Left is never right – The opponent’s rebuttal

The opponent’s reply to the rebuttal

The proponent, although denies vehemently that he is a believer in the efficiency of free market capitalism, a concept which has got completely discredited even in advanced capitalist countries, his entire thinking is enmeshed in the logic of free market capitalism. Let me explain by giving examples from his points under quotes.

The proponent argues that “the RBI uses a thumb rule even today that the rate of growth of money supply in the long run equals the rate of inflation”- This is another example of a rigid belief in the free market capitalism as argued by the monetarists under the leadership of Milton Friedman. There are ‘n’ numbers of theories which show that this belief in rate of money supply being equal to the rate of inflation is wrong. (See Kaldor’s Scourge of Monetarism). You are talking about empirics. Let me then also give you some empirical anecdotes. There had been a tremendous increase in the inflation rate all over the world in the recent period including India. Was it because of an increase in money supply world over? NO.  In India, did the Government increase the money supply to cause the inflation? No. Now, there is a peculiar situation. The Government is increasing money supply through decreasing the interest rate, bank rates, repo rates, CRR etc. But inflation has come down to 0.26%. This easy monetary policy was again done to revive the economy during recession. Has the situation improved? No. The industrial growth rate in the month of February is again negative. This tells us that the idea of using an easy monetary policy to counter inflation and any other problem in the economy is wrong. Only committed neoliberal ideologues believe in such theories.

The proponent points out: “given that these inefficiencies exist, the only way to raise tax receipts is to raise the tax rate, which, as we have established adversely impacts the aam aadmi.”-In our presentation (Leftwing position as a whole), we never argued for increasing the tax rate for the aam aadmi. We have talked about resisting the tax concessions given to corporate and the rich. It is only a distorted sociological thinking in the era of neoliberal capitalism that equates the corporate and the rich with the aam admi.

“Prices of some food items like tea have declined (TOI).”-Tea is not a food item. It is a beverage. Perhaps my neoliberal proponent has been influenced by leftwing call for labour’s welfare while he is celebrating the declining price of standard energy drink of working class! Please look at the price movements of essential food items: rice, wheat, dal, sugar etc. They are still increasing.

“Secondly, prices are increasing because of increased worldwide demand, not due to speculation.”-Currently there is a recession in the world economy. So there is no question of increased demand. More interestingly, George W Bush said a similar thing when he argued that food prices are increasing because of increased demand from India and China. Well your views are congruent to his. George Bush is no believer in Keynesianism and public intervention. He remains one of the most vociferous flag bearers of laissez faire capitalism. So are you.

“Agricultural commodities are mostly perishable and hence immune to speculation.” Again you say, “remember that price regulation leads to hoarding and black marketing”-Now, hoarding is done for speculative gains. So your second sentence contradicts the first. More importantly, the entire assertion that there can be no speculation on agricultural commodities is entirely wrong. There exists large scale speculation in agricultural commodities. In India, you should know that the Government under pressure from the Left banned future trading on some essential agricultural commodities to curb the influence of speculators on food price inflation.

“Moreover, agricultural markets are widely documented as being closest to perfect competition, with a large number of producers and consumers.”-Here our friend has forgotten about some thing called monomania. Do you believe that Monsanto and Cargill participate in perfectly competitive agricultural markets to buy or sell their products? They are amongst the biggest monopolies in the world participating in the market for agricultural commodities. And by the way they have come to Indian market also.

“If productivity declines, wages should fall, and that is the sole opposition I have to banning wage cuts. Secondly, on a decline in wage shares, I would like to remind my opponent that a decline in wage shares simply means that profits have been increasing faster than wages. Note, it does NOT mean that wages have been decreasing. A decline in the wage share is entirely consistent with an absolute increase in wages in line with productivity increases.”-I think that the proponent in this paragraph has forgotten the basics of economics. He has either forgotten or got confused between the notion of nominal variables and real variables. In this paragraph what wage or profit is he talking about, real or nominal? Even according to neo-classical economics, if productivity increases then real wages increase and not absolute wages (I do not know what he meant by absolute wages, I assume that he meant nominal wages). Now, in India, productivity has increased. If the workers could gain the entire increase in productivity, then real wages would have increased leading to a decline in profits, since the output is shared between real wages and profit. However what has happened is that even with an increase in productivity, the share of wages has declined. Now, if the share of profit has increased and that of wages have decreased then it shows that there has been no increase in real wages even with an increase in productivity. In fact, there exist studies which show that real wages in Indian industries have in fact declined even with an increase in productivity. The proponent is completely oblivious to this.

As per poverty estimates I will just like you to ponder over the point, that today in India the poverty line is Rs 356.30 for rural India and Rs 538.60 in urban India per capita per month. There is no point in going on about the poverty debate as we have already made our opinions quite clear. The proponent has deliberately avoided the Arjun Sengupta Report which states that “77% of Indians, or 836 million people, lived on less than 20 rupees per day with most working in informal labour sector with no job or social security, living in abject poverty.” Even World Bank estimates 456 million Indians (42% Indians) now live under the global poverty line of $1.25 per day (PPP) meaning that a third of the global poor now reside in India which is ironically just double of the 21% data provided by the proponent. Instead I would like you to visit any village or city in India with the above mentioned money (Rs 356.30 for villages and Rs 538.60 for city and town) and spend one month, taking care of your fooding, lodging and clothing. The impossibility of this task only proves the hollowness of the poverty estimates.

On privatization, I would again like to reiterate that in India, profit making PSUs have been privatized and those profit making PSUs earned the highest profits in India. You conveniently glossed over this very important argument against privatization and only repeated the neoliberal clichés against the public sector.

Neoliberal hegemony as an ideological hegemony of the ruling classes already has an acceptance of secessionism of the rich from the poor. Unfortunately, the proponent subscribes to such distorted sociology and neoliberal ideology with its own distinctive rhetoric although he accuses the opponent to be rhetorical and ideological. There is no problem in being rhetorical and ideological; the point is that which interests you are serving in articulating your politico-ideological positions in a battle between neoliberal hegemony and leftwing counter-hegemony. My dear friend, with your above arguments, are you not in favour of the elitist shining India by completely forgetting the plebeian India?

Lastly, I would just like to say that the economic policy of Left in India saved the country from the devastating impact of the financial crisis. It is for the Left’s opposition to the policies of financial liberalization that the common man’s money is safe in Indian banks which have not collapsed like the banks in Europe and USA. The policies of neoliberal capitalism have become completely discredited and proved to be harmful for the development of a country like India. In the current conjuncture, the neoliberal economic policies have led to the global economic meltdown and the ruling classes of our country wants to liberalize the financial and the retail sector to tackle this crisis in exchange with the rising miseries of the common people of India. It is an opportune time in the midst of economic crisis that budding economists of Oxford also recognize the fallacies of neoliberalism and supports the policies/politics of resistance that the Left represents. If you hate the Left then at least pay some respect/tribute to Keynes! Due to lack of space, I end this debate here and would like to debate and discuss further with the opponent (if he has any further query) in the Oxford Union with a glass of wine sponsored by me in the coming Michaelmas term.

The Opponent: Maidul Islam is a Clarendon-Hector Pilling Scholar (2007-10) and a Doctoral candidate in Politics at Brasenose College.

Date: April 11, 2009