Saturday, June 13, 2009

Death of Socialist Ideals

The recent drubbings of the Left parties in election and of the leftist ideal parties in the European Union election point to one thing, amidst such recession too the leftist ideals are not able to hold ground. Socialism which was considered as the most viable alternative to the rogue and oppressive capitalism is failing the test. Soviet Union did not survive and with Right to Property granted in China it cannot be called a socialist country though there is strong state control. What I want to discuss here in this piece is why the socialist loosed the battle despite offering world peace and harmony between countries based on mutual respect and trust. It lost though it promised that there would be no hungry people and that men would be equal, despite offering an equitable and just society it lost .Why??
Though I am not an expert and there may be thousands article written on it but I would just like to propose my idea. It lost because men are inherently wicked and such high ideals were just too much for him. It is good thing that there would be no hungry people around but to quell someone’s freedom of speech and his way of thinking just because it was not acceptable to society means that though he is not hungry but he is not satisfied and in some time rebellious feeling will begin to grow inside him. Not to mention that they had a worthy foe in America which was hell bent on making capitalism order of the day. Soviet Union were may be equal to America in terms of military power but were they prepared for the soft power that America was using against it. All over the world American lifestyle became synonymous with liberty, luxury and while the world was pursuing the great American Dream what was Russia offering us?? Bicycles, square meals a day, justice and fair society far too lofty ideas for a common man. While America was showing the world that they are free Russia was shrinking in a shell of its own.
Capitalism has many benefits too over socialism. It promotes competition, free thinking and encourage new ideas. Competition ensures that you have variety, have options. Free thinking lead to intellectual development and expression of the same. New ideas carry the world forward. In contrast in socialist society there is no competition and prices are fixed by the state, no competition and hence no option and no variety .You cannot say a word against the state and civil rights are nonexistent. Ya if that’s starting to sound like slavery don’t blame me this is the way thing is. We know of several brands like Nike, reebok, McDonalds and other all originating from capitalistic countries and none from socialistic country. It cannot be a coincidence. All of you, who would give China as an example, let me tell you it is a different form of socialism. Socialist government cannot survive for long because once people have ensured that they are well fed they yearn for free thinking and personal freedom and when this stage reached Soviet Union could not survive it. China on the other hand has learnt from the mistakes and learnt it well. First it turned its full attention on the countryside so that it has its share of support there because no revolution can succeed without rural masses. Secondly it provided them with economic freedom and security. Plus it has allowed foreign investment and with right to property it has taken another step in the direction of capitalism and if not capitalism at least mixed economy like India. For it know too well that they cannot entirely control people and that curb on free thinking and unbiased media wont last long if they do not deliver at the economic front. Though socialism did not survive excepting of course in some countries like Cuba and Venezuala they could not really exert influence the world like Soviet Union did and its good for self sufficiency but it cannot give prosperity , Chinese form of economy certainly can and in my opinion this is the way forward.

Path to Recovery

In recent months or may be from last year we have seen some tremendous ideological changes at the national level and more so at the international level. People no longer speak of reforms as some magic wand that will solve all the problems. Don’t get me wrong they are not against it either but they are apprehensive about it. It has lost its charm. If people do approve of reforms they ask for stricter regulation. Being a Keynesian is no longer a drawback. The reason for this tectonic shift is the ongoing recession. It is the worst that the world has faced after The Great Depression and hopefully the worst that I would see in my life time. Though the damage in India was not of the same magnitude as in America or Europe but it certainly was felt. I agree that banks did not collapsed neither do companies seek state support or filed for bankruptcy but there is decline in the foreign direct investment, GDP clocked its lowest in the last five year and there certainly is decline in the job sector, something which all of us are familiar with!! What was most frustrating in the entire experience was lack of information. Suddenly everyone was expert and even the experts were clueless about the impact. First there was denial (Even likes of Chidambaram said that our economy is decoupled from the world economy and that we do not depend entirely on exports, ours is domestic demand driven economy and that the recession would not affect us), then there were talks of credit card crises about to break out in US, talks of China proposing new world currency (how would that affect us, I have no idea), prices of houses going down and inflation was high thereby making it hard for government to infuse liquidity in the market and it being an election year government was in no mood to risk. It seemed like a bottomless pit and on top of that Obama was saying that it is going to be worse before it gets any better.
But that’s not the case with India. The worst is behind us and we can look ahead for better times. Sure recession is not over yet but we are well on our way to recovery. There are signs of recovery and I am not making facts up. The following points will illustrate my view.
1. Indian economy clocked 6.7 GDP in 2008-09 year while most economies around the globe contracted. This performance was better than those predicted by the IMF and other leading economic bodies which said that we will clock 5-5.5. The performance was even better than that predicted by even RBI which said 6-6.5. The unexpected but robust performance enthused investors round the globe about India’s future potential.
2. The Sensex is riding high again. Though I believe it is not a parameter to judge economic growth but it is a parameter to check how world perceives us. Its current bull riding on FII is an indicator that world sees us as a safe and profitable investment option. That means we can look forward to some increased FDI flow in the country and if we can get huge FDI in infrastructure then it will certainly augur well for the country.
3. The most visible signs of recovery are the increase in the direct tax collection which is 17%higher than last year’s may collection when economy was booming. This is an early but sure signs of recovery. If there is an increase in the corporate tax collection for first quarter it would certainly be an indication of revival.
Add to this the return of UPA with a thunderous majority and their resolve to carry out reforms has infused markets with new optimism. However there are few bottlenecks too. The government expenditure would have to rise if we to have to continue on the path to economic recovery. The yawning fiscal deficit is a hindrance to it. Though we know that Manmohan Singh led government is not blind to it but the flagship schemes and others social sector programs (very important though) is costing exchequer heavily. Unless we get huge FDI inflow we can see reduced expenditure in infrastructure and sectors like increasing land under irrigation. Both of them are very important for the long term and should be ignored at one’s own peril. What lies ahead for the government is a tough balancing act between social sector expenditures, infrastructure and yawning fiscal deficit. It would have to tread very carefully. Can we trust Team Manmohan for the job? I will bet my money on them..
Signing off