Business

Tax Avoidance – India is not far behind …

Posted on November 14, 2017. Filed under: Business, Guide Posts, The English |

An Editorial in the Guardian – Saturday 11 November 2017

The Guardian view on the Paradise Papers – not all is lost The tax avoidance revelations have unleashed a demand for reform and social justice. Only a rash government would ignore it.

While it is true that until recently the Queen did not even pay tax, it is shocking that her Financial Advisers saw nothing wrong with investing several million pounds of her Personal Wealth through such a convoluted offshore fund. The Queen finances a whisker of BrightHouse, the household goods business accused of exploiting its customers.

Bono owns a bit of a Lithuanian shopping centre. Lewis Hamilton dodged VAT on his private jet with the finesse of an F1 champion.

These are just a few of the headline details that have emerged this week out of the Paradise Papers, a leak of 13.4m files from the offshore Law Firm Appleby. They show the World’s Super Rich employing legions of accountants to legally avoid paying the tax they owe to the Country where they live.

And all over the World, jaws have dropped in astonishment.

The Guardian was one of 95 media organisations with whom the International Consortium of Investigative Journalists shared data obtained by the German newspaper Süddeutsche Zeitung.

The Papers are a reminder of how erratic and sometimes downright obstructive the British Government has been in its attitude to reforming domestic taxes, and in supporting international attempts to tighten up transparency and accountability rules.

Less than a fortnight out from a budget that is set to maintain the cap on public spending, the discovery of so many who are so willing to flout the rules by which most of us live has provoked the kind of outrage that should be a watershed.

Unlike last year’s leak of the Panama Papers, which exposed illegal tax evasion, the Paradise Papers have not uncovered criminality.

Instead, they reveal a state of mind where it is entirely normal to ignore what most citizens regard as the wider obligations that accompany great good fortune.

So, for example, while it is true that until recently the Queen did not even pay tax, it is shocking that her Financial Advisers saw nothing wrong with investing several million pounds of her Personal Wealth through such a Convoluted Offshore Fund.

The stories that have emerged – some of Celebrity Greed, some of a Rapacious Capitalism – are all the more shocking as the threadbare state of the UK’s Public Realm after seven years of austerity is now unmistakable.

Setting aside the individual pain of impoverished services, in this past week alone a powerful Report from a group of think-tanks argued that the NHS needed an extra £4 bn a year to stand still, while the boss of NHS England, Simon Stevens, issued something close to a back-me-or-sack-me appeal as he demanded a similar increase.

Teachers’ leaders pressed the Chancellor to fund a 5% pay rise; Councils demanded that the cap on their borrowing to build is lifted as more than 78,000 families face homelessness. The crisis in social care is unresolved.

Ending tax avoidance may never be possible. Nor, alone, would it raise enough to restore the fabric of Britain’s Public Services. But it could be much more tightly controlled.

And while some abuses like the offshoring of profits by global companies need the kind of international cooperation Gordon Brown advocated in a BBC Interview this morning, there is plenty of scope at Westminster too.

Yet in the past few weeks an attempt by Stella Creasy to close a loophole that allows foreign-owned Companies to deal in commercial property without paying capital gains tax was defeated.

This week, despite the revelations, Theresa May ruled out using UK Financial Clout to demand a Public List of Beneficiaries of Offshore Trusts.

Financial Services are major Conservative donors. A similar proposal in the European Parliament was obstructed by British MEPs. And HMRC, the Government Department that polices tax gathering, is widely accused of having being captured by the tax avoidance industry.

It is understaffed and underfunded, while most of the Department’s energy is directed towards inventing a customs and excise regime for the world after Brexit.

Death and taxes were supposed both to be inevitable. Now for anyone rich enough, taxes appear merely optional. But an appetite for change and social justice has been unleashed, and it would be a foolish Government that ignored it.

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Tax Havens n Tax Avoidance …

Posted on November 9, 2017. Filed under: Business, The English |

Offshore tax havens: How do they work? What can be done about them? Can they ever be legitimately used? Exactly how big is the problem? And what can governments actually do about it? – Ben Chu

Another massive leak of information from a tax haven law firm – dubbed the Paradise Papers – has shone a spotlight on the questionable ways in which wealthy individuals and big companies structure their finances.

But how do tax havens actually work? Can they ever be legitimately used? Exactly how big is the problem? And what can governments actually do about it? How do tax havens actually work?

One of the primary methods is corporate profit-shifting. This is where a multinational company registers its headquarters in a low -corporation tax jurisdiction and then books its profits there, rather than in the Country in which it actually makes its sales.

This is what firms such as Google and Facebook have been doing in order to lower their global corporation tax bills. But what about personal taxes?

An individual could simply become a resident of a low-tax country in order to pay a lower rate of tax on their income. This is what racing drivers and globe-trotting sportspeople generally do.

But there are also ways in which individuals can remain living in a non-tax haven, such as the UK, and still benefit from tax havens. If an individual keeps their assets in a Trust in an offshore tax haven they can legally avoid paying capital gains in the country in which they are resident.

What is a trust? This is where an individual puts their assets “in trust” to be managed by nominally independent third parties (or “trustees”) for the benefit of named beneficiaries, which can include the individual who put the assets into trust in the first place.

The income can be paid out by the third parties to the beneficiaries regularly, or sporadically, depending on the decisions made by the third parties.

Once it is received by the beneficiaries, the income is subject to income tax. But while it is in the trust the assets are not subject to capital gains and the income on the investments is not taxed.

A major tax advantage is that the beneficiary of a trust is also not subject to inheritance tax on the value of the assets when the person who put the assets into trust for them dies. So who are these trustees?

They can be local officials in the tax haven, or partners in a local law firm, or accountancy firm, appointed by the individual who put their assets into trust.

Given the likelihood of those trustees being influenced by the previous owner of the assets when it comes to income disbursements the scope for abuse of the arrangement is obvious. But aren’t there legitimate uses of tax havens?

Historically, mutual investment funds, which attract investors from around the world, have registered themselves offshore to avoid the risk of double taxation of their surpluses.

This isn’t necessarily a problem so long as the beneficiaries of the fund do pay income tax on the money they receive from the fund in their home country.

When it comes to off-shore trusts, some argue that they are necessary to safeguard the privacy of beneficiaries. There are some circumstances where one can imagine this is a legitimate argument.

Yet the problem is that privacy can be so easily abused to facilitate illegal personal tax evasion and other crimes such as money-laundering. How big is the problem?

Corporate tax avoidance is significant. At the end of 2016 the Giant US Technology Companies alone were estimated by Moody’s Investors Service to have $1.84 trillion (£1.4 trillion) of cash held offshore.

This is essentially profits that Firms such as Apple, Microsoft and Google registered outside the US, and most of which is piled up in tax havens. But personal tax avoidance is bigger.

The calculations of the Economist Gabriel Zucman – analysing discrepancies in Countries’ National Accounts – suggest that around $7.6 trillion, or 8 per cent of global wealth, is held offshore.

That’s up 25 per cent over the past five years. Not all of that money will be held off-shore in order to dodge tax in a morally questionable way. But it’s fair to assume that a large proportion of it is.

The Tax Justice Network Campaign Group estimates that Corporate Tax Avoidance costs Governments $500 bn a year, while personal tax avoidance costs $200 bn a year.

Didn’t David Cameron promise to clamp down on all of this? The previous Prime Minister did implement a series of “automatic exchange of information” Agreements between the UK and the tax authorities of various tax havens designed to prevent the possibility of evasion.

But campaign groups say that this effort was a lot less impressive as a crackdown than the fanfare suggested. And the new system hinges on an unrealistic level of cooperation from law firms and accountants in tax havens.

Cameron also actually fought a proposal from the European Union that there should be public transparency over the beneficiaries of offshore trusts. The previous government’s “diverted profits tax”, designed to curb corporate tax avoidance by the likes of Google, was also grossly over-sold by ministers as a viable solution to multinational profit shifting.

So what needs to be done? On corporation tax avoidance, there are broadly two potential solutions. One would be for governments around the world to collaborate and agree to tax a multinational’s profits on the basis of a fair international formula, based on their sales, investments and employee numbers in various countries.

This would effectively shut down tax havens, where no substantive economic corporate activity actually takes place.

The other solution is for governments to unilaterally tax a multinational’s revenues, while making allowance for its local costs, investments and exports. This was something that US Republicans were pressing for earlier this year, although the plan has now been ditched.

And on personal tax? Here a major part of the solution is to go down the route that David Cameron blocked: to demand full and public transparency on the beneficiaries of offshore trusts. Acting in concert, the Governments of the EU could bring serious pressure on many tax havens to comply.

Many tax havens such as the Cayman Islands and Bermuda are also British Crown Dependencies, giving the UK Government itself considerable leverage if it chose to exert it.

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Japanese Bullet Train takes India for a Ride …

Posted on October 31, 2017. Filed under: Business |

https://thewire.in/192863/india-japan-yen-loan-mumbai-ahmedabad-bullet-train/

Now that the hype over the bullet train has subsided, it is time to do some cold calculations. India will borrow Japanese yen 150,000 crores [equal to Rs 88,000 crores today], bearing 0.1% interest, with a 15 year lock-in period, repayable in 50-60 years. Looks attractive indeed. Prime Minister Narendra Modi is reported to have commented: the loan is “in a way free”. The prime minister was evidently not briefed properly, as the following analysis will indicate.

Today Re 1 buys 1.72 yen, ten years ago Re 1 could buy 2.80 yen and, 32 years ago, say on February 26, 1985, Re 1 could buy 19.77 yen. On February 26, 1985, the exchange rate of dollar/yen was 261 and that of dollar/rupee was 13.20. Divide 261 with 13.20, you get 19.77. So, had India borrowed 150,000 crores yen on February 26, 1985, today, that is after 32 years, the principal amount of loan (without interest) would have swelled 11.49 times (divide 19.77 by 1.72). Depending on repayment schedule and lock-in period of loan, the multiplication factor could have reduced from 11.49 to 6 or 7 on a conservative estimate. This is simple arithmetic and no rocket science.

So, can we not predict what fraction of a yen, Re 1 would buy after 50 years? If the rupee’s purchasing power has dipped from 19.77 yen in 1985 to 1.72 yen today, then after 50 years can a rupee buy anything more than just a fraction of a yen? Unlikely, unless yen interest rate shoots up and rupee rate becomes close to zero, which is highly improbable. Therefore, this 50-year yen loan, with a 15 years lock-in period, is anything but free. It is in fact a rip off. By the time the loan is repaid in 50 years, India would have shelled out Rs 300,000 crores at least, or even more, depending on how quickly the loan is extinguished. This excludes interest of 0.1% on yen loan which would add to the cost. Yen is a dangerous currency and it would be imprudent to ignore its track record.

India can ill-afford to keep such a huge liability in yen unhedged. But even the cost of hedging rupee/yen exchange risk would be prohibitive. Initially India would be required to buy Yen 150,000 crore forward outright in the international market, and keep doing rupee/yen swaps – sell yen spot and buy yen back forward, matching with each due date of loan repayment installment. This process would continue till the entire loan is extinguished. This is called roll-over swap, which corporate in India execute to hedge currency exchange risk in external commercial borrowings. But, such swaps, on each occasion, would entail huge costs for the simple reason that forward delivery of yen against rupee would be at a premium so long as yen interest rate remains lower than rupee.

It is axiomatic that forward delivery of a currency yielding lower rate of interest would always be at a premium vis-à-vis the currency yielding higher rate of interest. The yen interest rate is now close to zero. The rupee repo rate (rate at which banks borrow from the Reserve Bank of India) is 6%. Thus, multiple swaps executed till the currency of the loan would be hugely expensive as forward premia would have to be paid by India on each swap. India would thus end up paying well over Rs 300,000 crores (multiplication factor 3.4 taken) on a most conservative estimate. Notably, rupee/yen quote will not be available directly in the international forex market; consequently, dollar being the intervention currency for India, swaps would have to be performed through dollar/yen quotes. Rupee would thus have be converted into yen only through dollar.

The above figures/calculations do not take into account 0.1% interest burden on yen loan. Today, interest rate in Japan is hovering around zero to fractionally negative, like in Sweden. On September 7, 2017, the Central Bank of Sweden held its benchmark interest rate at (minus) – 0.5%. Similarly, the Central Bank of Japan has slashed interest rate to just shade below zero. Tokyo Inter Bank Offer Rate (TIBOR) is around 0.06%. A ten year Japanese Government Bond yields barely 0.04%. Therefore, 0.1% interest rate that Japan would earn from India is a very lucrative investment opportunity for Japan, which is struggling to fight deflation for over 15 years. More the lock-in period/tenure of yen lending in India, merrier it is for Japan, and costlier it is for India.

Also read: The Long and Short of India’s Bullet Train

Did India really need this loan of $13.5 billion (Rs 88,000 crores = Yen 150,000 crores today) with a forex kitty of over 400 billion dollar? Would Japan proceed with the project if India declines to avail of the loan? These questions can have disturbing answers. Ideally, India should have considered purchasing only technology for bullet train without taking loan from Japan.

And now about the technical feasibility and economic viability of running a bullet train on a 507 km Ahmedabad/Mumbai track. This is Japan’s second export (in 53 years) of Shinkansen technology, after Taiwan, where it didn’t succeed. Japan did not transfer technology to Taiwan. Japan would obviously like to monitor track maintenance and other operating requirements on an ongoing basis to ensure its accident free track record and punctuality. So, Japan is unlikely to transfer technology to India. A study carried out by IIM, Ahmedabad, indicated that a 100 daily trips would be required between Ahmedabad and Mumbai to make the bullet train financially viable. About 35 trips are reportedly being planned.

Overall, the yen loan is a rip off, the project’s economic viability is suspect and India is unlikely to receive technology. Why commit Rs 110,000 crores of public funds then? Obviously, mediocrity is ruling the roost and experts with domain knowledge are not being utilised – a tragedy for India.

Bishwajit Bhattacharyya is former additional solicitor general of India and a senior advocate in the Supreme Court.

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Globalization – What it Means …

Posted on October 25, 2017. Filed under: Business |

THE ORDINARY VIRTUES – Moral Order in a Divided World By Michael Ignatieff

A century ago, on the eve of World War I, the global advance of science and material prosperity made perfectly reasonable men look forward to a new era of humanitarianism and peace. In 1914, in search of that dream, the industrialist Andrew Carnegie established the Church Peace Union, which later evolved into today’s Carnegie Council for Ethics in International Affairs.

The 20th century did not work out as Carnegie imagined. In our own day, globalization has proved to be the most mixed of blessings. Nevertheless, the institution Carnegie fostered has continued to propagate his ideals. To celebrate its centenary, the Carnegie Council posed a question whose premise reflected the idealism of a vanished age: ”Is globalization drawing us together morally?”

The organization turned for an answer to Michael Ignatieff, who, as a moral philosopher now serving as rector of Central European University in Budapest, might have had good reason for wishing the proposition to be true. But Ignatieff is also a journalist who has seen humans do horrible things to each other.

One of the chief merits of “The Ordinary Virtues: Moral Order in a Divided World” is that the author discovered in the course of his research — or perhaps he knew all along but slyly withholds the insight — that he was asking the wrong question. The right question is: “How can we hang on to decency in a world where old patterns, good and bad, have been disrupted?” In addressing that challenge, Ignatieff’s admirable little book represents a triumph of execution over conception.

“The Ordinary Virtues” is a shotgun marriage of moral philosophy and global junketeering. Ignatieff traveled with a team from the Carnegie Council to Brazil, Bosnia, Japan, Myanmar and South Africa, as well as to Los Angeles and New York City’s borough of Queens, where they met with civic groups, as well as men and women on the streets.

With the exception of passages on Bosnia, which Ignatieff knows well, and Fukushima, which he writes about movingly, the reader rarely feels the sense of immersion-in-the-other that fine journalism, including Ignatieff’s, provides. The touching-the-bases format appears to have been the result of an imposed schedule. Nevertheless, locality itself matters, for it is locality, rather than globalization, that is the book’s true subject.

Ignatieff concludes that globalization has, in fact, shaped certain fundamental aspects of the moral reasoning of his interlocutors. The spread of democracy and of the idea of human rights universalized the notion that citizens have a right to be heard. The people Ignatieff speaks with have not only a sense of standing, but of equal standing. And even nondemocratic leaders find they must satisfy the aspirations of ordinary citizens.

But more democracy does not necessarily lead to more respect for human rights. Ignatieff furnishes the dismaying example of Myanmar, where brutal military dictators agreed to a peaceful transition to a political party led by the Nobel Peace Prize recipient Aung San Suu Kyi.

“Her example,” Ignatieff writes, offered Westerners “vivid, personal proof that the yearning for freedom, democracy and rights was universal.” But it was not so. “The Lady,” as she is reverently known, now presides over a regime that persecutes its Muslim minority, known as Rohingyas. Ignatieff finds that scholars and activists — the typical bearers of global moral discourse — support the ugly crusade.

What went wrong? Ignatieff explains that Myanmar is a plural society that never answered the primal question of who is “us,” and who “them.” Majority rule thus unleashed resentments that autocrats had suppressed, just as it had in the former Yugoslavia.

In fact, globalization had not only failed to overcome an ancient divide but had widened it, for now local Muslims were seen as the advance guard of a mighty wave. Not just these Buddhists, but “Buddhism,” was now at war with “Islam.” All politics is not local, Ignatieff writes, but political responses are rooted in local loyalties and antagonisms.

Yet this stubborn resistance to the universalisms that govern moral thought in the West is itself an alternative source of just behavior. This is the collection of habits and intuitions that Ignatieff calls “the ordinary virtues.”

People need a sense of moral order, he argues; they need to feel that their life has meaning beyond the mere struggle to survive. They need to feel that they have acted rightly. But before whom? Not before an abstraction like “mankind.” They think instead about themselves and people like them, family and friends, caste and community. This sense of kinship is in turn the foundation of the ordinary virtues: loyalty, trust, forbearance. This is what Ignatieff finds in Rio’s favelas, in the municipal workers of Fukushima, in the haggard, persistent survivors of genocidal violence in Bosnia.

Of course if we flip over the card of the ordinary virtues we find the ordinary vices: resentment, pettiness, chauvinism. The sense that moral obligation extends only to “us” is the source of the blood-and-soil nationalism now spreading across the world like a virus. The saving grace, Ignatieff argues, is that these intuitive moral systems are in constant contact with those of other people, and of the institutions that surround us.

Thus in a polyglot neighborhood like Jackson Heights, in Queens, diversity works not because immigrants believe in it as a principle, but because their “moral operating system” has been shaped by the community’s “tacit code of welcome,” its respect for privacy and, above all, the prospect it offers everyone of “a way up and a way out.”

Collective behavior is the consequence of a series of pragmatic accommodations. Difference is tolerated in the interest of group survival; it is not intrinsically admired.

Ignatieff notes that people in Jackson Heights live “side by side,” not together, and concludes that “it may be the case that the only realistic way for diverse populations to live together is to live side by side.” To adopt the ordinary-virtues perspective is to accept that such liberal principles as “cosmopolitanism” will probably not flourish outside laboratory settings like the university campus.

The ordinary virtues and vices are a human given. So is the inner world of moral intuition. The variable is what lies outside, which is to say institutions, understood in the broad sense of social structures of belief and practice, whether in the form of the corner barbershop or the political party.

Ignatieff concedes that the centrality of institutions has become a cliché of development economics and state-building. What distinguishes the ordinary-virtues perspective is the claim that institutions matter above all because they shape private behavior. “If the test of a decent society is that it allows people to display these virtues easily,” he writes, “what policies and institutions do we need to create so that virtue can remain ordinary?”

The problematic word in that sentence is “we.” If “we” believe that we should, and can, promote democracy abroad, then we seek — humbly, of course — to help democratic practices take root. But if people resist the moral abstractions we peddle — if that resistance is “an enduring element in ordinary people’s defense of their identities” — then our humility must be so much the greater.

The moral choices of people in Bosnia, or even Jackson Heights, are founded on a world they know, and one we don’t. Think, for example, of the lives lost and the billions of dollars wasted trying to install a Western legal system in Afghanistan. Perhaps we would have been better off helping Afghans achieve Afghan justice.

If globalization will not save us, then there are no big, all-inclusive answers — not technology or democracy or spiritual rebirth or anything that happens to everyone everywhere. There are only small, local answers, though they may well incorporate the technologies or policies dreamed up by the benevolent globalizers.

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Environment and Economics …

Posted on September 20, 2017. Filed under: American Thinkers, Business, Guide Posts |

George Monbiot in The Guardian

There was “a flaw” in the theory – this is the famous admission by Alan Greenspan, the former chair of the Federal Reserve, to a congressional inquiry into the 2008 financial crisis. His belief that the self-interest of the lending institutions would lead automatically to the correction of financial markets had been proved wrong.

Now, in the midst of the environmental crisis, we await a similar admission. We may be waiting for some time.

Similarly, Milton Friedman, an architects of neoliberal ideology, put it: “Ecological values can find their natural space in the market, like any other consumer demand.” As long as environmental goods are correctly priced, neither planning nor regulation is required. Any attempt by governments or citizens to change the likely course of events is unwarranted and misguided.

But there’s a flaw.

Hurricanes do not respond to market signals. The plastic fibres in our oceans, food and drinking water do not respond to market signals. Nor does the collapse of insect populations, or coral reefs, or the extirpation of orangutans from Borneo. The unregulated market is as powerless in the face of these forces as the people in Florida who resolved to fight Hurricane Irma by shooting it.

It is the wrong tool, the wrong approach, the wrong system. There are two inherent problems with the pricing of the living world and its destruction.

The first is that it depends on attaching a financial value to items – such as human life, species and ecosystems – that cannot be redeemed for money. The second is that it seeks to quantify events and processes that cannot be reliably predicted.

Environmental collapse does not progress by neat increments. You can estimate the money you might make from building an airport: this is likely to be linear and fairly predictable. But you cannot reasonably estimate the environmental cost the airport might incur.

Climate breakdown will behave like a tectonic plate in an earthquake zone: periods of comparative stasis followed by sudden jolts.

Any attempt to compare economic benefit with economic cost in such cases is an exercise in false precision. Even to discuss such flaws is a kind of blasphemy, because the theory allows no role for political thought or for action.

The system is supposed to operate not through deliberate human agency, but through the automatic writing of the invisible hand. Our choice is confined to deciding which goods and services to buy. But even this is illusory.

A system that depends on growth can survive only if we progressively lose our ability to make reasoned decisions.

After our needs, then strong desires, then faint desires have been met, we must keep buying goods and services we neither need nor want, induced by marketing to abandon our discriminating faculties, and to succumb instead to impulse.

You can now buy a selfie toaster, that burns an image of your own face on to your bread – the Turin Shroud of toast.

You can buy beer for dogs and wine for cats; a toilet roll holder that sends a message to your phone when the paper is running out; a $30 branded brick; a hairbrush that informs you whether or not you are brushing your hair correctly. Panasonic intends to produce a mobile fridge that, in response to a voice command, will deliver beers to your chair.

Urge, splurge, purge: we are sucked into a cycle of compulsion followed by consumption, followed by the periodic detoxing of ourselves or our homes, like Romans making themselves sick after eating, so that we can cram more in.

Continued economic growth depends on continued disposal: unless we rapidly junk the goods we buy, it fails. The growth economy and the throwaway society cannot be separated.

Environmental destruction is not a byproduct of this system: it is a necessary element. The environmental crisis is an inevitable result not just of neoliberalism – the most extreme variety of capitalism – but of capitalism itself.

Even the social democratic (Keynesian) kind depends on perpetual growth on a finite planet: a formula for eventual collapse. But the peculiar contribution of neoliberalism is to deny that action is necessary: to insist that the system, like Greenspan’s financial markets, is inherently self-regulating.

The myth of the self-regulating market accelerates the destruction of the self-regulating Earth. What cannot be admitted must be denied.

Ten years ago this week, Matt Ridley – as chair of Northern Rock – helped to cause the first run on a British bank since 1878. This triggered the financial crisis in the UK. Now, in his new incarnation as a Times columnist, he continues to demonstrate his unerring ability to assess risk, by insisting that we needn’t worry about hurricanes: as long as there’s enough money to keep bailing us out, we’ll be fine.

Ridley, who helped destroy the hopes of millions, is one of the faces of the New Optimism that claims life is becoming inexorably better. This vision relies on downplaying or dismissing the predictions of environmental scientists.

We cannot buy our way out of a process that could, through a combination of heat stress, aridity, sea level rise and crop failure, render large parts of the inhabited world hostile to human life; and which, through sudden jolts, could translate environmental crisis into financial crisis.

The sigh of relief from insurers and financiers when Irma changed course could be heard around the world. In April Bloomberg News, drawing on a Report by the US Federal Mortgage Corporation Freddie Mac, investigated the possibility that climate breakdown could cause a collapse in real estate prices in Florida.

It looked only at the impact of sea-level rise – hurricanes were not considered. It warned that a bursting of the coastal property bubble “could spread through banks, insurers and other industries. And, unlike the recession, there’s no hope of a bounce back in property values.”

The sigh of relief from insurers and financiers when Hurricane Irma, whose intensity is likely to have been enhanced by global heating, changed course at the last minute could be heard around the world.

This year, for the first time, three of the five global risks with the greatest potential impact listed by the World Economic Forum were environmental; a fourth (water crises) has a strong environmental component. If an economic crisis is caused by the environmental crisis, it will be the second crash in which Ridley will have played a part.

They bailed out the banks. But as the storms keep rolling in, you’ll have to bail out your own flooded home. There is no environmental rescue plan: to admit the need for one would be to admit that the economic system is based on a series of delusions.

The environmental crisis demands a new ethics, politics and economics. A few of us are groping towards it, but it cannot be left to the scattered efforts of independent thinkers – this should be Humanity’s Central Project.

At least the first step is clear: to recognise that the current system is flawed.

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Raghuram Rajan …

Posted on September 8, 2017. Filed under: Business, Personalities |

Rajan left the central bank last September after unnerving political leaders with his outspoken nature. Several months later, Modi blindsided the nation by scrapping 86 percent of currency in circulation, saying the move was essential to unearth unaccounted wealth and fight graft. Since then, speculation has raged over who thought up the policy, with the debate getting hotter.

Excerpts from what he said on the launch of his book –

Q – “I do what I do ….” I thought your kids did not like the title. What was in your mind about this title?”

A – “My wife liked it. She did….. We were looking for a title and she has always been a good sounding board and I had something like sort of RBI Days and all that. She remembered this statement that it came from one of the monetary policy press conferences. As it was ending I was asked whether I was dovish like Yellen or hawkish like Volcker.

‘I understood what the reporter was asking, but I wanted to push back on the attempts to pigeonhole me into existing stereotypes. …………… Somewhat jokingly, I started in a James Bond-ish vein, ‘My name is Raghuram Rajan —- To my horror, mid-sentence I realised I did not know how to end in a way that did not reveal more on monetary policy than I intended.

‘So with TV cameras on. came the title of the book ‘I Do What I do’ reflects the serendipitous nature of public life.”

Exactly one year after his term as Governor of the Reserve Bank of India came to an end, Raghuram Rajan published his book with his “commentary and speeches” to convey what it was like to be at the helm of the central bank in “those turbulent but exciting times”.

Rajan has stayed away from the press since. He, however, made an exception recently for the media team at Chicago Booth, where he is currently teaching. During the interview, Rajan touched upon the financial crisis of 2008 as well as his recent stint at the RBI.

When Raghuram Rajan stepped down as the Reserve Bank of India’s governor in September last year, he left a gift for his successor — the gift of silence – to allow the new governor time and space to give voice to his ideas. Rajan has stayed away from the press since.

The man who predicted the 2008 global financial crisis also presaged the damage Prime Minister Narendra Modi’s unprecedented cash ban would cause to India’s economy. Raghuram Rajan was governor of the Reserve Bank of India in February 2016, when he was asked by the government for his views on demonetization, according to Rajan’s book, “I do what I do”, the first time he’s spoken about his experience in the country.

“Although there may be long-term benefits, I felt the likely short-term economic costs would outweigh them and felt there were potentially better alternatives to achieve the main goals,” he writes. “I made these views known “.

Rajan left the central bank last September after unnerving political leaders with his outspoken nature.

Several months later, Modi blindsided the nation by scrapping 86 percent of currency in circulation, saying the move was essential to unearth unaccounted wealth and fight graft. Since then, speculation has raged over who thought up the policy, with the debate getting more divisive last week as a slew of data showed demonetization contributed to a sharp growth drop ..

Raghuram Rajan and the Dosa

Rajan was replying to a question from a Dosa-loving engineering student at a Federal Bank event in Kochi.

“In real life, I have a query on Dosa prices — when inflation rates go up, Dosa prices go up, but when inflation rates are lower, the Dosa prices are not lowered. What is happening to our beloved Dosa, sir?” she asked. His response –

“The technology for making Dosas hasn’t actually changed. Till today that person puts it (Dosa batter) on the tawa, spreads it around and then takes it out, right? There has been no technological improvement there.

“However, the wages that you are paying to that gentleman, especially in a high-wage sort of state like Kerala, are going up all the time,”

“So, what happens is that in an economy which is growing and when there are sectors which are improving technologically while other sectors are not improving their technology, the prices for the goods manufactured by sectors, that are not improving their technology, will go up faster”.

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The Naked Truth re BLACK Money …

Posted on January 18, 2017. Filed under: Business, Indian Thought, Uncategorized |

Captain GR Gopinath …

Almost all of us – politicians and bureaucrats; the low and the elite – have all dealt with black money at one time or another.

When it suits and benefits us we have paid or accepted donations to admit children in good schools, bribed the police if caught driving intoxicated at night to avoid inconvenience and embarrassment, greased the palms of the RTO to get a driving licence, paid the sub registrar under the table through our lawyer to reduce stamp duty while registering our property, paid in cash to avoid VAT while purchasing material for building our house, paid the doctor, lawyer, auditor or architect or bought goods in cash and not insisted on bills, or bribed the income tax assessment officer through the accountant to reduce our tax liability.

Then when the Govt decided to build a dam, the babus, lawyers and sundry facilitators took away most of the farmer’s compensation money. 

Corruption by government officials in cahoots with politicians and middlemen destroyed the lives of millions while it enriched officials, contractors and others. It gradually became common knowledge that if you landed a job as an inspector or an official in the government department it was the easiest and quickest way to wealth.

Black money like cancer devoured the country and ordinary citizens. Like Laxman’s Common Man, Hirannayya’s stories and anecdotes are inspired from stories of the day’s newspapers and journals. An example there is this  Constable who drags a hapless villager to the local police station pushing a bicycle and produces him in front of the sergeant.

The sergeant asks – ” What’s the offence ?” Constable -” Sir, he was riding to the next village without lights. I brought him in to fine him.” Sergeant, surprised – ” But, its only 11 in the morning !” Constable- ” Yes Saar. But when I asked him what time is he returning from the other village, he said 8 at night. So I guessed he will be riding back in darkness without lights. So I hauled him up just to teach him a lesson.”

I took premature retirement and came back to my village and took to farming the remote barren land given as compensation for the land devoured by the waters of the reservoir created by the dam. I was 28 years old after having served 8 years in the Army. I found that fighting the Pakistanis had been easier than battling the bureaucracy and government.

I had to get land records completed, surveys done, approach road to my lands constructed from the irrigation department as it was rehabilitated land and had      obtain electricity. I had to deal with offices of Tehsildar, sub registrar ,state electricity board and other sundry offices. I soon foimd my file would not move an inch unless I gave it a push through ‘speed money’.

Then I bit the big ‘Apple’. I started the helicopter and aviation company with an ex Army pilot. For three years I ran from pillar to post to get an aviation licence. Finally our sheer dogged persistence. It was well known that aviation was and still is, to a great degree operated under a ‘license Raj’. I mean there are a lot of discretionary powers both at the ministry and bureaucratic level which are still happy operating under antiquated cumbersome laws which is the root of corruption.    And if you go with a suit case full of money to the corridors of power in Delhi someone will come and dispossess you of it.

While running the aviation company I was unwittingly at first , wittingly at other times – sucked into dealing with cash of big National political parties, who used our helicopters for election rallies. Most of the money that was paid by all political parties was unaccounted money paid by big business.

It is an open secret. The high and mighty politicians – a few with reputations of being honest and many others known to be corrupt – from all major national and regional political parties – all traveled extensively on choppers and jets, criss crossing the country.

Many politicians reneged on payment after use. Quite a few surprised me by being honorable and kept the commitment and paid in cash. Political parties paid part in cash and part in cheque. We were constantly running to the government for approvals and clearances and the aviation company’s survival hinged on speedy clearances.

I knew, in many instances that I would have won in a court of law against the ministry of aviation and the regulators, but that would have taken years and in the mean time the air craft would have become worthless and the company would have gone belly up. 

I had decided not to bribe in cash. Somehow it felt vulgar and demeaning. But I found a way to cheat myself and offered in kind, by giving my choppers and planes during elections for free or offered free air tickets and guest houses and cars for their vacation.

Politicians flew to meet God Men. God Men jetted and hopped in and out of choppers to meet politicians. Businessmen fell over each other and paid us for the trips of both. I felt diminished for what I did. I washed off my guilt saying to myself I did it to save my company.

Almost the entire educated middle class as well as the small and medium businesses (with rare exceptions) are corrupt in their day to day dealings. The politicians along with the bureaucracy, big corporates and crony capitalists who all have a cozy nexus are in the forefront of the large scale corruption that we see in papers and television.

We all know that they bend the law, are above the law and have been amassing massive fortunes with brazenness and impunity. Educated Indians often talk about our corruption in the country as though it’s part of our inherited genetic disease – a DNA in Indians as a race.

Let me just say all people of all countries are corrupt when there are cumbersome rules, ill conceived policies, high taxes, lack of accountability and NO transparency and when there are institutions without autonomy and there’s laxity in strict enforcement of rule of law.  When society allows rulers to rule with conflict of interest coupled with subversion of democracy.

Historically we have seen similar decline in many countries. Russia, East Germany , China , Argentina are a few examples that come readily to mind. Even in the West many European countries not under communism have seen their rise, fall and rise again.

 Here is what Ralph Waldo Emerson said of America in one of his celebrated essays in the 1850s. – “The young man, on entering life, finds the way to lucrative employments blocked with abuses. The ways of trade are grown selfish to the borders of theft, and supple to the borders (if not beyond the borders) of fraud. The sins of our trade belongs to no class, to no individual. One plucks, one distributes, one eats. Every body partakes, every body confesses, — with cap and knee volunteers his confession, yet none feels himself accountable. He did not create the abuse; he cannot alter it. ..”

We have all partaken the fruits of corruption. In such a state of affairs, where corruption and black money is a way of life, it was naive of Prime Minister Narendra Modi to have expected demonetization in isolation to act like a magic wand and end the scourge of black money. 

If a farmer receives twenty thousand rupees in cash it is legal. It’s white. There’s no tax on his income. If the farmer then goes to a doctor and pays five thousand without bills it becomes black. If the doctor then goes to a five star hotel and spends it on dinner, it is billed and it becomes white again but the doctor hid his income. So black and white are inextricably entwined. We have all been corrupt. Man is selfish and will take advantage of situations and exploit it to his advantage. Gender, caste, color, creed or race – there are no exceptions to temptation of lucre or power. 

That’s why we all, including the best of us , need institutions to keep us in check. That’s why even the judge of highest rectitude and unimpeachable integrity is expected to recuse himself while trying cases of his kin or where there’s a conflict of interest. In India we have the proverbial case of the fence eating the crop. We have to strike at the flow of black money and creation of it , otherwise it will be akin to removing piled up garbage once in twenty years.

Whatever be his failings and the numerous controversies that surround Prime Minister Modi, whatever be the charges of his critics and detractors, he has suffused energy into the moribund economy and infused optimism into the aspiring millions who were in despair and were looking up to a strong leader with a clean image untainted by corruption during the declining years of UPA Two when the nation was plunged into despondency and gloom.

With indefatigable energy and inextinguishable enthusiasm – despite his saffron affiliates often queering the pitch by striking discordant notes and working at cross purposes – he single handedly galvanized world opinion, crisscrossed the world, met world leaders and investors and business magnates – managed to put India on the world map and turned it into the fastest growing economy in the world and got them interested into looking at investing in India even though many of his colleagues were not able to deliver on his promise and often made a sorry spectacle of themselves.

Now with such a dazzling accomplishment in a short span of two years, riding the wave of the fastest growing economy in the world, even after taking into account sceptics who charged that the growth statistics was fudged (even the fearless erstwhile RBI governor Raghuram Rajan known for his highly respected professional and apolitical views, as well as the IMF and World Bank validated India’s preeminent position as the fastest growing economy in the world).

After such a trail blazing feat, despite overwhelming odds, Mr Modi, in one fell swoop undid everything by extinguishing nearly 90 per cent of the currency without first preparing the ground for implementation and without first introducing far reaching reforms for checking the generation of black money starting with the politicians, bureaucrats and police, for demonetization to achieve its intended objectives and carry credibility.

It may be too late to reverse some of the damages already inflicted but it is never too late to pursue the implementation of bold reforms to transform governance and society. Despite the foreign media (the same media that extolled him till recently are now disapproving his demonetization as poorly planned and lacking in comprehending the complex economics of it and being ill advised) despite large sections of the Indian intelligentsia including many reputed economists tearing him apart and calling it harebrained, Modi is still fortunate as he enjoys a fount of good will.

The teeming millions of the poor and the dispossessed who constitute the mute suffering majority are still rooting for Modi and believe in him and his popularity has in fact risen. They see him in mythic imagery, incarnate as the slayer of demons – the demons of black marketeers and hoarders. And combined with that goodwill of the masses , the opposition is in total disarray and are at sixes and sevens. There are hardly any leaders among them of any commanding national stature and credibility.

So Mr Modi can still afford to act swiftly with courage and carry out with speed far reaching structural institutional reforms for achieving the results of demonetization to percolate down to the common people while they are still with him and before the groundswell of support evaporates. 

For that he must set an example and begin his surgical strikes right at the top. Modi may be individually honest, but good governance, – his election campaign credo – can only be achieved through strong autonomous institutions.

Time is running out. May we wish he does it in the New Year.

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US – China Relations under Trump …

Posted on December 6, 2016. Filed under: American Thinkers, Business, Chinese Wisdom |

Shasank Nayak in Quora –

The economic relations between China and the US is remarkably similar to the relations between Japan and the United States. Japan and China both are State Capitalist market economies with export orientation and “strategic” use of Foreign Direct Investment and markets to improve economic growth. Both are heavily dependent on trade and are the chief Capitalist competitors to the United States. Both markets however, remain largely closed to domination by foreign companies.

The United States had up until 1980’s taken a fairly lax view on Japan’s economic policy despite it’s fairly negative impact on American economy especially it’s Industry. Japan used Industrial policy to develop it’s export oriented Industry that had created vast imbalances in form of excess savings in Japan, heavy trade surplus for Japan that made it one of the largest capital exporters in form of foreign direct investment in other countries, over investment and weak domestic demand. The US was becoming very critical of this as this entire policy depended on Japan being a weak country and the US being unquestionably stronger. It was becoming clear that this was no longer the case. The persistent trade surplus had as I mentioned earlier turned Japan into the world’s largest creditor nation in 1985 and the US into the largest debtor nation with it’s liabilities increasing from $81 Billion to $831 Billion. This was economically untenable. The Japanese had been the key exporters of excess goods and capital to their trading partners.

Well, the Japanese were getting very worried that their core strengths were being recognized and that many people were learning too much of it’s secret. Japan employed a trick that Russia would use later (as they did during the recent elections). Use American domestic agenda to influence foreign policy in it’s favor. In case of Japan it was the stressing upon racism in American public whereas for Russia it is isolationist tendency on both left and the right. Whenever any article started occurring that stressed upon Japanese differences, the consulate of Japan would respond very quickly stressing that it was racist and exclusionary to differentiate them from the West. They criticized that “revisionist” writers who were “Japan-bashers,” a barely disguised euphemism for anti-Japanese racists. The local Japanese consul would keep on denying the charges and claim that there were no structural differences in Japan’s economy.This campaign succeeded in silencing many critics. Japan even threatened to sell weapons to China and Russia and this worked until the mid 1980’s.

Nonetheless, the United States then forced Japan to strengthen the Yen (Plaza Accord) which proved disastrous for Japan. The Japanese Central bank cut interest rates which worsened the excess capacity and sent much of the capital into local construction industry and real estate speculation leading ultimately to the bubble burst from which Japan never recovered.

Another important point. When the US stock market crashed in 1987, Japan directly assisted the US by buying a large amount of stocks stabilizing the financial system. This made the US implicitly dependent on the Japanese government. In 1995, the Japanese government succeeded in forcing the US to allow for weakening of yuan to boost it’s exports. There was an implicit threat that Japan would pull out the support that it was providing the US by buying government bonds and other forms of investment. Japan’s low-cost financing replaced America’s virtual dearth of domestic savings and allowed the United States to run huge external deficits without paying any of the usual costs, particularly a catastrophic loss in value of the dollar, while keeping inflation low and American financial markets buoyant. The US agreed and that had a devastating impact on South Asia leading to the East Asian crisis because many of those countries had their currency pegged to US dollar and were also export dependent. Worse, they had carelessly liberalized their currency markets leading to a disaster.

This relation was taken over by China which has replaced Japan as America’s largest trade partner, biggest source of job losses particularly in blue collar areas, biggest investor in American economy in form of buying government bonds and just like Japan, it’s companies are buying American ones which has raised eyebrows during the Obama administration.

There is one major difference however, Japan was an American ally while China is becoming America’s real competitor for geopolitical influence. China has been building very close relations with Latin America (including countries like Cuba) and Africa. This means the same crisis we saw in 1980’s when there was a strong anti Japanese sentiment in the US (see the burning of Japan made cars), we have a strong anti China sentiment.

The policy that President elect Trump is pursuing is in some ways continuation of President Obama’s policy. They have recognized that the United States cannot fight all it’s rivals i.e Russia in Europe, Iran in Middle East and China in Asia at the same time. Obama’s attempt to improve relations with Iran was an acknowledgment of this and one of the reasons why the US has not taken a more muscular approach to Syria that France and Germany have been demanding is precisely because the American “establishment” believes that China is a real threat. Obama attempted to solve this by supporting TPP which was an attempt to improve the competitiveness of American Corporations and business in Asia and Europe.

Trump has changed this in some ways. He wants to improve relations with Russia so as to focus better on threatening and combating Iran and China better. His rejection of TPP leaves only the militaristic threat in the arsenal of the United States. It is in this context, we must view his phone call to Taiwan’s President and “anti China” policy.

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Daring Economic Proposal to Reboot Indian Economy …..

Posted on October 18, 2015. Filed under: Business, Indian Thought |

An Economic Advisory body constituted by a group of Chartered Accountants and Engineers.proposes –

Scrap all 56 Taxes including income tax excluding import duty.

Recall high denomination currencies of 1000, 500 and 100 rupees.

All high value transactions to be made only through banking system – cheque, DD, online and electronic.

Fix limit of cash transaction and no taxing on cash transaction.

For Govt. revenue collection introduce single point tax system through banking system – Banking Transaction Tax (2% to 0.7%) on only Credit Amount

Facts -:

As of today total banking transaction is more than 2.7 lakh crores per day say more than 800 lakh crores annually.

Less than 20% transaction is made through banking system as on today and more than 80% transaction made in cash only, which is not traceable.

78% of Indian population spend less than 20/- rupees daily so why do they need 1000/- rupee note.

Result if All FIFTY SIX Taxes incl income tax scrapped

Salaried people will bring home more money which will increase purchasing power of the family.
All commodities including Petrol, Diesel, FMCG will become cheaper by 35% to 52% .
No question of Tax evasion so no black money generation.
Business sector will get boosted. ie self employment.

Result if 1000/ 500/ 100 Rupees currency notes recalled and scrapped
Corruption through cash will stop 100%.
Black money will be either converted to white or will vanish as billions of 1000/500/100 currency notes hidden in bags without use will become simple pieces of paper.
Kidnapping and ransom, “Supari killing” will stop.
Terrorism supported by cash transaction will stop.
Cannot buy high value property in cash showing very less registry prices.
Circulation of “Fake Currency” will stop because fake currency printing for less value notes will not be viable.

Result if Banking Transaction Tax (2% to 0.7%) is implemented :

As on today if BTT is implemented govt can fetch 800 x 2% = 16 lakh crore where as current taxing system is generating less than 14 lakh crore revenue.
When 50% of total transaction will be covered by BTT sizing 2000 to 2500 lakh crores, Govt will need to fix BTT as low as 1% to 0.7% and this will boost again banking transaction many fold.
No separate machinery like income tax department will be needed and tax amount will directly deposited in State/Central/District administration account immediately.
As transaction tax amount will be very less, public will prefer it instead paying huge amount against directly/indirectly FIFTY SIX taxes.
There will be no tax evasion and govt will get huge revenue for development and employment generation.
For any special revenue for special projects, govt can slightly raise BTT say from 1% to 1.2% and this 0.2% increase will generate 4,00,000 crores additional fund.

Effects of if implemented  :

Prices of all things will come down.
Salaried people will get more cash in hand.
Purchasing power of Society will increase.
Demand will boost, so will production and industrialisation and ultimately more employment opportunity for youth.
Surplus revenue to the govt for effective health/ education/ infrastructure/ security/ social works.
Cheaper and easy loans from banks, interest rate will come down.
Spare money for political system for clean politics,
Prices of land/ property will come down,

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India Shining in Twenty First Century ….

Posted on July 14, 2015. Filed under: Business, Guide Posts, Indian Thought | Tags: , |

This is an edited piece by Avay Shukla, an IAS officer who retired in 2010.

An observer cannot fail to notice the deep rot spread in our polity and society. The cancer has spread through all organs of the state. All the four pillars of a democratic dispensation – legislature, executive, judiciary, press – have developed deep fractures and have been taken over by termites and weevils who have hollowed out the innards of the edifice.

It is my contention that a few families and individuals in these four vital organs have taken them over and have molded them to suit their own purposes.

Consider the political executive. State after state has been commandeered by the likes of the Badals, the Dhumals, Virbhadras, Yadavs, Mayawatis, Patnaiks, Karunanidhis, Jayalalithas, Pawars, Hoodas, Lalls, Abdullahs, Raos and Naidus. The states have become privately owned businesses. It is impossible for anyone not owing allegiance to one or the other of these sicilian-style families to enter the power structure.

Parliament itself is the personal fiefdom of a few dozen families, a franchise of the dominant families; and the franchisees are doing very well, thank you: According to the website of the Association for Democratic Reforms, the average wealth of an MP in the current Lok Sabha is now Rs. 15 crore, up from Rs. 9 crore in the last one. And this is only the declared assets!

The state legislatures are no different, packed with sons, daughters, spouses of the Dons. And so we have the scandalous situation of the Badal family having twelve Ministers in Punjab, and Mulayam Singh has so many of his family in the government that even he probably can’t remember the number.

The judiciary too is not exempt from question marks, the biggest of them being: why is it so keen to retain its choke-hold on appointment of Judges ? In no other genuine democracy do judges appoint judges, but here we have a circus playing out on a daily basis in the Supreme Court where a perfectly reasonable NJAC Act is being scrutinized for its constitutionality, and in the interim all appointments have been put on hold – and that too when as many as 251 posts of judges are lying vacant and more than 40 million cases are pending in the courts. Why?

Maybe the answer lies in the following statistics which a Mumbai lawyer M.J. Nedumpara recently submitted to the Supreme Court, based on information gleaned from the websites of the SC and 13 High Courts – 33% of SC judges and 50% of High Court judges are ” related to higher echelons of the judiciary, which translates to 6 in the former and 88 in the latter.

This has been the result of the existing Collegium system of appointments (which the NJAC seeks to replace) in which vacancies are neither notified/ advertised nor is there any transparency in the appointments. Further, a succession of judgments in the past has ensured that retired judges have almost complete monopoly over appointments to various Commissions and Tribunals, guaranteeing them post retirement sinecures – If this does not smell of an oligarchy or netocracy, I am not sure what does.

Take our so called “free” press or media. Most of our leading newspapers and News Channels are owned / managed by business interests (Bennet Coleman, Mukesh Ambani, Bhartiyas) or politicians (Jayalalitha, the Marans, Rajeev Shukla, Chandan Mitra, the Badals, Karthikeya Sharma). Their agenda is naturally set by these behind-the scenes puppeteers whose sole objective is to preserve the oligarchic status quo.

They will not tolerate any change or any “outsider” trying to crash the party. That explains their almost vitriolic hatred of Narender Modi when he first made his bid for Delhi, or of Arvind Kejriwal even today. Mr. Modi is now acceptable to them partly because they have no choice now that he is the Prime Minister, and partly also because he is gradually getting co-opted into the cosy club himself. But Kejriwal is still fair game for a disgustingly biased reporting because he will not abide by their rules.

Consider India Inc. as our world of business is grandly termed. They are the real plutocrats who pay the piper and call the tune. Protectively nurtured in the license -raj nursery they have now attained adulthood and have claimed their legacy. There are 180,000 of them – dollar millionaires. But the real barons of the business world, the dollar multi – millionaires number 14800 (India Today, 10th November 2014) and they are the real oligarchs.

According to the Credit Suisse Global Wealth Report of October 2014 the top 1% of Indians own 49% of the country’s wealth, and this continues to grow: In 2000 the figure was 36.8%. The top 5% own 65.5%. In contrast the bottom 50% Indians own just 5%! And this in a country where a quarter of the world’s destitutes reside, more than 400 million people still live below the poverty line – now we know why they are there.

Even in a far wealthier country like the UK the top 1% own only 23.3% of the wealth.

These then are the four sub-oligarchies which coalesce into a grand whole which is the democratic republic of India. The four guard their turf zealously, both individually and collectively and also network with each other to ensure that no harm befalls any of them. They do not allow any meaningful action to be taken against any of them and ensure that wrong-doing is never punished.

The Radia tapes exposed the most venal complicity between politics, media and big business but were quickly erased. 2G and Coal allocations were not a one-off mistake or malfeasance: they were part of a mutually beneficial public policy, and many more names than those charge-sheeted are involved but the lid has been hastily lowered on the investigations.

It is common knowledge where the SAHARA moneys came from and where they went, but our oligarchs are certainly not interested in the truth becoming public, so Subroto Roy remains in jail: he will pay the bail amount some day and walk free and everyone will breath easier. Jayalalitha’s bail application is heard in record time while the victims of UPHAAR still wait for their application to be heard even after one year.

Convicted members of our privileged netocracy can get bail within hours while unconvicted under trials rot in dungeons for years. A High Court judge passes a patently illegal order and threatens to register an FIR against his own Chief Justice; another defies the law by refusing to sentence a convicted rapist and instead ordering a “mediation” between the rapist and the victim (!!) – and both continue to serve in the courts, no doubt to pass similar illegal orders in the days to come.

Five thousand poor farmers have committed suicide in the last one year under pressure to repay their loans, but one of our high flying (literally) multi-millionaires who owes more than Rupees seven billion to the banks continues to party in his private jets and Mediterranean villas and produce movies for his son.

The country’s banking system is collapsing under the weight of Rs.300,000 crores (US$ 50 billion) “non-performing assets” which is just a euphemism for loans taken by big business which they just refuse to return, with no consequences for them: of course – you and I have to pay for it by more expensive loans and lower returns on deposits. Official secrets are stolen from central ministries and the companies doing so identified (yes, they belong to our 1% club) but only class four employees and middle level managers arrested – the long arm of the law in India shrinks in direct proportion to the moneys and oligarchs involved. (I can guarantee that we will hear no more of this case).

No less than four retired Supreme Court judges give (paid) legal opinions to help an absconding Lalit Modi, knowing fully well that his case is sub – judice and is likely to come up before the same court they were a part of till the other day. Can money speak any louder?
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One can go on ad-nauseam but I think I have made the point intended – viz. that our oligarchs look after their own. In the first place laws and policies are made to suit them. If they still fall foul of them, then the laws are bent to breaking point. If even that doesn’t help then perverse legal interpretations are floated (such as drawing a distinction between an ” affidavit” and a ” disposition” and ” absconder” and ” evader” and so on.) And if, by some miracle, even that is of no avail then the final frontier stares us in the face: an impenetrable thicket of laws and lawyers, judges and judgments, adjournments and appeals that somehow ensures that the innocent is incarcerated and the guilty is freed.

Is it any wonder then how the present Lalit Modi burlesque is playing out? The Congress may be shouting ” thief!” now but it took no action against Lalit Modi when it was in power itself – how could it, when it has been feeding at the same trough in our own Animal Farm? In fact, Mr. Lalit Modi has rendered a great service to this country – he has exposed the putrefied core of our democracy and revealed how every institution meant to strengthen it has actually been undermining it from within. It would appear our tryst with destiny has been postponed indefinitely, for surely it cannot be our destiny to be an oligarchy?

To take another metaphor from ‘Animal Farm':
”The creatures outside looked from pig to man and from man to pig, and from pig to man again: but already it was impossible to say which was which.” The bestial transformation is complete.

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