Poor fall prey to austerity

We welcome bailouts, fiscal stimulus and corporate tax cuts but think about fiscal deficit when providing for the needy

By Author Dr Ramachandra Reddy   |   Published: 8th Jan 2018   12:04 am Updated: 7th Jan 2018   10:47 pm

A few days ago an important news item about a letter written by India’s leading development economists to union Finance Minister, asking him for an increase in the budget allocation for social security pensions and maternity benefits appeared in almost all newspapers. It drew attention to the Union government’s measly contributions to social security pensions and its reluctance to pay maternity entitlements mandated under the National Food Security Act.

When the World Bank upgraded India’s Ease of Doing Business (EoDB) ranking and Moody’s elevated sovereign rating, there was a lot chest thumping. However, the news about the benefits the vulnerable have either not been receiving or receiving inadequately got little attention.

Unfortunately these poor, who assiduously queue up in front of the polling booths every five years to cast their votes, are mostly either illiterates or semi-literates and don’t even know how best to protect their interests. As they can neither engage lobbyists nor finance the campaigns of politicos, they remain powerless, patronless and voiceless.

No Ease of Living

After our rulers embraced the neo-liberal agenda in 1991 yielding to the World Bank (WB) and International Monetary Fund (IMF) prescribed Structural Adjustment Programs, they expectedly discarded people-centric policies and began emulating the western world. Now whatever they do is ‘big capital-centric’ like deregulating and giving tax cuts and bailouts to corporates with a single-minded devotion to improve the EoDB, and increase the GDP numbers.

Our Prime Minister even went to the extent of claiming that the EoDB means ease of living. The fact is, organisations such as WB, IMF and credit rating agencies promote the interests of the big capital that thrives in laissez-faire economies such as the US.

Gandhiji said, “Recall the face of the poorest and the weakest man whom you may have seen, and ask yourself, if the step you contemplate is going to be of any use to him”. These days, it appears that our rulers, before they do anything, recall the faces of the super-rich and formulate policies that empower them to amass further wealth. Because they feel that only the plutocrats have the ability to push the GDP numbers up.

Boosting Big Business

Our rulers feel that the lords of big capital can take care of the supply-side economics, also known as ‘trickle-down’ economics. In the US, the policymakers believe that what’s good for corporate America is good for America and their economic policies revolve around big businesses. In the aftermath of the 2007-08 financial crisis, which was a direct result of rampant deregulation, they gave an unprecedented bailout to the corporates labeling them as ‘too big to fail’.

The Trump administration recently announced one of the biggest corporate tax cuts to benefit big businesses. Our rulers are copycatting the US in
granting bailouts and pushing deregulation.

The government, as part of its demand side policies, which are intended to spur consumption-led growth, blindly accepts the Pay Commission recommendations to give hefty pay hikes and spends money for fiscal stimulus on the development of physical infrastructure such as roads. Again all these infrastructure development contracts are bagged by big businesses.

The amount that is needed to finance the fiscal stimulus is mostly got through deficit financing, which increases the national debt. The people who lend money to the government are again the rich, who also end up receiving most of the interest payments.

Mirage of Trickle-down

In essence, whether it is demand-side policies or supply-side polices, they always end up benefiting the rich and pave the way for the establishment of an oligarchy. The promised ‘trickle-down’ forever remains a mirage as the sole aim of any big business is ‘shareholder wealth maximisation’.

As a result of this corporate greed, the ‘gush-up’ effect started manifesting through ever-widening inequalities. In this scheme of things, the poor and vulnerable don’t have any place, as the meagre earnings from their menial labour neither allow them to invest nor consume much.

When it comes to providing for the poor and the vulnerable, they are reminded of fiscal deficit and need of observing austerity. They, however, don’t think about the same austerity when they announce bailouts, fiscal stimulus and corporate tax cuts. Don’t they increase the fiscal deficit? Don’t they increase the national debt and consequently shoot up the future debt service obligations of the country?

Bubble Will Burst

The neo-liberal world is just like a bunch of peacock feathers, which look bewitching but it is a bubble that will burst one day. It runs on perpetual debt, fuels consumerism, measures everything in terms of GDP, causes irreversible damage to mother earth, further impoverishes and marginalises the poor, paves the way for an oligarchy in an insidious manner, and worst still, it turns the entire world into a big casino, where each and every conceivable property is turned into a speculative instrument to mint money in the stock markets. And it is all done just to serve the interests of the plutocrats, who want to lead king-sized lives.

The only way out of this vicious circle is an increase in awareness among the people so that economic policies gain centre stage during the elections and they are fought over the bread and butter issues. When politicians utter the word ‘vikas’, the people should be able to question ‘whose vikas?’

Now politicians and their corporate cronies are diverting the attention of the people from bread and butter things and bringing forth futile issues such as religion, caste, statues, nationalism and cows. If we, as an enlightened electorate, elect leaders who formulate people-centric and sustainable policies, we will not need to beg for increasing spending on health, education and social security.

(The author is a former Associate Professor)