The Wrongs of Rightist Economics

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The middle class, which seeks safety and protection, is seeing in Modi a strong leader who can protect them against enemies, even invented enemies, and is not seeing the platitudes of the saffron polity

ALAM SRINIVAS

ALAM SRINIVAS

Alam Srinivas is a business journalist with nearly three decades behind him working for The Times of India, India Today, Outlook Financial Express and Business Today. He is the author of Cricket Czars: Two Men Who Changed the Gentleman’s Game

The waves and tectonic tremors of a new form of Economic Nationalism, or a 21st Century Economic Right-Wing ideology has gripped Planet Earth. Author Rana Dasgupta dubbed it as a part of the popular rising of “energetic authoritarian ‘solutions’” that shine forth in myriad political and social ways. “Distraction by war (Russia, Turkey); ethno-religious ‘purification’ (India, Hungary, Myanmar); the magnification of presidential powers and the corresponding abandonment of civil rights and the rule of law (China, Rwanda, Venezuela, Thailand, the Philippines and many more).”

What is fascinating is that these globalised ripples seem to contradict and clash with past mindsets and thought processes. And yet, the former seem to grow in size and impact, as if the troughs and crests of the new and old waves match each other perfectly in self-fulfilling and ever-rising prophecies. Remember the tuning fork and glass tube experiment? When the wavelengths and frequencies of the sounds match, the decibel levels peak. The same seems to be working for Economic Right-Wing, whose shocking popularity rises, and rises again and again, with breathless fervour and ferocity.

The twin processes of globalisation and Economic Nationalism are pulling human civilisation and nations apart. Cross-border capital, material and services flows go up, and so do the pressures of nationalistic protectionism. More humans seem to be without homes and roots, and even more so, who found their feet on the ground just a generation ago, wish to kick them out, even kill them. The earth is flat, claimed Thomas Friedman decades ago, signifying an era of borderless world, the proliferation of global souls. Yet walls are being constructed to concretise borders.

Sense of Nonsense

If one has to make any sense of it, one has to quickly rewind to a few hundred years ago, and then quietly fast forward to snatch glimpses of what happened in the arena of economic ideology, minus the tags of socialism, capitalism, Communism, and any other form of mixed-isms. It’s only then that one will notice that the opposing forces have always, and invariably, marched along together, sometimes in tune, and sometimes out of step. There were conflicts in latter cases, and complete bonhomie in the former ones.

For example, when globalisation and Economic Nationalism opposed each other, there were extreme forms of trade wars and protectionism. When they co-existed, either one of them ruled the world. The three things to watch out for are how things were made, the people who made them, and the vast majority that consumed the products. In a nutshell, look carefully at the manufacturing processes, business class, and the middle class. Therein lies the tale; therein lies the story of the two Economic Right-Wings, which are essentially the two sides of the same materialistic coin.

When global mercantile trade ruled the show hundreds of years ago, during the heights of the East India Company, and their likes, protectionism always lurked in the background. The mercantile imperialism of the 16th and 17th centuries was driven by the needs to protect the domestic industries. Lancashire needed Indian and US cotton to fuel their cotton textile manufactories. Spain needed the bullion trade to finance its wars, or protect its defence sector. Germany and Russia sought geographies to protect their citizens from extreme hunger and starvation.

Economic Imperialism

After the civil war in the US, a new trend of economic imperialism took roots. No longer was it essential to conquer nations and lands to encourage cross-border trade; it was enough to bring down the trade barriers, and let the capital flow easily and smoothly across the globe. But this form of Adam Smith-kind of laissez faire came with its own sets of protectionist and divisive mechanism. American industry forced its government to protect its financial and other interests. It was a form of diplomatic protectionism.

Obviously, the flip side was another form of exploitation, as American and European industry fleeced the natural resources from the Third World, and sold back the finished goods at hugely profitable prices. Even grants, aid and charity came with several attached strings, strings that could strangulate national heads (pun intended). Of course, the exploited revolted in their own ways, clearly nationalistic, to gain freedom and independence. The 20th century saw the birth of dozens of new, fledgling countries.

From there on, globalisation and protectionism clashed for decades, and the mixture acquired different contours – socialism, Communism, benign dictatorship and extreme dictatorship. All of them were dictated by the relative degrees of acceptance of the two opposing ideologies – globalisation and protectionism. After a series of experiments, most nations veered around to some form of Adam Smith’s thinking. Economic ideology, it was claimed, was dead. This was publicly claimed by the famous Francis Fukuyama.

What this did was a nuanced, but critical, change in economic policies. Earlier, one of the driving logic was ‘Made”, as in “Made in India”. It implied that goods needed to be made in India, by Indian companies, for both Indians and the global consumers. Clearly, protectionism of domestic industrialists was at the heart of this mindset. Even if foreign technology and capital was required, it had to come in the form of joint ventures or partnerships tilted in favour of Indians. Imports were allowed, but import duties were managed.

Today, the rhetoric is about “Make”, i.e. “Make in India”. It can be done by foreign capital and technology, but factories had to be set in the country, and goods had to be supplied to the world. So, the concept of global manufacturing hubs became the buzz word, although the process began earlier. This is the strongest economic plank of the Narendra Modi regime, as the prime minister invites any company to come and invest here, and expect a red carpet welcome. Indigenisation gave way to Foreign Indigenisation.

Hand-in-Hand

Since globalisation, protectionism, and state control over economic issues went hand-in-hand, though in varying degrees and contours, the business communities of most countries were happy. So are they now because ‘Make” means that the domestic industrialists will be protected to differing extents, yet the investment doors will remain open for the foreigners. More importantly, favours will continue for the select group, whose members may change, but the club continues to thrive.

In some senses, the erstwhile ‘Bombay Club’ of the pre-Independence era continues in India. Its earlier members were former ‘nationalist’ business persons, who feared Jawahar Lal Nehru’s extent of socialism and state control. They advocated a “mixed” economy, in which they could retain their powers, controls, and expanse. They succeeded. Through the 1970s and 1980s, the members of the club changed, but it continued as new players came to the forefront. One of them was the late Dhirubhai Ambani.

Even today, despite the new waves of Economic Nationalism, domestic businessmen seem unperturbed. At least this is true of the new ‘select elite’. Certain business groups have grown enormously over the past few years, both in India and abroad. Others have witnessed the dropping of government cases against them. Yes, some of them have got bludgeoned in the process, with a series of tax raids by various government agencies. The ‘State’ decides who’s ‘In’ and who’s ‘Out’, and who gets an entry into 7, Lok Kalyan Marg.

7 Race Course Equations

Of course, politico-business equations changed, and new faces popped up. An article in the wire.in said, “One of the most influential businessmen in (Narendra) Modi’s India is someone you’ve never heard of. Search for Nikhil V Merchant on the Internet and you would be hard pressed to find a single paragraph or profile or interview or even a quote of the 50-something entrepreneur whose proximity to Narendra Modi is an open secret in the upper echelons of the Bharatiya Janata Party and its government in Delhi.”

Although Merchant is a director in 18 companies, his flagship, Swan Energy, is not even a mid-size company with an annual turnover of Rs 300 crore. However, his power can be hinted at by a single transaction. “In August 2016, India’s largest public sector oil companies, ONGC, IOC, and HPCL threw their weight behind Merchant’s pet project – a proposed LNG terminal” in Gujarat. The three firms have combined 60 per cent stake.

A PTI article concluded, “As much as 90 per cent of the 5 MT capacity of the terminal has been booked for usage by state-owned firms. Booking capacity means these companies will pay Swan a pre-decided fee to use the terminal to import their own liquefied natural gas (LNG). Swan will not be exposed to the risk of LNG import business and would operate the terminal as a tolling facility.” It’s a win-win-win situation for Merchant; zero risks, gigantic profits.

Middle Class Mania

Surprisingly, for thousands of years, the middle class, which normally hates the business class, or is at least jealous of the latter, loves a strong leader, just like the business community. Whether it is Donald Trump, Adolf Hitler, Vladimir Putin, or Narendra Modi, the middle class loves them. The same can be said about dictators and Communist presidents. There is something about political and social power that obsesses the PLU, ‘People Like Us’. It is in our nature to have ‘great expectations’ from them.

This can be because of a mix of reasons. One of them is security, be it financial, business, social, political, and geopolitical. A strong leader will protect our incomes (jobs), borders, and communities (even if only the majority). In political terms, they will ring in a new phase of good and transparent governance. At least this is what we expect, hope and pray for. We get swayed by this range of rhetoric, even if it has proven to be false.

Next on our list of priorities comes safety. We feel that we are surrounded by real and imagined enemies, who will do us bodily and mental harm. Even when we don’t have any adversaries, we invent them. In fact, a nation and its people (citizens) are condemned to do it, or fade away into the sands of doom. The same is true for specific classes and communities. We need enemies to define ourselves, find ourselves and, hence, protect ourselves. The melting doesn’t work; the melting pot melts our ‘self’ and souls.

Umberto Eco wrote in his seminal essay, Inventing The Enemy: “Having an enemy is important not only to define our identity but also to provide us with an obstacle against which to measure our system of values and, in seeking to overcome it, to demonstrate our own worth. So when there is no enemy, we have to invent one.”

Osama bin Laden gave George Bush the “opportunity to create new enemies (after the Evil Empire fell)”. Donald Trump found new enemies in the form of outsiders like Muslims, Hindus and Christians.

Obviously, if one has enemies, one needs safety from them. A strong leader like Modi becomes the hope of the middle class. He can bring together the selected one together, and he can weed away the “others”, or force them into silent submission. The means don’t matter to the middle class, the ends do. This is true in our personal lives – we rave and rant against corruption, but quietly corrupt the system if our work gets done.

Once the middle class, including sections of the intellectuals, are tamed, and with the business community behind a leader, the nationalistic circus can begin. It can acquire differing political and social shapes, but economically what emerges is a kind of a constant form of protectionism for the select few, be it business persons, communities or classes. The nation seems to be on the move; the elephant seems unchained, and about to run. In effect, particular herd of elephants simply run randomly towards shifting goalposts.

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