By Dr. Sawraj Singh
It is becoming clear that the western capitalist crisis has started affecting India in a big way. The Rupee keeps sliding against the dollar. The bubbling real estate market has started cooling down. The petrol prices are climbing and this will have an adverse impact on the prices of essential commodities.
After independence, India adopted a mixed model of development. There was a state-controlled public sector, primarily influenced by the Soviet and the Eastern European model; and a private sector, which was mainly influenced by the western capitalist countries. As a result of this dual model, the Indian economy remained relatively insulated from the crises of both the western as well the eastern countries.
After the collapse of the Soviet Union, India practically abandoned this dual model and enthusiastically adopted the western capitalist model. By doing this, India’s economy is now almost completely integrated with the western economy. India is now paying the price for its mistake. The western countries, particularly America, are now forcing their crises on India, which has lost the insulation it used to have.
The immediate cause of the Rupee’s slide and the rise of petrol prices is that India has to pay for its oil in dollars. India could have easily secured its oil supply from Iran and paid in Rupees instead of dollars. However, because of the American monopoly on the sale of oil and America twisting India’s arm regarding maintaining cordial relations with Iran, it will not allow India to buy the oil in Rupees instead of dollars and will not allow India to buy more oil from Iran, its time-tested friend.
Under the western capitalist model of development, economic growth has only served the interests of a very small elite rather than the masses. This model of development has led to concentration of wealth in the hands of the few at the expense of the many. The resources of the country are being utilized for fulfilling the desires of the few as opposed to fulfilling the needs of the many. The gap between the rich and the poor keeps widening with larger and larger numbers of people being marginalized–just to add a few more names to the list of billionaires. The slide of the Rupee and the increase in the price of petrol will also affect the already deprived segments of society. Many rich people have billions of dollars in foreign banks, particularly Swiss banks. The slide of the Rupee will not have much impact on them.
The present crisis will lead to more calls for cutting subsidies to poorer segments of society. Many people do not realize that big corporations and the rich receive a much bigger share of the subsidies than poor people. However, these are generally called incentives rather than subsidies. These include tax incentives, making the land available to them at a fraction of the market price, and also direct subsidies to set up certain industries.
Most of the foreign-based investment caters to the elite rather than the masses and there is generally a net outflow of the capital when the foreign companies repatriate their profits. It is very unlikely that any of the foreign companies has taken a loss on their investments in India. Generally, they have made much bigger profits as compared to the margin of their profit in their own countries.
It is high time that India should start seriously reconsidering its economic policies. It will become obvious that the western capitalist model is not suitable for India. Even European countries are rejecting the American consumerist capitalist model, which had been applied in Europe under the pretext of austerity measures. Sarkozy, the most pro-American President France ever had, has been kicked out. Angela Merkel’s party recently lost in a big way to Social Democrats in the provincial elections. Generally, European countries are dumping the so-called austerity measures and switching to the concept of growth of the economy, which can be called utilitarian capitalism or the concept of a welfare state, or capitalism with a human face.
It is becoming clear that the European experience proves the fact that social controls on capital are better than giving capital a free reign under the concept of letting the market forces control themselves. The original Indian model had built-in social controls.
At the world level, global institutions need to be changed to reflect the new global realities. The western share of the total world economy and the total world trade is continuously declining, and the share of the developing countries, particularly the Asian countries, continues to climb. However, the existing global institutions continue to preserve and promote western hegemony and domination. These institutions have to be restructured and new parallel institutions such as BRICS and SCO (Shanghai Cooperative Organization) need to be strengthened.
The monopoly of the American dollar needs to be broken. India should start trading with other countries in currencies other than dollars. A common Asian currency should also be in the cards.
India should realize that the unipolar world, after the collapse of the Soviet Union, is a temporary and transient phenomenon. The world is actually moving to a multipolar world order. India and the other South Asian countries should unite to form an important pole in this multipolar world. Forming a South Asian Economic Alliance will convert South Asia into a very big pole in the multipolar world. Moreover, the trade between the South Asian countries does not need dollars, pounds, or Euros and can very easily be done in Rupees. This will certainly strengthen the Rupee against the dollar.
Dr. Sawraj Singh, MD F.I.C.S. is the Chairman of the Washington State Network for Human Rights and Chairman of the Central Washington Coalition for Social Justice. He can be reached at [email protected].
