Why America loves Manmohan By Dr Bharat Jhunjhunwala, Central Chronicle | October 31, 2005 http://www.centralchronicle.com/20051031/3110301.htm US Under-Secretary for Political Affairs R Nicholas Burns says that India and US both stand to gain by "knitting together our two nations in a dense web of healthy economic connections." Now the bonded labour and the Zamindar are also knitted together in a dense web of economic connections. Good rains bring cheers to both. Yet we do not glorify such relation because the Zamindar captures most of the benefits while the bonded labour gets only a few crumbs. So also the US gains much more than India from the economic connections being built by Dr Manmohan Singh. Hence Mr Burns loves Dr Manmohan Singh. Dr Singh draws solace from the fact that India's growth rate has increased in the last two decades. He implies that we will be able to catch up with the rich countries if we keep up the pace. While addressing the Indira Gandhi Conference in November 2004 he said: "Compared to a near zero rate of growth of national income per year in the period 1900 to 1950, the Indian economy registered a 3.5% rate of growth between 1950 and 1980 and over 5.5% growth per annum between 1980 and now. Given this track record, I do not see why the next decade cannot record 7.5% growth if we manage our resources well. This is do-able."
But the global inequality shows no tendency of receding after the implementation of economic reforms by Dr Manmohan Singh in the nineties. According to World Bank data the US' share in world GDP increased from 26.5% in 1990 to 32.1% in 2002. The increase in India's share in the same period was, in comparison, negligible-from 1.46% to 1.57%. The US in clearly making most gains from the present world economic order-just like the Zamindar capturing most gains from good rains. The most important reason of this growing inequality is the Patents regime foisted by the United States on the world under the WTO and willingly accepted by Dr Manmohan Singh's Congress government during its previous run. At the time of signing the WTO agreement it was known that we would be hit by the new patents regime. But it was thought that the loss from a patents regime would be for only 20 years while the gain from free trade would accrue for hundreds of years. But ten years down the line it has become clear that we are unable to use many technologies even after expiry of patents and we are not getting much benefit from free trade either. Small improvements in technologies are continuously patented and that prevents the commercial use of technologies even after the expiry of the patents. For example the patents on Windows 93 will expire in 2013. But by that time Windows 15, Windows 98 and Windows XP have been patented and Windows 93 is practically useless. Thus patent protection has practically become an endless affair. On the other hand, the gains from free trade have been less than expected. Free trade has led to lower prices for our produce. For example, Vietnam is competing with India and Brazil in the coffee market leading to lowering of prices. Dr Manmohan Singh, however, is satisfied by the crumbs being thrown by the US. Instead of asking for the removal of TRIPS from the WTO, he seeks strengthening of the same ostensibly so that we get more advanced technologies legally. The second cause of increasing global inequality is the facade of strong dollar. America needs to import wealth of about $1.5 billion every day to meet its huge import requirements. Such money is no longer coming as the private capital flows because the dot.com boom has not been followed by another similar technological innovation. However, the dollar continues to be the dominant currency because leaders of the developing countries like Dr Manmohan Singh are overawed by the sheer size of the American economy. India could withdraw her reserves from the dollar and place them in a combination of other currencies of the world. This will speed up the decline of the dollar. Second, India should denominate her foreign trade in non-dollar currencies. Presently, if India buys oil from Iran the price is specified in dollars and the money is paid and received in New York. This requires that India holds substantial amounts of dollars for the transactions. The developing countries should create a notional currency consisting of a basket of our currencies in which such trade may be denominated. This will lead to less demand for the dollar. Third, we should proactively focus on exports to the developing countries. America is presently importing $500 billion more of good every year than it exports. With America trying to increase exports the dollar will decline and the attractiveness of the American market will evaporate. However, developing countries will sell their goods at ever cheaper prices if they to be mentally fixed on the American market and prevent a fall of the American economy. Dr Manmohan Singh does not take such an aggressive approach. Rather the Reserve Bank, under his government, continues to buy US dollars and strengthens the US economy thus US Nicholas Burns is happy with Dr Manmohan Singh. The third element of US supremacy is the free movement of capital and unfree movement of labour. The benefit to the world economy can be secured as much by free movement of labour. Say, the average rate of profit in India is 20% and in the US it is 5%. $100 invested by the US in India would earn a profit of $ 20 for the world instead of $ 5 that it was earning at home. Now a similar prosperity of the world can be secured by free movement of labour. The average wage in India is $ 2 per man day. The average wage in the US is $ 100 per man day. The movement of one labour from India to the US would increase the world income by $98. Mancur Olson of University of Maryland thus says: "If other things remain equal, migration of labour from poor to rich countries would colossally increase world income. When a single Indian worker migrates to Western Europe or the United States, for example, world income typically goes up by tens of thousand dollars." The problem arises when free movement is restricted to the flow of capital alone. As a result the returns to capital increase while returns to labour remain flat. India should seek free movement of labour first and free movement of capital next. But Dr Manmohan Singh does not raise such a demand hence Nicholas Burns is happy with him. We have to decide whether we are satisfied with the 0.11% increase in our share of world income while that of the US has gone up by a hefty 5.6%. Dr Manmohan Singh is satisfied with the 0.11% increase hence Mr Nicholas Burns loves him. ------------------------ Yahoo! Groups Sponsor --------------------~--> Get fast access to your favorite Yahoo! Groups. 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