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Two Competing Models in the Global Economy

Dr. Susmit Kumar, Ph.D.

The two tables and six charts shown below prove which economic model India should follow, either:

  • The US economic model that lost millions of jobs related to:
    – a decrease of nearly 35% (from 14.2% in 2000 to 9.3% in 2008) of the world export market in just eight years (thereafter it is hovering around 9%), and also
    – the goods for its own consumption corresponding to record increase in trade deficit since mid 1990s (as shown in Chart 1), or
  • The Chinese, 3.7% in 2000 to 8.4% in 2008, a 127% increase, and the German which has kept a steady percentage despite the rise of the global Chinese workshop.

One point worth noting is that the US economy was in severe recession at the onset of economic crisis in 2008 whereas both China and Germany did not have a similar issue. Even a high school student will tell you not to ask US economists for advice but instead adopt a combination of the German and Chinese economic models.

Despite the historic loss of millions of middle class jobs during 2000 to 2008 and job losses related to the record increase in its trade deficit in this period, the US economy kept on booming firstly due to the tech stock bubble and then the real estate price bubble. When the real estate bubble burst in 2008, the Bush administration (and later the Obama administration) had to spend trillions of dollars to prop-up banking and real estate sectors. During the early 1990s and 2000s US economic recessions, the Fed could counter the recession by lowering interest rates, as shown in Chart 6. But the same treatment by the Fed is not working now despite the interest rate having been kept to a historic zero level since the 2008 Great Recession. The reason for its failing is that this time banks are not finding enough people, with good credit rating (as they do not have good paying jobs), to provide loans to. The US economy has a deadly cancer (massive loss of good paying jobs) whereas the zero interest rate is just a pain-killer. The low interest rate is not the cure this time.

The US is a bankrupt country surviving by printing its currency, which happens to be the global currency (read my article The US Dollar – A Ponzi Scheme). The only attacking weapon in the arsenal of the US economists appears to be to increase share prices. At the onset of the 2008 recession, the economies of the East European countries were on the verge of collapse. In an October 2008 speech, Romanian President Traian Basescu pinned the blame on “corrupt” outsiders. He said, “There were smart guys coming to Romania, who had studied at Harvard and Oxford, and they invented how to increase the value of one’s shares without actually having money.” (Craig Whitlock, “Financial Crisis Leaves Romania Reeling,” Washington Post, November 5, 2008.) His statement describes in brief the Reaganomics, the current fundamentals of the US economics. Wall Street has created and sold the US to its Frankenstein China.

Dr Manmohan Singh (previous Prime Minister of India) is credited world-wide for the 1991 economic liberalization of India. Actually, he was forced to do so under the IMF dictates when India had to airlift 67 tons of gold to London to get a loan from IMF to overcome FOREX crisis. I give a “Fail” grade to Dr Singh for his work. Both China and India started their new phase of economic liberalization at the same time, in the early 1990s, but China is now the global economic leader whereas India is nowhere. Yes, the growth rate of India in last couple of years is the highest in the world but it is vulnerable to economic collapse, due to an economic crisis as a result of generating trade deficits year on year. For 15 years out of the 25 years since economic liberalization, Dr Singh was at the helm of the government to steer the Indian economy: first five years as Finance Minister and then ten years as Prime Minister for two terms. People blame high crude oil prices for the economic crisis during 2011-13, a time when economists were writing obituaries of the Indian economy (read: "None of the experts saw India's debt bubble coming. Sound familiar?", The Guardian, UK, August 26, 2013; "‘Fragile Five’ Is the Latest Club of Emerging Nations in Turmoil", New York Times, January 28, 2014), but blame “lies” on Dr. Manmohan Singh who did little to try to turn perennial trade deficits into trade surpluses. Due to the record trade deficit during 2011-13, the exchange rate of India’s rupee (vis-à-vis the US dollar) tumbled from 44.17 in April 2011 to 62.92 in September 2013. One point worth noting is that Russia and China were not included in the new club of “Fragile Five”. Both Russia and China have been running trade surpluses since the early 2000s. Had high crude oil price persisted for a couple of more years, it was certain that India would have had to go to the IMF to take loan, which would have destroyed the Indian economy for next decade or longer, due to the IMF’s bitter medicine of getting rid of subsidies to balance the budget, significant increase in the interest rate, and selling the crown public sectors to Wall Street bankers at throwaway prices.

Table 1 World Export Market Shares of Goods and Services 2000-2008:
(Data source: World Economic Outlook which is published twice a year by IMF):

Table 2 World Export Market Shares of Goods and Services 1970-1999:

Chart 1 US Monthly Balance of Trade (1975-2017):

    

Chart 2 US Share of World Exports:
(Source: “Why Is the U.S. Share of World Merchandise Exports Shrinking?,” Benjamin R. Mandel, Current Issues in Economics and Finance (Federal Reserve Bank of New York), Volume 18, Number 1, 2012,
accessed at: https://pdfs.semanticscholar.org/a7e5/df2ffaa6e85d45856f7f0a98f048286c543c.pdf)

Chart 3 US Trade Deficit with Various Countries (in USD billions):

Chart 4 The 20 Countriers with the Highest Trade Surplus in 2015 (in USD billions) :
(source: https://www.statista.com/statistics/256642/the-20-countries-with-the-highest-trade-surplus/)

Chart 5 Largest Trade deficit by Country (in USD billions):
(source: http://www.worldsrichestcountries.com/trade-deficits-by-country.html)

Chart 6 US Fed Rate:
(Source: http://www.macrotrends.net/2015/fed-funds-rate-historical-chart)

Is “Make In India” Theme Helping Indian Economy? – Part II

By Susmit Kumar, PhD
susmitk@hotmail.com

Please click here for its Part I: Is "Make In India" Theme Helping Indian Economy? – Part I

As shown in Charts 1 to 9 below, India’s foreign trade is following in the footsteps of that of the US, a bankrupt country surviving on printing its currency which happens to be the global currency. As explained in Part I of this article series, before even thinking to become a super-power, a country needs to generate a trade surplus, which the US did for more than 30-35 years after World War II, China since early 2000s (Chart 6, 7 and 8), and both Japan (Chart 4) and Germany (Chart 5) in recent decades. The last two countries are economic super-powers but are too small to be military super-powers.

As explained in my article The US Dollar – A Ponzi Scheme, during World War II, US enticed all other countries by claiming that it would keep its dollar pegged to gold at the rate of $35 for one ounce of gold. (Please read my article “Chinese yuan replacing US dollar as global currency: A not so distant prospect” for how the US Dollar became the Global Currency due to the 1944 Bretton Woods Accord). The US asked other countries to use the US dollar as reserve currency and also for conducting transactions between countries. This resulted in the 1944 Bretton Woods Accord, signed by 44 countries. As per the agreement, you could have asked the US govt to give you one ounce of gold for $35. As shown in Charts 2 and 3, the US had trade surplus from the end of World War II till early 1970s, but since it has had trade deficit year after year. The reason for it is that Nixon de-linked the dollar from gold in 1971, after which the US has just continued to print dollars to fund its trade and budget deficits. This has been going on since the Reagan administration. Had the dollar not been the global currency, there would not have been “Reaganomics”, the much-revered economic theory of the Republican party. According to economist Allan H. Meltzer at Carnegie Mellon University, “We [United States] get cheap goods in exchange for pieces of paper, which we can print at a great rate.” (“U.S. Trade Deficit Hangs In a Delicate Imbalance,” Paul Blustein, Washington Post, November 19, 2015).

Unlike the 2003 Iraq War, for which the U.S. has had to bear all costs, the U.S. made money out of the first Gulf War in 1991, though its allies lost money. Out of about $61 billion cost for the 1991 war, $32 billion was paid by Kuwait, Saudi Arabia, and other Gulf States, and Germany and Japan paid $16 billion. Because of this, the U.S. balance of payments immediately after the war was positive, a very rare occurrence nowadays since it has happened only once in the last 35 years. Apart from these payments, Saudi Arabia and other Gulf countries bought more than $400 billion worth of arms and ammunition from Western countries, mainly from the U.S., over the next decade. This helped in jumpstarting the sluggish U.S. economy, which was facing recession during the last years of the Bush Sr. administration. Following that, it was the information technology revolution that stimulated the economy. The advent of information technology, including the Internet, as well as soaring stock prices and housing markets, which gave consumers extra money to spend (two-thirds of the GDP depends on consumer spending), helped the Clinton administration balance the federal budget and helped state governments increase their revenue beginning in the mid-1990s.

There were two turning points for China. In 1994, China devalued its currency by 34% which caused an increase in its trade surplus at the expense of the then East Asian Miracles countries like Thailand, Indonesia, South Korea and Malaysia, leading to the collapse of their economies in 1997. Again after joining World Trade Organization (WTO) in December 2001, China undersold other countries, increasing its balance of trade year on year. China imports minerals from all over the world, converts them to manufacturing items and sells them to entire world at cut-throat price. China has been under-cutting other countries by selling products below their production costs. But Chinese rulers are not fools who would sustain prolonged losses in selling “Made in China” products at below production costs. As discussed in my article, “The Hidden Cost of Imported Items and The Need to Redefine Modi Administration’s “Make in India” Policy” (read: “The Hidden Cost of Imported Items and The Need to Redefine Modi Administration’s “Make in India” Policy”, Susmit Kumar, January 7, 2017),  a sticker price of 100 rupee “Made in China” may in fact  cost 200 rupee to Indians. If a person in India purchases a "Made in China" commodity instead of "Made-in-India" commodity, then India loses not only a factory job but also indirectly associated jobs such as in schools, hospitals, and auto sector. Instead his purchase of the imported commodity creates such lost jobs in China.

Although India is a member of WTO since its inception on January 1, 1995, it has trade deficit year after year. When the United Progressive Alliance (UPA), led by the Congress Party, took over the reins in 2004, progressive deterioration in trade deficit ensued till 2013. In 2008, crude oil price went up to $140 a barrel, but did not remain this high long enough to damage India's economy. In mid-2008, we got the Great Recession in US which led to the collapse of the price of crude oil. But when it again went up during 2011-13, it damaged the Indian economy and rupee significantly. In 2013, some economists were even started writing the obituary of the Indian economy. Prime Minister Modi is fortunate that he took over the reins in 2014 when the crude oil price went down and not earlier.

At the onset of the 2008 recession, the economies of the East European countries were on the verge of collapse. In an October 2008 speech, Romanian President Traian Basescu pinned the blame on “corrupt” outsiders. He said, “There were smart guys coming to Romania, who had studied at Harvard and Oxford, and they invented how to increase the value of one’s shares without actually having money.” (Craig Whitlock, “Financial Crisis Leaves Romania Reeling,” Washington Post, November 5, 2008.) His statement describes in brief the Reaganomics, the current fundamentals of the US economics. Wall Street has created and sold the US to its Frankenstein China. Until the start of the 2008 economic downturn, Wall Street hedge funds were creating havoc in Third World countries, for instance the 1994 Mexican peso crisis and the 1997 East Asian Economic crisis. Now they are doing the same in the United States and the European Union.

During the 2008 Global Great Recession, the unemployment in Germany was in single digit only, unlike the nearly double-digit unemployment in United States and other EU countries, and the lowest any time after the unification. During the 2008 recession, the German government offered money to firms to retain workers and cut working hours instead of producing layoffs. Hence, Germany came out of recession early. Its manufacturing sector still contributes about 25 percent of its GDP as compared to only 11 percent in the case of the United States. German corporate boards have generally equal numbers of management persons and workers, and hence the future of a firm is decided by stakeholders instead of shareholders. For this very reason Germany is still the world’s second-largest exporter and has not faced the same severe crisis that countries such as the United States and other Western nations have been facing due to emergence of the global Chinese workshop.

The sudden collapse of the Soviet Union is a warning to India. Despite being a military super-power, with significant number of aircraft carriers, submarines, military aircrafts and tanks, second only to the US, the Soviet Union collapsed due to the paucity of some tens of billions of dollars. As explained in my article Communism Collapsed Due to Collapse in Oil Price in Late 1980’s and German Banks – Not Due to Reagan, the Soviet Union collapsed because it could not get external funding for modernizing its economy under Mikhail Gorbachev’s Perestroika and Glasnost policy. There was drastic reduction is price of crude oil, the main Soviet export, during late 1980s and early 1990s after the end of Iraq-Iran War (1980-88). Crude oil price dropped from an average of $78.2 a barrel in 1981 to as low as $7 a barrel one time. These two factors led to a rise in Soviet external debt. In 1985, Soviet oil earnings and net debt were $22 billion and $18 billion, respectively, whereas these numbers in 1989 were $13 billion and $44 billion, respectively. By 1991, when external debt was $57 billion, creditors, many of them major German banks, stopped making loans and instead started demanding repayments, contributing to the collapse of the Soviet economy (Jeffrey Sachs, The End Of Poverty, The Penguin Press, New York, 2005, p. 132.). Because of lack of hard currency Russia's shelves were empty of bread. In 1984-85, the USSR imported 55.5 million tonnes of both wheat and coarse grain, a record for a single country to take in one year. Beginning with the 1972-73 crop season, the Soviet Union imported more wheat than any nation had ever done. It is an irony that today Russia is the number one exporter of wheat in the world.

Had oil prices increased, like it did during early Putin administration (2000s) or had German banks financed Gorbachev’s Perestroika and Glasnost like Japan and China financed US debts since 1980s, the USSR and communism would not have collapsed in 1991. 

Unlike the Soviet Union, the US has been getting external funds from Japan during 1980s and 1990s, and thereafter from China, in form of treasury bond investment as well as foreign investments in its private sectors and other government bonds, like Fannie Mae and Freddie Mac bonds. Till last year, both Japan and China had more than $1 trillion US Treasury Bonds, each. Even countries like India and Russia had significant amount of their FOREX invested in the US financial system.

As explained in Part I, the “Make-in-India” policy of the Modi government has no significant positive bearing on the trade deficit. India should stop listening to the US educated economists and MBAs because their brains are poisoned by massive propaganda of the Reaganomics by the Republican Party in US. Reaganomics is reduction of taxes and the promotion of unrestricted free-market activity. As explained above, had the US Dollar not been the global currency, there would not have been “Reaganomics”. In order to achieve trade deficit, the Modi administration needs to come up with a way to incorporate the German and Chinese industrial policies.

Unless India makes a change in its policy to become self-sufficient in consumer items, which it is importing right now, it will be always in danger of going into the emergency ward of the IMF which would nothing but set back the Indian economy for couple of decades. Without becoming self-sufficient in consumer items, India has no hope of becoming a super-power.

Chart 1. India Monthly Balance of Trade (1995-2017):


Chart 2. US Monthly Balance of Trade (1950-75):


Chart 3. US Monthly Balance of Trade (1975-2017):


Chart 4. Japan Monthly Balance of Trade (1980-2017):


Chart 5. Germany Monthly Balance of Trade (1950-2017):


Chart 6. China Monthly Balance of Trade (1984-2017):


Chart 7. China Monthly Balance of Trade (1995-2017):


Chart 8. China Yearly Balance of Trade (2004-2015) :
(source: https://www.statista.com/statistics/263632/trade-balance-of-china/)

Dignified Socio-economies Both Closed and Open

By Trond Øverland

Keywords: Protectionism, free trade, national capitalism, Prout.

Whenever someone mentions "the economy", many of us actually think of "our society and its economy". It is hard for most people to separate "economy" from "society". We often hear about fluctuating interest rates, unemployment figures, retail prices, and stock exchange markets, but all the while we wonder how such developments might impact us and our families, society and peace.

"Socio-economy too is a
collective expression of humanity"

Among all living beings, humans in particular seem to have clear ideas about progress. We aspire to be something much more than just a cog in a wheel; a piece in a financial puzzle and a figure in someone's Excel sheet. We feel deeply that our society isn't just meant to be an economic machine. First things first then: Actually what is a society?

Societies obviously consist of living beings. Still, for a group of people to qualify as a society they require something other than just being many in number. Societies of monkeys, thieves, and of human beings all have their particular features and qualities, a sort of purpose and dynamism that make them come alive in their own way as a society. 

Take the example of passengers on a metro train. When boarding the train, all we may see is a collection of random individuals seemingly unrelated and socially quite inactive. Whereas if the train comes to an unexpected long stop in an awkward place, or an accident takes place inside the carriage, those previously apparently unrelated individuals would suddenly start to interact. Personalities, groups, etc. will come into play and a kind of society will manifest among them. Some passengers will proceed to form parties and opinions: A few will take the lead, others will follow, one or two will want to be daring, others cautious, some will argue, others will be commenting bystanders, some will try to get a more comfortable place, etc.

Still, the orderly passengers we saw when we first boarded the train also formed a society even when all they did was quietly reaching their respective destinations together. After all they were not that passive but had already paid their fares in order to form a society of passengers on their journey.

Historians label societies. For instance, our present society and times are said to be characterized by rapid technological advancement, ruthless economic competition, the emancipation of women, ecological awakening, cynicism, and a great many other things. Past societies and times have been labelled as matriarchal, patriarchal, monarchic, dark ages, enlightenment, industrial, modern, post-modern, etc. Such labels intend to convey something about the ways and customs of those societies. The long string of these labels may lead us to conclude that:

  1. We the members of society love to define collective and individual potentiality, perhaps as a way for us to better know and become ourselves.
  2. Societies frequently move from one such label to another, indicating that we have it in us to change our ways fundamentally (having to do with our evolved basis), and even rudimentally (having to do with our existential roots), in order to realize fresh potentiality. 

Socio-economics, more than just economics

All living beings are born into some society or the other. Like ants in an anthill, for instance. Society is where we humans grow up to fulfil our instincts, interests, and dreams. Society is our playground, school, university, and workplace — our common home and world.

In society we realize ourselves individually and collectively. As collectives societies exhibit particular properties of life in their own collective ways. Collective sentiments of anxiety, safety, sorrow, joy, depression, hopefulness and bliss, indifference, compassion, passivity, participation, possessiveness, generosity, animosity, friendliness, revenge, forgiveness and grace, etc. are among the chief momenta we see reflected in the behaviour, traditions, and laws of societies. 

Naturally, features expressed most clearly by a majority of the members of a society will typify that society. Coming back to our original subject, which is socio-economy, purely economic factors, such as investment, financial returns, and profits, are far from common to most humans but found to be dominant only among a small minority consisting of traders and others intimately connected with economics. On the other hand, the general goals and values of society — survival, security, belonging, togetherness, creativity, cultural growth, civilizational refinement, spirituell emancipation, etc. — are universal and the domain of all. It follows that society is something more than economic affairs, and that economy should be subordinate to society.

Socio-economy of individuals and groups

We have now established that, like any other dimension of human society, socio-economy too is a collective expression of humanity. One feature of socio-economics is its need for both closedness and openness in order to function properly. In human terms we may say we need a certain degree of privacy and stable personal circumstances in order to strengthen our self-reliance, while at the same time we need to develop social skills and ability to engage and participate. It follows that the closedness of a society maintains its rudimentary existence and basic identity, while its openness generates further development and integration beyond its indigenous limitations into a larger world and universal spirit.

“Countries with closed economies are entirely self-sufficient and neither export nor import goods. …
In an open economy, the country willingly trades outside of its borders, including both imports and exports…”2

Closed socio-economy

A society's first priority is the security of its members. From a security point of view, basic necessities should be produced domestically. Not only should crucial commodities be home-grown, they should also be tax-free (according to Prout1 regular domestic taxes should not be levied at the consumption stage in the form of income tax and VAT but at the starting point of production).

This is a main aspect of the closedness of a Proutistic socio-economic system: A strong foundation of basic self-sufficiency. If such self-reliance is not established, efforts should be continued until basic self-reliance is achieved.

"Socio-economic dignity starts
with basic security and rights."

Here the term closedness is not used as in "a closed society" or "closed economy". Psychology has taught us that abused people need to learn to set boundaries for others so that their life of abuse ends. This has to be done without becoming isolationalist, self-centered, or abusive oneself. In the same way, societies, too, need to exercise a certain autonomous control in order to recover their sense of dignity. When one is vulnerable to the control of others, one has been deprived fundamentally of their dignity and becomes a victim. Such abused socio-economies may be termed as vulnerable or victimised socio-economies. A properly developed socio-economy is self-reliant open to dignified interaction. Socio-economic dignity starts with basic security and rights.

Another aspect of Prout's dignified socio-economics is its emphasis on mother tongue and local culture. The propounder of Prout, Shrii Prabhat Rainjan Sarkar, noted: "The psychology of suppression undermines the progress of a country. People will eventually revolt against it and restore unity. The sentiments of people cannot be forcibly suppressed for a long time. Human beings best express themselves through their mother tongue. If people’s mother tongue is suppressed, it is equivalent to strangling them. The suppression of people’s mother tongue is a sin."3 And, "According to the policy of PROUT, besides the mother tongue, students can also learn as many languages as possible. Let people know as many languages as they can. Still, in the practical field—government and non-government work and court work—the mother tongue should be used."43

Open socio-economy

No matter how much we human beings value our security and cherish the soil, stones, grass, plants, trees, mountains and coastlines of the country of our birth, we still dream of a greater world beyond. Human history abounds with tales of exploration of the unknown. And of great migrations. And these days, airports all over the world require constant expansion and upgrading, while on the Internet we may find and study in depth … 

Crude and subtle indications abound of our universal craving for the unknown: The science of ecology tells us that all of us as well as each and everything are interconnected, while the science of spirituality prods us still further on in this respect. As each one of us awaken once again to these old truths it becomes evident that we clearly want to find the link between that which is already known to us and that which is still not.

Our common need for basic security coupled with the innate human longing for further exploration present us with an apparent socio-economic riddle: No security-conscious society can afford to leave its basic necessities to chance or to foreign powers naturlly concerned first and foremost with their own local interests. On the other hand, we cannot and do not wish to remain in isolation.

Prout's solution to this historical conundrum is balanced dynamic development. Another term for it would be movement towards synthesis. Faced with society's basic need to be socio-economically self-reliant, Prout balances the closed dimension with being open to global trading and bartering of semi-essential and non-essential commodities, and promoting free trading and bartering of overproduction (more on this free trade model below). Cultural exchange and cultivation of a general non-dogmatic spiritual outlook and its practice throughout the educational system completes this approach to synthesis.

Socio-economics is not an isolated field of human activity — all kinds of human acitvity are mutually related. Prout therefore invites further interaction and syntheses between various countries and regions for improved security and further progress. For instance in the form of common environmental planning and projects; implementation of universal legal values; human, animal and plants rights; united military strength, etc. For the smooth running of such global dynamics, Prout suggests the establishment of a world government based on a world constitution.5

Earlier in this short essay, society was defined in a general way illustrated by a few examples. Particularly on the socio-economic point, Prout defines societies as people with same economic problems; uniform economic potentialities; ethnic similarities; sentimental legacy including language, historical traditions, literature, common usages and cultural expressions; and similar geographical features such as topography, river systems, rainfall and irrigation water.

"A healthy socio-economy is both closed and open, serving a conglomerate of human beings, animals and plants in a dignified way."

With a proper closed-open balance such dignified societies will continue to grow both their own independent core as well as their ability to reach out and interact. In the process, adjacent societies will increasingly find that they share socio-economic characteristics and challenges with their neighbours. Naturally, Prout suggests the merger of properly self-reliant, mature, well-matched units into greater and still greater units—until the entire World is established as one smoothly functioning dignified socio-economic unit.

Protectionism and free trade

A healthy socio-economy is both closed and open, serving a conglomerate of human beings, animals and plants in a dignified way. It is firmly secured at its core and outwardly participatory. As such, societies can deal and adjust with constant changes in both domestic and external circumstances.

Coming back to the economy again, Sarkar suggested free trade6 (trade free from export and import duties) in someone's overproduction as a solution to the underproduction of others. Sarkar reasons that such trade will allow overproducing- and underproducing countries to make adjustments between themselves. Overproduction of any industrial or agricultural produce in one country may be consumed by another country where there is underproduction of the same commodity. 

Prout does not however support trading in raw materials. Wherever there is production of raw material, efforts should be on producing refined goods within the country and not just shipping raw materials abroad. 

Sarkar noted that local raw material prices in the export market are subject to manipulation and sudden fluctuations as they are currently traded through speculative commodity markets, which are controlled by vested interests. "To root out dishonesty from the field of trade, free trade should be established throughout the world as far as possible. Manufactured goods, on the other hand, are generally subject to less price manipulation and command better prices than raw materials. By manufacturing locally finished products, a socioeconomic unit can conserve its reserve bullion and improve the purchasing capacity of the local people."7

The refining of raw materials at home will strengthen domestic technology and know-how whereas wholesale exports of raw material will only increase trade imbalances (the difference between the value of a country's exports and imports) due to the fact that consumer products generally command higher prices than raw materials. For instance, if a country exports cotton and imports cotton products it will stand to lose in so many ways on the transaction.

Prout's raw material doctrine is of course diametrically opposed to the present trading practices of global capitalism. Prout clearly contradicts the classic capitalist theories on the importance of comparative and absolute advantages in the creation of global wealth, formulated by Adam Smith and David Ricardo. Today, all that is left of Smith and Ricardo's theories is the frantic search of capitalist exploiters for profitable resources (cheap labour, available raw materials, ready markets, etc.) all round the world. Those basic ideas of global capitalism, once heralded as harbingers of universal prosperity, are no longer indicative of any mutual benefit but only of one-way profiteering.

Prout's model of trade can be said to be a synthesis of protectionism and free trade. This synthesis will, like Prout itself, remain dynamic and not cut in stone. Prout's dynamic model of trade, which opens the doors to both protectionism and free trade, will be able to adjust to constant changes in various countries and the world in order to serve consumers first and foremost and then society.

Two socio-economic solutions

It is often said that capitalism is an open system. Open to what, one may ask. At most we can say that capitalism seems to be wide open to exploitation of any available resources. With its dominating tendency towards centralisation of wealth, capitalism seems to be more of a closed system as far as generating opportunities for all individuals and the collective. 

Prout points to a number of significant conflicts and contradictions under capitalism that need to be resolved. Two particularly severe structural dichotomies are:

  • Unbridled private wealth accumulation as opposed to rational distribution  
  • Profit maximization as opposed to maximum utilization

Unbridled private wealth accumulation vs. rational distribution 

Rational distribution instead of unbridled accumulation has to do with ensuring universal access to resources and prevention of fatal standstills and collapses. Apart from the enormity of the suffering that capitalist exploitation has caused to society before the onset of its own serious crises and eventual collapse, there are two particularly critical structural downsides to its exploitative nature that his capitalists themselves in the final phase of capitalism; one physical and the other mental.

Firstly, the colossal accumulation of physical wealth by a few leads to a state of affairs where vast funds are no longer accessible to society. The negative implications of such a situation become particularly apparent in economically uncertain times when the exceedingly profit-hungry and hyper-rich few prefer to hold back on investing instead of risking losing on it.

This holding back of enormous and most critical capital reserves in times of particular need naturally results in large-scale financial and industrial standstills. It is the natural outcome of the speculative, hesitating, and essentially criminal motivations of the mega-rich and most greedy at a time when profitable opportunities no longer abound but their essentially exploitative instincts probably are stronger than ever before.

This is the second downside to liberal capitalism: The psyche of those who keep accumulating beyond their actual needs, and at the cost of the life quality and indeed lives of others, corrupts increasingly and degenerates into sub-animal greed and crudity. In the end such people become unable to perceive—not to speak of act on—the acute needs of severely deprived individuals and societies, even in times of their extreme physical, mental and spiritual crises.

In fact, not even in its worst nightmares does the capitalist instinct dream of kneeling humbly before humanity. Rather, in the same way as the proverbial duty-bound seacaptain prefers to go down with his ship, the capitalist demons in human form would sort of prefer to one day leave the rest of us for good with all their ill-begotten riches in hand even if in this case that would call for the entire world to go down first.

Remove the rich from socio-economic power

In order to liberate society from economic exploitation, Prout suggests to initially:

  1. Remove the rich from socio-economic power.
  2. Limit individual accumulation.
  3. Establish a system of rational distribution where everyone is guaranteed a minimum of purchasing power in exchange for their work, and where the extra output of the industrious and those with above-average talent are further rewarded from what is left after everyone's basic needs and those of the collective are secured.

This is the value of rational distribution: To provide for the minimum needs of all (on the strength of their work) and at the same time reward those deserving and meritorious for their above average output.

Profit maximization vs. maximum utilization

Profit maximization vs. maximum utilization has to do with the utilization of all kinds of resources: individual, collective, physical, economic, political, social, cultural, mental, and spiritual resources. Let us first take a quick look at the main controlling hubs of all such resources today: Stock exchanges.

The main task of companies listed on stock exchanges is to reward share owners for their investment. This basically counterproductive business template has led to a universal rat race where “leaner and meaner” equals good practice. The term "counterproductive" has been used, as it seems so much more productive to allow investments to be harvested by those who work on them directly, and not by someone unrelated

This is the same principle as the one applied in the establishment of basic security touched on earlier when discussing socio-economic closedness. We should attempt to properly appreciate the socio-economic implications of direct ownership by employees, and conversely their potential alienation towards the total value created by the enterprise they work in.

As already mentioned, global capitalism involves opportunistic restructuring and reallocation of operations to wherever cheap raw materials, labour, etc. are readily available. This essentially one-eyed, profit-motivated strategy entails layoffs, poverty, and ruin in formerly prosperous areas being suddenly laid to waste by the sociopatic dictates of stock exchanges and big banks.

By contrast, Prout upholds the principle of maximum utilization. It means continuous accelerated all-round output of individuals and societies, and not of their financial output alone.

As already indicated, human beings and their societies possess numerous physical, mental, political, social, cultural, and spiritual potentialities which can be harnessed and put to good use. A society is a collective mirror of its individual members in many respects of their lives, and at the same time societies take on their own, collective shape and form. To paraphrase what has already been stated: To make economic potential the end all of individuals and society is not only a serious misapprehension – it perverts the natural evolution. The most natural thing for human beings is to bring the potentialities of all living beings towards fulfilment. Capitalism, on the other hand, is a system that allows only for the greed of a few to grow by all leaps and bounds at the cost of the life quality and indeed the life of the rest of us.

Very few human beings are, as already mentioned, economically motivated in their basic life aspirations. The most important thing for most of us is to be well and live our lives in satisfying physical, mental and spiritual development and richness. Only a very few are willing to renounce their mental and spiritual development in order to sacrifice all their life energy for the collection of physical riches at the cost of the welfare of others.

If the prevailing system dictates an exclusively economic approach to life, we should liberate ourselves from it. In order for us to embark on the journey from a profit-motivated setup to one of maximum utilization of all resources—physical, mental, spiritual—we first need to close down the stock exchanges and all other exploitative capitalist institutions, including all big banks except for the central bank. In the place of profit-motivated economics we should cultivate a socio-economy centering on consumer-motivated cooperative enterprises free of profit-motivation.8

Ideological concerns

Prout’s aim is all-round development. It wants people to live physically, mentally and spiritually fulfilled lives. Prout's definition of progress9 is movement towards the highest good, towards supreme emancipation. Practically speaking then, Prout's progressive socio-economics is embedded in trust in a clear idea of what all-round progress really is.

The bonds between individual human beings and societies are intrinsic, deep, and undeniable. Trust is an instinct, a basic inner force that living beings mobilize in order to bond with circumstances. In the same way as individuals need to trust themselves, societies need to trust their worth and innate capabilities. For this the members of a society require a clear image and understanding of their common journey through history and of the objectives and goals that are in front of them. Without such strong, deep-felt self-assurance and self-understanding little can be done.

Again we witness the need for closedness and openness playing round each other towards a greater and mnore comprehensive synthesis. Societies need to nurture both their native identity and their universal soul.

“Nacism”

Time and again throughout human history hero worship has provided the members of societies with much needed self-assurance and understanding – and not seldom with only a devilish semblance of it. Many a strong leader, armed with notions of ideological grandiosity, has attempted to hold up images of eagerly anticipated societal greatness. More often than not such imagery has been painted in colours of stark nationalism and even today, in our modern world of greatly expanded global sense and sensibilities, we still get to see the return of crude nationalism in many places.

Right now we witness the rapid growth of national capitalist (Naci) ideology both in superpowers such as China and the US, and in many European countries. Nacism promotes capitalist interests on a pseudo-nationalist platform. The term pseudo-nationalism is used here as Nacism carries the mask of nationalism over its real face of capitalism. Nacism is fundamentally fake and a contradiction in terms as capitalism's greed and level of exploitation will never stop growing by itself. The malignant cancer at the core of Nacism will continue to spread across any geographical boundary. Neither will Nacism serve any one nation (but only exploit its citizens) and neither will it stay within any limit or border. 

Nacism could turn out to be far worse than national socialism (Nazism). As Nazism and other geo-centred “isms” have already proven, nationalism produces to a very high degree excluding and negative sentiments and far much less inclusive and positive ones. The industrial force of Nacism coupled with its nationally mobilising force and the systemic coherence of global capitalism continue to bolster the momentum of this monstrous force in the world today.

Renaissance of a greater sense of belonging

The term nation indicates "unity based on birthplace". As already touched upon, the truth of ecology and spirituality is that we are all born on this planet in this Universe rather than that each one of us were born in a small special place. To those who have awakened to this ecological and spiritual ethos already, the sweet appeal of the “global village” is obvious. Today, claiming that one only lives in a country quite isolated from the rest of the world is a symptom of severe existential myopia with all its unfortunate consequences.

Our crises-stricken world is crying out for comprehensive, unifying, universal thinking that may serve today's emerging world society in all spheres of existence—physical, economic, political, social, cultural, mental, and spiritual.

Conclusion

The global economy appear as "the One ring to bring them all and in the darkness bind them". Indeed, more than any other current factor or element, capitalist economy dictates the lives of most of us, namely the conditions and circumstances we live in. So it is the economy we have to change if we are to liberate ourselves from exploitation and reclaim our existence locally and globally, individually and collectively.

We humans are many-faceted beings with numerous needs, aspirations, and potentialities. Whatever we are and desire to be, we are not just cog and wheels in an economic robot. Our main job is therefore not only to dismantle capitalism but also to construct and evolve a truly human economic system. It would be a dignified system where both socio-economic closedness and openness are recognized and put into practice and synthesized.

Sources

1 The fundamental principles of the Progressive Utilization Theory (Prout) propounded by Shrii Prabhat Rainjan Sarkar in 1959: http://proutglobe.org/2011/05/5-fundamental-principles-of-prout/
2 Source: “What are the differences between closed and open economies?”
-Reference.com
3 "Three Cardinal Socio-economic Principles," P.R. Sarkar. Prout in a Nutshell Part 16. Ananda Marga Publications. http://proutglobe.org/2017/03/three-cardinal-socio-political-principles/
4 "Talks on Education – Excerpt 4," P.R. Sarkar. Prout in a Nutshell Part 18. Ananda Marga Publications.
5 Material on Prout's concept of world government: http://proutglobe.org/prout/socio-economics/social/political/world-government/
6 “Economic Dynamics,” P.R. Sarkar. A Few Problems Solved Part 9. Ananda Marga Publications. http://proutglobe.org/2011/05/economic-dynamics/
7 "Socio-economic Movements," P.R. Sarkar. A Few Problems Solved Part 8. Ananda Marga Publications. http://proutglobe.org/2011/06/socio-economic-movements/ 
8 For more on Prout's cooperative economy, see: http://proutglobe.org/coops
9 The term progress derives from the Latin progradi, indicating «well-directed movement». The Latin term in its turn derives from pragati in Sanskrit, meaning the same thing.

Three Cardinal Socio-Political Principles

By Shrii Prabhat Rainjan Sarkar

For the all-round welfare and development of human beings, society needs to follow some fundamental socio-political principles. Without the firm foundation of such principles, disunity, injustice and exploitation will flourish. To avoid this and to safeguard the interests of all people, the leaders of society must ensure that cardinal socio-political principles are strictly followed. Otherwise, individual and collective progress can never be achieved.

There are three cardinal socio-political principles which should never be violated. First, people should not be retrenched from their occupations unless alternative employment has been arranged for them. Secondly, people should not be forcibly converted from one religion to another. Thirdly, no mother tongue should be suppressed. Occupation, spiritual practice and mother tongue are very important to human beings. If the sentiments associated with them are hurt, human beings will be deeply affected. So, you should never violate these cardinal socio-political principles.

There are many instances where these three cardinal principles have been violated, causing much suffering and disturbance in individual and collective life. Let us discuss what happens when people loose their livelihood. Take the example of rickshaw pullers in India. The work of rickshaw pullers is exhausting and poorly paid, but if it is declared illegal, many rickshaw pullers will become unemployed and their lives will become more miserable. Those who cannot find alternative employment will either die of starvation or become criminals in an effort to survive. In either case, society will be adversely affected. So, before this occupation is prohibited, rickshaw pullers should be provided with suitable alternative employment.

Take another example. In the Pathan period and at the height of the Mughal empire, Zamindars or landlords were permitted to maintain military forces. This practice was banned at the end of the Mughal period and the start of the British period. As a result, many soldiers from military communities like the Bagadis of Ráŕh and the Cuyárs and Lodhas of Midnapur were retrenched from the armed services. Consequently, they became criminals. Even thirty to forty years ago, members of these communities were still engaged in antisocial activities, but now they have virtually ceased this practice. If these people had been inducted into the military or the police, they would have earned a proper livelihood without being compelled to harm the society. Their destiny would have been quite different.

Finally, take a third example. In India during the time of the British, many small kingdoms were ruled by rajas and maharajas. When India became independent, these kingdoms merged into India, and the Indian government decided to pay the former monarchs a stipend. However, this scheme was not a good idea, because many former monarchs wasted money and lived luxurious, sycophantic lifestyles. After a particular leader became prime minister, the scheme was abandoned at short notice. This caused economic hardship for some of the less well-off recipients who were unable to make alternative financial arrangements. Some old people in particular found it difficult to adjust. While the government should not have adopted the scheme in the first place, having adopted it, the government should have withdrawn it gradually and taken the responsibility for looking after the elderly people on humanitarian grounds.

Now you understand the consequences of retrenching people without arranging a suitable alternative livelihood for them.

The second inviolable principle is that people should not be forcibly converted from one religion to another. People will not leave a religion if it is able to guide them properly on the path of Dharma. However, if a religion has a narrow outlook or contains some defective teachings, such as supporting the caste system or oppressing the poor, then people will naturally become disillusioned with it. The followers of other religions will take advantage of these defects and forcibly convert them.

In the past there were many instances when large numbers of Hindus were forcibly converted to another religion. Hindus were fed onions or beef without their knowledge and women were abducted, compelling them to transgress their religious beliefs. As a result, they were excommunicated by the Hindu priests. They were declared outcastes. When those who had instigated the transgressions observed this development, they escalate their campaign of forcible conversion.

There is a well-known story about a Zamindar from Bengal called Kalachand Roy, later Kalapahar, who was a follower of Kálii. He worshipped a stone image of Kálii with great devotion. At that time some invaders, belonging to another religion, started a campaign to destroy all Hindu temples and deities. When Kalachand’s temple was about to be destroyed, he prayed to Kálii saying, “Mother, I do not have the power to protect you, so please protect yourself.” But how can a stone idol protect itself? In due course his temple and idol were destroyed, and Kalachand lost faith in Kálii. He was converted to the religion of the invaders, and became known as Sheik Kaluddin Khan. He launched his own campaign of terror throughout Bengal and Orissa and forcibly converted people to his new religion. He disfigured deities, destroyed temples and threatened people with physical violence to convert them. Once he travelled to Kashi and set about converting a widow who also happened to be his elder sister. She refused to succumb to his threats, and scolded him mercilessly for his bad behaviour.

This made him realize the error of his ways, and he abandoned his campaign. If Hinduism had not practiced idol worship, Kalachand would not have been converted. Because of his forcible conversion, Kalachand became extremely hostile towards Hinduism and launched his own campaign of terror against it. A religion should be so strong that no one can be converted from it.

Such incidents made the priests in eastern India realize that soon all the Brahmans would be converted to Islam. One priest called Devi Bar Ghatak from Mallálpur in the Birbhum district of Bengal, devised a strategy to prevent people being excommunicated. He argued that instead of excommunicating people who had been compelled to violate the tenets of Hinduism, they should be given the status of a special community within the Hindu religion. For example, families from which a girl had been abducted became one community, those who had been forced to take onions or beef became another community, etc. The members of these communities were permitted to marry amongst themselves and engage in normal social relations. This system was called the Melbandhan system, and it saved the Brahmin community of Bengal from conversion to Islam. Although the Kayastha community of Bengal did not accept the Melbandhan system, they accepted its inner spirit, and there after they did not excommunicate any of their members.

A different system was followed in Bihar. Members of the Brahman community who had been forcibly converted to Islam formed a group and adopted the title Syed. The Kayasthas took the title Mallik, the Rajputs became Mián Mussalmen or Pathan Mussalmen, and the Bhuminars became Sheik Mussalmen.

Hinduism will degenerate and people will convert to other religions as long as the caste system exists in the Hindu religion. If Hinduism continues to degenerate, the progress of Indian society will be retarded because Hindus are the majority community in India. Moreover, if there are continued conversions to Islam, women will become second grade citizens, because they are not given equal status with men in Islam. Consequently, there will be further degeneration. Thus, nobody should be forcibly converted from one religion to another.

All religions should be established on a strong foundation of logic and reason, then such things will not occur. If people are forced to violate the teachings of their religion, they should not be excommunicated. Even if people knowingly contravene a religious code without compulsion, they should have ample scope to rectify their behaviour. A religion should not be like a glass container which breaks with a light tap.

In the future you should be careful not to hurt the religious sentiments of others, even if most people become Ánanda Márgiis. Deities should be preserved in museums, and temples should be restored to maintain the cultural and historical heritage of the country.

Thirdly, no mother tongue should be suppressed. If a mother tongue is suppressed, the consequences are most dangerous. Take the example of Pakistan. When Pakistan was formed, Urdu was declared the national language. But the actual language position of undivided Pakistan – that is, East Pakistan and West Pakistan – was that 60% of the population spoke Bengali and 40% spoke Hindi, Baluchi, Punjabi or Urdu. When Urdu was declared the national language, East Pakistan revolted and this led to the division of Pakistan. There was a famous song at the time:
Orá ámáder mukher bháśá keŕe nete cáy…
"They are intent on snatching away the language of our mouth…"
This song aroused the sentiments of the people, and the whole country became united around the issue of their mother tongue.

In India, Hindi has been imposed on non-Hindi speaking people, resulting in much ill-feeling between many states and the centre. The imposition of Hindi amounts to Hindi imperialism, and those who do not speak Hindi feel suppressed. The important languages of Bihar, for example, like Bhojpuri, Maethilii, Angika, Magahii and Nagpuri, have been suppressed in favour of Hindi. The people of Bihar do not even know the pronunciation of Hindi words because they speak with their own intonation. Other languages like French in Canada, Basque in Spain and Sicilian in Sicily have also been suppressed.

Several decades ago, Hitler invaded France. He planned to teach everyone German and eradicate French. If he had done this, regardless of anything else that he did, the people would have revolted.

The psychology of suppression undermines the progress of a country. People will eventually revolt against it and restore unity. The sentiments of people cannot be forcibly suppressed for a long time. Human beings best express themselves through their mother tongue. If people’s mother tongue is suppressed, it is equivalent to strangling them. The suppression of people’s mother tongue is a sin.

India is a multi-lingual and multi-religious country. If a particular regional language is declared the national language, it would be very detrimental to the overall welfare of the coun try. Rather, all the languages spoken in India should be recognized and encouraged. In this regard, India should follow the example of some other countries. In Switzerland, for instance, four languages are recognized as state languages – German, Italian, French and Romansch – although more than twice as many people speak German than the total speaking the other three languages. This is the correct approach, as it does not go against the collective psychology of the people.

Similarly, if a particular religion is proclaimed the state religion, those who follow other religions will not identify with the country. Consequently, the unity of the country will be undermined. If people go against this basic principle, they may be politically successful for a short time, but eventually they will inflict great harm on the country and prove to be a failure.

There are occasions when majority decisions do not create unity in society because people are more or less divided on an issue. In such circumstances, the leaders should be very cautious when making their decisions, and take special care to safeguard the interests of everybody. In particular, they should select a course of action which does not harm the sentiments of any group. For example, suppose there are seven brothers in a joint family, and these brothers are divided on an issue. Four brothers may be on one side and three brothers on another. If the head of the family takes a decision based on the wishes of the majority, the family will be divided into two groups. Therefore, a decision should be taken which safeguards the interests of all the brothers.

If any group tries to violate any of these three cardinal socio-political principles, you should immediately oppose them with a thundering voice and sufficient force. Victory will be yours, because you are supporting the collective psychology. But before launching any movement, you should make sure that the masses are conscious of their exploitation, otherwise the movement will not be successful. Although it may take some time to raise the consciousness of the masses, ultimately you will be victorious.

A leader of the Maethilii community in Bihar wanted to start a movement against the exploitation of the Maethilii language, so he organized a massive rally and started to lecture the people about the suppression of Maethilii. Initially, everyone listened to him attentively and supported his ideas. At the end of his address he told the masses: “We will live for Maethilii, we will die for Maethilii.” But one person amongst the crowd shouted out: “Yes, we will live for Maethilii, but why should we die for Maethilii? Rather, I choose to die in Kashi.” According to mythology, if one dies in Kashi one goes to heaven. Immediately all the people started supporting this view, and as a result the meeting was disturbed. This happened because the people were not conscious of the suppression of their mother tongue, and they followed the path of religious dogma instead.

So, you should ensure that these three cardinal socio-political principles are not violated. By doing this you will safeguard the welfare of society.

Published in Prout in a Nutshell Part 16
Copyright Ananada Marga Publications 2017

Centralization of Wealth, Capitalism’s Losing Battle

The global trend of wealth concentration does not bode well for global capitalism. A main precursor of its armageddon is that the money accumulated by capitalists stops circulating and remains inert or unutilized. The huge hoarders think that if "their" money are allowed to roll freely then their profits will decrease, even though it will bring relief to the common masses. Capitalism is caught in its own sorry trap much in the same way as the proverbial monkey's fist by the food trap. The tragedy is the colossal suffering taking place in so many ways in today's world.

Read: P.R. Sarkar on Economic Dynamics

Increasing centralization
2017: World's 8 richest men are as wealthy as half the world's population
2016: World's richest 62 people as wealthy as half of the world population
2015: "1% of the world’s population will own more wealth than the other 99% by next year"

In Russia 25 years after the collapse of Communism:

  • 1% of the Russian population controlled 71% of all wealth
  • 110 persons controlled 35% of all wealth
  • More than 9 out of 10 Russians owned less than the equivalent of $10.000
    (source: Credit Suisse 2013)

In India, 57 billionaires have the same amount of wealth as the bottom 70%. The top 1 per cent of the Indian population owns 58.4 per cent of India’s total wealth, according to an Oxfam report.

In the USA, the five largest financial firms — JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley — control about 70 percent of all commercial bank deposits and hold on their combined balance sheets over $10 trillion in assets, roughly equal to two-thirds of the American economy. More than 90 percent of their assets is backed by debt, with very little equity capital 
(source: Robert Lenzner).

The Hidden Cost of Imported Items and The Need to Redefine the Modi Administration’s “Make in India” Policy

By Susmit Kumar, PhD
susmitkumar.net

If you live in India and purchase a "Made in China" commodity instead of "Made-in-India" commodity, then your home country loses not only a factory job but also indirectly associated jobs such as in schools, hospitals, and auto sector. Instead your purchase of the imported commodity creates such lost jobs in China."

There are two major hidden costs to India when you buy an imported item.

(1) The first major hidden cost is that we lose jobs that would have been created inside India if you would have bought instead a “Made-in-India” item. When you buy a 100 rupees imported item, then its sticker price, i.e. 100 rupees is actually equivalent to say a 200 rupees “Made-in-India” item. This is so because a “Made-in-India” item generates jobs in a domestic factory which pays to its employees and local businesses to buy ingredients for the item. Nowadays employees spend their salaries and wages to purchase goods and services from foreign businesses. Businesses make their own purchases and hire employees, who also spend their salaries and wages throughout the local, regional, and state economies. A chain reaction of indirect and induced spending continues, with subsequent rounds of additional spending. In economics, this chain reaction employment is divided into three categories:

(i) Direct jobs: Employment in manufacturing plant.

(ii) Indirect jobs: Employment changes in suppliers and distributors.

(iii) Induced jobs: Jobs resulting from direct and indirect employees spending more and increasing consumption. For an example, employees expending creates jobs in industries like auto, housing, school/college and food, i.e. as the employee will rent or buy a home and auto, his children will attend school or college, etc. The government will also be getting taxes from these jobs which would be spent on infrastructure and welfare schemes. There are additional secondary effects by job creation through benefits of improved access to infrastructure, such as access to more reliable power allowing enterprises to produce more, and more efficiently.

Based on one study, the table below shows the number of all jobs (Direct, Indirect and Induced jobs) created for each direct job in a sector. In a certain sector, the total number of all jobs per direct job was as high as 19.

(2) The second major hidden cost is that when you buy an imported item, it is costing India its hard-earned dollars. In India, people use the Indian rupee when they pay storeowners, who in turn purchase imported items from domestic importers. The importers pay in US dollar when they buy these items in world markets, and these dollars are provided by banks in India that are authorized to do transactions in foreign currencies. Hence, in the end, India has to get these dollars from somewhere, say from the dollars earned by exporters or foreign investors. If India does not have enough dollars to pay for imports, it has to devalue its currency so that exporters can export more. As India imports 70% of its oil and oil is priced in dollars in the world market, the oil price increases in terms of rupee, after devaluation. Whenever there is a price rise in commodities such as petrol, opposition parties and common people blame the government for the price rise, whereas they should blame their own countrymen who are purchasing imported items. Indians, who purchase cheap imported items, do not realize that they are in fact paying much more than the sticker price.

Therefore, if we take entire economy into consideration, a 200 rupee tag of a Made-in-India item might be cheaper than 100 rupee rag imported item. Therefore, the Modi government needs to redefine its “Made-in-India” program to consider the above-mentioned facts and also to teach Indians the benefits of purchasing “Made-in-India” items. The government should target imported products that are killing domestic jobs and provide tax-breaks as well as subsidies towards labor cost to manufacture these products, similar to what it does in MGNREGA in rural sector. Rather than allowing profit-oriented large conglomerates to create factories for this purpose, the government should allow only small cooperatives, working on no-profit-no-loss principles, to manufacture these products locally so that more and more jobs are created.

Stop Taxcuts-fueled Consumer-driven Economy Which has Led the US to the Brink of Impending Bankruptcy

By Dr. Susmit Kumar, Ph.D.
susmitkumar.net​

The Modi government needs to stop listening to the US-educated economists’ mantra of trickle-down economy, i.e. to use taxcuts to fuel a consumer-driven economy. The same mantra has led the US to the brink of impending bankruptcy. It should not increase the income-tax exemption limit from 2.5 lac rupees. Instead it should use the collected tax wisely to come out of perennial trade deficit and also to directly target the economy of rest 80 percent of the population who have been largely left out of the economic boom.

"In PPP (Purchasing Power Parity) terms, US dollar should be only 13 to 14 Indian rupees, one-fifth of the market value. If you take the Delhi metro from Connaught Place/Rajiv Chowk to Dwarka (30 km) it will cost you 25 rupees, i.e. about one third of a dollar, whereas for same distance in the Bay Area, California the metro will cost you 8 dollars. Hence the US dollar is over-valued."

The US is on the verge on economic bankruptcy by following the taxcuts-driven trickle-down economy. The US dollar is over-valued; hence trickle-down economy is somehow working temporarily in the US. For more than three decades, by taking advantage of the dollar being the global currency, the US has been able to print as many dollars in order to fund its twin deficits (trade deficit and budget deficit), something India cannot do, i.e. India cannot fund its deficits by printing its currency Rupee.

In Purchasing Power Parity (PPP) terms, the US dollar should amount to only 13 to 14 Indian rupees, one-fifth of its current market value. If you take Delhi Metro to go from Connaught Place/Rajiv Chowk to Dwarka (30 km) it will cost you 25 rupees, i.e. about one-third of a dollar, whereas for same distance in the Bay Area, California the metro will cost you 8 dollars. Hence the US dollar is over-valued.

Once China brings down the dollar, as explained in my article Chinese yuan replacing US dollar as global currency: A not so distant prospect, and the dollar reaches down to its actual PPP value, there will be a complete collapse of the US economy, akin to the Russian economy during 1990s. Right now even after massive loss of manufacturing jobs, the living standard of even an hourly wage American is at the same level as middle-middle income class Indians. At even $10 an hour, working in a restaurant, they make $1600 a month, out of which they spend $200-$300 on food, $700 on the room rent and $300 to $400 on a car. But if the dollar comes down to its real PPP value, there will be complete chaos in the US. Then a brand new Toyota Camry in US would cost $125,000 instead of $25,000 and it will be out of bounds even for the middle class in US. Right now the moment a person in US gets a $50,000 a year job, he buys a brand new car like Camry.

"If India wants to be a super-power, it needs to follow China rather than he US, i.e. India needs to be producer country."

During 2011-13, India saw how its increasing trade deficit can destroy its economy. India can barely manage its trade deficit by its Foreign Direct Investment (FDI) which is about $50 billion a year, and NRI remittances (about $70 billion a year). For this very reason India's credit rating is just one notch above the junk status. When the crude oil price went above $100 a barrel during 2011-13, India could not pay her $180 billion to $200 billion a year trade deficit, leading to the collapse of the country's rupee from 44 to a dollar to 62 to 1 dollar.

Although it was unexpected for so-called economic experts (None of the experts saw India's debt bubble coming. Sound familiar?, The Guardian, 26 August, 2013 ), I had warned about collapse of Indian economy in my books, published much before the 2011-13 crisis. Nowasays India’s trade deficit is increasing by leaps and bounds with China, on the same pattern as the US trade deficit with China. If India wants to be a super-power, it needs to follow China rather than he US, i.e. India needs to be producer country, with trade surplus as well as it should be able to provide minimum necessities, mainly food and housing, to all its citizens, otherwise it will be always in danger of economic collapse. If the crude oil price again goes above $100, Indian economy would have same fate as that of Greece. After the onset of the Ukraine crisis, the US used its dollar as a weapon to destroy the Russian economy, but Russia was able to withstand it mainly because it was running both trade surplus and budget surplus.

"If we take into consideration the entire economy, a 150 rupee tag of a Made-in-India item would be cheaper than 100 rupee tag imported item."

The raise in the income tax exemption limit will give extra income to maybe 10% of urban population in order for them to buy things like car rather than a 2-wheeler (extra few thousand rupees a month) resulting in a marginal increase in industrial growth but the same few thousand rupees a month can drastically raise the income level of a family in low income group. The brunt of demonetization and coming action against the benami properties will be felt by unorganized labor as housing industry would be down for next several years because it was the black money in cash which was fueling the housing industry. The government needs to keep the same 2.5 lac income tax exemption limit and give the extra money to help the semi-skilled and un-skilled labor.

India has been spending its precious dollars on importing simple items like scissors, air coolers and idols which can be manufactured easily in the country. Not only India is spending its hard-earned dollars to buy them it is also losing the related manufacturing jobs. A 150 rupee tag price of a domestically manufactured item may be cheaper than a 100 rupee tag imported item because out of 150 rupee, the government would be getting tax, it will generate job in a family which would lead to associated jobs in industries like auto, housing, school/college and food, i.e. as the worker will rent or buy a home and auto, his children will attend school or college, etc.

Hence if we take into consideration the entire economy, a 150 rupee tag of a Made-in-India item would be cheaper than 100 rupee tag imported item. Therefore, the government should target the imported products which are killing the domestic jobs and provide tax-breaks as well as subsidies towards labor cost to manufacture these products, similar to what it does in MGNREGA in rural sector.

Rather than allowing profit minded large conglomerate to create factories for this purpose, the Indian government should allow only small cooperatives, working on no-profit-no-loss principle, to manufacture these products locally. The World Trade Organization (WTO) should not intervene for the country providing subsidies to these industries because majority of high-tech industries in the Western countries have origins in government subsidies.

For an example, the US-based Tesla, which makes electric cars, sells solar panels and launches rockets into space, is mainly funded by the government subsidies (Elon Musk's growing empire is fueled by $4.9 billion in government subsidies, Los Angeles Times, May 30, 2015). It is an open secret that China has become the world's number one exporter of consumer goods only by providing government subsides to manufacturing firms. A country should never import a mass consumed item because not only it loses related manufacturing jobs, it will also be at the mercy of factors outside its control.

By demonetization and coming action against Benami properties, PM Modi has already solidified his urban vote for next 2019 elections. They will vote for the ruling NDA because he is the first person in history of India who has taken any concrete step against corruption. Apart from over-all growth in Indian economy, he needs to provide basic necessities to the un-organized labor who are feeling the brunt of his policies against black money otherwise he may have same fate as the NDA1's in 2004 parliamentary election which they fought on “India Shining” slogan.

Demonetisation Will Not Bring Down Corruption and Black Money in India

Picture above: Nearly 40 deaths – including suicides, cardiac arrests in long queues, hospital casualties and a murder in a fit of rage in the first few days of India's demonetisation. The move caused a huge cash crunch in the country and turned life upside down for the lower middle class and poor families in India.

[Prout Globe, December 2016] – The demonetisation of 500 and 1000 rupees banknotes a month ago in India has raised pertinent questions about Indian government policies on corruption. In the short term, the sudden and previously unannounced move may have shocked and disturbed the criminal rackets: counterfeiting of banknotes and the flow of black money in the country, rampant corruption, the use of drugs, smuggling, etc. The long-term effects of demonetisation policy remain to be seen.

"While fighting corruption there should be a constructive ideal."

However the immediate effect of demonetisation has also been utterly disastrous for the people of India. A universal inability to pay for goods and services has brought the country to a standstill and near-collapse. The lives of ordinary people, small businesses, agriculture, and transportation have been thrown in greater chaos than ever.

Cause and symptoms

The science of medicine says that in order to cure a disease, its causes and not its symptoms must be addressed. In this particular case it seems that the government of India has determined that bank notes are the cause of corruption, black money, and counterfeiting allegedly used by terrorists to destabilise the country, etc.

According to PROUT, if corruption in the form of black money is to be treated at its root, it should be done via the taxation system. PROUT advocates a system of taxation where individual income tax is abolished and essential commodities are tax-free. Taxes should be levied at the starting point of the production of each taxable commodity and be paid directly by the consumers of such products. PROUT founder Shrii Prabhat Rainjan Sarkar suggested:

“If income tax is abolished and excise duty on excisable commodities is increased by only 10%, there will be no loss of government revenue. When there is no income tax, nobody will try to accumulate black money. All money will be white money and as a result there will be economic solidarity, an increase in trade and commerce, more investment, more employment and an improvement in the position of foreign revenue.”*

Some historical examples

“The best system of taxation was in vogue in the ancient Hindu Age. In those days only twenty-five percent of the entire produce was given to the king as taxes. The farmers could also give cows, horses or sheep as taxes. In such a system farmers did not face any inconvenience. Today, however, farmers face much inconvenience because they have to pay their taxes in cash. Farmers cannot always arrange cash by selling agricultural produce, because a proper market does not always exist.

“According to PROUT, a certain percentage of the farmers produce should be collected as direct taxes. It is also convenient for the government to realize taxes in the form of goods, because it needs to store produce as insurance against future contingencies. Taxes in such a form can easily be distributed from government stores when the people are in need. Moreover, this system will easily meet the requirements of people in the towns and cities. Such a system can rapidly transform the Indian economy.”**

“To overcome the great famine that struck Bengal in 1943, the Wavell administration introduced a rationing system. Wavell also tried to alleviate the famine by restricting the movement of food from one province to another. But these measures did not solve the problem – rather most people became trapped in the food rationing system.

“Even after the departure of the British in 1947, about 145,000 people were included in the rationing system. This resulted in the gradual increase of black marketeering, profiteering and other corrupt practices. The central government suddenly abolished the food rationing system in an attempt to solve the problem of corruption. This precipitous step caused the price of food to rise to exorbitant heights. Later the food rationing system had to be reintroduced.

“The Indian leaders tried to solve this food problem by calling for a “grow more food” campaign, but the campaign was a failure because the system of agriculture was not changed to increase output. The government adopted the policy of increasing the area of arable land and not the productivity of the existing land. There was no planning to determine whether or not the new land was suitable for agriculture, and no proper irrigation facilities to improve productivity.

“But above all, in the democratic system bureaucrats had ample scope to neglect their responsibilities, and due to defective administration much agricultural potential was wasted. Consequently, dishonest traders conspired to make the agricultural sector ineffective. They perpetuated the food problem to satisfy their own selfish interests. So from all points of view the agricultural system in India is extremely weak.”***

Conclusion 

Banknotes are physical objects and cannot themselves be the cause of corruption. Neither can they be described as its symptoms. It is the illegal handling of banknotes that may be viewed as symptoms of corruption. The cause or causes of such corruption are yet to be named properly by the government of India.

PROUT stands for rational distribution, development and maximum utilization of all the resources of this world – physical, mental and spiritual – all has to be taken care of. This theory will create harmony and peace in the society, a society where exploitation and corruption will not exist.

This means that corruption is the result of greed, mean-mindedness, and selfishness. In order to cure a society and its members of such a severe disease, PROUT advocates the practical application of firm principle as a short-term measure, and the cultivation of deep humanism and spirituality as a long-term measure.

“While fighting corruption there should be a constructive ideal. Different civic movements in India have failed to give benevolent service because they lacked a constructive ideal. They fought only for the sake of fight. Therefore it is necessary that the ideal should be first, the ideal second and the ideal always.

“Those who lack a constructive ideal help the capitalists in their exploitation. Only criticizing capitalism will not be of any service to the people, rather it will help the antisocial elements to find or invent more tactics for exploitation. This is the condition in India today. The leftist groups are engaged in criticizing the capitalists, which is bearing no fruitful results, and the capitalists have captured power by influencing the ruling party.****

Only a radical re-orientation of human aspirations and efforts towards truly great individual and collective goals will succeed in rooting out corruption for good and will introduce a moral and spiritual society for all and not only for a few.

Notes

* “Some Aspects of Socio-Economic Planning,” P.R. Sarkar, Prout in a Nutshell Part 15
** “Agrarian Revolution,” P.R. Sarkar, A Few Problems Solved Part 2
*** “Agrarian Revolution,” P.R. Sarkar, A Few Problems Solved Part 2
**** P.R. Sarkar, Discourses on Prout 2

No More Political Parties – PROUT for Essential Social Unity

[Prout Globe, November 2016] – The present system of democracy relies on political parties as a means for directing voting processes, representation, etc.

Party politics however only seems to teach us to be quarrelsome, judgemental, divisive, backtracking, tricky, crooked, etc. The party system could be said to act as a bar to natural basic human cooperation.

In fact, the party system generates a class of “political animals”; individuals basking in mudslinging and lazy opportunism. Smart oratory cannot hide the fact that party politics remains divisive and dirty. Party affiliation and party hegemony do not promote basic human integrity.

Then there's the matter of money. Modern politics has become a career path for professional politicians and not a channel for service to society. Also in the same way as money means everything to politicians, it directly affects the outcome of election campaigns. Huge advertising budgets decide the results on Election Day, and those who contribute the most to campaigns can expect to be favoured by the winning political regime.

In contrast to an increasingly discredited political circus, PROUT seeks to promote a political system where people cast their votes for deserving people of integrity – not for the advertisement flashing the party ticket.

In PROUT's political setup individual candidates will have to publish their program in black and white. The successful candidate will be held responsible for their program and will have to resign if found guilty of serious backtracking.

Voters on the other hand will have to qualify to be able to join the electorate. The criteria of voter qualification will vary according to circumstances quite naturally. Everywhere basic literacy will be mandatory, and more advanced electoral educational institutions will evolve where people are ready for it. There will be efforts everywhere for the maximum progress of the electorate so that the entire political system may serve real human needs and not vested interests.

Age is not considered a deciding factor in PROUT's political system. In fact, PROUT calls on the young and conscious to enter the political fray.

A final word on PROUT's political system is that it places economic democracy at the centre of political affairs. Economic democracy, meaning economic rights and right to employment and being able to support oneself, is seen as essential to political processes. Without economic democracy, political democracy becomes meaningless.

The Vital Energy of Students

By Shrii Prabhat Rainjan Sarkar
(14 September 1959, Motihari, Bihar)

Normally between the ages of sixteen and twenty-four human beings have abundant vital energy (práńa shakti). This is the period of their student life. Though there is plenty of vital energy during this period, due to intellectual underdevelopment the physical and intellectual waves are unable to adjust together properly. Hence those with a developed intellect, cunning political leaders, cast a net of high-sounding, illusory theories and exploit the vital energy of students to achieve their selfish political goals. Because of their underdeveloped intellect, the student community remains unaware of such exploitation.

"Let non-party persons be student leaders."

In democratic countries the mundane goal of party leaders is merely to obtain ministerial posts. To achieve this they propagate so-called ideologies which attract students, and thus they utilize the vital energy of students to fulfil their selfish aims.

Read also: The Younger Generation

The question is, how should the vital energy of students be utilized? With the first stir in the vital energy an extraordinary state occurs, and it becomes difficult to judge what to do and what not to do. Cunning people mobilize students in such a state to achieve their objectives.

Students have vibrant vital energy. If it is not used for constructive activities, it is bound to become engaged in destructive works. Vital energy cannot sit idle. When students do not have any constructive plans before them, they get deceived by the illusions created by such selfish opportunitsts and feel a misplaced pride in allowing themselves to serve as their instruments.

The ideal of human beings is not to extrovert but to introvert the vital energy. In the process of introverting the vital energy, adjustment between the vital energy and the intellectual wave brings progress in a proper direction. Improper use of the extroversial momentum will certainly engage the vital energy in destructive activities.

"Spirited students should be zealous and ever-ready to wage war against economic injustice, immorality and corruption."

When pondering the history of the student community in India, we find that the vital energy of students in pre-independence India has mostly been properly utilized. Before the nineteenth century education in this country was personal, whether in traditional Vedic schools (catuśpát́hiis) through the medium of Sanskrit, or in Muslim schools (maktabas) through the medium of Urdu or Persian. It had not attained a social dimension at that time. There were students, but there was no student community. After the middle of the nineteenth century, due to the use of the English language and India's contact with westerners, gradually a class of students emerged in India. A class feeling developed in the students when thousands of them came in contact with English education. Political consciousness among Indian students is a direct and beneficial result of English education.

At the beginning of the independence struggle, senior students used to guide and instruct the juniors.

During the twentieth century the student community discovered a meaningful slogan in the fight for independence, and a way to utilize their vital energy. This movement was not non-violent. The very character of vital energy is to wage a war against opposing forces. By fighting against opposing forces, the vital energy creates a resultant. It can never be non-violent. To be non-violent one would have to avoid clash. Non-violence is against dharma, hence it is against reason too. It may serve a pretentious policy, but it cannot be a principle.

The first quarter of the twentieth century was a period of direct clash where the vital energy of the students was fully utilized. That was appropriate for chátras. Chátra does not mean “students”; chátra means “jurisdiction”. People living within the jurisdiction of a particular teacher used to receive and to follow guidance from that teacher, hence they were called his or her chátras. These days students and professors in colleges differ in their opinions, hence the students are not chátras in the real sense of the term.

When the vital energy of youths does not find scope for expression within the prevalent system, it starts waging a war against that system. According to this principle, the youths’ fight for independence was certainly justified.

After the first quarter of the twentieth century, the faint light of independence became visible. Those leaders who understood the implications of the initial struggle started to calculate the possibility of gaining power after independence, which they considered to be their right. Power politics started with speculation about who would hold higher ministerial posts and who would hold lower posts. Although the struggle itself was highly justified, the power politics was completely unjustified.

"They should remain alert and guard against the exploitation of their vital energy, and should carefully judge whether they are opposing immorality and corruption, or whether they are joining forces with a particular party."

Chátras who become involved in power politics spoil their careers and lives while working to install a person or a group in ministerial office. This has become more evident since independence. Joining party politics today means destroying oneself for political leaders. Hence, this is not a proper direction for students.

Chátras will have to adopt a natural course for the expression of their vital energy. The immorality which permeates social life certainly hinders the natural growth of chátras’ vital energy. Hence spirited students should be zealous and ever-ready to wage war against economic injustice, immorality and corruption, whatever the type, which causes shortages of clothing, the adulteration of foodstuffs, etc. This is the way to properly utilize their vital energy.

A particular political party opposes the misconduct and corruption of the ruling party, but it becomes involved in the same activities when it attains power. Favouring a party implies linking oneself with the inherent defects and the mistakes of that party, which is not proper.

The proper use of vital energy lies in fighting against injustice. The ruling British class obstructed the natural growth of the psychic propensities of a particular group, hence it was proper for the chátras to fight and gain independence.

In the changed circumstances of today, chátras should remain alert and guard against the exploitation of their vital energy. They should carefully judge whether they are opposing immorality and corruption, or whether they are joining forces with a particular party. If their vital energy is being utilized to fight against immorality, it is proper.

Chátras may have various student organizations, but the purpose should be to create movements which do not favour any party or ism. One of the students should be the leader so that external leaders from political parties do not get the opportunity to exploit them. Let non-party persons be student leaders.

Published in Prout in a Nutshell Volume 1 Part 5