August 30, 2015

Mayhem on the Markets

THE blame for the collapse of prices on the stock markets, commodity markets, and foreign exchange markets (against the US dollar) around the world, which occurred on Monday, August 24 and is continuing, has been laid at China’s door. The US has asked China to carry out “reforms” in its financial sector to stem the collapse, and many Western bourgeois commentators have also urged the Chinese government to intervene for this purpose. This however gives a completely false impression; it amounts to blaming China for what is simply an inevitable accentuation of the capitalist crisis.

What was happening till now is that this accentuation had been kept in check by developments in the Chinese economy. Now, with the crisis beginning to affect China as well, and its government taking some corrective measures, China is being blamed for this accentuation, as if world capitalism has a God-given right to ride piggy-back on the Chinese economy.

China’s Trade-Weighted Exchange Rate had appreciated since 2005 by as much as 50 percent, which shored up to a degree the level of economic activity in other countries of the world by keeping up their net exports. China itself on the other hand could afford to do this because there was an internal asset price bubble that contributed towards keeping up its own growth rate. With that bubble collapsing, as was inevitable, and with the world markets upon which China is so dependent showing no signs of recovery, China’s growth rate is slowing down. To counter this, the yuan has been recently devalued by over 3 percent, which has, not surprisingly, created expectations in the minds of speculators everywhere that competitive devaluations, ie, a spate of “beggar-my-neighbour” policies, are round the corner. They expect this to increase uncertainties and choke whatever inducement to investment remains for the capitalists, resulting in a worsening of the crisis. When speculators expect such developments, they actually come to pass, which is what happened on Monday. It is not China’s fall that is dragging down the capitalist world, but the very opposite: the Chinese buffer is no longer available to the capitalist world.

To demand that the Chinese government should rescue capitalism is unreasonable and unrealistic. In fact the Chinese government did announce the use of pension funds for shoring up its stock market. But this puts pensioners at risk; and to demand more such actions on its part is invidious. It is indeed ironical that those who never tire of preaching the virtues of the free market, should demand State intervention, and that too by the State of a foreign country outside the usual capitalist orbit, to rescue the free market.

The basic problem, which is why the crisis started in 2007 has persisted till now, lies in the fact that while globalisation has greatly increased inequalities and hence produced a tendency towards reduced consumption demand (which can only be transiently countered through enlarged consumer credit) and global over-production, State intervention to offset this is no longer possible. There are two reasons for this: the first is the hostility of finance capital to fiscal deficits; the second is the fact that there is no global State to undertake such intervention, and the scope for individual nation-States to come together to do so is limited. The crisis therefore persists, and, minus the Chinese buffer, has got aggravated.

The Indian government spokesmen expectedly have put on a brave face and claimed India to be invulnerable; but an India linked as never before since independence to the global capitalist economy, can scarcely escape the impact of the global crisis, whose worst victims will be the workers, who would lose employment, and the peasants, who would be squeezed by falling commodity prices.

This does not of course mean that the current mayhem on the markets would continue. There would no doubt be ups and downs, with every interlude of stability or revival being hailed as marking the end of the crisis, until the next episode of crisis strikes. But the system as a whole is clearly caught in a bind. The current mayhem on the markets is thus one episode in the protracted crisis of neo-liberal capitalism.



Fiasco of Talks

IN retrospect, the Ufa initiated talks between India and Pakistan at the NSA level were bound to fail. This is because, the Modi government had called off the foreign secretary level talks in 2014 on the grounds that the Pakistan High Commission had invited the Hurriyat leaders for a meeting. If that was a red line drawn by the government, did the prime minister and his team apprise the Pakistani side of this condition while deciding to proceed with the NSA level talks?

The efforts to project the first round of talks solely on terror-related issues as an achievement for the Modi government also ensured that the Pakistani government came under attack from the hardliners in the ruling and military establishment. It also showed up the Indian government’s shallow and short-sighted approach to diplomacy and foreign policy. If the Modi government thinks it has shown firmness in refusing to discuss Kashmir with Pakistan, in any manner, it is pushing India into a cul-de-sac.

For over a decade, the composite dialogue with Pakistan has been going on, with some interruptions, which covers all outstanding issues between the two countries and this includes Kashmir.

There was also a recognition that Kashmir needs to be discussed bilaterally by the two countries and internally the central government has to talk with all shades of opinion in Kashmir which includes the separatists. That is why during the Vajpayee government, talks were initiated with the Hurriyat leaders and interlocutors appointed. After allowing the Pakistani side to meet the Hurriyat and other separatist leaders, before or after bilateral talks held in Delhi for a decade, this new stance of the Modi government carries no conviction.

The Modi government’s attitude to relations with Pakistan is riddled with contradictions and lack of a thought-out approach. It has not utilised any of the back channel diplomacy which served well other governments, including the Vajpayee government. The present stance on the NSA-level talks has only strengthened the hardline military and security establishment in Pakistan.

Meanwhile, the unfolding situation in Jammu & Kashmir is a cause for concern. After the PDP-BJP coalition government was formed, the communal divide between Jammu & Kashmir has widened; after a long time, educated youth are joining the militants and declaring their goal or resorting to arms and the LoC is now a border which sees constant firing and shelling. The Modi government’s immature macho approach towards Pakistan will only worsen the situation.

There has to be a two-fold process. The dialogue with Pakistan has to be resumed. If there is a need to restructure the composite dialogue that can be done in consultation with the Pakistani side. But the cavalier approach of the Modi government has to stop. At the same time, immediate steps to end the cease-fire violations need to be taken so that lives of civilians are safeguarded and normalcy restored in the border areas. Finally, the BJP government has to embark on a process of talks with all shades of political opinion in J&K, so that even though belated, people in the valley will get some hope that there is some discussion which takes into account their views and aspirations.

(August 26, 2015)