Bear Stearns, Northern Rock, Western hypocrisy and an Indian mess

P. Sainath, Rural Affairs Editor of the Hindu has launched a scathing attack on the downright hypocritical (my phrase) practices of Western countries that preach about open markets and criticize the 15 billion dollar loan waiver granted to Indian farmers, but who jump in to bail out their banks and financial institutions whenever they fall into a hole that they have dug themselves. He does not stop at that, but goes on to attack the economic policies of successive Indian governments that, according to him, are responsible for the rise in prices of agricultural commodities that India has been experiencing over the last few months.

In my last post, which was a reply to Arun Maira’s article on Capitalism, I criticized his position because he took liberties with words like capitalist and capitalism. But I am unable to do the same with Sainath’s current article because what he says is more or less right.

Think of it: a tiny Wall Street cabal which gave itself bonuses worth billions of dollars just weeks before the crash gets a bailout of Rs.1,19,520 crores. That’s almost double the Rs.60,000 crores given to tens of millions of farmers in dire straits in this country. A country where one farmer kills himself every 30 minutes in despair. The problems of farmers do not even begin to end with that waiver.

On the other hand, a bunch of thugs in tuxedos who did pretty much whatever they wanted, laying a minefield across the world, have got the waiver of a lifetime (or many lifetimes). The lifejacket for the bank does not require the return of their bonuses. So much so that Jim Rogers, CEO of Rogers Holdings and a staunch free marketer, calls it “Socialism for the rich.” In his words “the Federal Reserve is using taxpayer money to buy a bunch of Bear Stearns traders’ Maseratis.” He points out that hundreds of billions of dollars are being spent to bail out Wall Street as a whole. The theologians of the global market are between a rock and a hard place. Hypocrisy has rammed into reality.

You can read the rest of his columns at India Together.

Sainath points out huge problems that Indian farmers and our rural sector faces. And he has the authority to do so. But his solutions are no solutions at all, not to a capitalist. A return to government controlled agricultural (or any other) markets – whether government intervention is non-existent is a point of debate – is not a good idea because it does not work. Our PDS system is corrupt and moribund. The PDS shops will run out of stock precisely when their need is felt the most. The Food Corporation of India spends billions of dollars on procuring and hoarding bad quality grains in its warehouses. And its officials make money by diverting the grains to the black market when they should be sent to villages and towns facing a shortage of food. How do you fix such problems? All this only leads one to conclude that the Government is at the root of all problems.

The basic idea behind Capitalism is that a free market manages supply and demand on its own. But for a capitalist system to work, coercion has to be eliminated from relations. And that has not happened. What we have instead, is government abdicating its responsibilities in one sphere – law and order, and encroaching upon other spheres – economics, media, personal lives of citizens, etc.

No one is happy with the current system. The economic left is not happy because they still dream about a socialist paradise. The economic right is not happy because the present system is hardly what one would call capitalist. But both groups want a government – they only differ on its size and scope. The only problem is government is not an automaton. It has to come from within the society itself and will be managed by people from that very society. And, when a government does begin functioning, only one question, and a big one at that, remains – Quis custodiet ipsos custodes? Who will police the police?

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