Playing with fire

In an article in the latest issue of CPM organ People8217;s Democracy, general secretary Prakash Karat questions...

In an article in the latest issue of CPM organ People8217;s Democracy, general secretary Prakash Karat questions the wisdom of the government and finance minister P.Chidambaram in persisting with economic reforms that have burnt the US in the form of the present crisis. He argues that the US crisis must open the eyes of all the political parties who have uncritically supported financial sector liberalisation like allowing FDI in the insurance sector, favouring the privatizing of pension funds and supporting the takeover of Indian private banks by foreign banks by allowing up to 74 per cent stake. 8220;After the bursting of the real estate bubble and the financial crisis in the United States, one would have expected this ardent advocate of financial sector reforms to rethink. But that has not happened,8221; he says.

Karat says that investment banks and hedge funds in the US played a key role in restructuring the financial system which consisted of the use of derivative instruments like options and futures. It is this unbridled financial speculation through use of dubious instruments driven by greed for quick profits which has led to the current financial meltdown. In the Indian context, he says the New Pension Scheme, if implemented, would lead to thousands of crores of rupees of the employees going into the stock markets, and no regulatory authority can stop the wild fluctuations in the stock markets. The New Pension Scheme does not assure a minimum return to employees, he adds. 8220;The finance minister and the ruling establishment are not concerned about what would happen to the savings of ordinary people, or, the pensions of the working people, or, how public investment would be affected if India gets subjected to the rapacious deregulated financial system prevalent in the US. But all other non-Left political parties should ponder over the course which has been adopted in the name of pushing through reforms,8221; he concludes.

PM in the people8217;s dock

The editorial accuses Prime Minister Manmohan Singh of violating many of the assurances given by him in Parliament on the nuclear deal and says such a betrayal of trust by the PM has serious consequences, both for India8217;s future as an independent nation in the world and for the future of India8217;s parliamentary democracy itself. 8220;In the final analysis, the executive government, whose head is the prime minister, is answerable and accountable to the legislature. The negation of this accountability is the negation of the Indian constitutional scheme of things,8221; it says.

Claiming that many of the nine assurances that the PM had given in Parliament were systematically violated in the run up to finalising the deal, it says in the bargain, India ends up being tied to US imperialism8217;s global strategy impinging severely on our independent foreign policy and sovereignty. 8220;The issue, thus, is not one of accepting the CPIM8217;s or the Left8217;s critique of this deal as being against the fundamental interests of India and reducing India into a subordinate ally of US imperialism. The issue is whether the prime minister of India will remain loyal to his own assurances to his own people made in the Indian parliament?8230;8230; 8220;What we are asking is simply this: the prime minister must stand by his own assurances to the parliament. Otherwise, as he is fond of repeatedly stating in the parliament, history shall judge him. Prior to that, however, the Indian people shall surely do so,8221; it says.

Worst is yet to come

In an article titled the end of an illusion, noted economist Prabhat Patnaik talks about the financial crisis that has gripped the US. He says even if the bailout of distressed financial giants manages to prevent a severe economic crisis, it will certainly not be able to prevent a recession which appears to have already set in.

The state of credit will continue to be difficult for sometime to come, which will only worsen the recession. Even the financial crisis will not be over with the current 8220;bail-out8221; package, he says.

After the Bear Stearns episode earlier this year every one thought that the worst was over, but it wasn8217;t. The same perhaps is true of the present. The system of course will recover, but the form in which it will do so is unlikely to be the same as before. And this will open up new possibilities of praxis, he claims.