Trapped by Propaganda
Philosophy of Poverty
Poverty has been reduced
to a great extent and that pov
erty is no longer a problem! This claim is substantiated daily by the official press and other publicity media with apparently factual corroborative documents and figures that are taken as unquestionable truth and then reproduced for further work. Repeated propaganda in favor of the ruling cliques without any substantive opposition has led to a strange tendency among the poor to believe that poverty elsewhere must have been eradicated and that there is a way out of poverty about which they are in the dark and that some assistance from the local or remote government bodies or from a suitable parliamentary party can possibly raise them above poverty in which they are at present languishing. The tools that the authorities use to establish their point of view are increments in number in the data related to national income and economic growth rate, in both absolute and percentage terms. For example, in 1950-51, the year that marks the beginning of planning in India, the National Income (Nl) stood at Rs 8574 crore and planned development had raised the figure to Rs 615273 crore in 1993-94 representing a 72-fold increase. During the same period the Per Capita Income (PCI) at current prices increased from Rs 239 to Rs 6929 which is a great leap of 28.99 or 29 times. This statement is based on official figures. Yet another aspect of the story is that since the Second 5-Year Plan, the era of inflation began. It was slow initially but gathered momentum subsequently to galloping speed from which there is no respite yet.
Correcting the above-mentioned data by the inflation rate during the period mentioned above, India's National Income (Nl) has increased by 5 times ( not 72 times) and Per Capita Income (PCI) has actuaily increased by same absolute amount, that is, by 100% (not 29 times). Between 1993-94 and 2011-12, there has been no abating of the pain of inflation. Economic Survey 2011-12 states that GDP at current market prices in 2006-07 equals to Rs 4294706 crore showing a growth rate of 16.3% over the previous year when translated to factor cost at 2004-05 prices gets reduced to Rs 3564364 crore representing 9.6% growth rate. This disparity in Nl and growth rate figures is drawn by changing the base for calculation from current to factor price of the base year for a short interval of two fiscal years. For a long period, the discrepancy will be much higher. Therefore, correcting the highly hyperbolic statements and inflated figures by the truth value of 5/72 or 0.0694, one can see through the cloak of untruth that these official publicity materials cover up and thus tentatively arrive at the terra firma of the state of the economy—not a bed of roses but one of thorns.
Statistics is a science based on numbers and statisticians cannot function without supply of new numbers. And the Government is considered the repository of new numbers. Other agencies, local, national or international, depend on numbers supplied by the Government. The faulty data supplied by the Government are at the root of unreliability of the conclusions based on them. All these create a paradoxical situation-one cannot spurn the data altogether but has to work with a grain of salt. In the present case under review, for example, National Income (Nl) and Per Capita Income (PCI) figures are unreliable mostly due to vigorously sustained and accelerated inflation such that a statistician cannot find a year suitable for consideration as the ideal base year. All the base years betray rising price levels such that inflation is multiplied on inflation making subsequent data on Nl and PCI unreliable. Under the circumstances the percolation of income theory on which the experts and apologists of success of poverty eradication build their stories cannot stand the rigorous test.
The theory of percolation of income is simple. It states that since there is increase of income and production going on at the national level for such a long period, the fruits thereof must have been percolated down to the poor just as water percolates through a sieve. One must say that this is not a law of nature and that although a flow, income like water does not trickle down automatically under any law of economics as that of gravity in nature. On the other hand every student of economics knows that inflation benefits only the rich vis-a-vis the poor, accentuates concentration of wealth and acts as a barrage preventing the flow of income from flowing down income pyramid towards the poor. Continuous and galloping nature of inflation in India during the whole period following the Second 5-Year Plan up to present time enriched only the wealthy and has led to world's highest concentration of wealth in India. No measure at the disposal of the market economy can redistribute wealth and income favoring the poor. Yet this wealth is generated by the huge investment made possible by the abstinence and self denial of the vast masses of India —the poor and working class. These are the people whose blood and sweat has erected the foundation of a robust industrial economy. But income has not percolated to the poor.
Prior to liberalization the approach to development was through internal generation and utilization of resources for the purpose of development. Initially India's investments were made by India's internal savings pool contributed by the vast masses of poor and fixed income group of middle class Indians. External assistance at Government to Government level as well as at the Government to international finance institutions level bound by strings of conditionality was also added to the national investible pool. Such conditional aids were accepted as part of the planning model taking into consideration India's technological backwardness and paucity of investible fund. No doubt the progress was slow and had difficulties. But under the aegis of the present ruling class Indian economy veered away from the secure path of self sufficiency and self sustained growth due to mismanagement emanating from corruption at high places. A large part of the income generated was allowed to turn into black money, another part through fraudulent trade practices hidden in nameless foreign bank accounts, still another part just evaporated from the books of account enhancing the wealth of the ruling political class in the same proportion.
Themselves being the beneficiaries, the ruling circles, instead of clearing the Augean stable through vigorous Herculean means, opted for the easiest of ways of selling whatever wealth the working people of India had worked up. Instead of allowing the expert managerial and technocratic class to function independently towards making every unit in the public sector viable by generating surplus, the ruling parties, since early 1970s deliberately indulged, aided and abetted mismanagement making the PSUs (public sector units) sick and recurrently loss making. Crying hoarse of loss to the exchequer, the ruling elite then opted for distress sale of PSUs that once commanded great heights in the economy. Finally they chalked out a policy of surrendering those vital units to private corporate bodies.
Any corporate house whether Indian or foreign or multinational can now buy bulk or controlling shares of the PSUs on sale. How is it that the Indian corporate tycoons who so long were shy of venturing risk capital on these fields of heavy industry are now coming forward in hoardes to take over the reins of the units that the Indian PSU technocrats had failed to deliver? The clue to the answer to this riddle will be found in the fact that MNCs and Flls extended helping hands to the Indian business community in every conceivable way—by extending finance capital, latest technology, and then opening up the export market. Foreign Direct Investment (FDI), Foreign Institutional Investment (Fll), transnational risk capital and high technology are now embedded in Indian industries as well as in stock, commodity and metal exchanges. For the purpose of making the operations in these exchanges safe and secure many watchdogs are working full time to enforce transparency in dealings. Small investors taken into the fold are also getting some benefits from transparent trade practices in these exchanges.
Special Economic Zones, Foreign Direct Investment in retail business, opening up of the Capital Market for speculation by foreign financial intermediaries operating from overseas hubs through the Internet - to name only a few - have now made India a safe destination for investment, a euphemism for plunder and ruination of India's economic resources. All these and many more pass for the current accelerated economic activity leading to development and growth. Since the MNCs or their agents are now operating directly from their offices in India, a higher and more intense and at the same time more transparent levels of activities have been enforced. A variety of secondary and tertiary economic activities like construction, infrastructure, power, sourcing and mining of metals, communication, information technology, electronic and print media etc. are emerging at a rapid pace. A new set of workforce on hire and fire terms of employment is fast emerging which being largely white color in nature and upwardly mobile and adjusted to the hire and fire regime are working hard to make the foreign capital financed enterprises generate surplus value and repatriate funds overseas after paying dividends to shareholders. These employees work in an environment of wage slavery yet are satisfied that the overall wage rate is much higher than that in PSUs and other government or government-aided services. This upwardly mobile class is the fast growing consumer class in India. Modern services like car loan, housing loan with the facilities of affordable repayments through EMIs online have been extended to them as well as to others in the upper sector salaried income bracket. Occupants of new urban centers with visibly higher standards of living are now emerging. That indeed is the bright side. The vast masses of evicted, who were suddenly unsettled in their age old settlements, then ousted and forced to vacate their own habitats and avocations and simply crowded out to no wherewithal, turned into developmental refugees floating to nowhere, simple folk, illiterate and extremely poor, are the bigger black squares in this odd chessboard of growth and prosperity.
The darker side of this so-called scenario of development and growth can be gauged by observing the balance of payments aspect of India's external trade. Since the beginning of the planning era India's balance of trade never showed surplus. That is to say, India imported more than exported in value terms for a pretty long period. Till the onset of liberalization India's imports were largely on capital goods account. It was held that employment of those capital goods would not only lay the foundation of a robust industrial economy but also in future yield far greater wealth which, after squaring up the past backlog of trade deficits would pave the way for an egalitarian society in India. Imports bills mounted every year leaving exports far behind creating a mess, a huge burden of debt on the side of external trade from which India has so far not recovered. India is and will remain perpetually a debtor country. The people of India bore all sufferings believing that present distress will be compensated by future returns from the investments created by their sweat and blood. The stage of self sustained growth would at last be dawned!
The persons in power not only deceived the nation by allowing the gains from international trade to be siphoned to nameless private accounts in foreign banks, but also in the end played false by opting to dismantle and privatize the great structure of the PSUs that were built by the above-mentioned sufferings of the people of India. In an effort to outwit the common folk as well as to circumvent and steal a march on their previous assurances, the ruling elite always cites the argument of foreign exchange reserve at the disposal of the Reserve Bank of India (RBI). In short, it is held by them that whereas the foreign exchange reserve was null or negative in the pre-liberalization era, it is now overflowing with funds and this is a precious gain in as much as it gives the managers of the economy the advantage of leverage, of adjustment with volatile external economic environments. But the truth is that this foreign exchange reserve is a slush of foreign funds made up of Flls, FDIs etc. which are highly mobile and will stay as long as these are guaranteed comparative advantages, that is, as long as the rulers of India serve the interests of international finance capital even at the expense of the interests of the people of India.
One stock argument that the ruling circles extend is that China's communist rulers are doing the same and that too more vigorously. But the present leaders of the CPC (Communist Party of China) are not following the socialist path, they are staunch and at the same time ruthless capitalist roaders. They genuflected before the might of the imperial finance capital, abandoned the socialist path, allowed Special Economic Zones to be set up and function uninhibited, exploiting cheap labor without trade union rights for long hours squeezing them dry and then exporting the produce, thus earning huge surplus value quickly. Limited to Guangdong province initially, foreign finance capital has now swept almost the whole of China. The sole difference between China and India lies in the nature of utilization of the valuable foreign exchange, especially the US$ in the two countries. Whereas Indian rulers indulged, aided and abetted leakage in foreign exchange earnings, the Chinese rulers not only did not allow such pilferage of national wealth but also scrupulously saved and invested the precious earnings from international trade in the Gilt-edged securities in European and US bond markets as a matter of government policy. This at the current period gives China some amount of counter balancing power to neutralize the West's design of spoiling the gains of trade overseas. But the people of China remain stricken with extreme poverty.
Initially the rulers of China used to deny emphatically the existence of poverty in their country saying that poverty is a term relative to richness and that since there are no rich landlord and bourgeois classes in China and distribution of income is more or less egalitarian and accumulation of wealth is done solely by the State, there is no question of rich and poor divide. But the opening up of the economy by the capitalist roaders saw through the myth and deception of so-called socialistic distribution of income. There are now scores of billionaires and tycoons emerging in China. Distribution of income and wealth held privately is extremely skewed in favor of the party functionaries, bureaucrats and the rich. Consequently, the Chinese people in general are languishing in extreme poverty. There is no denying it. Now the Chinese have resort to fudging. Not accepting the World Bank-IMF benchmark of USS 1.25 per head per day for extremely poor and US$ 2.00 per head per day for the poor, set as per minimum requirement of calorie intake by individuals worldwide, the Chinese authorities claim that the calorie value of food intake alone should not be the appropriate indicator of poverty. Housing, clothing, compulsory free primary education and some other provisions for relief against distress should be taken into account. Setting arbitrary cost towards these services provided by the government, the Chinese authorities lowered the poverty line to a great extent and then claimed to have lifted 662 million people above the poverty line through opening up of the economy. Taking the cue from the Chinese, the Indian rulers now claim that taking into consideration government expenses on account of subsidies and reliefs, on various extension and poverty eradication programs, on rural housing programs for the poor, mid-day meals program in primary schools, etc. the poverty line should be drawn at Rs 32.00 per head per day for urban poor and at Rs 26.00 per head per day for rural poor. On the basis of this benchmark, Indian poverty count has dropped to 29.8% in 2009-10, lifting 354 million people out of poverty and leaving only 350 million out of 1.31 billion inside the poverty trap. But Rs 32/- is far below the WB-IMF benchmark for extremely poor.
However the self trumpeting is being carried on to confuse the people. Bringing in the names of scholars who prescribe alternative computing methodology for hiding the fudge, the government and the planning commission are claiming success on the poverty eradication front. The point they are missing is that US$ 1.25 (currently $ 1= Rs 56.00) per head per day, that is its equivalent Rs 70.00, is the minimum amount of money that the government and the planning body should aim to ensure for each family. Even then those families having Rs 70/- per head per day will be considered 'extremely poor'. The families taking home Rs 112.00 per head per day are considered stuck in the poverty line, in the Indian context, the 'per-head-per-day' (phpd) band of take-home money between Rs 112/- and Rs 70/- is the thick poverty line. It is incumbent on the government and the planning commission to manage the economy in such a way as to see that, 1) families do not fall below the Rs 70/- 'phpd' benchmark and 2) families trapped within the poverty band should be raised above the Rs 112/- per head per day. On this count nearly 85% of the population in both India and China are below the poverty line. The governments of both the countries are wasting energies to hide the truth that they have failed on the most vital aspect of macroeconomics-distribution of income to ensure that the fruits of growth and prosperity reach the bottom of the income pyramid. Not the number of billionaires, their conspicuous consumption, etc. nor even the allowances, perks and Z-category security cover for elected members of parliament and ministers are the indicators of growth and prosperity. The ruling plutocracy saps the vitals of the economy by denying the poor of their legitimate claim on the fruits of accelerated economic activities.
Vol. 45, No. 14 - 17, Oct 14 - Nov 10 2012
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