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The economics of the ‘Turkish Spring’

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Pitched battles between anti-government demonstrators and Turkish police over several days at Istanbul’s Taksim Square constitute a national uprising against Recep Tayyip Erdogan’s incipient Islamist dictatorship. As of this writing on June 2, tens of thousands of regime opponents are in control of the heart of Istanbul while police have withdrawn. The economic distress of Turkish households is an important factor in the country’s political upheaval.

News media have already dubbed the demonstrations a “Turkish Spring”. That is a turnabout, for the “Turkish model” was touted two years ago as the solution to the economic and social problems of the failing police states of Arab nationalism. Erdogan’s supposedly moderate Islamism and dynamic economic management supposedly offered a way out for Egypt and other failed economies of the Middle East.

Erdogan had declared himself a “servant of Sharia” during his 1994 mayoral campaign in Istanbul, but most Western observers chose to take the would-be Turkish dictator at his subsequent word that he would respect the secular character of the Turkish state.

It was never to be. Erdogan did not preside over an economic miracle – contrary to the credulous estimates of many Western observes – but arranged, rather the usual sort of Third World credit bubble, which has left Turkish consumers to tighten their belts in response to a devastating debt burden. “Economic troubles will dominate the political agenda, and Erdogan’s claim to leadership of the Islamic world – let alone his own country – will look far less credible,” I warned in this space April 23 (see Turkey’s ticking debt time-bomb, Asia Times Online), just before Moody’s assigned Turkey an investment-grade rating, perhaps the poorest judgment by the rating agency since it put a “AAA” stamp on securities backed by subprime mortgages.

Turkey’s problems can’t really be compared to the 2011 revolts in Muslim North Africa, to be sure: the country’s economy will keep functioning, although far below the expectations of ordinary Turks, and its political system is robust. But the anti-government demonstrations denote a turning point in the fortunes of Turkish Islamism.

The demonstrators’ anger, to be sure, centers on Erdogan’s creeping dictatorship: the gradual imposition of Islamic law in a Turkish state founded on secular principles, the jailing of hundreds of regime opponents, and the assimilation of enormous economic power into corrupt monopolies controlled by Erdogan’s party. Leaked US diplomatic cables claimed in 2010 that Erdogan amassed a huge personal fortune through bribery during his term and commissions on the sale of Turkish assets to foreign investors. [1] Kemal Kilicdaroglu, leader of the secular opposition party CHP, compared Erdogan to Hitler.

Syria’s civil war, moreover, sharpens Turkey’s sectarian and ethnic divisions. Perhaps a fifth of Turks adhere to the Alevi sect, a branch of Islam that fairly could be described as moderate, and which votes mainly for the secular parties. Erdogan’s emergence as the leader of militant Sunnism in Syria as well as Gaza, where he patronizes Hamas, worries the Alevis, who have a long memory of Sunni persecution. The Alevis have little to do with Syria’s Alawites, the Assad family’s minority sect, but the Alevis have some sympathy for the Assad government because the Turkish Sunnis are so determined to destroy it.

The Kurdish minority comprises more than a fifth of Turkey, and its fertility rate is double or triple that of Turkish-speakers. Ethnic Turkish Sunnis – the population segment to which the ruling Justice and Development Party (AKP) appeals – barely make up a majority of the Turkish population, and the demographic trend will make them a minority in 20 years or less. Syria’s two million Kurds have become an independent factor as a result of their country’s civil war, with their own municipal administrations and militias. They view Arab jihadists who dominate the rebel forces with justifiable fear and distrust. Again, Erdogan’s backing of the Sunni rebels upsets Turkey’s Kurds.

Only a small minority of the AKP base, moreover, favors its Islamist agenda. Only 12% of Turks want Sharia to be the law of the land, according to an April 2013 Pew Institute survey, compared to 84% of Muslims in South Asia, 77% in Southeast Asia, and 74% in the Middle East and North Africa.

That is why Erdogan’s mandate rested on economic performance. His Sunni fundamentalist agenda does not appeal to the Turkish majority. But he drew votes from secular Turks on the putative strength of his economic management. The analogy to Hitler is in some respects odious, but it holds in characterizing Erdogan’s covert agenda to impose an ideological dictatorship. The Turkish public correctly views as creeping Sharia the government’s new laws that prohibit the sale of alcohol after 10 pm and ban any portrayal of alcohol consumption in public media.

In his 2011 presidential campaign, Erdogan emulated an earlier Anatolian, namely St Nicholas. As I wrote in a 2012 study for Middle East Quarterly,

Erdogan’s bubble recalls the experiences of Argentina in 2000 and Mexico in 1994 where surging external debt produced short-lived bubbles of prosperity, followed by currency devaluations and deep slumps. Both Latin American governments bought popularity by providing cheap consumer credit as did Erdogan in the months leading up to the June 2011 national election. [3]

Erdogan’s politically directed generosity has come back to bite Turkish consumers. Personal consumption is falling in real terms. GDP growth is close to zero, propped by a 20% rate of growth in government consumption. With government spending dominating economic activity at the margin, it is not surprising that Turkey’s inflation rate stands at 7%.

The aggregate economic data disguise growing distress in the Turkish economy. Government data distinguish salaried employment in the formal sector from “unpaid family employment” and “self-employment”. During the past year, employment in the formal sector-has shrunk by 5%, while “unpaid family employment” has risen by 5%. That means simply that manufacturing and service workers with real jobs were laid off and took the bus back to hard-scrabble farms in central Anatolia or sponged on small family businesses. This is disguised unemployment. A 5% shrinkage in the formal economy workforce is a devastating result.

Turkey’s economy, oddly vaunted as the next China, relies on low- and medium-tech exports to Europe, the Arab world, and the former Soviet Union. It grew as a cheap-labor outlet for European and some Asian manufacturers and sank as the European economic crisis, Russian economic stagnation and disarray among Muslim trading partners shrank its markets. It has a lower rate of high-school graduation than Mexico and an enormous informal economy. A few Turkish universities teach to world standards, but Turkey has nothing to compare to the talent pool of China, Taiwan or Korea.

To sustain the consumer bubble, Turkey ran a current account deficit that reached 10% in 2012, financed overwhelmingly with short-term debt-provided in large measure, according to anecdotal evidence, by the Sunni Gulf States who view Turkey as a bulwark against Iran.

Turkey’s short-term foreign debt is still growing at a 30% annual rate year on year (and at a 70% annual rate during the first three months of 2013). The economic slowdown was supposed to have reduced Turkey’s foreign borrowing; instead, it has accelerated. The patience of Turkey’s funders in the Persian Gulf is long but not unlimited.

Consumer debt outstanding has risen nearly 10-fold since 2006, and jumped by 40% during the past year. As I noted in my April 23 essay, it is hard to reconcile a 40% annual increase in consumer debt with a 5% annual increase in nominal consumer spending (inflation is running at 7%, so real spending is down by 2%). The data imply that Turkish consumers are borrowing enormous amounts to refinance the interest they owe on their existing debt.

Erdogan’s spending spree of 2011 has left Turks with a horrendous hangover. Banks cannot balloon their consumer loan book by 40% a year indefinitely; when the music stops, Turkish households will have to reduce their consumption sharply. Debt-burdened consumers know that this must happen sooner rather than later, and this presentiment probably helps sour the national mood.

“Turkey’s longer-term risks are even more daunting,” I wrote in the cited essay for Middle East Quarterly. “A developing country cannot sustain a fertility rate that leads to a rapid increase in elderly dependents, yet the fertility rate of Turks for whom Turkish is a first language has been in steady decline over the past fifteen years, falling to only 1.5-equal to that of Europe-while its population is aging almost as fast as Iran’s, leaving the country’s social security system with a deficit of close to 5 percent of GDP. “If we continue the existing [fertility] trend, 2038 will mark disaster for us,” Erdogan warned in a May 2010 speech.” Within a generation, half of Turkey’s military age men will come from Kurdish-speaking homes if the present trend continues.

In retrospect, analysts of Turkish politics may conclude, Erdogan’s Islamism was not a fresh start for Turkey but rather a belated attempt to pour Islamic glue into the cracks that threaten to fracture Turkish society. He may already have failed. A growing proportion of Turkish voters has concluded that they made a deal with the devil, and that the devil hasn’t kept his side of the bargain.

Notes:
[1]
US cables claim Turkish PM Erdogan has eight Swiss bank accounts, Hurriyet Daily News, November 29, 2010.
[2]
The World’s Muslims: Religion, Politics and Society, Pew Research Center on Religion and Public Life, April 30, 2013.
[3]
Ankara’s ‘Economic Miracle’ Collapses, The Middle East Quarterly, Volume XIX, Number 1, Winter, 2012.

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Indonesia’s political will is the key to a successful carbon tax implementation

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Authors: I Dewa Made Raditya Margenta, and Filda C. Yusgiantoro*

A carbon tax should be overviewed as an oasis of post-pandemic recovery. The proper carbon tax scheme will solve two of Indonesia’s extensive homework; reducing greenhouse gas (GHG) emissions and boosting revenue to support economic recovery. In the end, Indonesia’s political will is crucial in completing this mission.

Recently, the carbon tax has become an exciting topic of discussion in Indonesia. This carbon tax is introduced in a revised General Taxation Law bill and becomes this year’s Indonesia National legislation Program. According to the bill, the government plans to collect a carbon tax of IDR 75,000 (US$ 5.25) per tonne of GHG  (tCO2e). The carbon tax could target emissions on the use of fossil fuels such as coal, diesel, and gasoline by factories and vehicles.

The introduction of the Carbon Tax is quite astounding. Previously, the Coordinating Minister for Maritime Affairs and Investment of Indonesia, Luhut Binsar Pandjaitan, said that President Joko Widodo planned to issue a Carbon Trading regulation in December 2020. However, there has been no signal that the regulation will be issued until now.

Implementing a carbon tax is seen as a strategic step for the government to reduce GHG emissions and boost state revenue to increase development funds. As a result, the carbon tax scheme must be well constructed, specific, and well-targeted so that the carbon tax implementation can recover the environment and Indonesia’s economy.

However, the carbon tax implementation will not succeed without strong political will and commitment from the government.

Carbon tax as a climate action plan

As the sixth-largest GHG emitter in the world, Indonesia becomes vulnerable to climate change impact. According to the Ministry of Environment and Forestry of Indonesia, the transportation and manufacturing sectors contributed to around 64% of 2017 national GHG emissions. This number will rise considering the increase in energy demand and manufacturing activities to stimulate the economy. Therefore, a new climate policy, such as a carbon tax, needs to be promoted as a climate action plan.

As an economic-environmental instrument, a carbon tax is more straightforward to address this issue. Also, the revenues gained from this tax can be recycled to support green development. Thus, the target of this tax must be well identified, and the carbon tax scheme must be designed correctly to avoid a deadweight.

Singapore can be the lead example to emulate its carbon tax scheme. Based on Singapore’s climate action plan, the tax is applied to the facilities that emit abundant GHG annually. They also promote clean and simple carbon tax to preserve fairness, uniformity, and transparency. Its carbon tax scheme, which takes place from 2019 to 2023, will be reviewed by an impact assessment in 2022.

From Singapore, Indonesia can learn that the scheme may have the flexibility to respond to the dynamics that will occur, including the opportunity to move towards a carbon trading scheme in the future. Besides, having a solid political like Singapore will give Indonesia’s carbon tax implementation an upper hand.

Building Indonesia’s political will for a climate action plan

Indonesia’s successful climate action plan relies on various variables such as GHG emissions reduction, identifying the most appropriate instruments, and introducing new climate policies. However, all of these variables are highly dependent on political will.

Indonesia’s political will on climate mitigation would be a perfect start and a powerful tool to take immediate action in climate mitigation initiatives. Instead, Indonesia’s political will may face a political challenge during the policymaking process. A lengthy policymaking process of the New and Renewable Energy Bill is one of the examples. Hence, Indonesia’s political will to address climate change at the beginning of the policymaking process is crucial.

Gaining public trust and being severe are essential steps that should be carried out before introducing a carbon tax.

At first, the government must improve its accountability and transparency, reflecting on what Singapore has shown. Indonesia should also consider complementary economic policies that minimize a carbon tax’s negative impacts on business and household sectors.

Then, Indonesia could consider removing fossil fuel subsidies and replacing them with direct subsidies to low-income households.

Finally, Indonesia should guarantee that the obtained revenue from the carbon tax will be recycled for green development and improving community welfare.

Conclusion

In brief, implementing a carbon tax in Indonesia will determine the nation’s and its citizens’ future.

Ensuring the carbon tax implementation will be on point, Indonesia’s political will is the brain, which can be seen from a carbon tax scheme and the supporting policies. The success of this policy will be seen from intensive GHG reduction, positive economic growth, and improve Indonesian people’s welfare simultaneously.

*Filda C. Yusgiantoro, Ph.D., chairperson of Purnomo Yusgiantoro Center and an economic lecturer in Prasetya Mulya University


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Central Bank Digital Currencies: What do they offer?

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The decision of the government of El Salvador to adopt bitcoin as legal tender has invited mixed reactions from around the globe. Notwithstanding the pros and cons of the issue, the message is loud and clear – digital currencies are here to stay.

The total market cap of bitcoin has reached 600 billion US dollars by March 2021. Cryptocurrencies have captured the imagination of rich and poor alike. The percentage of cryptocurrency users has been steadily increasing in countries facing financial instability and grappling with weak currencies. Latin America has seen large scale activity in bitcoins, especially in countries like Venezuela and Columbia. Nigeria likewise has emerged as a hub for bitcoin trade given the challenging economic climate in the country. The Central Bank of Nigeria (CBN), in a February directive, had warned banksand financial institutions of facilitating payments for cryptocurrencyexchanges.Cryptocurrency trade has grown to such volumes that it can’t be overlooked by the state actors.

States and Central Banks unable to buck the trend are contemplating their own version of digital currencies. So, do ordinary citizens gain something from the Central Bank Digital Currencies (CBDC’s)?

Societal and Environmental concerns

Experts have already pointed out serious pitfalls of allowing a free hand to decentralised currencies outside the regulatory framework of the governments. Crime syndicates use cryptocurrencies as safe conduits for money laundering, cross-border terrorist financing, drug peddling and tax evasion. Recently an FBI operation, “Trojan Shield”, which busted a criminal underworld along with the seizure of millions worth of cryptocurrencies, further echoed the proximity of criminals with the crypto-world. Several cryptocurrency frauds have unearthed in recent history. The widespread popularity of cryptocurrencies has diluted the globalstandardson KYC (Know Your Customer) and AML (Anti Money Laundering), providing room for criminals and lawbreakers. 

The energy-intensive nature of cryptocurrency mining has raised concerns about its impact on climate change and pollution. China and Iran have recently put stringent controls on bitcoin mining owing to environmental pollution and power blackouts. It is bizarre that the total electricity used for bitcoin mining surpasses the total energy consumption of all of Switzerland.

Threat to sovereign power 

Decentralised currencies pose a grave threat to the sovereign power of the governments. Several States and Central Banks have thus stepped in to maintain their relevancy, by announcing their version of digital currencies, backed by sovereign guarantee. In the latest Bank of International Settlements (BIS) paper, 86% of 65 respondent central banks have reported doing some research or experimentation on Central Bank Digital Currencies.

China leads the rest

China is quite ahead in the development of its CBDC compared to all other nations. China has already distributed some 200 million yuan (US$30.7 million) in digital currency as part of pilot projects across the country. By early implementing the digital yuan, China expects to challenge the US dollar’s hegemony as the international currency. In future, China hopes to achieve more international trade through a digital yuan, which would further China’s global ambitions and effectively push plans like the Belt and Road Initiative (BRI). Moreover, it provides China with sufficient strength to effectively bypass US sanctions in any part of the world.

The Federal Reserve and the European Central Bank have taken a more cautious stance and indicated that they are not in the race for the first place. In late May, Fed Chair Jerome Powell announced plans for a discussion paper on digital payments, including the pros and cons of the US Central Bank currency. European Central Bank Chief Christine Lagarde said her institution could launch a digital currency only around the middle of this decade.

Why CBDC’s may not offer anything new

Only stringent regulations or an outright ban on decentralised currencies could control money laundering and financing of crimes through digital currencies. It is unlikely that the introduction of CBDC’s would hamper the flow of illicit money through decentralised channels. In all probability, criminal elements would still run their show through decentralised currencies where there is anonymity and the lack of regulations.

CBDC’s may perhaps offer fast and real-time settlement of payments. While this is a plus, the existing bank payment systems already provide for swift and sophisticated transaction processing. So, real-time settlements are nothing new and certainly not a novel innovation. Moreover, cross-border transfers might not see any revolutionary change because these transfers still have to go through the existing regulatory frameworks.

CBDC’s would boost the surveillance mechanisms of the State. It would put every transaction under the government scanner. Individual privacy will be a major causality if proper safeguards are not incorporated. Brighter sides are that the government could effectively target economic crimes like tax evasion with greater ease and a reduced carbon footprint.

Threat to the banking system

Though the actual modalities have not come out, reactions from Central Banks indicate that CBDC’s will co-exist with the existing fiat currencies. The new system can potentially destabilise the present banking system and the financial intermediaries. Proposed digital currencies are backed by the Central Bank, which could never go bankrupt. In the existing system, money is secured by the guarantee offered by private banks. In a period of economic instability, citizens might pull too much money out of banks to purchase CBDC’s, backed with better security and consequently triggering a run on banks.

Back to centralisation

The introduction of digital currencies is out of necessity to preserve Central banks’ legitimacy in the face of the cryptocurrency boom. It possibly will protect the citizens from the extreme volatility of decentralised currencies and may serve as safer mediums of exchange. Since it is backed by sovereign guarantee, it might also act as a better store of value. But, CDBC’s would expand the state power and cause the continuance of the regime based on “trust” in governmental institutions, which was precisely what decentralised currencies like bitcoin had intended to annul. Essentially, CBDC’s would bring in more government to our daily lives, which is rather regressive and goes against the spirit of modern libertarian values.

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Rise of Billionaires In India, Lobbyism And Threat To Democracy

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Let me start by asking you – Have you watched Oliver Stones’ 1987 masterpiece, ‘Wall Street’? Great! For those who haven’t, here is a quick reflection of its storyline. This movie is a premise with a promise, and exert its audience to seek an answer to one of the most neglected question in the philosophy of ethics and greed – ‘How much money is enough money?’. Michael Douglas plays an unsparing millionaire raider Gordon Gekko. Bud Fox, played by Charlie Sheen, is a stockbroker full of ambition, doing whatever he can to make his way to the top. Fox is enchanted by Gekko, and entice him into mentoring him by providing insider trading information. Although Fox is loyal to his mentor Gekko, throughout the film, he is seen asking the millionaire trader Gekko, “How much money do you need to be satisfied with? How much is enough?”. And each time Gekko ponders and thinks hard, but the truth is, he himself doesn’t know. There is a scene in the movie where Gordon Gekko uses Fox’s inside information to manipulate the stock of a company that he intended to sell off, while throwing its workers, including Bud’s father. When Bud hears about his father losing the job along with other workers, he experiences deep agony and immediately repents his participation in the millionaire’s duplicity and deception. He storms to his office and asks again, “How much is enough, Gordon?”

And, Gekko answers – (Source :Wall Street, 1987)

“The richest one percent of this country owns half our country’s wealth, five trillion dollars… You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now, you’re not naïve enough to think we’re living in a democracy, are you, buddy?  It’s the free market. And you’re part of it.”

Now, what this scene exposes is the adrenaline rush of power that wealth provides. But, what this scene also highlights is how this power of wealth has created a society where corporate empires are thriving through lobbyism, while middle-lower class are palpitating in a life of destitution. And in case you are thinking how a 1987 American classic like ‘Wall Street’ is relevant to the rise of billionaires in 2021, here is the answer – wealth, national morality and democracy all symptomatic of a thriving country. But, with the rise of billionaires in India, this is exactly what is at stake.

Corporate Political Activity (CPA) – When Corporations Colonizes The State

Luis Fernandez said, “Either we can have democracy or a great amount of wealth concentrated in the hands of few. We cannot have both”. So, what did he mean by this? For starters, hoarding of wealth not only gives you the liberty to buy luxury goods, but it also gives you the freedom to buy votes, laws, and legislation. How? Well, corporate involvement in any democratic ecosphere is usually manifested into a corporate political activity (CPA). This corrupts the democratic process by excluding the citizens from policy decision-making. Thereby, privatizing profits for corporation and socializing the loss among citizens(Daniel Nyberg,2021). So, how is this accomplished? It’s achieved through a specialized team of people called – Corporate Lobbyists. They act as a mediator between the political parties and the corporation they work for. But, what do these billionaires lobby against? Mostly tax deregulations. However, the devil hides in details – Most billionaire monopolists lobby against anti-force entrustments, giant banks lobby against risk regulations, polluters in the private sector lobby against environmental regulations, and private corporations lobby against public services. Each one of these is detrimental to the growth of any democracy because lobbyists act out in the interest of billionaires and influence government policy-making by taking in no account of public interest (Mehrsa Baradaran, 2019). In simple words – they suggest extraneous elements in decision-making and subvert the public interest in areas like infrastructure (highways, airports, and massive scale projects under the Jawaharlal Nehru National Urban Renewal Mission in 63 cities), natural resources, and energy (gas, oil, petrol, energy), telecom (3G and 4G technology),military (weapons and aircrafts), mining (where giant corporations have developed stakes making billions on India’s tribal heartland), and agribusiness (seeds, privatization of agriculture sector), etc. And, how does this work? Keep reading.

You must be aware of the ongoing farmers’ protest since last year. It is strictly against two issues. First being the ‘three new farm laws’ introduced by Modi government. Second, being the agitation against India’s two richest billionaires – Mukesh Ambani and Adani, who are close to Modi and is believed to profit from these new farm laws. These two billionaires have been eyeing India’s farm sector for a while now. In 2017, Ambani expressed his interest in investing in the agriculture sector. His Jio Platforms, today, is leveraging its partnership with Facebook to dilate into this domain with Jiokrishi app, which will ease out the farm-to-fork supply chain. The company’s records suggest that it source(ed) 77% of its fruit directly from farmers. Now, currently, the farmers take their produce to wholesale markets, governed by APMC (government body). APMC in every State decides the price it will pay to the farmers for their produce. Remember, this market becomes the central point for government acquisition of food grains. With the new farm laws, a giant corporation can directly approach the farmers, buy and pay for the produce at an agreed amount. In short, this new farm law aims to abolish this structural network and privatize it. But, this is just structural damage for farmers. As I mentioned earlier, the devil hides in details – The news laws do not make a written contract between the farmers and corporations mandatory. This means that if there is a conflict of interest between both parties, it will be extremely difficult for farmers to prove that a corporation has breached that agreement. Additionally, this law states that a farmer has no right to take these disputes to an independent judiciary for justice. Instead, they would have to reach out to two bodies – a conciliation board (district-level administrative officers) or to the appellate authority. Now, both of these bodies are dependent on government, which can potentially revert the case in favor of corporations. This law also has a grave danger of impacting the minimum support price that government bodies offer to farmers in case of a declined price fall for their produce during a particular season. The farmers here are sailing on a boat of uncertainty, economic chaos, and policy madness —- all favoring the interest of the giant corporates instead of the public; more specifically, the farmers, who are the beating heart of an agrarian economy like India.

Remember, The Rafael deal? The deal was given to a Ambani brother, who had minimal to no experience in aircraft. Rafael offset contract has been given to Reliance Defense, which was formed 12 days before the announcement of the Rafael deal. ‘Mediapart’, a French-language publication, quoted Francois Hollande (2018), “It was the Indian government that proposed this service group (Reliance), and Dassault which negotiated with Ambani. We had no choice. We took the interlocutor who was given to us.” Two weeks back, the French newspaper ‘LeMonde’ dropped a bombshell stating that the French authorities passed off Anil Ambani’s $162 million tax after Modi-led NDA government negotiated Rafael deal with France based Dassault Aviation. Another example- Back in 2018, when the Modi government approved the privatization of six airports, it also relaxed the prerequisite requirements. BJP allowed companies with no prior experience in this sector to present their bid. After deliberation, all six airports were given to Gautam Adani, the second-highest billionaire in India with no history of running airports. Today, in 2021, Adani Airports has acquired 23.5% stake in Mumbai International Airport Ltd(MIAL), and is set to extend the stakeholding percent to 74%, which will give Adani group the ownership of the upcoming Navi Mumbai airport in which MIAL holds majority stakes. His other ventures in sectors like Adani green energy, power, and transmission hold a close-by narrative. His Carmichael coal mine project in Australia has earned him an infamous ‘climate change villain’ title. Tax deregulations is the primordial goal of corporate lobbyists, and they seem to be winning. The Indian government last year announced that it had reduced the rate of tax for certain existing companies at 25.17% , the lowest since 2010. There is an extra tax deduction of 15% from earlier level of 25% for start-ups. One would argue that the low tax rate would increase international corporate investments. But recent studies show that businesses are moving to countries like Bangladesh, Vietnam, Indonesia for labor-intensive operations. Thereby, failing to bring employment to the country.

Figure 1: The rate of tax imposed on corporates by the Indian government in the last ten years

Figure 2: Mukesh Ambani’s $2 billion house overlooking the slums of Dharavi – The world’s largest slum. Source of the image : www.thecharette.org

Tax deregulation, tax invasion, and corporate lobbying are not the only problems that manifest with the rise of billionaires in India. The most chronic and malignant effect is the ever-widening gap between the rich and poor, threatening economic justice and social cohesion in a society. This economic gap is so dilated that it becomes a life of excess for these billionaires and destitution for the rest of the 1.38 billion Indians. According to Forbes magazine, the third richest Indians – Mukesh Ambani ($84.5 billion), Gautam Adani & family($50.5 billion) and Shiva Nadar($ 23.5 billion) own 60% of the country’s wealth. India’s top three richest people have added over $100 billion between them. In fact, since the initial lockdown in March 2020, India’s top billionaires increased their wealth by 35% during COVID-19 pandemic. According to Oxfam report, India’s top 100 billionaires witnessed their fortune increase by staggering number of Rs 12.97 trillion. This amount could have provided every 364 million poor Indians a cheque for ₹94,045 each. So, what was the economic status of the working class? They suffered abominably during COVID, while billionaires thrived. The study, ‘State of Working India 2021 – One year of Covid-19’, by Azim Premji University, revealed that the economic recession caused by the COVID-19 has pushed 230 million Indians below the poverty line. This number accounted for and contributed to the global increase in poverty by a whopping 60% in 2020. The study shows the loss in monthly income earning for all kinds of workers. The fall was 17% for temporary salaried jobs, 18% for self-employed, 21% for daily wage workers, and 5% for permanent salaried workers. This ever-widening gap of economic inequality in India goes against every fiber of true democracy, where public resources and rights like healthcare, education, COVID relief financial aids, etc., instead of being elevate, are subverted. Gabriela Bucher, Executive Director of Oxfam International said, “Rigged economies are funnelling wealth to rich elites who are sailing through the pandemic in luxury and ease, while those on the frontline of the pandemic — medical assistants, healthcare workers, and market vendors — are struggling to pay the bills and put food on the table”. Existence of these billionaires in any society is symbolic of a theocracy thriving and a democracy that’s palpitating. Times like these demand a moral obligation to question, resist and fight against the economic injustice, not just for ourselves, but for our children and many generations to come by. Remember, power seeks self-preservation first and foremost. The billionaires will do anything and everything to continue hoarding resource, wealth and pass it to their heirs. So, the question is not – when will this stop? But, what are you going to do about it?.

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