In 2019 – the last year for which we have complete statistics – all classes of financial investment had a total increase of 23 trillion US dollars, particularly Stock Exchange securities and public debt instruments. The global value of Stock Exchange securities alone grew by 17 trillion US dollars, from 67,000 to 84,000 US dollars, while, finally, the global value of bonds alone grew by 6 trillion US dollars.
A very weak house of cards. In fact, two events alone, such as the closure of the Straits of Hormuz, or a new “democratization” in the Middle East, would be enough to trigger an inflation led by oil or other raw materials cost, which would bring the whole great house of cards of public and private debt down.
A “short-term life”, an “altered stage” of finance that currently – with fintech and derivatives, born with Clinton’s banking reform – can afford not to consider the financial flows data, but only a manipulated calculation of probabilities, against which, however, you can insure yourself.
The entire Eurozone, which believes to be smarter than the others, lives on trade surpluses – often huge as in Germany – but also with a mix of low domestic wages and booming foreign trade, which makes the EU economies extremely vulnerable to asymmetric attacks from some non-EU expanding countries – not to mention the USA and China, which will tolerate for a short time yet this difference in level, which harms them significantly.
The European Target 2, the interbank payment system that no longer allows to resort to foreign currency reserves to offset banks’ liquidity deficits, has now a full balance of over 1 trillion euros, of which 800 billion euros are German flows only, which therefore live on purchases by the Euro area.
Hence a system that amplifies the asymmetric shocks, which are inherent in a “rigid” currency and not lender of last resort as the euro, but which favours above all the holders of greater surpluses than the EU countries, which are currently less capable of achieving trade surpluses. Therefore, for Italy, beating the surplus within the Eurozone is a primary goal of economic and financial warfare. It can be done.
Certainly Keynes’ old and still valid idea – launched at the Bretton Woods Conference – to find a single currency and also an account currency, namely bancor, which would revalue the currency of the country recording a surplus and devalue the country recording an excessive deficit, was defeated by the USA, the winning country, which had also financed Great Britain – that paid its debt to the USA until 1973 – but which wanted above all to internationalize the dollar, so that it could have a “high” value despite its structural trade deficit.
Therefore, this enables the EU countries which record higher balance of payments surpluses to purchase bonds – for example, Italian ones – while the further reduction in value of the Greek, Spanish and Portuguese bonds is maintained by favouring one or the other markets of government bonds and securities. Currently the shopping of public debt instruments is a primary method of economic warfare.
In this very weakened framework, the huge Covid-19 pandemic broke out.
It is the seal – if ever there was a need – of a new war economics.
This means: a) initial planning of actions; b) predefined distribution of resources; c) hierarchy of goals; d) careful selection of public and private spending.
Furthermore, democratic Socialism, but also social Catholicism, were born from the experiments that the great capitalist economies carried out during the First World War, such as the Beveridge Plan – a continuation of war Socialism by other means – just to paraphrase Von Clausewitz’s well-known statement – but also the subsequent democratization of Germany following the end of the Third Reich, which led the winners to maintain the workers’ co-participation in the management of small and large companies.
When this health and human tragedy is over, we can think about a sort of new “Glorious Thirties”, as a French economist called the years from 1945 to 1975.
Nevertheless, we shall give up what the Maoist Red Guards called the “four old habits”, i.e. old ideas, old culture, old habits and old behaviours.
But obviously we shall do so within our eternal Western culture, which respects all the others and, often, enhances them.
Old ideas: balancing the budget as a goal in itself. Let us consider that currently the EU Member States’ Constitutions enshrine precisely the “balanced budget” principle. It is a laughing matter. What should be done if Vesuvius erupted? Could we leave the whole Campania region without aid? What about Smith’s invisible hand?
What if a new pandemic broke out? What should be done? Are we not aware of the fact that probably also the current financial criteria may be undermined, not only by people’s demands, but precisely in their intrinsic structure?
Old culture: what if we rethought all the finance and productive economy?
What if, for example, we rebuilt the internal market, without thinking – as it will never happen – that trade-induced capitalization will be such as to refinance the system? The mountains of money on which the global “billionaires” are sitting like Uncle Scrooge are not really cashable now, even if it seems so.
Hence we are building a “Monopoly” that looks like a real system, but it is not so any longer.
Old habits: what if we tried to control production so as to avoid – even manu military – companies’ delocalization abroad? What if we understood, for example, that a mechanic from the Piaggio company in Pontedera is not at all interchangeable with a poor Indian immigrant?
Surely they will never make the same Vespa scooter. Hence, what if we invested not in the quick planned obsolescence – possibly with much advertising rhetoric – but in items capable of being a non-monetary investment for buyers?
This is the theory of generalized wear – even in goods production – that Ezra Pound expressed in the 45th Canto of his most important work.
However, there are no industrial nations by vocation or mission.
Nevertheless, the shrinking of the Welfare State following the eventful advent of the so-called “Second Republic” in Italy has been based on the concept – which is very hard to prove scientifically – that the cost of market limitation is always greater than the cost of a restructuring crisis.
This has never been the case, not even on a simple accounting level.
Hence a war economics against the pandemic is needed to rebuild the old Welfare State with new formulas.
The war economics, as it was studied after the Second World War, is made of many things: the economic “war cycles”, which absorb the Schumpeterian creative destruction; the calculation of the national income; the estimate of real capital and its depreciation, not to mention the input-output tables.
There is an old study by the Naval War College, drafted by Jim Lacey in 2011, which tells how US economists probably determined the allies’ real victory in the war against the Axis powers.
In 1931, a British intelligence cell supervised the German industrial reconstruction, while in the 1930s and 1940s, the economic experts – not the poor ideologists of the current tout va bien – identified the industrial sectors which had to be selectively funded, as a priority, to secure the victory and the war efforts.
A cost-benefit analysis was made – not the ridiculous one that is currently so fashionable for infrastructure in Italy – but the one based on Leontief’s matrices.
Preference for strategic bombing, for example, as well as for precision weapons and for surgical actions on convoys.
The battle of materials theorized by Ernst Jünger was made by the Allies, not by the Third Reich.
Hence, in the current Covid-19 times, selective investment is needed in biological sciences and electronic infrastructure – all public investment, even if some private entities would have the possibility to invest in these fields – but also in technical and mass information, scientific training and all the new technologies.
The private sector may currently have the capital to invest, but it has not the heads for it while, in the medium or long-term, the public sector can afford a return on non-financial investment and, in any case, lower than the one that a private investor in the same sector would expect.
This is the reason why, based on my first-hand experience of that era, I can say it was silly to privatize IRI’s large product and business sectors.
This is also the reason why energy is still mostly public in Italy, precisely because the capitalists in the sector would have been forced to – or would have anyway preferred – a “shorter” timeframe for the return on capital.
As is the case with household appliances, cars and even computers. As often currently happens, they are homogeneous products, but selected by consumers on the basis of structurally non-efficient criteria such as colour, fashion, user-friendliness, advertising, etc.
The next industrial revolution will be much less advertising-based than the current one. The market is already rather updated and selective.
The Washington Consensus is also over. Disciplined fiscal policy is not necessary, as the most recent European history has shown us. Quite the reverse. “Fiscal moderation” does not produce capital and investment. Also the “public spending readjustment” does not produce the desired effects, because the average wages of those who remain at work are lowered and the positive interest rates do not always guarantee the investment expansion, but probably above all the unearned and unproductive income.
Furthermore, there is no free “market” of exchange rates, considering that it is guided by exquisitely political evaluations and that the privatization of public companies does not ensure greater quality of management. Quite the reverse. It entails a distribution of “donations and contributions” to the new political parties – as happened with the “Second Republic” in Italy. Finally, deregulation is not necessary given that it permits the exploitation of the lower labour costs, but does not automatically optimize the production formula.
With these economic and financial mechanisms, the wealth produced in the Glorious Thirties has been drained. However, much less wealth than expected has materialized.
The offensive weapons of war economics are still traditionally the same: limiting the financial flows in the enemy country; the embargo; the manoeuvres on the public debt (to cause the fiscal crisis of the State or its insolvency). Today it is a matter of overturning these rules, so as to identify those that capitalize on the Covid-19 epidemics and stop their adverse actions.
For Italy, the cost of this epidemics is now quite clear: if it ends next May, although it is unlikely, the cost for companies – generically calculated – will be approximately 300 billion euros.
If the epidemics lasts until next December, companies’ losses will be over 640 billion euros.
Obviously all this requires a war economics, both in terms of a planned strategy for investment and subsidies and in terms of the future reprogramming of Italy’s production system.
This system shall be targeted to take essential market shares away from the States that would currently like to benefit from our crisis, both to acquire our companies at low prices and to make the remaining Italian companies ancillary to their production formula.
This is the new war economics.
Indonesia’s political will is the key to a successful carbon tax implementation
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.
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
Central Bank Digital Currencies: What do they offer?
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.
Rise of Billionaires In India, Lobbyism And Threat To Democracy
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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