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India’s Fiscal Deficit: Recent Trends and How to Tackle It

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Role of any government in the  economy is an essential  one where it takes decision on receipts and  expenditure. Total expenditure and total receipt are the two important features of budget yearly presented by government. Fiscal deficit actually refers to the excess of the spending over the revenues.[1] It  is calculated as a percentage of the  GDP.[2]  

Gross fiscal deficit or GFD is basically the excess of the total expenditure which includes the loans, net of recovery, over receipts of revenue (which includes external grants) and receipts of non-debt capital.[3] Net fiscal deficit is the GFD minus net lending.[4] 

Whenever fiscal balance is in positive then it is considered to be beneficial as revenue  is above  expenditure. Whereas, negative fiscal balance in fact means borrowings on which an economy depends on and is seldom bad.[5]   

Targets for fiscal deficit  are set annually  that  India fails to follow . We will see through this paper why is fiscal deficit happening , what impact it has on economy,  how  demonetisation and GST has impacted it and also how to use it to tackle the economic problems.  

Why Is Fiscal Deficithappening?

 Tax evasions by various organisations along with various other factors, leads to a loss in revenue for government that leads to fiscal deficit.

The Union budget, for 2019-20, estimated fiscal deficit to be 3.3% of GDP or Rs 7.03 lakh crores.[6] The overly-optimistic revenue estimations for 2019-20, was further worsened by the reduction in corporate income taxes (CIT), for which there were no expenditure or revenue offsetting steps been taken. This could result in the government breaching, by about 50 basis points, its fiscal deficit goal.[7]  Cutting CIT to the extent of Rs. 1.45 trillion, was mainly done to lift the weakening economy.[8]The fiscal impact would be felt much sooner than the decision’s growth impact.[9] 

The government ended August 2019, with a Rs 4.36 lakh crores revenue deficit.[10] As of mid-November, the Center mopped up just 6 lakh crores in direct taxes, that is about 50% less of the current direct tax revenue goal of 13.35 lakh crores.[11] This will lead to an increase in fiscal deficit. 

Comptroller and Auditor General or CAG stated that government’s key deficit numbers might be substantially higher than mentioned in the budget. CAG has therefore, asked whether or not extra-budgetary resources taken into account in budget reflect the true picture.[12] The CAG re-calculated, 2017-18 fiscal deficit to reveal that it is 5.85% actually. Government reported a 3.46% fiscal deficit that year.[13]  The fiscal numbers of the government over past few years are under heavy scrutiny as growth has been sluggish since year 2016’s third quarter.

Impact Of Fiscal Deficit On Economy

Fiscal deficit is similar to a vicious cycle. Fiscal deficit has dire consequences on the economy as the government borrowings is in fact one of the last resorts left with the government and that results in higher interest rates in the market.[14] 

Higher interest rates are resulted because markets are doubtful about repayment by the government;  due to which the government bears high interest rates, for this perceived risk that later puts the government into further debt, hence being a vicious pattern.   Higher the rates, lower is the scope of private investment that decreases resources that are available for the private sector investment. High government borrowings can have various potential hazards that are mentioned below.  

The Crowding Out Effect

The government to cover up for its deficit borrow more from the private sector in form of bonds. By selling the bonds it takes money from the private sector. When the private lenders lend money to the government, they actually lend it out, of their savings/ profits. The savings of the private sector gets reduced which lessens itsability to invest which ultimately crowds out the private investment, out of the market.[15]

Therefore, government spending increases and the private spending reduces. Since the government spending’s are considered less effective than private spending this is bad for the economy. The government during a fiscal deficit in fact does two things: increases borrowings or increases tax revenue.

INCREASES TAX REVENUE- Whenever the government increases tax, it does it by actually increasing corporate taxes, income taxes etc. which results in a reduction in disposable income of the firms, so this increase in the government spending does not really result in increase in the aggregate demand(AD).[16]

The increase in the government spending becomes offset by the decrease in the AD   that is due to decrease in the disposable income. When the private sector has lesser money, it even spends lesser in the private projects.

Inflation 

When the government sticks to not borrowing of money but actually ‘monetisation’, inflation occurs,[17] which increases the money supply in the market. Therefore, aggregate demand too increases causing inflation. Fiscal deficit can also imply an increment in the government spending’s which then increases AD that results in higher price levels of services and goods.

Higher Taxes 

Whenever the debt to GDP ratio amplifies, the government requires to increase the tax revenue which it does by increasing its tax rates.[18] 

Impact of demonetisation and goods and service tax(GST) on fiscal deficit

Demonetization changed our currency system providing the people an incentive to use and spend money in a much productive way than letting cash lying around. Cash lying around was deposited in the banks and eventually people started trusting digital payments. Banks also experienced a surge in liquidity. Banks then deposited this sum, through different windows such as SLR, to RBI. This resulted in an increase in the government treasury. The raids for the black money also led to an increase in revenue. This resulted in an increase in income taxpayers. Income taxpayers grew by 9.1 million. There had been an 80% rise, above the average annual increase, in taxpayers.[19] The rise was also reflected in the filing of IT returns and the payment of advance tax. While in the evaluation year 2016-17 the figure of taxpayers increased, in the next year the rate of growth fell to acquainted levels.

But demonetization affected India’s MSMEs badly. Micro-industry owners weren’t ready to cope with the lasting effects of demonetization. Therefore, a lot of micro-industry workers lost their jobs and also went back to their villages. These companies therefore had a low growth rate of 1%.[20]   

The primary goal demonetisation was tackling black money, at which it failed. Since the system has recovered 99.3% of the demonetized notes, it indicates that the activity didn’t bring enough “black money”.[21] This could be because just a tiny portion of tax evasion takes place in cash. 

It resulted in job cuts which led to higher unemployment rates.[22] Job losses led to lower productivity and the decrease in liquidity disrupted India’s cash-based economic structure, which devastated unorganized sector. Though, demonetisation led to higher tax revenue, the cumulative losses arising from the move left a scar on economy, which had an impact on GDP and fiscal deficit. Since demonetisation the GDP, has decreased to 5% (July-September 2019) from 8.8% (July-September 2016).[23] In FY20, fiscal deficit breached Rs 7lakh crores mark.[24]

By removing the cascading effect of multiple central and state taxes, GST has worked to increase profit and reduce costs of doing business. This could attract investment which would lead to an increase in GDP.  The increase in GDP would result in an increase in revenue for the government since taxes will increase. The GST is a type of tax that is consumption based and not anymore production based.

During the first 6 months, of the GST implementation, indirect taxpayers increased by 50%, partially due to several small businesses actively opting to be a part of the GST in attempt utilise input tax credits.[25] Even with a wider base, however, GST revenues were underwhelming.[26] Indirect tax collections of the Center in the post-GST era, rose by just 1.8% from the year earlier in April-September 2018, far slower than the growth of 5.6% seen in the full year of 2017-18 and even smaller than the growth of over 20 percent in the previous two years.[27] This is primarily because of decrease in economic activity, sluggish demand and compliance issues. 

Therefore, flawed GST implementation, coupled with demonetisation, served as the catalyst in India’s growth slowdown, which opened doors to fresh economic problems and affected the fiscal deficit.[28] 

Measures To Control Fiscal Deficit

There are two methods of restraining fiscal deficit. First, if the government decreases its expenditure, second, if it increases its revenue. There are again ways to achieve on both the ends.    

Reduce Expenditure 

SALE OR CLOSURE OF SICK UNITS  

India is a centre for the public sector undertakings(PSUs). Several of these PSUs are not making profits and demand more than giving. So, selling or closing the non-viable, sick industry would decrease the government spending on them.[29]

REDUCE SUBSIDY PAYMENTS

The subsidy bill is more than 10% of GDP, of which the non-merit subsidies add up to 5.7%.[30] Rationalization these could free up to 6% of fiscal space.[31]

REDUCE INTEREST PAYMENT  

India’s government is paying a lot of interest in previous years loans. Approximately one-fourth of the Indian spending of the budget went to interest payments.[32]   Therefore, government borrowings need to be reduced in order to decrease interest payments resulting in lower expenditure. 

Increase In Revenue   

PREVENT EVASION AND INCREASE TAX REVENUE 

Government needs to take measures to stop tax evasion and streamline the process of tax so that taxpayer base of the country widens which will lead to higher taxation. Agriculture could be included in the tax net, because distinguishing jobs cannot be the criterion for not paying tax, but rather it should be centered on high and low income.  In fact, people for evading taxes disguise their non-agricultural income as agricultural income.  

DISINVESTMENT 

Disinvestment is PSUs offers the government funding to cover the fiscal deficit and also has long-term advantages, as this money can be spent or invested in productiveuses that would generate jobs, increasing revenue and taxpayers.[33] The government has targeted mobilising 1.05 lakh crores by the means of disinvestment.[34]

ECONOMIC GROWTH

 Business promotion will help the economy to flourish. If the economy grows, the government tax revenue increases. It includes setting up a framework conducive to businesses and environmental improvement. 

Conclusion

India’s fiscal deficit, for many years, has been a concern. Although, fiscal deficit affects the economy in many ways like by increasing inflation, increasing interest rates, crowding out private investment, etc., it can be helpful when borrowings are done for productive uses, which can amplify government revenue. It can also be controlled by several measures when it is harmful for the country. The government, in recent years, has taken several reforms like introducing GST and demonetisation, the effects of these can be observed on the fiscal deficit.

A fiscal stimulus dose is needed to revive the growth rate of the economy. The stimulus size will be calculated by the constraints on debt servicing, borrowing capacity and Indian sovereign rating concerns. A downgrade will raise borrowing costs not only for government, but also for private sector; this could cause a freeze in the portfolio funds which track indices passively and has been flowing into India. In addition, such a freeze can strain the exchange rate of the rupee, which could drop abruptly. The possibility of a sudden cessation or reversal of foreign flows is serious, and our fiscal managers cannot neglect it. That is the price you pay for being not able to pay, in your own currency, for imports. It is undeniable that foreign inflows are required, at least in order to pay for capital goods and imported oil.

As India’s fiscal space is at a risk, it can also be assisted with easier monetary policy. Monetary policy must maintain a loosening or easing bias, given the economy’s cyclical weakness, at least till the predicted recovery takes hold.  

To be effective or successful in fiscal policy, it must be counter-cyclical, so a larger deficit in a year like a recession is all right. Every valuable additional fiscal rupee must result in a boost in consumption and growth immediately. The tax on capital gains ought not be abandoned, as stock market being at a high, as these are progressive direct taxes. Because Google, Apple, Microsoft, Amazon and Facebook, five of the world’s most successful entities, in India have a huge customer base, a digital tax should be imposed. The GST rate must be rationalized. This could give the fiscal buck, a greater turnout than a reduction in the individual income tax, which is borne only by about 3% of the population. This should be followed by a base expansion. The compensation formula provided to states for their failures in GST collections could be revised, as they too should bear some of the fiscal pain. 


[1]“Definition of ‘Fiscal Deficit” (December 2018) <https://economictimes.indiatimes.com/definition/Fiscal-Deficit>

[2]Will Kenton, “Fiscal Deficit” (August 2019) <https://www.investopedia.com/terms/f/fiscaldeficit.asp>

[3]“India’s Economy Dashboard” The economic times (February 1, 2019) <https://economictimes.indiatimes.com/news/economy/indias-economy-dashboard/what-is-economy-dashboard/slideshow/67755935.cms>

[4] Ibid 3.

[5]Sean Ross, “Understanding the Effects of Fiscal Deficits on an Economy” (August 2019) <https://www.investopedia.com/ask/answers/021015/what-effect-fiscal-deficit-economy.asp>

[6]Singh K, “August Fiscal Deficit at 78.7% Of 2019-20 Target ”The economic times (September 30, 2019) <https://economictimes.indiatimes.com/news/economy/indicators/august-fiscal-deficit-at-78-7-of-2019-20-target/articleshow/71377147.cms?from=mdr>

[7]Asit Kumar Misra, “IMF says India should avoid fiscal stimulus, opt for easing policy” (May 2019) <https://www.livemint.com/news/india/imf-says-no-to-fiscal-stimulus-okay-with-further-monetary-policy-easing-11577181218530.html>

[8]“Fiscal deficit hits 93% of budget estimate at ₹6.52 trillion till Sept-end” (October 2019) <https://www.livemint.com/news/india/fiscal-deficit-hits-93-of-budget-estimate-at-rs-6-52-trillion-till-sept-end-11572526967720.html>

[9]Asit Ranjan Misra, “Corporate tax cut may widen fiscal deficit by 40 bps: Fitch Ratings” (October 2019) <https://www.livemint.com/politics/policy/india-s-fiscal-deficit-may-shoot-up-to-3-7-in-fy20-fitch-ratings-1569489629214.html>

[10]Ibid 6.

[11] Nandi S, “More Steps to Revive Growth Soon: Finance Minister Nirmala Sitharaman” livemint (December 7, 2019) <https://www.livemint.com/news/india/more-steps-to-revive-growth-soon-finance-minister-nirmala-sitharaman-11575706380335.html >

[12]Narayanan D, “CAG Demonstrates How Govt Relies on off-Budget Resources to Fund Deficit” Economic times (July 25, 2019) <https://economictimes.indiatimes.com/news/economy/indicators/cag-demonstrates-how-govt-relies-on-off-budget-resources-to-fund-deficit/articleshow/70360281.cms> accessed December 26, 2019.

[13]Ibid 12.

[14]Reem Heakel , “Forces That Causes Changes in Interest Rates” (August 2019) <https://www.investopedia.com/insights/forces-behind-interest-rates/>

[15]Rajesh Kumar, “De-jargoned | Crowding out” (September 2012) <https://www.livemint.com/Money/x5B8XGNuQXqeZzZ6RU41jJ/Dejargoned–Crowding-out.html>

[16]Tenjvan Pettingar, “Crowding Out” (Economics Help,2017) <https://www.economicshelp.org/blog/1013/economics/crowding-out/>

[17]Chandavarkar, Anand G. “Monetization of Developing Economies (Monétisation Des Économies En Développement) (Monetización De Las Economías En Vías De Desarrollo).” Staff Papers (International Monetary Fund), vol. 24, no. 3, 1977, pp. 665–721. JSTOR, www.jstor.org/stable/3866500

[18]Julia Kagan , “Gdp Tax Ration” (July 2019) <https://www.investopedia.com/terms/t/tax-to-gdp-ratio.asp>   

[19]Ibid 18.

[20]Aishwarya Krishnan“Demonetization Anniversary: Decoding the Effects of Indian Currency Notes Ban” (May 2019) <https://economictimes.indiatimes.com/tdmc/your-money/demonetization-anniversary-decoding-the-effects-of-indian-currency-notes-ban/articleshow/61579118.cms?from=mdr>

[21]Ibid 20.

[22]Koustav Das, “Three years after demonetisation: Lot of sound and fury signifying nothing” (November 2019) <https://www.indiatoday.in/business/story/demonetisation-three-year-anniversary-economic-slump-gdp-unemployment-negative-growth-outlook-1617099-2019-11-08 >

[23]Ibid 42.

[24]Ibid 42.

[25] Kundu T, “How GST and Demonetisation Impacted Govt Finances” livemint (November 5, 2018) <https://www.livemint.com/Industry/pkS48kM47yZbxS49jL6MSN/How-GST-and-demonetisation-impacted-government-finances.html>

[26] “Dip in GST Collections Tells a Story” The hindu business line (October 3, 2019) <https://www.thehindubusinessline.com/opinion/quick-take/dip-in-gst-collections-tells-a-story/article29585185.ece>

[27]Ibid 20.

[28]Ibid 19.

[29]Devika Kher, “Divestment: More than just revenue” (May 2016) <https://www.livemint.com/Opinion/ZxVQBVNoq8UbqDwVhCMY6M/Divestment-More-than-just-revenue.html>

[30]Nikita Kwatra, “How government can fund a growth revival” ,(November 2019) <https://www.livemint.com/news/india/how-the-government-can-fund-a-growth-revival-11574237638358.html>

[31]Ibid 24.

[32]Krishnaand Tripathi, “Budget 2019: Do you know, a fourth of India’s Budget goes into interest payment?” (January 2019) <https://www.financialexpress.com/budget/budget-2019-do-you-know-a-fourth-of-indias-budget-goes-into-interest-payment/1454897/

[33]Smriti Jain, “Budget 2014: Five prescriptions for Narendra Modi to tackle fiscal deficit” (The Economic Times,2014) <https://economictimes.indiatimes.com/news/economy/policy/budget-2014-five-prescriptions-for-narendra-modi-to-tackle-fiscal-deficit/articleshow/37697902.cms>

[34]“Cabinet approves new strategic disinvestment process” , (October 2019)<//economictimes.indiatimes.com/articleshow/71445908.cms?from=mdr&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst,https://economictimes.indiatimes.com/news/economy/policy/cabinet-approves-new-strategic-disinvestment-process/articleshow/71445908.cms?from=mdr>

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COVID-19, major shifts and the relevance of Kondratief 6th Wave

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Covid-19 has changed the global strategic equations, it has impacted each part of human life so has it let us to ponder upon the Kondratieff cycles, as with Covid-19 there has started a new debate about sixth wave, which is about the importance of health sector, especially the biotechnology which is crucial for progress of society in future.

Henceforth, the countries that are working on these sectors know that the most important engine for our economic and social development will be health in the 21st century. For example we have USA that focused on these and now has created around 2/3rd of its jobs in health sectors along with that has invested about $3,500 billion on health sector back in 2017. Also a 2008 report said about 4,700 companies all across worked in  field of biotechnology whereby 42% were in North America, and 35% in Europe, which depicts these states long-term understanding of the emerging scenario as seen from the emergence of Coronavirus. But then the on the other side if we look into the health structure of underdeveloped states, we can easily conclude that these states will suffer the most if a global health issue emerges, and in the contemporary world it has emerged in the form of COVID-19.

COVID-19 has brought changes in the political and economic arrangement. It has not limited itself to the China from where it has been started but has impacted the whole world. The virus that is itself unseen has shaken the structure, with severe consequences for all states. No matter if it’s the USA that is the super power or any small states, the pandemic has divulged the capability and integrity of all in their response to the Covid-19. With some having the capabilities to deal with it, but most lacking in these sectors which resulted in huge loss not only of human life but also of resources. Time has come when the world is criticizing globalization at one hand because globalization is the reason for the spread of COVID-19. This has marked the end of one era with the emergence of a new one.

Mention below are some of the major shifts which Covid-19 has resulted in economic sectors in both the developed and the underdeveloped states, along with the major political shift that has led many to debate about the new structure of world after the crisis would be over.

The Covid-19 that was first reported in China, in November has changed the world completely and resulted in a lot of economic and political changes all across. For example the global economy due to Covid-19 crisis have a setback of $590 trillion. Apart from this many people lost their jobs, the household incomes have reduce, moreover World Bank report say nearly 49 million people will move into extreme poverty because of pandemic. Then World largest real estates are having economic problems, the Tourism industry has declined. An estimate showed the loss of about $1.2 to $3.3 trillion in this area of tourism all over world. Also report of International Air Transport Association predicted a loss of $63-$113billion. Moreover the oil sector also faced problem as it was for the first time that its price has gone negative. Henceforth, it can be predicted that once the pandemic is over the world will have a lot to calculate.

The impact of this crisis is seen in both core and periphery states. In core states like the US and china COVID-19 has brought huge economic impact but along with this also a question of who will act as the world saviour. As Chinese economy is expected to decline by 13% in February also the Belt and toad initiative is at halt, but still apart from the economic problem this pandemic has helped a core state like china to use the situation and move towards the status of Global power. Thus this struggle of Global saviour resulted in US and China at odds with each other. Indeed, COVID-19 has brought political repercussions along with economic consequences. When it comes to Europe the industrial production decline by 17%. Likewise USA is also effected by COVID-19 as by this pandemic about 39 million American have lost their jobs, also US economy seen to decline by 20% so US health sector has been in the eye of analyst for its failure to curtail the coronavirus. Then covid-19 has more devastating impact on peripheral states as there health care facility is not well developed. For example the GDP of Bangladesh fell by 1.1%, then many African states that look for tourism as a source of economy faced a loss of about $50 billion. Also 29 million in Latin America fell into poverty. Though they have been exploited in past but the need of the hour is that the world must help them.

Global dynamics are showing transformation amid coronavirus. The pandemic has shown how China is using its trump cards to transform the contemporary situation in its favour while bolstering its image as the “global saviour”. China’s emergence from the sick man of Asian to the positing of global saviour has opened the prospect of a tilt in the global status of Hegemon from US towards China. The question is that will the Chinese strategy amid COVID-19 will hinder the prestige of US who instead of acting as the global leader has shown a deterioration in its role in global governance.

The future of China’s pre-eminence in the global spectrum has been widened by the pandemic. All of this has been further bolstered by the broad rejection of Trump to engage in Europe and elsewhere. COVID-19 not only emerged as an impetus to shift the global dynamic but has helped China to strengthen its position. In response to the confident play by China, US hasn’t come up with any convincing tactics to prevent the increasing role of China in achieving its interest. Recently, a move by Trump administration to withhold US funds of around $400million will surely leave a gap, moreover will be an opportunity for china to bolster its position in WHO. Taking backseat in its global role amid pandemic, then the withdrawal from global treaties, and withholding of funds from WHO shows a pattern which will further create a vacuum for China to take advantage of the prevailing situation. 

The current international order set by US will be subject to testation as the changing shifts in the geopolitics have to be catalyzed by the COVID-19. For it is now the right time for us all to ponder the relevance of Kondratieff 6th wave in current scenario of Covid-19. As now the focus has diverted towards the health care system and biotechnology since the world has in current situation saw a blame game between states with few called corona virus as naturally occurring but some regarded it as ‘Chinese virus’. This has led to the realization that that warfare scenario has entered into discussion over biotechnology. So after the Covid-19 pandemic, the policy makers of both periphery and core state will work on new technological area which has the Medical technologies, Nanotechnologies, Biotechnologies etc. for the improvement in health sector will be crucial for the progress in future.

Conclusively, the current COVID-19 as a bioweapon has resulted in a clear impetus and will definitely bring a shift in the states attitude towards medical research and the multiple fields of technology in future, this is so because COVID-19 has created a ground for relevance of Kondratieff 6th wave.

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How U.S.’s Response to Covid-19 Could Precipitate 2nd Great Depression

Eric Zuesse

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On March 10th of this year, there were 290 daily new U.S. cases of Covid-19 (coronavirus-19).

On March 13th, U.S. President Donald Trump declared a pandemic national emergency, because the number of daily new cases was now suddenly doubling within only three days. However, no lockdown was imposed. The policy-response was instead left to each individual. This is in accord with America’s libertarian idelogy. Trump even announced that “he was allowing his health secretary to bypass certain regulations to provide more flexibility to doctors and hospitals responding to the outbreak” — outright reducing, insead of increasing, federal regulations, this being his way to address the matter. That’s the libertarian response.

Covid-19 (coronavirus-19) cases started soaring in the U.S., from 600 daily new cases on March 13th, to 25,665 on March 31st. Americans were scared to death, and facemask-usage soared, and independent small businesses started laying people off en-masse. (Restaurants, hair salons, travel agencies, inns, dental offices, etc., were hard-hit.)

Immediately, the alarming rise in new cases halted on April 4th (at 34,480), and the daily new cases remained approximately flat, but slightly downward, from March 31 to June 9th (when it reached bottom at 19,166), but then soared yet again, to 78,615, on July 24th.

But, then, it again declined, so that, on September 8th, it was at only 28,561. This was already returning to around what the new-cases rate had been back on March 31st. So: despite peaking again on July 24th, the rate of daily new cases was little changed between March 31st and September 8th. And, all during that 5-month period, people were coming back to work.

The key immediate and direct economic variable affected by Covid-19 is the unemployment rate. Here, that economic effect is clearly shown:

U.S. unemployment: March 4.4%, April 14.7%, May 13.3%, June 11.1%, July 10.2%, August 8.4%

Though the daily-new-cases rate went down after March 31st and after July 24th, the unemployment rate progressed far more gradually downward after March 31st: the small businesses that had been panicked by the explosion of new cases during March were now gradually re-opening — but they remained very nervous; and, so, unemployment still was almost twice what it had been during March.

Here, that experience will be compared with two Scandinavian countries, starting with Denmark, which declared a pandemic national emergency on March 13th, just when Trump also did. “Starting on 13 March 2020, all people working in non-essential functions in the public sector were ordered to stay home for two weeks.” The daily new cases fell from the high of 252 on March 11th, down to the low of 28 on March 15th, but then soared to 390 on April 7th, and gradually declined to 16 (only 16 new cases) on July 9th. Then it peaked back up again, at 373, on August 10th, plunged down to 57 on August 26th, and then soared yet again back up to 243 on September 8th. The new-cases rates were thus irregular, but generally flat. By contrast against the experience in U.S., Denmark’s unemployment-rate remained remarkably stable, throughout this entire period:

Denmark: March 4.1, April 5.4, May 5.6, June 5.5, July 5.2

Sweden’s Government pursued a far more laissez-faire policy-response (“The government has tried to focus efforts on encouraging the right behaviour and creating social norms rather than mandatory restrictions.”), and had vastly worse Covid-19 infection-rates than did the far more socialistic Denmark, and also vastly worse death-rates, both producing results in Sweden more like that of the U.S. policy-response than like that of the Danish policy-response, but far less bad than occurred on the unemployment-rate; and, thus, Sweden showed unemployment-increases which were fairly minor, more like those shown in Denmark:

Sweden: March 7.1, April 8.2, May 9.0, June 9.8, July 8.9

That was nothing like the extreme gyration in:

U.S.: March 4.4%, April 14.7%, May 13.3%, June 11.1%, July 10.2%, August 8.4%

Why was this? 

Even though Sweden’s policy-effectiveness was more like America’s than like Denmark’s at keeping down the percentages of the population who became infected, and who died from Covid-19 (i.e., it was not effective), Sweden’s policy-effectiveness at keeping down the percentage of the population who became unemployed was more like Denmark’s (i.e., it was effective, at that). Unlike America, which has less of a social safety-net than any other industrialized nation does, Sweden had, until recently, one of the most extensive ones, and hasn’t yet reduced it down to American levels (which are exceptionally libertarian). Therefore, whereas Swedes know that the Government will be there for them if they become infected, Americans don’t; and, so, Americans know that, for them, it will instead be “sink or swim.” Make do, or drop dead if you can’t — that is the American way. This is why Swedish unemployment wasn’t much affected by Covid-19. When a Swede experienced what might be symptoms, that person would want to stay home and wouldn’t be so desperate as to continue working even if doing that might infect others. Thus, whereas Sweden’s unemployment-rate rose 27% from March to May, America’s rose 202% during that same period. Americans were desperate for income, because so many of them were poor, and so many of them had either bad health insurance or none at all. (All other industrialized countries have universal health insurance: 100% of the population insured. Only in America is healthcare a privilege that’s available only to people who have the ability to pay for it, instead of a right that is provided to everyone.)

On September 9th, Joe Neel headlined at NPR, “NPR Poll: Financial Pain From Coronavirus Pandemic ‘Much, Much Worse’ Than Expected”, and he reported comprehensively not only from a new NPR poll, but from a new Harvard study, all of which are consistent with what I have predicted (first, here, and then here, and, finally, here), and which seems to me to come down to the following ultimate outcomes, toward which the U.S. is now heading (so, I close my fourth article on this topic, with these likelihoods): 

America’s lack of the democratic socialism (social safety-net) that’s present in countries such as Denmark (and residual vestiges of which haven’t yet been dismantled in Sweden and some other countries) will have caused, in the United States, massive laying-off of the workers in small businesses, as a result of which, overwhelmingly more families will be destroyed that are at the bottom of the economic order, largely Black and/or Hispanic families, than that are White and not in poverty. Also as a consequence, overwhelmingly in the United States, poor people will be suffering far more of the infections, and of the deaths, and of the laying-off, and of the soon-to-be-soaring personal bankruptcies and homelessness; and, soon thereafter, soaring small-business bankruptcies, and ultimately then big-business bankruptcies, and then likely megabank direct federal bailouts such as in 2009, which will be followed, in the final phase, by a hyperinflation that might be comparable to what had occurred in Weimar Germany. The ceaselessly increasing suffering at the bottom will ultimately generate a collapse at the top. Presumably, therefore, today’s seemingly coronavirus-immune U.S. stock markets, such as the S&P 500, are now basically just mega-investors who are selling to small investors, so as to become enabled, after what will be the biggest economic crash in history, to buy “at pennies on the dollar,” the best of what’s left, so as to then go forward into the next stage of the capitalist economic cycle, as owning an even higher percentage of the nation’s wealth than now is the case. Of course, if that does happen, then America will be even more of a dictatorship than it now is. Post-crash 2021 America will be more like Hitler’s Germany, than like FDR’s America was.

The Democratic Party’s Presidential nominee, Joe Biden, is just as corrupt, and just as racist, as is the Republican nominee, Donald Trump. And just as neoconservative (but targeting Russia, instead of China). Therefore, the upcoming November 3rd elections in the U.S. are almost irrelevant, since both of the candidates are about equally disgusting. America’s problems are deeper than just the two stooges that America’s aristocracy hires to front for it at the ballot-boxes.

Author’s note: first posted at Strategic Culture

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Economy

Democracy in the doldrums

Samudrala VK

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It is clear that during the COVID-19 pandemic  times, Democracy has gone pear shaped throughout the world. Power and Political activity are considered as alpha and omega of the modern day democracy.
The Modern state(political authority),which is based on legitimacy and a tool to deliver political, economical and social justice, has been rendering yeoman service to
corporates, both domestic and foreign. The ruling dispensations all around the globe have resorted to authoritarianism under the guise of health emergency. In addition, the topsy turvy of Democracy, through excessive centralisation and the iron curtain imposed on political activities during this pandemic, has left minimal space to raise the concerns of the urban poor. The pandemic, a bolt from the blue, has caught our health systems off guard. In India, the labour class has caught between the devil and the deep sea, thanks to the recent twin moves of the central government, privatization and the helter-skelter lockdown. The pernicious effects of the lockdown are yet to hit the masses. Seemingly, the rudderless policies of central government have created enough space to further pauperization of masses, mostly have-nots.
Now, the federal governments of third world countries have to walk on razor edge by meeting the fiscal deficit targets on one hand and by connecting the welfare dots on the other.It is not surprising to say that the big corporates are making good fortunes with the relaxation of tax rates and new labour codes. As unemployment is hanging like the sword of domacles over the working class, the corporate class would expect this surplus labour to be at their beck and call.The early warnings of intelligentsia on the consequences of disastrous lockdown  were remained as the voices crying in the wilderness. The ruling elite has been trying to enshroud the general despondency among the civic force by shifting the propaganda machinery to sensitive elements like religion, hyper nationalism and sloganeering-not to mention self aggrandizement.

Neo-liberalism and corporatisation

The diktats of the world bank and the IMF(International monetary fund) on the third world nations like pruning the subsidies, roll back of welfare measures and the abatement of labour laws as an essential sina qua non for any sort of relief package during the crisis of BOP(Balance of payments) have left labour class of the thrid world nations in quandary. The US with the support of the WTO( World Trade Organization)had exhorted all these countries to provide untrammeled access its products. Apparently, the aims and paths of federal governments of these nations ,the WTO and the IMF are congruent with regard to free trade and the globalization of capital. The lawful protections for the working class under the labour laws have proved disastrous for the interests of the capitalist class and being viewed as shackles for the exploitation. The decades-long struggle to retain these labour rights in independent nation states has been ending in smoke due to weakened trade unions and the decline of social capital. The time has come to fight tenaciously and move heaven and earth to restore their rights which are otherwise go to the dogs. When the market space is being dominated by Monopoly or Duopoly or Tripoly, the free and fair competition which the unhindered market guarantee is an absolute sham. Extolling the virtues of Neo-liberalism, the modern nation states have centred their development agenda in and around urban centres. Economically, in the post-liberal era of India, the upward mobility is largely confined to a few sections of the urban middle class.

Welfare economics

It is wrong to mention that welfare economics is based on “Rob Peter to pay paul principle” when Peter has direct access to resources(natural, political, economical and social) vis-a-vis Paul. It is not the Peter but the Paul who is running from the pillar to post in search of opportunities. The notion of political equality of liberal ideological stream revolves around freedom and liberty of an individual and overlooks the core elements of equality like social and economical justice. The central governments all over the world have successfully repudiated the pro-poor agenda and this volte face from welfare state to pro-capitalist state has pushed the labour class out of the frying pan into the fire.

Nexus between political class and biggies

The unholy nexus between the political class  and corporates has been riding roughshod over the interests of poor. This alliance behooves the political class to safeguard the vested interests of corporate bigwigs. It is apposite to mention that representative democracy has been metamorphosing into a turncoat democracy. Back in the day, Politicians were known for their erudition, statesmanship and uncompromising ideological commitment. On the contrary, present day representatives are turning into snollygosters for their personal gains. There are several voluminous reports from different corners on rising economical disparities in the post-liberal era on which no political party is keen to act upon. As Michael Jackson, king of pop, penned in one of his famous tracks “All I want to say is that they don’t really care about us”-the lyrics are still relevant in this pandemic times.

Globalization and dependency

The South Asian nations have started their LPG (Liberalisation, privatization and Globalization) path at the same time, with the exception of Sri Lanka which had opened its economy by fits and starts.They had adjusted their economical apparatus with a new global integration process at a time when the global economical architecture was dominated by unipolar power, the US.
The lopsided globalization process has been converting many third world countries as dependents and in some cases almost to a level of aid recipients upon the erstwhile colonial powers or the US. Under the banner of global integration, all these nations were dragged into this complex whole, in most of the cases through persuasion. In the name of free trade, the Western powers have been  bleeding these nations white of their resources. The asymmetrical globalization has also challenged the sovereignty of these nations while the same has remained intact in case of developed nations. The US has been playing a rigged game of globalization under the auspices of the WTO, the world bank and other agencies. The time has come for these players to bury their hatchet and rise as a one voice to have a just order at the international sphere.

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