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Admin 2020-02-15

15 Feb 2020: The Hindu Editorial Analysis

1) On crime and politics: Choice and candidacy


  • The idea of removing the taint of criminality from electoral politics has been engaging the country for decades. Yet, whatever progress made in this regard has been through the initiative of the Supreme Court and the Election Commission. 
  • Political parties which ought to be cleansing the system with legislation and internal organisational reforms have done precious little, and their reluctance to avoid fielding those with criminal antecedents is quite obvious. 
  • The Court, in September 2018, sought to enforce greater disclosure norms about electoral candidates. On noting the “alarming increase” of those with a criminal background in the last four general elections, the top court has now come up with an additional requirement while hearing a contempt of court petition. 
  • Now, parties have been asked to explain candidate choice and why those with criminal cases pending against them were preferred over those with no such record. De-criminalisation of politics cannot be achieved by judicial fiat alone. 
  • The Court has asked national and regional parties to disclose the reason for their selection “with reference to qualifications, achievements and merit of the candidates concerned”, and barred them from merely citing “winnability” as a reason. 
  • In addition to full disclosure of the cases pending against them on their official websites and social media accounts, the parties are also required to publish these details in a local regional language paper and a national newspaper. 
  • This is a forward movement from the present situation in which the burden of disclosure is on candidates through mandatory affidavits filed along with their nomination papers.

  • The latest order is in line with a series of judgments aimed at preserving the purity of the election process: directions to ensure the asset disclosure and criminal records of candidates, the incorporation of the ‘none of the above’ option in the voting machine, and the invalidation of a clause that protected sitting legislators from immediate disqualification after conviction.
  •  In addition, the Court has directed the establishment of special courts in all States for the quick disposal of cases involving elected representatives. However, it must be underscored that de-criminalisation of politics cannot be achieved by judicial fiat alone. 
  • The political class has to respond to the challenge. Parties would probably justify their choice of candidates by pointing out that the law now bars only those convicted and not those facing charges, however serious they may be. 
  • Besides, they are apt to dismiss all pending cases as “politically motivated”. A legislative option is to amend the law to bar from contest those against whom charges have been framed. 
  • A more meaningful option would be for parties to refrain from giving ticket to such candidates. Beyond this debate, a larger question looms: what good will more information on the background of candidates do, if voters back a particular leader or party without reference to the record of the candidates fielded?

 

2) On falling industrial output: Troubling data


  • Earlier this week in Parliament, Finance Minister Nirmala Sitharaman spoke about green shoots in the economy. One of the variables she laid faith in was the industrial output data which showed a 1.8% growth in November after contracting from August to October. 
  • This faith in a growth recovery proved misplaced as the December industrial output data, out on Wednesday, shows a contraction of 0.3%. This is curious because the core sector, accounting for 40% of the index of industrial production, showed a 1.3% growth in December. 
  • The villain seems to be manufacturing, which contracted by 1.2%, with consumer durables and non-durables in sharp decline. This does not square up with anecdotal evidence from consumer durable manufacturers — of seeing a recovery. 
  • Be that as it may, what is clear is that the growth impulses are unstable yet and certainly not uniform across sectors. And as luck would have it, even this tentative recovery is under threat due to the coronavirus outbreak in China. 
  • The shutdown of factories in China due to this is likely to affect supply chain networks for products from mobile phones to automobiles. 
  • Manufacturers in India are reporting slim inventories for critical items of production and if factories do not begin to hum in China soon — the chances of that happening are remote given signs of an intensifying outbreak — it could spell trouble for India.
  • Meanwhile, inflation continued to hold sway with the January prints showing a rise in both consumer price inflation and wholesale price inflation. CPI accelerated to 7.59% in January, the second successive month of above 7% print, while wholesale price inflation broke the 3% barrier in January (3.1%) moving up from 2.59% in December. 

  • The surge in both numbers is largely due to rise in food prices, including of proteins and pulses but core inflation has also moved up to 4.1%. While food inflation may calm down this month following the retreat in vegetable prices, the rise in core inflation is cause for worry. 
  • With cooking gas prices rising by a huge ₹144 a cylinder the inflation expectations of households may also go up. Inflation is likely to remain well above the RBI’s median of 4% at least for the next two quarters. 
  • The central bank has already paused on its rate cut cycle and going by the latest data it appears that the next rate cut — the last in the cycle — will not happen until later this calendar year. 
  • Interest rates are being driven down through other measures and again, it is not as if growth is being held back by high finance costs. Far from it. Banks are reporting poor credit growth because businesses are unwilling to invest. 
  • Growth is not held back by high finance cost, but by poor consumer demand. Therefore, the key to a turnaround is, therefore, in the hands of the consumer.

 

3) A tale of outbreaks, both in China


  • The title of the third chapter of my China memoir, Smoke and Mirrors, was ‘Coronavirus’. This was not an act of precognition, but merely an account of having lived in Beijing during the 2003 SARS epidemic, or Severe Acute Respiratory Syndrome, which was also caused by a coronavirus.
  • There are obvious parallels between the epidemics of 2002-2003 and 2019-2020. Both began in winter and featured cover-ups and whistle-blowers. The origins of both were traced to China’s unregulated wet markets and the sale of wildlife. 
  • Both resulted in quarantines, empty streets and considerable panic. They featured the jaw-dropping feats of entire hospitals being constructed within a few days’ time. And both demonstrated the pros and cons of China’s authoritarian political system.
  • The ability to implement drastic measures to contain a crisis, but only after the unnecessary escalation of the crisis resulting from a repressive culture of censorship.
  • But there are also differences. SARS was far deadlier, with a mortality rate of about 10%. The mortality rate for the novel coronavirus (COVID-19) is yet to be established, but appears to be about 2%. 
  • However, it is much more infectious. More than 1,300 people have died from the new virus, a number that is already greater than SARS’ final death toll of 774. It took eight months for SARS to spread to more than 8,000 people. The COVID-19 has infected over 63,000 people in about six weeks.
  • More openness this time: There are also differences in the government’s handling of the epidemics. With SARS, the cover up went on for far longer than it did in the present instance. 
  • Although the SARS virus first began appearing in November 2002, China’s then Heath Minister, Zhang Wenkang, gave a televised press conference as late as April 3, 2003, assuring the world that Beijing had only a handful of infections. 
  • Then suddenly on April 20, it was announced that the capital in fact had 339 confirmed cases, 10 times more than the 37 infections made public until then. Three days later, on April 23, the official number of cases in Beijing was doubled, to 693.
  • With regard to the current epidemic, the first instances of COVID-19 appeared in early December. By the end of the month, China had already alerted the World Health Organization (WHO) to several cases of A SARS-like pneumonia in the city of Wuhan. 

  • By the second week of January, China had genetically sequenced the virus and shared it with WHO. On January 23, Wuhan suspended all public transportation; all outbound trains and flights were halted. 
  • In the days that followed, travel restrictions were applied to neighbouring cities as well, eventually affecting well over 50 million people. Despite the inconvenience and the huge economic costs, China’s New Year holiday period was extended. Factories lay idle while people were urged to voluntarily quarantine themselves at home.
  • How other nations reacted: But despite these almost-draconian measures and the improved speed with which the Chinese authorities have responded to the ongoing epidemic, the global response has been more fearful and arguably more xenophobic than during SARS. 
  • The restrictions on travel to and from China are more punitive, even as there is a resurgence of racist tropes portraying Chinese food habits and other customs as unsafe and unsavoury.
  • The U.S. (with some exceptions) and Australia have banned entry to all foreign nationals who have been to China in recent weeks. Other countries, including India, Malaysia, Russia, Vietnam and Italy, have temporarily stopped issuing certain classes of visas to travellers from Hubei Province, where Wuhan is situated, or China altogether. 
  • A large number of airlines have suspended their China operations. Meanwhile there have been increasing reports of restaurants, hotels and shops in countries, ranging from Japan to Vietnam turning away Chinese customers.

  • What accounts for this larger, arguably “excessive” reaction? Social media certainly plays into it. SARS occurred in the pre-Facebook/WhatsApp/Twitter era, although text messaging was already well established then. Also, far greater numbers of Chinese are travelling abroad today.
  • There are certainly genuine concerns about public and personal health, but these have meshed with the discomfiture that many around the world feel towards China, a country that has exponentially grown in economic and military heft, even as other, traditionally ascendant, nations have lost some of their former geopolitical sheen. 
  • The widespread mistrust of China’s political system and anxieties about its geostrategic intentions are mingling with an ugly schadenfreude as China is exposed to censure. It is perhaps unavoidable. China’s new status as a major world power means that its handling of crises will inevitably be subject to global scrutiny.
  • And although compared to SARS, this handling has shown improvements, it nonetheless throws the deficiencies, even fragility, of China’s political system, into sharp relief. The severity and extent of the disease in Wuhan was underestimated for weeks. Information was not adequately shared. 
  • Worse, those like Dr. Li Wenliang (the whistle-blower who subsequently contracted the virus and died) who tried to voice their concerns were muzzled by the police. 
  • The egregious consequence of the weeks-long official silence was that it facilitated the movement of some five million people in the days before Wuhan was quarantined, enabling the spread of the virus all over the country and overseas.
  • In some way, it would seem that the more things have changed in China, the more they have remained the same. The larger context of the Chinese political system, in particular its overly controlling attitude towards information, has proved persistent. 
  • Local government incompetence is hardly confined to China, but in less restrictive societies, whistle-blowers such as Dr. Li would likely have found the means to get their message out. 
  • Under China’s President Xi Jinping, state control over the media has only deepened, which, together with his unabated emphasis on maintaining social order, means China remains vulnerable to crises despite surface strength.

 

4) One Asia, two perspectives


  • In 1968, Gunnar Myrdal, distinguished Swedish economist and later a Nobel Laureate, published his three-volume Asian Drama. Its subtitle, An Inquiry into the Poverty of Nations, reflecting Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, was meant to convey that it should be seen as a modern epic.
  • That the economies of Asian countries, perhaps mainland Asian countries excluding Japan, were in dire poverty in the early part of the 20th century was widely accepted. 
  • But in the middle of the century they became independent countries and UN members that called for necessary changes in diplomatic parlance. The poor countries became “underdeveloped” (and rich countries “developed”) and development became the central idea in official and scholarly discourse. 
  • And soon the crux of the problem was identified too. The underdeveloped economies were caught in a “low-level equilibrium trap” — low incomes, low savings, low investment — and thus a built-in inability to grow. The remedy, of course, was foreign aid accompanied by labour-intensive technologies.
  • Myrdal refused to fall in line. It is hazardous to summarise what took Myrdal 2,000 pages to analyse Asian countries and then to arrive at his own pessimistic conclusion about the continent’s prospect. 
  • As an economist, he used the standard concepts of the profession, but what he put forward as the “social system” had additional features: attitude towards life and work and institutions in general. Expounding these special features of Asia took the major part of Asian Drama.
  • Value comparison: Myrdal made a comparison of “Western values” and “Asia Values”. Among the latter he included survival mindedness; irresponsiveness to opportunities for betterment; scorn for manual labour; unwillingness to work for others; superstitious beliefs and irrational outlook; submission to authority and exploitation; low aptitude for cooperation. 
  • Combine these with what Myrdal considered to be institutions specific to Asia — underdeveloped institutions for enterprise, employment and credit; imperfections in the authority of government agencies; low standards of efficiency and integrity in public administration. 
  • Add to these the caste system and the joint or extended family, and Asia emerges substantially different from western nations. He was willing to concede that radical policy measures could bring about change in Asian countries, but thought that social, cultural and religious attitudes made it virtually impossible to realise changes via that route. 
  • Asian countries, therefore, were caught in a poverty trap, he felt. While working on Asian Drama, Myrdal was possibly not aware that another scholar was working on Asian economic development in historical perspective. 
  • Angus Maddison in several of his historical studies in the late 1970s and early 1980s, especially The World Economy in the Twentieth Century (1989) pointed out that in 1820, just two centuries ago, Asia accounted for almost two thirds of the world population and three fifths of the world’s income. 
  • China and India put together accounted for half the world population and world income. That is, Asia (China and India in particular) was not always at the bottom of the pit and poverty was not its characteristic feature.

  • Another recent study on Asia is Resurgent Asia: Diversity in Development by Deepak Nayyar (Oxford, 2019). Some readers may remember that he was one-time Chief Economic Adviser, Government of India as also Vice-Chancellor, Delhi University. In the book, he recalls that when Asian Drama came out in 1968. 
  • He was a graduate student in Oxford University and that the pessimistic outlook about Asia was widely prevalent in academic circles. Nearly 50 years later (and after holding academic positions in different parts of globe and authoring many books), he decided to take a closer look at Asia, by now noted for its diversity in development.
  • Nayyar saw that the two Asian giants, China and India, contributed close to 60% of the global manufacturing production and an even larger proportion of manufactured exports until around 1750.
  •  However, over the next two centuries, the Industrial Revolution in Britain brought about a radical transformation of the situation that changed the profile completely, except for the outlier, Japan. 
  • During the second half of the 20th century, the situation has changed again as is widely known. It began with the East Asian tigers, South Korea, Taiwan, Hong Kong and Singapore. Soon others joined, Malaysia, Thailand and Indonesia; then, of course, China and India. The economic profile of Asia has completely changed.
  • A diverse Asia: These changes indicated too that Asia cannot be and should not be treated as a single unit; social, cultural and economic conditions are significantly different among Asian countries, much more than in other continents, Europe for instance. 
  • Initially, the author considers four sub-regions, East Asia, South East Asia, South Asia and West Asia, and then 14 states. The states are China, South Korea and Taiwan in the East; Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam in Southeast, Bangladesh, India, Pakistan, Sri Lanka in the South and Turkey in the West.
  • The colonial era witnessed a precipitous decline in Asia’s economic position. By 1962, Asia’s share in the world population diminished to 50%, while its share in global income fell sharply to 15%. 
  • And by 1965-70, Asia was the poorest continent. For China and India taken together these shares plunged to 35% and 8%, respectively. The share of China and India in world manufacturing production collapsed from 47% in 1830 to 5% in 1963. 
  • By the second decade of the present century, things had changed drastically, but also differentially in the subregions and countries. East Asia was the leader and South Asia was the laggard with South East Asia in the middle.
  • Taking the Asia-14 together, the author describes the economic growth of the past 50 years as “stunning” with China being the star performer. In all instances where growth was impressive, high levels of investment and savings were the main drivers which must have come as a bit of a shock to all who in an earlier period considered the Asian “poor” countries of being incapable of generating high savings. 
  • The pattern in many countries including China was rapid investment growth coinciding with increasing exports. Education too contributed towards raising growth rates. Many countries have been experiencing lower levels of growth in the 21st century.
  • Moving to services: Nayyar then turns to the structural transformation of economies which goes with economic growth. What is considered as the standard pattern is for labour force to move from agriculture (A) to manufacturing and industry (M) and then to services (S) and this pattern is seen in the case of South Korea, Taiwan and Singapore. 
  • In India and several other countries in South East, there was an exit from A, not much into M, but significantly into S. The move into the S sector was partially into productive activity, but more so into transactions of different kinds, including stock market activities. It also manifests as unemployment and under-employments of various shades.
  • Of equal importance is the fact that the big economies of Asia, notably China and India which began their development strategies as closed economies opened up to international trade and capital movements subsequently, and have become notable players in what since the turn of the 21st century at least has come to be referred to as “the global economy”.

  • Nayyar also notes that the growth of the Asia economies has considerably reduced the percentage of their population considered to be below the poverty line. But that has been accompanied by sharp increases in inequalities of income and more so of wealth in democratic India and even communist China which also raises questions about the future. 
  • Obviously the transformation of Asia during the past 50 years has been phenomenal, and there can be little doubt that in the next 50 years, Asia’s multifaceted economic performance will continue and by the beginning of the next century, if not earlier, China will overtake the United States as the largest economy. 
  • Indeed, three other economies to claim top positions will most likely be from Asia — India, Indonesia and Japan and many other Asian countries may also do well, a far cry from the pessimism that was the cardinal note of Myrdal’s Asian Drama. 
  • And yet there will be problems too. Absolute poverty may be minimal by 2030, but the poverty-inequality-unemployment nexus may continue. There are also the challenges of technology and environmental consequences. But these are global issues and will affect other economies also. 
  • Nayyar’s concluding words are optimistic. “There can be little doubt that, circa 2050,... Asia will account for more than one-half of world income, and will be home for more than one-half the people on earth. 
  • The Asian economic story has moved from pessimism to optimism. It will, thus, have an economic and political significance in the world that would have been difficult to imagine fifty years ago.