economic reform

The Making of an Economic Superpower: How China Escaped Shock Therapy

In ‘How China Escaped Shock Therapy’, Isabella Weber provides a detailed study of China’s economic miracle, whatever its pitfalls and ensuing inequalities.

How did China become a global economic superpower? How did it avoid the economic and social catastrophes inaugurated by the ‘shock therapy’ of Big Bang market fundamentalism in eastern and central Europe and in Russia after the disintegration of the Soviet Union? And why didn’t those former eastern bloc ‘socialist’ states look east to China and follow its lead, and avoid the devastating hardships that ensued for their peoples? Having consciously avoided the disasters of shock therapy, what might China have to teach the world about building and managing spectacular economic growth? And what does the model of a socialist market economy with Chinese characteristics, and the attendant cultural, material and military power that accrues, mean for world politics, especially to the Western world system of power, led by the US? And more unusually, what has China’s capitalist world integration meant for its Mao-era championing of Third Worldism – anti-colonial national liberation struggles across the world?

Isabella M. Weber
How China Escaped Shock Therapy: The Market Reform Debate
London and New York: Routledge, 2021

These are among the questions directly addressed or raised by Isabella Weber’s enlightening and detailed study of China’s economic miracle, whatever its pitfalls and ensuing inequalities. Weber lays bare in great depth the vigorous debates in China about how to think about and reform its economy from the late 1970s and into the 1980s. The issue at that time was not whether China’s economy needed reform in capitalist directions and towards market relations, it was how that should be done so as to minimise political instability and mass unrest, maximise regime legitimacy, develop the economy and lift millions out of poverty and hunger, especially in the countryside.

A few facts: While Russia’s economy shrank from a 4% share of global GDP in 1990 to around 2% in 2017, China’s increased from just 2% to over 12%. For 99% of Russian people, the average real income in 2015 was lower than it had been in 1990; in China, 99% of the people saw a quadrupling of real income. US share of world GDP has fluctuated in between but was 26% in 1990 and stands at around 24% today. It wasn’t all roses for China, however – inequality became rampant and remains a core source of political and economic discontent.

This is not the ‘China’ of Western mythology

Weber’s study is essential reading. Professor Kerry Brown of the Lau Institute at King’s College London is surely right when he argues that over the past couple of years, so many of us seem to ‘know’ China and what it is and what it stands for, all too frequently without bothering to look for hard evidence. As Mobo Gao argues so persuasively, the West is busy “constructing China” – a China that is legible and useful for western purposes, not necessarily the real-world China that actually exists. China, once again, is being ‘othered’, the new-old ‘Yellow peril’, ready to take over the world. After all, as a leading thinker in former US president Donald Trump’s state department noted, China is not a Caucasian power, making it incomprehensible to the West, unknowable, unpredictable, inscrutable, suspicious.

The short answer to the question of China’s remarkable economic development, for Weber, is that China was economically transformed by a conscious state strategy of “crossing the river by groping for the stones”. As Weber so elegantly puts it, China made “the path while walking.” This is not just quintessentially Chinese idiom but almost a philosophy. Pragmatism and experimentation, small changes in limited areas, gathering data and results, constantly recalibrating, feeling their way in the dark towards gradual change. Making sure of your footing before taking the next small step to your destination. The Long March also started with a single step, no? This is also how Chinese guerrilla warfare worked during the civil war, Weber points out.

Markets are made by people, states, not nature

Weber shows that the state decided that markets don’t happen naturally, should be carefully constructed and managed, and should be a tool of the state to develop a modern economy and meet popular needs. Market as instrument of the state, not as the driver of state strategies. The visible hand of government orchestrating the invisible hand of the market, and trying to maintain popular legitimacy and authority. While this is a major step towards the restoration of capitalism, it retains a level of state power that acts as insulation against global economic and financial crises and turbulence. China, to be sure, is integrated into global capitalism but not in the ways preferred by Western neoliberals. China’s retort to the Thatcherite “there is no alternative” (Tina) is that there is, and it can work quite well.

In great detail and with considerable insight, Weber demonstrates that Reformers made distinctions between state setting prices in the ‘heavy’ or significant sectors of the economy (those that impacted national plans and people’s everyday lives and necessities) and the ‘light’ sectors that were more marginal and could be left to private markets.

But before embarking on their remarkable journey, Chinese political leaders, bureaucratic economy managers and economists scoured the world for ideas and methods. They consulted economists from Japan, Hungary, Yugoslavia, West Germany, the US, the UK, among others. The foreign economists included Milton Friedman and Jeffrey Sachs and others championing massive immediate economic change from a state-managed to a private free-market economy. Foreign economic advisers also included Alec Cairncross and John Kenneth Galbraith who had advised their own governments during and after World War II, helping capitalist economies transition to wartime price and wage controls, and transition more or less quickly after the War to market-led pricing. They too, by sheer necessity, had crossed the river by feeling for the stones. Chinese reformers also looked at the so-called Erhard era economic miracle in West Germany, promoted by Friedman and Sachs as fit for application to 1980s China, debunking the myth in the process. Weber argues that Erhard’s market miracle led to labour strikes and resistance, inflation, and eventually a U-turn.

China’s reform generation largely rejected market dogma and shock therapy.

Children play next to adults at a park in Beijing, China June 1, 2021. Photo: REUTERS/Tingshu Wang

Drawing on China’s history and experience

But the reformers did much more than look abroad to western and other economists. They drew on their own historic experiences of managing the parts of the Chinese economy they controlled during the war with Japan from 1937 and into the civil war against the forces of Chiang Kai-Shek, and economic management strategies after the 1949 revolution. Plus, in the reform era, China’s economists and others also were aware of, though not necessarily fundamentally influenced by, economic debates in ancient China that at least rhymed with the issues of the late 1970s and 1980s. Weber is referring to China’s leaders from centuries before the Christian era debating how to manage transitioning economies from war to peace, of the problems of regime legitimacy in the eyes of the people, of managing prices of staple goods and services that would enable gradual change versus Big Bang strategies which had caused mayhem in ancient times.

Chinese economic reformers went shopping in the global market of ideas and methods, sifted, sorted, debated, synthesised, drew on their own experiences, and decided their own path. A remarkable, important story related in depth in Weber’s landmark study.

Major US institutions also fundamental in Making China

The World Bank played an important role in the process, as did the American Economics Association, and the Ford Foundation. They especially promoted Western economics in China in a wide variety of ways, spending hundreds of millions of dollars in investing in scholarly exchange programmes, setting up undergraduate and postgraduate economics in a wide range of universities, sending US professors from elite universities to teach and train in China, and funding thousands of Chinese professors and students to study and research at American and other universities. A whole network of think tanks was created or strengthened and transformed, helping to inform reform and crystallise elite and attentive public opinion in favour of market socialism with Chinese characteristics. They built in the process solid elite knowledge networks that bled into and out of US and Chinese state strategies and activities.

By the time Weber attended economics lectures in China just after the 2008 global i.e. Western financial crisis, she was amazed to find the same economic theories and American textbooks with which she was familiar in Berlin. Yet, she notes how different from the US was the Chinese economy itself, despite what professional economists thought and taught. This leaves us puzzled, of course: professional economics appears to have nothing useful to tell us about the actual economy and how it works, or why it frequently doesn’t.

And this is important. It wasn’t all ancient Chinese wisdom against western ignorance. China had its own market fundamentalists too. There was a massive debate over how to reform the economy or how to set prices. The free market theory basically suggested that virtually immediate abandonment of state ownership and control was essential for transformative and permanent change, regardless of the morality of imposing massive hardships on millions of ordinary working people. And the Chinese leadership was divided, and ideas ebbed and flowed between state-managed prices and free markets. It was not pre-ordained that China would emerge where it did – and anxieties among the Chinese leadership about regime instability and mass uprisings emerged time and again. Is this elite paranoia or a ruling class that knows its own people?

China has come a long way since 1978, since the time of Mao who, incidentally, as Weber points out, had already embraced the necessity of economic reform before his death, and appointed a successor (Hua Guofeng) who set up the first experimental special economic zone that laid the foundations for Deng Xiaoping’s transformative leadership.

Souvenirs featuring portraits of China’s late Chairman Mao Zedong and China’s President Xi Jinping are seen at a shop near the Forbidden City in Beijing, China, September 9, 2016. Photo: Reuters/Thomas Peter

China’s globally integrated and interdependent, so why’s there a new Cold War?

That there is a new ‘cold war’ between the US and the West and China is pretty much the conventional wisdom today. And it does feel pretty frosty, no question. Trade tariffs, tit-for-tat sanctions, diplomatic boycotting of the 2022 Chinese Winter Olympics, ramped up arms sales and rhetoric about Taiwan, the South China Sea, Hong Kong, and the human rights of Muslim minorities – this is the stuff of daily news stories. Yes, two decades into the global war on terror and wars leading nowhere in Iraq and Afghanistan, the US worries about the human rights of Muslims. And that’s even without mentioning the ‘Wuhan’ virus.

Whatever the truth of the matter, the sheer volume of rhetoric about a new cold war seems to have some of the qualities of a self-fulfilling prophecy. Yet, it remains the case that China’s economy is a state-capitalist one, not communist by any stretch of the imagination, while the Communist Party is dominated by very rich men and women whose children are in droves studying in elite American and other universities. President Xi is a billionaire. China’s economy is interdependent with US and western economies and financial systems, has massive investments in the West and vice versa. China and the US have a vested interest in cooperation on the current and future global pandemics as well as climate change policy. China holds trillions of dollars of US debt, and its post-2008 policies of massive fiscal stimulus aided their and global economic recovery. China does not have a string of communist parties overseas committed to spreading its ideology, unlike the Soviet Union. It does not have anything even remotely resembling the Warsaw Pact. Its military spending is around a third of the US’s. It’s not even the most significant military power in its own region.

And on top of all that, China today is no emancipatory leader of the globally oppressed. It supports no national liberation struggles as it did under Mao. It is very close to Israel diplomatically and economically, not to mention other US allies in the Gulf. There is nothing revolutionary about China, other than its profit-driven hi-tech sector. However flawed the debt-trap diplomacy critique is (and it is surely exaggerated by the anti-China ‘lobby’), there is the whiff of financial and commercial imperialism in China’s international relationships. It has become more like the West.

More like, but not of the West. Like ‘rising’ Japan in the 1980s and 1990s. It’s an outsider, an interloper, a competitor and a rival. It’s not Caucasian. And does not appear to know its place and is in need of subordination.

Weber hints that China’s state-directed market model of economy is a key source of friction with the US and West. It probably is, especially given the continuing ideological power of neoliberalism. Yet this may not be the whole story.

The racial-civilisational factor is surely a part of the story, as is the sheer strength of China’s hi-tech leadership. Its geopolitical ramifications, however fragmented and ill-thought through the Belt and Road Initiative may be, are potentially revolutionary. The dominance of the Eurasian landmass could spell major diminution of Anglo-American sea power.

And then there’s the domestic politics of external threat-construction, which goes both ways. The US and the West more broadly are suffering a crisis of authority and legitimacy at home, rising authoritarianism and right-wing and white supremacist populism, including an attempted coup and insurrection in the US. China’s domestic inequality, corruption, and mass protests remain powerful and enduring. Hence, constructing external threats plays well at home, performative politics that distract attention from political elites themselves.

Weber’s book is well researched, based on Chinese language documents and dozens of interviews with key thinkers and actors in its economic reforms, and is informative and stimulating. It’s an important book that deserves a wide readership. It offers a sober analysis of the intellectual and political struggles – that occurred on an international scale – that transformed China, and are having global repercussions. It provides key insights into ‘how China works’ and subtly demonstrates that neoliberalism is not the only game in town. It is one of the most thought-provoking and illuminating books I have read.

Inderjeet Parmar is professor of international politics at City, University of London, and visiting professor at LSE IDEAS (the LSE’s foreign policy think tank). He is a columnist at The Wire. His Twitter handle is @USEmpire.

Stealth, Skill and 10th Lok Sabha’s TINA: How Narasimha Rao Tamed Critics of IMF Loan

Hailed as the father of liberalisation, Rao’s personalised decision-making and working style earned him enemies and his party’s tally dropped from 252 MPs to 140 MPs when he lost power in 1996.

Thirty years ago this week, Narasimha Rao, then a minority prime minister, outsmarted his critics in the Lok Sabha by resorting to a hitherto unused mantra in Indian politics – that there is no alternative to him. It was this TINA factor that prompted poll-wary MPs to finally fall in line and go along with his plans for economic liberalisation. The story has been told well by Rob Jenkins in his 1999 book, Political Skills: Introducing Reform by Stealth.

Opposed to the International Monetary Fund (IMF) conditionalities that were defining the process were a formidable line-up of Nehruvian Congressmen, socialists like George Fernandes and Chandra Shekhar and the Swadeshi nationalists of the RSS. Here is a field reporter’s version of how Rao kept his colleagues in the dark while he plotted the deal even before he took oath as prime minister on June 21, 1991.

Let us begin with the tussle for the prime minister’s post, which played out in true Congress style. By the evening of June 18, 1991, it seemed Sharad Pawar was unstoppable with over 130 MPs aligning with him. There were two well attended dinner parties in his favour. Unnerved by this, family loyalists like Arjun Singh, M.L. Fotedar, N.D. Tiwari and Karunakaran at a late night meeting decided to switch loyalties to Rao. They wanted to avert a Pawar takeover at any cost. Soon, Pranab Mukherjee also joined them.

The next morning (June 19), Karunakaran, Antony, Andhra chief minister Janardana Reddy and G.K. Moopanar met at Kerala House. Karnataka chief minister Bangarappa and Siddharth Shankar Ray lent support to the regional syndicate. This forced Pawar to agree to Karunakaran and S.S. Ray seeking the opinion of individual MPs in private. And the two observers found that a majority of the Congress MPs supported Rao.

Ten minutes later, the Congress parliamentary party at its meeting in Central Hall unanimously elected Rao as its prime ministerial nominee. This was on June 20. Soon Rao, accompanied by Arjun Singh, met President R. Venkataraman and staked claim to form the government. When Rao got the presidential invite a little after 2 pm at his Motilal Nehru Marg residence, he was in a huddle with Arjun Singh, Pranab Mukherjee, M.L. Fotedar and R.K. Dhawan.

Also read: Thirty Years After Liberalisation, a Look Back at the Various Pieces of the Puzzle

The prime minister-designate first rushed to 10 Janpath to seek the blessings of Sonia Gandhi. While returning, he got a message from cabinet secretary Naresh Chandra. He said he wanted to appraise Rao of a very urgent matter. At the officials’ meeting, Rao listened to the finance secretary, explaining the impending financial crisis: foreign exchange reserves had dipped to a dangerous Rs 2,500 crore, India’s external debt was as high as 22% of GDP and internal public debt stood at 56%. Rating agencies had put India at a ‘dangerous level’.

The Chandra Shekhar government had to pawn RBI gold held in London banks to raise $400 million. At the meeting that lasted 90 minutes, the senior officials also told him how they took the initiative to negotiate a standby loan of $2.3 billion from the IMF for a 20-month period. For this, the IMF also insisted on a set of conditionalities. Naresh Chandra wanted Rao to take the decision on carrying forward the negotiations with the IMF.

In a separate meeting with Naresh Chandra, Rao sought a few clarifications. He went through the written and unwritten conditionalities. Then he announced the momentous decision: inform the IMF that India accepted all its conditionalities. This was a day before he took oath as prime minister.

At his residence, senior party leaders and well-wishers waited for the prime minister-designate. Where had he gone? Most leaders thought from 10 Janpath he had gone to Chandraswami’s ashram to seek the god man’s blessings. After his return, Rao walked straight in to resume discussions on matters like the ministers’ list and modalities for the swearing in.

Rao did not give any inkling of the historical decision he had taken barely 30 minutes before. An astute politician, he must have been aware of the strong objections among his colleagues to the IMF’s conditionalities. Possibly, his strategy was to push ahead with the IMF decision and then come out with a fait accompli.

While Rao was with party colleagues, P.C. Alexander arrived. The prime minister-designate led him to his study. Going by what Fotedar revealed in one of his media briefings after his group formed Congress (T), that crucial day Rao went on alternating between drawing room and study.

The first unwritten conditionality was that the Rao must appointed a reform committed man (not politician) as finance minister. Accordingly, Alexander first contacted I.G. Patel. He said he suffered from various ailments and could not undertake any heavy responsibility. The next in the IMF list was UGC chairman Manmohan Singh. When Alexander contacted him, Singh took it in a lighter vein. Soon, Rao himself came on the line and offered Singh the job. This made Singh cancel an evening party with friends.

Later when they met, Rao gave Singh a free hand to deal with the IMF offer. As economic advisor to the previous government, he was well aware of the nature of negotiations with the IMF. In the next two days, Singh held a series of meetings with the secretaries of other economic ministries and RBI officials.

Six years later, after Sitaram Kesri took over as Congress president, Devendra Dwivedi gave us a blow-by-blow account of the events that happened on June 20 and 21, 1991. Dwivedi was a former solicitor general and close confidante of Rao’s who stood by him even during his bad days. As per his version, the IMF conditionalities were quite humiliating and intrusive. The first was that India must appoint an IMF man as finance minister. The second precondition was to demonstrate the political will by carrying out devaluation of the rupee to the IMF-prescribed level.

In the long ‘must’ list were immediate trade liberalisation, scrapping of licensing and the slashing of subsidies. The IMF would release its funds only after India presented a budget acceptable to the lender. According to Dwivedi, soon after the swearing on June 21, Singh gave a handwritten note to the prime minister on fulfilling the IMF conditionalities step by step.

Also read: IMF Says It Cares About Income Inequality, But Will It Change Its Ways?

Singh’s first golden counsel to the prime minister was not to place any liberalisation proposals at cabinet meetings where his colleagues were bound to block the moves. Everything went as per the plan. A 9% devaluation was announced on June 30 followed by another 11.83% on July 2. The next day, commerce minister P. Chidambaram, in the new trade policy (NTP), scrapped the quota system and removed export restrictions.

The NTP contained a whole range of trade liberalisations as per the IMF playbook. Singh, in his IMF-compliant budget on July 24, announced a steep 20% hike in petrol, diesel and LPG, abolition of MRTPC, automatic approval of FDI, partial disinvestment in PSUs and a new amnesty offer for black money holders. Two days later, the railway minister announced a steep hike in fares and freight rates. From Washington, IMF chief Michal Camdessus expressed satisfaction over India’s response.

The political opposition to the IMF’s conditionalities was fierce. From Nerhuvian Congressmen to poll-wary politicians and Subramanian Swamy, all hit out. Swamy on July 3 revealed that the IMF had put similar pressures when he was commerce minister under Chandra Shekhar. There was a chorus of protests when Singh told the media that all of the Congress manifesto could not be implemented.

Rangarajan Kumaramangalam and Harish Rawat said Singh had no right to say such things. A group of young Congress MPs issued a statement asking Rao to remove Singh. Priyoranjan Dasmunshi said Singh would ‘decimate’ the Congress in the elections. Dasmunshi was proved right. In the subsequent assembly elections, the party suffered severe reverses, including in the prime minister’s home state Andhra Pradesh and Karnataka. Subsidy cuts and the slashing of the public distribution system were major triggers. Panicked by this, Rao drew up his ‘revamped’ PDS.

In parliament on July 12, the BJP and NF-LF assailed Rao for ‘surrendering’ to the IMF. Murli Manohar Joshi warned Rao against ‘mortgaging’ India to the Fund. No one lent support when the prime minister on June 25 briefed V.P. Singh, Harkishen Surjeet, Chandra Shekhar and L.K. Advani. George Fernandes, Madhu Dandavate and Yashwant Sinha were furious over the ‘surrender’ when the prime minister and Singh met half a dozen opposition leaders the next day.

Rao’s IMF gambit had caused deep revulsions within both the ruling party and main opposition. In the BJP, a group led by Advani and Jaswant Singh wanted to take a lenient view. But a more vocal group led by the then party president Murli Manohar Joshi and RSS stalwarts like Dattopant Thengdi, H.V. Sheshadri and former sarsanghchalak K.S.Sudarshan argued against the IMF model of development. They were supported by K.R. Malkani, Sunder Singh Bhandari, K.N. Govindacharya, L.K. Sharma, Jai Dubhashi and a host of others. The latter argued that economic nationalism was integral to the cultural nationalism of the RSS.

There were sharp differences at the Sarnath meeting of the BJP’s national executive on March 14-16, 1992 when the dominant group presented an ‘alternative model of development.’ The issue was sorted out at a special chintan baithak heldthe next month at Sariska where other RSS outfits like BMS, BKS and Swadeshi Jagran Manch were also invited.

Finally, the Gandhinagar session of the BJP’s national council (May 1-3, 1992) adopted an agreed upon document called A Swadeshi Alternative. The RSS continued with the agreed policy and tried put a spoke in the Vajpayee government’s reform programmes through its six years. The change in the Sangh’s view finally happened only under Mohan Bhagwat, as part of his deal with Narendra Modi.

As for the ruling party, Rao’s unpopular reform measures, a split in the Congress and half a dozen scams personally involving the prime minister were its undoing. The Congress tally fell from 252 MPs in 1991 to 140 in 1996.

P. Raman covered politics for national dailies since 1978 and is the author of Strong Leader Populism: How Modi’s Hybrid Regime Model is Reshaping Political Narrative, Ecosystem and Symbols. (In press)

Pakistan Meets Conditions to Receive Next $500 Million From IMF

The IMF and Pakistan reached a staff-level agreement that Pakistan had completed reforms required for the release of around $500 million that had been suspended for about a year.

Islamabad: The International Monetary Fund (IMF) and Pakistan on Tuesday reached a staff-level agreement that Pakistan had completed reforms required for the release of around $500 million in IMF funds that had been suspended for about a year.

“The package strikes an appropriate balance between supporting the economy, ensuring debt sustainability and advancing structural reform,” the Fund said in a statement issued by both sides. “Pending approval of the Executive Board, the reviews’ completion would release around US $500 million.”

Financial analysts say the hold-up was due to questions around fiscal and revenue reforms.

“This is a good development for Pakistan,” finance minister Abdul Hafeez Shaikh said in a tweet.

Agreement was also reached on the measures required to complete further reviews of the reform programme, which should eventually bring Pakistan $6 billion from the IMF’s Extended Fund Facility (EFF).

Pakistan has also received $1.4 billion from the IMF’s Rapid Financing Instrument in separate, emergency funding to help it fill a funding gap stemming from the coronavirus pandemic.

Also read: Cash-Strapped Pakistan Secures $ 800 Million in Debt Relief From G20 Nations: Report

It requested money from the EFF in 2019 after the then newly elected government of Prime Minister Imran Khan refused for months to seek a bailout, and has received the first tranche, worth $450 million. Khan later acknowledged that it had been a mistake to delay seeking the funds to stabilise an economy under strain due to a yawning current account deficit and low foreign reserves.

Khan inherited economic growth of 5.8% in the fiscal year July-June 2017/18 (FY2018), but saw it dip to 1.0% in 2018/19 and a contraction of 0.4% in 2019/20. Inflation on his watch peaked at over 14%.

The IMF said economic reforms prior to the COVID-19 shock had started to reduce Pakistan’s economic imbalances and created the conditions for better economic performance. “As result of the authorities’ actions, the COVID-19 first wave started to abate over the 2020 summer and the impact on the economy was significantly reduced. The external current account improved due to stronger-than-expected remittances, import compression, and a mild export recovery,” the fund said.

It projected economic growth of 1.5% in fiscal 2020/21.

(Reuters)

Cautioned Optimism to Outright Alarm: How ‘The Economist’ Covered Modi Through the Years

‘Over the past five years Mr Modi has lived up neither to the hype nor to the dire warnings.’

New Delhi: Billionaire investor and philanthropist George Soros has singled out India as the country where the ‘most frightening’ setback has occurred in the global tide of authoritarian nationalism.

Speaking at the World Economic Forum (WEF) in Davos, Soros said, “The biggest and most frightening setback occurred in India where a democratically elected Narendra Modi is creating a Hindu nationalist state, imposing punitive measures on Kashmir, a semi-autonomous Muslim region, and threatening to deprive millions of Muslims of their citizenship.”

He is not alone. Worldwide, criticism has come thick and fast of the tendency of the Narendra Modi-led BJP government to fashion India into a Hindu nation. A picture of the change in perception is visible through the covers of the UK-based weekly The Economist through Modi’s political career.

Soros’s remarks were hot in the heels of the latest Economist cover.

The Economist magazine cover for January 25-31, 2020.

The January 23, 2020 edition titled ‘Intolerant India‘ rebuked Narendra Modi for stoking “divisions in the world’s biggest democracy”. The story traced the BJP’s rise to electoral prominence following the demolition of the Babri Masjid and the subsequent increase in its vote bank after riots in Gujarat in 2002. Noting that a thumping electoral victory in 2019 had further emboldened the BJP, the editorial asserted that “what has been electoral nectar for the BJP is political poison for India”.

Highlighting the blatantly discriminatory policies of the Modi government, the editorial further lambasted the BJP for glorifying cow vigilantes, pushing for a “flagrantly biased approach to citizenship” and meting out a form of “collective punishment” for the people of the Kashmir Valley.

The edition signalled a marked shift from the more or less favourable commentary that Narendra Modi, as Gujarat chief minister and then the prime minister, had been on the receiving end of.

An article in a July 2011 edition of The Economist had referred to Gujarat as ‘India’s Guangdong‘ which served as a glimmer of economic growth despite its “black spot”. The state, the piece noted, could be a potential “springboard” for Modi’s national ambitions. Modi then had yet to shed his polarising image, but had “at least built up an enviable record on the economy”.

As Modi was poised to be the frontrunner ahead of the 2014 general elections, the December 14, 2013 edition of the weekly, presciently titled ‘Would Modi save India or wreck it?‘, questioned whether his qualities outweighed the “huge stain” of the Gujarat pogroms.

The Economist magazine cover for December 14-20, 2013.

The editorial applauded Modi’s record as chief minister of Gujarat and his efforts to cut red-tapism, encourage investment and exports and improve social indicators. Describing Modi’s promises to replicate Gujarat’s growth model and industrial development across India as “refreshing”, The Economist noted:

“Much about Mr Modi appeals to this newspaper too. He is a man of action and an outspoken outsider in a political system stuffed with cronies.”

However, the editorial expressed concerns over his autocratic leadership qualities and the apparent threat to India’s “inclusiveness” and said:

“In the next five months Mr Modi needs to show that his idea of a pure India is no longer a wholly Hindu one. How he does that is his own affair, but an unambiguous public demonstration that he abhors violence and discrimination against Muslims is a bare minimum. Otherwise, this newspaper will not back him.”

A month before election results in 2014, when Modi’s election was practically a foregone conclusion, the April 5 edition of The Economist titled ‘Can anyone stop Narendra Modi?‘ held that while, in comparison to the corruption-tainted Congress coalition, Modi was “clean”, there were still unaddressed concerns:

“So there is much to admire. Despite that, this newspaper cannot bring itself to back Mr Modi for India’s highest office.”

The Economist magazine cover for April 5-11, 2014.

Referring to Modi’s persistent refusal to answer questions surrounding the anti-Muslim riots in 2002, the magazine advised that in the event of a likely BJP victory, “its coalition partners should hold out for a prime minister other than Mr Modi” and added:

“And if they still choose Mr Modi? We would wish him well, and we would be delighted for him to prove us wrong by governing India in a modern, honest and fair way. But for now he should be judged on his record—which is that of a man who is still associated with sectarian hatred. There is nothing modern, honest or fair about that. India deserves better.”

A week after the 2014 election results, Modi was gracing the cover of The Economist yet again in an editorial titled ‘India’s strongman: How Modi can unleash India‘.

The editorial felt that “for the first time ever, India has a strong government whose priority is growth” and that Modi’s victory had given India “its best chance ever of prosperity”.

The Economist magazine cover for May 24-30, 2014.

Delineating all the economic hurdles Modi had promised to overcome, the editorial foresaw some possible dangers.

“One is that Mr Modi turns out to be more of a Hindu nationalist than an economic reformer,” the magazine said. Another was the fear that Modi would, like Indira Gandhi, “rule as an autocrat, not a democrat”. Underscoring years of institutional rot in the country under the Congress, The Economist cautioned:

“The main police investigator is politically directed, the media can be bought, the central bank, which does not have statutory independence, has been bullied before, and Mr Modi has authoritarian tendencies.”

Months before the Modi-led NDA was scheduled to present its first full budget, The Economist, in February 2015, wrote that it was finally ‘India’s chance to fly‘. Given that several economies were mired in stagflation, the editorial argued that India needed “bold reforms and political courage” and that the country’s leadership should not defer the tough reforms needed for lasting success.

The Economist magazine cover for February 19, 2015.

“Mr Modi and Mr Jaitley have a rare chance to turbocharge an Indian take-off.,” the article said.

In a special report in The Economist in May 2015 called ‘India’s one-man band‘, correspondent Adam Roberts said that Modi had grand ambitions for the country and a self-confidence to match. “But he has yet to show how he will deliver,” said Roberts.

The report noted that while Modi’s decision to cut back on bureaucracy may have been necessary, his style had “spread dismay”.

“He dominates his government but has struggled to silence members of the RSS as well as Hindu-nationalist-inclined members of his own administration who try to spread religious discord,” the report said.

Even as the news cycle in 2016 was largely dominated by Donald Trump and Brexit, The Economist cover on March 5 titled ‘India online‘ was optimistic about “the world’s fastest-growing large economy, and the planet’s biggest population of millennials” and the potential of Indian e-commerce.

The Economist magazine cover for March 5, 2016.

In June 2017, The Economist‘s cover titled ‘Modi’s India: The illusion of reform‘ called Modi more of “an administrator than a reformer” and said that perceptions of an acceleration in economic growth under his term were “deceiving”.

The Economist magazine cover for June 24, 2017.

Calling the GST a welcome but unnecessarily complicated and bureaucratic reform, the editorial held that Modi’s government was the strongest in decades and that political conditions in India were “as propitious for reform as they are ever likely to be”. The magazine further said:

“Mr Modi’s admirers paint him as the man who at last unleashed India’s potential. In fact, he may go down in history for fluffing India’s best shot at rapid, sustained development. And the worries about a still darker outcome are growing.”

In 2019, days after the attack on a CRPF convoy in Pulwama, Jammu and Kashmir, The Economist unveiled its cover on February 28 titled ‘Modi’s dangerous moment‘ and expressed alarm at the rapid escalation of hostilities between the two nuclear-armed neighbours of India and Pakistan.

The Economist magazine cover for March 2, 2019.

The editorial also pilloried the Modi government’s hollow promises of reform. “Over the past five years Mr Modi has lived up neither to the hype nor to the dire warnings,” it noted and added that unemployment had actually risen under Modi.

Nonetheless, the magazine stopped short of accusing Modi of outright communalism and said:

“By the same token, Mr Modi has not sparked the outright communal conflagration his critics, The Economist included, fretted about before he became prime minister.”

The latest cover, however, would seem to suggest otherwise.

Despite the Spin, Demonetisation Simply Wasn’t Worth the Time or Effort

The RBI’s data, and the government’s new narrative, is indicative of how badly demonetisation failed. Worse still, more important goals such as cracking down on benami property and reforming political funding are being gone about in a half-baked manner.

The RBI’s data, and the government’s new narrative, is indicative of how badly demonetisation failed. Worse still, more important goals such as cracking down on benami property and reforming political funding are being gone about in a half-baked manner.

Much of the behavioural change the government wanted from demonetisation comes from GST. It’s the other goals such as clamping down on benami property that have fallen by the wayside. Credit: Reuters

Politically, Prime Minister Narendra Modi sold the idea that demonetisation was a pro-poor move, aimed at flushing out black money lying with the relatively wealthy. The RBI has now finally released data to show that 99% of the notes that were demonetised last November are back with banks. This means that whoever had black money has successfully pushed their money back in the system. This is clearly a colossal failure of the policy, whatever new spin finance minister Arun Jaitley might want to give. The obvious fallout of this monetary vandalism inflicted on the nation last November is a decline in industrial growth, bank lending and employment generation post-demonetisation.

Remember, we were told that banks would have massive new deposits, which would be lent to businesses. Well, bank credit growth for the nine months since demonetisation is the lowest in 60 years.

Even the finance minister shouldn’t be able to spin happy stories in the face of such negative data. That hasn’t stopped him from trying though. On Wednesday evening, Jaitley made an astounding claim that there was nothing wrong in 99% of the demonetised money coming back as it was never the aim of the government to confiscate black money. “We wanted behavioural change in the economy,” Jaitley has said.

Let us examine both these claims. First, it was the finance minister himself who had claimed in November that going by past experience about 15-20% of the demonetised currency, roughly Rs 3 lakh crore, was likely to get extinguished and would not return to the system. Thus it would be tantamount to confiscation and become RBI property, to be eventually handed over to government for the welfare of the poor. The then attorney general Mukul Rohatgi stated this before the Supreme Court. So how can Jaitley now say the confiscation of black money was never the objective? The cash that does not return to the system stands automatically confiscated. It is like money taxed at 100%.

Nevertheless, the finance minister has to give a new spin because everything did indeed come back and nothing got extinguished or confiscated. It is doubly embarrassing for the government that the RBI ended up spending over Rs 30,000 crore on the printing of new currency and managing the other logistics of demonetisation. As things stand, the expenses incurred by the RBI are way more than the actual amount of Rs 1000 and Rs 500 notes that were extinguished or confiscated – Rs.16,000 crore. It is this deficit that caused the RBI to hand out far lower dividend to the Centre for 2016-17.

Indeed, Modi’s tone from day one after demonetisation was one that threatened to confiscate black money. There were widespread raids all over the country. In the initial weeks, there was great enthusiasm shown by the government and the RBI as it reported on a daily basis the cash that was coming into the system. Then at some point in December, the RBI stopped giving daily reports because the government realised the bulk of the demonetised notes were coming back, thus making the prime minister look bad. By December-end, nearly Rs 13 lakh crore had come back. The RBI was possibly told to clamp down on giving any further information in the name of national security. In the meantime, the Centre began changing its narrative to achieving greater digitisation, curbing fake money and terror funding.

This overall failure is more palpable when one realises that the whole black money debate only relates to the cash component of the total black wealth stock, which is about 40% of GDP. Thus, the total black wealth stock is roughly $800 billion and the cash component is merely 6% or $50 billion. The remaining $750 billion of black wealth stock is in real estate, gold and the like, which has not been touched yet. We have a long way to go.

Jaitley said the government would target benami properties under the amended law but so far one has only seen the IT department going after the alleged benami wealth of opposition parties. Recently in the Lok Sabha, Orissa MP Jay Panda, urged the government to identify benami beneficiaries of shell companies that may own huge properties. Jaitley replied to Panda saying “cooks and drivers” posing as directors of companies would be covered by the new benami law. Does anyone remember cooks/drivers as directors in the Purthi group of companies owned by a senior cabinet minister in the NDA. So whatever spin Jaitley might give to demonetisation, people will not be convinced unless there is action on the ground.

On Wednesday, the finance minister claimed higher digitisation and behavioural change was the big objective and not confiscation of black money. Well, RBI data shows that digital transactions fell 27% in April this year compared to the previous month. Major online retailers like Flipkart and others are experiencing cash transactions similar to pre-demonetisation levels when 60% of all buying was cash based. A friend of mine, while recently putting up his house for sale in Delhi, pointed out that the buyers that came forward wanted to pay 50% payment in cash. So much for behaviour change.

Jaitley has also claimed that demonetisation should be seen along with GST implementation as a method of examining behavioural change.

It is true that GST, if implemented smoothly, will shake up the way small firms do business. But then, if that was the goal, GST alone would have been a sufficient agent of change. In any case, the GST regime was already in the pipeline and there was no inkling that demonetisation would come so close to GST implementation. If anything, demonetisation and GST implementation being so close to each other is being seen as hugely disruptive and clearly not good for small businesses.

Finally, Jaitley has argued that political funding reform, which the government is planning, should be seen as part of the demonetisation package. This is utterly laughable because the latest data collated by the Association for Democratic Reforms shows how 80% of all corporate money has gone to BJP in recent years. Corporates who have successfully pushed their black money into the system will now contribute 80% of it to the BJP. And as per the new law brought by the government, this need not even be made public. And all this is carried out in the name of transparency!

In Philippines, Rural Women Bear the Brunt of Both Climate Change and Conflict

The impact of climate change is exacerbated by conflict and poverty, resulting in the widening income inequality between women and men.

Extreme weather and conflict have a particularly accute impact on female farmers in the Philippines. Credit: PWRDF, CC BY-SA

Heavily exposed to increasing incidence of extreme weather events, the Philippines is among one of the countries most vulnerable to climate change in the world.

Climate-induced disasters in the Philippines frequently disrupt fruit and cash-crop production, resulting in income loss and higher food prices. Over the past four years, weather events have cost the Philippine economy an annual average of 0.3% of GDP.

Typhoon Haiyaan alone caused crop loss of 1.1 million tonnes and destroyed 600,000 hectares of farmland in 2013, costing the Filipino agriculture industry and small farmers an estimated US$724 million.

Migration as a coping strategy for women

Losses in rural areas, especially where there’s ongoing armed conflict, are not just financial. Across the world, climate and conflict are deeply intertwined and their negative effects mutually reinforcing.

In the Philippines, this relationship is evident in Mindanao, a farming community on the country’s southernmost island. Despite peace efforts to end over 40 years of social and ethnic conflict there, hostilities remain.

According to research conducted by the University of Queensland and Oxfam, the violence has particularly marginalised women, from female farmers to the widows of those killed in combat. In parallel, the area has also seen an increase in both typhoons and droughts over the past decade.

Conflict and extreme weather have triggered social and economic upheaval in Mindanao in recent years. Studies show that a 1℃ increase in growing season night-time temperature in the Philippines can cause a loss of rice yield and biomass by 10%.

Facing limited land availability and persistent poverty, agricultural productivity in Mindanao undergoing long periods of low production and food insecurity is on the rise.

Because young women, wives and widows can find seasonal employment in urban areas more easily the men, many women find themselves compelled to leave the area in quest of jobs that can help stabilise family income and mitigate poverty.

Some women are forced by conflict and drought to migrate to cities seeking work. Credit: Brian Evans, CC BY-SA

The outcomes are not always positive. In times of conflict and disasters, women and children are particularly susceptible to trafficking, sexual abuse, prostitution and what locals in areas facing scarcity call isang gabi, isang salop, exchanging sexual favours for food.

In Mindanao and elsewhere in southern Philippines, the transit and trade of underage girls and young Filipino children for the purpose of sexual exploitation, forced labour and use as human shields is on the rise, with an estimated 60,000 to 100,000 children linked to commercial sex exploitation.

Non-economic loss and damage from climate change

Female migration is just one of many coping mechanisms that rural Filipinos employ to adapt to the effects of their changing climate.

When faced with prolonged droughts or typhoons, farmers in Mindanao also make difficult choices, such as skipping meals, selling livestock and taking out loans. Many families decide to restrict consumption of food by adults in favour of feeding small children and the elderly.

As the chair of the Climate Vulnerable Forum, the Philippines has pushed international partners to develop mechanisms that would address the kind of non-economic loss and damage that can result from climate change.

There is now growing acceptance that extreme weather does not just impact tangible economic products that are traded on the market but also affects other, less tangible goods.

Flash floods hit the Philippines in 2011. Credit: Mathias Eick EU/ECHO, CC BY-SA

Recurring crop failures, for instance, have forced farmers into long-term lease arrangements and agreements with the private sector and traders, often at exorbitant interest rates. Other farmers have seen themselves compelled to give up their land, abandoning farming entirely and moving to the city.

In Mindanao, people told the University of Queensland and Oxfam researchers that they now associate annual extreme climatic events with the loss of belongings, death of family members, increased hardship, famine and hunger and loss of livelihood and income.

For women, these community-level concerns are compounded by the specific risks they face during seasonal migration to cities. Fear and psychological distress are a growing presence in their lives.

According to the research findings, all of these climate- and conflict-related changes have fundamentally shifted values, lifestyles and gender relations in Mindanao. Such social and cultural loss often goes unnoticed or unaddressed in climate change policies and disaster assessments.

Focus on gender

To help rural communities in the Philippines adapt to climate change and mitigate its negative effects, aid and development efforts should focus on improving the lot of women, particularly female combatants, widows and poor female smallholder farmers, many of whom face land-tenure problems.

That means stabilising the agricultural sector and fostering agricultural investments, which in conflict-prone parts of rural Philippines cannot be done without accompanying long-term peace and reconciliation processes.

Given the local sociocultural issues that must be navigated, the national government is likely better positioned than international aid agencies to spearhead programs that would link peace, security and reconciliation programs to agriculture and economic reforms.

It is the national government, too, that must integrate risk-transfer mechanisms, such as weather-index insurance policies, into the Phillipines’ existing public safety nets, subsidies and compensation schemes.

NGOs and international organisations do have a role in breaking the cycle of conflict, climate and gender inequality in Philippines. Access to micro-credit can play an important role in refinancing rural farming activities after disasters, and there’s some evidence that such programs work particularly well to build community resilience when they’re aimed at women.

Alvin Chandra, Postdoctoral Research Fellow, The University of Queensland

This article was originally published on The Conversation. Read the original article.

Why the Women’s National Republican Club is Rooting for a President Trump

A “whole bunch of women” want to see Trump in office to show that all this “nonsense discussion about sex is not the issue of the day”.

Donald Trump at a rally in September 2016. Credit: Michael Vadon/Flickr, CC BY 2.0

New York: Sarah Dowson, seated to my left at the circular table, already knew how to fold the napkin in just the right way before she served herself some potato chips. She had been here before to watch the vice-presidential debate and had shared the same table with two women and three men – all of whom were Republicans. Dowson is a registered Democrat who looked up ‘debate watch parties’ on Google and found herself once again at the Women’s National Republican Club in midtown Manhattan this past Wednesday. She wasn’t keen on going to a bar to watch the third presidential debate and had already been to a Democrat club for the one before. “I usually listen to public radio and I don’t get the Republican point of view very much. I just wanted to come out to a setting and see what the reaction was,” she told me. “Looks like the group on this table are friends with each other, so I probably won’t be talking to them very much.”

In front of us, Fox News was playing on the giant screen that had been put up in between two small chandeliers and heavy-set drapes that shut out the noise from Fifth Avenue. The countdown had begun at the University of Nevada in Las Vegas, where the presidential nominees would face off once again in the last of the debates in America’s most bizarre presidential campaign. Outside the grey building where Dowson and I met, a short walk from Trump Towers, it was business as usual for New Yorkers. But inside, it felt like we were on the set of The Great Gatsby. Ornate chandeliers, circular tables, cushioned chairs, an American flag with an eagle superimposed on it atop the flag pole, and a strict dress code that had forced me to dig through my collection of accessories for fake pearls.

In 1912, American members of the UK-centred Suffragette movement – which campaigned for women to be given the right to vote – founded the Women’s National Republican Club. This week’s debate-watch took place on the third floor of the building the club bought in 1933. “President Coolidge, President Hoover, many of the Republican presidents in the twentieth century played a significant role in this club house, as did the first ladies,” WNRC president Robin Weaver told me. Their website now lists “Mrs George H.W. Bush and Mrs George W. Bush” as honorary members. On the wall adjacent to the stairs leading up to the fourth floor hangs framed photographs of women who contributed to setting up the club house.

Many were suffragettes who worked tirelessly to extend the right to vote in public elections to women. Eighty years later, many of the distinguished women seated around me, who hail from some of Manhattan’s most elite families, expressed their strong allegiance to a man who was caught on tape making lewd remarks about women. Nearly every woman I spoke to about Republican nominee Donald Trump’s remarks responded with a version of: “You know what, I don’t really try to focus too much on that. The focus should be on the issues and the candidate’s views on the issues.”

Esther Muller (a quick Google search revealed she is a well-known New York realtor), who shared the table with me, was more vocal. “Hello? Hello!” she repeated when I brought up the allegations of sexual misconduct levelled against Trump by nine women. “There are issues that no one is dealing with, like the economy, foreign policy, trade, everything else. Sex is about 5,777 years old and it was written for men. That’s the way it was written so let’s get off the whole subject,” she exclaimed. I wondered as I walked back to my cushioned seat and daintily helped myself to potato chips if 5,777 was just an arbitrary number.

I had noticed Muller earlier in the evening, when she interrupted a Q&A session with Trump’s economic advisor David Malpass, who was summoned to the WNRC to give a short talk about the Republican candidate’s economic policy. Muller had announced that ‘New York Women for Trump’, a diversified body of “empowered women”, would gather the next day close to the Trump Towers to extend their support. “It’s a whole bunch of women, from different professions, who believe that their voice is not being heard and they want to see Trump in office and want to show that all this nonsense discussion about sex is not the issue of the day,” she told me later.

Malpass spoke for nearly twenty minutes about how the “system in Washington is utterly broken”, insisting that every government department is plagued with corruption, building up to his ultimate pitch: that an outsider, and not a career politician, could create change. He spoke about America’s stagnant growth rate and the worrying forecasts that predict more stagnancy for years to come. “If Hillary Clinton is elected, she is going to take the current policies and, in my view, make them worse. She is going to raise taxes,” he said, listing taxes that evidently would affect the people in the room. “So Trump’s programme is much better than Hillary Clinton’s because it’s based on faster growth. He will create 25 million jobs and he does that in a very traditional way, which is: Lower the tax rate, reduce regulations, allow more energy and innovation, and reform the trade system. All those work together to create growth.”

He then fielded questions, most of them from men who had accompanied their wives or had been invited to the debate party as guests, from hedge fund managers, and those concerned about how Trump will work with the Federal Reserve, which he had criticised in an earlier debate. At one point, Malpass was asked if “his candidate would stick to issue-based discussion” in that night’s debate. He responded with what he hoped Trump would say: “You are right that he has to find a way to get from the personality right on to the policy and say: ‘Hillary, your plan, you aren’t even trying to get the country growing faster, so how can you speak to the inner city when you can’t even talk about how you create more jobs? Because you wouldn’t create more jobs, you’d have less jobs under your programme.’ Something like that would be good. Let’s see.”

The audience did see. Soon after Weaver welcomed Governor Mike Pence’s nephew, who had joined the debate-watch party, the volume on Fox News was turned up. The gathered Republican faithful settled into their chairs with their glass of wine and sneered, laughed, clapped and hooted over the next hour-and-a-half. Men and women from moneyed and educated families, influential New Yorkers in real estate, law firms, hedge funds, architects, businesswomen, found Trump’s obnoxious comebacks to Clinton adorable. They squealed, laughed uncontrollably, hooting for Trump and collectively chanting, “Oh, come on!” when Clinton spoke against him. A sarcastic “aww” was heard when Clinton brought up the photograph of a wounded and dazed four-year-old Syrian boy sitting in an ambulance that went viral in August.

“She’s a bitch, she is a snake,” an Israeli-American engineer who sat to my right told me after the debate ended. I had asked him about his love for Trump. “It’s time for change. The problem is she has all the minorities supporting her. They don’t watch such debates on TV and don’t care about it. They don’t understand what is going on but they will decide and tip the balance in her favour. This election is very unusual.”

Sowmiya Ashok is an independent journalist based in New York. She tweets @sowmiyashok.