Prof. Arindam Chaudhuri
Hony. Dean, Centre For Economic Research and Advanced Studies, IIPM -
United States’ finely tuned images of ‘land of opportunity’, ‘land of the free’ and ‘home of the brave’ – all have in recent time received a major jolt with protestors pouring in from all over the country in thousands. It is probably the biggest protest since anti-Vietnam-war demonstrations in the 70s! Finally their police are finding it tough to control their own people. This time they are failing to smoke them out, because the enemy lies in every other house. I wrote about the coming end of capitalism – the way we know it – in 2008 itself as an aftermath of the latest recession that has hit the world due to its blind belief in free market profiteering and was surprised why (despite people around the world, from countries in the Middle East to a laid back country like India, showing a tendency to come out on the streets to press for their rights) people in the western world were delaying coming out in the streets to press for what was their right – the right to stable and dignified living. But finally the streets in the western world are slowly starting to look like streets of Egypt, with thousands out on the streets, protesting against the shameless profiteering of the Wall Street – the symbol of capitalism at its greediest best. It is a movement of the working class – which forms overwhelming majority of the American population – being deprived, ignored and cheated by the greedy corporations, which forms the top one per cent of the population. The growing protests that have spread its tentacles all across the nation indicate a serious problem in the financial districts of the American cities. The conservatism that has put unchecked and deep crony capitalism to almost heavenly pedestal is the root cause for such economic injustice, which has literally forced thousands to come out on the streets to protest. No wonder, the gradual transition of American capitalism to crony capitalism is a result of inherent shortcomings that the financial system and capitalism on the whole has been experiencing since decades.
For the last 30 years, the United States is suffering from erosion of jobs and corporate big shots renouncing the values and spirit that once made America as great as it is perceived today because of short term profits – a classic case of uncontrolled deregulation practised in this crony capitalist system. This system has made a class of minuscule super rich even richer, driven by the Wall Street, but has marginalised the vast majority who faced the albatross of dead end jobs, lay-offs, lack of future and other destruction of the very tenets of any functional democracy!
One of the reasons that led to this out-cry is irresponsible lending by the banks and very high consumer debt. It has eroded the purchasing power of the common man. Lack of consumer demand is halting new investments and preventing new job creation. Obama’s steps to steer the economy to safer ground – mortgage refinancing, healthcare overhaul, student’s loan minimisation programmes – have not seen any breakthrough so far. The reasons are Republican’s opposition and consequent blocking of government’s intervention in the economy.
The Gini coefficient (that measures the income divide in a country) of the US is at par with that of undeveloped countries of Africa like Uganda. In 2010, the top 20 per cent of all Americans owned 49.4 per cent of the nation’s income. The top one per cent of all Americans owned 40 per cent of the total wealth of the US and 24 per cent of all income – most importantly an increase by 31 per cent in the last four decades. Moreover, in these four decades the income of wealthy Americans have increased by 300 per cent while that of middle class has increased by merely 20 per cent and that of lower strata by merely five per cent – thus increasing the Gini coefficient from 39.7 in 1967 to 46.0 in 2005. A report by IMF titled ‘Leveraging Inequality’ published back in December 2010 concluded that ‘long periods of unequal incomes spur borrowing from the rich, increasing the risk of major economic crises’ in the way it did during the Great Depression of 1929 and the Great Recession of 2007. This income gap kept many poor Americans away from schools and proper medical facilities, eventually affecting their productivity and income per se. The executives at the Wall Street enjoyed hefty pay packages and impressive compensation while others had to struggle for a decent salary. Studies show that in 2004 the top 25 highest paid hedge fund managers on Wall Street collectively earned more than the combined income of all of the CEOs from the top 500 large-cap American companies. The employment rate still lingers around 9.1 per cent with 4.5 million people still unemployed, which is at a historically high!
More than 6,000 protestors gathered on October 15, 2011 at Times Square and around 100 were arrested after the protest went violent. The protests have just been gathering steam. Chicago police also arrested more than 150 protestors. Similar phenomena was seen in London too and the police had to debar people from entering Paternoster Square (London Stock Exchange). The protests have crossed the domestic borders and reached almost all the continents of the world. Recently protestors were found displaying their anger outside Reserve Bank of Australia. Similarly, protest rallies have graduated into violent riots in Rome and other European nations and more than 100 protestors were arrested. People also got violent in Japan, Hong Kong and Korea.
The fact that these incidents (and specially Republican’s opposition to federal government’s attempts to fix the economy) elevated the problem and went beyond control is testimony to the fact that people all across the capitalist world had to resort to violent mass protests, shaking the very foundation of untenured capitalism all across the world. This movement reminds me of the great civil rights movement that took place during late 1960s and also of the recent Tunisia revolution. The only thing it lacks is a philosophical or ideological leader leading it, though the sales of Karl Marx's Das Kapital have surged worldwide.
The growing divide between the rich and the poor had already increased in the gap in service delivery mechanism. America – not only for the sake of America but for the entire world – needs to scrutinise the deceiving practices and lobbying happening on the Wall Street and the very basic tenet of greed that drives capitalism. Bail out is no solution. Bailing out corporations who have created this unprecedented financial divide should have been penalised in the first place. It is reported that the total bailout till date has been almost 150 per cent of America’s GDP, which is bereft of any kind of economic rationality. At the same time, ceiling on compensation and focus on other strata of society is also an immediate imperative. Capitalism needs to question and seriously rethink if unhindered profit making and the sole focus of survival of the fittest can take it any further in this age of excessive availability of information flow and social activism where the majority and its voice are becoming harder to ignore with every passing day. It's not that only Egypt and Tunisia are under threat. Every nation which is doing injustice with its people is facing threat. And while the atrocities of Middle East countries have been in-your-face, the exploitation in the name of freedom and democracy practised by the Americans is also being finally exposed. Dictatorship not only exists in China or Middle East, in the US the totalitarian corporate dictatorship takes place under the garb of freedom of speech. And it is being finally questioned and exposed... Not by a few intellectuals – who in the past have been instantly condemned by the capitalist owned media as Marxist dogmatists – but by thousands on the streets now. I refuse to believe that this is going to die down without bringing an end to capitalism, the way we have known it over the last century and more.
So one might wonder then, what does the future of capitalism look like?
I have always believed that driving an organisation by looking only into profits is like driving a car by looking only into the rear view mirror: it tells you about the road you have been through but not about the road ahead. Today’s entrepreneurs, leaders and businessmen need to look beyond personal short run profit if they have to take this world forward. The future lies in what I call belief in the faith called 'survival of the weakest' (as Dr Malay Chaudhuri and I outlined in our book The Great Indian Dream), as against the current faith in 'survival of the fittest'. For long economists have been blindly following Darwin’s theory of 'Survival of the Fittest' as the maxim for the functioning of the capitalist economy. That is the root cause of all problems. The problem is they forget that the whole purpose of functioning of an economy is to move towards a more civilised form of existence. Civilisation has seen man moving out of the jungle and reach where he is today. But sadly he has not been able to discard the rules of existence that he used to follow in the jungles. Capitalism from the very beginning has been based on the principle of individualism and 'survival of the fittest'. When Adam Smith talked about man being rational and therefore trying to maximise his returns if left free in the market... he had also referred to the same principle. The rules of the capitalist market always wanted us to compete with others and maximise our benefits (read as profits). The critics point out the fact that when left free in a market, an individual’s return is not only a function of his competence and efforts (in terms of the number of hours he puts in) but also a function of his past accumulated wealth (on which he might have had no contribution). In a jungle, the “fittest” refers to the strongest, or the one who can best adjust to the existing environment; in an economy, the “fittest” would refer to the richest. Therefore, we see that the market economy has always helped the rich to grow richer at the cost of the others and that is the key problem with capitalism, which is forcing people to come out on the streets today.
I don’t want to question the contribution of capitalism in making this world a better place to live in. What I want to say is that after so many years of growth and development, which has seen capitalism reach its materialistic peak, enjoy the comforts which at one point of time would have sounded unrealistic, why doesn’t this system focus on the crucial aspect of ever widening gap between the rich and the poor. Today, when the rich already have five cars, can’t they stop for a while till the others (globally) at least come up to a situation where they don’t die of hunger, before they decide to buy their sixth car? Men are born equal. If given the same opportunities in regard to health and education, their capacity to contribute would become nearly equal; the only difference being in terms of intelligence or combination of genes that they possess. It is the society that we have created where these opportunities are not equally distributed/guaranteed, thereby leading to a difference between people. Today when some of us have reached high standards of living, it is the right time to bring out some humanitarian aspects to the society we live in. Is it not true that in a family that might have a physically challenged individual, the maximum resources and comforts are directed towards that person? If such a family were to have the budget for just one air-conditioner, wouldn’t it be most likely that the air-conditioner is put in the room of such a challenged individual? Or is it that the family – believing that the physically challenged person can’t contribute – stops giving food and other such basic necessities to the person? If the former option is what a family is most likely to do, then what does it point to? “Survival of the fittest” or “survival of the weakest”?
When an economy reaches a stage where the fittest can manage to live well even if their standard of living doesn’t grow rapidly, it is the duty of that economy to put its resources on the weakest and their survival. In our respective families, we all believe in communism; that is, to each according to his need. But when it comes to the nation, we want to follow just the opposite. By this I am not insisting on all economies to turn communist; but I am expecting them to incorporate this most human and natural rule of family existence in their nations, while they continue to operate in a free market. Influential writer and management consultant Peter Drucker once wrote that the Americans are already spending 23 hours on an average on social work every week. It's time for them to lead the way in the introduction of the concept of 'survival of the weakest' in the society for their own survival and for the survival of capitalism on the whole. If we need a more peaceful, humane and equal world, 'survival of the fittest' should no more be a concept of any importance in today’s world. And only that can make capitalism survive against this growing difference that is certainly here to stay and gather more and more dissent.
The strengthening of the weaker sections of the society and bringing them to mainstream and guaranteeing them respectable living is the need of the day and it need not be at the cost of the stronger or the richer. The maximum that can happen is that the rich people would grow at a slower pace and their capacity to grow at a faster rate would be transferred to the poor and get reflected in their future. This contribution from the richer sections of the society is something that the world would be proud of.
It should not be just at national level but also at the international level. The stronger nations of the world should start supporting the weaker nations in a genuine manner. But it has to be unlike what they do today, wherein, after such a lot of haggling, a majority of these nations have declined to contribute even two per cent of their cross border revenues for the development for the third world countries. The whole of Latin America and Africa combined doesn’t have a single permanent member on the Security Council; India with a population of almost one billion too does not enjoy the privilege. The obdurate veto system along with the abuse of the Security Council by the powerful nations is exalting a new colonialism within the UN. The UN was formed at the end of a monstrous war that had claimed some 10 million lives. Today, more than twice the number of people killed during the Second World War die of hunger and curable diseases; all this while the United Nations brags of bringing peace to the world. The rich countries enjoy a life expectancy of around 80 years while the poor countries hardly have a life expectancy of around 45 years. This is what survival of the fittest has achieved and the reason I repeat why people are now finally coming out on the streets in the nations of material plenty as well as protesting against it. The question is very clear, don't the people born in the poorer families and poorer countries have a right to live beyond the age of 45? These billions of lives are being brought to an end by the rich countries for the sake of a few additional comforts to their already existing ones. How long should we wait for the carnage to stop?
The protests against the Wall Street have huge lessons for India as well. If people can come out on the streets in the West, where the poorest have access to heated homes and cars, then it's just a matter of time that the majority in India, the weakest and poorest also come out. Our leaders have betrayed the nation and sucked it dry.
India is ranked 119th out of 169 countries in the world in the Human Development Index for 2010. Today, around 37 per cent of the Indian population is living below the poverty line as per the Tendulkar Committee Report in 2010. Recently, in 2004-05, the government estimated that 25.7 per cent of the population (and not 37 per cent) was living below the poverty line. The Director of the UN Research Institute for Social Development, Thandika Mkandawire, commented that the Indian data (with respect to poverty estimates) is “always controversial”. As it's known, the poverty line in India was recently defined at Rs 32 per person per day for urban areas and Rs 26 per person per day for rural areas. Only Indian politicians and economists with all their insincerity have the ability of calling this a poverty line. This should be called the destitution line. According to the government, earning Rs 960 per head per month is enough to be above the poverty line in urban India! No wonder that in the red light district of Mumbai, Kamathipura, women are bonded into prostitution because years ago their grandparents took loans ranging from Rs 12 to Rs 50! Today, we contribute 1.32 per cent to the world’s total exports (WTO figures for 2009). Compare it with China, which contributes 9.6 per cent. Their percentage might still seem low because of their phenomenally competitive prices. But to realise the Chinese impact, one has to just visit the shops in Europe and the US and pick up any product – from the cheapest of utility items to the costliest of designer goods – to discover that they are all ‘Made in China’. India alone accounts for around 35.5 per cent of the total adult illiterate population of the world (283.1 million illiterate adults in 2010); yet, we are excited about being the country with the most qualified and educated human resource. In India, we have one Indian doctor per 2,400 Indians but we have one Indian doctor serving every 1,325 Americans in the US.
Today, 40 per cent of Mumbai is a slum and 35 per cent of Delhi defecates in the open. Only 232 towns in India have a working sewer system and that too partially including Delhi. Around five lakh people still carry human excreta on their heads everyday. India ranks 67 on the Global Hunger Index 2010 by the International Food Policy Research Institute (IFPRI) and is home to 42 per cent of the world’s underweight children under the age of five (Nepal, Pakistan, Sri Lanka are better, and so are Sudan, Lesotho, Uzbekistan and Rwanda). We created such a lot of noise when just about 50 people died of plague because the richer segments of our economy were also under danger. But when around 3,70,000 people die every year of tuberculosis and nearly half a million people suffer from diarrhoea everyday, no one raises a whisper. China has around 60 per cent of arable land compared to India. Their annual food production at the same time is 550 million tonnes (2011 projections) as against the 241.56 million tonnes that we produce (RBI, FY 2010-11).
We still see leaders in India, who just talk or play the unending blame game, a corporate world which still cannot go beyond seeking concessions from the government, an NGO sector which has become an industry in itself and also the rest of us, who have little choice but to watch helplessly, waiting for crusaders like Anna Hazare to come along. With a crippling lack of leadership at the government level in the country and oceans of sufferings around us, one often wonders if India truly is a democracy, when people don’t have basic right to food, drinking water, health, sanitation – in short, the right to a life of dignity, or in most cases, the right to life itself; and I wonder how long will it be before people in India are also out on the streets demanding for the right to dignity and not just Lokpal Bill.
Contrast this with neighbouring country China (where the capitalists have been waiting for a mass movement to start for years), where things happen through massive top down planning from the government at the Centre. The growth in China has also succeeded in rapidly lifting people out of poverty. UNDP data states that incidence of rural poverty went down in China from 30.7 per cent in 1978 to just 1.6 per cent in 2007. Clearly, this makes it not only a country which has taken far better care of the poorest of poor, but even a far more strong market for business as compared to India – precisely the reason why despite its so called dictatorial regime, people are relatively happier with the governance since they can see things positively changing around them all the time and the government taking care of its people.
Countries, corporations and people around the world need to realise that in the interest of the weakest lies their interest. No amount of management and marketing techniques can enable corporations to have a more than 10 to 15 per cent growth in their market even in growing economies – but the market can be expanded by more than 1000 per cent in countries like India, Africa and Latin America by increasing the purchasing power of the people. Then, for example, for a country like India, instead of the middle class consisting of approximate 100 million, it would become more than 500 million. This common sense economics should be clear to everybody. In the long run the success of companies primarily depends upon how vast is the market that the economy has been able to give them and how much is the purchasing power of the people in the country they wish to sell their goods. With 'survival of the weakest' as the maxim, its capitalism that will win finally, the people at the bottom level would get more purchasing power along with better health and education facilities, which would not only make a huge difference in the quality of human capital but would also satisfy the most important criteria for the growth of corporate sector world wide. That is they would become a part of the consuming market. So, not only for the sake of humanity but also for the sake of their own long run interests, industrialists should support policies which benefit the weaker sections of the society and which contribute towards this strata’s uplifting.
It’s high time we redefine the basic rules of the capitalist economy and business leadership; and it is time for us to become better global citizens with a bigger heart for those marginalised by the society; and this is possible by following 'survival of the weakest' as the guiding principle of existence, for only then we will see peace in the world. Till then, long live the 'Occupy Wall Street' protests. May it gather more and more steam and finish capitalism – the way it is practised today, in all its greed.
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