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Open the war chest

Unfortunately, instead of concentrating energies to meet the challenges of the current global capitalist crisis, congenital anti-Left bashing is doing the rounds, writes Sitaram Yechury

india Updated: Nov 06, 2008 22:21 IST

Unfortunately, instead of concentrating energies to meet the challenges of the current global capitalist crisis, congenital anti-Left bashing is doing the rounds. The main thrust is that the Left’s thwarting of many neo-liberal financial reforms proposed by the UPA government has little to do with India escaping a full-throttle devastation. A former advisor to the Prime Minister says: “The Left’s claim is like the head of a monastery saying she had saved her nuns from pregnancy. Celibacy is not a virtue in economics.”

To put the record straight, the Left never staked any claims. All that was said in this column last fortnight was that even the devil must be given its due. That said, what about the ruling neo-liberal hedonistic testosterone-prime pumping that turbocharged the race towards a catastrophic collapse with the AIDS of financial speculation. Any rethinking on this neo-liberal agenda? If no, then such critiques suffer from a different type of AIDS — Acute Intelligence Deficiency Syndrome.

Another right-wing columnist, with pretensions of an ideologue, says: “The Left got some things right. But even a dud clock records the right time…” The job of any clock is to record time. Why gripe if the job is well done? Further, the Left can “certainly take some credit in stalling the complete opening up of the insurance sector and preventing the rupee from being fully convertible. But credit must also go to the former RBI Governor…” Please take credit where it is due. Likewise, stop being cussed and give credit where it is due.

Substantive issues, please. Items of legislation were introduced in Parliament for reforms in the financial sector. Now be clear on one aspect. Once an item of legislation is introduced in Parliament, no other office can prevent it from becoming a law except parliamentarians. The Banking Regulation (Amendment) Bill was introduced on May 13, 2005, and returned from the Standing Committee on Finance with strong dissenting notes by the Left on December 13, 2005. It was listed for consideration and passing in the Budget Session of 2006. This has not happened. If this was enacted, foreign banks could have acquired 74 per cent equity stakes in private Indian banks with corresponding voting rights. Imagine the consequences. The Bill to reduce the government’s stake in the State Bank of India was similarly stalled.

The Pension Fund Bill was introduced on March 21, 2005, and not passed. It had proposed to permit the transfer of pension funds, the hard-earned life-long savings of employees, to the share markets. The global meltdown would have virtually wiped out the future of crores of Indian workers and employees. The Union Cabinet, post- crisis, proposes to increase the foreign investment cap in the insurance sector from 26 to 49 per cent, which so far was prevented by the Left. Its note to the UPA-Left Coordination Committee in 2005 warned: “Countries which enthusiastically opened up their financial sectors in

order to attract capital inflows often experienced enhanced volatility in their financial markets and speculative attacks on their currency.” Grant this wisdom, even in retrospect, and rescind this proposal.

The UPA government, however, was pushing ahead with its efforts. On March 18, 2006, the Prime Minister told a global audience in Mumbai that India would prepare a roadmap on full capital account convertibility to integrate the Indian financial system with the global. Earlier, the Finance Minister on October 21, 2005, said: “We will press on with financial sector reforms.” Post the global meltdown, the Prime Minister, on September 30, 2008, says: “The foremost challenge is to insulate India from the ill-effects of the international financial crisis.” From integration to insulation, indeed, a complete U-turn, nevertheless in the correct direction.

With the record set right, how do we proceed to meet the challenges before India? The official mindset, unfortunately, continues to remain within the neo-liberal framework. There is this refusal to accept the fact that the ideology of neo-liberalism that sanctioned the predatory greed of financial speculation has been rendered bankrupt.

The solution does not lie in injecting greater liquidity into the economy, which seems to be the reigning philosophy. The global crisis has occurred, among many factors, primarily because of the increase in lenders’ perception of risk. This is so because the solvency of borrowers has become suspect owing to the presence of a plethora of ‘toxic’ securities in the system. What is required, therefore, is to improve the solvency of the borrower and not inject liquidity for the lender. This can only be done through massive doses of public investment that leads to greater employment generation and consequent expansion of aggregate demand.

The Left’s opposition to neo-liberal economic policies, during the four years of its outside support to the UPA, was characterised as ‘Keynesian fundamentalism’. We had characterised the UPA as pursuing ‘fiscal fundamentalism’. On his return from China, the Prime Minister, surprisingly, spoke of pump-priming the economy with larger doses of public investment. Please do it.

Sitaram Yechury is CPI(M) Politburo member and MP