Food in mouth problem

Understand the Indian farmer, only then can you have the luxury of railing against American presidents.

President Bush in his irrepressible way spoke out about the Indian middle class emerging as meaningful consumers and hence being at least partly responsible for the global rise in prices. This has come in handy for xenophobic politicians in our country and we have many of those crying themselves hoarse. Can diverting attention to imaginary foreign bullies help our government in dealing with the public clamour about prices of food-grains? It is always easier to blame others rather than face up to our own shortcomings. No government likes to see a rise in food prices. The Roman Emperor Diocletian discovered centuries ago that high food prices can be hazardous even to the unshakeable imperial throne. He experimented with price controls and as is inevitable when you ignore the rudimentary laws of economics, he failed. High prices overall are rarely an outcome of supply-side problems; inflation is always and everywhere a monetary phenomenon.

If we have global inflation today, it is because Mr Greenspan kept pumping up the money supply too much and for too long. He tried among other things to help President Bush fight a war without bearing its fiscal consequences. When money grows too fast, prices rise just as night must follow day. His successor, the intelligent and well-meaning Bernanke, has been forced to continue with easy money in order to save the financial system and prevent a Depression like that of the 8217;30s or a decade of de-growth as Japan has witnessed in recent times. The net result is that the inflation genie is out of its post-Volckerian bottle. The dollar is weak, aggravating the seeming price rise of commodities where international prices are quoted in dollars. As an aside, inflation is not that high in euro or Swiss franc terms. Despite our trading patterns largely dollar-denominated, the monetary authorities in India have in fact reduced the dollar8217;s impact by strengthening the rupee quite a bit. But there is a limit to which they can hold inflation.

The real question to ask is not whether there is high inflation, but whether relative prices of wheat and rice have changed. Here it seems to me that the data is not clear at all. Measured in ounces of gold or in barrels of oil or in ingots of steel or in bags of cement as distinct from in dollars or rupees we may not have any significant increase in the price of rice or wheat. When the analysis is complete in twelve months from now 8212; late as with all economic analyses it may turn out that neither is the Indian Middle Class Consumer nor the US Bio-fuels Producer responsible for anything more than a lot of verbiage in the press.

However, going beyond the money illusion caused by the unstoppable printing presses of the Federal Reserve, if in fact there has been a change in the relative price of rice and wheat which is probably modest at best it is worth looking into seriously, not with the foolishness and irresponsibility that one has come to associate with the current set of political leaders in India. It was the venerable statesman C. Subramanian who went by his intuition contrary to the beliefs of World Bank dummies that the Indian farmer was not stupid. The Indian farmer was an optimiser in a world of great uncertainty and risk. On average he may have received prices that covered his costs and gave him a fair return. But the 8220;average8221; hid many risks. In years of glut, the Indian farmer had no insurance cover for his returns. This insight was the origin of the minimum support price and the procurement policies that kicked off the Green Revolution. The intelligent Punjabi farmer, once assured of a price, was able to plan better and produce more.

We constantly keep saying that we are a nation of farmers and that agriculture is our backbone. Why then are we not happy if in fact the relative price of rice is up as compared to steel or oil? Why are we banning the export of rice and flooding the country with duty-free food items to the detriment of our patriotic kisaans? Why are we not praising Bush instead of berating him?

The answer is simple 8212; the welfare measures of our 8220;socialistic8221; state have failed. While some farmers may benefit from high rice prices, all urban classes are hurt and our state is mortally scared of them just as Diocletian was! It must be pointed out that the Roman Empire and Victorian England were more advanced in dealing with issues of the welfare of the poor than we are. We spend tonnes of money, primarily for the benefit of contractors, bureaucrats and politicians 8212; not for the benefit of the poor. For a country with the levels of privation that we have, we don8217;t even have public soup-kitchens or their equivalents through public-community-private partnership deals. All we have is monumental theft from the poorly executed PDS. And of course most of our agricultural welfare expenditure is marked not for the benefit of farmers or the poor, but the barons of the Fertiliser and Pesticide industries. We subsidise them and keep prices low resulting in overuse of these items which in turn causes untold ecological damage. The only intelligent programme in recent times was that launched by Jayalalithaa in Tamil Nadu where she encouraged temples and dargahs to provide free meals to the poor and encouraged well-to-do devotees to pay for them. She leveraged traditional beliefs and institutions in an imaginative way.

Let us not once more fall into the trap of feeling good by criticising the 8220;foreign hand8221; of Bush or anyone else. We have issues in Indian agriculture, but we are doing our best to hurt farmers. We have issues regarding the complete absence of the welfare measures we need to protect the vulnerable sections of our population. Let us fix these self-inflicted problems of ours. We will then have plenty of time to tilt at windmills foreign and homegrown.

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The writer divides his time between Mumbai and Bangalore jerry.raoexpressindia.com