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An unequal burden

While the rich are getting richer, the common man is facing rising prices thanks to speculation and official hikes. This will lead to social tensions, writes Sitaram Yechury.

columns Updated: Mar 25, 2010 20:41 IST

The Delhi government has brazenly announced an across-the-board hike in the prices of essential commodities including fuel and cooking gas. The message is clear: the burden of financing this year’s Commonwealth Games is to be borne by the aam aadmi. This comes on top of the inflationary content of the Union Budget, attested by the finance minister when he informed the Rajya Sabha, “I will not be surprised if it (inflation) reaches double digits in March itself.” He then went on to justify that India has lived with higher rates of inflation in the past and, therefore, this was no big deal.

This is not only a reflection of the audacity that accompanies a government in its first (honeymoon) year. This, in fact, reflects the international pattern of neo-liberal prescriptions that seek to emerge from the global recession by burdening the vast mass of the people and benefiting the corporates and the rich with the hope that the latter through their spending will rejuvenate the economy. This year’s Union budget reflects this philosophy when it doled out concessions to the rich and hiked indirect taxes for the poor.

While we in India are being asked to prepare for a fiscal consolidation to reduce our 6.5 per cent deficit, the 2009 US budget sent by President Obama to its Congress has a $1.75 trillion deficit or 12.3 per cent of its GDP. This comes on top of the over $10 trillion of bailout packages that were given last year in the name of recovering from the crisis. The consequence of such a global trend has increased the number of billionaires in the world by over 200 and their aggregate capital has expanded by over 50 per cent. Recently, Forbes reported that as of late 2009 the number of billionaires soared from 793 to 1,011 and their total fortunes from $2.4 trillion to $3.6 trillion.

Given the global recession such massive accumulation in the hands of the wealthy can only be put to good use on stock and raw material markets leading to the creation of new financial bubbles that neo-liberalism hopes will trigger growth-based on speculation. The seeds of fresh crises are being sown by replicating the process, which in the first place, created the current crisis. It is not surprising, therefore, that oil prices that had hit an all-time low of $47-a-barrel in December 2008 now stands over $80. Global financial indices are also climbing steadily. A classic case is that of Russia which saw a GDP decline of 7.9 per cent in 2009 but had double the number of billionaires as its stock market grew by over 100 per cent. The result is that the very same financial giants which caused the present crisis are now announcing super profits. JPMorgan Chase announced a record $2.7 billion profit in the second quarter of 2009.

As the bankruptcy crisis in Greece shows, much of this largesse to make the wealthy wealthier is being done at the expense of massive cuts in social security expenditures. In late January, the Greek government adopted an austerity package worth $6.8 billion. In March, it announced an additional package of saving an additional $6.5 billion. This has been financed by raising taxes, slashing social security expenditures, increasing the retirement age, cutting the pay of civil servants etc. This has naturally led to four successful general strikes in the space of one month.

Many raised an eyebrow at the rise in the sensex post-budget. As India is following these very neo-liberal prescriptions, this is not surprising. In addition to tax concessions announced this year, the budget documents show that nearly Rs 80,000 crore was ‘uncollected’ from the corporates and Rs 4,000 crore from high-end income-tax payers last year. Instead, if this was collected and utilised for hiking public investments in building our much-needed infrastructure, it would have generated high levels of employment. The consequent expansion of domestic demand could have spiralled the cycle of sustained growth. This latter course, however, would have denied the rich from making further quick super-profits.

This process is already feeding speculation in India. The total value of trade in agricultural commodities in the commodity exchanges during the fortnight ending January 31 increased by a huge 64.14 per cent. The cumulative value of trade in agricultural commodities during the year from April 1, 2009 to January 31, 2010, grew by a whopping 102.59 per cent, in absolute terms valuing over Rs 10.13 crore. Now any forward trading can make profits only when the prices of these commodities are higher than what they were when the trading initially took place.

The aam aadmi is, therefore, faced with a double whammy attack — rise in prices through official hikes and speculation. Like the spate of general strikes and protests across Europe, India is bound to see the rise in popular actions demanding that the government reverse these policies. The jail bharo call given by the Left parties on April 8 will only be the beginning.

Sitaram Yechury is CPI(M) Politburo member and Rajya Sabha MP

The views expressed by the author are personal