Pope calls for a new economic order

July 7, 2009

Pope Benedict XVI has called for a new financial order, a new way of understanding business enterprise, that respects the dignity of workers and looks out for the common good by prioritizing ethics and social responsibility over dividend returns, according to a report by the Associated Press.

The text of the enyclical titled “CARITAS IN VERITATE” or “Charity in Truth” can be found here on the Vatican web site.

The Pope in this third encyclical of his pontificate has addressed squarely a myth that has surrounded modern capitalism and economic growth. Most often this mythology has attempted to perpetuate the dominance of the rich classes.

This mythology has as its key theme that for capitalism to thrive, trade unions must be weakened or non-existent, that profits have to be maximized even if it goes hand in hand with worker layoffs and lower wages, sometimes achieved through offshore outsourcing.

The profit motive is worthy, but it need not be exhorbitant profits at the expense of the worker. Both the capitalist and the workers can have a share in the wealth of a company.

On the other hand, the government does not exist for the investor but for the people, understood as workers, investors, and other classes of people on the margin of society.

It is the responsibility of the government to spend on development, on education, on healthcare. The private sector cannot be expected to deliver in these sectors in a manner that delivers services that are affordable to the poor.

There will be those who will argue that competition reduces prices. Competition will not however reduce prices beyond a point where they do not meet the high profitability requirements of the private sector. Don’t expect the private sector to insure the poor sick….those will be on the streets if the government cannot foot the bills.

Competition in private sector education may lower costs, but not as low as a government-run and subsidized schools. The private sector wants a share of the subsidies by offering to deliver services better than the government. The pet line goes: if poor kids can’t afford private schools let the government pay the fees for them. But the government can have far more kids educated at the fees private schools charge.

One of the greatest challenges facing the economy is to achieve the most efficient use, and not abuse of natural resources, based on a realization that the notion of ‘efficiency’ is not value-free, the Pope wrote.

The Pope said that the drive to outsource work to the cheapest bidder had endangered the rights of workers, and demanded that they be allowed to organize in unions to protect their rights and guarantee steady, decent employment for all, according to the AP report.

Pope Benedict is concerned about the inhuman conditions for factory workers in outsourcing hubs in China and south-east Asia. The move to outsource at the lowest cost has led to workers working in sweat shops, under inhuman conditions, as has been documented by Naomi Klein (No Logo) and other writers.

Some writers like nobel laureate Paul Krugman have argued that sweat shops are an improvement over the current lving conditions of people in some Asian countries. But the Pope cannot take the clinical (if cynical) view of an economist. His concern is the pain, the dehumanization of people worldwide.


In India a budget to be proud of

July 6, 2009

The free marketers are crying foul. In his budget speech on Monday, Minister of Finance, Pranab Mukherjee disappointed them by not detailing a plan for allowing foreign investment in the insurance sector, for privatization of public sector companies and of education.

Even as Mukherjee was making his budget speech, the Sensex of the Bombay Stock Exchange dropped.

To a large extent, big business led to its own disappointment by its euphoria after the re-election of the government of Prime Minister Manmohan Singh. Share prices soared on the stock markets as investors believed that the UPA, freed of its dependence on the Left parties, would now pursue a reformist agenda.

The term “Reformist” has usually been defined by business and the pro-business media in terms of free market policies that liberalize cross-border capital flows, open new sectors to private investment, and make labor markets more flexible (read ease out labor unions).

The evening after Mukherjee’s speech, the pro-business The Wall Street Journal is making a spectacle of itself, claiming interestingly that Mukherjee’s budget was ” a pretty dreadful spectacle”. Newspapers are expected to report and analyze, and not espouse causes, but that is a subject for another post, another time.

What industry and media like the WSJ mis-understood is that the Congress party, which is the main partner in the coalition government, has traditionally had a stand of its own on social policy, which is social democrat and far from pure capitalist.

Mukherjee used the budget speech to remind viewers that India was protected from the global financial meltdown because its large banks are government controlled and did not expose themselves to speculative activity, and stocking up on CDOs. He credited his former leader, the late Indira Gandhi, for nationalizing the banks when she was Prime Minister of the country.

By his focus on inclusiveness, on rural development, on expanding the economy through stimulus spending, Mukherjee has sent out a strong signal that social democracy is not dead in India.

By refusing to privatize education, and by in fact making a budgetary allocation for new IITs, Mukherjee is making the point that Pt. Jawaharlal Nehru’s strategy to spend on education and research as core competencies is still relevant.

Mukherjee’s budget in fact creates the opportunity for the emergence of more people from out of the pale of poverty, into becoming beneficiaries (and consumers) of the economic boom. The question is; will foreign investors decided this is a good market opportunity for them ? Or will they continue to demand what seems to be quite impossible in a country that is moving to its social democractic roots ?

There is some concern about the deficit in the budget, but at times of economic crises, deficit financing and government spending is the way out to stimulate the economy and create jobs. The challenge for Mukherjee is to rein in inflation when it happens, by a reduction of the deficit, and other appropriate fiscal measures.

There are also issues such as the implementation of the programs that aim to bring India’s vast rural poor into the mainstream of economic development. There will undoubtedly be leakages, corruption, and some of the money will not reach the target group.

But unbridled capitalism won’t solve that problem. Civil society and good politics can.

India needs English education for all

July 1, 2009

Education is the way out of economic backwardness for India’s large number of poor. Needless to say access to capital at reasonable rates, subsidies, health and other services are as important.

In this post my focus is on education. A number of state governments are enforcing state vernacular languages as the medium of education with scant regard to the relevance of this education in the job market.

They forget that India would not have emerged as an outsourcing hub but for a quirk of history, the decision by the British to introduce English as the language of education in the country.

We should be equally concerned about protecting our local culture and language. The McHomogenization of Indian culture is not at all desirable. But the classroom may not be the place for the protection of culture at this stage of India’s economic development.

The Wall Street Journal in this article has argued that the denial of English education to the masses is in a sense a form of domination, to keep the people subjugated.

“In fact, much of the political class remains opposed to English medium education supposedly because they fear the loss of local culture and language,” WSJ writes. It’s more believable that it’s because an ill-equipped population of voters is a malleable population of voters,” it added.

In the state of Goa in western India, a majority of the people backed Konkani as the mother tongue of the state, because it was the language spoken by most people But when it came down to the implementation of the language as a medium of education, parents fought back in favor of English.

They had by then realized that the official language issue had helped Konkani protagonists to perpetutate their roles as culture czars and educationists.

These protagonists re-wrote the language in the name of standardization, and expected children to learn a language that was by now quite different from what they had been used to speak at home. The script was also different.

Clearly there is a need to separate the politics of language from the relevance of a particular language in the new economic scheme of things. The education system, whether we like it or not, is geared to producing people suitable for employment in our factories and offices.

A few of us may have some discomfort about this mechanistic and production oriented metaphor of education. But to India’s poor, this is right now probably the only education that is relevant.