicians)…
Tuesday, December 2, 2008
Mumbai Terror
Mumbai still continue to be on the headlines. Surprisingly, the entire thanksgiving day news cover on CNN was on Mumbai. I do not quite know what the reason behind the more than 50+ hours of coverage on a main stream American media, could be because there were American citizens involved, could be because Americans still respond very strongly to acts of terror in the post 9-11 context, or could be because they did not have any other event, covering which they could have reaped better TRP. I did not have access to BBC even if my first preference has always been BBC.
Now that the dust has settled, it is anger, frustration, the crippling feeling of helplessness and despair at the lives lost, orphaned children, wrecked families. Everybody is writing something of the other right from the mighty Mr. Bhachan to journalists of all hues.. from red to saffron. Including Arun Shanbagh, BigB There are all sorts of articles right from those informing us about the increased TRP of news channels due to terror attacks (grouse) to those debating the position of a Muslim organisation refusing to accommodate the bodies of the terrorists. So where do we go from here?
1) Resignation of the home minister: And finally Mr Shivraj Patil realised he is incompetent for the job as well as that resigning now with just 5 months left for his term to end, there were so much brownie points to be collected if he owns up moral responsibility and so much less to loose. Oh! Come on. We the electorate we are stupid enough to elect incompetent governments but not as stupid to see the ‘moral responsibility’ stuff. We have seen this far too often in the past. It is surprising to see how he managed to be around even with so many terror acts unfolding across the length and breadth of the country.
2)Pakistan :It has become a sort of ritual to blame country-region> for everything that happens here. We are tired of that as well. place st="on">Pakistan is like a monster created to keep the attention of the electorate diverted. Just like young parents do when feeding their stubborn child “oh! If you don’t finish this entire apple, I will call the monster; the monster will come and gobble you up”. So incompetent government just wants to divert our attention and we shut our mouths and refrain from asking those crucial questions. Let us not get into this whirlpool of diversion. We all know
3)Politicising the entire terror issue: So everyone wants to make the best of the situation. Don’t they? A few politicians do not want to ban SIMI because their terror acts are not strong enough. So if they end up killing more people, that’s when they can be banned according to these people. Of course the incumbent incompetent government is slower to react. They figure out they need NSG after loosing top police officials including IPS officers. Then there are disgusting full page advertisement as to whom to vote, who will be a better option when it comes to fighting terror? All these folks are of course not bothered about their own safety because they are covered with Z+ security. That means, there are competent people around then who will sacrifice their own lives to protect these folks. So they can stop bothering about their own lives, they do not have to worry about earning a living, they usually male as much to last for at least 3-4 generations (unless the lineage turns out to be extremely stupid) and they it does not matter for then as to who die. After all in a democracy it is the percentage of votes that matters not the absolute number. Let them die.. is their point
4) Irresponsible politicians: Then there are people like R R Patil who think it is normal for such ‘small’ incidents to happen in big cities like Mumbai. I wonder what his reaction would be if he were to be holed up in one of the rooms there at Taj/ Oberoi; Better yet his son-daughter or a younger member of his family. Then there is Vilas Rao Deshmukh, who wants to help his aspiring son attain star-hood, takes his son and Ram Gopal Verma (Till now I had respected him for his directorial abilities, now I abhor him) to the blast site so that they could make a realistic movie! What apathy. Then there is Achutanandan the chief minister of Kerala who after being snubbed by the father of a slain soldier goes on to say,’ not even a dog would visit…’disgrace. I only hope not even a single person, let alone a dog would vote for these people in the next elections. Boot them out bloody, boot them out.Raj Thakhary and his wife, who feels all the dead were Marathis etc. We citizens did not know ‘Yama’ was partial and had a preference for Maharastrians. I only hope Raj Th.. learnt his lessons very well. He is yet another face of greedy, powder hungry b……. that populate our political system. Then there is Advani (A few days back I would not have mentioned his name with out the respectful ‘ji’ in tow, now he is just Advani) equally power hungry, instead of standing behind the country, all he wants to do is criticise the government and campaign for more votes. Well done. You bloody politicians think of nothing but your own skins, your own votes.
5) What next? Now it is as important to think about clues as it is to think of ways to stop such incidents from occurring again. How do we do it? No single answer. Even as I write this, there is another bomb blast in
What next? In my next post…
Thursday, October 23, 2008
Fiscal Deficit
Fiscal deficit
Another word that seems to scare American politicians appears to be fiscal deficit. Why are they afraid? Because fiscal deficit is bad! Why is fiscal deficit bad? No idea!!!
Some theory behind the story of Fiscal deficit; It is a common practice in economics to just state the theory, assumptions are also presented but many a times they take the back seat. So the story of the fiscal deficits begins with some such assumptions.
The theory says that when ever there is fiscal deficit, there will be inflation. (Therefore fiscal deficit is bad! What about the assumptions?) One of the most important assumptions behind this theory is that of full employment. Fiscal deficit leads to inflation if and only if the economy is in full employment. That is to say, all the resources, labour, capital, natural resources are already employed and there is no scope for further increase in production, will a fiscal deficit (where in the government spends a lot more than it earns) leads to a situation where too much money is chasing too few goods and there will be inflation in the economy. So what is so scary about it that Mr McCain wants to go for a balanced budget?
I don’t know.
Under the conditions of the assumption, there will definitely be inflation, true. But what if the assumption is violated? In the presence of spare capacity in the economy, there is always a chance that fiscal deficit which is used to print money (monetised fiscal deficit) will lead to better utilisation of the existing capacity/resource to improve production and therefore be beneficial to the economy.
What are the current economic conditions here in United States? Does the situation warrant a balanced budget?
Well currently unemployment is very high. There are a lot of people wanting to work, but are finding no work. There are producers who have excellent prospects but are slowing down due to lack of credit. The propensity to consume is weak, consumer driven American economy is slipping into a recession. We might already be in the midst of a recession!! It does not take very long to get from recession to depression, a balanced budget or a budgetary surplus is just the shortest way to get there!
So why is Balance budget good? And Ms Palin was so proud of her fiscal achievements in Alaska? Well it is alright to cut down expenditure on extra cars, fancy dinners, business class air tickets, but what about schools, what about infrastructure and what about productive expenditure? No answers I guess…
The candidates will keep harping about balanced budgets! Please vote for us, we will give you a balanced budget and as a complimentary offer, we will give you a small piece of hell….
Another word that seems to scare American politicians appears to be fiscal deficit. Why are they afraid? Because fiscal deficit is bad! Why is fiscal deficit bad? No idea!!!
Some theory behind the story of Fiscal deficit; It is a common practice in economics to just state the theory, assumptions are also presented but many a times they take the back seat. So the story of the fiscal deficits begins with some such assumptions.
The theory says that when ever there is fiscal deficit, there will be inflation. (Therefore fiscal deficit is bad! What about the assumptions?) One of the most important assumptions behind this theory is that of full employment. Fiscal deficit leads to inflation if and only if the economy is in full employment. That is to say, all the resources, labour, capital, natural resources are already employed and there is no scope for further increase in production, will a fiscal deficit (where in the government spends a lot more than it earns) leads to a situation where too much money is chasing too few goods and there will be inflation in the economy. So what is so scary about it that Mr McCain wants to go for a balanced budget?
I don’t know.
Under the conditions of the assumption, there will definitely be inflation, true. But what if the assumption is violated? In the presence of spare capacity in the economy, there is always a chance that fiscal deficit which is used to print money (monetised fiscal deficit) will lead to better utilisation of the existing capacity/resource to improve production and therefore be beneficial to the economy.
What are the current economic conditions here in United States? Does the situation warrant a balanced budget?
Well currently unemployment is very high. There are a lot of people wanting to work, but are finding no work. There are producers who have excellent prospects but are slowing down due to lack of credit. The propensity to consume is weak, consumer driven American economy is slipping into a recession. We might already be in the midst of a recession!! It does not take very long to get from recession to depression, a balanced budget or a budgetary surplus is just the shortest way to get there!
So why is Balance budget good? And Ms Palin was so proud of her fiscal achievements in Alaska? Well it is alright to cut down expenditure on extra cars, fancy dinners, business class air tickets, but what about schools, what about infrastructure and what about productive expenditure? No answers I guess…
The candidates will keep harping about balanced budgets! Please vote for us, we will give you a balanced budget and as a complimentary offer, we will give you a small piece of hell….
Socialism and American Public
I have been following the election campaign here in the United States. One thing that stands out is the American public’s fear for words like ‘welfare’ and ‘socialism’! these words seems to have derogatory connotations! It is so surprising, that one presidential candidate should criticize another because his plans amount to ‘welfare’ and sounds ‘socialistic’. I don’t believe that this could even happen. Personal ideological longings apart, what is the harm in taxing those who can afford to pay and spend the money thus raised so that the less privileged could have a better life. After all the richest in this country are indeed the richest in the entire world, if they cannot part with their accumulation for the betterment of their own fellow citizens, what is the hope for the rest of the world which is evidently so much less privileged than all these people?
The first question that arises is why do people fear ‘welfare’?
The first thing to strike me is that this country made enormous gains in the past few decades from free enterprise, much more from open global trade and from low tax regime that now they are scared of higher tax rates? No not convincing enough. Liberalising health care sector, meant hardship to a lot of people but Insurance, Medical care providers, Pharmaceuticals and hospitals made a lot of money. Similarly, in financial sector, investment banks, hedge funds and those rich enough to invest a lot of money made much more money than they had ever done. Now what is the result? Who is bearing the brunt? The ordinary tax payers, small investors who lost money at the stock markets, bonds (issued by companies like Lehman) people who are being laid off left right and centre and those who brought homes at the peak...Why does ‘welfare’ scare even this subset of the population? Does not ‘welfare’ mean cheaper healthcare and cheaper education and better infrastructure for all these people? Is it not the duty of the state to ensure that its citizens can afford these basic facilities?
Before coming to this country I strongly felt that the Indian government is not doing enough to provide healthcare and education to its population, but now I feel it is doing a much better job. Being one of the richest countries in the world and for the small population they have, this country is not taking care of those who cannot afford the expensive healthcare, or the expensive college; whereas in India, there still is something to fall back upon. However poor you are there are charitable hospitals, government run hospitals that provide somewhat inferior quality care, but do offer something which is better than nothing- total exclusion! And education in India! I studied in a government run free school, a government aided college and a government university. The cost of my entire 20 + years of education cannot be more than the fee charged for a single course in the cheapest possible university here in United States! Indeed with all the scholarships that I got, I must have made a lot more money than I paid up in fees. I am glad we do have the option to do that in India. Of course with the increasing richness, there are so many more choices than before, but competition is good for all of us. I strongly feel we have this option in India because our resource constrained Indian governments feels obligated to have ‘welfare’ in mind! The State still feels responsible for the welfare of its citizens, just that they should not be producing cars and incense sticks, but concentrate on schools and hospital.
Why are Americans scared of ‘welfare’? The question still remains to be answered!
Does it have something to do with the cold war era mindset? When it was believed that ‘right’ is ‘right’ because it is opposite of ‘left’? Is it because it is so very easy to obfuscate communism, socialism into sounding similar? That reminds me of the presidential debate in JNU-2004, when a candidate from one of the smaller parties took on the task of differentiating himself from the left-backed major party candidates and did a wonderful job. May be American public needs to hear one good lecture on the topic. Though the aim of this post is not actually to differential between the two ideologies, I will try and do it in may be a few lines!
Socialism could also be a part of a democratic ‘welfare’ state. No doubt the communism had its roots in socialism but socialism is not just communism. In a democracy, there are enough checks and balances to avoid the trap of communism. And what is wrong in providing free health care (education)? The Scandinavian governments do, the French and the British do it. They do not have to shell out $ 700-800 on their health insurance each month. They do pay higher taxes and their economic growth has been slower. But what is the use of having faster economic growth rate that just benefits the rich and leaves the underprivileged worse off? Every research that studied inequalities in the recent decades concludes that inequality has risen; so why do we need growth if it cannot benefit a majority of the population? Life in Scandinavia and Europe is much better than that of United States, is it not? Here it would not take long for a hardworking salaried taxpayer to become homeless and not afford heath care; the possibility is so much more muted in Europe.
Communism on the other hand is a setup which seeks to establish a classless society. Everyone owns everything and everything belongs to the communes. So there is no scope for private ownership, no private enterprise, no private profits, everything is for everyone and people simply disappear never to come back. True this experiment has failed; the proof is Russia and other eastern European states. It kills enterprise, incentive to work hard and breeds a discontent and violence. True, communism and its lack of liberty scared me like hell! I even have nightmares about it. I was never as disturbed as I was when I went through George Orwell. It is scary, but it has nothing to do with welfare.
A ‘welfare’ state can exist very well without even coming kilometres close to communism. They are successful welfare states which encourage private enterprise and private ownership of assets, have vibrant democracies and their citizens are better off that way. Why should social welfare be scrutinised under the leans of communism?
What ever it is the spin doctors are doing a good job of scaring the hell out of American public. The bottom line is, in our enthusiasm for certain jargons and prescription; we forget the aim of ‘society’, ‘government’ and ‘democracy’ themselves. The primary aim is wellbeing of all citizens, if all is impossible; the aim is the wellbeing of a majority of the citizens (Bentham still rules!!!) and it should always be remembered. What ever promotes the wellbeing of the majority should be promoted, cheered and accepted. What reduces wellbeing of the majority should be feared, discouraged and snubbed. It is not easy get lost in the jungle of jargons?
The first question that arises is why do people fear ‘welfare’?
The first thing to strike me is that this country made enormous gains in the past few decades from free enterprise, much more from open global trade and from low tax regime that now they are scared of higher tax rates? No not convincing enough. Liberalising health care sector, meant hardship to a lot of people but Insurance, Medical care providers, Pharmaceuticals and hospitals made a lot of money. Similarly, in financial sector, investment banks, hedge funds and those rich enough to invest a lot of money made much more money than they had ever done. Now what is the result? Who is bearing the brunt? The ordinary tax payers, small investors who lost money at the stock markets, bonds (issued by companies like Lehman) people who are being laid off left right and centre and those who brought homes at the peak...Why does ‘welfare’ scare even this subset of the population? Does not ‘welfare’ mean cheaper healthcare and cheaper education and better infrastructure for all these people? Is it not the duty of the state to ensure that its citizens can afford these basic facilities?
Before coming to this country I strongly felt that the Indian government is not doing enough to provide healthcare and education to its population, but now I feel it is doing a much better job. Being one of the richest countries in the world and for the small population they have, this country is not taking care of those who cannot afford the expensive healthcare, or the expensive college; whereas in India, there still is something to fall back upon. However poor you are there are charitable hospitals, government run hospitals that provide somewhat inferior quality care, but do offer something which is better than nothing- total exclusion! And education in India! I studied in a government run free school, a government aided college and a government university. The cost of my entire 20 + years of education cannot be more than the fee charged for a single course in the cheapest possible university here in United States! Indeed with all the scholarships that I got, I must have made a lot more money than I paid up in fees. I am glad we do have the option to do that in India. Of course with the increasing richness, there are so many more choices than before, but competition is good for all of us. I strongly feel we have this option in India because our resource constrained Indian governments feels obligated to have ‘welfare’ in mind! The State still feels responsible for the welfare of its citizens, just that they should not be producing cars and incense sticks, but concentrate on schools and hospital.
Why are Americans scared of ‘welfare’? The question still remains to be answered!
Does it have something to do with the cold war era mindset? When it was believed that ‘right’ is ‘right’ because it is opposite of ‘left’? Is it because it is so very easy to obfuscate communism, socialism into sounding similar? That reminds me of the presidential debate in JNU-2004, when a candidate from one of the smaller parties took on the task of differentiating himself from the left-backed major party candidates and did a wonderful job. May be American public needs to hear one good lecture on the topic. Though the aim of this post is not actually to differential between the two ideologies, I will try and do it in may be a few lines!
Socialism could also be a part of a democratic ‘welfare’ state. No doubt the communism had its roots in socialism but socialism is not just communism. In a democracy, there are enough checks and balances to avoid the trap of communism. And what is wrong in providing free health care (education)? The Scandinavian governments do, the French and the British do it. They do not have to shell out $ 700-800 on their health insurance each month. They do pay higher taxes and their economic growth has been slower. But what is the use of having faster economic growth rate that just benefits the rich and leaves the underprivileged worse off? Every research that studied inequalities in the recent decades concludes that inequality has risen; so why do we need growth if it cannot benefit a majority of the population? Life in Scandinavia and Europe is much better than that of United States, is it not? Here it would not take long for a hardworking salaried taxpayer to become homeless and not afford heath care; the possibility is so much more muted in Europe.
Communism on the other hand is a setup which seeks to establish a classless society. Everyone owns everything and everything belongs to the communes. So there is no scope for private ownership, no private enterprise, no private profits, everything is for everyone and people simply disappear never to come back. True this experiment has failed; the proof is Russia and other eastern European states. It kills enterprise, incentive to work hard and breeds a discontent and violence. True, communism and its lack of liberty scared me like hell! I even have nightmares about it. I was never as disturbed as I was when I went through George Orwell. It is scary, but it has nothing to do with welfare.
A ‘welfare’ state can exist very well without even coming kilometres close to communism. They are successful welfare states which encourage private enterprise and private ownership of assets, have vibrant democracies and their citizens are better off that way. Why should social welfare be scrutinised under the leans of communism?
What ever it is the spin doctors are doing a good job of scaring the hell out of American public. The bottom line is, in our enthusiasm for certain jargons and prescription; we forget the aim of ‘society’, ‘government’ and ‘democracy’ themselves. The primary aim is wellbeing of all citizens, if all is impossible; the aim is the wellbeing of a majority of the citizens (Bentham still rules!!!) and it should always be remembered. What ever promotes the wellbeing of the majority should be promoted, cheered and accepted. What reduces wellbeing of the majority should be feared, discouraged and snubbed. It is not easy get lost in the jungle of jargons?
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