Sunday, August 9, 2015

Abandoning The Gold Standard and Printing Currency as they wish (by US and EU) !!!- Another bane of the world.

The widening vortex of global finance

It is fairly well established that the past three decades have witnessed a worldwide growth in inequality. This phenomenon is often evoked in the same breath as the extraordinary salaries and bonuses that financiers pay themselves.

Clearly, financial institutions such as hedge funds and investment banks are able to generate huge profits, which is why they can afford humongous compensation packages. But what exactly is the source of financial profit? And what is the link between rising financial profits and growing inequality of wealth/income?

Before we can answer these questions, it is necessary to contextualise this phenomenon.

First, rising inequality and sky-rocketing financial profits have paralleled the rise of global finance, or “financialization”, which also denotes the growing penetration of real economic activity (to do with generating surplus value) by finance capital.

In his book, T he Everyday Life of Global Finance , the economic geographer, Paul Langley, explains how the common view of global finance as something “out there somewhere” — timeless, spaceless, identified with 24X7 global markets — is fallacious. It is simply not true that finance operates primarily in a rarefied realm of super-specialists far removed from the world of everyday economic activity such as earning, saving and borrowing.

On the contrary, Langley argues, global finance has fundamentally reengineered the ordinary ways we think about and manage money.

Where risk enjoys a good press

Till the generation of say up to the 1980s, the future was conceived as a realm of uncertainty, one that held possible harm, for which one provisioned through savings and insurance. Financialisation is born when uncertainty is quantified into risk. How we frame risk decides what we do with our money.

In Langley’s formulation, if risk is calculated and managed as a future harm that requires prudence in the present, it makes for an approach of thrift. But if it is framed as an opportunity that holds the possibility of immense rewards, it mandates an approach where the most rational form of saving becomes investment.

Therefore, at the ideological level, financialisation entails two manoeuvres: one, the transformation of nebulous uncertainty into quantifiable risk, which is then managed through an array of calculative technologies; two, a shift in the common-sense understanding of risk as something potentially harmful, to something potentially rewarding.

Given that risk is essentially a financial category, the current civilisational obsession with data is another testament to the growing supremacy of finance capital (in alliance with technology), which wants every piece of the world’s data on anything and everything in order to be able to manage risk optimally for maximum returns.

Your PF is not a saving anymore

We are all financial investors today — either directly or via mutual funds or through insurance or pension funds.

The recent move to allow the investment of Employees’ Provident Fund Organisation (EPFO) money in the stock market basically takes the matter out of the individual’s hands. So, it is not just the rich and the middle classes, but the poor too who must become investors, which is why it’s vital to substitute the provision of essential survival goods with cash transfers. It is the logic behind the neo-liberal state’s enthusiasm for so-called financial inclusion through schemes such as the Jan Dhan Yojana, whose bank accounts would presumably channel portions of personal income (wages/cash transfers) to financial markets via schemes such as the Pradhan Mantri Suraksha Bima Yojana and Atal Pension Yojana.

The objective of these so-called social insurance schemes is less to serve as savings to be drawn upon when needed, than as another source of liquidity for the financial markets. Why else would one want to cap premature withdrawals of PF — all too often the only savings for many — at 75 per cent? But it makes perfect sense in the context of the move to invest PF savings in the capital market.

The flipside of ensuring that one cannot save without investing is that one cannot spend without borrowing.

As one of the largest corpuses of workers’ savings, the EPFO is again a good case study: another government proposal — this time to use the future stream of EPFO contributions for housing loan interest payments — heralds the arrival of the already indebted Indian worker as a tradable “security” in the global financial market.

The engine of financialisation

Saving is not the same as investing. Savings are income that is not consumed. Investment is savings converted into capital with the objective of producing profit.

When the aam aadmi ’s saved income, say, in the EPFO, is invested in equity, or when your bank manager asks you to put your savings in a mutual fund rather than in a fixed deposit, or when you take a home loan not because you need shelter but as an investment, you are willy-nilly participating in the logic of global finance — profiting without producing, purely by managing risk.

In plain terms, what financialisation does is to transfer (or spread) the burden of risk from bearers of investment (therefore risky) capital such as banks, or the state, onto the individual worker or household. Even so, when big banks — whose job is risk assessment — mess up, prevailing wisdom mandates that they be bailed out. However, there is no such luck for the common man who will typically have to pay for the mistakes of private financial institutions through higher taxes and less of public amenities.

The extraction of financial profit

In his book, Profiting Without Producing: How Finance Exploits Us All , the Greek economist, Costas Lapavitsas, lists three defining features of a financialising economy: one, a growing distance between non-financial enterprises and banks; two, banks seeking revenue more from financial markets and lending to households than from lending to industry; and three, an increasing interpenetration between streams of personal income and networks of global finance.

All three are evident in India. The business journalist, Vivek Kaul, has written about how, even as overall lending by banks in India has slowed down, home loans have continued to grow at the same pace. Home loans formed 11 per cent of total bank loans given out during the period of one year ending May 2013. For the one-year period ending May 2015, this had jumped to 19.6 per cent of the overall portfolio.

This single phenomenon confirms all of Lapavitsas’s three criteria. An expanding home loan portfolio means banks in India are increasingly looking to future streams of personal income for profits. It also means companies are relying less on bank loans for raising capital, and preferring capital markets. In fact, in the April-June quarter of 2015, fund-raising from the markets by Indian companies stood at Rs.1.73 lakh crore — more than double the corresponding figure for last year. Finally, given that banks raise loanable capital from money markets, a growing inter-connection between financial profit and future earnings of individuals is inevitable.

Given that financialisation is not just an abstract economic phenomenon but has real social consequences, the next question is the one we began with: what is the source of financial profit?

We also know that the source of profit for productive capital is the surplus value created. The source of profit for banking capital is interest, based on the time value of money. But financial profit, such as the millions earned instantly by founders from an initial public offering, or capital gains earned from trading in securities, have nothing to do with value creation. So, where does the profit come from?

Lapavitsas’s answer is that financial profit is ultimately derived from two channels: expropriation of a portion of surplus value generated by productive capital, and expropriation of a portion of personal income earned by workers (as they turn investors/borrowers).

What does this mean for the aam aadmi ? To begin with, a future of rising indebtedness. Faced with an expropriation of profit by finance capital, productive capital can be choosy about investment. But labour does not have the option of desisting indefinitely from employment, which is why in a capitalist society, financial expropriation will ultimately be at the cost of the wage-earning classes, leading to indebtedness.

The debt could take the form of direct, household debt. Figures from the National Sample Survey Office (NSSO) reveal that during 2002-2012, household debt grew by seven times in urban India and by four times in rural India, the bulk of this debt being incurred for essentials such as housing and education.

The debt burden could also be indirect. Here, servicing sovereign debt will take precedence over public investment for development, as is happening with Greece. These debt payments will come from future streams of tax revenue extracted from the working population through a multitude of income-indifferent indirect taxes such as Value Added Tax and Goods and Service Tax.

So, is it at all possible for a lifelong wage-earner to secure, or feel secure about, her post-employment future in a financialised world where savings lose value unless they become finance capital? And, which in turn, holds the ever-present threat of losses on account of the risks inherent in investment? Perhaps not. This may explain why our age is often described as “the risk society”.

The flipside of ensuring that one cannot save without investing is that one cannot spend without borrowing.

The recent move to allow the investment of provident fund money in the stock market basically takes the matter out of the individual’s hands. So, it is not just the rich and the middle classes, but the poor too who must become investors

Monday, August 3, 2015


A good article about what ails the world. But Christian ideology offers no solutions.

Valerian Rodrigues
In the short span of two years of his papacy, Pope Francis has attempted to reform the archaic institutional layout of the Catholic Church that he heads, has striven to promote inter-religious dialogue, and has taken a stand on a set of key social concerns. What is likely to be the impact of these initiatives, and how will they affect the different constituencies they are addressed to?

Among the social issues addressed by him, these could be considered significant: the treatment meted out to gay and lesbian members of the Church, the role that money and profit-seeking have come to play in human relations, growing income inequalities in societies, environmental degradation and climate change, urban growth and the marginalisation it begets in its wake, the approach of the developed world to the refugee problem, the rise of youth unemployment, poverty and exclusion, ideological ghettoes and corruption in public life. The relationships among LGBTQ groups had no place within the Catholic Church, and, socially, they suffered much ostracism. While the Church has not come forward to formally accord sanction to such relations, the Pope has called for respecting, on grounds of human dignity, the choice that persons belonging to these groups make.

Subjection and dignity

The near collapse of all human urges to consumer culture, he feels, tends to undermine all human values. The economic system in place has eroded economic opportunities to the poor and their life chances. The Pope has tended to link environmental degradation with migration, new modes of slavery, human trafficking and shanty urban growth. As a result, millions of people have been forced to leave their hearth and home for crowded inhuman peri-urban growth. The uncurtailed growth of cities is leading to shanty towns and slums on their peripheries. Conspicuous consumption has led to the depletion of fossil fuels and resulting in adverse climate change. He has denounced the measly treatment extended by the developed world to refugees fleeing their land due to natural and human tragedies. It is not uncommon that boats that transport such asylum seekers are being pushed back into the sea, and all such exodus being subjected to intense surveillance.

The Pope feels that some of the ideological frames advanced in certain parts of the world in the name of freedom beget new modes of subjection. Corruption in public life is a widespread malaise particularly in the non-European world that denies people what is rightly their due. Rampant youth unemployment is a mode of humiliation heaped on them, and the kind of labour that a large number of people are being subjected to make their lives meaningless. On the other hand, there is a massive concentration of wealth in a few hands and conspicuous consumption which the Pope has described as “immoral”. There is one intimate link across all these issues. They are an affront to human dignity. According to him, “putting bread on the table, putting a roof over the heads of one’s children, giving them health and education, these are essential for human dignity”. But he also sees these concerns as being deeply bound with man’s relation to nature, and merely to the here and now.

Significance of religion

The Pope has felt that faith is an integral element of human striving expressed through several religious persuasions. This emphasis on the larger significance of religion in human life has drawn much support personally to this Pope from diverse religious denominations. In Lumen Fidei , his first encyclical, he speaks of the loss of meaning and purpose that a person suffers from in a consumer society. There is not much to strive for after beyond the humdrum of day-to-day life.

Given the role that religions play as bridgeheads to the beyond, paying insult to a religion is a way of humiliating the followers of that religion. One does not have the right to offend and ridicule the faith of others in the name of freedom of religion. Along with Muslim religious leaders he has condemned the satirical depiction of the prophet in the Charlie Hebdo case. At the same time he has denounced the killing of people in the name of religion, and called upon other religious leaders to condemn the same. He has argued that Islam is a religion of peace, compatible with a respect for human rights and peaceful coexistence, and has declared as unacceptable, attempts to isolate Muslims by suspecting them for inciting terror and violence. At the same time he has felt that religious belief should not be abused in the cause of violence and war. In his public appearances, inter-religious dialogue has been a recurrent theme.

In January 2015, when he spoke at the Inter-religious and Ecumenical Gathering at the Bandaranaike Memorial International Conference Hall in Colombo, he argued for “full and forthright presentation” of the convictions of different faiths. While there will necessarily be a variety of religious convictions, honest and transparent expression of the same would bring out what unites and divides the believers. He feels that there are adequate resources in each religion in favour of peace and coexistence. While defending religious freedom, he has denounced fanaticism and religious fundamentalism.

Reforms as challenge

It is over the institutional reforms within the Church that he faces some of his biggest challenges. The labyrinthine corridors of Church offices and Papal bureaucracy are replete with vested interests of all kind, and such has been the case for long. The monarchical design of papal administration has little built-in transparency and accountability. Patronage and clientelism are widespread under the sacral canopy. There have been recurrent financial scandals at the Vatican. Recruits from Italy have dominated offices and positions that govern the Church worldwide. The vow of celibacy that binds the Catholic clergy has led to much abuse including child abuse. The Pope has taken some initiatives on this front, by bringing in new personnel, by convening the College of Cardinals as a body to oversee and elicit accountability, and by taking a few measures to strengthen the synod system. But the institutional leviathan side of the Church is little geared yet to imbibe the exhortation of the Pope two years ago at the conclave that elected him: “The Church is sick and it is closed on itself. It needs to go to the peripheries and risk everything for the shunned and marginalized.”

Behind the initiatives

How does one explain these initiatives? Where is the motivation and justification for these initiatives drawn from? The Pope is not a votary of the liberation theology as it is understood generally. While he has admitted even before he became the Pope, as Cardinal Jorge Mario Bergoglio, that many Marxists display exemplary commitment, he has publicly said that Marxist ideology is wrong. He has not favoured the socialist upsurge in Latin American countries in recent years while condemning authoritarianism and dictatorships. In fact he feels that Marxists have stolen the flag of Christianity, the poor.

Some of the initiatives of the Pope can be explained from his own personal experiences — the situation the Church confronts in Argentina where he was a church functionary for decades, and particularly the legacy of the Society of Jesus of which he is a member. He has the reputation of opposing dictatorial rule resolutely in his own country. Even as a Cardinal, he is supposed to have opted for public transport, lived in a small apartment, and cooked his own food. As Pope, he opted to stay at a guesthouse, ‘Domus Sanctae Marthae’, at the Vatican, than at the Apostolic Palace. The anointed ring that he wears is made of silver rather than gold.

These symbolic options can be explained through certain resources available in Christian teaching, i.e., option for the poor, as exemplified in such exhortations as the Sermon on the Mount, which appealed to Mahatma Gandhi immensely. When, as Pope, Cardinal Bergoglio assumed the name of Francis, such partisanship is reflected. Francis of Assisi, a 12th century saint, is known to have dedicated himself to the poor, the sick and the afflicted.

A place for the Church

But the wider context which calls for these initiatives is not less noteworthy. More and more people have deserted the Church in recent decades. In fact, today, church attendance in Europe is at its lowest ebb. There have been new and rival churches on the rise such as the Pentecostals. Very few people look up to a Catholic priest as an exemplar. At the most his role is confined to certain rituals. The intellectual role that the Church once played as well as the academic discipline of theology is increasingly dominated by lay scholars. The Catholic churches generally possess abundant resources in land, buildings and antiques as part of their inheritance. In fact one of the first steps that Pope Francis took after assuming papacy was to sell the shares of banks held by the Vatican and make it a mere account holder.

However, there is a much more serious reason for this initiative. While the developed world can still offer avenues for scientific, literary and humanistic pursuits, and has room for entrepreneurship, questions are being raised increasingly whether it is all there worth striving for. The kind of consumer citizenship that the market promotes leaves little room to pursue dreams and objectives other than commodities. Human concerns come to be narrowly circumscribed. Competitive politics generally revolves around the mundane and the here and now. In this context, there are many who feel that there is a dimension of the human to seek the beyond that has been wholly set aside by the existing state of affairs. Seeking the beyond could also be linking oneself with the other, particularly the deprived other. Pope Francis seeks to insert the Church into this new-found ethical and religious craving. He also probably feels that religious persuasions and particularly the Church should play this role. But can they?

The social issues the Pope has raised are already a part of public reason worldwide. Whether policymakers are going to take the concerns expressed by the Pope seriously or not depends on several factors. Being persuaded by his concern may not be a significant factor in this regard.

The Church enjoys little moral status in many societies today where it was once the dominant voice. There are other voices in society which can claim to play this role, and rightly so. The papal bureaucracy, with its 800-year history, is little prepared to loosen its grip over significant issues, short of a radical overall. Church interests have been caught with capital, power and order for far too long, and there is already a conservative backslide against many of the initiatives of the Pope. Therefore, will he just end up being “the voice crying in the wilderness”?

(Valerian Rodrigues is ICSSR National Fellow at Mangalore University and formerly Professor of Political Science at Jawaharlal Nehru University, New Delhi.)

The Pope has argued that Islam is a religion of peace, compatible with a respect for human rights and peaceful coexistence, and declared as unacceptable, attempts to isolate Muslims suspecting them for terror and violence.

Pope Francis is seeking to find a place for the Church in a materialistic and market-oriented world where there is a new-found ethical and religious craving