In the name of law-human rights violation

A law and its victim

AJOY ASHIRWAD MAHAPRASHASTA

The detention for 90 days of a film-maker under the Chhattisgarh Special Public Security Act points to the law’s dangerous nature.

PHOTOGRAPHS: WWW.RELEASEAJAYTG.IN

A poster of the Committee For The Release Of Ajay TG, which was formed to campaign against the arrest.

“I DO not ask for mercy. Section 124(A), under which I am happily charged, is perhaps the prince among the political sections of the Indian Penal Code [IPC] designed to suppress the liberty of the citizen. Affection cannot be manufactured or regulated by law. If one has no affection for a person or system, one should be free to give the fullest expression to his disaffection, so long as he does not contemplate, promote, or incite violence,” said Mahatma Gandhi during his trial after his arrest during the Non-Cooperation Movement.

The Mahatma’s address to the jury was, perhaps, the most revealing description of the political impasse created then by a piece of British legislation. Section 124 of the IPC, framed by the British, continues to remain in force. This section, which describes “sedition”, says, “Whoever, by words, either spoken or written, or by signs, or by visible representation, or otherwise, brings or attempts to bring into hatred or contempt, or excites or attempts to excite disaffection towards the Government established by law in India, shall be punished with imprisonment for life, to which fine may be added, or with imprisonment which may extend to three years, to which fine may be added, or with fine.” The expression “disaffection” includes disloyalty and all feelings of enmity.

Sixty-one years after India managed to break away from the British colonisers, the dreaded impasse seems to persist in the State of Chhattisgarh. On May 5, Ajay Thachhappully Gangadharan, an independent documentary film-maker and a freelance journalist, was arrested by the Chhattisgarh Police and sent to jail on allegations of association with the Communist Party of India (Maoist), an unlawful organisation, and sedition.

He was kept behind bars for three months. The Chhattisgarh Police, investigating the case, failed to file a charge-sheet against him within the mandatory period of 90 days. Ajay was, therefore, granted statutory bail by the Durg District Court and released from prison on August 5. Despite finding no evidence against him, the police have not closed the case. The bail order required Ajay to present a personal bond of Rs.50,000, two sureties of Rs.25,000 each, and an affidavit with a list of his movable and immovable property, and appear at the local police station on the second Monday of every month. The bail also denied him the right to travel outside India without the court’s permission.

Public support

Ajay Thachhappully Gangadharam and wife Shobha with pupils and teachers of the school that they started in a slum cluster of Bhilai.

A committee for the release of Ajay was formed after his arrest. It includes names such as playwright Habib Tanvir, social activists Aruna Roy, Harsh Mander, Sudhir Patnaik and Banwari Lal Sharma, academic Kamal Mitra Chenoy, law researcher Usha Ramanathan, journalist Siddharth Varadarajan, and film-makers Ranjan Palit and Amar Kanwar.

The committee has been organising shows and public meetings all over India to sensitise people, not just about Ajay’s case but also about the draconian impact of the Chhattisgarh Special Public Security Act, 2006 (CSPSA), and Section 124(A) of the IPC. Several petitions condemning Ajay’s arrest have been subsequently filed by the People’s Union of Civil Liberties (PUCL), the People’s Union for Democratic Rights (PUDR), some film-makers and Amnesty International.

Amnesty International says, “We have reason to believe that the charges against Ajay are politically motivated. Ajay has been actively engaged since 2004 in documentation of human rights violations as part of the PUCL’s ongoing efforts to protect the rights of Adivasi communities in the face of escalating violence in the Bastar-Dantewada area of Chhattisgarh between banned Maoists and Salwa Judum, an armed anti-Maoist militia campaign widely regarded as supported by the State government.”

Historians such as Ramachandra Guha have also voiced their support. “I know Ajay and can attest, as a mutual friend puts it, that for all forms of violence he has a deep and abiding distaste,” Guha says. The CSPSA, under which Ajay was arrested, contains a broad definition of what constitutes an unlawful activity (Section 2), which can be invoked to clamp down on the freedom of expression and the rights of journalists.

Punishment of up to seven years’ imprisonment is prescribed under the law for uttering words, or writing or making visual representations that create “risk or danger for public order, peace or public tranquillity” (Section 8).

Moreover, any organisation can be declared unlawful by issuing a government notification. But Usha Ramanathan says that although the government is obliged to specify the reasons for declaring an organisation unlawful, it may dispense with that requirement if, in its opinion, that is against the public interest to do so (Sections 2 and 3). She adds that the Act gives the powers to notify and take possession of the places and the property used for the purpose of “unlawful activities” (Sections 9, 10 and 11).

The Chhattisgarh Police picked up 42-year-old Ajay on May 5 on charges of “being part of an urban network of naxals”. The Director-General of Police of Chhattisgarh Vishwa Ranjan told a national magazine that the police had recovered a letter written by Ajay addressed to the spokesperson of the Maoists saying “either return the camera I gave you or pay me in place of that”. “The incriminating element is ‘I gave you’,” Ranjan asserted. He admitted that there was nothing that directly implicated Ajay but added that “under the law, one cannot have any contact or commerce with members of a banned organisation.”

The letter, written by Ajay, was recovered from the house of Malti Rao, the wife of Gudsa Husendi, the Maoists’ spokesperson, after the police claimed they “busted the naxalite racket” on January 21. Ajay was under the police scanner since then.

Ajay’s wife, Shobha, said that on January 22, three policemen came to their Ayyappa Nagar house at eight in the morning. They searched the house and took away Ajay’s computer and other belongings such as his camera manuals, research material and the master tapes of his films, which are still with the police. The police also showed him the letter recovered from Malti Rao.

Ajay admitted that he had written the letter but had also told the police the circumstances under which it had been drafted. Ajay told Frontline that in April 2004, while he was filming in Bastar in Chhattisgarh, an armed Maoist squad threatened and detained him. They had, then, taken away the camera from him. The letter, he said, was to tell them to return his camera as he could not afford another one to start working again. It is important to note that the Act under which Ajay is charged came into existence in April 2006, while the letter is supposed to have been written in 2004.

The film-maker at a public meeting of Adivasis. Recently, he made films on the lives of working women in Chhattisgarh, the police attack on Hero Honda workers in Haryana, and the work of Dr. Binayak Sen.

The police, however, are convinced that Ajay’s arrest is not linked to the 2004 incident. While emphasising this is a “totally different case”, they have overlooked a vital detail. The letter is undated. So while the police may want to believe Ajay wrote the letter much after the 2004 incident, they cannot negate the possibility that it was written as a sequel to the incident that took place two years before the CSPSA came into force.

But none of this counts as a slip-up for the police. Running contrary to the very spirit of fundamental rights, the CSPSA authorises the police to arrest anyone with political leanings or associations that question state policies. Ajay, a State executive member of the PUCL, is the second PUCL member to be arrested. The first, famously, was Dr. Binayak Sen, who was arrested on May 14, 2007.

Ajay and Shobha live with their 20-month-old son in Bhilai, Chhattisgarh. Ajay grew up in a joint family that migrated from Kerala. His uncle came to Bhilai in 1959 to set up a tea shop near the steel plant. Eventually, Ajay had to leave school and work.

A chance encounter with Jonathan Parry, the well known anthropologist from the London School of Economics who was in Bhilai for a research project, was the turning point in Ajay’s life. He became Parry’s research assistant and developed a keen interest in the history and life of Chhattisgarhi people.

After learning basic film-making skills, Ajay and Shobha made films about social issues and over the years acquired a camera, microphones, cables and an editing computer. Ajay’s concerns led him to becoming a member of the All India Youth Federation, the wing of the Communist Party of India (CPI), and the State convener of the Campaign Against Child Labour.

The couple later opened a school for 25 poor girls in a slum cluster of Bhilai. Meanwhile, in his documentaries, Ajay began exploring the issues of migration and human rights. He became a voluntary member of the PUCL.

His recent films, made before he was arrested, were about the March 8 Women’s Day celebrations and the lives of working women in Chhattisgarh, the police attack on Hero Honda workers in Gurgaon in Haryana, and on the work of Dr. Binayak Sen. Ajay was also a strong opponent of Salwa Judum, the state-run programme to counter Maoists in Chhattisgarh. Salwa Judum has been criticised by many political and civil society organisations for violating human rights through its alleged state-sponsored violence.

Draconian definition

Ajay is still an accused under Section 124(A) of the IPC and under the CSPSA. According to Vrinda Grover, a lawyer, the definition of the Act and the section suggests that if the state finds the views of anybody – film-makers, journalists, writers, actors, academics, social activists – even mildly critical of the government, they can be targeted. “Such acts create a situation where the police will have to do less investigation and even a person with a tendency to interfere with the personnel of the state can be booked under the law,” she said.

A debate on the utility of the draconian laws enforced in the name of “protecting” the Indian state is long overdue. Proponents of these laws argue that the country is in the grip of multiple insurgencies seeking to dismember it and is the target of both indigenous and global terrorist networks.

Most civil society groups agree that terrorism in all its forms must be resolutely countered, but they point out that the means employed by constitutional democracies must not violate the core rights and freedoms that form the bedrock of civilised society.

why the communists oppose the nuclear deal?-reason in this report

Waiting traps

R. RAMACHANDRAN
in New Delhi

The shift to an import-led nuclear programme would make India vulnerable to the vagaries of the global market.

PHILIPPE WOJAZER, POOL/AP

At the Elysee Palace in Paris, in the presence of Prime Minister Manmohan Singh and President Nicolas Sarkozy, French Foreign Minister Bernard Kouchner (right) and Atomic Energy Commission Chairman Anil Kakodkar sign an accord on September 30 to enable French companies to sell civilian nuclear technology to India.

THE signing of the India-United States Civil Nuclear Cooperation Agreement, or the 123 Agreement, on October 10 by Minister for External Affairs Pranab Mukherjee and U.S. Secretary of State Condoleezza Rice marks the final step in a paradigm shift in the development of nuclear energy in the country.

From the hitherto strongly self-reliant and indigenous approach, the Indian government is seeking to increase the generation of nuclear power by following an import-led growth path, notwithstanding the constraints and vulnerabilities that characterise such an approach as well as the realignments – geopolitical, strategic and scientific – that the country would be forced to make.

In particular, the signing signals the opening of the door to nuclear imports from the U.S. after 34 years. India’s nuclear power programme kicked off with an India-U.S. bilateral agreement in 1963 to set up two 160 MWe nuclear power plants (NPPs) at Tarapur, Maharashtra, but the cooperation ended abruptly following India’s Pokhran-I test in 1974. It led to the stoppage of fuel supplies to Tarapur and the emergence of a regime of controls on the export of nuclear technology and goods to non-signatories to the Nuclear Non-Proliferation Treaty (NPT), such as India.

Even though a self-reliant approach ultimately to nuclear technology development was part of Homi J. Bhabha’s vision, the Department of Atomic Energy (DAE) was forced to take to this route quicker than envisaged. In retrospect, it proved to be highly beneficial for the DAE and the country. Now this approach is being marginalised by a growing strategic alliance with the U.S. and the consequent Manmohan Singh-George Bush joint statement of July 18, 2005, of which civil nuclear cooperation has become the totem pole.

From the limited perspective of the import of additional nuclear power generation capacity, the DAE seems to be far from clear about the extent of imports it envisages in the years to come. A figure of importing 20,000 MWe by 2020 is quoted often, particularly in the documents of the Planning Commission and in the statements of the Prime Minister. However, in recent times, the DAE has even begun talking of importing 40,000 MWe by 2020.

Even before the possibility emerged of importing from around the world, the DAE had set itself a target of 20,000 MWe by 2020, which included 8,000 MWe on the basis of the hope that Russia may supply 6,000 MWe in addition to the 2,000 MWe currently being installed at Kudankulam in Tamil Nadu.

Either of the two revised import scenarios that have been articulated in the wake of the impending possibility of global nuclear commerce with India would imply that the Indian nuclear energy programme would be driven predominantly by Light Water Reactors (LWRs) based on (low) enriched uranium (LEU) instead of the natural uranium-based Pressurised Heavy Water Reactors (PHWR), which have been its mainstay.

The Indian programme would then become highly vulnerable to the vagaries of the global nuclear market, in terms of capital cost (which at about $2 million/MWe is already much higher than in the case of PHWRs), uranium cost (which has escalated rapidly in recent times) and disruptions in supplies. All these factors are highly sensitive to changes in global geopolitics and the non-proliferation order set by the NPT and related controls on nuclear transfer as dictated by the guidelines of the 45-member Nuclear Suppliers Group (NSG).

India has been allowed to do nuclear commerce by an amendment to the NSG Guidelines (Frontline, October 10).

The crossing of this hurdle had, in principle, laid the premise for India to engage in nuclear trade with countries such as Russia, France and Japan. Trade with the U.S., the prime mover of the NSG waiver, could begin only after the U.S. Congress approved the 123 Agreement.

Of course, there seems to have been a tacit agreement between the two governments that India would not talk to other suppliers before the agreement was approved. Now that this has also happened, it enables an ostensible “level playing field” to potential suppliers. (The 123 Agreement enters into force after the exchange of appropriate diplomatic notes between India and the U.S. as required under Article 16(1) of the Agreement.)

Of course, having given a written assurance on September 10 that the Government of India intended to source a minimum of 10,000 MWe from U.S. nuclear energy firms “on the basis of mutually acceptable technical and commercial terms and conditions”, India could not have negotiated with others.

One could argue that the caveat in quotes amounts to not giving a firm commitment. But the manner in which the U.S. pushed the sale of its Westinghouse AP1000 reactors to China in 2006 despite similar financial terms from Russian and French suppliers, not to mention their better technologies, is evidence enough that the U.S. could resort to similar tactics here as well (The Hindu, January 26, 2007).

More pertinently, while the government may perceive the NSG waiver to be “clean and unconditional”, the contours of global nuclear trade with India will in all likelihood be determined by the parameters set by the 123 Agreement. These are quite constraining, notwithstanding the counter-spins being given by the government and the bulk of the media.

Even though India has to enter into bilateral agreements with France and Russia, the NSG waiver provision of consultations among NSG members and the provisions in the Hyde Act as well as the U.S.-India Nuclear Cooperation Approval and Non-proliferation Enhancement Act of October 8, 2008 – the RosLiehtinen-Berman-Lugar Act – seem to ensure that other potential suppliers too played by the rules set by the U.S. (The RBL Act signifies Congress’ formal approval of the 123 Agreement.)

“This is an agreement…,” remarked Pranab Mukherjee at the signing ceremony, “[that] reflects a careful balance of rights and obligations [of the two countries]. The agreement has been passed by the U.S. Congress without any amendments. Its provisions are now legally binding on both sides once the Agreement enters into force. We look forward to working with U.S. companies on the commercial steps that will follow to implement this landmark agreement.”

In his remarks to the press soon after, he reiterated these points and added, “We intend to implement this agreement in good faith and in accordance with the principles of international law and I am confident that the U.S. will also do the same” (emphasis added).

The Minister’s remarks on the legally binding nature of the agreement and its implementation in accordance with the Vienna Convention are a consequence of President Bush’s remarks in his letter to Congress while transmitting the Agreement (and the associated documents as required by the Hyde Act) on September 10. In that, with regard to fuel supply assurances, he had said (Frontline, October 10): “[T]he agreement records certain political commitments…. The text of the agreement does not transform these political commitments into legally binding commitments because the agreement, like other U.S. agreements of this type, is intended as a framework agreement.”

These remarks had led to a counter-statement on September 12 from the Ministry of External Affairs (MEA), which said: “The rights and obligations of both India and the U.S. are clearly spelt out in the terms and provisions of the 123 Agreement. Once this Inter-Governmental Agreement enters into force, the Agreement would become a legal document in accordance with well-recognised principles of international law and the Law of Treaties [the Vienna Convention].”

This war of words continued when Bush, while signing the RBL Bill into law, said: “The Bill I sign today… establishes the legal framework for [the] agreement to come into effect. The Bill makes clear that our agreement with India is consistent with the Atomic Energy Act (AEA) and other elements of U.S. law…. The legislation makes no changes to the terms of the 123 Agreement…. The legislation does not change the fuel supply commitments that the U.S… has made to… India…. The agreement also grants India ‘advance consent to reprocessing’, which will be brought into effect upon the conclusion of arrangements and procedures for a dedicated reprocessing facility under IAEA safeguards” (emphasis added).

Differing interpretations

MANISH SWARUP/AP

At a protest against the nuclear deal, in New Delhi on September 25.

The government of India believes that cooperation will be governed by the provisions of the 123 Agreement only and that the fuel supply assurances given therein imply that the U.S. is legally bound to provide fuel or help India create a strategic fuel reserve for the lifetime of the U.S.-supplied reactors. Similarly, it believes that the “reprocessing consent” given in the agreement amounts to upfront grant of reprocessing rights.

But the U.S.’ interpretation of the agreement has been greatly at variance with India’s, and Bush’s remarks do not in any way allay India’s apprehensions, contrary to some commentaries in the media.

If the Hyde Act provided the basis for the U.S. perspective on the agreement, the RBL Act not only reinforced those provisions but also added new ones, especially towards harmonising the norms of trade with other NSG members. The RBL Act is thus just ‘Hyde Plus Act’.

In principle, since Congress was required to waive the usual consultation period of 30 consecutive legislative days for its approval as a simple privileged resolution, amendments could also have been brought in to the RBL Bill to alter the terms of the agreement. Because of the waiving off of the consultation period, its approval was no longer possible as a privileged resolution and this allowed for amendments.

Indeed, Senators Byron Dorgan and Jeff Bingaman had together mooted an amendment, which mandated certain specific U.S. actions in the event of an Indian nuclear test. This would have led to India rejecting the agreement.

But the U.S. administration, in its bid to ensure passage of the agreement under the current regime itself, ensured that the amendment was turned down.

In a statement of ‘Administration Policy’ on October 1, the Executive Office of the President said: “The Administration strongly urges swift passage by the Senate of H.R. 7081 [the RBL Bill], without amendment…. The Administration strongly opposes the amendment to H.R. 7081 offered by Senators Dorgan and Bingaman…. The proposed amendment would inject rigid and burdensome mandates into a statutory scheme (in the AEA) already equipped to address the unanticipated circumstance of India not adhering to the nuclear testing moratorium that it affirmed to the U.S. in 2005 and reiterated to the broader international community as recently as September 5, 2008. Accordingly, the Administration considers this amendment to be unnecessary and potentially harmful to the success of U.S.-India Civil Nuclear Cooperation Initiative…. Congress and the Administration have carefully addressed testing concerns in the Hyde Act, the U.S.-India 123 Agreement and the testimonies of Administration officials.”

Indeed, at the hearing of the Senate Foreign Relations Committee on September 18, Under Secretary of Political Affairs William Burns and Under Secretary for Arms Control and International Security John C. Rood testified quoting Condoleezza Rice’s statement of April 5, 2006: “We have been very clear with the Indians… should India test, as it has agreed not to do… the deal, from our point of view, would at that point be off.”

The RBL Act (Section 101(b)) states: “The agreement shall be subject to the provisions of the AEA of 1954, the Henry J. Hyde… Act of 2006… and any other applicable U.S. law….” Significantly, Section 102 (a) notes the following, serving a reminder as it were to the administration to adhere to the statements and clarifications it made to Congress in various hearings and documents submitted to it. “Congress declares that it is the understanding of the U.S. that the provisions of the… [123] Agreement have the meanings conveyed in the authoritative representations provided by the President and his representatives to Congress and its committees prior to September 20, 2008, regarding the meaning and legal effect of the Agreement.”

Incidentally, the Indian government has been dismissive of these, saying that these are not reflected in the 123 Agreement, the basic document that governs the cooperation, and are hence irrelevant.

Fuel supply assurances

With regard to Bush’s statement that fuel supply assurances in the agreement are only political commitments that are not legally binding, the following testimonies of Burns and Rood are revealing. Burns stated: “As the President made clear in the transmittal letter, they are political commitments… in the sense that we are determined to help India to try to ensure a reasonable steady supply of fuel and should disruptions arise, for example, [owing to] trade disputes, [when] a commercial firm fails to meet its requirements, then we are firmly determined to… meet those requirements to the fullest extent consistent with U.S. law. And so any President would be bound by U.S. law and I believe that the Indians understand the clarity of our position.”

Rood stated: “[T]he 123 Agreement provides a legal framework. It’s an enabling piece of agreement…. It does not compel American firms, for instance, to sell a given product to India… [I]t is not a government activity to produce nuclear fuel; it’s a commercial activity in the U.S. and we in the U.S. government could not legally compel American firms to provide fuel to India if they did not wish to do so.”

He further clarified with regard to the Indian interpretation that the U.S. would help India procure fuel from elsewhere if the U.S. terminated its supplies: “It would be inconsistent with a President’s decision to terminate U.S. supply… to then seek the supply from other countries…”

Section 102(b)(1) and (2) of the RBL Act reiterate the provisions in Section 103(a)(6) and (b)(10) respectively of the Hyde Act. Sub-section (1) of Section 102(b) states: “In the event that nuclear transfers to India are suspended or terminated… it is the policy of the United States to seek to prevent the transfer to India of nuclear equipment, materials, or technology from other participating governments in the NSG or from any other source.”

Subsection (2) states: “[A]ny nuclear power reactor fuel reserve provided to… India for use in safeguarded civilian nuclear facilities should be commensurate with reasonable reactor operating requirements.”

While there is a clear and obvious interpretation of the above sentence, the Indian government maintains that, since “reasonable operating requirements” has not been defined, it can be interpreted to mean lifetime fuel reserves. Clearly, the Indian government should be more realistic than to make such sweeping statements that do not make sense and defy logic.

Significantly, the RBL Act also requires the President to submit as part of the Implementation and Compliance Report as required by Section 103(g)(2) of the Hyde Act, a listing of “any U.S. efforts to help India develop a strategic reserve of nuclear fuel as called for in Article 2(2)(e) of the Agreement”, of “any U.S. efforts to fulfil the political commitments made in Article 5(6) of the Agreement [concerning fuel supply assurance]” and of “any negotiations that have occurred or are ongoing under Article 6(iii) of the Agreement [concerning reprocessing of U.S. origin or U.S. obligated fuel].”

Reprocessing rights

As regards reprocessing rights, which come into effect only after arrangements and procedures are negotiated and approved by Congress, the RBL Act (Section 201(c)) says that the subsequent arrangements and procedures will not take effect “if Congress adopts [consistent with the requirement of 130 g.(2) of the AEA and the RBL Act], and there is enacted, a joint resolution stating in substance that Congress does not favour such subsequent arrangement.”

In effect, this only reiterates what has been commented upon in these columns as well as by the Left parties that there is no upfront grant of permanent right to reprocess spent fuel of U.S. origin, contrary to what the government has repeatedly sought to portray.

In addition, through this Act, Congress has sought a congruence of measures by other potential suppliers with the “subsequent arrangements and procedures” of the U.S. Section 201(b)(1)(C) requires the President to transmit to the appropriate congressional committees “a certification that the U.S. will pursue efforts to ensure that any other nation that permits India to reprocess or otherwise alter in form or content nuclear material… requires India to do so under similar arrangements and procedures.”

This, essentially, would amount to other suppliers, such as France and Russia, also being forced to allow reprocessing only in a dedicated facility, besides following other procedures with regard to safeguards and environmental and physical protection of material that pass through such a facility. If the U.S. could actually enforce this on all the potential suppliers, the implication of this could be serious. That is, India cannot begin commercial negotiations with any supplier – French, Russian or American – before it builds a reprocessing facility and obtains reprocessing rights. Reprocessing remains central to the Indian nuclear programme, which relies on the breeder route, notwithstanding its shift towards imported nuclear power.

In this context, it would be of interest to know what India has negotiated with France in terms of reprocessing rights. For some inexplicable reason both countries have kept the agreement under wraps after Prime Minister Manmohan Singh and French President Nicolas Sarkozy signed it in Paris on September 30.

According to one news report, France has agreed to have Indian spent fuel shipped back to France for reprocessing, as in the case of Japan. Besides problems of logistics, the shipping cost would increase significantly the operating costs and hence the tariff on electricity generated.

Through a specific policy directive to the administration, the RBL Act seeks to restrict the transfer of Enrichment and Reprocessing (ENR) technologies. It has been India’s hope that even if U.S. policy did not allow such transfer, it could procure these from sources such as Russia and France. Section 204(a) states that before entry into force “the President shall certify to the appropriate congressional committees that it is the policy of the U.S. to work with the members of the NSG, individually and collectively, to agree to further restrict transfers of equipment and technology related to the enrichment of uranium and reprocessing of spent nuclear fuel” (emphasis added).

Indeed, Rice had made a “personal commitment” to House Representative Howard Berman in September that at the November meeting of the NSG the U.S. would give the highest priority to reaching a decision to seek limits on the export of ENR technologies to countries that were not signatories to the NPT. Neither the NSG Guidelines per se nor the India-specific waiver restricts such transfers except for requiring that exporters “exercise prudence”. However, such a certification, as required by the Act, is yet to be made. Therefore, even though the agreement has been signed by the two countries, it is yet to take effect.

In addition, the Act (Section 104(1) and (2)) also requires that the U.S. can issue licences for nuclear transfers pursuant to this agreement only after the India-specific Safeguards Agreement concluded between India and the International Atomic Energy Agency (IAEA) on July 7 has entered into force and India has filed a declaration of facilities to be brought under safeguards that is not inconsistent with India’s civil-military Separation Plan of May 11, 2006 (“taking into account the later initiation of safeguards than was anticipated”).

Section 204(c) further requires the President to submit not later than six months of the enactment of the RBL Act, and every six months thereafter, a report on the efforts by the U.S. towards this policy on ENR technologies. It is not clear if these have happened.

Clearly, India’s perceptions of what its rights and obligations are under the 123 Agreement belong in the realm of imagination or deliberate posturing to ward off severe criticism at home. But congressional testimonies, the U.S. Acts as well as documents have repeatedly proved them wrong. Even if one went strictly by the premise that the 123 Agreement alone is the legal document that India will abide by and that alone will govern the nuclear trade and cooperation, Article 2(1) of the agreement states clearly that each party will implement the agreement “in accordance with its respective applicable treaties, national laws, regulations and licence requirements….”

Therefore, it is simply illogical to maintain ad nauseum that the provisions of internal laws of the U.S. are of no concern to India and what matters is the text of the 123 Agreement. It is that very text which implies that all the restrictive provisions of the AEA, the Hyde Act, the RBL Act and any other applicable U.S. law will have a bearing on India’s nuclear trade with the U.S., and probably with others as well via the Hyde and RBL Acts. Not acknowledging this would be akin to keeping an ostrich-like posture.

Evil impacts of FDI in retail sectors in India

Half ministers

ERA SEZHIYAN

Political sovereignty of a developing country like India has become subservient to a globalised economy.

RAMESH SHARMA

Prime Minister Manmohan Singh with Finance Minister P. Chidambaram.

INDIA is a sovereign state, which means that as a nation it is a self-governing political entity. Sovereignty means full supremacy of the state and its right to have control over the area of its governance, people and law-making authority, to ensure its independent existence, to supply social services such as education and health to its people, to provide them shelter and to regulate the economy.

In March 1950, the National Planning Commission headed by Prime Minister Jawaharlal Nehru set for itself the following goals:

1. to increase production to the maximum possible extent so as to achieve a higher level of national and per capita income;

2. to achieve full employment;

3. to reduce inequalities of income and wealth; and

4. to set up a socialist society based on equality and justice and devoid of exploitation.

The foremost objective of planning in India was to bring about rapid economic growth through the development of agriculture, industry and infrastructure. Normally, the economic development of a country is reflected on the expansion of per capita in real terms. Indian planners assumed that the continuous increase of national income would eventually percolate to the masses and reduce the level of their poverty. But at the end of the Third Five-Year Plan, it was found that the increase of national income at the macro level did not reduce the poverty of the masses at the micro level.

Accordingly, the Fourth Plan emphasised the need to raise the standard of living of the people, especially the less-privileged sections of society. It stated: “While increased production is of the utmost importance, it is equally important to remove or reduce, and prevent the concentration of wealth and economic power. The benefits of development should accrue in increasing measure to the common man and the weaker sections of society, so that the forces of production can be fully unleashed.”

New Economic Policy

The new economic policy of liberalisation, privatisation and globalisation introduced by Finance Minister Manmohan Singh in 1991 marked a total departure from the Nehruvian model of planning. Emphasising the role of a globalised market economy, he declared in his 1991-92 Budget Speech: “A vast number of people in our country live on the edges of a subsistence economy. We need credible programmes of direct government intervention focussing on the needs of these people. We have the responsibility to provide them with quality social services such as education, health, safe drinking water and roads. In the same way, the development of capital and technology intensive sectors, characterised by long gestation periods, such as transport and communications and energy will need to be planned with much greater care than ever before.”

He also assured the nation that the austerity of Gandhiji would be the guiding principle and stated: “In highlighting the significance of reform, my purpose is not to give a fillip to mindless and heartless consumerism we have borrowed from the affluent societies of the West. My objection to the consumerist phenomenon is two-fold. First, we cannot afford it. In a society where we lack drinking water, education, health, shelter and other basic necessities, it would be tragic if our productive resources were to be devoted largely to the satisfaction of the needs of a small minority.”

In his Budget Speech of 1992-93, Manmohan Singh asserted: “We must begin a new chapter in our agricultural history where farm enterprises yield not only more food, but more productive jobs and higher income in rural areas.

The new economic policy initiated by the Narasimha Rao-Manmohan Singh government was faithfully followed by successive governments led by the United Front and the Bharatiya Janata Party. In 2004, when Manmohan Singh became the Prime Minister of the United Progressive Alliance (UPA) government, the policy of globalisation got more importance in all forms and means of governance.

Let us see how far the objectives and targets visualised by Manmohan Singh and followed diligently by successive governments during the last 17 years have been fulfilled, especially in increasing production in the agricultural sector, ensuring higher income in rural areas and providing to people drinking water and roads and “quality social services” such as education and health.

Agricultural decline

Agriculture has always been considered the backbone of the Indian economy as it provides employment to about 60 per cent of the total labour force in the country even now. However, when the economic and industrial growth of the country has significant progress, the share of the agricultural sector in the gross domestic product (GDP) has been falling continuously during the last six decades of free India as follows: 1950-51 – 55 per cent; 1970-71 – 44 per cent; 1990-91 – 31 per cent; 2000-01 – 26 per cent; 2001-02 – 24 per cent; and 2007-08 – 17.5 per cent.

Compared with the steep fall in the share of the agricultural sector in GDP, the proportion of the workforce depending on agriculture has only declined marginally from 72 per cent in 1951 to 69 per cent in 1991 and to 58 per cent in 2001.Thus the per capita earning capacity in the agricultural sector has fallen to irretrievably low levels, forcing farmers into more indebtedness and eventually leading to suicide.

As Finance Minister in 1991, Manmohan Singh was assertive that the main objective of globalisation and invitation to foreign investors was to develop social services such as education and health.

Education and health

In 2004, as Prime Minister, he released the National Common Minimum Programme (NCMP) of his UPA government, giving categorical assurances to the people to raise public expenditures on education to at least to 6 per cent and on health to at least 2-3 per cent of the GDP over the next five years. Even as early as 1965, the government had accepted the recommendation of the Kothari Commission to make annual allocation of not less than 6 per cent of the GDP for education.However, the government has miserably failed to keep its promises. The share of the governments’ expenditures on education (the Central and State governments combined) in terms of the total GDP has declined 3.1 per cent in 1990-91, 2.69 per cent in 2005-06, 2.88 per cent in 2006-07 (RE), and 2.84 per cent in 2007-08 (BE); the budgetary allotments for health by the governments (the Centre and the States combined) for these years have been 1.2 per cent, 1.27 per cent, 1.36 per cent and 1.36 per cent.

In 1991, Manmohan Singh emphasised the need of foreign investments under the globalised economy in India “to provide them with quality social services such as education, health, safe drinking [and] water”. Where did the government allow all the flow of foreign investments to be invested? It has not been able to come anywhere near its targets in the most vital sectors of human development such as education and health.

It is obvious that the grand march of globalised economy and the rapid flow of foreign exchange into India have failed to develop in any way the agricultural sector or the social services of education and health. Instead of development, there has been a steep deceleration in these vital fields, affecting large sections of society.

The government claims to have succeeded in raising the foreign exchange reserves from $5.8 billion at the end of March 1991 to $310 billion at the end of March 2008. In his 1991-92 Budget speech, Manmohan Singh said that his purpose was “not to give a fillip to mindless and heartless consumerism we have borrowed from the affluent societies of the West” and that “our productive resources were to be devoted largely to the satisfaction of the needs of the poor”.

Has the government prevented the frittering away of the procured resources in “heartless consumerism”, which is reflected in the spread of the supermarket culture? It is true that in 1996, Finance Minister P. Chidambaram, under pressure from some constituents of the Deve Gowda government and its Left allies, put a complete ban, by law, on foreign direct investment (FDI) in retail trade. In India, more than 20 million people are small retail traders and the average size of the shop run by an Indian trader is less than 500 square feet.

In 2004, the Congress party solemnly promised in its election manifesto to create “legal space in the cities and towns for hawkers, vendors, food-sellers and all such informal sector service activities that enrich urban life, so that they are spared the risk of extortion, eviction, confiscation and harassment”.

Supermarket culture

In spite of the laudable promises given by the Finance Minister in 1991 and the Congress manifesto of 2004, and despite the fact that FDI in retail trade is banned, giant international corporations are entering India, overtly and covertly, through the long chains of retail shops established in the names of big Indian trading groups.

Mukesh Ambani’s Reliance Industries, with assets worth $43 billion (Rs.18,57,600 crore), has planned to invest Rs.25,000 crore in 15,000 retail shops across the metros in India. It has tied up with the second largest international retailer, Carrefour (of France), whose annual income in 2006 was €72,737.7 million (Rs.4,67,679 crore). Sunil Bharti Mittal of Airtel, with assets worth $12 billion (Rs.5,12,400 crore), is entering the retail trade in India with the world’s largest supermarket chain Wal-Mart with an annual revenue of $388 billion (Rs.1,67,46,480 crore).

Tata Industries plans to establish retail trade with the backing of Woolworth, and other big business houses in India are competing with one another to get international partners for organising their retail trade in India.

Unrestrained invasion

D. GOPALAKRISHNAN

At a cramped primary health centre, which functions in the panchayat office building at Pichanoor near Tirupattur in Tamil Nadu's Vellore district. The combined budgetary allocation for health by the Central and State governments has only marginally increased from 1.2 per cent in 1990-91 to 1.36 per cent in 2007-08.

The United States has 85 per cent of its retail trade organised against India’s 4 per cent. Departmental stores and supermarkets cater to the higher income groups in large cities; India has 70 per cent of its people in rural areas with very low income. It is calculated that every departmental store employing 40 persons will make 400 retail traders unemployed. Against the unrestrained invasion of powerful foreign giants with the help of national business barons, the future of 21 million retail traders of India and their families is bleak. Unless the government takes effective steps to create alternative employment facilities for all retailers thrown out of job, India will witness growing unemployment and poverty will prove to be a great disaster for the country.

East India Company came as a trading group to India and built a political empire. At the present, from all directions, India is being invaded by more powerful corporate giants. Under the globalised economy, the gap between the developed and the developing countries has increased, and between the rich and the poor within countries.

India, according to its Constitution, is a sovereign, socialist and democratic republic. It is the largest democracy in the world, but in terms of human development index, it occupies the 128th place in the list of 177 countries of the world. According to the 2007 World Development Indicators of the World Bank, 34 per cent of the population of India subsists on an income of less than $1 a day 80 per cent on less than $2 a day. Politically, India is a free country but economically it has become utterly subservient to foreign domination.

The per capita income of an Indian is $3,460 at purchasing power parity (PPP) value whereas the per capita values of GDP of the U.S. is $41,890, Norway $41,420, France $32,153 and the United Kingdom $33,238.

It cannot be denied that economic inter-dependence at the global level has come to stay. While the globalised economy has certainly added to the economic development of India in respect of national income at the macro level, the government has failed miserably to achieve its stated objective of alleviating poverty and backwardness through its new economic policy.

India has failed to impose strict restrictions on the area and extent of domination available to giant corporations, whether Indian or foreign. In many countries, there are significant market access restrictions on foreign investments in retail trade, on foreign equity ownership, on purchase or renting of real estate, on practices of service suppliers and on forming joint ventures with local suppliers.

Restrictions

Whenever there is an application for setting up a supermarket store, the Ministry concerned in Japan first ascertain the possibilities from local authorities and find out the views of the local small-scale retailers. As a policy the Japanese government does not to allow foreign traders to deal with the sale of rice, prepared food, liquor, tobacco products and soft drinks that are normally available in small retail shops.

If there is an application for setting up a supermarket with a space of 300 square metre or more, the French government accords permission only after getting the approval of the local authorities and consulting the local traders.

In the U.S., the local authority impose restrictions while allowing a supermarket to establish a branch in its area. Wal-Mart, which has its headquarters in the U.S., was not allowed by the New York City to open even a single retail store in New York. New Yorkers objected to Wal-Mart on the grounds that it paid low wages and provided deplorable health benefits to its employees. Wal-Mart does not allow any union to be formed by its employees. In several counties and cities, the local authorities, by law and in some places by referendum, banned Wal-Mart from setting up its stores in areas under their control.

For instance, the world’s biggest retailer could not get the permission of the local authority to set up a super centre in Inglewood, California. Under the law there, Wal-Mart appealed for a referendum. In the public opinion taken in April 2004, 61 per cent of the people gave a big rebuff to Wal-Mart’s efforts to open a store in their area.

In India, there are no legal restrictions or limitations on the allotment of space to the retail giants or on the variety of commodities to be sold by them. Nor is there any consultation with the local authority or the retail traders in the area concerned.

It is wrong to assume that farmers and producers will benefit much by selling their products to supermarkets. The truth is that global retailers have been competing with one another to place bulk orders from the low-cost markets of the world where cheap labour is available. Owing to low costs and abundant supply of labour, China has become the biggest sourcing location for world retailers. It is estimated that Wal-Mart purchases $12 billion worth of goods from China for its stores all over the world and Carrefour gets 61 per cent of its purchases from China.

Larger than governments

It may be noted that the annual income of Wal-Mart in 2007 was $388 billion (Rs.1,67,46,480 crore). The total revenue of the Central, State and Union Territory governments in India in 2007 was Rs.8,84,765 crore.

Regarding the grim impact of globalisation on developing and poor countries, Joseph Stiglitz, a Nobel laureate in Economics, stated that “globalisation has unleashed market forces that by themselves are so strong that governments, especially in the developing world, often cannot control them. Governments that attempt to control capital flows may find themselves powerless to do so, as individuals find ways of circumventing the regulations.” (Making Globalization Work, 2006, page 20.)

It is very difficult for anyone to pinpoint correctly the extent of the benefits that India or any other developing country may be able to get by being part of the globalised economy, but it is abundantly clear that the present arrangements accepted or imposed on India have totally failed to bring about sustainable development or to contribute to the process of equitable distribution of benefits to all sections of society.

The globalised market economy introduced in India is concerned only with consumerism, attracting high-income groups that mostly live in the cities. The agricultural sector, the rural economy, basic social requirements, decent employment and standard of living are all out of focus in the present strategy of growth under globalisation.

How much damage, politically and economically, the globalised economy has caused India was openly admitted by Manmohan Singh, as the Leader of the Opposition in the Rajya Sabha, to Thomas L. Friedman, a noted American journalist, who met him in 1998. In his book Lexus and the Olive Tree, the author reports the anguish and distress felt by Manmohan Singh by the process of globalisation in India:

“We learned that there were advantages in having access to international capital markets, [but] the government’s ability to deliver and control shrank the more it opened to the world…We have a world where our fates are linked, but [India’s specific] concerns and aspirations don’t get taken into account…If you are operating an exchange-rate policy, or monitory policy, your policies become an adjunct of what Allan Greenspan [chairman of the U.S. Federal Reserve from 1987 until his retirement in 2006] does. It reduces your degree of freedom, even in fiscal policies…I have a friend from a neighbouring country who also became a Finance Minister. The day he got his job, I called to congratulate him. He said, ‘Don’t congratulate me. I am only a half minister.

PAUL J. RICHARDS/AFP

Shoppers at The Wal-Mart store in Fairfax, Virginia. In a referendum held at Inglewood, California, in April 2004, 61 per cent of the voters gave a big rebuff to Wal-Mart's efforts to open a store in their area.

The other half is in Washington' " (page 108, April 2000).

This was the startlingly sad confession of Manmohan Singh who, as Finance Minister in 1991, was responsible for introducing the globalised market economy. After having gone through the bitter experience of loss of freedom and ability to ensure a free economic development, he bewailed the fate of a Finance Minister in a developing country. It will be interesting to know his assessment of the present status of the Prime Minister or the Finance Minister of India under the globalised economy.

INDIA'S ECONOMIC CRISIS AVERTED BY COMMUNISTS

Return of the state

PRABHAT PATNAIK

The hegemony of finance capital that underlay neoliberalism is unlikely to persist in the old form.

THE HINDU PHOTO LIBRARY

John Maynard Keynes, who advocated "socialisation of investment".

THE Great Depression of the 1930s was a spectacular practical demonstration of the contradictions of “laissez-faire capitalism”. John Maynard Keynes, the renowned economist, writing in the midst of the Depression, had attributed the failure of markets, especially financial markets, to their intrinsic incapacity to distinguish between “speculation” and “enterprise”, and to get dominated by the activities of speculators to a point where “enterprise becomes the bubble on a whirlpool of speculation”. As a result, the level of employment and output in the economy, and hence the livelihoods of millions of people, became dependent on the whims and caprices of a bunch of financial speculators, “a byproduct of the activities of a casino”.

Keynes was opposed to socialism and was a defender of the capitalist system, but he saw that major repair had to be done to the capitalist system if it was to survive. The repair he recommended was “socialisation of investment”, that is, state intervention to ensure that the level of investment in the economy was such as to achieve “full employment”.

The basic argument that “laissez faire capitalism” is fundamentally irrational (insofar as it makes employment and output the byproduct of the activities of a casino), and hence needs to be replaced by state intervention, has never been successfully refuted by neoliberalism. Indeed, intellectually, neoliberalism has always been vacuous, in the most elementary sense that the assumptions required by neoliberal theory to show the salutary consequences of the unfettered operation of markets are either palpably unreal, or at palpable variance with other assumptions required for the same demonstration, making the argument logically inconsistent.

The resurgence of neoliberalism against the Keynesian position, therefore, was a result not of its intellectual persuasiveness, but of its being promoted by the new hegemonic entity in world capitalism, namely, international finance capital, whose ideology it constituted. Of course, the Keynesian prescription for capitalism, that is, state intervention in demand management, had ceased to work. But this fact did not mean that the Keynesian diagnosis was wrong, and nobody has succeeded in proving otherwise. What is more, the fact of the Keynesian medicine not working any longer was itself the result of the emergence of international finance capital.

The state whose intervention Keynes had advocated was necessarily a nation-state, and in a world where finance was globalised, that is, in a world characterised by international finance capital, the capacity of the nation-state to pursue policies of its choice was necessarily undermined: any set of policies that are not to the liking of international finance capital would provoke the flight of such capital to other shores, plunging the original host economy into dire straits. Keynes was aware of this constraint upon demand management and hence was very particular that “finance above all must be national”. But the spontaneous tendencies of capitalism, towards the concentration of finance in larger and larger blocs and its deployment all over the world in quest of speculative gains, operated even within the regime of Keynesian demand management, and ultimately undermined it from within.

Undermining the old regime, however, was not enough for finance capital. An alternative new regime had to be erected, which would facilitate the global movement of finance by removing all barriers to such movement; which would permit finance capital to pick up “for a song” profitable public sector enterprises and scarce and valuable natural resources that had been largely nationalised following decolonisation in the Third World; and which would turn the state from being a Keynesian (or for that matter a Nehruvian) state into one that was actively engaged in promoting the interests of international finance capital, of which the domestic financiers and the high bourgeoisie constituted a component. This transformation, which required not just the thwarting of Keynesianism (or of Nehruvianism or of Third World nationalism, generally) but actually transcending the latter, institutionalising an alternative regime to the ones that were in force, had to be sustained by an ideology. Neoliberalism was that ideology.

Neoliberalism had not disappeared during the heyday of Keynesianism. It had been overwhelmed, but it continued to exist, pushed to the fringes and advocated by die-hard believers like Milton Friedman who were looked upon with amused tolerance by “mainstream” economics, even as debates within the latter centred on different versions of Keynesianism. Even Richard Nixon famously said in 1971: “We are all Keynesians now.”

Neoliberalism’s emergence from the shadows was the theoretical counterpart of the emergence to dominance of international finance capital through, inter alia, the progressive removal of capital controls, which had characterised the Bretton Woods System, first in the advanced countries during the 1960s and later in the developing countries.

G.R.N. Somasekhar

Indian financial institutions have largely escaped the effects of the unfettered operation of financial markets because, thanks to the opposition of the Left and other progressive forces, financial liberalisation in the country has not proceeded far enough. Here, a May Day rally organised by the Centre of Indian Trade Unions in Bangalore in 2008.

What is occurring in world capitalism now is a reaffirmation of Keynes’ proposition that financial markets, precisely because they get dominated by speculators, function like casinos. Financial crises, resulting in severe depressions, are inherent to the functioning of this “free market” system. In fact, efforts by the state to prevent such crises, through “bailout” packages, when successful in the short run, have the perverse effect of further emboldening speculators to become even more reckless, and hence creating the potential for even more severe crises in the future. Financial crises in this sense resemble earthquakes: if they do not happen for some time, then when they do happen they are even more severe.

Government intervention to prevent such crises in an economy dominated by finance capital, and hence open to speculation, prevents a current crisis by creating the conditions for a far more severe future crisis. To say this is not to suggest that the government should allow financial crises to occur, but to argue that the neoliberal regime that permits financial crises to occur at all should be transcended. (Many, including myself, would argue that this is not possible without transcending capitalism itself, but that discussion need not detain us here.)

Keynes had said with remarkable prescience: “As the organisation of investment markets improves, the risk of the predominance of speculation does, however, increase.” One of the “improvements” in the organisation of financial markets in recent years has been the development of the “derivatives” market, the total value of trade in which in 2007 was 40 times the total gross domestic product of the world economy. And confirming Keynes’ prognosis, this has been a major stimulus to speculation and hence a major factor behind the severity of the current financial crisis.

Loans made by investment banks, for instance, are “cut up” and re-bundled for sale to others in the derivatives market. This has two important consequences: first, the risks associated with holding claims upon the ultimate borrowers get hidden from those who hold these claims. Derivatives, in short, lead to risk-concealment, which means that the euphoria of a boom in the prices of assets, against which loans are made, continues much longer than would have otherwise been the case. Secondly, even when the risks are not concealed but are known, the market ensures that the least risk-averse are left holding the maximum risk. This, too, by lowering the general level of risk-aversion in the economy, implies that speculation continues much longer than would have otherwise been the case. It follows that the development of the derivatives market has the effect of prolonging speculative booms, and hence intensifying the magnitude of the crash when it finally comes.

The Left’s resistance

All these factors have been at work in the current financial crisis. Its root cause lies in the unfettered operation of financial markets, which is an essential part of the neoliberal package and which is promoted by finance capital. The fact that Indian financial institutions have largely escaped this crisis is precisely because, thanks to the pressure of the Left, “financial liberalisation” has been somewhat checked, despite the best efforts of Manmohan Singh and the other leading luminaries of our neoliberal contingent.

Not that India will escape the consequences of the world financial crisis, but this is because the shifting of funds by the foreign institutional investors (FIIs) will result in a mutually reinforcing downward movement in the prices of stocks and of the rupee, and also because any recession in the world economy within the neoliberal regime will entail the import of unemployment into our economy and a crash in the prices of cash crops for the peasantry. (The collapse of the financial giants on Wall Street has already put a question mark over employment prospects in Business Process Outsourcing units and call centres.)

G. Moorthy

At the annual general meeting of the Madurai District Pensioners’ Association in Madurai on September 16. If pension funds had been deployed on the stock market, as the neoliberals had wanted, then the loss in their value would have meant either acute suffering for old-age pensioners or an inordinate drain on the government’s budget for rescuing pension funds.

But this transmission mechanism will, at least, not be supplemented by an additional imported financial crisis, as is happening with British and continental banks, because financial liberalisation has not proceeded far enough, and certainly not as far as our domestic neoliberals would have liked. Likewise, if capital account convertibility had gone through, as those setting up the successive Tarapore Committees had wanted, then the collapse of the stock market, and the threat to the value of the rupee in the foreign exchange market, would have been far greater than now, since it is not just FIIs but even the domestic wealth-holders who would be shifting funds out of the country. Similarly, if pension funds had been deployed on the stock market, as the neoliberals had wanted, then the loss in their value would have meant either acute suffering for old-age pensioners or an inordinate drain on the government’s budget for rescuing pension funds.

Ironically, Chidambaram has been reportedly shoring up the stock market by asking public sector banks to buy up stocks, an option that would have been denied to him if his own advocacy for privatising public sector banks had succeeded. Ironically, too, the most ardent advocate of privatising insurance in the country was the AIG, the world’s largest insurance company, which is at present in the doldrums and rescued only through a loan of $85 billion by the United States government.

The country has been spared all this because of the stout opposition mounted by the Left and other progressive forces against neoliberal policies. But it is also important to draw a salutary lesson from all that has happened. Any economy is ill-served when its affairs are entrusted to a group of persons who are wedded to an ideology that is intellectually vacuous and owes its apparent triumph only to the fact of its being promoted by the self-serving needs of international finance capital.

That ideology, however, has run its course. The solution to the crisis that its triumph has precipitated is increasingly being seen to lie in the part-nationalisation of financial institutions in the capitalist world, which represents a negation of its basic premise. Originally it was thought that an “injection of liquidity” was all that was needed to overcome the crisis. But the obvious question was: injection of liquidity where? The reason why credit has dried up all over the capitalist world is an increase in the lenders’ perception of risk, since the solvency of the borrowers has become suspect owing to the presence of a plethora of “toxic” securities in the system.

If A does not have confidence in the solvency of B so as to be willing to lend to B, then simply improving A’s access to liquidity is unlikely to make any difference. Of course, if B’s access to liquidity can be improved, then, since B is of dubious solvency and hence cash-strapped, this may help overcome the crisis, provided that this liquidity is available on a fairly long-term basis and provided that B uses it wisely. The only way that such liquidity can be made available without arousing public ire is through part-nationalisation, whereby the government injects funds in lieu of equity.

The European governments, especially the United Kingdom and Germany, have accepted this idea, and British Prime Minister Gordon Brown has already put it into practice. The Americans, however, have been reticent, which is why Treasury Secretary Henry M. Paulson’s original “bailout package” (involving simply the government’s buying out “toxic” securities) had such a rough weather (though Paulson now seems willing to consider nationalisation). Likewise, even measures such as guaranteeing inter-bank loans, which European governments have announced, are unlikely to get public support unless control over the behaviour of banks is exercised as a quid pro quo. The rescue operation from the crisis, therefore, will entail in a basic sense an abandonment of neoliberalism.

If nothing else, the extreme public anger against the international financial oligarchy will ensure this. In the face of this anger, directed against a bunch of greedy speculators who have brought the world economy to the brink of ruin, the hegemony of finance capital that underlay neoliberalism is unlikely to persist in the old form. How the crisis and its sequel unfolds remains to be seen, but the world will not go back to what it was before.

LEARN LESSONS FROM US FINANCIAL CRISIS-COMMUNISTS

THE past two weeks have made it clear that the developing world is far from immune to the storms raging in the financial markets in industrial countries. Stock prices in emerging markets have gone on roller-coaster rides similar to those in New York and Europe. Indeed, they have shown such very high volatility, going sharply up and down on a daily basis around an overall declining trend, that the pattern is reminiscent of the behaviour of stock indices in the last major international financial upheaval in 1929/30 – the Great Depression. And the credit crunch and freezing of inter-bank lending have been only too evident even in developing countries whose economic “fundamentals” are apparently strong and whose policymakers believe that they can decouple their economies from the global trends.

This almost immediate diffusion of bad news is the result of financial liberalisation policies across the developing world that have made capital markets much more integrated directly through mobile capital flows and created newer and similar forms of financial fragility almost everywhere. But the international transmission of turbulence is only one of the ways in which the global financial crisis can and will affect developing countries.

A medium-term implication for developing countries is the impact on private capital flows, which are likely to come down with the credit crunch and with reduced appetite for risk among investors. The past five years witnessed an unprecedented increase in gross private capital flows to developing countries. Remarkably, however, this was not accompanied by a net transfer of financial resources, because all developing regions chose to accumulate foreign exchange reserves rather than actually use the money. Thus, there was an even more unprecedented counter-flow from South to North in the form of central bank investments in safe assets and sovereign wealth funds of developing countries, a process that completely shattered the notion that free capital markets generate net financial flows from rich to poor countries.

The likely reduction of capital flows into developing countries is generally perceived as bad news. But that is not necessarily true, since the earlier capital inflows were mostly not used for productive investment by the countries that received them. Instead, the external reserve build-up (which reflected attempts by developing countries to prevent their exchange rates from appreciating and to build a cushion against potential crises) proved quite costly for the developing world, in terms of interest rate differentials and unused resources. While some developing countries may indeed be adversely affected by the reduction in net capital inflows, for many other emerging markets this may be a blessing in disguise as it reduces upward pressure on exchange rates and creates more emphasis on domestic resource mobilisation.

Similarly, it is also likely that the crisis will reduce Official Development Assistance (ODA) to poor countries. It is well known that foreign aid is strongly pro-cyclical, in that the developed countries’ “generosity” to poor countries is adversely affected by any reversal in their own economic fortunes. But in any case, development aid has also been experiencing an overall declining trend over the past two decades, even during the recent boom.

In fact, the developed countries were extremely miserly even in providing debt relief to countries whose development prospects have been crippled by the need to repay large quantities of external debt that rarely contributed to actual growth. Notwithstanding the enormous international pressure for debt write-off, the G-8 countries have provided hardly any real debt relief. When they have done so, they have provided small amounts of relief along with very heavy and damaging policy conditionalities and in a blaze of self-serving publicity. So the speed and extent of the debt relief provided to their own large banks by the governments of the U.S. and other developed countries, even when these banks have behaved far more irresponsibly, has not gone unnoticed in the developing world.

REMITTANCE INCOMES

One major source of foreign exchange that will certainly be affected is remittance incomes, especially from workers based in countries of the North. Already, the Inter-American Development Bank estimates that 2008 will be the first year on record during which the real value of inward remittances will fall in Latin America and the Caribbean. Remittances into Mexico (which are dominantly from workers based in the U.S.) in August were already down 12 per cent compared with a year previously, and this will only get worse. There is also evidence of declining remittances from other countries that relied strongly on them, such as the Philippines, Bangladesh, Lebanon, Jordan and Ethiopia. In India, where around half of inward remittances currently come from the U.S., the same pattern of decline is likely.

Exports of goods and services, like remittances, are going to be affected by the global economic downturn. For most developing countries, the U.S. and the European Union remain the most important sources of final export demand, and as they inevitably tip into recession, exports to these markets will also decline. There has been much talk of China emerging as the alternative engine of growth for the world economy. But this is highly unlikely, for several reasons.

First, the Chinese growth, which has pulled along many other Asian developing countries in a production chain, has been largely export-led. The U.S., the E.U. and Japan together account for more than half of China’s exports, and as their economic crisis intensifies, it is bound to affect both exports and economic activity in China.

Second, even if China’s policymakers respond by shifting to an emphasis on the domestic economy, this is unlikely to generate levels of international demand that will come anywhere near meeting the shortfall created by recession in the developed countries. China’s share of global imports is still too small for it to serve as a growth engine on the same scale.

Fond hopes have been expressed by some Western policymakers and economists that China can use the $2 trillion of foreign reserves that it controls (directly and through Hong Kong Special Autonomous Region) to bail out the bankrupt U.S. financial system. But these hopes are also misplaced. Certainly, it is likely that eventually some of the shares purchased by the U.S. Federal Reserve and Treasury in their troubled banks may be eventually auctioned off to Chinese and other sovereign wealth funds, among other investors. But this is not anything like a solution to the basic problem of dealing with the “toxic assets” held by the various troubled financial institutions of the West, especially as even the full amount of such assets is still not known given the complicated tangle in which such institutions are caught.

Across the developing world, one additional detrimental effect of the current crisis is likely to be the postponement or even cancellation of large investment projects whose ultimate profitability is now in doubt. This will have negative multiplier effect, as cancelled orders and lost jobs further reduce demand. The construction sector has already been hit, and many large projects are being cancelled even in economies that are still growing. The aviation sector is going through a major shakeout, which is evident even in India where there has already been a tendency towards mergers and worker retrenchment (see separate story). The tourism and hospitality sector, which had emerged as an important employer in many developing countries, is facing cancellations and declining demand across both luxury and middle-class segments.

END OF COMMODITY BOOM

The recent crisis has also signalled the end of the commodity boom, which is bad news for developing countries that predominantly rely on commodity exports, and good news for commodity-importing developing countries. This follows a period of unprecedented increase in oil and other commodity prices, led largely by speculative investor behaviour. On October 14, oil prices (Brent Crude futures) fell to less than $75 a barrel from nearly $150 in early July. One important index of commodity prices, the Reuters-Jefferies CRB index, on October 14 was 40 per cent below its all-time high in July. While speculative behaviour was clearly behind the volatility in commodity prices over the past year, it is likely that such prices will continue to decline now because of the broader economic slowdown.

This may provide some breathing space in terms of inflation control for importing developing countries, especially oil importers. But remember that even at $75 a barrel, oil prices are still 300 per cent of their nominal level of only five years ago. And while world prices of important food items have also declined in the recent past, they are still too high for many developing countries with low per capita incomes and a large proportion of already hungry people. Indeed, the financial crisis may actually make it more difficult for many governments of poor developing countries to secure adequate commodity supplies to meet their people’s needs. The food crisis seems to have gone off the international media map, but it still rages for possibly a majority of the population of the developing world. The current global economic crisis will certainly not make it better.

CHINA SAFE

These are forces that will affect all or most developing countries, but they will be felt differently in different places. In particular, the extent of financial contagion and possible local financial crisis depends on how far the developing country concerned has gone along the road of financial liberalisation. It is worth noting that countries that have gone furthest in terms of deregulating their financial markets along the lines of the U.S. (for example, Indonesia) have been the worst affected and may well have full-blown financial crises of their own. By contrast, China, which has still kept most of the banking system under state control and has not allowed many of the financial “innovations” that are responsible for the current mess in developed markets, is relatively safe. India, which still has a nationalised banking system and a greater degree of regulation, is better off than Indonesia, but reforms that the National Democratic Alliance (NDA) and the United Progressive Alliance (UPA) government have pushed through despite Left protests, along with a growing current-account deficit, have rendered the country more fragile and potentially vulnerable than China.

In addition, countries with large external debts and current-account deficits will face particular problems. Already, it is apparent that financial markets are estimating the risk of default (in the form of the price of credit default swaps) for countries such as Pakistan, Argentina and Ukraine as high as 80 per cent or more. Sometimes, as in Kazakhstan and Latvia, it is because of their highly leveraged banking systems. In other cases, as in Turkey and Hungary, it is because of the very high current-account deficits.

Of course, developing countries are still bit players in this global drama. This particular financial crisis has so many ramifications mainly because it is occurring in the very core of capitalism and originated in the U.S., the country which had the global power and influence to impose its own economic model on almost all of the rest of the world. And the depth and severity of the crisis are likely to signal global political economic changes that will shape the world for the next few decades. Geopolitical shifts are likely to result from such glaring exposure of economic vulnerability in the global hegemony.

While the drama is still being played out and the ultimate denouement is still unclear, what cannot be denied is that U.S. dominance of world economics and politics is now under severe question and has suffered a blow from which it may not recover. There was certainly some symbolism in the fact that on the day when a Chinese man was walking in space for the first time, U.S. Treasury Secretary Henry Paulson was down on his knees pleading for a bailout. The changes in the world in the next decade will not be linear or unidirectional, and there are bound to be savage conflicts over resources and much else, but the recent pattern of global imperialism has been disturbed severely.

No more western lectures

This is not a conclusion that will be easily drawn in Washington, or even in Europe. Financial crises were things that happened in the developing world. And after overcoming the crisis, Western officials, consultants and others could lecture the governments of the crisis-ridden countries on their past profligacy and wrong policies, and proceed to administer the severe “Washington Consensus” medicine that they felt was essential. Now, of course, the wrongdoing and the collapse are most evident in the U.S. and Europe, and they are following the opposite of what they had prescribed for developing countries, by rescuing banks and going in for Keynesian counter-cyclical macroeconomic policies. So it should be difficult, at least for a while, for even the most hard-boiled and insensitive Western policy adviser to take the same high moral tone with developing countries as in the past.

The global financial and trading system is one that for many generations has been almost exclusively determined by the governments of former colonial powers of the West, and their writ still runs large in all the global institutions. Thus, the G-7, which leaves out Russia and China, not to mention India and Brazil, still presumes that it has the right to redesign the international financial architecture. The Financial Stability Forum of the Bank for International Settlements excludes any representation from developing countries. The tiny countries of Belgium, the Netherlands and Luxembourg, with a total population of less than 28 million, have more votes in the International Monetary Fund than China, Brazil or India.

But even more than the geopolitical or economic shift, a bigger shift may come about from the clear failure of the economic model of neoliberalism. The notions that markets know best, and that self-regulation is the best form of financial regulation, have now been completely exposed for the frauds that they are. And so this pervasive financial crisis, which is still to fully play out and work itself through in real economies, may have led to one very positive shift. It has created a genuine opportunity not only for questioning the economic paradigm that has been dominant for far too long, but also replacing it with more progressive and democratic alternatives.

P. Ramamurti-A Fighter all the way

Fighter all the way

S. VISWANATHAN

P. Ramamurti, whose birth centenary is observed this year, spent all his life for workers’ rights and social justice.

HE lived for 79 years, 60 of which he spent in the service of the oppressed and exploited. His political activism, in tune with the ideology to which he was committed, landed him in jail for nine years and drove him underground for another five years. This, in a nutshell, is the saga of service and sacrifice of Marxist veteran and trade unionist P. Ramamurti (1908-1987), whose birth centenary was celebrated in Tamil Nadu in the third week of September.

At a meeting held in Chennai, glowing tributes were paid to the memory of the doyen of the Indian trade union movement by his colleagues and successors in the communist movement from different States. They recalled his achievements also as a freedom fighter, legislator and parliamentarian. They remembered his guidance to the Communist Party as a Marxist theoretician during some of its crucial moments and the concern he had for every party worker. The speakers extolled his unflinching faith in secularism and social justice, his consistent interest in protecting public sector undertakings, his advocacy of making the mother tongue the medium of instruction and, above all, his humane approach to the problems of the underprivileged.

Ramamurti was born on September 20, 1908, in a land-owning Brahmin family at Veppathur village in the undivided Thanjavur district in Tamil Nadu. His father died when he was three. Five years later, the family moved to Madras (now Chennai), where his brother, Mahalingam, took up a job at the Currency Office. Ramamurti, whose primary education was in his native village, now continued his studies at a school in Triplicane, where the family lived.

He was drawn into the freedom movement during this period. The fiery speeches of nationalist leaders such as Bal Gangadhar Tilak, Mahatma Gandhi and Subramania Bharati at the nearby Marina beach and incidents such as the Jallianwalabagh massacre provoked him to join the national movement under Gandhi’s leadership.

When Gandhi launched the Non-Cooperation Movement and leaders called upon students to join only national schools, Ramamurti left the Triplicane school to join the National School in Allahabad, which was run by Jawaharlal Nehru and Purushottam Das Tandon, who later became the Congress president. The Allahabad experience helped Ramamurti speak Hindi fluently.

After about two years, the authorities decided to close the school for want of students. Ramamurti visited C. Rajagopalachari, popularly known as Rajaji, at the Sabarmati Ashram in Ahmedabad. This was his first meeting with Rajaji. On Rajaji’s advice, Ramamurti returned to Madras to resume studies at his old school.

Later he joined Presidency College, Madras, for higher studies. Within months, the college authorities accused him of working for a Congress candidate in the State elections and threatened him with disciplinary action. Ramamurti left the college and joined Banaras Hindu University, then under the control of Madan Mohan Malaviya, another freedom fighter. When he was in the final year of his two-year degree programme in science, he led the protest against the visiting Simon Commission in 1929. The next year he was jailed for six months for participating in the agitation against the use of foreign cloth.

After his release from jail he returned to Madras and took part in the Congress’ activities. Inspired by Gandhi’s campaign against the oppression of Dalits (whom Gandhi called Harijans) by caste Hindus, Ramamurti organised Dalits against untouchability. At that time, Dalits were denied entry into temples. Ramamurti organised cobblers in the Triplicane area, all Dalits, to fight against the discrimination. He urged them to participate in the elections for the posts of trustees of the famous Parthasarathy temple.

According to the temple rules, only Thenkalai Vaishnavites could become members of the trust and participate in the elections. But the Vaishnava temple at Triplicane, the heartland of Hindu orthodoxy, denied access to cobblers though they donned namam (a religious symbol) on their foreheads like all Thenkalai Vaishnavites.

Ramamurti helped them recite slokas from Divya Prabandham, a Thenkalai Vaishnava text, and get the Vaishnavite symbols chakra and conch tattooed on their upper arms, and took them to the temple officials, demanding that they be allowed to participate in the elections. The priests refused to concede to their demand.

The trustees got an injunction against Dalits becoming members and claiming voting rights. Ramamurti helped them file an appeal in the Madras High Court, which allowed the appeal. Gandhi wrote in Young India that it was a “great victory”. The temple administration enrolled the Dalits as members but said they could not contest the elections since they did not own property as per temple rules.

Soon Ramamurti became a Congress activist. When Jayaprakash Narayan formed the Congress Socialist Party, which functioned within the Congress, he joined it. Around this time, he got some Marxist text, interestingly, from an intelligence official. In association with P. Jeevanandam, popularly known as Jeeva (Frontline, August 24, 2007), and a few others, he organised rickshaw-pullers, workers in snuff factories, and others. Later he became involved in organising workers of textile mills, sugar factories and engineering units. He appeared before labour tribunals to argue the cases of workers in industrial centres such as Madras, Madurai and Coimbatore.

In the 1930s, Ramamurti, along with B. Srinivasa Rao, or BSR as he was known, launched struggles against the oppression of farm labourers, most of whom were Dalits. At a Congress political conference held at Bathlakundu, he moved a resolution demanding the abolition of the zamindari inam system. Jeevanandam supported it. A section of the delegates proposed an amendment that the system be abolished after paying compensation to the inamdar. Ramamurti opposed it. The resolution was passed, but the then Prime Minister of Madras Presidency, C. Rajagopalachari, had his own reservations on the issue. The move had to wait for a later day to get the government’s nod.

Ramamurti now came into contact with the legendary Communist leader P. Sundarayya, who used to cycle 175 kilometres from Nellore to Madras to organise workers. This relationship and his discussions with Jeevanandam took Ramamurti to the underground Communist movement. Gradually he moved up the ladder in the Communist Party and central trade union organisations. He had a number of conspiracy cases against him and went to jail.

Even as Ramamurti was in jail, he was elected to the Madras Legislative Assembly from Madurai North Constituency in the first general elections after Independence, in 1952. The United Front, which included the Communist Party, won a majority. The Congress, however, formed a Ministry with Rajaji as Chief Minister by making him a member of the State Legislative Council and winning the support of two small constituents of the United Front, promising ministerial berths.

Ramamurti challenged Rajaji’s nomination to the Council in the Madras High Court. In the first ever public interest petition in the country, he argued in person that the nomination was against democratic norms. The petition was rejected on the grounds that the court could not decide political rights or enforce public interest or constitutional conventions. “The very same principles PR [P. Ramamurti] advocated in 1952 were emphatically accepted by successive constitutional benches of the Supreme Court nearly three decades later,” wrote R. Vaigai, Ramamurti’s daughter, a lawyer, in an article recently.

As Leader of the Opposition in the Assembly, he made many remarkable speeches in the House. His speech in Tamil during the debate on the first State Budget earned him the appreciation of Finance Minister C. Subramaniam. He repeatedly pressed for making Tamil the official language of the State, the court language and the medium of instruction at all levels.

He took the initiative to pass a number of Bills relating to peasants and agricultural workers. He never missed an opportunity to press for comprehensive land reforms. He also highlighted the police atrocities against striking workers and agitating peasants. During this period, Ramamurti fought relentlessly with the Union government to get the Neyveli lignite and power project in Tamil Nadu.

Many leaders of the past generation recall the contribution made by Ramamurti for the success of the talks between the Tamil Nadu and Kerala governments in the 1950s over sharing of river waters. The discussions facilitated the diversion of surplus waters in the Periyar and Aliyar rivers to Tamil Nadu, which could enhance its irrigation and power resources substantially at a crucial time.

Despite political differences, Ramamurti maintained cordial personal relations with many of his contemporaries such as Rajaji, who as Chief Minister called communists “enemy number one”; “Periyar” E.V. Ramasami, founder leader of the Dravida Kazhagam; K. Kamaraj, former Chief Minister and later Congress president; and C.N. Annadurai, founder-secretary of the Dravida Munnetra Kazhagam. He also had a good relationship with the Nehru family.

In 1964, there was a rift in the Communist Party of India over ideological issues. Ramamurti was one of the nine founder-members of the Polit Bureau of the Communist Party of India (Marxist), which broke away from the CPI. Later, in 1970, the All India Trade Union Congress (AITUC) was also split and the Centre of Indian Trade Unions (CITU) was formed, of which Ramamurti was the founding general secretary.

He toured the length and breadth of the country to strengthen the trade union wing. He used his oratorical skills in many languages to widen the base of the party. He wrote a number of books and pamphlets on several contemporary issues during this time.

Ramamurti was elected to the Lok Sabha in 1967 and to the Rajya Sabha in 1971 and 1977. He played a significant role in his 16-year career as a parliamentarian. His valiant fight in the Rajya Sabha in 1979 against the agreement between Bharat Heavy Electricals Limited (BHEL) and the German multinational Siemens, which he thought was aimed at killing indigenous initiatives in the field of science and technology and bringing great harm to public sector undertakings, is well known. His spirited speech that lasted nearly two hours saved BHEL for the country. Ramamurti’s warning against deals with multinationals and foreign countries at the cost of India’s self-reliance and sovereignty is still relevant.

Although Ramamurti was relieved of party responsibilities in 1983 owing to ill-health, he was in touch with trade union leaders, offering them his guidance whenever needed. Even his last public speech a couple of months before his death in Chennai on December 16, 1987, was at a conference of Tamil Nadu Mill Workers Federation at Coimbatore.