2008- Looking back in revelation

The year 2008 was a real watershed in the history of financial markets and governing paradigm as a whole. The virtual suzerainty and infallibility held by neo liberal laissez-faire which had been doctored on the globe unchallenged for three decades suddenly lost into vapor. Its proponents publicly confessed of their ignorance. The virtual icon of deregulation era, Alan Greenspan had to admit what they believed was wrong. The market is fallible and its self regulation is an unfounded myth and an oxymoron. How else should we judge the dramatic meltdown happening right in front of us? Financial giants melted down leading to a virtual evacuation of Wall streets. Firms like Lehman Brothers which had withstood the storms of two World wars withered down with a whimper. One after another, starting from Bear Stearns, financial giants especially the most espoused Investment Bankers crumbled down struck by the Frankenstein they had been raising. For the time being Keynes has come back trouncing the monetarism of Milton Friedman and likes. The neo liberal regime which was unblemished since the Reagan era has established itself as a failed ideology.

            Keynes had rightly pointed out the deficiency of capitalist system- its innate incapacity to distinguish between “speculations” and “enterprises”. As rightly predicated by him , “when enterprise becomes bubbles in whirlpool of speculation”, economy which is slated to be the by product of “ activities of a casino” will be visited by the violent turns of crisis. Whirlpool of speculation was such unleashed in the last decade comparable only to the scene of pre-1930s with the financial capital and markets, hegemonized all aspects of industrial capital and main street activities. Its whims and caprice were celebrated and keenly followed by global media which in turn acted as trumpet holders of the new order.

            For a better clarity its inevitable to reflect on the financial market structure designed after the 1970s. Banking sector itself underwent a drastic paradigm shift in this era. Till then, US was considered a well regulated and stable banking sector. Soon, the deregulation fundamentalists dismantled even the last vestiges of existing frameworks. The sound monitoring network framed after 1930 depression underwent an overhaul with new catchy “self regulation”. “Lend and Hold” principles of core banking were forced to be jettisoned to suit the new order of financial “innovations”. It was believed “deregulation breeds innovation”. A new set of glamorous cavaliers appeared in the form of Financial Engineers. However as Joseph Stiglitz had pointd out recently “ the innovators were too intelligently designing new products to circumvent even the last resorts of regulatory frameworks”. They were such successful in their mission and the world collapsed! Regulatory frameworks were circumvented by the liaison of Financial and Banking services. One stop financial servicing centers captured the limelight, when processing fees and securitization commanded the sway over the outdated margins between lending and borrowing. ”Originate and Sell” thus becomes the underlining mantra for successful bankng model. Assets of security are no more held by the banks but pooled packaged and sold to the investors charging a processing fee along with it. Thus the risk was distributed all around the market among various stake holders, thus designing multi layered complex environment impossible to decipher. Associated frameworks of regulations of each layers were found inadequate to obtain the complete picture and the end result was the catastrophe we are seeing around us. Every one is at a panic stage not knowing when the risk pops up and running around the corners wailing for bail outs. The loss of confidence in the altars of financial capital was soon reflected onto the industrial sectors with the already weak real income generation.

Self regulation and much touted “new states of equilibrium” was breached once the loss of confidence resulted. The mutual insurance between the financial players not only spread the instability, but also brought the whole sector into a stand still once a domino was let to fall. Hypocrisy was soon let open by the fervent appeals from apparatchiks of laisseze faire denouncing all forms of regulations, but begging for Federal bailouts. Credit Rating agencies who are to be paid by the security generating bankers, kept on giving the much wanted AAA ratings till the last week of havoc and when their credibility itself was dragged to ignominy. Once the sub prime mortgages started failing, all the hidden risks started rising up in tandem, bubbles of assets got small pricks and the whole system was in turmoil.

Government action also saw a wild swing with al sorts of monetary measures running out of options with Federal rates plummeting to the lowest ever possible. Fiscal measures and active government intervention regained the space with vengeance. Demand for radical make over of International monetary frameworks ascended. The monetary readymade crisis solutions advised by IMF to developing countries so far was thrown into dustbin by now beleaguered Rich nations exposing the hypocrite and ideological fallacies promoted by these institutions. Now one wonder, how extensive was the damage posed on the South American and East Asian countries by advices of the IMF and international policy makers during the crisis of 1990s.

            Thus 2008 showed itself to be a recrystallizing episode with its strategic lessons. The role of the state is to be ascertained more by the tragic episodes which was caused the recklessness of market. Glamour of financial engineers and mesmerizing products revealed the whirlpools we were subjecting ourselves. Greater call for regulations and controls with vigilant activism of state is demanded as well as for violent shake up of global medias who missed the crucial junctures rejoicing themselves in false prides of bubbles. It must be an eye opener to all financial media who couldn’t see any wrong with the massive hundred billion Ponzy schemes of Madoff! More over, at least as a rhetoric, Real street is capturing the limelight from Wall streets demanding the active Govt spending in basic infrastructures. In short for financial sector 2008 proved itself a painful lesson and a paradigm shift.    

             

A Pointlist Coverpage for Khazak from Mahabalipuram

Global Food Crisis- A neo liberal Frankestein

For many reasons, the year 2008 etched a watershed in terms of the financial volatility and unprecedented meltdown. The fears of recession still not cleared from the skies where giant investment firms, turn after turn, lookup to Federal Reserve for respite. The cyclical process after a long undisrupted illogical boom has started taking its toll shattering the capital markets one by one. However, when financial markets affect only the upper sections who has the potential resources for speculation, another crisis has been looming over, threatening to throw billions back into the damning vortex of hunger. This year stands apart itself in an unprecedented ferocity in terms of steep rise in the staple food prices.

The food price had remained quite stable for the last three decades, explained by multifarious reasons. The agricultural revolution as triggered by the new scientific practices and integrated Government approach had almost ensured that the Globe has got enough to feed its teeming population. Since the start of 2006, the average world price for rice has risen by 217%, wheat by 136%, maize by 125% and soyabeans by 107%. The price rise reached monstrous level to trigger food riots across the globe, from Philippines to Africa, from Bangladesh to Latin America. The rise is discriminatory in itself as it impacts the poorest among the poor disproportionately draining off their meager capacity to satisfy basic necessities. Global food reserves have plummeted into worst levels forewarning a deeper malaise. In all respect the situation has reached the nadir of  hope as recapitulated by World Bank authorities – the present crisis in food prices is erasing off 60% of our achievement in poverty eradication for the last 3 decades, dragging a billion back into the abject poverty.

            The root cause analysis will be a challenging task as it is interlinked in a complex outline with the labyrinth of enormous global network of capital and policy neglects, prompting any partisan to tweak the facts suiting their line of argument. As already touted  by US President and German Chancellor, high priests of altar of Global finance are seeing a just corrective pattern attributed to the changing diet pattern of the developing world, especially of India and China. The prospering middle class of these countries have moved up the food chain with the consumption tilting to meat and animal products which indirectly effect pressure on the staple food which remains its costly inputs. The spiraling population pressure is also exacerbating the demand side pulls.   Thus the crisis is being explained in terms of demand side peaks. But an empirical analysis will disprove this demand side monocausal explanation. Except in Soya consumption, developing nations hasn’t seen any spike in staple food. In a rather ironical findings, even when India and China have been galloping in terms of economic growth since 1990s, the average calorie consumption of its people has seen a gradual decline. This study undertaken by Utsa Patnaik is undermining the myth of growth itself. Although China has shown slight improvement in its indicator since 2005, its well below 1990 level. Adding this into the stable picture of the population dynamics where China has almost reached its targeted stability and India seeing decline in the population growth, the demand side explanation of the crisis smacks of hurried eye washes.

            Thus rejecting the demand side myth of convenience, we should foray into explaining the structural constraints and destabilizing forces which acts on the supply side. The crisis in food scenario is concomitant with volatility in hydro carbon price. The steep rise in the oil price has a domino effect on the farmers with the absorption layer provided by Government subsidies being dismantled. This exposes the farmer to the vagaries of illogical international speculations. The fluctuations in the prices manifest itself through the energy intensive mechanization, power consumption for irrigation, fertilizers and transportation costs. Thus multiplier effect of oil price rise complicates the interlinkage and any unregulated commodity speculation in the oil commodity market radically shifts the burden directly on the food price. Combined with the neo-liberal ideology of ‘lesser the Government, the better’ thrusted on the policy decisions, food prices thus become a toy in the hands of never trustable ‘invisible hands’ .

            The next factor destabilizing the food supply is the emergence of Bio fuel. Governments across globe from Europe and US has shifted to BioFuels on a priority base intending to delink themselves from Middle East dependence. The active state support through huge subsidy packages has diverted the farming acreages from food to fuel needs. Traditionally US had remained the food bowl of World, with the wheat from US feeding the starving Africa. Although, food channel was prioritized as an instrument of world dominance, it was undeniable- the role of US farming on world food supply. Thus the sharp variance in the diversion of land for energy purpose has toppled the supply situations to a verge of instability. The increase in the redirecting of corn and oil seeds for bio fuel purpose had a telling effect on the world food price. As a byproduct of this new engagement the wide scale deforestation in Amazon lands contributes in negative terms to the overall greenhouse phenomena debilitating the agriculture further. The drastic change in the climate has also contributed to the disruption in the agricultural seasons. Harsh droughts which ravaged Canada and Australia accompanied by the torrential rainfall in parts of US had an overall dampening impact on the global food production.

            The consistent neglect of world and national authorities towards agricultural sector has been a steady phenomenon, worldwide since 1960s. The lacunae after green revolutions and the over enthusiastic focus on secondary and tertiary sector persisted since then. The neglect was severe in third world countries where consequences were sharp owing to the population inertia on the agriculture. The excess labour couldn’t be absorbed into more productive areas due to various policy malfunctions and at the same time, land productivity couldn’t be enhanced adding to the depletion in the natural productivity owing to the aftereffects of inputs oriented Green Revolution. The agricultural productivity saw a virtual stagnation in an emerging power like India with no further land being utilized for agriculture. On the other side, a dangerous trend of conversion of rich agriculture land for industrial purpose is also gathering momentum, suiting the new liberal equations of Growth ideology. The synergy seen in 1960s between scientific community, farmer and the government seems lost for ever.

            The structural conditions hampering easy flow of food production can be traced to the changing global finance and capital structure. Invasion of profit seeking hot funds into the commodity market has vitiated the already delicate conditions further. The neo-liberal agenda of deregulation amounting to market fundamentalism give birth to rampant short term speculators who have no concern other than short term profits. Volatility is the key word where speculators relish themselves. The rocketing scales of investments from hedge funds into commodity market have reached astronomic proportions compared to 2 years back. The volatility drives speculators and they drive volatility. Market fundamentalists have conveniently forgotten this basic premise in  their hurry for opening up new avenues of profit. When investments graze over equity market, the speculation can be allowed, but over essential commodities it has harsh brunt over the starving populations who wont count in the myopic race for profits. As Jayati Gosh has pointed out the concomitant volatility in food price and oil has associational nature and the fundamental nature of speculators is driving this volatility.

            The integration of world markets through the financial globalizations has thrown open the public into the throes of often illogical dynamics which rule the global financial sectors. Any volatility is thus penetrated into the local markets contradicting the essential feature of just demand and supply equations at local level. This feature is compounded by the manipulated phasing out of Public Distribution Systems. The oft quoted reason behind the PDS dismantling – distortions in market- becomes an irony in the phase of global distortions. This is better exemplified by the Indian market where the price remained high even after a record procurement. The irony is further deepened by the sheer pledge of speculation as not distortion but the essential gods with Invisible hands! Manytimes it is argued that agricultural produce is often deflated and its high time the farmer get his due. But the already deep rooted agro giants like Cargil foods usurp the surplus value and dominates the global trade disproportionately. The euphemistic chant of ‘ farmers time has come’ is a disguised eulogy for these corporate giants which make a kill while the world starves around.

            The neo-liberal agendas have succeeded in twisting the concept of food security itself. In the 1980s itself many third world countries including India started reciting the mantra learnt from International masters ‘ Food security is not what you store but what you can buy’. At the first sight this looks innocuous, however a deeper analysis brings out hidden pattern of linking the market into the food supply and allowing profit seeking sharks to swamp the market meant for basic subsistence of world population. The dislike for PDS and food reserves thus has an ideological base formulated in the policy makers of developing world in 80s itself.

            Thus an analysis of root cause scenario has provided us base enough for repudiating the Demand hypothesis as advocated by the Financial world. Economists world wide have shredded this theory into pieces already, citing the empirical findings itself. On the supply side the structural conditions and constraints have ramifications on a scale never thought before. And as we have seen already, this crisis has its root in the policy and implantations- which can be controlled. The food supply is such integral not to be thrown into the whims of financial markets. Deep rooted national policies are required to fight off this crisis. As exemplified by the experience of Venezuela and other Latin American countries who could be more susceptible, determined state actions are instrumental in the fight for human existence. More investment in the agriculture research is the need of the hour as well as the realization of tactical importance of food security

Red

In a land where Love killed itself
A color of red comes back haunted
The streets where red dotted the pavements
Gushing out of the wounded heads
Blood tells a story of love.
Roses were nipped out to have a 14th
The blood in our streets never drained away.

Reconciliation

Its just like that!

You get used to the shrouding vacuum opposite to you

while you sip an orange juice

while you sketch a dream in words

Once your melancholus narration of the unseen hope

crumbled down to the vacant seat against you.

The songs which you wished for yourself

kept on avoiding you.

You were left desolate -stranger on the 'messenger' with the wildly angst

Around the candle light, the emptiness opposite to me

Transpired into my other self.
I was holding my own hands

Reading the nuances of wayward palm lines

I was feeling my own breath against my face

Against the mirror I found my mate

cloaked in the rag of my desperation.
Now, wrapped in the hug of my own fingers

I linger for eternity

Long walks in the boulevard, beside my restless mind

I join my hands with my own self,

the other side of my own hollowness

scattered visions

In the frozen wasteland of dreary time
You lit a flame of kinness
The colours which inebbriate in the rain
The moments which pierce into our conscience
All fades into the horizon
When your light kisses the strings of infinity

Ants creep against my eyelids
They share with me their thousand eyes,
A world which crumbles down to million colours and scents
A dream which scattered into splash of joys
Pricks of honey combs at the tips of grass

On the silent portrait of your unending passion
We lit the saintly candles
We pray to you, the relief from the other worlds
When death couldnt silence you
The wax melts and falls on our eyelids
We emerge out of the frosty evenings!!

While writing

When I try scribbling down
Beware of me
Unknown fears grip me
Putrid demons possess me
Till the last drop from the stylus
I should erect a signboard – beware of a beast in pain

Memories which maul me apart,
Silent crimes chill out my ear
All those stale dark scents
Appear on my nib.

Scent of her which turns to
The stench of decayed ruins of imagination
I pray for the life of a moth
To live full for just two days