Some Quotes

"I will not say I failed 1000 imes,I will say that I discovered there are 1000 ways that can cause failure.......... Thomas Edison" "Believing everybody is dangerous;Believing nobody is very dangerous.......Lincon" "If you start judging people you will be having no time to love them....MOTHER TERESA"

Thursday, September 24, 2009

9/15: Capitalism’s Attack On World’s Peoples

It has been a year since the legendary financial giant Lehman Brothers collapsed on September 15, 2008. This global giant had weathered the railroad bankruptcies that rocked the USA in the 19th century and also the Great Depression of the 1930s. On this occasion, it became the first victim as well as the trigger that shot down financial markets globally, causing probably the worst recession in capitalism's history.

The World Bank has explicitly stated that 2009 would be the first year on record since the World War II to register an absolute fall in world output. It has revised its earlier estimate of a minus 1.7 to a minus 3 per cent fall in global GDP. During these twelve months except, for China (7.5 per cent) and India (5.5 per cent), all other major economies have seen a decline in their GDP.

Despite having injected over 2.3 trillion dollars into the US financial system, its GDP fell by a minus 2.6 per cent. Similarly, all the G8 countries have registered negative growth rates, Germany minus 6.2, France minus 3.0, Italy minus 5.1, Japan minus 6.0, UK minus 4.2, Canada minus 2.3, Russia minus 6.5. Among the emerging economies, Brazil registered a minus 1.3 per cent, Mexico minus 7.3 and ASEAN countries minus 0.3 per cent.

According to the World Bank, nearly 100 million people will be trapped in absolute poverty in 2009 and 2.8 million more babies may die by 2015. The ILO has declared that more than 50 million are going to join the existing ranks of the unemployed this year. The real estimate is bound to be higher as the ILO relies on the data supplied by respective governments, many of whom are not counting the vast number of migrant labour losing their jobs and returning home. In USA alone the official unemployment rate has climbed close to 10 per cent while unofficial estimates record 16 per cent. In absolute numbers the unemployed have crossed the seven million mark in the USA.

Such is the gloom that according to a Washington Post-ABC news poll released on September 15 2009, President Obama's approval rating on the handling of the economy dropped from 62 per cent in February to 45 per cent now. It is becoming increasingly clear that all the bailout packages have mainly helped the financial corporates to beautify their balance sheets and not stimulate the real economy for generating jobs for the people. As we have repeatedly stated in these columns earlier, these bailout packages always put profits before people rather than putting people before profits. This is evidenced by the fact that Goldman Sachs and JP Morgan Chase, the two financial giants that collapsed on the Wall Street have now emerged from the ruins, feasting on the monies they have received through such bailout packages. On the back of billions of dollars of taxpayers’ money, JP Morgan Chase has announced a record 2.7 billion dollars profit in the second quarter of 2009.

On the occasion of this anniversary of 9/15, many books have been published seeking to unravel the manner in which this crisis unfolded. One of these makes an analysis of the cyclical capitalist business cycle in the entire history of capitalism. It shows that in the aftermath of an average crisis asset prices fall sharply, real housing prices fall on an average by 36 per cent over six years, equity prices by 56 per cent over three and a half years. Unemployment tends to rise by seven percentage points during the down phase of the cycle, which on average lasts four years. Government debt increases by 86 per cent. GDP falls by over 9 per cent on the average, and typically takes ten years to return to what it was before the crisis. This is the history of an ‘average’ crisis. What we are witnessing is much worse than an average crisis. Under these circumstances, it would be naive to exude confidence of a visible turn-around in the global economy.

Such optimism being exuded by the prime minister and the Planning Commission could well be a case of gross overestimation of the Indian economy. During this year India's growth plummeted from over 8 per cent to 5.5 per cent. During the first quarter of 2009 industrial growth was 0.3 per cent compared to 6 per cent in the last quarter of 2008. India's exports fell from a 10.4 per cent growth in September 2008 to minus 33.2 per cent in the first quarter of 2009. Over 30 lakh jobs are estimated to be lost in the organised sector alone by the end of 2009. Nearly 12 lakh jobs have already been lost in the export oriented sectors. In the unorganised sector the job loss is bound to be much higher. In addition are those lakhs of people returning from abroad having lost their jobs there particularly in the Gulf.

Like elsewhere in the world, in India too the stimulus packages announced by the government have helped the corporates to emerge from the crisis but have not helped to stimulate the real economy into generating a larger number of jobs. We have in the past analysed that the relative resilience shown by the Indian economy in the wake of the global recession has been due to two specific factors: the prevention of greater financial liberalisation by the Left under the UPA-I government and the injection of huge liquidity into the economy due to the sixth pay commission and the fifteenth general elections. The latter is a one off expenditure which cannot sustain expanding domestic demand in the future to maintain higher levels of production. This can happen only if a quantum leap is made in the levels of public investment which would lead both to the building of the much needed economic and social infrastructure in the country as well as generate new employment.

Instead, as we have seen, the budget papers for this year inform us that as much as Rs 4.18 lakh crore were foregone as tax collection last year as a result of various tax concessions. While continuing these concessions the government has now abolished surcharge on corporate tax and increased the exemption limit for income tax giving an additional bonanza of Rs 10,000 crore. Thus Rs 4.28 lakh crore are the amount that is being foregone by the government's own admission. This is being done under the presumption that with greater availability of capital, the corporate world would expand its activities and thus stimulate the economy. There is a fundamental flaw in this reasoning. No amount of availability of capital can stimulate the economy unless there are people who have the purchasing power to consume what is produced. Instead, if this amount of money was put into direct public investment for building our infrastructure, the consequent job creation would have vastly increased the purchasing power of the people and thereby stimulated the economy. However, like everywhere else, as is the internal logic of capitalism, the governments have stepped in to shore up the corporates through various bailout and stimulus packages rather than bailing out the people through increased public investment. This is clearly reflected in the performance of the top Indian firms (BSE 200) during this year since the collapse of Lehman Brothers. In the last quarter of 2008 the income of these firms rose by 12.8 per cent while their net profits declined by minus 17.6 per cent. In the first quarter of 2009, while their income grew by a minuscule 0.2 per cent, their net profits jumped by 28.6 per cent. In the second quarter of 2008, their income declined by minus 7 per cent, yet the net profits rose by 20.7 per cent. Clearly, while the economic activity is contracting, leading to unemployment and misery for the people, they continue to reap super profits thanks to ‘bailout packages. Such is the logic of capitalism that puts profits before the people.

It is thus imperative that popular struggles must be strengthened to force our government to adopt policies that put people before profits by vastly expanding public investments.

Note:Article took from the People's Democracypeoples Democracy

Thursday, September 10, 2009

Has India Joined the PSI!

IN the first week of August, the Indian Navy interdicted a North Korean cargo ship off the Andaman coast. The Indian Navy has claimed that the cargo ship, M V San had entered Indian territorial waters without the requisite permission. The Indian Navy’s interdiction of the North Korean ship has earned plaudits from Washington. The US Navy had not dared to interdict a North Korean ship M V Kang Nam 1 which the Americans suspected of carrying “banned cargo” for Myanmar. The US Navy had trailed the ship for three weeks in the middle of the year but did not dare to board the ship. North Korea had warned that such a move by the US would be tantamount to a declaration of war. The job of interdiction of North Korean ships seems to have been subcontracted by Washington to willing third countries.

The incident in the Andaman Sea was the first time a North Korean ship was seized and detained under the terms of the sanctions adopted by the United Nations Security Council Resolution 1874 in June this year. The resolution banned all arms exports from North Korea and authorised member countries to inspect suspicious ships for banned items. The new sanctions were adopted after the North conducted another round of nuclear tests in May this year.

Russia and China, along with many other countries in the region, have been quite lukewarm in their support of the US initiated sanctions against the North, particularly on the question of interdicting North Korean ships on the high seas. China and Russia resisted a binding use of force resolution because they don’t want US ships prowling their neigbourhood on the pretext of interdicting ships carrying suspicious cargo to or from North Korea. Moscow and Beijing are against Washington acting unilaterally to interdict ships. They would prefer UN flagged ships to carry out the Security Council mandated interdictions/inspections on the high seas and that too after only getting actionable information collated by international experts.


The North Korean ship intercepted by the Indian Navy was carrying a cargo of 16,000 tons of sugar bound for West Asia. No evidence of any illegal cargo on board was found after a rigorous search. A couple of days before the ship was searched, sections of the Indian media had carried tendentious stories routed through the western media about North Korea helping Myanmar to build a nuclear reactor. Till the first week of September, the ship is still in the custody of the Indian Navy. Meanwhile the captain of the ship is desperately trying to offload the sugar on board.

The recently retired Naval Chief, Admiral Suresh Mehta, defending the interdiction, told the media that the ship had strayed into Indian waters. Adm. Mehta told the media that “the ship had no business being there”. The law of the sea however clearly states that all ships have the right of “innocent passage” through a country’s territorial waters. Effectively, forcibly boarding a North Korean ship is an infringement of the country’s sovereignty. Many legal experts say that it is almost tantamount to a declaration of war.

According to reports, the unarmed crew protested after the Indian Navy boarded and searched the ship for “nuclear materiel or fuel”. A senior police officer in Port Blair told the media that a preliminary investigation by a team of Indian nuclear scientists failed to detect any radioactive material on board of the ship carrying the huge consignment of sugar. The interdiction of the North Korean ship has been hailed in the western media as an illustration of the “international noose” tightening around North Korea.

It is well known that the top brass of the Indian Navy has been very keen to team up with the US Navy to jointly patrol busy sea lanes like the Malacca straits or the Straits of Hormuz. The top naval brass was particularly keen to sign up to the US sponsored Proliferation Security Initiative (PSI). Another former Indian Navy Chief, Admiral Arun Prakash, said in 2005 that “India’s status in world affairs warrants that we should be one of the core countries” to join the PSI. The origin of the PSI can be traced to the interception of another North Korean ship in 2002. US Intelligence had notified Spain, a close ally about the ship moving towards Yemen. The Spanish Navy boarded the ship which was carrying missile parts for the Republic of Yemen. After the Yemeni government protested, the ship was released along with the cargo.

The Indian Navy has been practicing maritime interdiction and counter terrorism maneuvers with the US Navy for many years. India and the US have also finalised a Maritime Cooperation Framework (MCF) to enhance maritime security. India has provided port facilities for US forces engaged in the war in Iraq and Afghanistan. Admiral Mike Mullen, now the chairman of the US Joint Chiefs of Staff, during a visit to India in 2007 had broached the “thousand ship navy” (TSN) concept. The idea is for ships of like minded countries getting together to enhance security on the high seas. Admiral Mullen had said at the time that there was “a very positive response on the TSN from the Indian Navy”.

The TSN in essence is a slightly toned down version of the controversial PSI. The creation of PSI was announced at the 2003 G-8 summit in Krakow, Poland. The purported goal of the PSI is to stop the proliferation of weapons of mass destruction through maritime routes. The Bush administration had chosen not to aggressively push membership of PSI. Other nations were asked to participate in PSI on a case-by-case basis, depending on their capability to make specific contributions to a particular interdiction effort. India is obviously helping out on a case-by-case basis.

The Indian Navy’s action against the North Korean ship came at a time when the Obama administration itself was shifting gears in its Korea policy. The former president, Bill Clinton had just returned from a high profile visit to Pyongyang. He had met with the North Korean leader Kim Jong-Il for three hours. Accompanying Clinton were old Korea hands with links with the US state department. In the last days of the Clinton administration, Washington was on the verge of establishing diplomatic relations with Pyongyang. Clinton’s secretary of state, Madeleine Albright had made an official visit to the country in late 1999.


India has had full diplomatic relations with North Korea since independence. North Korea may be currently in a dire economic situation and politically isolated. What it needs now is a helping hand to overcome its problems, much of it resulting from decades of American hostility. Countries like India should help in defusing the tense situation in the Korean peninsula instead of adding fuel to the fire. The Indian action also violates the spirit of NAM, which has called for a peaceful resolution of the Korean conflict. Last year, at the behest of Washington, India had denied over-flight facilities to a North Korean plane coming in from Iran. During the NDA regime, the Indian Navy had interdicted a North Korean ship off the Gujarat coast in 1999 allegedly carrying missile parts for Pakistan.

One of the important goals of the PSI was to make India the regional policeman working on behalf of the US. Bush administration officials had made it clear that the main thrust of the PSI was against North Korea and Iran which were part of president Bush’s “axis of evil”. The PSI, according to most experts, is in contravention to the Law of the Sea. The PSI gives the signatories the right to interdict ships, merely on the suspicion that it may be carrying suspicious materials on the high seas. Under the PSI, even ships carrying fertilisers can be intercepted on the grounds that the cargo can be used to make WMDs. Russia and China are among the states that have said the PSI is an attempt to substitute interdictions for established multilateral treaties and is tailored to isolate specific states like North Korea and Iran.

Domestic political pressure has so far kept New Delhi from formally joining the PSI. The Indian government has however admitted that Indian officials had attended a recent meeting of the PSI. The minister of state for External affairs, Preneet Kaur, told the Rajya Sabha in the third week of July that the US “had shared with us the details and rationale of the PSI”. The minister said that there was no decision taken by the government to join PSI.

Pranab Mukherjee, when he was holding the Defense portfolio in the last government, had stated in January, 2005 that proliferation through sea routes was one of the “biggest problems” and in this context, initiatives such as PSI would “need to be examined in greater detail”. The “New Framework for the US-India Defense Relationship” signed in June 2005 specifically mentions among other things that the two countries would collaborate “to combat the proliferation of weapons of mass destruction”.

The latest country to join the PSI is South Korea. Seoul only signed up this year after the North conducted another round of nuclear and missile tests. The right wing government in the South has abandoned the “sunshine policy” of engaging with the North. Relations between the two neighbours had thawed considerably in the last ten years. The previous South Korean government also shared the views of countries like China which believed that forcibly boarding a North Korean ship at sea could spark a military clash that could even escalate into a full-fledged war. After the latest UN Security Council resolution expanding and tightening the sanctions on the North was passed, many commentators in the region had warned that the move was fraught with danger. Good sense seems to be prevailing in Washington and Pyongyang after the Bill Clinton visit. There are indications that the six party talks to resolve the crisis in the Korean peninsula will be resuming soon.