Category Archives: Global crisis

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 Debt Crisis

Countries in black are already in debt crisis. red denotes a strong risk, orange denotes a real risk.
Countries in black are already in debt crisis. red denotes a strong risk, orange denotes a real risk.
[PROUT Globe] – The term ”debt crisis” describes the situation where countries are unable to pay their foreign debt. Topically, African and Latin American countries have been compelled to spend the major part of income from their exports on paying off foreign debt, forcing them to take new loans to pay old loans. The result: the more they pay the more they owe, and the less income from exports goes towards internal development in those countries.

At present, one in four of the world’s countries are in a debt crisis or near to it. These 50 countries total 436 million people. As clear from recent developments in Europe, one country’s debt crisis affects its neighbours, other countries in the region, and directly or indirectly the rest of the world. In this way, the continents of Africa and Latin America are particularly hard hit by the debt crisis, which continues to affect the entire world as well.

Under exploitative capitalism, massive debt does not equal debt crisis. The Economist's debt clock displays a running account of accumulating national debt all over the world. It indicates that the greatest debtor nations are not those who are in or near debt crisis. Rather, most of the countries in the debt crisis zone are poor and have relatively little debt compared to rich countries.

Hence, under exploitative capitalism huge debt = wealth and power.

Debt crisis is a vicious circle that needs to be stopped and set right. PROUT suggests the following remedies for ending the debt crisis:

•    A system of basic protection of local economies should consist of both prioritising local produce and prohibiting exports of local raw materials.
•    Further on, a system of cooperative free trade should be evolved to remove import- and export duties on consumable commodities, but only once basic self-sufficiency is attained – i.e. countries that are basically self-sufficient may engage in such free trading.  This means that overproduction in one place can be consumed by other countries.
•    Barter (exchange of goods) and not purchases by money transactions should be the preferred basis of trade among those basically self-sufficient countries.

As is evident from the above, PROUT is only possible in the absence of exploitative capitalism.

Further reading:

PROUT’s Rewriting of Protectionism and Free Trade

Trade for regional Self-reliance

Trade and Commerce

The Eight Principles of Economic Democracy

Dr Ravi Batra: Debt unraveling is the biggest pain in the world

Commentary: "A debt is a debt and it is a contract," Lagarde

Why Is Capitalism Taking So Long To Collapse?

The existence of powerful international bodies and their frequent interaction with world stage politicians, is the main structural reason that enables global capitalism today to somehow keep its head above water in an otherwise lost game.

[May 29, 2015] – All over the world, experts and laypeople alike are increasingly wondering about the apparent resilience of global capitalism. Against all odds it is still in existence, a coherent worldwide moneymaking machinery for the benefit of the 0.1% at the cost of the welfare and survival of the 99.9%.

So why doesn’t global capitalism go the same way as communism and join all other useless systems of the past in the junk yard of history?

Capitalist organisations

Perhaps the most obvious factor responsible for keeping global capitalism alive is that this is not 1929 when international capitalism was most prone to the natural ups-and-downs of speculative stock exchange markets.

International regulatory bodies were then mostly political. At world summits political issues remained prominent, while economic policy was still deemed to be a national concern. Today, it seems to be the other way around; economic and monetary policy dominates the world scene.

Frequent meets

Whereas a few decades ago the world's financial elite used to meet annually, in Davos, meetings between significant financial policy makers from all over the world are now more frequent and held on a needs basis. For instance, at the time of writing this piece, world finance ministers happen to be having another meet, this time in Dresden, Germany.

The first global financial initiative was probably the 1944 Bretton Woods conference where the ground-rules for commercial and financial relations among the world's major industrial states were established. Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), the forerunner to the present World Bank Group.

Among other important international bodies today we find the WTO, the EU with its Central Bank, and regional bodies for economic cooperation on all continents, such as NAFTA (North America), SELA (Latin America), AEC (Africa), APEC (Asian-Pacific), etc.

The Institute of International Finance (IIF) is one international organisation that deserves special mention. It is a global association of 550 big banks, insurance companies, central banks, pension funds, and other types of financial institutions. The mission of IIF is "to support our members in prudently managing risks and to advocate for regulatory, financial, and economic policies that are in the broad interest of our members and that foster global financial stability and sustainable economic growth," according to iif.com.

The existence of these particular international bodies, and their frequent interaction with world stage politicians, is the main structural reason that enables global capitalism to somehow keep its head above water in an otherwise lost game.

Disorganised majority

Add to this the numerous human frailties among “the 99.9%,” such as an insufficient sense of responsibility, poor factual knowledge due to the  persuasive power of commercial media, overwhelmed by fear of the apparent powers of the status quo, etc., and the reasons for the continuation of the present exploitative system become even clearer.

It is only a question of time however. Even if the structural and oppressive powers of capitalism are multiplied a hundred times, the fact remains that the basic fault line of the system remains as catastrophic as ever: There is not enough for even a single person’s greed, we just have to cooperate and capitalism is not the system for doing so.

Inevitable downfall

In 1987 P.R Sarkar gave his landmark discourse on Economic Dynamics, wherein he foresaw "the inevitable downfall of both capitalism and communism.” Later that night he was asked how long it would take for that to happen. Sarkar replied that the fall of communism was at hand, whereas the fall of capitalism would take just a little longer. He remarked that capitalism was a much older and therefore more entrenched system than communism. Sarkar also touched on the factors outlined above, that the capitalism of today is better equipped to handle a deep crisis than it was back in 1929.

Sarkar then made an undulating motion with his hand indicating several ups-and-downs, and commented that the fate of capitalism would vacillate like that for some time, until at one point, he said, “it will go down and only down and so far down that no one will see where capitalism went and it will never return.”

A severe stage

In the above mentioned discourse, Sarkar pointed out that when society's capital is concentrated in the hands of a few, the majority of people are exploited by a handful of people. When the exploitation enters a severe stage, a serious explosion takes place. "This explosion is known as a depression in the economic world. The concentration of wealth and particularly the concentration in the value of wealth is the fundamental cause of a depression," Sarkar elucidated.

He added, that when capitalists discover that their investments no longer yield expected profits, "then they stop rolling the money. This keeps the money immobile or inert in various ways. As the money does not roll, there is no investment, no production, no income and hence no purchasing power, and the situation becomes so dangerous that there are few buyers to buy the commodities," Sarkar concluded.

By Trond Øverland

“I’M Finished”

By Dr. Susmit Kumar

During economic recessions the United States reduces it interest rate. At the moment it stands at near zero in order to spur growth and reduce unemployment.

On the other hand, having to swallow the bitter pills of IMF, aid recipients are required to increase their interest rates by double digits, which leads to an increase in their unemployment rates and depresses their economies further.

During the 1997 East Asian economic crisis, a popular phrase was used to characterize the IMF and its policies: For the average person the actual meaning of IMF was “I’M Finished.” After watching IMF at work during the crisis, Joseph E. Stiglitz, the 2001 winner of the Nobel Prize in economics, wrote in April 2000:

I was chief economist at the World Bank from 1996 until last November, during the gravest global economic crisis in a half-century. I saw how the IMF, in tandem with the US Treasury Department, responded. And I was appalled.[i]

The IMF may not have become the bill collector of the G-7, but it clearly worked hard (though not always successfully) to make sure that the G-7 lenders got repaid.[ii]

It was after watching the IMF at work during this crisis that Joseph E. Stiglitz, the 2001 winner of the Nobel Prize in economics and chief economist at the World Bank from 1996 to 1999, expressed how appalled he was by the way the IMF and the US Treasury Department had responded (as quoted in the introduction of this book).

“The IMF may not have become the bill collector of the G-7, but it clearly worked hard (though not always successfully) to make sure that the G-7 lenders got repaid,” Stiglitz wrote.[i] It was perhaps he who described the crisis best:

The IMF first told countries in Asia to open up their markets to hot short-term capital [It is worth noting that European countries avoided full convertibility until the 1970s.]. The countries did it and money flooded in, but just as suddenly flowed out. The IMF then said interest rates should be raised and there should be a fiscal contraction, and a deep recession was induced.

As asset prices plummeted, the IMF urged affected countries to sell their assets even at bargain basement prices. It said the companies needed solid foreign management (conveniently ignoring that these companies had a most enviable record of growth over the preceding decades, hard to reconcile with bad management), and that this would happen only if the companies were sold to foreigners—not just managed by them.

The sales were handled by the same foreign financial institutions that had pulled out their capital, precipitating the crisis. These banks then got large commissions from their work selling the troubled companies or splitting them up, just as they had got large commissions when they had originally guided the money into the countries in the first place.

As the events unfolded, cynicism grew even greater: some of these American and other financial companies didn’t do much restructuring; they just held the assets until the economy recovered, making profits from buying at fire sale prices and selling at more normal prices.[ii]

In his book Globalization and Its Discontents, Stiglitz, who was also a member of the Council of Economic Advisers under President Clinton, described meetings where President Clinton was frustrated because an increase of one-quarter to one-half percentage point in the interest rate by Federal Reserve Bank Chairman Alan Greenspan might destroy “his” nascent economic recovery.[iii]

A comparison here with the actions of the IMF during the East Asian debacle is instructive: There, the IMF forced interest rates to raise by 25 percentage points—fifty times the interest rate Clinton complained about—for economies going into recession. The IMF argument for this enormous increase was that higher rates would make a country more attractive for investors.

In reality, it made the situation even worse. Generally, a crisis starts due to Western creditors’ refusal to roll over short-term loans out of concern about firms’ potential inability to repay their loans on account of high indebtedness. A large increase in interest rates, however, makes matters worse for these firms.

An increase in interest rates increases the number of ailing firms, causing an increase in nonperforming loans. Therefore, an increase of 25 points in interest rate is enormous and will thus have more catastrophic consequences.

Excerpted from Casino Capitalism: The Collapse of the US Economy and the Transition to Secular Democracy in the Middle East
Dr. Susmit Kumar, 2012.
Buy it and other books by the author here

Notes

[i] Joseph Stiglitz, “The Insider: What I Learned at the World Economic Crisis,” New Republic, April 17, 2000.
[ii] Joseph E. Stiglitz, Globalization and Its Discontents (New York: W.W. Norton, 2003), 208.
[iii] Ibid., 208.
[iv] Ibid., 129–30.
[v] Ibid., 109.

370: From Tragedy to Humility

By Taraka

Tsaalun chu vzmala ta trattay
Tsaalun chu mandinyan gattakaar
Tsaalun chu paan-panun kaddun grattay
Heyti maali santuush vaati paanay.
Lalla Ded

[Patience to endure lightning and thunder Patience to face darkness at noon Patience to be ground in a grinding mill Be patient, whatever befalls Doubting not, He will come to you.]

Article 370 of the Indian Constitution, which provides for special privileges for the state of Jammu and Kashmir, has been a topic of controversy in the Indian media for the last two years. The debacle of the Congress party (author of Article 370) in popularity and the recent elections has further fueled such discussion. The ruling BJP Hindu party has had the revocation of Article 370 on its agenda for a long time. Due to the longstanding movement for secession and the presence of various Muslim terrorist organizations sponsored by Pakistan, a climate of hatred has been created towards Muslim Kashmiris. Removing Article 370 is a way of the Hindus (who are in the majority) of telling the minority Muslims in Kashmir that they have no chance at all of independence from India and they should accept this or be crushed by military force. The dominant mood in media commentaries is that the Kashmiris need to be taught a lesson. A similar mood prevailing in the Israeli media regarding the Palestinians has led to the barbarous persecution of Gaza. The danger of Kashmir becoming another Gaza is a real danger as even the Kashmiri protestors are inspired by the Palestinians.

In India as in Pakistan, various right-wing think-tanks associated with religious conservatives try to create in the media a movement towards the crushing of all resistance to the rule of the corporate take-over of the country and this includes Kashmir. The so-called experts of these think-tanks like their role models in the United States are regularly invited into the media. Just as George W Bush inaugurated such experts into his administration, in recent days such “experts” have been installed in very important posts in the new Indian government. Naturally, some members of the BJP have a more mature and nuanced approach but this is not expressed publicly in the media.

While this drive towards the eradication of 370 is ongoing, on the other hand, since the resumption of elections in the 1990s in Kashmir, political parties have rallied support by a mission to restore the original status of Article 370 and gain freedom from the control of the Army and the Central Government. The rigged elections for much of the history of Jammu & Kashmir, the grave human rights violations by both the Indian Army and the various militant groups (documented by a number of human rights organizations), the repression of freedom of expression by both groups has created a traumatized population in Kashmir. The trauma was even more severely compounded by the ethnic cleansing of 250,000 Kashmiri Pundits from Kashmir. Various militant groups who talk of human rights in Kashmir and clamour for Azadi (“Freedom”) are guilty of participation in this heinous crime. Indian politicians have exploited the suffering of the Pundits but have done nothing meaningful to end this exile or allow them to live in dignity, protecting their culture in exile.

Sadly, the situation is as bad or worse in Pakistani controlled territories of Kashmir. There also, the repression of freedom, arrests, torture and so on is prevalent. Often naïve Indian Kashmiris who come to so-called “Azad Kashmir” find themselves under surveillance and if they criticize Pakistani rule, face arrest and torture. This is compounded by the fact that in the Pakistani constitution there was nothing like Article 370 and hence Pakistanis have been settled in Pakistani Kashmir in large numbers and bought up large amounts of land and control the local economy. As reports by Human Rights Watch have documented, the ISI, Pakistani army and various militant organizations have created a highly dangerous environment in Pakistani-controlled Kashmir. Elections were found to be similarly fraudulent with candidates only being allowed who were approvers of Pakistani policies in Kashmir. In 2006, the Asian Legal Resource Centre documented that in fact the ISI was involved in arresting the youth of Pakistani Kashmir and forcing them to become jihadis in Jammu & Kashmir. Those who resisted were tortured into submission. In the Pakistan controlled state of Gilgit & Baltistan, the repression is more severe as the tribal languages and cultures are quite different from mainstream Pakistani culture. This is why protests there have embraced the majority of society in this region.

The repression is combined with the most insidious form of repression – cultural repression. The repression of languages in J & K has a long history. As the esteemed linguist Shrii Prabhat Ranjan Sarkar has revealed, despite the efforts of the Sikh Maharaja Ranjit Singh, due to the opposition of the Kashmiri Pandits and Urdu scholars, the Dogrii language of Jammu could not be developed or gain official recognition (“A Scriptological and Linguistic Survey of the World”). The Kashmiri language enjoyed more freedom but not much support during monarchial rule. However after the arrest of Sheikh Abdullah in 1953 and the installation of the Indian puppet government of Bakshi G Mohammad (later removed due to massive corruption), Kashmiri was no longer in the school curriculum and no longer had official status. Instead Kashmiri was simply given basic recognition like other tribal languages like Balti and Shina. This strangling of the Kashmiri language and culture was a heinous crime as this kind of crime paves the way for the degradation and exploitation of a civilization.

The best means of communicating human expressions is through one’s mother tongue, as this is most natural. If people’s natural expression through their mother tongue is suppressed, inferiority complexes will grow in their minds, encouraging a defeatist mentality and ultimately leading to psycho-economic exploitation. Thus, no mother tongue should be suppressed. (Developmental Planning Proutist Economics)

IND2248B.JPGThis low self-esteem causes a ‘terrorism as an effect of helplessness complex’ when people are not given an opportunity for civilized and orderly agitation due to military rule, as per the founder of new science of social psychology, Shrii Prabhat Ranjan Sarkar has noted (Discourse 6, Shabda Cayaniká Part 1). We should note that this policy of repressing Kashmiri was in favour of Urdu. Amazingly, in J & K, it is Urdu that is the official language that is taught and supported by the government – a policy that the Central Government, the mainstream Kashmiri parties and the militants all agree upon. This is also practiced in Pakistani Kashmir since linguistic imperialism has been endemic in Pakistan since the day it was formed. The Indian Government has endeavored to propagate Hindi by creating signs in Sanskritized Hindi (with the Nagrii script) that few Kashmiris understand. Furthermore the Advisory Boards constituted by state governments on education most of time were comprised of primarily non-Kashmiri speakers as per a report (January 18, 2014) in the Greater Kashmir newspaper. Since 2008 Kashmiri has been re-introduced into schools, but the authorities have not shown much interest in doing this in a serious, comprehensive manner.

The tragedy of this is that Kashmiri is one of the most unique languages and has one of the richest traditions of literature not just in India but in the world. From the beginning there was the omnipresent influence of Kashmir Shaivism in contrast to the lesser influence of anti-social, more dogmatic Vedanta that is influential in other languages. This Shaivism was based on Tantra and hence the spirit of freedom from dogma and arduous spiritual practice was innate to Kashmiri civilization. Furthermore in Kashmir, Sufism blended with this Tantra in a most unique syncretic or synergistic way not seen elsewhere but in Bengal. As the great Sufi Nund Rishi sang,

That Lalla of Padmanpora drank nectar in gulps
She saw Shiva all around her,
In each and every object.
O God, please bless me
With such greatness.

Hence the Sufi tradition of Kashmiri is far more developed than in Urdu and the Tantric tradition of Kashmiri literature is far more developed than in Hindi. In contrast to Kashmiri, both Hindi and Urdu have been strongly influenced by communalism and religious superstition – especially in modern times. The demise of Kashmiri has gone hand-in-hand with the rapid rise in Salafist Muslim fundamentalism in Kashmir and the slow rise of Hindu extremism in Jammu that has attacked Kashmiri Sufi-Tantric synthesis patiently evolved over the centuries.

Bondage of Knowledge

Jiṋánam bandhah – ‘Knowledge is bondage’ says the second sutra of the Shiva Sutras revealed to the great yogi and devotee Vasugupta on Mahadeva Mountain near Shrinagar. This is perhaps never more true than in the case of Article 370 itself. Herein, we shall simply and briefly explore the history and legacy of 370. There are countless “experts” in the media, in political life, in think-tanks, in academia who pontificate on this topic. Long ago, the founder of Kashmiri Sufism, Nund Rishi pointedly remarked about these experts.

You’ve crammed the books only for worldly ends.
Your learning never prevents you from foul deeds.
You always think in terms of trapping each other.
Your opinions are all wrong because
You consider yourself among the chosen elite.
I fortell with authority that you shall not reach the goal.

All these people think they know what has happened and what should be done. However, the Kashmir conundrum has not gone away and shows little sign of doing so. In reality the so-called knowledge of those involved in Kashmir in the past as well as the present is the very cause of the problem. We see Congress leaders and Central and state politicians as well as militant groups speak in a ritualized jargon (with clichéd phrases) that is more of a monologue or rant than an attempt at a conversation. On the other hand we hear the poisonous speeches of Hindu and Muslim extremists. In such an environment, the very experiences of those scarred by this conflict are a source of psychological wounds that prevent genuine self-understanding, let alone communication or enlightenment. The psycho-therapist Shobna Sonpar who visited and wrote a detailed psychological study of the traumatized society of Kashmir, noted in an interview with Outlook magazine,

Interlocuting has to do with conversation and I imagine that the most important task is to facilitate a change in the cliched discourses on all sides so that a genuine conversation emerges. It is only through genuine conversation that difficult issues can be talked about without self-righteousness, raised hackles and sulks. Listening without a personal agenda and without having to please some constituency is essential…In my practice, I find myself urging warring couples to do what it takes in their heads and in their emotional reactivity to maintain a stance of respectful curiosity about the other instead of blame and judgement. It is in the process of practicing this — that the ability to read one’s own subjective state without defensiveness and that of others without assuming malign intent — a truly reflective space, becomes possible. Psychologists call this capacity mentalisation. Also, there is the need to have conversations with the government and other sections in India, which perhaps poses a more formidable challenge.

Hence the way forward lies in the so-called experts learning the humility to listen and control the race to judgement and condemnation. The value of knowledge lies in its ability to create the wisdom to act in ways that establishes peace based on justice, equality and economic democracy. And the value of any wisdom lies in its ability to create a genuine society bound by ties of indomitable affection and not coercion. In reality the countless experts and speakers on this issue have truly been found by history to have precious little wisdom because of their failure after 60 years to create any genuine love both within Jammu & Kashmir and between the people of Kashmir and India and in Indian society or the world in general. As Shrii Sarkar has noted,

To build something on the basis of humanism means to build something on the basis of real love for humanity. It is not possible to build a genuine society, one which is truly dedicated to collective welfare, if its most intelligent and active members, or those who are more developed than ordinary people, constantly evaluate their contribution to society in terms of profit and loss. When love for humanity is the primary concern, the question of individual profit and loss becomes secondary…In a healthy society where the only binding ingredient is genuine love, how will it be possible for coercion or legal compulsion to manifest this love, the true expression of society? (“Social Justice”. Human Society Part 1)

The story of Article 370 in the Indian Constitution starts with the withdrawal of British governance over its colonies in 1947. This era of Partition, communal genocide, vast exoduses of millions of refugees has created trauma in all involved countries from which they have never truly recovered. Part of the chaos was due to the fact that while British India was clearly divided, the fate of the Princely States governed by local monarchs was never clearly stated. While Churchill (out of typical malice towards India) wanted each Princely State to become a separate nation, Mountbatten worked to bring the Native States in line with either Pakistan or India. Princely states on the Indo-Pakistan border were faced with serious problems. In the case of Junagdh (Gujarat), the Muslim ruler acceded to Pakistan but India took control of it by force on the grounds that it had a Hindu majority.

Kashmir was another such case. The Maharaja Hari Singh was the son of Golap Singh – a Dogra chieftan to whom the British sold the province of Jammu & Kashmir. Golap Singh had then conquered Laddakh from Tibet. Both Golap Singh and his son favoured their Rajput brethren and even brought in Rajputs as rulers from outside the kingdom. Not just the majority Muslim population but even the Kashmir Pundits were repressed. In reaction, the Muslim Conference movement emerged protesting the injustices to the Kashmiri people. In response to the urgings of Nehru, the name was later changed to the National Conference by its leader Sheikh Abdullah who became close friends with Nehru. In 1947, when independence came to Kashmir, it was not welcomed with celebrations. Two centuries before, Habba Khatun, the famed, tragic poetess of Kashmir had sung,

In western climes, Freedom comes
With a shower of light and grace,
But dry, sterile thunder is all
She has for our own soil.
Poverty and starvation
Repression and lawlessness –
It’s with these happy blessings
That she has come to us.

In contrast to other rulers of princely states, the Maharaja declared that he wished Kashmir to remain independent of India and Pakistan like Switzerland. However, while Switzerland was a society based on internal localized democracy, strong defense and a population committed to neutrality, Kashmir was different altogether. The National Conference continued its protests against the Maharaja. In this crucial period, the repression of protests was more brutal than usual. This allowed the Pakistani government to use these crimes against Muslims to propagandize its population into supporting first cutting off supplies to Kashmir (which had few other outlets at that time) and then by sending huge numbers of tribal warriors from the Pashtun area of Pakistan into Kashmir. Before 1947, Jinnah had visited Kashmir and based on that visit became determined to make it part of Pakistan. Pakistan had also worries that if India sent in troops to the state, Pakistani Punjab would be in danger and hence in this case offense was the best defense. The Maharaja was unable to deal with such large forces of bandits who committed many atrocities on the Kashmiri people irrespective of whether they were Hindu or Muslim. The Maharaja was then forced to ask for military help from India. As per an account by an Ambedkar scholar Dr. K Jamanadas, Nehru was going to angrily dismiss this appeal for help when Sheikh Abdullah dissuaded him. Sheikh Abdullah was not attracted to the militant Islam of Pakistan’s Muslim League. The people of Kashmir as per most reports also were in favour of accession to India. Accordingly, the Maharaja was told that he would only get military aid if Kashmir acceded and became part of India. The Maharaja, who at the time faced more than half of kingdom under the rule of marauding bands from Pakistan, gave in and signed an Instrument of Accession to India. This document was largely the same as what other rulers of Princely states had signed. However, the document did not commit itself to the future Indian Constitution. All the persons involved clearly agreed that this accession would become legitimate after a plebiscite by the people of J & K. The Governor General’s letter of acceptance of the Accession on the 27th October, 1947 promised that the state’s accession will be discussed with its people. The Government of India White Paper on J & K renewed this commitment.

This accession was however not accepted by some nations and certainly not by Pakistan. The Indian army rapidly defeated the marauders and could have pushed them out of Kashmir. Nehru told them to halt and worried about international condemnation, against the advice of Dr. Ambedkar, referred the matter to the UN. This was a very foolish decision indeed, because the UN was essentially created by the United States and at that time was largely controlled by it. Pakistan was created by the British as a military base that was inherited by the US. So it was natural that the UN would be more prone to take the side of Pakistan especially due to India’s strong ties with the Soviet Union. The UN asked Pakistan and India to withdraw troops so that the Kashmiri people could vote. Pakistan of course refused and ultimately negotiated a ceasefire leaving them in control of almost half of the country. The famed proverb that ‘possession is 9/10ths of the law,’ thenceforth granted legitimacy to the barbaric conquest of more than a third of Kashmir by Pakistan.

The story of the negotiations of Article is a complex affair. What was unusual is that the Maharaja was left out of the negotiations, and even more significantly so was the Home Minister Patel. The Article was based on personal negotiations between Nehru and Sheikh Abdullah. Nehru has been blamed for sidelining Patel in this way, causing Patel to offer his resignation. However, on page 312 of his memoirs Aatish Chinar, Sheikh Abdullah claimed,

“On November 4 1947, Patel along with Mahraja of Patiala & Defence Minster Baldev Singh visited Jammu and had a talk with Mahraja. On 5th November a proclamation was made in the city informing the Muslims desiring to go to Pakistan to assemble at police lines. In response men, women & children came in large numbers. They were herded in around forty trucks with each truck holding around sixty people. On reaching a hill side near Samba, the young women were abducted while the rest were mowed down by machine Guns already set up there.”

Patel has even been accused of allowing diversion of government arms & ammunition to RSS militias (see Nehru’s letter to Patel dated 30th December 1947). Whatever may be the truth of these charges, it is clear, that to put Patel in charge of negotiations with Kashmir would have most likely led to their demise. Patel in forcing acquiescence to the Indian Constitution of other princely states had used strong-arm tactics that have made him popular with those with fascist inclinations. In the case of the Raja of Alwar (Tej Singh Prabhakar), who was avoiding entry into the Indian Union, Patel arrested him for supposed involvement in the assassination of Gandhi and searched his palace for treasure. Needless to say, such approaches were not possible with J & K which was a huge region partly occupied by Pakistan and under review by the United Nations.

Despite this, the secretive way in which these negotiations were carried out without consulting other members of the Constituent Assembly, let alone the people of Kashmir must be condemned. Here again we see the vanity of the persons involved. Nehru confidently thought with typical British duplicity that he could lull the apprehensions of Abdullah and at the same time, covertly incorporate Kashmir into India. At the same time Nehru was prone to flights of sentimental romanticism about Kashmir which was his birthplace. Perhaps Nehru biggest mistake was to make the entire Kashmir question dependent on the whims of one man. Sheikh Abdullah was not clear of what he wanted and that was the crux of the problem. He wanted to be in secular India but at the same time he feared Kashmir being crushed by the Hindu majority.

Shrii Prabhat R Sarkar explains this ambivalence saying,

Most of the minorities could not rely on the Hindu majority of the country. That is why – out of fear complex – they wanted to divide the country. (Dangers of Communalism)

Sheikh Abdullah wanted both to be a part of India and at the same time be independent. While this is not normal in the British constitutional tradition, we can note in passing, that in the Soviet Union and Russia today, there are separate republics with their own flag and separate government under the national government. It is true however, that in practice their liberty was often minimal – particularly during the era of Stalin.

It was in this context then, that 370 was created in which the role of the Central Government was forbidden except in the areas of Defense, foreign relations and communications. This was a continuation of what the Maharaja declared in the Instrument of Accession. What was important about Article 370 was that it forbade any changes to this outline of powers except by the President of India with the permission of the J & K Constituent Assembly that would be drafting the Constitution of the State. This deference of power to the J & K Constituent Assembly and the very fact that Kashmir would be having its own Constitution was a remarkable development that was decided in secret by Nehru and Abdullah. This Article also banned non-Kashmiris from owning property in Kashmir. After Article 370 was drafted, Nehru instructed Abdullah to discuss the implantation of 370 in the Constitution with Ambedkar who was the Law Minister at that time. Ambedkar was, as always, a man of independent mind with unshakeable convictions. As reported by Balraj Madhok, Ambedkar bluntly told Abdullah,

“You wish India should protect your borders, she should build roads in your area, she should supply you food grains, and Kashmir should get equal status as India. But the Government of India should have only limited powers and Indian people should have no rights in Kashmir. To give consent to this proposal, would be a treacherous thing against the interests of India and I, as the Law Minister of India, will never do it.”

Ambedkar refused to have anything to do with the drafting of Article 370 and in the debate in the Constituent Assembly, he refused to speak. Hence the drafting of 370 went into the hands of N Gopalaswami Ayyangar, the former Prime Minister of Kashmir from 1937 to 1943. It was at this time the Nehru left the country. Since Ayyangar was not capable of dealing with a mercurial personality like Abdullah, Patel was privately consulted by Ayyangar for advice. It was at this time that a highly irregular event took place as documented by A G Noorani in his edition of documents on the Constitutional History of Jammu and Kashmir. At the very last minute, changes were made in the wording of Article 370. Without Abdullah being informed, this altered document was presented to the Constituent Assembly as the final document. Abdullah only found out about it afterwards and wrote an angry letter to Ayyangar who protested that the change was simply a minor one. It was the opinion of A G Noorani however, that this change gave the Prime Minister power to suspend the government of J & K which Nehru later used against Abdullah in 1953. It remains to be seen who was responsible for this change – Ayyangar or Patel. Furthermore a detailed legal analysis is required to substantiate the charges of Noorani.

The next step was to present 370 before the Constituent Assembly. Nehru personally phoned Patel and asked him to do this. Patel has been called an “iron man” but this was one clear case when he clearly violated his own personal convictions. When he felt this article was inimical to the future of India, should he have arranged for it to be passed – be it out of friendship for Nehru or out of ambition for Cabinet ranking in the future government? The fact remains that in the end, major responsibility for Article 370 lies with Patel. In his article for the India Defense Review (V26.1) Major General Thapliyal quotes the description of the stormy meeting in the Constituent Assembly from the writings of V. Shankar, the personal secretary of Patel,

“The meeting was one of the stormiest I have ever witnessed barring the party meeting which discussed the proposition relating to Rajaji becoming the first President of Indian Republic. The opinion in opposition to Gopalaswamy’s formula was forcefully and even militantly expressed and the issue even brought in the sovereignty of the Constituent Assembly to draw up the Constitution without being tied down to the apron-strings of the Kashmir State Constituent Assembly. In such a situation even Maulana Azad was shouted down.

The Party was in uproar. The Sardar (Patel) had to plead that because of the international complications, a provisional approach alone could be made leaving the question of final relationship to be worked out according to the exigencies of the situation and mutual feelings and confidence that would have been by then created. Once the Sardar had taken charge, all opposition to the draft was silenced”

Immediately after the passing of Article 370, the first order of the President of India was passed under Article demarcating all the different areas under the realms of Defense, Foreign Relations and Communications. In August of 1951 polls were held for the Constituent Assembly of J & K. The National Conference won 75 seats although unconfirmed claims were made that electoral fraud was present to some degree and under 5% of the population is said to have voted and the elections were boycotted by the Hindu party of Jammu, Praja Parishad. This election was used by India to claim the support of the people of J & K for being a part of India. However, the United Nations Security Council stated in its resolution 91 dated March 30, 1951 that it would not consider elections held only in Indian administered Kashmir to be a substitute for a free and impartial plebiscite. This was once again an indirect response to the increasing unpopularity of Nehru with the Anglo-American establishment at the UN. In the negotiations of Abdullah regarding the drafting the constitution of J & K clear division started to emerge between Nehru and Abdullah. Abdullah expressed that he was beginning to feel that Kashmir had only two choices – to become independent or become wholly swallowed up by India. Nehru in a letter tried to allay his feelings but this was to no avail as Abdullah realized that 370 was included as one of the Temporary Provisions of the Indian Constitution.

Furthermore the Indian elections of 1952 saw the emergence of the Bharatiya Jan Sangh led by Shyam Prasad Mukherjee. This Hindu extremist party (ancestor of the BJP) made the removal of Article 370 from the Indian Constitution as one of their key issues. Even after elections the campaign against the “Three Nation Theory” only became larger and galvanized support from across India. Mukherjee was banned from visiting Kashmir but Mukherjee claimed that the National Conference was persecuting Hindus in Jammu. While normally, such claims by Hindu nationalists are best taken with large doses of salt, Mukherjee was of a very different character than later leaders of Hindu parties. Even his strong ideological opponent, Subhas Chandra Bose, respected his moral integrity. The authenticity of Mukherjee’s charges needs to be investigated by historians. Mukherjee planned to illegally enter J & K and went on a hunger strike protesting the fact that Indian citizens for example needed an ID card to reside in J & K. Mukherjee was arrested on May 11th, 1953 while trying to enter the state. On June 23, 1953 the hospitalized Mukherjee was declared dead. This death, which many (with good reason) felt to be murder, only emboldened the Hindu nationalists to make the revocation of 370 as part of the heart of their mission for India.

Seeing the hostile mood in the country, Abdullah began to feel there was no hope for Kashmir in India. Accordingly Abdullah began to propagate independence for Kashmir. This prompted Nehru to dismiss and arrest Abdullah for which there is said to be some evidence in the autobiography of B M Mullick (head of the Intelligence Bureau). On August 8th 1953, the regent of Kashmir, Karan Singh (son of the Maharaja) dismissed the cabinet of Abdullah on the grounds of divergence in the cabinet. While there was serious divergence in the cabinet, these were most fraudulent grounds for the dismissal of a government. Abdullah was denied the opportunity to prove his majority in the J & K Assembly. Abdullah was arrested but Mirza A Beg, his follower created the Plebiscite Front on 9th August 1955 to fight for the release of Abdullah and to hold a referendum on whether Kashmir should remain part of India. Accordingly Abdullah, Beg and others were arrested on charges of the Kashmir Conspiracy Case. The intelligence agencies had collected letters and recordings of speeches planning to unite J & K with Pakistan. Abdullah was to spend nearly eleven years in prison before being released and the charges being dropped. A G Noorani uncovered a letter from Nehru to the new National Conference. The letter shows that for several decades, the NC was to become a pliable tool in the hands of the Prime Minister.

Thus began the dark age of the history of J & K relations with India. B K Nehru (former Governor of Kashmir) in his memoirs, Nice Guys Finish Second, openly declared that the elections from the 1950s to the 1970s in the state of J & K were openly rigged to make the Congress puppets win. While certain leaders like Bakshi Mohammad did endear themselves to the people by their attempts to create harmony between the Muslims and the Kashmir Pundits, their overwhelming corruption and subservience to India soon made them infamous. It was in this climate of state repression, censorship and fraudulent government that the Constitution of J & K was created. On February 15th, 1954, the Constituent Assembly of J & K unanimously voted to support the accession of the state as part of India. Needless to say, the opinion in the state and internationally was hardly unanimous.

This J & K constitution itself, was regularly changed by the Indian government by directives given by the President of India. In December 1963, the authorities in the Hazratbal shrine claimed that the supposed relic of the hair of Prophet Mohammad had disappeared from the shrine. This led to widespread protests and violence in India and Pakistan. The hair reappeared later under mysterious circumstances. This incident began to show the power of militant Islam over the people of Kashmir and some Kashmiris still believe Nehru was behind this theft. The preceptor of Neohumanistic love and union of humanity, Shrii Prabhat Ranjan Sarkar, expressed the feelings of many rational people in India over these killings over the theft of a strand of hair saying,

When people’s ideas are so fixed that they will not entertain any discussion or argument it is called “fanaticism”. It is said that religion is a question of faith, not logic. In India, there are many religious fanatics. Due to religious fanaticism and bigotry, there have been innumerable violent clashes in the past. How repugnant that thousands of people were killed on the pretext of a single strand of hair! These fanatics never bothered to listen to the beliefs of others, and moreover, for them it is a sin to listen to others. In one sense they are worse than animals, because animals do not harbour any communal feeling. Physical sentiments are predominant in such religious expressions. People should keep aloof from the bondages of religion. Behind all religious dogma, physical considerations are dominant. (“How to Unite Society”)

Article 370 remained a topic of controversy in India and in 1964 there was an attempt in Parliament to remove this from the Constitution. What was most revealing was the statement of the Home Minister G L Nanda to Parliament on the 4th of December. It was claimed that 370 was in fact a dynamic document and was continually being altered by directives being passed by the President. Nanda claimed that by this policy of deliberate “erosion” nothing was left in fact of the original Act as the Central Government had taken over many areas of the state, amended the Constitution of J & K and amended 370 itself to replace the rule of the elected head of the J & K Legislative Assembly with the rule of the Governor appointed by the Central Government. In addition areas such as labor, legal, medical, trade & commerce, price control, newspapers & books were being increasingly controlled by the Central Government. Nanda then concluded that 370 was just a shell. Nanda claimed that in fact 370 was in fact a tunnel to covertly introduce more and more, the rule of the Indian constitution into the rule of J & K. This public declaration of manifest legal duplicity and knavery was indeed a blunt bludgeoning of whatever faith Kashmiris may have had in the commitments of Indian leaders to preserve 370. In his excellent book Noorani produces the proceedings of the Lok Sabha on the 27th of November 1963, when Nehru declared that 370 was only a temporary provision and that

Article 370 has been eroded…There is no doubt that Kashmir is fully integrated. We should allow erosion to go on and not end this article.

Here we see the classic British duplicity that became the hallmark of Congress culture of trying to please-cum-deceive all sides. And it has indeed been a tangled, bloody web the Congress has woven out of its history of deceit with regards to 370. Ironically Nehru had himself written to the President on the 29th of July 1952 that it was not clear from 370 that the President may keep issuing notifications and directives several times after the creation of 370. Rajendra Prasad concurred with him and expressed the opinion that 370 was designed to be used only once before the formation of the Constituent Assembly. Despite this however, Nehru forced President Prasad to pass another order on the 15th of November 1952 and that is how the entire process began. The process culminated in a ruling by the Supreme Court in 1968 which said that Article 370 can be used to issue Presidential orders because the J & K Constituent Assembly no longer exists and that since the J & K Constituent Assembly did not terminate 370, it was still valid. This ruling, was in contradiction to its own earlier ruling (in 1959) the J& K Constituent Assembly would determine the relations between the state and the Centre and the use of 370. The 1968 ruling was certainly not held with much regard by unbiased Indian and international legal scholars.

In 1974, Indira Gandhi entered negotiations with Sheikh Abdullah which led to what has been called the Indira-Sheikh Accord. The accord confirmed that the state of J & K was indeed governed by Article 370 and that the power to pass legislation resided with the state with the exception of certain areas. From the Central Government’s point of view what was crucial is that J & K should accept the system of a Governor being appointed with the centre. This gave them the power later to dismiss governments at whim. In the elections of 1977 in the state, Abdullah won by a huge margin to the chagrin of the Centre. Abdullah had learned from his Delhi masters and instituted press censorship and gave the police the power of detention for up to two years without appeal. He even ordered Cabinet members to swear oaths of loyalty to him. The subversion of the J & K constitutional democracy was institutionalized under his rule. In 1981 handed over the leadership of the feudal National Conference to his son Dr. Farooq Abdullah. Indira Gandhi tried to dismiss the Abdullah government by force after Dr F Abdullah won the 1983 elections marked by widespread violence and accusations of rigging. Governor B K Nehru refused and so she appointed Malhotra Jagmohan Governor.

On the 31st of July 1984, Governor Jagmohan swore in the puppet government of GM Shah. It was at this point that serious resistance began to manifest in the Kashmiri people, many of whom had been educated and learnt to expect more from their so-called democracy. The violence started with empty buildings being blown up by local protestors. However Pakistani militias quickly took over these movements, made them increasingly violent and carried out a program of terrorization, propaganda and Islamization of the Valley. The people who were living in an ideological vacuum in which communism and liberal democracy had shown themselves to be increasingly fraudulent – took to this new Islamic fundamentalism. People who had nothing to believe in thought that by Islam they could attain freedom and true brotherhood with their fellow Muslims worldwide. This was one of the many delusions that were lost in decades of bloody barbarism that left the Kashmiri people trapped between the violence of the jihadis and the Army – like their fellow victims of British divide-and-rule in Northern Ireland. Cowardly attacks on minorities are always the easy way out to express rage and humiliation. In Kashmir this truism manifested in increasing hostility towards the Kashmiri Pandits. Kashmiri Muslims were threatened to make them break contacts with sadhus of Kashmir Shaevism and the bonds between the two communities were deliberately severed one by one. Balraj Puri the author of a book on Kashmir who was present at that time accused the Central Government and Governor Jagmohan of allowing the spread of hostility and intimidation as well as the spread of rumours of atrocities without making any attempt to protect the Pandits or to reassure them. The ensuing flight of the Kashmiri Pandits was the crowning infamy in the history of 370. While Muslims also fled the militancy they returned but the Pandits could not. They not only lost their homelands they also lost their culture as their children grew up speaking Hindi and cut off from the mainstream of Kashmiri life. Various governments, including the BJP government for two terms in power, made promises to repatriate the Pandits but in fact as Chief Minister Omar Abdullah recently said, in 2012 his government created a program to financially support and help the Pandits resettle in Kashmir but the Congress government never bothered to reply to this proposal.

In 1997 the PDP party of Mufti Mohammad Sayeed carried out a detailed study of the erosion of 370 and made a similarly detailed proposal to restore the original vision of Article 370. Countless Kashmiris voted for them seeing this as a non-violent way to end the Armed Forces Protection Act which has made enemies of so many innocent Indian citizens in a number of Indian States. As usual when the Central government changed this process ended and again the violence started but this time it aroused the mass protests as well. In 2009 again proposals for restoring autonomy were raised with the Centre. Typically the Congress divided the proposal in different parts to be studied by different committees who as usual took no action. And then in the recent elections once again 370 arose in public conversation but this time in India as a symbol of frustration, anger and sometimes hatred the Indian people felt for the unending violence in Kashmir and for the betrayal they felt by the open advocacy of the protest leaders for making J & K part of Pakistan.

People in Pakistan and India, both talk with the same passion about Kashmir condemning the violence of the other country and remaining blind or justifying the violence of their own country. In essence, Jammu and Kashmir has become the crucial lance plunged in the heart of both India and Pakistan. It is a lance that cuts both hearts – unites both hearts. No one knows how to stop the hate, the pain and the killing. Yet they all claim to know the truth about Kashmir. Their knowledge truly is what binds us all to the cycle of violence. The saint Jnaneshvar commenting upon the idea that knowledge is bondage, said just as the pupil of the eye can see everything except itself, so also the “wise men” know everything except themselves. So long ago Lalla Ded – the Grandmother Saint of Kashmir said,

Shiv chhuy thali thali rozan
Mo zaan Hyund ta Musalaman
Truk ay chhauk ta pan panun parzanav
Soi chhay Sahibas sati zani zan.
Shiva is all-pervading and present in each particle.
Never differentiate between a Hindu and a Muslim.
If you are really shrewd and intelligent,
Know THY SELF.
Therein lies real acquaintance with God”.

Darkness at Noon

So now the question arises about what is to be done. As usual the question is not – what is to be done to create unity and brotherhood between India and Kashmir. It is not about how to end the hate and violence. The question instead is simply about whether Article 370 should be removed and whether it can be removed legally. The BJP brought up the same issue the last time it was in power and issued the same threats but in the end did nothing to end 370. This time they have a majority in the Lok Sabha and only need a few partners in the Rajya Sabha to pass any bill they choose. The Congress which is ruling the state in alliance with the National Conference as usual is urging people to do nothing. Several legal scholars have expressed doubt as to whether it is even possible by bonafide legal means to end Article 370.

As we have seen based on the Supreme Court judgement of 1968, using Point 3 of Article 370 itself, the President can bring 370 to an end since the Constituent Assembly of the state no longer exists. Such a move however will not be respected by legal scholars. Any other route to ending 370 is not possible due to the unique safeguards inserted to protect 370 in the Constitution. Firstly Article 368 under which the Constitution is amended clearly states that no amendment can be brought relating to the state of J & K unless it is applied by an order from the President. Regarding such a Presidential order, clause 1d of Article 370 mandates it must be in “consultation” with the government of J & K. However, consultation is held by some legal experts to be different that concurrence or agreement. As per this view the President simply has to consult with the J & K government and then go ahead and pass the Presidential order ending 370. Even more crucially, Presidential orders and the Indira-Sheikh Accord have identified the “Government” of the state with the Governor appointed by the Centre. Hence then the President simply has to consult with the Governor of the state and then pass the order regarding ending 370 and based on this order Parliament can amend the constitution to end 370. However the changing of the status of the Government of the state from the head of the legislature of J & K to the Governor appointed by the centre has been judged by many to be an illegal move and it is doubtful even the most ardent anti-370 MP would proceed in this fashion. As Nehru said, 370 has been eroded. The real question is then, do we deal with 370 as it originally was or do we deal with 370 as it exists today after decades of erosion through Presidential orders.

Another issue raised by J & K Chief Minister Abdullah in recent days is that of Article1 of the Indian Constitution which identifies Kashmir as a part of the Indian Union. It has been said that Article 1 applies to Kashmir only because of 370 and that if 370 were removed, then the status of Kashmir in India would have to be re-negotiated because 370 is the only link between Kashmir and India. However as Advocate J. Said Deepak points out, the State Constitution of J & K of 1957 clearly states in its preamble and in Article 3 that the state is an integral part of the Union of India.

Other critics have declared that the Constituent Assembly of J & K would have to be reconvened. However this is not true because article 3 of of 370 clearly says that by Constituent Assembly it refers to the particular Constituent Assembly mentioned in clause 2 of 370. Clause 2 says that this particular Constituent Assembly is the one that will draft the constitution of J & K. Obviously then there are two alternative conclusions. Firstly that the President could have only ended 370 before the creation of the J & K state constitution and that afterwards, 370 cannot be revoked. The second conclusion would be that after the end of the J & K Constituent Assembly, 370 can be revoked simply by the order of the President. The fact that 370 itself was placed in the constitution in a section dealing with temporary measures shows that conclusion 1 must be false. Often in considering such questions a crucial issue is what was the intent of the writers of a particular constitutional clause? Since 370 was created by Nehru and Abdullah in private discussions and since 370 was written by Ayyangar with some consultation with Patel, this question cannot be answered without a great deal of historical research, if indeed it can be answered at all.

Finally we should note the elephant in the room avoided in discussions pro and contra 370, is the very constitution of J & K itself. What will happen to this constitution once 370 ends? There is no clear answer on this issue. Many or most of the controversial parts of 370 are in the state constitution. How will they be removed by the Centre? This reveals the complete short-sightedness and grandstanding of the critics of 370. We should note that every state of the United States of America has its own constitution, own anthem and own flag. This is not a cause of disunity in America, then why should it be in India. The fact is why should not each state have their own identity? Rather than trying to destroy the independent identity of J & K why not guarantee and foster the identity of every language and community in each state via a state constitution? Why should Indians simply decide no or yes to 370 or any other issue? Why not collectively talk and create a national and state consensus about a new India and new Indian constitutions?

The next issue is why is 370 such an object of animosity in India aside from the fact that it gives the state some form of autonomy from the control of the Central Government. One complaint is that the Centre does not have the power to suspend the state government in case of a national emergency since the provisions for emergency in the constitution are not applicable to J & K. This is a ridiculous complaint since the history of the state shows that, by hook or crook, the Centre has been able to suspend the state government time and again. The question we need to raise is – should the Emergency power of the Centre be expanded to cover J & K or should they be minimized for the whole of India. In view of the increasing “erosion” of civil liberties during what has been called the “silent emergency” of recent Congress regime and possibility of the acceleration of this erosion in the present government this is a far more serious issue than 370. One recommendation made by Shri Prabhat R Sarkar for the reformation of the Indian Constitution was that

The President may continue the period of emergency with the approval of Parliament for a period of six months, and with such a Parliament the President may continue a period of emergency for not more that two years. (“Requirements of An Ideal Constitution”)

Another objection to 370 is that an Indian from outside the state is not allowed to buy property in the state but Kashmiris are allowed to buy property anywhere in India. Some politicians have complained that because outsiders are not allowed to buy property in Kashmir, tourism could not be developed. But let us look at Uttarakhand where outside exploiters were allowed to loot the land, destroy the enivironment, leaving the local people as mere peons in the tourism industry. The result was the devastating natural disasters of last year – is this the future we want for Kashmir? Furthermore while people complain about 370 property restrictions, they seldom take notice of the fact that Article 371G of Constitution bans Parliament from passing any legislation regarding the ownership and transfer of land in Mizoram unless the legislative assembly of Mizoram first passes a resolution authorizing this. As Justice Sachar has pointed out, that when this article was incorporated in the Constitution in 1986, BJP supported it. Was this not indeed a case of double standards – one for Christian Mizos and another for Muslim Kashmiris? Furthermore Article 371A of the constitution makes the exact same provision banning Parliament from interfering in the issues of land in Nagaland unless the Legislative Assembly of Nagaland. So once again why should Naga people have special rights if Kashmiris should not? We should also note that 371A and 371G orders that the administrations of civil and criminal justice is to be governed by Naga and Mizo customary law respectively. So, as the critics of 370 it is a crime that Kashmiris are governed by their own laws but this is acceptable when it comes to the Nagas and the Mizos. What is even more discriminatory is that Article 370 is described as a “temporary” provision whereas Articles 371A and 371G are described as “special” provisions. So Kashmiris should have only temporary rights to control over their land and their laws but Nagas and Mizos should seemingly have it forever. Why this double standard?

We should note that on July 26, 2010 the Nagaland Legislative Assembly after consulting constitutional experts passed a law stating that any law made by the Central Government with regard to oil and natural gas would not be applicable to Nagaland and used this to stop the actions of the Indian Oil Company of the Centre. This action was taken after decision made by various tribal leaders of Nagaland. On June 13, 2013, the Union Minister for Oil and Petroleum said that any law passed by the Nagaland Legislative Assembly negating a law of Parliament was illegal. The minister asked the Nagaland Assembly to withdraw the bill and threatened to override the Nagaland bill and Article 371A as well. Here we see clearly the fundamental nature of the Centre – rights are rights only so long as they do not interfere with the power of the Centre to grab resources and give them to the corporates who financed their election campaigns. If they do interfere, then the Constitution will be changed. This is part of a 60 year trend toward increasing seizing of state powers by the Centre. As Shrii Sarkar has noted,

[Certain] things are partly given to the federal government and partly to the state government. Excise tax also rests partly with the federal government (on sugar, tobacco, jute, tea and coal) and partly with the unitary provincial governments (ganja, hashish, wine, etc.) In India none of the four major cash crops and products (jute, tobacco, tea and coal) are in the control of the unitary states.

There used to be certain powers which were vested with the unitary states. But later, by amendment to the constitution, those powers were vested with the federal government. For example, the jute industry was initially controlled by the state government was later transferred to the federal government. Similarly, education was initially a state subject. The central government used to dictate only a few policies and priorities and allocate funds. But now education is within the jurisdiction of both the state and federal governments. Foreign trade and other foreign affairs, defense, currency, etc., which were essentially under the control of the central government, are still retained by the central government. Police administration was certainly under state jurisdiction after India’s independence, but now it is controlled by the central government. (“Some Different Forms of Government”)

The fundamental fact that the Constitution in these Articles grants special privileges to particular states arises from the facts of the history of these states. Nagaland right from 1947 fought a bitter war to remain free from the control of Delhi and the capitalists from western India. It is because the Centre was unable to crush them that as part of a peace deal Article 371A was created. The same is the case for Mizoram as well. So an unwritten principle of the Indian constitution is that those states that have successful secessionist (terrorist) movements will get special economic and cultural rights. But why should not every state, every community get economic and cultural rights without becoming successful terrorists? This question arises today as the economic rights of countless Indians are being devoured by the omnivorous greed of corporations and their governments in the states and the Centre. One reason for this is that the relationship and separation of powers between the states and the Centre has never been clearly defined. A true constitutional reform or a new constitution would clearly define the roles and specific powers of both the state and the Centre. Furthermore in each state constitution the separation of powers between the state government and regional, district, block and panchayat governments should be clearly defined so as to allow maximum scope for grassroots democracy while allowing minimum scope for grassroots casteism and other prejudices.

The Preamble of the Indian Constitution promises different varieties of justice – social, economic and political. The social and political rights of Indians (individually and to some extent collectively) are secured by explicit guarantees of rights in the constitution and by a number of laws. However, the rights of all Indian individuals and all communities of India to economic justice are nowhere guaranteed in the form of clear rights in the Constitution. Rather than complaining about the special economic rights of the Kashmiris should we not guarantee economic rights for every state and every economic-cum-cultural bioregion? Would this not be a more progressive approach to the issue of Kashmir? Let every state have their economic and cultural rights guaranteed in their own state constitution and in the Indian constitution. For in reality India is not a nation but in fact is an assemblage of various civilizations, each of which has being dying since 1947 due to the increasing power of the Centre and the corporate economic and cultural interests supporting the politicians in Parliament.

A very important issue for J & K has been the issue of plebiscite. The idea of a plebiscite in Pakistani Kashmir is impossible as outsiders have been coming into the state for the last 60 years. Ambedkar was for having a plebiscite only in Kashmir and having Jammu and Laddakh remain part of India. Nehru abandoned the idea long ago only to have Abdullah adopt it as an inspiration for azadi. The issue of secession of states is a crucial unresolved issue in global politics. Views are marred by contradictions governed by selfish interests of the nations concerned. For example, for the US, for a group of right wing Ukranian nationalists to seize power by violence and establish a government by throwing out other parties is legitimate but if the overwhelming majority of people in Crimea and other parts of eastern Ukraine vote for secession from these Ukranian fascists it is fraudulent. The right to secession is important in cases like Ukraine where the language and cultural rights of nearly half the population are violated by a government created by a coup. The right to secession is one right that will constrain the greed, arrogance and bullying nature of the Centre in relations to the states. In this regard Shrii Sarkar, recommended that every constitution have a clear provision for secession on the part of any state of a country based on a plebiscite.

Parliament in the role of constituent assembly. The parliament will play the role of constituent assembly only with a majority of 7/8 of the members, because changing the constitution at regular intervals reduces the status of the constitution. The right of self-determination and plebiscite.

The right of self-determination for a part of the country may be recognized only on the basis of a plebiscite held in that area with the permission of the parliament functioning as a constituent assembly. If the plebiscite is to be held, it should be held under the strict control and supervision of the central government by the chief election commissioner of the country. (“Requirements of an Ideal Constitution”)

Another crucial issue is that of the internal democracy within the state of Jammu and Kashmir itself. As seen earlier Jammu has a separate history from Kashmir. The famous chronicle of Kashmir, the Rajatarangini does not mention the Jammu region. In reality it was only during the time of the British that Jammu became under the rule of Kashmir and Dogrii – the language of Jammu was never developed. Similarly it is only during the time of the British that Laddakh came under the rule of Kashmir. The unspoken doctrine of Abdullah and the militants is that Kashmiris should not be slaves of India but the people of Jammu and Laddakh should remain under the rule of Kashmiris. As retired Justice of J & K, J N Bhatt has noted, in the suburbs of Jammu there are thousands of plots of prime real estate allotted to wealthy or connected Kashmiris and they gain prime access to water whereas people in non-Kashmiri parts do not. Furthermore reports of forced conversions of Hindu minorities in Poonch and Doda have never been investigated let alone counteracted.

Prof Hari Om in the History Department of Jammu University has noted that Kashmiris who are only 22% of the state population by electoral district border division mechanism created by the National Conference in 1951 enables it to capture almost one half of the total assembly seats and Lok Sabha seats. There are 46 assembly seats in Kashmir vs 41 in Jammu and Laddakh. Kashmiris fill 2.3 lakh (hundred thousand) out of 2.4 lakh seats in government and semi-governmental jobs as well as 25% of jobs in the regional services of Kashmir. The majority of telecommunications, entertainment, construction and other industries and the majority of the colleges are in the Kashmir valley and are owned by Kashmiris. Even in the medical, engineering college and Agricultural University of Jammu, 50% of the seats are held by Kashmiris. Jammu and Laddakh are heavily taxed but not the Kashmiris and thus over 90% of income tax revenues of J & K comes from Jammu and Laddakh. So the militants and the wealth elites like the Abdullahs and Muftis will demand economic freedom for Kashmiris but not for the people of Jammu and Laddakh. In Laddakh and increasing number of Kashmiris are taking control over the region and acceleration the ecological, economic and cultural destruction of this beautiful land. So Kashmiris want freedom from the exploitation of Marwaris, Punjabis and Gujaratis so that they have freedom to exploit the people of Laddakh. This is naked veniality beneath the rhetoric in the valley of either azadi or autonomy. Finally we should note that the Shias of Kashmir and Laddakh since 2012 have been protesting their victimization by the Sunni militants backed by Pakistan who is infamous for its persecution and murders of Shias.

Justice demands that the people of Jammu and Laddakh find freedom from Kashmiri exploitation. The people of Jammu to their credit have time and again resisted the attempts of the BJP to fan communal sentiments in the region. It is high time for the critics of 370 across India to get together and decide how Jammu and Laddakh can become separate states of India. Clearly for this reason among a host of others, a new States Re-organization Commission is required. Shyam Prasad Mukherjee and Ambedkar had proposed the independence of Jammu and Laddakh long ago, so all parties should support this project.

There are those who will reject this division of the state on the grounds of security concerns. In this regard we should note that Shrii Prabhat Ranjan Sarkar proposed the following solution long ago in 1967. At that time there were agitations for the separate states of Punjab and Himachal Pradesh. Noting that the language of Laddakh is closer to the Kinnauri language (of present-day Himachal) that to either Dogri or Kashmiri and that Dogri the language of Jammu is spoken in the Kullu valley (of Himachal), Shrii Sarkar proposed a large state called Khaja Hill comprising the present-day regions of J & K and Himachal Pradesh. What was most unique is that every socio-economic bioregion of the state (Jammu, Kashmir, Laddakh, Kinnaur, Srimaor, Pahari) was to be economically independent. This would mandate putting the regional, district and block level administration in the hands of the people via networks of cooperatives in the local area but keeping political power in the hands of the state administration which would enable a strong defense in coordination with the Central Government.

This brings us to the fundamental fact that neither the militants, nor the Indian or Pakistani political parties will discuss – real azadi. Real azadi comes from community economic democracy and from every individual having the right to purchasing power for food, clothing, housing, education, medical care as a part of one’s daily life. Who will give this azadi to the people of Kashmir, India or Pakistan? Many Islamic militants will say this is western socialism. They are wrong however. Long ago, Sufi Nund Rishi said,

There are people who have hoarded
Enormous amounts of food grains –
Food of various tastes and colours.
There are people who long for
A morsel of food.
Their babies wail and weep of hunger.
This state of affairs
Is created by man and continued by man.
God has nothing to do with all of this.

Helena Norbert Hodge has chronicled about the society of Laddakh before being corrupted by Hindi culture and Kashmiri exploitation. There was no poverty, no riots, no castes, no religious hatred. People lived hard lives but they lived in genuine communities based on genuine love that needed no constitutions or armies. Jammu and Kashmir however have long suffered the injustices, caste divisions, superstitions and persecution of women endemic to Hindu and Muslim culture. Despite this heritage of misery, the land of Kashmir has left an indelible touch of the Ineffable on even the most hardened soul who has visited this beautiful land. Habba Khatun poignantly expressed this in one of her songs,

Azadi
O bulbul (nightingale)
Let the freedom urge possess your soul
Bid goodbye to your cage, step out
Gather your flowers and enjoy their bloom,
Speak out bold and clear
Your voice need not falter in fear
As when you sang in your cage…
Though unfreedom made you stammer
Your call enchanted the birds of the air
Because it was born out of love.

This brings us to what many think-tanks advocate – a “Final Solution” for the Kashmiri “problem.” In recent days the new government in the Centre has declared a total war against the Maoists in Chattisgarh. Many members and supporters of the government advocate a similar program for J & K. The role-model of course is Patel. In particular, Patel’s ruthlessness in the subjugation of the Nizam of Hyderabad has been held as an role model for proto-Fuhrers in the ruling party. The popular story of this campaign is that an increasingly hostile Nizam began supporting Razkars or violent Muslim fundamentalists who were terrorizing the state. Patel sent in troops and crushed the Razkars and established the rule of the Centre. In reality during the terror spread by the Razkars, there was a revolution in rural Telangana and adjacent regions. Countless landless peasants seized land from landowners in violent actions that the Nizam could not control. Ironically the religious terror of the Nizam led to a freedom struggle of the exploited people of Telangana. This struggle was corrupted and betrayed by its Andhra leaders from the communists. Patel crushed this revolution and handed over the land back to the landlords. In addition the Sunderlal Commission was instituted after the conquest of Hyderabad. Its report was censored by the Central Government. Historians like William Dalrymple who have seen it have noted it condemned Patel as being responsible for the slaughter of 200,000 Muslims. Is this the future we want for Kashmir? Is this what it means for India to become a superpower – to become powerful by massacring its own people and bullying and grabbing land from its neighbours? In both Pakistan and India we see media, politicians and civilians dedicated to expressing love for their religion by spreading hatred towards the religion in their neighbouring country. This hatriotism has engulfed Pakistan and is beginning to dominate the Indian psyche. Long ago, Nund Rishi called out to the venomous engineers of this hatred, saying,

Why are you bent on creating hatred amongst them?
They are the descendants of one and the same mother.
Serve to the best of your capacity, Muslims and Hindus.
If you follow this path, God will bestow His Grace upon you.

These are simple words from a man who renounced wealth and power for poverty and isolation and who renounced religious dogma for mystical love. There is more honour, dignity and hope in these words than there is in the thousands of sermons and soundbites of the countless mullahs, sadhus, TV pundits and politicians who dominate the culture of our subcontinent today.

Service and Sacrifice

This brings us to most crucial fact about the dying civilizations of J & K. First and foremost we need a spiritual revolution to fight religious fundamentalism with the rallying cry – “Mystics of the world – Unite!” This is a social revolution to bring the humanism of the mystics, bhaktas and sufis to fight the narrow sentiments of nationalism, casteism, communalism and ethnic-supremacy. This is an economic revolution to bring to an end the economic exploitation that used religion to justify its crimes and divert the people’s rage into communal hatred and violence. This is a cultural revolution to liberate each language from Hollywood-Bollywood pseudo-culture based on vulgarity and selfishness. Shrii Sarkar revealed the mission of such a cultural revolution saying,

There is also cultural life. Tendencies are of either a degenerating or an exalting nature, that is, they are either of a depraving or an elevating nature. We should encourage the elevating tendencies and discourage the depraving ones. In certain parts of this world, depraving tendencies such as pornography exist. Simply protesting will not stop these things: we will have to do something positive to check it. Such positive action will create a new stir in the human mind. Pornography and other depraving tendencies will be completely discouraged and checked. That will be our course of action. We have to create new literature, new books, new music, new songs… We have to chalk out a programme and act accordingly. (“The Rule of Rationality”)

Above all, we need a spiritual revolution to create a revolution against the culture of self-centredness that dominates our global mindset. This alone can create the true sheikhs and pundits leaders of the future. The great saint-poetess Rupa Bhavani who followed the path of Lalla Ded said,

Selflessness is the sign of the selfless;
Bow down at the door of the selfless.
The selfless are of the highest authority,
The kings of the age and the wearers of the crest and crown.

We need a meditation revolution that is not restricted to elite yogis and sufis. Only such a revolution can bring about a revolutionary change in the collective mind. Then everyone will sing in ecstasy like Shamas Faqir,

Mye vuchh har shayi su yaar.
Chhuno kahn moi ti khali.
Vanai bo siri israr yino aasakh vubali.
I perceive the Divine in every place
Not an inch is without Him
This is the secret I reveal to you.
O do not get lost.

Above all we need a revolution of bhakti or Ishq-e-haqiqi or mystical love. Every girl should be blessed with the opportunity to become the next Lalla and every boy should be blessed with the opportunity to become the next Nund Rishi. Simply preaching divine love without speaking out about the social (communal, caste) prejudices that are the number one obstacles towards creating a society based on this love is cowardice. Cowardice is the sign of someone who has no bhakti or ishq but only the hypocrisy of religious conformity. Simply preaching divine love without speaking out about the economic exploitation that is killing so many innocent people, animals, plants and the entire planet itself is a betrayal of the Beloved who is suffering within all of these beings. Simply living for one’s personal enlightenment is the path to degradation as it is based on the illusion that you are separate and distinct from everyone else. This dualism at the root of selfish spirituality is also at the root of religious dogma. A real saint is bound to feel what the great Kashmiri poet of the last century, Zinda Kaul, wrote in his poem called “Unready”. We who are ever ready to fight and hate and every unready to unite and love cannot fail to be moved by these words,

The One who loves me more that I myself
My hope, my light, my tears and my Master.
The One who searches for me
The One who waits for me My eternal Lover.

He says,
“In this country, for some time
You must wait for Me
Let flowers of love and separation-pains grow
You must gift the flowers to your neighbours
And now, your crossing, your salvation
That is My work, leave it to Me.”
Thus He says, the one who waits for me
My eternal Lover.

And it is with this humility that we conclude this exploration of 370. So much more can be written about creating a vibrant economic democracy in every part of the state, about creating a renaissance in every form of literature of every language, about creation a mystical love revolution to fight communalism, about creating decentralized economic planning for every block of the state and above all by finally bringing into being what the Preamble of the Indian Constitution guarantees to all Indians – genuine brotherhood and sisterhood of all communities of the country, the subcontinent, our beloved earth and this entire universe of stars and planet which can be seen most beautifully at night in Kashmir. But, we cannot but with our pranam conclude in the words of Naropa, the great Buddhist Tantric siddha who was born in Kashmir,

This unconstructed self-knowing itself
Which is free from the defilement of mere thought [based on discrimination between myself and others]
Is the nondwelling Nirvana…
How can my conceptual mind [limited in its perceptions]
Discover the profoundity by stirring up
The ocean-like depth of true meaning.
May all learned masters forgive my errors.

How much are you paying to commodity speculators?

By Susmit Kumar, Ph.D.

Due to the rise in investments in commodity markets, the global prices of commodities such as gas, corn, wheat, rice, and potatoes are going through the roof. These prices are not determined by demand and supply but by investors, who in almost all cases do not take physical possession of these commodities, except maybe precious metals, at all.

In mid-2011, the gold price was up by 40 percent from a year earlier. This tremendous rise in gold price is not because of a sudden increase in the number of users of gold or a sudden drop in supply. The rise of price is due to investors. The same is true for the steep rises in consumer items such as gas, wheat, onions, corn, and potatoes.

It is worth noting that the required down payment for purchase of a commodity on a future date is only 10 percent. Hence one can buy $1 billion worth of a commodity (petrol, wheat, corn, rice, copper, silver, etc.) with only $100 million at one’s disposal. If the price goes up by 10 percent in a week, the commodity speculator can make $100 million by selling the contract (i.e., 100 percent return in just one week).

In November 2010, silver and copper were 44 percent and 25 percent, respectively, above May 2010 prices. In late 2010, JPMorgan Chase bought $1.5 billion worth of copper contracts, more than half of 350,000 tones of reserves, on the London Metal Exchange, pushing the price of immediate delivery of copper to a record level.

In 2008, twenty-seven barrels of crude were being traded every day on the New York Mercantile Exchange for every one barrel of oil that was actually being consumed in the United States. [i] It is said that we are paying as much as 40 percent more in gas price due to the speculators. Hence if you spend $250 a month on gas, you are paying $1,200 a year to speculators.

Food prices have skyrocketed. The World Bank’s food price index rose by 15 percent between October 2010 and January 2011, and was 29 percent above its level a year earlier. In early 2011, wheat and corn rose 85 percent and 87 percent, respectively, in just one year at the Chicago Board of Trade. [ii]

The money invested in commodity index funds and commodity derivatives went up from $13 billion in 2003 to $250 billion in early 2008. It is alleged that Goldman made a $1 billion profit in trading in the food market in 2009. In 2010, Armajaro, a hedge fund, was said to have bought 240,000 tons of cocoa beans, driving the price of cocoa still higher.

In India, food prices have tripled in the last four years. In 2009, the total turnover of the potato at commodity exchanges in India was four million tons, but the actual delivery was only seven thousand tons. That means 99.82 percent of the trade was mere speculation on paper. [iii] Out of the 8,038.42 billion rupees turnover of 2009 at India’s National Commodity Exchange (NCDEX), delivery was 0.28 percent (2.2 billion rupees). [iv]

Notes

[i] “Did Speculation Fuel Oil Price Swings?” CBS 60 Minutes, January 11, 2009.
[ii] Rudy Ruitenberg, “World food prices rise to record, may gain further, UN says,” Bloomberg, March 3, 2011.
[iii] Omer Farooq, “Gadkari demands stop to commodities trading,” The Pioneer (India), June 7, 2010.
[iv] “BJP demands probe into price rise,” www.rediff.com, April 6, 2010.

Copyright The author 2012. www.susmitkumar.net

A Failure Analysis of the US Economy

By Apekshit Mulay (Apek), Microtech Analytical Labs
engmulay@gmail.com

Introduction

As failure analysis engineers for companies, our job is to find the root cause of failure and recommend changes in design, process, tests, etc. to fix the problem. This type of analysis has become an important part of semiconductor mass production, which makes electronics cheaper and affordable for consumers. At the same time, mass production helps the manufacturer / producer of parts by increasing their profits.

“Workers should be able to work
for fewer hours to achieve their
production target. They could use
their spare time to pursue higher
education, leisure, hobbies,
vocational training, etc.”

What we need to recognize is that both producers and consumers are vital for the semiconductor industry. Without a healthy demand for the latest electronic gadgets such as smartphones, tablet PCs, hybrid cars, etc. there would be no incentive for global semiconductor firms to keep investing in the research and development of new technologies that improve the quality of life. While we make a living through the failure analysis of modern-day electronics and keep our jobs, pay for mortgages, groceries, utilities, cars, etc., we also contribute to the demand for other goods by spending our wages. We are workers on one side and consumers on the other. Consumer spending helps create jobs for other services and 70% of the US economy depends on consumer spending [1]. It is the consumer’s purchasing capacity that is the best metric of economic performance.

Common Sense Macroeconomics

Producers and Consumers are like two wings of a bird. If either of the wings gets hurt, the bird will no longer be able to fly. If that bird is not nursed quickly and properly, it would be disabled and either die from hunger or fall prey to a predator. With the same analogy, both producers and consumers have to prosper for a robust economy.

Before we get into more details of macro-economics, let us see where the economic profession stands at this juncture. In a recent article in The New York Times, Professor Robert J. Shiller of Yale University and a best-selling author argues that even now we don’t understand what really causes a recession and layoffs [2]. But another best-selling economist, Professor Ravi Batra, seems to have solved the puzzle of recessions by offering a new theory of unemployment. His theory relies on common sense as he argues that recessions and depressions occur when worker productivity keeps rising faster than the economy’s average real wage. He demonstrates that this happened in the 1920s, which were followed by a depression. The same thing also occurred during the 2000s and the world has been in The Great Recession since 2007.

Batra argues that worker productivity is the main source of supply while wages are the main source of demand. If productivity rises faster than wages, then supply rises faster than demand. This results in overproduction and forces the manufacturer to fire workers. Producers are the suppliers of goods, and consumers generate the demand for these goods. Consumer demand, being dependent on wages, is sustainable only if the consumers as workers earn higher salaries. If the wages of consumers do not catch up with increased supply of goods, the supplier of goods is unable to sell all that he/she has manufactured.
Let us take an example of the semiconductor industry where the semiconductor wafer foundries manufacture tens of thousands of wafers per month. These facilities supply silicon for the semiconductor industry. For a wafer fabrication facility to be profitable, it has to be able to produce as many wafers as possible that meet the Statistical Process Control (SPC) stability metrics and customers’ quality requirements when it comes to DPPM (Defective Parts per Million). This ability to mass produce is measured by the productivity of the work force. A wafer foundry, like every other company, wants its employees to be highly productive to maintain a high supply of wafers for its customers. The wafer fab management pays incentives based on productivity.

Now, where does the need come for wafer fab to hire more workers? This occurs only if wafer fab customers demand more goods. Where does the customer demand come from? It comes from the wages of the people. When we have an economy where employed people have high wages or high purchasing capacity, they are able to generate a high demand for goods. Hence, the wages of the workers have to catch up with their productivity. If employees are very productive, that is they work hard and efficiently, they are able to increase the supply of goods into economy with their productivity. Now, what happens if the wages of the productive workers fail to catch up with their productivity? As a result of the growing gap between wages and productivity, eventually the purchasing capacity of the workers is not able to catch up with the amount of goods that are being manufactured by them. Hence this correlates to a gap between the supply of goods and the sustainable demand for them. In other words, the wage-productivity gap causes a supply-demand gap.

In my previous analogy, this hurts one of the two wings of a bird. In other words, the imbalance between oversupply of goods and weak demand for them leads to layoffs at the wafer fabrication facility. This is how an economy is so closely connected to maintaining a sustainable supply and demand of goods. Thus layoffs occur when people’s purchasing capacity falls short of the goods that workers produce due to their high productivity.

Consumer and National Debt

Some brilliant minds have devised a way to keep the wages of workers to remain the same or even fall, i.e. not letting wages catch up with their high productivity, but still maintain a high consumer demand. They do this by creating ‘consumer debt’. When a consumer is unable to buy much out of their real salary or wage, he/she can buy it using a credit card or by going into debt with a loan from financial institutions. While relatively stable consumer debt is good for the economy as long as the borrower is able to repay his/her debt within the allotted time frame with interest, what can consumers do when they lose their jobs in a recession, and are not able to find other employment soon? If the consumer is not able to repay his/her debt in time, the increase in interest on the credit card loan wipes out his/her savings, thereby resulting in bankruptcy.

It should be clear that when wages trail productivity, the overall economy suffers because of the reduced purchasing capacity of unemployed workers. If you follow this logic, then it is evident that consumer’s purchasing capacity is critical for sustainable demand. Hence, I consider a strong consumer purchasing capacity to be the chief source of high consumer demand, which acts as an engine for economic growth. Thus, the real job creators in a free market economy are not only the producers of goods but also the consumers of goods. Every company estimates its consumer base prior to manufacturing in order to avoid the over-production of goods. Hence, if consumer demand keeps on weakening, then the economy goes into a recession. In that case to avoid a depression, the government has to step in and increase its own spending that makes up for the loss in demand due to lost wages of the laid off workers. The government may also cut tax rates to boost consumer demand. In either case, the budget deficit rises, and may rise very sharply if the wage-productivity gap and hence the supply-demand gap are very high. This is the main reason why the budget deficit rocketed after 2007, so much so that it almost tripled from about $500 billion in 2007 to $1.3 trillion in 2011.

Now, if government spending creates jobs, then these workers can jump start the engine of economic growth by paying off their debts and boosting consumer demand through their real wages. The higher the wages of these workers, the higher will be their purchasing capacity and the higher the consumer demand. This would act as an incentive to the producers/manufacturers to make further investments.

However, if increased government spending does not boost consumer demand and instead goes into the pockets of manufacturers, the manufacturing sector may hire a few more workers because of the extra money it receives from the government stimulus, but that growth will not be sustainable. In fact, a case can be made that the high budget deficit of recent years has mainly helped the manufacturer. For instance, in 2011 the economy generated 1 million new jobs with the help of a budget deficit of $1.3 trillion. If you divide 1.3 trillion with 1 million, you get 1.3 million. In other words, the government spent an extra $1.3 million to create one job in the economy. Is this not absurd, given the fact that the average wage is only $50,000 per year? Thus, the government deficit is now mainly helping the manufacturers, who must be getting the difference between $1.3 million and $50,000 for each person they hire.

As Batra shows, this is what the continued rise in the wage-productivity gap does to an economy. Just 15 years ago, in 1999, we had a budget surplus along with an unemployment rate of less than 5 percent. Today, we have a trillion dollar deficit along with an unemployment rate close to 8 percent.

Free Trade vs Fair Trade

An economy is sustainable when it is able to balance its trade and budget. If any country has a trade deficit (where imports are larger than exports), it leads to a fall in the country’s FOREX (FOREign eXchange) reserves (which eventually depreciates its currency). The value of a country’s currency is a deciding factor in the standard of living. Hence, a country cannot run year-over-year trade deficits if it wishes to maintain the standard of living of its citizens. Also, high trade deficits result in loss of FOREX reserves, which are important as they determine the buying power of the country’s currency.

Let us take an example of a country ‘A’ where its population has sufficient purchasing power and can buy everything produced in the nation. But there are some products that are not produced at home and have to be imported from another country ‘B’. Hence country ‘A’ has to pay money [its currency] to buy country B’s goods. Either country ‘A’ has to balance its trade by getting country ‘B’ currency from a third country ‘C’, or go on printing its own currency. But there is a limit that country ‘B’ will accept country ‘A”s money. After that country ‘A’ will have to produce the items within the country, causing huge inflation due to depreciated value of its currency resulting from excess money printing. It is possible to avoid trade deficits through balanced trade policies. Fair trade is more important than Free trade. Free trade implies no import duties imposed by a country on its imported goods. While Free trade works great when trading with countries having nearly similar value of their monetary currencies, it results in high trade deficits when multinational corporations (MNCs) from a rich country make goods for cheap in another country with a significantly lower value of its currency. The MNCs in the United States prefer to manufacture things in low wage countries with cheap currencies, as it is highly profitable. However, in addition to increasing trade deficits, this practice also leads to massive job losses in the home country, especially when jobs are also outsourced.

As a result of this free trade policy, the U.S. economy has been running over half a trillion dollar trade deficit for the past four years [3].While such a deficit results in higher corporate profits for MNCs in the United States, it results in depreciating FOREX reserves. This threatens the economic independence of the U.S. as a country.

Figure 1 below shows the FOREX reserves of BRIC (Brazil, Russia, India and China) in USD over ten years. According to Dr. Richard Haas, Chairman of the Council of Foreign Relations, China’s ownership of trillions in FOREX is a great threat to the United States, as China, with vast FOREX reserves, is in a position to influence US foreign policies through its control over the value of US currency [4].This is similar to the way the United States was able to dominate the foreign policies of Britain and France after World War II and forced their troop withdrawal during the Suez crisis purely because of its ownership of British and French debt[5].

Figure 1: World Forex reserves in billions of USD as per International Monetary Fund (IMF), April 2009 [6]

During the Reagan years, the trade deficit started to increase at a rate not seen in the last 60-70 years [7]. The Reagan administration then had to pressure Japan to sign the 1985 Plaza Accord to devalue the U.S. dollar at the expense of the Japanese yen in order to increase U.S. exports[8]. As a result of yen’s appreciation, Japan experienced an economic crash and lost a decade of growth. The Nikkei average went up to about 39,000 in December 1989, but after the crash it hovered around 15,000 during the lost decade of the 1990s. In the last several years it has dropped even more, hovering around 10,000 [9].
Looking at the fate of what happened to Japan as a result of the yen appreciation; China has refused to appreciate its currency significantly in spite of the pressure by the Obama administration, which hopes to boost U.S. exports to China [10]. This should be a great concern for the United States because it would not be able to export significant amount of goods to China to balance its trade.

Counterfeit Electronics as a Threat to US National Security

In addition to nearly 600 billion dollars in trade deficit due to free trade policies, the counterfeit electronics from China entering into the U.S. supply chain have become a national security threat [11]. Initially, the United States manufactured all defense-related products at home. However, consumer electronics were being built in China due to its low cost of labor. As technology progressed to advanced transistor technology, it required a large investment from defense contractors, who work for profit, to manufacture semiconductor wafers in the United States. Hence, several defense contractors started to use Chinese built ICs for military weapons like missiles and machine guns. Along with the state-of-the-art infrastructure, the technical know-how to make advanced technology products has also been transferred to China.

So now China is flooding the U.S. defense supply chain with counterfeit ICs [12]. It has become very costly to prevent this, which is also eating away profits of U.S. defense contractors. The free trade policies of the United States are creating a perfect storm for its semiconductor industry. According to Professor Ravi Batra, “Free trade has done to the United States what Hitler and Imperial Japan could not do during the war.” He characterizes free trade as the ‘Agrification syndrome’ by which Americans continue to lose manufacturing jobs, and continue to work harder at the jobs they do have, but suffer declining wages, despite increases to their productivity[13].

If the United States had adopted fair trade instead of free trade, it would have imposed tariffs on the cheap goods that are dumped in this country by China. As people prefer to get the best value for their money, U.S. consumers would have preferred to buy U.S. made goods as tariffs would make them competitive with Chinese goods. This way manufacturing jobs would have been preserved. Simple math shows that by just eliminating the 600 billion dollar annual trade deficit would create 6 million jobs paying a $100,000 salary every year. This is a simple job creation strategy, as the country faces the highest unemployment rate since the Great Depression.

Figure 2: BLS, BEA Census- Productivity and real income index from 1964-2008 relative to 1970 (Source: David Ruccio: Graph of the week: USA productivity and real hourly wages 1964-2008 [14])

Economic Reforms

If you observe Fig. 2 above, real wages have failed to keep up with productivity since the 1970s. The productivity of American workers has been consistently increasing. However, the average household median income has not increased at the rate at which productivity has increased. The real hourly wages have remained fairly constant. The United States needs to reform its current economic model so that wages keep track with the productivity of workers [15]. Professor Batra argues that this can happen only in a free market system, where companies are small and unable to control prices. In such a system, there would be no need for the government budget deficit, and it would raise the living standard for every individual in society.

Under this system, the majority of shares of corporations would be owned by its employees rather than by a few investors on Wall Street. When workers become majority shareholders, they know that they are part owners of the company and will be fairly rewarded for hard work. By being highly productive, these workers would receive a fair share of corporate profits.

The system would still preserve the incentive for growth because hard work would bring higher incomes. At the same time, it would avoid severe recessions and depressions caused by poor consumer demand (due to a huge gap between wages and productivity resulting in poor purchasing capacity of the majority of consumers). Also, in economic downturns, it will be possible to cut back the working hours of the workers and reduce their wages across the board rather than lay off some workers. This would minimize, if not eliminate, the problem of high unemployment [16].

Modern economic thinkers blame automation as a major cause of job losses. Technology could be productively utilized in such a way that the manufacturing sector could cut back on work hours while paying workers a high wage due to their high productivity. This is because automation enables a worker to be very productive through use of machines to manufacture products. High worker productivity significantly increases the supply of goods in an economy. As a result workers would be able to work for fewer hours to achieve their production target. They could use their spare time to pursue higher education, leisure, hobbies, vocational training, etc. This way it is also possible to minimize, if not eliminate, the problem of high unemployment resulting from automation while still keeping the supply of goods proportionate to consumer demand.

Employee guided firms will also be able provide health insurance and pension benefits to workers and the government would not need to spend money for this purpose. This way the budget deficit would fall to zero and the national debt could be retired over time.
Additionally, it would also avoid undue pressure from Wall Street to ship jobs overseas under pressure of delivering maximum profits to Wall Street investors. This would minimize speculation, malpractices and economic bubbles through economic self-regulation with minimal government interference.

References

1. http://en.wikipedia.org/wiki/Consumer_spending
2. Robert J. Shiller : “The Mystery of Economic Recessions”, New York Times, 4 February 2001. p. 17 http://cowles.econ.yale.edu/news/shiller/rjs_01-02-01_nyt_mystery.htm
3. Martin Crutsinger : “US deficit tops $1 trillion for fourth year,” Associated Press, 12 October 2012. http://finance.yahoo.com/news/us-deficit-tops-1-trillion-fourth-011445884–finance.html
4. Justin Webb, “Don’t be distracted by Greece : Americans must also face financial facts, ” Telegraph (UK), 25 June 2011. http://www.telegraph.co.uk/news/worldnews/us-politics/8598451/Dont-be-distracted-by-Greece-Americans-must-also-face-financial-facts.html
5. Laurie Milner, The Suez Crisis, 03 March 2011. http://www.bbc.co.uk/history/british/modern/suez_01.shtml
6. http://en.wikipedia.org/wiki/Foreign-exchange_reserves
7. Alex Seitz-Wald : 10 Things Conservatives Don’t Want You To Know About Ronald Reagan, 5 February 2011. http://thinkprogress.org/politics/2011/02/05/142288/reagan-centennial/?mobile=nc
8. http://en.wikipedia.org/wiki/Plaza_Accord
9. http://en.wikipedia.org/wiki/Lost_Decade_(Japan)
10. China seeks to learn from mistakes of 1985 Plaza Accord, The Japan Times, 9 September 2006. http://www.japantimes.co.jp/text/nb20060909a3.html
11. Richard Dudley : Counterfeit Electronics in DoD are Widespread and Threaten National Security, 3 June 2012. http://defense-update.com/20120603_counterfeit-electronics-in-dod-are-widespread-and-threaten-national-security.html
12. Joseph Farah: Fake Chinese electronics threaten U.S. Defense. 29 May 2012. http://www.wnd.com/2012/05/fake-electronics-feared-undermining-u-s-defense/
13. Sean Fenley : Barack Obama, What’s Wrong with Protectionism?, 21 September 2008. http://www.opednews.com/articles/Barack-Obama-What-s-Wrong-by-Sean-Fenley-080918-200.html
14. David Ruccio : Graph of the week: USA productivity and real hourly wages 1964-2008. http://rwer.wordpress.com/2010/11/20/graph-of-the-week-usa-productivity-and-real-hourly-wages-1964-2008/
15. Ravi Batra : The New Golden Age : The Coming Revolution against Political Corruption and Economic Chaos, New York, Palgrave Macmillan, 2007. Also see ravibatra.com for Batra’s other writings.
16. P.R.Sarkar : PROUT in a Nutshell, AMPS.

About the Author

Apek Mulay is a Sr. Failure Analyst at Microtech Analytical Laboratories in Plano, TX. His studies started at University of Mumbai, India where he pursued his undergraduate studies in Electronics Engineering. He completed his graduate studies with M.S. thesis from Texas Tech University, Lubbock, TX. After graduating he has worked as Failure Analysis engineer in US corporations like Qualcomm Inc. and Texas Instruments Inc. Prior to joining Microtech, Apek was working on 28nm technology development in Advanced CMOS technology development team at Texas Instruments Inc. Apek is also an author of one Patent while employed at Texas Instruments Inc. He has been actively involved in ISTFA by chairing technical sessions at symposium.

Globalizing the Company Town

An undated photo of the H.C. Frick Coke Company’s town of Shoaf, the Shoaf Mine tipple and Coke Works are shown in the upper right hand corner
Photo courtesy of the collections of the “Coal & Coke Heritage Center,” Penn State University Fayette Campus, Uniontown, PA

By Ravi Logan

A “company town” is a town in which all property, services, and enterprises are owned by a single company. In a company town, it is the company that hires, fires, and retires workers. It is the company that runs the store where people get their commodities and that controls the water and the electric systems. The company runs the school and runs the medical clinic. The company owns the homes that workers rent. And it is the company that brings in the hired security force when there is labor unrest. In the company town, whose interests rule?

“The world is becoming a company town.”

Let us now consider the global economy. In the global economy, who provides the jobs; who outsources the jobs? Who runs (and ruins) retirement programs? In the global economy, who owns the resources, and who plunders the resources? Who decides what factories get built — and then decides when they get moved and where? Who runs the hospitals; who controls the energy grid, the media, the currency? It is an increasingly small number of growing conglomerates.

The world is becoming a company town writ large. Transnational corporations thrust into every sphere of life — including those once within the purview of civil society or of government. They are contracting to run prisons. They are taking over municipal water supplies. They are privatizing education. They run the cable systems. They underwrite public broadcasting. They manage military logistics.

And they are thrusting just as forcefully into political life. Agents of big corporations draft legislation. Government officials come from the ranks of corporate executives, or from corporate lobbies or councils. The selection and funding of candidates for elected office is determined by corporate money. And electronic voting machines are manufactured, programmed, operated — and sometimes rigged — by big corporations.

The world is becoming a company town. The power once vested in the people, or in local communities, to decide their destinies, to shape their collective life, is being usurped by the planet-spanning metacorporations.

In a company town, when the coal plays out, when the timber is all cut, what happens to the company? What happens to the town? And what happens to the mill tailings, to the ruined forests? In a company town, what responsibility does the company take for the future well-being of the people, of the land?

In the same way, the global economy, what responsibility do the global corporations take for the well being of communities, cultures, and families? Or of species, of ecosystems? What care do they take to maintain the purity of the water and the air? Except under pressure of regulations or public protest, what willingly do they do in the service of life? Damn little. Their allegiance is to their profits.

Why, then, should humanity cast its future with the global company town?

From Company Town to Global Village

I am not a political activist or political philosopher; I’m a spiritual teacher. Spirituality is that which uplifts the human spirit; it is that which gives us vibrant connection to all life, to all being. Spirituality speaks to the deep desires of human beings to feel joy, to feel connected in love.

I cannot help but be aware that in the global economy spiritual life is impoverished. And without spiritual life, the essence of our humanity goes unexpressed. This is too steep a price to pay for a paycheck.

But without a paycheck to get our basic amenities, it’s tough to pursue spiritual life. Without a vital economy, spiritual life cannot flourish.

Many people now rise in struggle to curtail the excesses of the globe spanning corporations. Their struggles perhaps serve to lessen the oppressiveness of life in the global company town. But this is not sufficient for spiritual life to flourish.

What more is needed is for humanity to embrace a new paradigm of development, a life economy that returns economic power to people and communities, that promotes equity, and that seeks a sustainable balance with the biosphere.

This is the project of the Progressive Utilization Theory, of PROUT.

Ravi Logan is the Director of the PROUT Institute (www.proutinstitute.org) and author of PROUT: A Solution-Oriented Paradigm of Development.

Global Capitalism’s Four Fatal Flaws

By Dada Maheshvarananda

There are four inter-related defects inherent in global capitalism. The first fatal flaw is great concentration of wealth. Greed is the excessive and selfish pursuit of wealth or other material things, without concern about whether one’s actions deprive others of necessities. Rather than controlling this instinct, unregulated capitalism encourages it. Some proponents of free market capitalism go so far as to argue that greed should be considered a positive trait because the race to maximize profits propels the global economy forward. As the character Gordon Gekko in the film Wall Street said, “Greed… is good!”

“The world needs a powerful “wake-up call” to make everyone realize that to survive, we have to change now.”

Though the wealth of the world is steadily increasing, the world’s richest people are hoarding almost all of it. And because of this huge, increasing gap between the rich and the poor, common people can afford to buy very little.

For example, the chief executive officers (CEOs) of multinational corporations are paid salaries with stock options that Fortune magazine describes as “outrageous!”[1] In 2009 Aubrey McClendon of Chesapeake Energy received US$114 million, Lawrence Ellison of Oracle received US$130 million, and H. Lawrence Culp Jr. of Danaher received US$141 million.[2] On average the CEO of a Standard & Poor’s 500 index com- pany was paid US$9.25 million in compensation in 2009.[3] During the same year, millions of U.S. workers lost their jobs, their homes and their retirement savings in the worst financial crisis since the Great Depression.

The disparity between rich and poor continues to grow. The wealth of the world’s 51 richest people more than doubled during the last eight years, to more than US$1 trillion.[4] This is more than the combined annual income of half the world’s population–three billion human beings.

When wealth is concentrated in the hands of a few and not circulating productively, ordinary people have less and less purchasing power. As Australian artist Angela Brennan wrote in one of her paintings, “Every morning I wake up on the wrong side of capitalism.”

Poverty and suffering on our planet is increasing. Currently, over half of the rural population in Latin America and the Caribbean is poor and almost a third lives in conditions of extreme poverty.[5] The World Bank estimates that in 2008, 1.4 billion people suffered what they call “absolute poverty,” living on less than US$1.25 a day, and 2.7 billion lived on less than US$2 a day.[6]

Richard Wilkinson and Kate Pickett, in their book, The Spirit Level: Why More Equal Societies Almost Always Do Better, demonstrate the “pernicious effects that inequality has on societies: eroding trust, increasing anxiety and illness, and encouraging excessive consumption.”[7] They claim that in more unequal rich countries, results are substantially worse for each of eleven different health and social problems: physical health, mental health, drug abuse, education, imprisonment, obesity, social mobility, trust and community life, violence, teenage pregnancies, and child well-being.

The greatly unequal distribution of wealth throughout the 1920s is now viewed as one of the main causes of the Great Depression. According to a study done by the Brookings Institute, in 1929 the top 0.1 percent of Americans had a combined income equal to the bottom 42 percent.[8]

Yet mainstream economists did not predict that depression, nor did they foresee the global financial crisis that began in 2007, because they do not consider wealth concentration a chronic and fatal problem of capitalism.

Speculation instead of production

The second fatal flaw of global capitalism is that the vast majority of investments are now made in speculation instead of production. The tremendous wealth held by the richest people is rarely invested in start- ing companies, paying salaries, or producing goods. We can understand why this happens by observing what motivates big investors. To start a new enterprise takes capital, careful planning and constant work. Many people have to be hired; managing them and confronting the daily problems that arise is a big responsibility. Most new enterprises fail; even the successful ones generally make no more than ten or twenty percent profit during the first few years of operation.

Wealthy individuals have the capital to invest in new enterprises, but few of them are interested in all that work for such a small profit. Instead, they prefer to gamble on ventures that offer the chance to earn big profits quickly, such as the stock market, the futures market, real estate, currency trading, derivatives, etc. This has been termed the financialization of the economy, in which financially-leveraged wealth surpasses that of the industrial economy. Consequently, the majority of people lose out as these speculative investments create only a few new jobs and tend to concentrate the wealth of the society in the hands of fewer and fewer individuals.

This results in the grossly inflated “bubbles” of speculative capital, when prices that investors are willing to pay soar far higher than the intrinsic value of the product. Economic bubbles burst from time to time and place to place, causing economic depressions with widespread unemployment and suffering.

About $3.98 trillion per day is shuffled around in this great casino of speculation as investors gamble in foreign exchange and related markets and try to get rich quick.[9] The prices of stocks, real estate and other markets have grown into speculative bubbles of incredible proportions, completely based on investor confidence–a misplaced confidence.

Sadly, more than half of U.S. households have invested their savings in the stock market, sometimes involuntarily through their employers’ retirement programs. Families should not have to risk losing all their savings in the inevitable downturns of the ever-volatile stock markets.

What significance do the investments of the super-rich have for the rest of the world? A lot! Today the capitalist economies of most nations are ever more interconnected and interdependent. If the New York Stock Market falls, or the value of the dollar falls, within minutes the world’s other stock markets and economies will also begin to fall.

The International Monetary Fund in 2009 estimated the total value of the world’s economy to be US$70.21 trillion.[10] And yet the total world derivatives market in the second half of 2009 has been estimated at about US$615 trillion, more than eight times the size of the entire global economy![11] This explosion of financial assets destabilizes and endangers the world’s economic health.

Debt

The third fatal flaw of global capitalism is debt, encouraging consumers and businesses to buy on credit. Corporations spend hundreds of millions of dollars on advertising campaigns to make debt sound desirable and risk-free. Their sophisticated global ad campaigns and direct mail programs are aimed at every age group, from young teenagers to the elderly. The largest credit card companies have launched campaigns such as “Life Takes Visa,” MasterCard’s “Priceless” and Citibank’s “Live Richly.” The insidious goal of each of these campaigns was to eliminate negative feelings about going into debt. The creative director of MasterCard’s campaign, Jonathan B. Cranin, explained, “One of the tricks in the credit card business is that people have an inherent guilt with spending. What you want is to have people feel good about their purchases.”[12]

American consumers have dug themselves into a terrible debt trap. In March 2010 the total consumer debt was US$2.45 trillion, which aver- ages US$16,046 for each household.[13] The effects of debt are terrible on families. A 2010 survey in Great Britain found that debt problems have a negative impact on people’s close relationships, their health and their ability to carry out their jobs. The majority of respondents hid the fact of the debt problems from their partners, their friends and their parents, expressing they felt “shame” and “embarrassment.”[14]

It gets nastier, because financial companies prey on people who urgently need loans to pay for health care and other necessities. Lenders use unfair, deceptive, or fraudulent practices to induce people to take on more and more high-interest debt. To squeeze more profit from borrowers, U.S. credit card companies increased interest rates from 17.7 percent in 2005 to 19.1 percent in 2007, a difference that gave them billions of dollars in extra profits. Average late fees rose from less than US$13 in 1994 to US$35 in 2007, and fees charged when customers exceed their credit limits more than doubled from US$11 to US$26 a month.[15]

The lucrative lending practices of these merchants of debt have led millions of North Americans — young and old, rich and poor — to the brink of disaster. And yet in 2005 the U.S. bankruptcy laws were changed, making it much harder for consumers with modest incomes to escape their debt by filing for bankruptcy. The new laws encouraged more reckless lending on the part of lenders, because they could more easily force poor borrowers to repay. Still, more than one-and-a-half million Americans filed for bankruptcy in the 12-month period ending June 30, 2010.[16]

What is true for individuals is also true for countries. The largest debtor nation is the United States, with US$13.6 trillion national debt. The government constantly issues new bonds, bills and notes to finance this debt, borrowing an additional US$3.8 billion every day. In 2009, the budget deficit was US$1.4 trillion.[17] It is estimated that 48 percent of the federal budget is devoted to current and past military expenditure.[18] The goods trade deficit in 2009 was US$517 billion.[19] If for any reason the confidence of the world’s investors in the US economy were to fail, the largest economy in history would come tumbling down like a house of cards.

Exploitation of and ignoring the natural environment

The fourth fatal flaw of global capitalism is its tendency to exploit and ignore the natural environment. In addition to causing terrible human suffering, capitalist greed and mismanagement are destroying the environment. Unsustainable by its very nature, capitalism strives for ever- expanding markets, increasing consumption and production on a finite planet. The insatiable drive for profits results in corporations wielding their influence, money and power to get around or limit environmental laws and regulations. U.S. industries publicly admit to releasing 2.2 million tons of toxic chemicals a year,[20] and many companies open factories in other poorer countries with less strict laws about pollution.

Petroleum is one of the main problems. Our modern economy is very dependent on cheap fossil fuels, driving all transportation and much of industrial production, including all plastics. Corporations make great profits extracting oil from the earth, but they externalize the costs. For example, the companies externalize the cost of pollution caused by burning the petroleum. In 2007, due to the burning of fossil fuels and cement manufacture, China emitted 6.1 billion tons of carbon dioxide into the atmosphere, 21.5 percent of the world’s total, closely followed by the United States, at 5.7 billion tons, 20.2 percent.[21]

Air pollution kills people–2.4 million each year, according to the World Health Organization.[22] Yet the costs of those deaths and other problems caused by fossil fuels are paid for by individuals and society, not the petroleum corporations.

Carbon dioxide and other pollutants contribute to global warming. This puts at risk unique ecosystems and endangered species, causes sea levels to rise, and increases the frequency and intensity of extreme weather events, wildfires and famine. Millions of poor people living in the tropical regions are in the greatest danger. The planetary ecosystem is also at risk of reaching “tipping points”, such as the melting of the permafrost releasing methane gas, or the slowing of the Gulf Stream Current in the Atlantic Ocean, beyond which change progresses much faster and is largely irreversible.

BP’s Deepwater Horizon oil spill, from April 20 to July 15 2010, released 4.9 million barrels of crude oil into the Gulf of Mexico. The causes of the explosion and ensuing leakage, according to the White House oil spill commission’s final report, were the efforts of the corporations to work more cheaply. The report states: “Whether purposeful or not, many of the decisions that BP, Halliburton, and Transocean made that increased the risk of the Macondo blowout clearly saved those companies significant time (and money).”[23]

The disaster was also related to peak oil. This refers to the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters a terminal decline. Whereas scientists have warned of this approaching crisis for decades, it is well understood that the only reliable way to identify the timing of peak oil is in retrospect, after the fact, due to the unreliability and inconsistency with which petroleum companies estimate the capacity of known reserves.

The situation is further complicated due to the discovery of new reserves (which happens rarely now) and changes in consumption patterns. In other words, we cannot really know when it happens, until afterwards.

The BP corporation found that out of 54 oil-producing countries and regions in the world, 30 have definitely passed their production peak, and ten more appear to have flat or declining production.[24] Because of peak oil, and the global economy’s addiction to oil, BP and other companies drill in ever-deeper waters, squeeze oil from the tar sands of Canada and do hydraulic fracturing of shale rock, at ever increasing environmental costs.

The International Energy Agency finally announced on November 9, 2010 in their World Energy Outlook report that the milestone of peak crude oil already passed in 2006.[25] And in 2012 the International Monetary Fund predicted “…a near doubling, permanently, of real oil prices over the coming decade… In that case the macroeconomic effects of binding resource constraints could be much larger, more persistent, and they would extend well beyond the oil sector.”[26] As oil demand and prices rise, the global economy, so heavily dependent upon petroleum-based export agriculture and global shipping, will come under greater and greater strain.

Crisis and Opportunity

We do not live in a world at peace. The systemic violence of the global economy kills nearly 50,000 of the poor every day, through hunger, preventable infectious diseases and AIDS.[27] This genocide goes on even though the planet has enough food and basic necessities for every- one. Sadly, popular campaigns such as Great Britain’s “Make Poverty History” have failed to significantly impact the power structure of global capitalism.

Today’s multinational corporations are so big and powerful that they are out of control. Their structure and practices increase the gap between the rich and the poor, a gap that is dividing humanity. Because most investments are speculative instead of productive, and because of rising debt, the global economy is in serious trouble. Greed, the engine behind global capitalism, is a mental disease.

Even though the majority of the scientific community is well aware of the dangers of environmental destruction, climate change and peak oil, they have no means to compel nations to sacrifice comforts and take the radical and costly steps necessary to properly deal with these problems. The world needs a powerful “wake-up call” to make everyone realize that to survive, we have to change now.

Clearly, we require an economic system that is democratic, protective of the environment, and that offers a higher quality of life to all. We should not wait for the next economic disaster, depression or financial collapse, though any of these might strike tomorrow. Let us start building an alternative economy today to help our communities, our countries and the world overcome economic depression and minimize the suffering it causes.

Notes

1 Scott DeCarlo, “Big Paychecks”, Forbes, May 3, 2007.
2 Scott DeCarlo, “Special Report: CEO Compensation”, Forbes, April 28, 2010.
3 AFL-CIO analysis of 292 companies in the S&P 500 Index. CEO pay data provided by salary.com.
4 “World’s Richest People”, Forbes, 2010 list.
5 ECLAC, “Poverty Among the Rural Population in the Region
Increases Their Vulnerability to Climate Change”, 10 November 2010.
6 “Measuring poverty”, Wikipedia http://en.wikipedia.org/wiki/
Measuring_poverty
7 Richard Wilkinson and Kate Pickett, The Spirit Level: Why More Equal Societies Almost Always Do Better (London: Allen Lane, 2009).
8 Gusmorino, Paul A., III. “Main Causes of the Great Depression.”
Gusmorino World (May 13, 1996). http://www.gusmorino.com/pag3/
greatdepression/index.html.
9 April 2010 report, Bank for International Settlements
10 IMF World Economic Outlook, April 2009 http://www.imf.org/
external/pubs/ft/weo/2009/01/index.htm
11 “OTC derivatives market activity in the second half of 2009”, Bank
for International Settlements, 11 May 2010 http://www.bis.org/press/
p100511.htm
12 Gretchen Morgenson, “Given a Shovel, Americans Dig Deeper Into
Debt”, The New York Times, July 20, 2008.
13 The U.S. Federal Reserve “Monthly G.19 Consumer Credit Report”,
May 7 2012 and U.S. Census Bureau “State & County Quick Facts”, Jan 17, 2012.
14 Consumer Credit Counselling Service, press release 21 Jul 2010
http://www.cccs.co.uk/Portals/0/Documents/media/pressreleases/
Human-impact-of-debt-survey-press-release.pdf
15 Morgenson, op cit.
16 Administrative Office of the U.S. Courts, “Statistical Tables for the
Federal Judiciary”, 2010.
17 http://www.federalbudget.com and Congressional Budget Office, “Budget and Economic Outlook: An Update”, Aug. 24, 2011.
18 This includes Current Military ($965 billion) and Past Military ($484 billion), which includes veterans’ benefits plus 80 percent of the interest on the debt. War Resisters League http://www.warresisters.org/ piechart.htm
19 U.S. Census Bureau, Foreign Trade Statistics, Annual 2011 Trade Highlights http://www.census.gov/foreign-trade/statistics/highlights/ annual.html
20 U.S. Environmental Protection Agency, Toxics Release Inventory, http://www.epa.gov/tri/
21 The data was collected in 2008 by the U.S. Carbon Dioxide Information Analysis Center (CDIAC) for the United Nations.
22 “Estimated deaths & DALYs attributable to selected environmental risk factors, by WHO Member State, 2002”. http://www.who.int/entity/quantifying_ehimpacts/countryprofilesebd.xls.
23 “US oil spill: ‘Bad management’ led to BP disaster”, BBC, January 6 2011.
24 BP Statistical Review of World Energy 2010.
25 IEA World Energy Outlook 2010
26 Jaromir Benes, Marcelle Chauvet, Ondra Kamenik, Michael Kumhof, Douglas Laxton, Susanna Mursula and Jack Selody. The Future of Oil: Geology versus Technology. IMF Working Paper WP/12/109 (New York: International Monetary Fund, 2012).
27 http://www.starvation.net/

Excerpted from After Capitalism: Economic Democracy in Action by Dada Maheshvarananda (Puerto Rico: Innerworld Publications, 2012): www.aftercapitalism.org

What Has Become of the Land of Opportunity?

By Ravi Logan

The great national myth that binds the allegiance of the American people to capitalism is that America is “the land of opportunity” — that its economic system equitably empowers citizens to achieve affluence, if only proper effort is made.

The hold of this mythic belief is rapidly breaking down. As more and more people experience the reality of their economic disempowerment, and as communities become impotent to determine their economic futures, collective faith in capitalism is waning. People see the rich grow richer, the poor poorer — and those in the middle rushing to join the “race to the bottom”.

“PROUT is positioned to contribute
to a compelling post-capitalist vision.”

Discontent is erupting. And the growing chorus of discontent is having an impact, evidenced by President Obama’s major policy speech in Osawatomie, Kansas, earlier in the year. Economist Robert Reich characterized this address as “the most important economic speech of [Obama’s] presidency” and wrote a lengthy analysis of it for the Huffington Post.

Note how Obama opens his speech, how he sets out the national predicament:

“For most Americans, the basic bargain that made this country great has eroded. Long before the recession hit, hard work stopped paying off for too many people. Fewer and fewer of the folks who contributed to the success of our economy actually benefited from that success. Those at the very top grew wealthier from their incomes and investments than ever before. But everyone else struggled with costs that were growing and paychecks that weren’t — and too many families found themselves racking up more and more debt just to keep up.”

Obama went on to point out:

“. . . [in]equality also distorts our democracy. It gives an outsized voice to the few who can afford high-priced lobbyists and unlimited campaign contributions, and runs the risk of selling out our democracy to the highest bidder. And it leaves everyone else rightly suspicious that the system in Washington is rigged against them — that our elected representatives aren’t looking out for the interests of most Americans.

“More fundamentally, this kind of gaping inequality gives lie to the promise at the very heart of America: that this is the place where you can make it if you try. We tell people that in this country, even if you’re born with nothing, hard work can get you into the middle class; and that your children will have the chance to do even better than you. That’s why immigrants from around the world flocked to our shores.”

America is no longer the land of opportunity. Hard work no longer pays off, no longer empowers people to get ahead. Even the President must admit it. It is now out in the open: Capitalism cannot do the job. It cannot manage the fundamental requirement of an economy in a democratic society; the “basic bargain” with the people has eroded.

If capitalism cannot do the job, what is there to replace it? This now emerges as the central question of the day.

This is a question Prout is uniquely positioned to answer. Its economic theory, long on the peripheries of political discourse in America, now has currency. It is now positioned to contribute to a compelling post-capitalist vision of a decentralized, universally empowering economy that can bring equity, create opportunity for all, and buttress America’s rapidly decaying democratic system.

Ravi Logan is the Director of the PROUT Institute (www.proutinstitute.org) and author of PROUT: A Solution-Oriented Paradigm of Development.