Thursday, July 11, 2013

UNDERLYING ECONOMIC ASPECTS OF MOVEMENTS AND INEQUALITY

UNDERLYING ECONOMIC ASPECTS OF MOVEMENTS AND INEQUALITY
Arun Kumar
CESP/SSS, JNU.
Published in Chaubey, N.P., Panda, D. and Pant, G. (Ed.) Peoples’ Struggles and Movements for Equitable Society. Allahabad : ISSA and N Delhi, DAANISH Books.

I.          SOCIETAL PROCESSES RESULTING IN GROWING INEQUALITY
There are myriad causes of inequity and inequality in society that are built into the prevailing social system. Hence working to change a few of these based on a partial understanding will not lead to the desired change towards equity or equality. A holistic vision is necessary whose various features are briefly sketched out in this article. It would have to include cultural, environmental, linguistic, economic, political, historical, sociological, legal, scientific and technological and other such aspects. Since this is a vast terrain for any paper to cover, the focus will be on the underlying economic aspects of inequality as they effect these dimensions of the problem and thereby reinforce social inequality.
In the dominant economic framework of the market, only lip service is paid to the idea of equity – distribution is not on the agenda of policy making. Only what is called `efficiency’, defined as the attainment of optimality in the markets is discussed (See Any basic Public Finance text book, like, Tresch, 1981). That is why the notion of `trickle down’ and growth as a means of eliminating poverty are the main features of discussion in development literature but not equality or equity.
While economics does not determine everything in society, it has become the single most important feature of social existence and this is due to changes at the philosophical plane. This would also help us understand why there has been growing acceptance of social inequality. At the conceptual/philosophical plane we need to be clear what we understand by people’s movements and equitable society. Further, why the former maybe a pre requisite for the emergence of the latter? Alternatively, one may ask whether equity or equality can be automatically achieved in society, that is, can they be the natural state of society?
People are born equal with the same social potentialities that anyone else has but it is in terms of their social existence that they become unequal. As they grow up, typically, the differentiation only grows. If this is so, differentiation is not a natural state of affairs but has a large social content? While genetic factors are different for each individual that only determines the innate abilities which may flower given the support and opportunities in life. It is this support in the form of education and health and other opportunities that depend on the nature of society and what view one takes of the individual and of social differentiation. The social position of individuals is determined by their role in society and not by nature. Even if there are natural differences amongst different people, it depends on society to decide whether they would be treated as equal or if not, how unequally.
Society’s view of Man determines how unequally different people are treated and this is itself based on the social strata they belong to and where in the hierarchy it is placed. The dominant sections decide on who gets what status and for their own benefit create hierarchies. This is justified as natural division to lend legitimacy to their view of society. Their sense of `justice’ is also based on this view of society. For instance, in a feudal society, to justify hierarchies, there is an inherent view of people as unequal. In a capitalist society that appears to have changed but inequity based on ownership of capital is taken to be natural and just. Structurally, there is more inequity between capital and labour than amongst wage earners but most of the discussion is on the latter.

*Based on the paper of the same title presented in the 31st Indian Social Science Congress in Mumbai in 2007.

II.        NATURE OF GROWING INEQUITIES
II.1      Philosophical components of inequality and inequity
Inequality and inequity are linked to the state of society, its institutions and its sense of justice. In turn these determine the link with nature of exploitation in that society and what role continuation of inequality plays in that society. For continuing inequality, the ruling groups are important and they maintain their control over the rest through an ideological hegemony.
The notion of justice in a society also emerges from the ideological hegemony. This hegemony has its impact on the oppressed or the ones considered lesser in the system. They are blinded to the obvious ills of the system and to the link of that with their own situation. They believe that there is no alternative and that this is the natural state of affairs. Hence even they consider it to be just and accept it. Thus, under feudalism, the serfs also had aspirations to be a landlord and thought it to be natural that they would be serfs under the landlord and give him the labour of their toil. Under capitalism the workers believe that they would one day be the owners of capital. So, under capitalism, even workers TURN capitalists in their belief. The spread of the stock market habit in the West and even in the developing world makes the oppressed believe that they are also capitalists.
In the present day male dominated world, successful women also adopt the male centric values of society and consider this to be the natural state of affairs. Most do not feel that they can or need to evolve a different set of values or different structures that would not exploit the weak. Powerful successful women like Indira Gandhi, Bandaranayke, Bhutto, Sheikh Hasina, Zia, in South Asia have made little impact on the position of women in society and continued or even furthered the oppressive systems in their countries. Ms. Thatcher made little difference in UK or little is expected from Ms. Merekel in present day Germany. Their model of politics is no different from that of the others and their agenda as oppressive as that of others. Sometimes it is even more oppressive as that of Ms. Thatcher or Ms. Indira Gandhi since they have to prove a point in a male dominated world. Successful women end up also exploiting the weak and other women. In Indian households, the mother-in-law has replicated the structure of oppression of women (the daughter-in-law) as much as the others have by being an active party to the system.
 Similarly, in the Indian caste ridden society, the oppressed, the Dalits have adopted upper caste values. While they were denied entry into temples, they instead of creating their own structures demanded entry to these very temples. The successful have also oppressed the others rather than evolving an alternative structure of power. Even though they have been oppressed by feudalism and capitalism they have when in positions of power hardly behaved differently.
Change comes through change in social consciousness and not just through the good intentions of the ruler. Those in power try to maintain their position and that implies maintaining a balance between the ruling forces. Thus, change has to come despite what those in power want. It requires the bulk of society to force the change on the rulers because they begin to believe in something different. This change in social thinking comes through movements and struggles that change the consciousness of society as a whole. Many an idea exist in society but do not get taken up till the time comes when they become acceptable because consciousness changes. Gandhi succeeded in the national movement leading to independence but not in getting rid of untouchability. The time for the former had come because the bourgeoisie put its weight behind the idea of independence but for the latter, society was not yet ready and is perhaps still not ready.
In Europe, feudal values and ways have given way to capitalist ones. Manual work is not considered to be degrading. Households clean their own houses and toilets. Most do their own basic plumbing and electrical work or even carpentry and painting of their house. In India that is still not so with the elite still shunning such manual work. This in spite of their considering the West as the symbol of success. They copy West’s consumerism but not its value system.
The failure of the Environmental movement over decades is because it has not yet succeeded in checking consumerism. In Europe, despite Green movements, consumption per head continues to grow leading to use of ever more resources and putting an ever growing load on Nature. Temporary scares over ozone hole are dealt with through technological fixes  without the realization that that only puts off the day of reckoning and possibly the tipping point will come sooner than later since new problems result from newer untested and untried technologies. Society does not have the time today to test the technology over a period of time to see what ill effects it may have. Too many changes taking place simultaneously create the confusion that what may appear to be acceptable in an isolated instance may not be so when coupled with others.
Perhaps a distinction needs to be made between struggles and movements. The former are more localized and the latter more generalized. The finer points of distinction may be understood through application of political and sociological theory? Pure economic theory (as it is referred to today) has little to say on this but political economy would also suggest that such a distinction in understanding needs to be maintained if we are to understand social processes. Unfortunately, in common parlance these distinctions are glossed over and the two terms are used interchangeably.
The process of social understanding is considerably hampered by the way knowledge is split up between disciplines. In Economics, students have little understanding of history or social processes. As Samuelson lamented in 1986, for students, economics begins in 1980 with game theory. For many, proving mathematical theorems is all that matters since social processes can be reduced to statistics or variables. That social processes are not deterministic and use of mathematics or techniques based on that have a limited role is not understood by many in the field of economics. Even in the natural sciences, it is an axiom that one studies the world as it exists and not a hypothetical one since then there would be an infinity of them and there would be no basis of discussion amongst the scientists. The social scientists have also to agree that they must study the world as it is and not a hypothetical one based on their assumptions which only enable them to use the statistical and mathematical tools. The limits of these techniques in understanding social processes are immaterial for a large number of economists of the present day. That their results are based on specific assumptions and do not have a universal validity is glossed over. Due to their distance from reality, they end up providing justification to the ruling elite for what it is wanting to do in its own interest.
The process of fragmentation of knowledge is aided by the methodological splitting up of the social sciences into different disciplines and sub-disciplines. Within Economics, the neo-classical school has little idea of the classical ideas or the political economy, etc. Professional training for management, engineering, etc., is devoid of wider social questioning because it is deliberately designed to leave little time for wider reflection. This process needs to be reversed through building a unity of knowledge and learning and introduction of inter-disciplinarity rather than multi-disciplinarity promoted in its name.
            The consequence of this splitting up of the social understanding is that non-solutions abound and a holistic vision of Society and Nature is hard to build. That is why while solving one problem, we end up creating many more and problems get compounded. Often mistakes are realized too late for them to be corrected so one ends up accepting them and only reducing their ill effect rather than eliminating the root cause of the problem.
The lack of a holistic vision results in the creation of non-solutions for the problems facing society. What is being done at one stage of development may be proposed as a solution for a society at a different stage of development. This is true of urbanization, mechanization and automation in production, etc. Thus, while trying to solve a problem several others arise and need further solutions, etc.
Education can play a large role in creating a wider understanding but today it is alienating for large sections of the population. It has largely become a source of replicating the system as it exists rather than posing a challenge to it to make society a better place. Most students are narrowly concerned with a career and the teachers think of their job as any other and show limited commitment. The space for what education should be has been ceded by the intellectuals to the businessmen, bureaucrats and politicians - those in power. This has led to its vitiation and the entry of political interests and those of big money to the detriment of the liberal education that people need to be become civilized and one that would challenge the existing orthodoxy for achieving social change. Because of its link with the power structures, it is also not interested in affording opportunities to many in our society who are the oppressed.
It is also important to point out that language has been used to obfuscate and confuse issues. For instance, in 1991, a right wing agenda in India was pushed through on the pretext of Reform and liberalization. When growth has been exclusive, the talk is of inclusive growth. The entire media, dominated by the corporate sector has been systematically used to spread the confusion and make out that things are better than they are and on the correct path. In this, forces from the Left and the Right are no exception. The movements and the public get confused by this and unable to be decisive.

II.2      Material Inequity in the world is both falling and rising.
While inequity has many dimensions, today when one talks of it one predominantly refers to the material one. That is measured in terms of per capita income or how much resources of society can one potentially command. After the Second World War, when the phase of decolonization ended, there were sharp differences between the advanced countries (largely the colonial powers) and the underdeveloped world (the former colonies). Such differences in per capita income have declined with many of the former under developed countries doing particularly well since the mid Seventies. One may mention China and the South East Asian Tigers as some of the examples. They have narrowed the gap with the advanced countries. India has also narrowed the gap since the early Eighties when its GDP growth rate went up to an average of 5.2%.
However, in most of these countries, the distribution has worsened with a small minority gaining rapidly and leaving the rest far behind. This is true in today’s two fastest growing and large economies, China and India. It is also true for the largest economy, the USA. Disparities are rising within each of the countries even if it is falling across countries. In fact, both in the USA and India disparities are greater today than say 60 years back. Thus, overall inequity is increasing even if in some parts it appears to be not the case.
This is due to the neo-liberal agenda being followed all over the world under the influence of the International Finance Capital which is imposing similar policies on all economies, big and small making them follow `growth at any cost’ with all costs falling on the poor. Today, Capital is on the ascendancy and labour (and Trade Unions) on the decline. The control of the financial structures by a few people in the world is a way of increasing their share of income and this results in marginalization of the marginal and increase in inequity. In India, today less than 0.1% of the population controlling big business is making more income (18% of GDP) than 53% of the population dependent on Agriculture makes (17% of GDP). More can be earned through speculation in real estate and the stock markets than through regular work. Simply moving capital around the world is enough. However, it is now clear that these trends were aggravating the risks of a growing financial bubble and now a collapse of the system as a whole and not just of the financial structures has set in (Kumar, 2008b). Even the largest and best informed structure, US Fed did not realize its seriousness and extent.

II.3      Inequality leads to more of it.
It needs to be understood that inequality becomes the cause of more of it unless society makes a conscious effort to reverse the trend and eliminate the causes of its existence and accentuation. This has been discussed in Kumar (2007). It is argued that the beneficiaries of this process believe that they are responsible for their own progress and the rest who are suffering in that situation because of their own actions and so they are themselves to blame. The successful ones demand more and more concessions and policies favouring themselves. This then perpetuates the divide and makes the chasm grow.
This is a natural consequence of the social belief that people are homo-economicus – rational profit maximizing individuals. In this view, progress is seen to depend on the actions of the elite – the business community and the professionals. The elite classes are pursuing this in a self-serving manner and pushing for their narrow self-interests irrespective of its impact on distribution. Capital is taking advantage of this philosophy. Its earlier belief in a welfare state has given way to this exclusivist and elitist model of development. This is aggravated by market fundamentalism of `dollar vote’ and the marginalization of the marginal by the market processes.

II.4      Markets, equality and changes in consciousness.
Here an important distinction needs to be made between `markets’ and `marketization of society’. The former is a purely mechanical device for the exchange of goods and services while the latter is the penetration of the market consciousness into all institutions of society – whether it is marriage or consumption. What was not commercialized, like, water, sea beaches, etc., have been commercialized and markets have been created in these areas/activities where no markets existed. The underlying idea is `efficiency’ based on the notion of Man as homo-economicus. It relies on the idea of the Economic Man to the exclusion of all else – social, political or cultural, etc. It suggests that economics determines all else in society. This has been internalized in society and has created the modern day hegemony with people increasingly accepting it and behaving accordingly. A consequence is that the deepest feelings Man had of emotions, sense of community and togetherness have been replaced by alienation and atomization and the individual reduced to being no more than a sophisticated machine (as suggested in the 28th Congress in Gandhigram).
The result is that anything is possible and Society has lost its innocence and the citizen has been hollowed out with lack of emotions – like a sophisticated machine.  Trust in society is a casualty. Family which was based on trust and emotional attachment is now a mere shadow of its former self. Atomized individuals can divorce at will. Adjustment to each other is difficult because all are profit maximizing. Feeling of guilt and self-doubt is a cost in a profit maximizing world which needs to be minimized so one is always in a mode of self-justification so that there is little scope of adjustment to the other. One’s own gratification is the most important. When `more is better’, then sacrifice is stupidity. But family, society, etc., are institutions that demand sacrifice to build them but this value has taken a severe beating and that is why these institutions are in a state of crisis even in the most advanced nations.
The use of sex and violence to sell products or to entertain people has reached new heights. It is targeted to exploit the baser instincts of people. It is used to titillate. Its psychological impact on people needs careful analysis. Amongst children, it shows up as confusion resulting in violent behaviour and psychological pathology. Large number of people are forced in the advanced countries to go for counseling or for psychiatric help. This trend is growing rapidly in the developing countries also like in India. In the name of maturity of people, the entertainment and advertising industries weaken people and arouse their baser instincts for achieving their narrow interests of selling more and profiting. Society has played a civilizing role and strengthened people but today the trend has reversed due to commercial interests. This has also weakened movements by creating diversions and individualizing the citizens and making collective action that much more difficult.
The growing black economy involves illegality (Kumar, 1999). Since society works according to rules/laws, the black economy is anti-social. It has been characterized as eating up the innards of society like termites, making it hollow. It is currently estimated to be around 50% of GDP so is both systematic and systemic. It is concentrated in the hands of 3% of Indians and results in huge inequity. It results in large amount of social waste and unproductive activities. It has led to growing criminalization and undermining of the work culture in society. It also results in the alienation of citizens and consequently makes social actions difficult. Thus, it aggravates the market based tendencies noted earlier. Unfortunately, it is one of the most neglected aspects of the Indian existence and is hardly studied or sought to be controlled.
One may ask, can material progress be the only yardstick of progress? Only in an atomized and alienated world where economic well-being is the end all. Clearly, under the circumstances, other aspects of society that take a beating lead to an impoverishment of people in those spheres. All the costs of treating development purely in economic terms are falling on the weak, the marginalized and the poor. While a wage maybe paid to a worker, if free goods of nature disappear, poverty becomes harsher as is the case with the landless in the rural areas or the slum dwellers in the urban areas (Kumar, 1997). Incomes have risen but so has poverty. Its nature has changed and it is incomparable with what it was in an earlier era.
Due to the short termism prevalent in society, environmental degradation has reached new heights. Due to the international division of labour, polluting industries are relocating in the developing world helping reduce pollution in the advanced countries. The impact of this on the poor in the less developed countries is that they work in polluted environments and suffer health damage so that increased incomes are mostly absorbed by the health related expenditures. One may recall Larry Summers’ argument that it is more efficient for people to die in the developing world (reported in the London Economist, February 8, 1992).
There are several kinds of confusion in the argument for material prosperity as the sole criterion for gauging progress of individuals and society. It does not necessarily promote feeling of satisfaction and contentedness amongst the individuals. In fact, in a capitalist society, it is the opposite since lack of satisfaction and contentedness is used to promote more consumption so as to make higher profits. Higher material consumption leads to environmental degradation and reduction in prosperity or welfare through greater disease. One may live longer but if it is as a vegetable, it is hardly progress.
            Finally, this economistic view of society results in short termism and lack of a long term view of Nature or Society. However, homo-sapiens have evolved over a billion years and since this Earth can survive for at least another 4 billion years one needs to keep the long term in view. However, the disjuncture between the long run of society and existence and the short termism of individual and society poses a grave danger to existence itself and that is the ultimate in the downside of the current so called `progress’.
Question of globalization as marketization needs to be understood. Its one-way characteristics need to be analysed for what it impact it has on people’s struggles. It also impacts the nature of alternatives that people conceptualize and the limitations it imposes on their imagination. In this context, the definitional issues are critical. They need to be sorted out, otherwise we talk at cross purposes.
II.5      Aspects of Science and Technology
Improvements in S & T are seen as essential to rising prosperity of Man. It is argued that as markets enlarge with rising consumption, they spur technological improvements. Thus a virtuous circle is propounded between prosperity and technology. However, S & T can potentially continue to advance independent of rising consumption – there is no essential relationship between them. Some of the greatest scientific advances took place during periods when consumerism was unknown and markets were entirely limited to the local. There have been periods in which a society has made rapid advances in S & T and the same society in different periods has lagged behind the rest. This is linked to the social structures and creativity of the population which is spurred in certain periods and suppressed in others.
Even if market size is important in some sense, it should not be confused with marketization and the accompanying consumerism. Cheapening of products due to technological advancement may increase affordability and consumption so that the market size appears to be linked to the technological development but the causation maybe opposite to the one suggested by the proponents of  markets. Some technologies show increasing returns to scale. This is a property of the technology and not of the size of the market. Finally it has little to do with marketization.
In India, the recent expansion of the use of cell phones or of air services and the earlier expansion of colour TV has to do with the economies of scale and not the nature of the economic system or the dependence on the market philosophy.
Nano-technology and bio-technology are amongst the most rapidly evolving technologies. Undoubtedly, they have a vast potential but both have come with their own sets of problems for society. Specially, the latter has associated with it the issue of bio ethics. Meaning of life and nature of future men are linked to it. Use of stem cells, cloning, bio engineered foods, etc., are raising issues that we are not able to cope with because we do not have the full understanding of the likely consequences.  We may create new forms of life that may pose a danger to life as it exists and, including to humankind. Potentially this could create a further divide between the haves and the have nots because the new technologies are likely to be quite expensive. The use of the genetic information to type caste people may result in classifications that will have consequence for our view of equity and equality. Possibility of creating unequal people has opened up and this is a deeply disturbing trend (possibilities of Animal Farm kind of divisions are opening up).
Information technology has already demonstrated the pitfalls associated with rapid changes in technology. A deep divide between the haves and the have-nots has opened up and there is talk of the growing digital divide. While many structures of social functioning like banks, insurance, stock markets, are deeply dependent on the use of information technology and computerization, many do not even have access to electricity or to stable supply of electricity. This increases the marginalization of the marginalized. The digital divide as it is referred to is leading to growing disparity in access to knowledge and to the creation of a new form of unskilled labour which is almost non employable. Thus inequity and inequality are getting aggravated and becoming acceptable in society.
The world has witnessed in the last century a rapid technological change the like of which has never been witnessed before. Internet and automation of the kind that exists today was not conceivable even twenty years back. Thus, society is living in a mist where the future is unclear and uncertainty has increased many fold and this is shaping social attitudes. Short termism and narrowing of horizons (both in space and time) follows which makes the emergence of movements difficult if not impossible. People become more atomized.
A bigger question is whether S&T has changed social consciousness in a basic way? Some of the best scientists and technologists have been most right wing and individualistic. Superiority of the white race for genetic reasons, etc., is being propagated by some of the best scientists. Attitudes of scientists are shaped largely by their social milieu rather than the other way round. The narrow specializations inherent in today’s S & T is isolating the scientists and technologists from the social and cultural milieu of society and therefore they have a sanitized view of social processes. Consequently, they have little understanding of issues of equity and equality.  They are affecting society in untold ways but without an understanding of what they are doing. This is a potentially dangerous situation. This is not to argue that the social scientists or those in fine arts have a good appreciation of the Sciences and that too is dangerous.
Presently, technology dominates over Man like never before and in a wide variety of ways is resulting in their atomization. For instance, the way communication technology has progressed, people rather than meeting each other prefer to use its impersonalized forms. Maintaining contact with a large number of people is like not having any depth with anyone. There is little time left for deeper interactions or for reflection. There is overload of information but that does not get transformed to wisdom.
Today, the impact of modern physics and bio-sciences on society is profound. Not only our understanding of life is altering in a fundamental way but of our very existence. We are confronted by the idea that the nature of space-time and existence may impose on us severe limitations in understanding our Universe or Multiverse. We are restricted to four dimensions whereas some argue that there may be many more. Can we ever know the truth?
The social implications of this are deep and may affect religion in a deep way. The problem with religion is its link with power and its consequent deviation from its original conception. It has behaved like other institutions of society and has often been an instrument of furthering inequality and inequity. It has served to perpetuate the rule of those in power and keep the people from revolting. It has created another layer of obfuscation amongst people which is hard to overcome due to the personal faith involved. Hence while at the individual plane it may remain relevant, at the social plane it has often played a negative role. Modern Physics while expanding our horizons about existence is also going to philosophically change our attitudes to life.

II.6      Growing gap in culture. Today, culture has become mass culture. That would have been alright but it is guided by a few very large firms that are in turn guided by commercial interests. This is overwhelming local cultures and they are finding it hard to survive in the competitive climate. Local theatre, music groups, etc., are floundering in the face of advances by the film world and entertainment by TV. The print media is also suffering as a result of the penetration of media into homes and the conversion of large number of people into couch potatoes. There is a tendency for the homogenization of culture and entertainment in apparently diverse fields.
Today, the European film world is a pale shadow of what it was till the Eighties. British, Swedish, French, Italian and Polish film industry has been marginalized by Hollywood and its all pervasive influence. It even dominates the thriving Bollywood which is in any case under the grip of western influences. Use of European locales and marginalization of Indian themes and of the concerns of the marginal sections is very visible. Themes are related to the NRIs and the well-off sections. Dreams are being sold so that the common man has an escape from the drudgery of the day to day life. Of course, there are exceptions (like, Bill Gates or Infosys people) but that is what they are.
What would sell is decided by the interests of the large firms operating in the entertainment industry and they leave little scope for the off-beat and others. Budgets are huge since the technology involved is sophisticated and expensive. To recover the high costs, large markets are needed which are created through high pressured advertising.
The film industry and mass entertainment are linked with creating false dreams and selling them, keeping people from facing reality and reflecting on it. They promote consumerism and at times suggest that cleverness means fooling others – depicting extreme alienation. This is in line with selling what can be sold by whatever means. The industry is also promoting cult of violence in politics and life or justifying and humanizing the mafia (Sarkar, Munna Bhai, Godfather and Don).
Today, it has become acceptable to sell one’s name for a price. Whatever can be commoditized should be and no negative value is seen to be attached to it because the biggest value is money. In contrast, this was alien to the earlier ethos. Certain things were sacrosanct; the things most prized by self and one’s name and fame were certainly in that category. The contrast between Don Bradman’s behaviour and that of Sachin Tendulkar is stark. They are comparable in terms of their achievements in cricket and in terms of their talent but Bradman never used his name to sell anything or run commercial enterprises. Times have changed.
Even what is holy or sacred is not so any more. Like, the Ganga or Godavari being polluted. Everything can be commercially exploited. Thus, there are no fixed points for people to follow. One violation of the earlier code of keeping things private and non-commercialized is followed by the next - nothing is sacrosanct.
The world of business sees an opportunity for itself and propagates more of violation of the current laws. Initiative is associated with creatively bending rules. No remorse or guilt need be associated with one’s actions in earning money. A Bacchan or a Hema Malini or an Aishwariya or a Khan selling things they would not want their children and grand children to consume is acceptable. Social conscience is to be minimized for maximizing one’s gains. What happens to others or to society as a result of one’s actions is immaterial. Money matters and not what social impact it produces.

III.       NATURE OF MOVEMENTS AND STRUGGLES
III.1     Movements and spontaneity.
Do movements occur spontaneously and when and how do they come up? Is there a design behind them or are they created by people? What is the nature of movements? To understand these issues, there is a need for political and historical study.
Clearly, there is no automatic tendency for movements to take place in society. Otherwise change would have been quick and social progress would have been rapid. There is no painless way through which changes comes about. Movements are the result of human and social interventions and perhaps emerge when society faces crisis (see next section) or is in the process of rapid change so that the accepted assumptions get challenged. The role of a strong leader is at times postulated as a pre-requisite to the movements. The process is iterative with change leading to movements which leads to further change.
Movements lead to change in social consciousness and result in basic changes including in its structures and institutions. For instance, the movements for women’s rights has made gender equality acceptable and produced changes in the structure of the family and the nature of work. Civil rights movements have led to basic changes in legislation and the way justice is administered. Anti apartheid movements have changed perceptions about the status of the groups considered racially inferior and anti caste and anti untouchability movements have led to changes in our perception about our position in society and about the work we do.
However, today, in India, there is political competition to capture the space generated by the movements. Political parties tend to coopt the movements for their own narrow ends. Unfortunately, this camouflages the real issues. Mere formalism takes hold and action is slow so that people tend to become cynical and the movement weakens.

III.2     Crisis in society and movements. Their inter-linkage.
It is often argued that crisis in society calls for change to overcome the crisis. This change is what inter links the crisis to the movements. However, no uni-linearity can be postulated. Movements may or may not be successful in leading to the desired change.  History is replete with examples of failures and set backs. Without direction, they may result only in growing cynicism and increase in the crisis in the lives of the people
For instance, today, there is widespread crisis in the lives of the ordinary people due to the civilizational crisis facing society, yet, movements are limited and are having a marginal impact on society. As already discussed, the environmental movement or the women’s movement have had limited success while the crisis in society is deepening. Perhaps this is because the vision encompassing each of the movements is limited and not based on a holistic vision. These movements need to fight together rather than singly to produce the required larger vision. Often, movements are not for basic changes but fight for incremental change with limited gains. This does not result in change in social consciousness at the fundamental level.
For this reason, perhaps there is need to distinguish between a movement and agitation/struggle which fights for limited gains. For instance, communist movement had a integrated vision of society which was radically different from what exists. One cannot talk of agricultural or women’s movement in the same vein. These are best referred to as struggles. In other words, there is a possible hierarchy in movements that we need to analytically recognize.
Practically, in the last century, we have witnessed struggles for women’s rights, for democracy, for ecology, for civil rights, against caste inequality and movements for national freedom, for establishing socialism and communism. There have been religious movements and emergence of fundamentalism.

III.3     Lessons of recent Indian struggles and movements:
Nandigram, SEZs and movements against displacement, like, in Narmada basin point to the many ongoing struggles. Maoist are active in large swaths of the nation. These are fuelled by basic injustice and a lack of responsiveness of the system – of the political process and the failures of the judicial system and its recent turn towards a more right wing framework. Any number of judgments reflect this swing.
There is hope from struggles of the dalits and women. They are leading to a rise in consciousness amongst the marginalized sections of our population. However, often this effect is being undermined by the growing corruption and the decline of the democratic institutions. Parties leading the dalits lack a long term agenda and have not been able to give a social lead. They do not propagate a framework for all oppressed and the leadership has lent itself to easy cooption by the current ruling interests of capitalism. The Bhopal declaration on the Dalit Agenda was only to further the capitalist framework amongst the Dalits and not to promote equity amongst them or in the wider society.
The dalits can legitimately ask, why should they be the vanguard of struggle for equity and not take advantage of what they can get from the system as it is. They suggest that the others, their oppressors, should also feel the pain of marginalization since they have suffered that for long. Hence they feel that the marginalization of the Indian upper caste ruling elite in the world is desirable. They also feel that if the international forces can be used to weaken the local interests that have oppressed them, there is nothing wrong with that. It is a bit like under the British rule when the dalit leaders wanted a separate voice because they felt the upper castes would not give them equality. This was seen as divisive and perhaps that is how the British used it. The vocal dalits perhaps do not recognize that collectively they would be the worst sufferers from such exploitation even if some of them gain. This is the lesson of the British rule in India. As the social conditions deteriorated, the dalits suffered the most. The backward castes also suffered more than the upper castes did.
The dalits have not provided the leadership on the issue of education by asking for compulsory education for all children and for a common school system giving excellent education or for 10% of GDP to be spent on education which is the only solution for a vast majority of the poor, dalits, backward classes and women. They dominate the Parliament and the legislatures but their own consciousness is that of the upper caste legislators. Without good basic education how can their community rise as a whole (Kumar, 2006)?

III.4     Nature of the political process/parties in the Democratic World.
In democracies the will of the people is supposed to be supreme and the political system is supposed to facilitate it. However, the political parties, the instrumentality of the democratic political process, the world over have come to be closely associated with vested interest. In the USA, there are well defined lobbies that are operative in Washington and determine the nature of legislation. For instance, they moved the financial system towards deregulation which has now resulted in the worldwide crisis (Kumar, 2008b).
This has also increasingly been the case in independent India. Role of big money and black money has grown in politics and made the politicians dependent on them and hence willing to do the bidding of the vested interests (Kumar, 1999). One is witness to buying of tickets in parties and seats in upper houses. Genuine representative leaders are few and far in between. They live a life of luxury rather than life of sacrifice as after independence. Today, many of them systematically thwart democracy rather than promoting it.
In India, the vote percentage has remained stagnant or even declined drastically in some states. If rigging and other malpractices are netted out, the vote percentage would be even less. Undoubtedly, people vote and have become more conscious of their power but who do they vote for in the present circumstances. This is aggravated by the decline of the institutions of democracy – legislatures, judiciary, etc.
Consequently, democracy has become formalistic. Parliamentary democracy does not offer a genuine choice to the people. Two party system in the US or UK or the multi-party system in India is not giving people real choices; the choice is between Tweedledee and Tweedledum. Parties are like vote getting machines in India and abroad. Mostly they are not based on ideologies and ideological differences but are variations on a given ruling ideology. No wonder, RSS has said in the Indian context that Congress (I) and the BJP can combine for the sake of national interest. Almost any party or individual can combine with any other to get to power and all in the name of public interest and stability. No wonder, politicians have rapidly lost credibility with the public which has increasingly become apolitical. `Good’ candidates are not available to fight elections because it is seen as a game of power, money and criminals.
In India, all this is illustrated by how the Congress emerged during the national movement and has been shedding different splinters after independence and in an accelerating trend since the Sixties. The Socialists and the Communists have followed a similar pattern of splits. When one finds an SP claiming to be a socialist party and packing its development body with industrialists of all hues or a CPI (M) going against the people of Nandigram in a brutal fashion, one has to ask `What is left of the Left in the formal Left?’
The trade union movement has fractured beyond repair and weakened. Its growth is linked to the association with the ruling parties so they follow a path of economism by delivering on some promises. Each political party sets it up as a front for maintaining a vote bank. When some TU group opposes the policies of the ruling party even that is often linked to the interest of the opposition and not of the workers. Hence the same group may have a different behaviour in different states.
JP movement raised hopes for democratization of the body politic but the Janata experience shattered that hope. In the late Eighties, the emergence of the National Front again gave hope for change but that also came to naught. The creation of coalitions under United Front, NDA and the UPA did not even arouse much hope because people have become cynical. Parties lack accountability to the people since they are seen to be non-responsive to the public. Their manifestos are seen to be meaningless. Prime Minister Morarji is reported to have said that the manifesto is drafted by the party and the government is not bound by it. Nothing could be more damaging to public accountability of the democratic political processes. This is a recipe for domination by the vested interests in the political process and a decline towards anarchy.
The anti-corruption movements initiated by JP in Bihar, the emergence of the Nav Nirman movement in Gujarat or the VP Singh initiated movement in the late Eighties have all been wasted and corruption has only grown. Movements were discredited and cynicism has increased. Corruption has become a discredited issue because the party that comes to power is found by the public to be more corrupt than the party they replace.  
Today there are many small and local struggles but none that command a national following, so that they have not transcended to being movements that can bring about social change. There are many difficulties in this and these need to be understood.

III.5     Difficulty of organizing movements and collective actions.
Society and its institutions are characterized by a narrowing of horizons both in space and time so that holistic perspectives are difficult to build. Individuals have become atomized and social relations have been marketized. Consequently, the social aspects of the individual’s existence have retreated. It is said that the market is `objective’ while the social aspects are `subjective’ hence less important.
This has resulted in the absence of a social understanding based on a holistic vision. The sub division of problems and looking at them market by market adds to this narrowness of the vision. In such a milieu, social groups find it difficult to devise an alternative to the existing which can only be at the grand level. For instance, the farmers or the workers are not able to propose a holistic alternative to what exists and oppresses them.
Struggles do not mature into movements and are unable to gain momentum which is the only source of change of social consciousness. The vested interests are able to claim that `there is no alternative’ (TINA) and claim legitimacy for themselves. This only aggravates the social crisis.
The ruling classes claim that there is no crisis and local problems and deal with them in that fashion. However, crisis manifests itself in the long run and not immediately so one could argue that not recognizing the crisis is not the same as its non-existence; it cannot be wished away. The rulers themselves have been facing growing difficulties at various levels and have not had a peaceful existence, a sign of problems/crisis.
The lack of a global society has also created difficulties in the path of evolving alternatives. Since capital is global there is need for global movements to confront it and its consequences. However, capital has also thwarted the emergence of global movements for obvious reasons. Labour has been kept divided and labour aristocracy has helped in this process. Similarly, on issues like opposition to the Dunkel Draft or on environmental degradation the developing countries have not been able to take a united stand in favour of the marginalized. However, it was perhaps too naïve to expect this to happen given that the rulers in the developing countries are themselves allied to the local elites and do not necessarily represent the interest of their people.
NGOs in various parts of the world have also often served the interest of the vested interests and of the advanced nations. The source of funding is often the big foreign NGOs, industry, governments and so on. Each one of them pushes their own agenda through their funding. This is not to argue that there are no genuine NGOs but to suggest that often they are under suspicion and a part of the growing public cynicism. Finally, they give relief to local populations they work with but do not necessarily politicize them to fight for their rights.
The difficulties arise because capital is far more homogeneous than labour and it is able to define its interests more clearly than the workers. Mobility of capital has added to its clout and the weakening of labour the world over. Capital is able to make various nation states and the states within the nation to fight amongst themselves and thereby extracts concessions. Anyway the rulers belong to the same class or are coopted into it.

IV.       CONCLUSION
The paper argues that societies as they are constituted have moved away from notions of equity and equality. The underlying cause is economic and this is reinforced by various other aspects of social existence – political, cultural, environmental, etc.. It is suggested in this paper that inequity leads to more of it in the present capitalist system and the crisis faced by society in the recent past is linked to it (Kumar, 2008a). The most immediate crisis in the financial sectors and the wider economy is a consequence of this trend (Kumar, 2008b).
Penetration of the economic aspects into all forms of social existence and viewing every aspect of existence in economic terms has created severe problems. Both for society and for creating movements to counter these tendencies. The idea of man as Homo-economicus needs to be challenged. The present crisis of society is linked to this idea which is a narrow one visible in say S&T or culture. Change becomes difficult because it is inter locked into so many aspects of social existence. Any solution to the present problems of society have to be based on a holistic perspective and a long term vision.
People are born with the same social potentiality but it is the societal processes that create differentiation. Society has a civilizing aspect and even if there are natural differences, society can overcome them because of the potentiality of social thought and social organization. Civilized societies protect their weak since they realize the potential of each citizen. Altruism is inherent to people but has got suppressed due to the atomization of the individual and the promotion of the race for personal achievement through competition and unmitigated greed. Today, the best of the youth is being robbed of its formative years and a wider socialization due to the race for material well-being at an early age. Its idealism and energy is being turned into cynicism.
Today, society has lost its innocence and the individuals the emotional depth they had. Anything that the market wishes for is acceptable and technology has become the hand maiden for rising exploitation and achievement of greater material well-being. The economic structures of society that proclaim that the citizen is strong and must be given individual freedom for their own needs undermine the strength of the individual and weaken them through consumerism and advertising.
Alternatives need to be formulated based on society’s own vision of its people. Movements are needed for this so that the social vision and the philosophy changes to non-exploitative forms so that a more humane society emerges. However, the very forces that create the problems in the first place also undermine the struggles and their trajectory to become movements. They also undermine the democratic political processes which could have been the sources of social change.
Only a self-confident global society would be able to overcome its differentiation and move to granting equality to all even if there are natural differences between one and the other.


References:
  1. Alternative Economic Survey Group (Ed.) Alternative Economic Survey, India 2005-06: Disempowering Masses. 2006. Pp. 29-44. N Delhi: Daanish Books. ISBN 81-89654-24-1.
  2. Kumar, A. 1997. Fifty years of freedom from the perspective of the poor. Vidyajyoti. Vol. 61, No. 9. pp. 617-629.
  3. ------------. 1999. The Black Economy in India. N Delhi: Penguin India.
  4. ------------. 2006. Make Reservations Effective to Eliminate Them. Mainstream. June 9-15, 2006. Pp. 4 - 7.
  5. -------- ---. 2007. Macro Overview. Chapter in the Alternative Economic Survey Group (Ed.) 2007. Alternative Economic Survey, India 2006-07: Pampering Corporates, Pauperizing Masses. Pp. 37 – 46. N Delhi: Daanish Books. ISBN–10 978-81-89654-40-5
  6. ------------. 2008a. Faltering National and Global Growth Prospects. Economic and Political Weekly, Vol. 43, No. 28. July 12 – 18.
  7. ------------. 2008b. Global Financial Crisis and Government Intervention: Surplus Generation, Gearing Ratio, Asymmetry of Financial Multiplier and Other Considerations. Forthcoming.
  8. Tresch, R.W. 1981.Public Finance: A Normative Theory. Texas: Business Publications.


Saturday, June 15, 2013

Delhi University and the Crisis in India’s Higher Education

Delhi University and the Crisis in India’s Higher Education
Arun Kumar
Sukhamoy Chakravarty Chair Professor, CESP, SSS, JNU.
EPW Web edition Vol - XLVIII No. 24, June 15, 2013

I.          Introduction
Delhi University has been in the news for introducing the proposed Four Year Undergraduate Programme (FYUP). Many have accused the administration of being autocratic and rushing through with a scheme that is potentially disastrous. The administration claims to have followed procedures - having discussions with the stake holders and getting approval of the University’s Academic bodies. They suggest that the new scheme will change the way undergraduate teaching/learning occurs by providing greater flexibility to the students. The administration brands the opponents as status quoists and shirkers who are afraid of change.
A section of the MPs petitioned the PM and met him. The HRD Minister and his MOS have argued that politicians should not intervene in what is essentially an academic matter. This is a signal to the University administration to go ahead. Five top intellectuals appealed for intervention by the higher authorities to prevent the University administration from pushing its agenda. They characterize non-intervention as abdication of responsibility. Could they not have appealed to the academic body to rise to the occasion?
It is a cause for concern that academic matters rather than being resolved within the University are sought to be settled by calling for outside intervention. The crisis is that those outside who intervene all the time are calling for non-intervention and those who should be demanding autonomy want intervention.

II.        Concerns regarding the proposed FYUP
In principle, a four year (instead of three year) undergraduate programme poses little problem. It is being justified in terms of improved teaching-learning. In the first two years of programme the students are to get a wide background before specializing in the next two years. Nothing wrong if the students get more time to discover their interest. Inter-disciplinarily is to be introduced through allied subjects and `foundation courses’ and this sounds good. However, the problems are with the nature of the proposed courses, operational aspects and the manner of introduction of the programme.
Students joining the programme have already specialized in school and chosen their narrow field - social sciences or sciences and so on - and studied courses only in that area. So, in the FYUP, they will study subjects that they have not had at the secondary level and, therefore, the basic courses for all would have to be pitched at the level of the 9th class. So, the problem of specialization is linked to our secondary education but it is sought to be resolved at the College level.
The deeper problem is how to make courses interesting? Innovative syllabi and teaching would be required. JNU was supposed to be inter-disciplinary. For instance, instead of having geography, there is the Centre for Study of Regional Development. But, after more than 40 years of existence and many attempts to be true to the original mandate, inter-disciplinarily remains a distant goal in JNU. Inter-disciplinarity does not mean combining modules from different subjects or doing a cut and paste job from existing courses. It implies making an interconnected whole.
The manner in which FYUP has been pushed through has antagonized many academics and getting their commitment will be hard. Those who are concerned are protesting and those who are quiet are perhaps indifferent. The supporters of FYUP have drafted the new courses in a matter of months and even days. At JNU to revamp an entire MA course has at times taken ten years (not that it should). When the challenge is inter-disciplinarily and innovativeness, rounds of discussions would be required but some departments have stated that they have been bypassed.
Operational problems with the FYUP will be serious since more teachers and infrastructure would be required. There will be a mismatch between the Delhi University and other institutions of higher education. Since in India credits are not transferable across different institutions, Delhi University students will face problems.
Students who leave after two years would get a diploma which would be little better than a school degree given the nature of the courses taught. If students leave after the third year they would have done very few courses in the subject of their specialization so they would not be equivalent to students of other institutions and they would not be acceptable in the Masters programme of other institutions. If they complete the 4 year programme and decide to go for the Masters programme they would still have to do two years since there is no possibility of transferring credits and they would have just about completed what an undergraduate student from another institution would have done.
Is Delhi University copying the system in the USA? Some argue that Indian students going to study in the USA face difficulties because our system is different. But Indian students have been studying in the US for a long time and have had little problem. The real problem is not a three year undergraduate programme but rote learning and lack of questioning (Richard, 2013).
India as a poor country has to worry about access and equity – more than in the rich nations. Education is crucial for upward mobility for the marginalized sections. Adding one more year of studies to get to a better job will be a disincentive for the deprived. In India there is a huge reserve army of labour so that even for a job of a peon where the minimum requirement is a high school degree invariably undergraduates also apply. The increase in the costs of education due to an extra year will further undermine democratization in higher education which is under attack due to privatization (Chattopadhyay, 2012).
Finally, the real problem in India is with what in the US is called Graduate study. In India, this consists of 2 years of Masters followed by 2 years of M.Phil. and a minimum of 4 years of Ph.D. – in all at least 8 years. In the US the graduate programme is of 4 years after the undergraduate degree. Thus, in the US compared to India, students spend one year more in the undergraduate programme but save 4 years at the graduate level. In India, the M.Phil and Ph.D. are often a parking place for students who are waiting for some other job. It is this that needs urgent reform.
In brief, the wider ramifications of the introduction of the FYUP need analysis. If at all it is to required it should be implemented all over the country. Further, it is desirable that students specialize later rather than earlier but this change needs to start from the schools. We need to decide as a nation when and how to introduce specialization? Finally, reform of graduate studies and manner of learning are more urgent than FYUP. The moot question is how is the Delhi University administration able to push through FYUP in spite of the substantial opposition?

III. Weaknesses of Indian Academia: Eroding of Autonomy
The answer to this question lies in the change in the character of the academic body of Delhi University due to the increasing bureaucratization of the institution. This is a problem common to most institutions of higher education in India.
FYUP has gone through the formal process of approval by the Academic Council (AC), the highest academic body of the University and the Executive Council (EC), the highest decision making body of the University. The question is why did these bodies discount the arguments presented by the opponents of FYUP? The answer lies in the character of the AC and EC in Indian universities.
The AC and the EC consist of the top most academics of the University - the Deans, the department heads, senior professors, outside experts and so on. The senior academics of the university are dependent on the University administration for many things and, therefore, prefer to hold their counsel and mostly take a cue from the VC. Those academics who dare to challenge the VC are branded as trouble maker. Often they face systematic harassment like, delays in project funding or sanction of leave and so on. An example is set to dissuade others from following these independent academics.
The result is the silence of most academics and the dominance of the administration. VCs resist decentralization of power so that they can have a hold on academics. This furthers bureaucratization since no VC can go through all the papers that come to them and, therefore, become dependent on the bureaucrats around them and largely mechanically sign on the note put up by the bureaucrats. No wonder, in academia, often decisions are taken for administrative convenience and not to serve an academic purpose. This is the bureaucratization of academia.
The erosion of autonomy (Kumar, 1987), growing bureaucratization and growing outside interference in the universities in India have gone together. This is at the root of the present crisis in Delhi University. This process has been accelerated by lack of dynamism in academia and the vacation of space for non-academics to intervene. So, currently, politicians, bureaucrats, etc., influence/ determine what happens in the field of education.
In India, politicians like to control institutions and ambitious academics collaborate in this to quickly move up the ladder to gain power. The search committees set up to form the panel for the post of VC largely consist of pliant members who look to the political masters for signals. The letters exchanged between Hill and Bhatnagar in 1952 show (Kumar, 2006) that in independent India VCs have been political appointees.
Such people at the helm who are usually academically weak often depend on bureaucratic structures to force academics to fall in line. Their mind set is such that they would not even consider opposing the impositions of the UGC and the Ministry. For instance, courses and syllabi have been proposed by the UGC and the Universities have meekly accepted them. Centres have been set up for the study of North East, Informal economy and so on. That this duplicates departments of regional studies or economics is immaterial. Soon political correctness would require opening Centres for the study of each of the Indian states.
Schemes have been introduced for improving the admittedly poor standards in most institutions of higher education. In the 1980s, the Academic Staff Colleges were started. Now an index of performance (API) has been initiated to quantitatively measure the performance of academics. It has set into motion a process of weeding out the committed academics in favour of mediocrity and paper chase. Hundreds of journals have sprouted to enable academics to earn points – quality be damned?  The philosophy underlying these changes is that standards can be achieved through standardization (Kumar, 2013).
Is the charge of bureaucratization in academia vacuous? It is argued that most committees suggesting the changes have consisted of academics. But, they are the `favourites’ who are willing to comply with the administration’s wishes. Thus, the Pay Commissions which have suggested many of the steps to improve quality have followed the wishes of the political and administrative masters rather than take an independent line.
Higher education has long term implications. It is crucially about knowledge generation which at the best of times is difficult since it requires questioning and dissent. Academic decisions typically have long term implications but the world is uncertain, so, the likely outcomes of any decision need careful consideration. In the case of FYUP, none of this is being considered. The impression is that the proposed changes are linked to some agenda of the administration and not based on the interest of the institution.
The new programme is not going to be co-terminus with the present administration. It is the faculty that will have to carry it forward but it is being marginalized. What if another administration is convinced that the proposed programme is not good for Delhi University, will the whole process be reversed and at what cost to the students?
Universities cannot function like a bureaucracy or the police where orders are implemented without questioning; compliance is expected and dissent is a malaise – the anti-thesis of what academia needs. In the universities, faculty make their own courses and syllabi. Given the unique thinking of an academic, what she/he wishes to teach tends to be unique. That is why autonomy of the institutions and of the academics is so crucial for advancing knowledge generation. In Delhi University with many colleges all the teachers are involved in syllabus making and that is the way it should be.
Often, indiscipline in institutions of higher learning has been given as an excuse to impose non-academics as their heads and justify intervention. Undoubtedly, indiscipline leads to a deterioration in the quality of education. But, the cause of the indiscipline is often the political interference. Politicians try to control the teachers and the student bodies since they need them for their elections and general support. Political patronage is given to the favourites and appointments manipulated top down. Thus, rather than merit often it is the connections that matter. This emboldens students and teachers who indulge in non-academic pursuits and makes them academically non-accountable. The problem due to outside interference in academia is mistakenly stated to be a problem of indiscipline. So, when a favourite army officer is placed at the helm of an institution, that is hardly the solution since that leads to further erosion of autonomy of academia with consequent problems.

IV.       Conclusion
Delhi University today presents in a distilled form the crisis in higher education in India. All that has been going wrong in academia has come to a head. FYUP will aggravate the problems it is supposed to solve. Delaying specialization till the students have found their interest is good but it has to start in the schools. Today the problem is more with the graduate degrees than with the undergraduate degree and reform is needed to promote questioning.
The events in Delhi University, suggest that the basic weakness of institutions of higher learning is outside interference enabled by weak and pliable academics at the helm who promote bureaucratization and erosion of autonomy in their institutions.
Delhi University teachers are seen as the stumbling block to change for the better and they are being marginalized. Can a perfectly designed FYUP succeed, if a large number of faculty members are demoralized by the autocratic behaviour at the top? Or, is FYUP to be taught mechanically? But then why introduce it at all?

References:
Chattopadhyay, S. 2012. Education and Economics: Disciplinary Evolution and Policy Discourse. N. Delhi: OUP
Kumar, A. 1987. Accountability and Autonomy in Higher Education. Economic & Political Weekly. October 31.
------------. 2013. Indian Economy since Independence: Persisting Colonial Disruption. N Delhi: Vision Books.
Kumar, D. 2006. Science and the Raj: A Study of British India. 2nd Edition. N Delhi: OUP.
Richard, T. 2013. Academic Excellence and St. Stephen’s College: A response. Guest Post in Kafila. April 30.

Friday, May 24, 2013

From Bofors to 2G, the same fate

From Bofors to 2G, the same fate
Arun Kumar
CESP, SSS, JNU.
The Hindu May 24, 2013

The parliamentary committees on the howitzer scam and the stock market scandal protected the powerful and failed to fix accountability. The same is true in the spectrum case


The current political situation brings back memories of 1989. The Prime Minister then was under a cloud in the Bofors scam. Many of his close associates like Lalit Suri and Ajitabh Bachchan were accused of wrong-doing. Today, Prime Minister Manmohan Singh and many around him are under a cloud. The Congress president has been weakened by allegations against her son-in-law. The Joint Parliamentary Committee report on Bofors was rejected by the Opposition. It resigned en masse from Parliament forcing national elections. Presently, the JPC draft report on 2G has been rejected by the entire Opposition.
In 1989, Rajiv Gandhi was protected by the ruling party members in the JPC. The Opposition felt that some key people associated with the Bofors deal were not called to depose or had not been adequately questioned. Now too, A. Raja has not been called to depose, even though he is the key accused in the 2G scam, lest he should implicate the Prime Minister and the Finance Minister.


COALGATE

As in 1989, governance has taken a beating today with the government getting caught in one scam after another. In an attempt to brazen them out, the government is committing mistakes and compounding its problems. The mess created by the former Law Minister vis-à-vis the Central Bureau of Investigation and the Supreme Court, in an attempt to save Dr. Singh (who was also the Coal Minister when the scam took place), has embarrassed the government.
As the Bofors scam unravelled in 1987-88, India’s international standing plummeted. The GATT Uruguay round of negotiations was at a crucial stage with India acting as the leader of developing countries in negotiating with the advanced countries. India’s stand softened perceptibly at that time. Consequently, in 1999, in Seattle, India was not trusted by other developing countries. Today also, India’s stock has declined and its neighbours are taking advantage of the situation.
In 1987, it was the Swedish radio that brought to light the payoffs in the Bofors deal. In Parliament, Rajiv Gandhi denied any wrong-doing. His government argued that Bofors was a good gun but investigators in Sweden revealed that payoffs had been made. The UPA government, too, has denied wrongdoing in the various scams that have come to light and argued that its actions have furthered policy and helped keep prices down. It is the intervention by courts that has led to progress in investigations into scams like the CWG, Hasan Ali case, Liechtenstein disc, 2G and Coalgate.
In the Bofors case, the true beneficiaries could not be identified because of manipulation at the highest levels. This became clear soon enough but the matter was nailed when Madhav Singh Solanki passed on a note to the Swiss Minister — to slow down the case. This led to a furore in Parliament but rather than reveal the content of his note, he preferred to resign. Who sacrifices one’s career unless the stakes are very high? Ottavio Quattrocchi escaped from India and has been repeatedly helped by our agencies (which weakened the case) so that he does not return to India to face trial and questioning.
The Congress has accused the Opposition of playing politics with the Bofors scam saying even when the Opposition was in power, it was not able to unravel the case and find the ultimate recipient of the Bofors money. This is a pointer to how important cases are spoilt so that it becomes difficult even for an Opposition party to solve it when it comes to power. The system works like a mafia — in secrecy and silence. The institutions that should help expose scams are unable to do so because of the silence of those who know. The selection of people for key posts is often based on their pliability. IAS officers like Arun Bhatia or Khemka are marginalised. Some honest individuals who do get to the top typically keep their counsel and avoid ruffling the system much. They become the fig leaf behind which the system can hide its true nature.
In the Coalgate scam, it has emerged that the CBI is not independent of the political authority which it is supposed to investigate. It has now been confirmed that cases against politicians are activated or put on the back burner depending on the needs of the ruling dispensation. It is the Supreme Court that placed the CBI under the Central Vigilance Commission to introduce a degree of autonomy in its functioning. But it has now been proved beyond doubt that the administrative machinery under which the CBI personnel function can twist its arms, undermining its autonomy.
In India, Parliament is the ultimate watchdog to check wrong-doing by the authorities. The increasing number of scams is a testimony to its failure. JPCs are an instrumentality of Parliament and an analysis of their inability to make a dent is a pointer to what is wrong in the system. Their lack of success is due to their inability to pinpoint responsibility in the issues they have investigated, and this is largely due to the partisan attitude of the members of the JPCs. They have acted to protect the powerful. The JPC of 1992 on the stock market scam in which Harshad Mehta was the key player is a case in point.
Mehta played havoc with the financial system, including the RBI. He was the blue-eyed boy of the Finance Ministry at that time. In October 1991, when in spite of the crisis confronting the economy — high inflation, declining growth rate, and the BoP crisis — the stock market kept rising, concerns were raised in Parliament. The then Finance Minister replied that “he would not lose sleep” over the matter. A clear signal to people like Mehta that the government would not check their speculation in the stock market. However, when members of the JPC wanted this to be recorded in the report, the Congress members resisted and the report did not incorporate it. Clearly, accountability could not be established.
The Finance Minister met Mehta a few days before the budget in 1992 and accepted his demand that shares should be exempted from wealth tax. The markets rose sharply on the day of the budget and Mehta made a killing because he had advance information. Mehta was raided by the Income Tax department that day because of the huge amount of funds he had been moving around for some months but the Minister stopped the raid a few hours after it started. So the source of funds could not be traced and the scam could not be prevented. It was never revealed in the JPC who stopped the raid and why, because the officer concerned did not appear before the JPC. Again accountability could not be established.
The Janakiraman Committee report on the scam estimated a loss of Rs.3,128 crore to the public — huge compared to the Bofors scam of Rs. 64 crore. Today, the Coalgate and the 2G scams dwarf all other scams. It is clear that stock market scams have continued because accountability was not fixed in 1993. A large number of people lost their lifetime savings (as in the Saradha chit fund scam). Now again, accountability is not being established in the 2G scam.


ROT RUNS DEEP

Waves of scams have occurred in the stock market. Timber companies, granite companies and dotcom companies were floated only to disappear with the public money. It was estimated that 2,500 companies disappeared in the 1990s, leading to huge losses to the public. No one was prosecuted and that emboldened the scamsters. The collapse of the UTI had much to do with the manipulations in the stock market and the pressures from the Ministry of Finance but no responsibility was fixed. The problem is not peculiar to the Congress. Since 1989, almost all parties have been in power but the system has hardly changed. The rot of unaccountability runs deep and is visible in all institutions, including hospitals and universities where the most literate and conscious population of the country works.
Herein lies the lesson for the nation facing an increasing number of scams and breakdown of systems. Those in power are unaccountable since they operate in a system of silence and surround themselves with sycophants. Since little has been learnt on this score since 1989, the scale of disruption has grown manifold. When will we learn to fix responsibility?

Monday, March 4, 2013

Union Budget 2013-14: Caught Between Various Contradictions

Union Budget 2013-14: Caught Between Various Contradictions
Arun Kumar.
Sukhamoy Chakravarty Chair Professor, CESP, SSS, JNU
Mainstream. March 2, 2013. Vol LI No 11.

The Union Budget is the largest single economic event of the year for the nation. It sets the direction for the economy for the coming year. Hence it is keenly watched by the public. The Union Budget for 2013-14 projects an expenditure of 14.6% of the GDP for that year, i.e., Rs.16,65,297 crore. This is a huge sum of money and as usual the FM doles it out in dribs and drabs to every politically important section of the nation. In the part A of his speech which presents the government’s intentions, he mentions almost all these sections – SC, ST, minorities, women, youth and so on. The impression created is that it takes care of everyone. But the real question is, what does it do for the economy as a whole and whether it tackles the major problems that the economy currently faces?
The Finance Minister at the outset identifies the problem facing the economy – the difficult macroeconomic situation. Three aspects are mentioned. First, the economy is rapidly slowing down with the rate of growth falling quarter by quarter in the last more than a year. Secondly, the rate of inflation remains at a high level in spite of all the attempts by the government and the Reserve Bank. This high rate is persisting over the last three years, especially in food items, in spite of the high foodgrain reserves. Finally, the Current Account Deficit in the external account of the nation is dangerously high.
In addition to this, there were two mutually contradictory constraints on the budget. First, this is possibly the last budget before the next general elections and the party expected it to have a strongly pro-poor image to garner votes in a very bleak political scenario given its severely tarnished image due to scams and mismanagement of the economy. Secondly, the international agencies are watching hawk like the performance of the Indian economy from the point of view of the business climate and especially for international finance capital. They want the government to adopt a conservative political stance. The international credit rating agencies have been threatening to lower the rating of the economy because India’s foreign debt ($ 365 billion in September 2012) has been mounting rapidly given the current account deficit. If that were to happen, then in spite of the current high foreign exchange reserves ($295 billion in January 2013) of the country, capital may begin to flow out and lead to a sharp devaluation of the currency with consequent problems. There has been a rapid slow down in flow of FII and FDI into India.
Thus, the room for maneuver for the Finance Minister to give big ticket concessions to a lot of people (as in the 2008 budget) was limited. Yet, it can be termed as an election year budget given that it has not taken the tough steps required to put the economy back on the rails so that it could grow faster. For India a 5% rate of growth is inadequate in the present development scenario since that results in rising unemployment – a consequence of a high capital intensive development. The concession to elections is that the budget projects many small give aways to many sections of the population without giving away any major amounts to any one which would have dented the macro economic scenario and produced a reaction from the international institution.
Another concession to the international institutions is that the expansionary policies needed to step up growth have been held in abeyance and instead supply side response is sought to be generated via concessions to the corporates and the stock markets. That is why expenditures were severely curtailed in the present year (2012-13) and are sought to be kept in check in the year 2013-14. The attempt is to not increase direct tax collections rapidly and curtail the fiscal deficit but to cut back on expenditures given that the revenues have fallen short with a slowing economy.
In 2012-13, an optimistic nominal rate of growth of the economy (14%) was projected. At that time also the experts had pointed out that a 7.5% rate of real growth was unrealistic but the government was adamant that this rate of growth would be achieved. Now it is clear that the year is ending with a less than 5% rate of growth. What is also clear is that all the agencies predicting the economy’s rate of growth – IMF, RBI, ADB, World Bank, private agencies, etc. - have proved to be wrong. The consequence of this incorrect assumption is clear. Revenues have been less than projected by 7.3%. The government is again doing the same by projecting a rate of growth of 13.4% while this is nowhere in sight unless the rate of inflation rises sharply but that will have other adverse consequences and targets will not be met.
Again due to wrong assumptions, the expenditures in 2012-13 have turned out to be more than projected. The government is forced to show higher expenditures to dress up its image. For instance, 2012-13 is the first year of the 12th Plan and the government wanted to show that it is serious so it projected an increase of 16.8% in the Central Plan outlay over the revised estimates of the previous year.  But from the figures now available it is clear that in 2011-12 it ended up spending (Rs.5,08,596 crore), much less than the revised estimates of that year (Rs.5,58,172 crore). Further the revised estimates of 2012-13 are Rs.5,56,176 crore which is less than the revised estimate of the preceding year. Thus, comparison of revised estimates shows that in 2012-13, there is a decline rather than an increase in plan spending. The actual figure is likely to be even less given the previous year’s experience. Such jugglery with figures seems to be the hallmark of successful Finance Ministers.
A consequence of this kind of creative playing with figures is that the government projects a higher allocation in the Plan for the important ministries like, Agriculture, Rural development, Irrigation and flood control and Tribal Affairs but ends up spending much less. In each of these cases, the revised estimates of expenditures (in 2012-13) are less than the actual spent in 2011-12. There is an absolute decline and not an increase. For other important ministries like, Ministry of Human Resource Development, Ministry of Housing and Urban Poverty Alleviation, Ministry of Women and Child Development and Ministry of Health and Family Welfare the increase in Revised estimates for 2012-13 over the actual of the 2011-12 is hardly enough to compensate for inflation and as such there is little increase in expenditures for these necessities of the common man in real terms.
In his budget speech the Finance Minister now claims that he is increasing allocation to each of these Ministries by substantial amounts (to garner brownie points from the public for the coming elections). What he is showing is that over the much lower revised figures of expenditures in 2012-13 he will increase the allocations substantially in the coming year 2013-14. This is the usual jugglery adopted in the recent past and that is why the budgetary arithmetic turns out to be incorrect.
One of the unintended consequences of all this is that when the revenues of the Centre fall short then the transfers to the states also becomes less since they get 32% of the Central tax collections. The reduction in 2012-13 is Rs.32,000 crore. This makes the position of the states difficult and they also cut back from key social sector expenditures. Since they are the major spenders on the social sectors this worsens the position of the marginalized sections who depend more on the state expenditures. No wonder, we are unable to achieve the target of 6% of expenditures on education and so on. The Financé Minister has also promised to revamp the transfers to the states by changing the criterion and some backward states CMs seem to be happy with this. But unless the pie increases there may be only internal redistribution with some states losing out to others.
The Finance Minister has increased the tax on those earning more than Rs.1 crore per annum (42,800 in number) by 3% by imposing a surcharge of 10% on the tax they pay. This would garner along with other items of increased tax on luxuries about Rs.14,000 crore. But, this section benefits the most from the budget since the tax expenditures (taxes that should have been collected but are not, due to concessions) will rise by Rs.40,000 crore. Thus, the earlier statement by the Finance Minister that the super rich should pay more taxes comes to naught. There is also no increase in either the wealth tax or the estate duty.
To increase the revenue it was important to tackle the black economy and get additional resources but the Finance Minister has done little on this in spite of having received the reports from the three institutes that were charged with the task of analyzing the black economy. The postponement of implementation of GAAR to 2016 is a sop to the corporates and foreign entities. The changes in the secrecy provisions of funds routed through Mauritius and other tax havens were diluted immediately after announcement in the budget because of the reaction in the stock market. All this makes clear that the government is not serious about tackling the black economy. But this one step is the key to tackling inflation, improving governance, increasing the growth rate of the economy and checking the outflow of funds causing the BOP crisis at present.
In brief, the Finance Minister has missed the chance to correct the macro economic imbalance that afflicts the economy according to his own analysis. It is clear that there is much confusion in the Union Budget 2013-14 which has fallen between several stools and will not be able to give a clear direction to the economy apart from not disturbing the corporates and the foreign investors. The Aam Admi, in whose name the Congress (I) asked for vote, is once again marginalized.

      arunkumar1000@hotmail.com

Friday, November 23, 2012

Black Economy in India and Transnational Organized Crime: Undermining Democracy*

Black Economy in India and Transnational Organized Crime: Undermining Democracy*
Arun Kumar
CESP, SSS, JNU[1]. India

1.         Definitions     
Illegality typically leads to the generation of black market profits. The activities associated with it and the profits generated from it constitute the black economy. Hence, the size of a black economy represents the prevalence of illegality in a country. Illegality can be committed either through legal activities or illegal activities. Legal activities are those that are allowed by law (e.g., agriculture, finance, construction) and produce social “goods.” Revenues from these activities are counted as part of the national revenues. The implication is that they improve the welfare of the citizens and make society better.
Illegal activities are not permitted by law (e.g., smuggling, peddling of narcotic drugs, theft) and are said to produce social “bads,” since they degrade the welfare of society, if not also the individuals indulging in these activities. Profits from these activities are not counted in national revenue totals. Such activities are linked to criminal activities of various kinds (see Government of India 2011 for data on crime in India). However, not all crime is linked to generation of profits, for example murder or gender violence. Hence, the black economy will not capture such crimes. Furthermore, crime linked to economic activities that generate profits is often connected with organized crime, whether within countries or across borders – the latter is referred to as transnational organized crime.
The black economy can be understood as broadly reflecting illegality in an economy, even if it does not capture all criminal activities within a society (Kumar 1999). In India, the black economy pervades all sectors of the economy. Elite professions have also been found to be involved, for example businessmen, politicians, bureaucrats, police, legal representatives, medical personnel, chartered accountants, and education professionals, among others.
The size of the black economy has been rising since India’s independence in 1947. It has been estimated to have consecutively increased over the years: it was 4 to 5 percent of GDP in 1955/1956 (Government of India 1956); 7 percent in 1970 (Government of India 1971); 21 percent in 1980/1981 (NIPFP 1985); 40 percent in 1995/1996 (Kumar 1999); per projections by this author, it was 50 percent in 2005/2006. Thus, illegality and crime are constantly on the rise in the country, not only in absolute terms but in relative terms. It has grown from being petty and sporadic to becoming more organized (national and transnational).
Organized crime in India operates within a multitude of areas: illegal forestry and mining; narcotic drugs trafficking; gun-running; human trafficking; sex trade; illicit liquor making and distribution; encroachment of public land; production of spurious medicines and fake goods; adulteration of food items; malpractices in medical profession, including the sale of blood and organs and other malpractices, such as recycling of hospital waste; entertainment and film industry; hawala (an alternative remittance system that operates outside of traditional financing structures); flight of capital; illegal financing of trade; smuggling of goods, including gold and electronic items; and so on. Underlying these illegalities is the “Triad” of the corrupt businessmen, politicians, and the executive, which is made up of the bureaucracy, the police, and the judiciary.
2. Causes, history, and analysis
The black economy and illegality have existed in all societies at some point. In India, it became systematic during World War II, when shortages of essential items became critical. Rationing of food was introduced but there were black market activities to compensate. To escape detection, perpetrators bribed the bureaucracy and the police. Inflation led to increases in the prices of property, meaning that those without property found it difficult to get housing. The government introduced rent control laws, which became a source of corruption in the courts.
The British set up a civil service to administer (keep control of) India. The public servant became the public master with enormous power over the public, and this was used to extract bribes. However, the bulk of the population was poor, self-employed, and worked in agriculture. They had few public dealings, meaning that the level of corruption and the black economy was negligible. The civil service was accountable to the colonial masters. Because they were interested in efficient control of the country, they did not allow corruption to grow. They also paid the civil servants high salaries, as compared to the per capita incomes of locals, and gave them many privileges to lessen the temptation for corruption.
There was a landlord class ruling over the peasantry that extracted rent from the farmers on behalf of the colonial masters. They were a part of the tiny colonial ruling elite and had substantial powers, which were misused to extract money from the people they ruled. They were a law unto themselves and could extract money from the peasantry.
After independence, a political class came to power and replaced the colonial ruling elite. They started the task of development in a very poor country. They depended on the civil service for governing the country and did not transform it into a public service that was accountable to the people. The political class that emerged from the national freedom movement was democratic in its aspirations, but its members came from the country’s elite class and had feudal intentions. They thought of themselves as rulers and not as representatives of the people.
Consequently, independent India started with high aspirations but a weak democracy because the power was transferred from the colonial masters to a relatively unaccountable political class and a civil service that was accountable mostly to itself. As the democratic aspirations of the national movement weakened, the political class became more corrupt. The government of India (1956) talked about the need to keep the black economy in check so that more resources could be raised for development. It found businesses generating profits from black market activities in all sectors of the economy.
The Indian national movement understood that colonial rule was the source both of the poverty and the helplessness of the common man in dealing with their problems of unemployment, illiteracy, and so on. Therefore, it was decided that society as a whole had to overcome these basic problems of the people and the state was given a large role in economic matters. Furthermore, optimal utilization of resources required central planning, which required licensing of capacity in industries. This reinforced the role of the state in the economy.
Due to de-industrialization in India during colonial rule, Indian capitalists were too small to provide capital for the creation of the necessary infrastructure for transportation and power, for example. They lacked the technology and capital to invest in basic goods like metals and petroleum, or in capital goods manufacturing. The corollary was that a large public sector was needed to support both the growth of the private sector and the planning process. This required the mobilization of savings in a country that was poor. Consequently, consumption had to be restrained through taxation and limiting the production and importing of luxury goods. Imports were limited so as to conserve the foreign exchange required to import capital goods for development. A strategy of import substitution was adopted to boost industry and high customs duties were introduced for this purpose.
In 1944, the Indian capitalist class drew up a plan of industrialization in post-independence India that contained the abovementioned elements of policy (Thakurdas 1944). These plans were also incorporated in the industrial policy statements of 1948 and 1956. However, what the capitalists agreed to collectively, they undid through their private actions by fouling up policies through illegality. They cornered licenses by bribing authorities and creating monopolies for economic gain. In the various development activities and projects, corruption was introduced to make extra profits. This was not feasible without the connivance of the politicians and the bureaucracy, who were drawn into corruption. Luxury goods – or those goods that faced high customs duties – were smuggled in.
As India developed, the size of the middle class increased and shortages of basic goods (e.g., food, scooters, cement) or basic services (e.g., telephone and railway reservations) appeared. Queues formed for each of them, and soon thereafter black markets developed. Businesses took advantage of these black markets and corruption spread to the lower levels of society.
Big business in India realized that manipulating policies required close proximity to political power. It started exercising direct control over the political process by financing political parties and individual candidates for legislatures. It also increasingly interfered in appointments at the senior levels of the bureaucracy in key ministries. The Triad proved useful for this purpose and it was mutually convenient for the three arms of the Triad. The businessmen could manipulate policies, whereas the other two could get the help of businessmen to invest their ill-gotten gains.
Another aspect of colonial rule helped to spread corruption – the policy of divide and rule. The end of colonial rule left behind antagonisms and instability in India’s immediate neighborhood, which helped illegality to spread. There have been several wars and  continuing communal tensions with Pakistan; with China, there have been border disputes and strategic conflicts. These realities have fostered terrorist/separatist movements in India’s border states – Kashmir, Punjab, and in the northeast. In turn, they became areas for smuggling, gun-running, counterfeit-currency trading, human trafficking, sex trade, and so on.
India has had historically close relations with Nepal and, therefore, open borders. Large-scale poverty in Nepal and Bangladesh has spurred illegal activities in the border areas. The corrupt monarchy in Nepal and the unstable political climate in Bangladesh led to the spread of large-scale corruption. Ethnic problems emerged in Sri Lanka between the dominant Sinhala community and the Tamils concentrated in the north. The Liberation Tigers of Tamil Eelam emerged to fight a civil war over three decades. To finance its activities, it indulged in a wide array of illegalities. Their links with Tamils in India and across the globe helped in the proliferation of illegalities around the world.
Growing illegality in India was also linked to the oil crisis and the sharp increase in the petro goods prices in the 1970s. The sudden wealth in the oil-exporting countries led to large-scale economic activities there, but India lacked the necessary skilled labor (carpenters, plumbers, drivers, teachers, engineers, doctors), which they imported from South Asia on a large scale. These migrants started sending money back home to their families. This encouraged the spread of hawala internationally because the hawala operators provided cheap services and a premium on the money sent through them. Simultaneously, this service also allowed Indian businesses to send their capital abroad.
In 1991, India changed its policies and made massive concessions to the private sector – whatever it had been demanding in the 1980s was granted. Taxes were reduced, licensing was eliminated, and imports were liberalized, and so on. The role of the public sector and planning was minimized. With the arrival of the WTO in 1995, there was a further opening up of the economy to foreign trade and capital. The amount of illegality grew, and the nature of the black economy changed but it grew as well. As the market economy grew, queues ended but money determined who would get what. Anything could be imported, and the private sector allowed for the production of luxury goods. Thus, shortages of telephones, automobiles, televisions, and so on, disappeared, as did the black markets associated with them.
But, as restraints on business declined with the weakening of the state, business indulged in corruption in an even bigger way. The Triad, already in place, started functioning differently and shared the gains from corruption differently. Many politicians became businessmen – openly or in names of their family members. Businessmen also entered politics in larger numbers. Privatization and the establishment of the infrastructure of the private sector (in public-private partnership mode) offered new opportunities for making illegal gains by cornering resources like land, forests, and mines. Greater participation by the private sector since 1991 in the education and health sectors has created enormous opportunities to indulge in illegalities. The number of scams and the amount of money involved per scam has grown exponentially since the 1990s (Kumar 2012).
In brief, systematic illegality and corruption in the country has its roots in big business and the Triad it created. This has led to the emergence of organized crime in the country. The problems fostered at the borders with neighbors and the hawala links for flight of capital have enabled the linkage between local illegality and transnational crime. Finally, the indiscriminate opening up of the economy in 1991 has led to a further spread of illegality and crime.

3. Forms, cases, and interfaces of Indian illegality
For the black economy to be 50 percent of GDP, as it is currently, it has to be both systematic and systemic. Laws have to be systematically violated so that those in charge of maintaining the law of the land can partake in violations of the law. For certain favors, they will look the other way while businesses commit illegal activities. Take, for instance, the way the police and the judiciary in India function.
Illegalities are to be checked by the police, and the persons committing the illegal action should be brought to justice through the courts. In India, presently there are 40 million cases in the courts and they continue for years or decades (sometimes more than 30 years). The time in prison for many awaiting trial is longer than any sentence they might have to serve if they are convicted for the crimes they were supposed to have committed. Thus, in many jails, there are more people awaiting trial than there are people who have been convicted.
The delays are due to the widespread corruption in the courts and the non-accountability of the judges. Judges postpone hearing cases for frivolous reasons. The legal profession is also interested in such delays, since they collect fees on the basis of the number of appearances in court. Often in routine cases – in which a decision should come in less than a year – cases may drag on for more than five years. This leads to a fivefold increase in the number of cases pending. The pressure on the judges also increases. They may have to go through 50 cases in a six-hour working day, meaning that they have an average of seven minutes per case. Each case may come up for a hearing after a few months, meaning the judge must refresh her memory, thereby taking up precious time and often resulting in mistakes.
To smooth the work in the courts, a bribe might be paid. For instance, a court bailiff may charge a party between INR 1,000 (US$20) to INR 25,000 ($500) for having a property vacated by the losing party. The local police, who are required to accompany the court bailiff, charges separately. For the inspection of files, filing papers, and so on, an off-the-books payment to the clerks may be required. Judges have also been caught letting one of the parties to a case see whether the judgment suits their needs. One cannot publicly talk about these matters due to the fear of being hauled up for “contempt of court.”
The poor are mostly unable to approach the courts for justice, since filing cases is expensive and the laws are so opaque that often the poor who are not very literate do not understand their complexity. Even if they do go to court against a stronger party, the latter is able to bribe their way through the court and delay or subvert justice. Often there is a nexus between the judges and the lawyers. The well-off party hires a lawyer who is able to manipulate the legal system and who can fix a case to appear before a judge of choice. To minimize this kind of manipulation, the judge in a case is often changed. This has created its own problems, sometimes resulting in situations where up to 8 judges hear a case over a two-and-a-half-year period. This means each of the judges is unfamiliar with the case and often postpones the case on frivolous grounds.
Powerful persons in politics, business, organized crime, etc., can get cases against them thrown out by the prosecution. This is done at the initial stage of investigation, whereby crucial evidence is misplaced or not presented carefully so that the case fails in the court. Thus, these people do not even need to use corruption in the courts to obtain favorable decisions. Judges have often commented on the poor preparation of cases by the police. The powerful are known to influence witnesses to change their testimony. Threats – coupled with inordinate delays (the witnesses also forget what they have seen or heard) – lead to the spoiling of cases against the powerful people.
The result is that the members of the Triad have contempt for the law and violate it with impunity. In India, laws on paper differ substantially from how they are implemented due to the judicial delays and manipulations by those in power. For instance, there are laws against child labor, but these are circumvented in large parts of the country, including in the cities. In such violations, the police play an important part.
Illegality flourishes because the police participate in the process. They collect a weekly or monthly sum (hafta) to allow the illegal activities to continue. This money is collected from beggars in the streets, street vendors, encroachers on public land, businessmen, sex workers, car thieves, pick pockets, those doing illegal construction, and any other kind of illegal activity. The post of the head of a police station (called thana) is auctioned. This person sets targets for the collection of money for each of the “beat” constables. The more commercial activity or the higher the level of illegality in the jurisdiction of a police station, the more money collected. The money is then shared right up to the top (political bosses) (Kumar 1999). At every level, half the money collected is kept and the rest is passed on. Since the pyramid narrows steeply, a lot of money goes up to the few at the top.
The hafta from illegal activities is also collected by the local municipal officers and the local politicians. Thus, a substantial part of the earnings of a poor person is siphoned away by these officials and the politicians. The hafta results in linkages between the criminals and the officials. For instance, the pickpocket gets protection from the police and no new pickpocket can encroach on their territory. Organized crime is a party to this payment of hafta and it flourishes because of the official protection it receives.
In India, since land in urban areas is expensive, relative to per capita incomes, a large number of people migrating annually to the cities cannot afford any kind of formal housing. So the migrants either become homeless and sleep under overpasses, bridges, etc.; or they encroach on public land with the consent of the police and local politicians; or they crowd into existing slums, most of which have various degrees of illegality associated with them. Thus, with illegal acquisition of their shelter, they tend to fall into the grip of criminals. Since they need income, the family members at times get into illegal work, like bootlegging, sex trade, and so on. Organized crime gangs use their unstable living conditions and poverty to recruit workers for illegal work.
In private professional educational institutions, students pay for admissions (called capitation fees). In case of medical education, the capitation fee can be up to $100,000. The situation is similar in the case of engineering, management, and other professional courses. These institutions are often run by politicians and businessmen. On the pretext of providing social service, these institutions are allotted land at low prices and granted concessions. The involvement of politicians guarantees quick government approval.
Software- and information-related services have experienced a boom in India since the mid 1990s. These lend themselves to under- and over-invoicing and, therefore, to the flight of capital from the country. During the dot-com boom, many fake companies floated initial public offerings on the stock market and they disappeared with the public’s money. The recent scandal involving Satyam Computer Services* is instructive in learning about the various kinds of illegalities that such software companies can indulge in: under-invoicing; registering in tax havens; creating fictitious employment records; diverting funds to other companies owned by the same owner; funding politicians; buying real estate; and so on.
*Satyam was one of the high-flying software companies of India and an exemplary one, according to the government and the business community. It was controlled by the highly respected Raju family of Andhra Pradesh. In January 2008, Mr. Raju of Satyam, the chairperson, stunned everyone when he admitted to committing massive fraud against the public over the years. Apparently, the company was defrauded of Rs 7,000 crore ($1.5 billion) but the final tally could be larger. The loss to the shareholders and employees was a multiple of this sum.
Mr. Raju claimed that Satyam was operating with margins of 3 to 4 percent, when for comparable software companies, they were in the range of 25 percent. Was Mr. Raju lying under the auspices of telling the truth? The puzzle is that Satyam should have had higher profit margins, but its owner, Mr. Raju, claimed that it had lower margins, thereby willingly implicating himself in fraud. Was he trying to cover up a bigger fraud?
In India, there have been concessions in taxation on profits from exports. So, it may pay to divert profits from a company that is not entitled to tax concessions to another group company that is entitled to tax concessions, and thereby save on tax payments. Mr. Raju was siphoning funds from Satyam to sister companies dealing in real estate.
To take advantage of the provisions for exports, they have to be over-invoiced. Hence, more foreign exchange has to be brought into the country than has been earned. This way, undeclared wealth held outside the country or profits of other companies transferred out of the country through hawala are brought back – that is, reverse hawala.
Satyam tried to buy its sister companies at high and inflated prices. So, its fictitious bank accounts, worth Rs 7,000 crores, would have been drawn down and money transferred to the owners of the sister companies, that is, to themselves, and then there would have been no one to ask where the money went. So, using book transfers, the earlier transferring out of funds would have been covered up and the false entries of the bank balances and fixed deposits reversed/ set right.
Satyam was forced to reverse its decision to buy the sister companies by the investment bankers who approached SEBI (stock exchange regulator) with the story of the non-existent balance in the banks. There was little time to bring back other undeclared funds, and perhaps due to the global crisis of 2008, they became stuck. Since the funds did not exist in the Satyam bank accounts, Mr. Raju had to cover up by saying that the actual profitability of Satyam was lower and that he had been inflating profits for years.
The Satyam affair points to the scheming practices adopted by crooked Indian businesses – siphoning profits, fudging muster rolls, the cozy relations with politicians and bureaucrats, and finally, manipulating bankers, “independent” auditors, and “independent” directors. Mr. Raju’s admission has brought into question the notion of a “respectable” or “honest” businessman.




As already mentioned above, hawala is active in India. It is not regulated by the Central Bank. It is used to transfer funds within the country and outside of it. Since it deals purely in cash, large sums of money are moved from the premises where hawala operates. The police and the intelligence agencies know of these places, but they do not act because of the high-level political protection available to the hawala operators. The top politicians in power also know of them, since they use this channel, but they do not act against these hawala operators either out of self-interest. Thus, what is known privately is not known officially. The hawala channels are used by organized crime units to transfer money around the country and outside of it. Terrorists, drug dealers, and others use these channels because of the anonymity they provide.
In summary, due to existence of the Triad, all kinds of illegal activities and crime flourish in India. The common man is helpless in the face of these powerful people.


4. Global economic flows and routes
Local criminal activities described above have been linked to transnational crimes through terrorism; the printing and circulation of counterfeit currencies; the operation of hawala; the production and distribution of narcotic drugs; arms-trafficking; and the smuggling of electronic items, gold, and gems. As discussed in section II, in all these cases, the neighboring countries – and at times their secret services – are involved. The profits from these activities help finance terrorism and destabilize the nation.
Myanmar was a closed nation till recently and there has been much ethnic conflict. Thus, it was easy to move narcotic drugs through these territories into India’s northeast, where separatist movements were taking place. Similarly, Bangladesh has been another porous border through which human trafficking have been taking place and where terrorist movements have found sanctuary. They also became conduits for organized crime.
Conflict in Afghanistan since the beginning of the 1970s has led to power rivalries. The Western nations armed the Taliban – fundamentalist Muslims – to fight the Soviet forces that entered Afghanistan to help the left-leaning regime that came to power by dethroning the King there. Soon, Afghanistan became the Vietnam of the Soviets and they had to eventually withdraw, leaving the Taliban in charge. But by then, Afghanistan was awash with weapons supplied by the West. Afghanistan was also known for its production of narcotic drugs. When the central power weakened and regional warlords emerged, the Taliban smuggled weapons and narcotic drugs to enrich themselves.
A nexus emerged between the Taliban and the Muslim fundamentalists in Pakistan. This impacted the separatist movement in Kashmir and also became a major source of financing Muslim fundamentalism in India. In the process, India became a route for transnational crime. This was facilitated by a corrupt bureaucracy and the police.
An amnesty was given to smugglers in 1983 so that they could come into the mainstream. But this led to the entry of criminals into politics, or at least their more active participation in politics. Before they had financed politicians but remained largely in the background. The Triad now had criminals in it – either the businessman or the politician in the Triad had criminal backgrounds. As criminals entered the legislatures, the rule of law weakened. They manipulated the police, the bureaucracy, and the judiciary to get favorable decisions and also interfered more blatantly in decision-making.
Smugglers developed links with organized crime abroad to carry on their activities systematically. These links also required them to be in touch with hawala operators, who did not distinguish between clean (but illegal) money and dirty money. So they transferred the money of terrorists just as often as that of businessmen under-invoicing exports. In fact, the gold smugglers often needed foreign currency to buy gold for smuggling into India, and they got it from narcotic drug rings that needed to send funds to finance their activities in India. Thus, many inter-linkages developed.
Smuggling was driven by the chance to make easy money, since custom duties were high for the import of luxury goods, liquor, tobacco products, gold, and gems. It required corrupting the customs officials and the politicians. Airports and ports turned into dens of corruption with all kinds of illegal activities taking place. Very complex importing rules were deliberately set up so that the misclassification of goods and services was possible. The threat of harassment is an important driver for the willingness to bribe the official machinery.
In India, laws on paper differ substantially from the way law is practiced. Being in power implies the ability to offer favors for utilitarian considerations. For instance, traffic rules are violated with impunity, especially by those in power. When the average citizen gets caught, they offer a small bribe to the police to be let off. Hence, traffic on the roads is chaotic. A driving license can be obtained without taking a test. This is symptomatic of all rules and laws in the country. The honest get harassed while the dishonest make money or jump the queues.
It is the Triad that has facilitated systematic illegality in the country and – as it has strengthened over time – it has spread. The individual citizen is not able to resist and is more willing to make bribes and commit illegal acts. The Triad takes advantage of this by pushing for more illegality. In the process, people have moved from collective action to individual action and weakened democracy in the country. With the Triad functioning unhindered, international organized crime gangs have also found it easy to penetrate into India and set up operations.

5. Consequences for victims, outlook and impacts on the rule of law
The consequences of the growing black economy have been that development has been set back due to widespread policy failure. Kumar (2005) shows that the Indian economy has been losing 5 percent rate of growth since the mid 1970s due to the growing black economy. Today, the Indian economy could already have become the second largest economy in the world. Income distribution is highly skewed against the poor, and this is having an adverse social impact. India has the largest number of poor people in the world as well as malnourished children and women, illiterate people, and sick people.
The state is considered to be weak and unable to carry out its mandate. The institutions of democracy (e.g., legislature, judiciary) have been weakened due to all of this and there is a feeling that the nation lacks social justice. Thus, today, every section of society is trying to gain something at the expense of others. This has resulted in massive conflicts in society and often chaotic conditions. The political structures are badly fragmented, whereby there are a few hundred political parties, each jostling for its space and share of power, which is exercised not for the national good but for the section it represents. Thus, faith in the nation has weakened.
The poor face a criminal environment and live insecure lives. Their children often engage in various kinds of illegal activities and get into drugs, smoking, and other addictive behaviors. Women engage in other kinds of illegal activities and have to bear a double burden of taking care of the home as well as working outside.
Black economies lead to both higher costs of production with lower quality and to environmental damage. Thus, the rate of inflation is higher than it need be and health costs rise due to increased levels of diseases and low capacities to fight them. Corruption in the medical profession adds to health costs, and as a result, the poor often fall below the poverty line when treating a major illness in the family.
Tackling the black economy is the key to making a dent in crime, whether national or transnational. Since India’s independence, dozens of committees and commissions have looked at the problem of the black economy (and its various aspects) in the country. They have made thousands of suggestions and hundreds have been implemented: reducing tax rates; reducing controls and regulations; demonetization of high denomination currency; voluntary disclosure schemes; bearer bond schemes; acquisition of undervalued property; and so on. There are already enough laws to check corruption; the problem is that they are not implemented. Intelligence about organized crime exists, but no action is taken since top businessmen and politicians are involved. So the problem is not a technical one, and the size of the black economy has increased in spite of the steps taken to check its growth. The issue is one of political will, which is non-existent.
It is crucial to have political movements that would strengthen democracy and bring about accountability among the members of the Triad. Movements on the right to information, judicial accountability, the right to education, the right to food, and the right to housing are all needed to strengthen democracy and bring about accountability in the political process. Movements centered around these issues have been created in the last two decades, and they may eventually change things for the better.

References
Government of India. 2011. Crime in India 2010. Ministry of Home Affairs, National Crime Records Bureau.
Government of India. 1971. Direct taxes enquiry report. Chairperson: Wanchoo.
Government of India. 1956. Direct tax reform: Report of a survey. Chairperson: Kaldor.
Kumar, A. 1999. The black economy in India. New Delhi: Penguin.
———. 2005. India’s Black Economy: The Macroeconomic Implications. South Asia: Journal of South Asian Studies. Vol. 28, No.2. August 2005. Pp 249-263.
———. 2012. Indian economy since independence: Tracing the dynamics of colonial disruption in society. Forthcoming.
NIPFP (National Institute of Public Finance and Policy). 1985. Aspects of black economy in India. New Delhi: NIPFP.
Thakurdas, P. 1944. A plan of economic development for India. Bombay: The Commercial Printing Press.



* This paper is based on the author’s two books, The Black Economy in India (1999/2002) and Indian Economy since Independence: Tracing the Dynamics of Colonial Disruption in Society (2010)’.
[1] CESP – Centre for economic Studies and Planning, SSS – Studies of Social Systems, JNU – Jawaharlal Nehru University