Friday, April 03, 2015
The social revolution in Uttar Pradesh
Towards the end of poverty
Monday, September 02, 2013
A letter to Mr.Tariq Ali
In continuation with my earlier mail about you speech in
Chennai, you spoke about the corporatisation of media and
reduction of free press now. But the following points need to
be discussed :
1. In the heydays of socialism in India, esp under Indira
Gandhi, when corporate taxes were raised to confiscatory
rates of 98 % (for highest marginal rate), all media house
and other corporates were under the mercy of govt ministers
and bureaucrats. As it was impossible to operate honestly,
tax evasions was rampant and hence the threat of income
tax raids were always hanging over the heads of media
houses. There was acute shortage of news print and foreign
exchange (due to closed economic polices and license raaj).
Hence the print media was totally under the thumb of the
govt, unlike today. Moreover as there was not much private
sector (like today), in those days the major part of advertisement
revenue was from ad from govt and govt run companies. Hence
there was less freedom for media then when compared to now.
No wonder the quip about media during the emergence of
1975-77 :'When they were asked to bend, they crawled' !!
2. There was total govt monopoly in electronic media then.
only doordarshan and AIR. No private channels were permitted
until 'neo liberalsim' in 90s. and no private telecom and airlines
too. Hence communication was restricted while the govt run
TV was totally a propaganda instrument of the govt. Today,
with hundreds of channels, we get all kinds of news and views.
Certainly current situation is much much better than the 70s.
3. Poverty levels were terrible until the 90s due to stagnant
economy. In spite of doubling of population levels to 1.25 billion
today, poverty ration is reducing fast due to the much maligned
'growth'. Pls refer to the front page report from The Hindu :
Poverty levels down by 15% in eight years
http://www.thehindu.com/.../article4921497.ece...
And this rapid change is due to implementation of 'neo-liberal'
polices. Hence sweeping generalisations about neo-liberalism is
wrong, esp in Indian context.
And finally a word about your tirade against Montek Singh
Ahluwaliah. He and Manmohan Singh saved India during the
1991 balance of payments crisis. But for their vision and hard
work in those critical years, India would have become bankrupt
(like Zimbawae recently) with soaring hyper inflation and hunger.
History will record their contribution more accurately. You may
disagree with them, but to label them as 'conservatives' is
superficial.
Sir, you mentioned about the misuse of the term 'reforms'
whenever economic issues are mentioned. But more misused
are the terms 'progressive' and 'conservative' ; these are mere
labels which assume a lot. And the term 'conservative' is
unfairly stuck on many idealists right simply because the are
pro-market. Conservative means to conserve the status quo
and against any change, esp of standard of living of the poor.
Nothing can be farther from truth. The present neo liberal
polcies of the 'conservatives' are applied in most parts of the
world, not because of any 'imperialistic' conspiracy, but simply
because they are now deemed as rational and better than old
polices of statism. And these conservatives are more
'progressive' in their outlook than the real 'progressives'.
Thursday, March 14, 2013
Fallacy of Karl Marx’s Das Capital : Labour theory of surplus value
'Exploitation of the workers' is the moral basis for all forms of
leftist ideologies and Marxism. This concept has permeated the
collective conscience of human kind in the past 200 years like no
other concept before. The moral basis provided by this concept had
caused more deaths, mayhem, mass murder, suppression of human rights,
stagnation of economies and corruption than any other ideology
including Nazism or any religious dogma. But the whole basis for this
concept of exploitation of the surplus value of labour by the
capitalists, which is derived from Karl Marx's magnum opus "Das
Capital' is an invalid and disproved hypothesis.
Marx argued in Das Capital that the one and only source of profits
(which accumulate into capital subsequently) is the exploitation of
'surplus' value of labour for which the workers are not paid. He
evokes complex mathematical models to 'prove' this hypothesis. But
when this 'value' is translated in prices, the theory looses its
validity. According the Das Capital, profits are derived solely from
the surplus value of labour. He makes no allowance for the
enterprising and organising skills of the 'entrepreneur-capitalist' ;
But we shall see that the profits are created solely by the
entrepreneur's abilities and hard work.
The following projections are put forth by Marx based on labour theory
of surplus value :
1. Profits tend to fall within a business cycle as well as in the long
term due to come due to competition among capitalists who will
innovate and introduce labour saving machines to reduce cost of
production. As the surlplus value of the labour is the only source for
profits, introduction of more machines that displace labourers will
reduce the profits.
2. Each business cycle will be progressively worse than the previous
one and at the end of each business cycle, the smaller firms will be
bought out by large firms which will grow in size.
3. The standard of living of the workers will always tend to border
the subsistence levels and can never ever increase to reasonable
standards.
4. As the troughs of each business cycle tends be lower than the
trough of the previous cycle, this downward spiral of the whole system
will ultimately end in a massive collapse of the capitalistic system
itself from which the socialistic state will emerge.
But the economic history of the world since Marx's time has not
progressed as per the above projections. Business cycles have not
worsened in the way he predicted nor did profits fall with the
introduction of labour saving machines. Most importantly the standard
of living and working conditions of the workers have improved
dramatically in the past 150 years ; Especially in the developed
nations in Europe, N.America, Japan, S.Korea, Taiwan, etc. Even in the
developing nations like India, China, Chile, Botswana, etc the average
standard of living of the proletariat has improved a lot in the past
60 years.
All these results contradict Marx's hypothesis and hence it can be
assumed that the basis of his theory : surplus value of labour itself
is invalid. For the workers are always paid first according to the
market value of their labour, while the capitalist-entrepreneur may or
may not get the rewards for his risk taking and entrepreneurial
abilities. Some practical points that need to be explained by
Marxists are :
1. Assuming two or more similar companies engaged in the same industry
are located within the same industrial estate with similar capital
structure, machineries and labourers, the output, profitability and
growth of each unit varies considerably. Assuming the labour
productivity is the same for all the workers in this area, then what
can be the explanation for the sharp difference in the efficiency,
output, and profit margins of these companies ?
2. What explains the very high profit ratios in many industries which
had dramatically reduced the labour component in their production
costs by introducing automation and innovative machineries during the
course of a few decades. For example, in agriculture and textiles in
developed nations, in spite of the tremendous shift of populations
from these sectors to other sectors as a result of introduction of
enormous machines, the profitability in these sectors had not fallen
proportionately. Marxists may try to explain this paradox by arguing
that the surplus labour that went into the manufacturing of these
machines are the reason. But this again gives rise to the same
question about those industries that produce capital goods. No valid
and empirical proof exists for this theory !
3. According to Das Capital, the net surplus value in a system is
constant (and will vary with the variation of the workers population
only) ; But in reality the 'surplus' within many systems have
increased exponentially while the workers population had not grown
proportionately. Hence how did this exponential growth of total
surplus value occur ?
Any worker turned entrepreneur (there are many) would vouch for the
fact that it is the entrepreneurial ability that makes the vital
difference in the performance of the firm. All these worker turned
entrepreneurs had started their lives as workers, working along
millions of similarly placed workers. But some of them managed to save
and / or get into partnerships with co-workers to start small firms
which ultimately grew into giants. All the corporate giants in this
world were once tiny start ups fired by the sheer enthusiasm and
determination of those pioneers. Can anyone name any company which is
continuously existing in its present size and form for many centuries
? Petrochemical giants, pharma majors, automobile majors, IT majors,
companies like Walmart, CNN, Dell, Sony, Apple, Virgin Atlantic, etc :
all were founded by pioneering individuals with nothing but their bare
hands. Their legal heirs had expanded these companies into giants over
the decades.
There are of course, criminal elements among capitalists and corporate
who misuse the loopholes in the rule of law, especially in the
developing nations which have high levels of corruption and cronyism.
But these are exception rather than the rule. Generally in nations
where the rule of law is upheld systematically and where the ethics
remain high, (like in Scandinavian nations, etc) the misuse by
companies are rare. But Marxists usually cherry pick these exception
to paint a distorted picture while glossing over the terrible crimes
caused by their socialistic alternative to the system.
It is always the risk taking, hard working and pioneering effort of
the entrepreneur that makes the difference. Nothing else ; neither
government 'help' nor 'looting' from the public nor wars. These
pioneers are heroes and not the villains (who exploit the workers)
that they are portrayed to be by the Marxists. I salute them all.
All the nations which had allowed full freedom for these innovators
and pioneers to get along their vision, without blocking their
entrepreneurship in any manner had prospered over the centuries, while
all those nations which did the opposite stagnated and remained
impoverished. Indian and Japanese experience since 1947 are the
prime examples for this basic difference.
However the myth of 'exploited' workers still wreck havoc and is very
difficult to eradicate from the minds of emotional idealists who only
see the sharp contrast between the poor and the wealthy. Only way to
eradicate poverty and usher in prosperity on a mass scale is thru a
free market system based on liberal democracy along with a welfare
state.
Tuesday, October 09, 2012
World Economic Crisis – causes and solutions
Thursday, September 09, 2010
Food Vs Clothing in India
about the shortage of basic needs in India,
esp about food, healthcare and education needs.
But so far, i have not seen anything on the second most important
of the basic needs : Clothing
there is too much data on nutriciton deficiency, malnutrition, crisis in
agriculture, farmers sucides, food production, etc. But so far nothing
about clothing.
Clothing and textile industry has been allowed to evolve into full
fledged capitalistic model with economies of scale, etc after LPG.
Hence there is no supply constraints and prices too have
faller drastically when compared to the 70s and 60s. the poorest of
the poor are now better
and fully clothed than ever before. I guess for those who lived thru 50s, 60s
and 70s, witnessed torn and old cloths worn by poor and middle class.
Clothing was a luxury and owning terlin shirt was a prestige issue. Now,
a poor labourer can buy a piece of cloth (s shirt or saree) with his/ her one
or two day wages. I guess it cost more than these wage rates in the
olden days.
Can we have an informed debate about this ?
and land ceiling acts prevented Indian agricultre into evolving into full
fledged large corporate farms of 1000s of acres of size (or collective
farms of communist states). Only coffee and tea plantations have
been exemtped because they will not be viable on tiny or small
scale. But the logic behind allowing very large farms of coffee or
tea equally applies to other agriculture farms like paddy, wheat,
sugarcane, fruits, etc.
Any inputs about the comparisons between these two vital
needs : Food Vs Clothing in India ? I guess the entry of Reliance
made a big difference in this field..
Wednesday, September 23, 2009
Rajaji on Sri Sri Prakasa and Nehru’s policies :
Rajaji writes about Sri Sri Prakasa and Nehru's policies :
December 18, 1965 Swarajya
Source : Satayam Eva Jeyate Vol : III page : 170
Monday, August 17, 2009
Financial crisis? No, capitalism as usual
http://swaminomics.org/articles/20090805.htm
Financial crisis? No, capitalism as usual
Dated: August 05, 2009
Just five months ago, when stock and commodity markets hit rock bottom, capitalism was viewed as seriously if not terminally sick. The Financial Times ran a series of articles labeled "The Future of Capitalism." Economists, politicians, and philosophers saw the Great Recession of 2007-09 as a historic watershed, and produced new visions of a changed capitalism.
Today, that looks like much ado about nothing. Stock markets are booming, commodity prices are rising, and shipping rates have tripled. Pessimists warn of rising defaults in credit cards, commercial realty and corporate debt, so we could have a double-dip recession. But markets believe the worst is over. Despite political and public outrage over "casino capitalism" the financial reforms being contemplated across the world are not fundamental.
Four months ago, pundits waxed eloquent about learning lessons for reform from the financial crisis. Today the greatest lesson of all seems to be that capitalism, with all its flaws, can cope with Great Recessions. We have always had financial crises and always will: that's the nature of capitalism. The system will always need reforms to keep pace with changing technologies and innovations. Yet it has proved its resilience. Mark Twain once said that rumours of his death were greatly exaggerated. The same can be said of capitalism.
In years ahead, financial regulation will definitely increase. But this will change capitalism's profile only slightly, since the financial sector was the most regulated one even before the crisis. Hedge funds, the least regulated financial entities of all, survived the crisis without bailouts, even as banks, the most regulated entities, suffered badly. Regulation does not prevent all crises: Japan had the most regulated financial sector among developed countries but suffered a lost decade in the 1990s. Lesson: while the future will see more regulation, financial crises will still happen.
Stiffer capital adequacy norms look certain, to check the excessive leverage of the last decade. Yet history suggests that financial innovation will ultimately find ways round regulations. Bank regulation was ultimately circumvented by a shadow banking system, and off-balance sheet vehicles. Expect ultimate circumvention of the new regulations. This will not be entirely a tragedy. The gains of financial innovation may initially be eclipsed by losses, but the losses are typically checked after a fiasco whereas the gains become permanent.
In future, most derivatives will have to be traded through a clearing house, ending the counterparty risk that sank the asset-backed securities market. Despite criticism, securitization will continue with modifications. Banks will be able to securitise mortgages subject to retaining a certain proportion of mortgages they originate, a safeguard against excessive risk-taking in mortgage origination.
Some flaws will not be reformed at all. A special US problem is that its mortgages are non-recourse loans: the lender can get back the house after a default, but cannot go after the other assets of the borrower. This encourages massive willful default. Mortgage lenders in India, Europe and most countries, can go after other assets. But US politicians portray the entire housing bust as an evil perpetrated by lenders on innocent home buyers, and this political theatre avoids making borrowers accountable too. This carries the seeds of a future bust.
Politicians rail against excessive executive pay, and pay curbs have been instituted in companies being bailed out. Yet there is no move to fundamentally change payment structures in solvent companies. Some reformers want bonuses to be clawed back after a fall, but in many cases the employees may have left, and it is difficult to pinpoint accountability for innovations several years after they arise.
There is vague talk of reducing the global imbalances that exacerbated the crisis, but no sign of a credible remedy. Neither the IMF nor Financial Stability Forum have the requisite powers to check future imbalances. Asian countries still want to build high reserves as insurance, perpetuating global imbalances. This too has the seeds of a future bust.
Politicians want to check future bubbles, but are unclear how to do so. There will always be differing opinions on when exactly a boom becomes a bubble. Besides, bursting an asset bubble without damaging the overall economy is problematic. High interest rates will check a housing bubble, but will also hit corporates and consumers, and may cause a recession. Imposing stiff margin requirements to check a stock market bubble might drive money into other assets and cause bubbles there.
In sum, no major overhaul of capitalism seems on the cards. The rapid transition from despair in March to the stock market boom today suggests that the markets don't really see the need for great change. The existing system has survived the Great Recession, and that is seen as Great News.
Is this because humans are utterly myopic? No, moaning and groaning about the failings of capitalism are really part of political theatre in a recession. In my youth, the Communist Party would meet delightedly during every recession and proclaim that capitalism was now in its final death throes. Even after the collapse of communism, dirges are still sung by other parties. The singing ends abruptly as economies pick up again, and turns out to be more a recession ritual than an anthem for reform.
Recessions are viewed by the public as outcomes of policy blunders, as tragedies that cost jobs and production. That's certainly true. But recessions are also essential correctives to the excesses inbuilt in a capitalism system driven by animal spirits, innovation, the search for higher returns, and euphoria. The system works through creative destruction. This entails boom and bust, greed and failure, euphoria and panic, fast growth and recession. Recessions and financial crises may look like blemishes of capitalism, but are actually integral to its process of creative destruction.
So, even after reforms, expect more financial crises and recessions in the future. We would be wise to institute reforms that reduce the risks, but even wiser to understand that the risks cannot be ended without ending enterprise and innovation too.
http://swaminomics.org/articles/20090805.htm
Thursday, July 16, 2009
The bogey of "inequality"
---------------
At this URL you would get technical reasons for what you had stated so
Some other interesting issues:
http://www.economist.com/world/asia/displaystory.cfm?story_id=14052240&fsrc=rss
S.Neelakantan.