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Mechanism of consumer redressal in India

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Consumer protection in India has a rich history with its desirability being felt through ages. Consumer movements in India have evolved over many centuries and were finally institutionalised in 1986 with the enactment of the Consumer Protection Act, 1986. The first and foremost responsibility of the government is to ensure smooth and easy redressal of consumer grievance. If the government is futile in rectifying the atrocities of the consumers it results in consumers moving to courts and forums for their demands. To study the consumer movements in India it is important to look at the mechanism of consumer redressal present in the country which is briefly discussed in the first section of this article.

Consumers are the backbone of the economy of every country and it is the government’s job to keep the producers in check so that the consumers don’t suffer. The consumer protection laws in India are still a little vague and complex that makes them ineffective. To make the laws more effective the consumers should be made aware of their rights and obligations because the major hindrance in effectiveness of consumer protection is consumers’ obliviousness towards their rights.

Consumption has always been an integral part of any society. With the advent of hyper industrialization, there are bound to be some shortcomings that the producers have to address. To effectively make their damage good, people have to mobilize together and speak as a community.

The Consumer Protection Act, 1986 was enacted a benevolent legislation that states the rights of consumers and address the consumer redressal mechanism. It has enabled ordinary consumers to opt for speedy and less expensive redressal of their complaints.[1] Although there has been many legislations protecting consumers before independence like the Sale of Goods Act, 1930, Contract Act, 1872, this is the first time that specific attention has been given to general consumers.

The National Consumer Disputes Redressal Commission (NCDRC) was set up under Consumer Protection Act, 1986. It’s a quasi-judicial body with a President and eleven members. It has 3 types of jurisdiction i.e. Original, Appellate and revisional.[2] Under the Consumer Protection Act, NCDRC is entitled to entertain cases from Central and State governments because they qualify as “complainant” under section 2(b)(iii) of the Act. The complaints are processed under the supervision of Registrar by officers of NCDRC before placing them before the Hon’ble benches for hearing. The president is the head of the body and can distribute judges at each bench according to his discretion. Under section 23 of the Consumer Protection Act the complainant can file a review petition before the Hon’ble Supreme Court of India. The discharge of functions is governed under Consumer Protection Rules, 2017. Dept. Of Consumer Affairs allocates budget to NCDRC and the same is reflected in the Demand for Grants of Dept. Of Consumer Affairs. All the information regarding the cases, commission, statutes and workings of the Courts is available on NCDRC’s website in accordance with the Right to Information Act. All the information regarding National Commission is supplied within 30 days.

The NCDRC has the authority to entertain cases where the claimed compensation is above one crore and any appeal against state commission. It can also pass orders against the cases judged by any state commission where it feels that the proper procedure is not followed or where it feels that the court has exercised a power ultra vires.

Role Of NGOs Towards Consumer Protection

Consumer protection is of superlative importance in India as the population if India is ever increasing. They demand variety of goods and services every day, and there is an ever-increasing demand. Here we can see the number of cases filled by the consumers in the year 2017-18. This drastic improvement in the filing of the cases is because the awareness which is being spread through various forums, like advertisements, booklets, rallies, social media, and various other platforms. Here we take a brief look at what consumer protection entails in India.

NGOs have always been an integral part of the consumer movements in India and all over the world. They have paved the path for generating the awareness towards consumer rights violations as well as instilled the sense of justice in the people for claiming compensation for the same. The role of NGOs or consumer organizations is of paramount importance because, a general consumer is not always aware of his rights and even if they are, they don’t have enough means or understanding of the working of the various procedures laid by the law. The Consumer Protection Act 1986 has made it very opportune for the consumers to file cases and claim damages but this is mostly unknown to the actual consumer population, hence keeping them in the dark. NGOs come into play here. There are various NGO throughout India who work toward consumer protection. Some of the famous NGOs are VOICE, Common Cause, Consumer Awareness, Protection and Education Council of Karnataka, Consumer Guidance Society India.The need for NGO and self-regulatory authorities in the implementation of consumer rights is of supreme standing. They are needed because:

Awareness

One of the main reasons for the lack of awareness regarding consumer protection is the lack of education and vigilance. Education facilitates awareness. Due to the lack of education the consumers suffer silently without claiming for the implementation of their rights. The graph of the survey undertaken by CUTS International, depicts the lack of awareness among the consumer population.[3]

A survey was done by CUTS International to test the awareness of the Indian consumer, followings were the findings:[4]

  • Awareness regarding the various government schemes.
  • 20% were aware about the consumer protection act.
  • More than 50% were not even aware of the “Jago Grahak Jago” campaign.
  • 40% were aware about the food safety act.
  • TARI was recognized by 27% of the people, Electricity Regulatory Commission was recognized by 26%.

Urban dwellers are more aware about their rights, hence NGOs should work at the ground level with the villagers to spread awareness regarding their rights.

Research:

For representation of their grievances efficiently in the consumer court, consumers need to have the sufficient knowledge and skill for conducting the research. Many if the consumer grievances can be resolved with various surveys and studies. Now certain organization is researching the lead content in the children toys. These types of studies can only be conducted with proper research and skill. This is a skill which needs practice to be developed. Hence with the help of NGOs consumers can file and contest cases resourcefully. a consumer cannot always conduct various lab tests or advanced research which needs capital as well as the knowledge, here the NGOs can do this and help pace the implementation the consumer rights. In the graph below, it represents the awareness of the consumers regarding various laws in place. Given that the consumers are not well acquainted with any of them comprehensively, the need for NGOs to help them regarding research is imperative. 

Counselling:

The consumers are not always aware of the laws designed for them; with NGOs the legal aid becomes more accessible to the general public. NGOs can find and appoint people who are well conversant with the laws of the land and can represent and help them file cases. Additional to this, they observe the implementation of laws by the local authorities which were passed by the legislators. They can file public interest litigation cases and work towards representing the common sentiment of the people in the court.

Publication and media:

The consumer movement gained traction due to the various awareness drives organized by the NGOs. They pressurize the government on spreading awareness. We see advertisements like “Jago Grahak Jago” on television and we see numerous booklets, reports etcetera. Through these the consumers can communicate their grievances and raise their voice against the mal practices. In today’s digital and tech savvy world they operate blogs and online portals to keep in touch of the ground level reports and encourage the consumers to use this means to contact them for help. They also conduct various public meeting to advocate for consumerism and conduct open negotiations where the consumer community can meet and discuss their concerns. Some sources state that the consumers are more likely to be educated about their consumer rights through the televisions.[5]

Unanimous representation of the NGOs

There are many NGOs in across India. If all the NGOs will unanimously come under a same banner and take the consumer movement forward, then the movement will be more effective than it is today due to the region-specific approach of the NGOs. Along with addressing the problems of the people at the ground level, they should come together and file PILs which will gain traction and impose pressure on the government to take swift action.

PILs filled by the NGOs’:

The most efficient way to make the voice of the consumer heard is through the means of law. There are many cases filled daily, here we will discuss some of the landmark judgments of the PILs filled by the NGOs.

Afcons Infrastructure Ans Ors.v. Cherian Verkay Construction And Ors.– In this case, the court held that arbitration agreement is mandatory for dispute adjudication. At any point in the suit, the court cannot force the parties to go for necessary adjudication. The consent of both the parties is important for arbitration under section 89 of CPC.

Indian Medical Association vs V.P. Shantha & Ors.– In this case, it was held that doctors will come under the purview of Consumer Protection Act even though they are regulated by Indian Medical Association. So, medical negligence was made inexcusable.

Lucknow development authority v. MK Gupta – In this case, the Supreme Court held that all the functions rendered to consumers come under the definition of Consumer Protection Act. Even if the service is provided by statutory authorities the consumers are entitled to compensation.

Role of the government

The beginning of the consumer movement in India dates back to 1960s and the 1970s when there were rampant practices of unprincipled and unfair trade practices like food shortages, black marketing, hoarding, adulteration of food materials and edible oil. All of it led to a consumer movement being propagated, till then the limited consumer organizations were just involved in writing articles and booklets. There was no legal system in place to hold the seller accountable and the maxim “caveat venditor” has no legal standing. It was always the responsibility of the consumer to be aware of the product or service they are subscribing to. The consumer movement around the world took acceleration and India was behind. Due to the pressure and active pursuing of the NGOs and self-regulating authorities a monumental step was taken by the Indian government and it passed the Consumer Protection Act 1986 in the 1986 Session of the Parliament. This legislation became a milestone in the societal and commercial legislations in the country. In addition to this many laws were legislated to cater to the interests of implementing the consumer rights, some include Standards of Weights and Measures Act, MRTP Act, Essential Commodities Act and Prevention of Food Adulteration Act. But these laws were neither penal nor preemptive in approach and did not make availableprompt trials and disposalof the grievances of the pained consumers.

National consumer chair:

For the first time in history the Ministry of Consumer Affairs of India, Food and Public Distribution, Department of Consumer Affairs Government of India has set up a Consumer chair which is being headed by Prof. Ashok Patil.[6] He will be heading the chair for 3 years. This step, taken by the central government, will be monumental for the prolongation of the Consumer Movement in India. This chair has been set up to provide the consumer an efficient mode to access justice which they are entitled to.

Jago Grahak Jago:

This was an initiative started by the government of India in the year 1983.[7]This was an initiative to spread awareness among the consumers regarding various goods and services they use in their day to day life. Through this portal consumers can register complains. They also showcase numerous advertisements on the television to make the consumers aware of the unfair trade practices. The Jago Grahak Jago campaign was known to 51% of the population, due to its use of media to communicate the various remedies under the Consumer Protection Act.

National consumer helpline

13 years back, on March 2005, as a part of the “JagoGrahakJago” campaign the Department of Consumer Affairs started a consumer helpline to provide assistance to the consumers. This is to make the implementation of COPRA more efficient. The consumers can seek help regarding their grievances by just making a call to the National Consumer Helpline.

Even after much efforts by the self-regulatory authorities and the government intervention the responses received is just 21%. Hence, in India we need more efforts to spread vigilance regarding the consumer rights and their violation and the mode which need to be taken to address the concerns of the consumers. 

This is the breakdown of the areas of various consumer grievances.[8] Most complains registered by the NCH was for the E-commerce sector, 19%. Let’s look at it in detail.

Working Towards Reducing Delays And Improving Consumer Satisfaction:

Among the many items on the agenda of the government, it should also give substantial importance in reducing delays in the Consumer Court. Due to the delays the willingness of the consumers to file complains is deteriorating.

Working towards improving consumer satisfaction

The below graphs depicts the level of consumer satisfaction with the griveance redressal mechanisms, and reflects on their experience in the Consumer forum.[9] A huge proportionate of people are not completely satisfied with the mechanism at place, which gives the government sufficient reason to improve it.

E-commerce grievances

Now a days the grievances regarding the online consumer market is on a high. This is because the 21st century is pacing towards the digital age. The below graph specifies the increase in the consumer complains in the year 2015-16 and 2016-17.[10] The government can set up another helpline which will deal with these cases unambiguously.

We have a case which was filled by the Telecom Watchdog against the online giants Amazon and Flipkart. The approved that these e-commerce giants were violating the Foreign Direct Investment norms. They circumvented the FDI norms by steering popular goods at much discounted rates through proxy ‘controlled sellers’ and this cause the pushing out of the small businesses off the market. The New Delhi High Court has recently issued a notice to the two companies.

Cross National Comparison Of Consumer Attitudes

Different countries have different mechanisms in place to deal with consumer movements. While the more developed economies have an established institution regarding consumer protection, developing countries like India are still in the nascent stages to develop their consumer forums. In this section, we’ll study this same distinction and how it came into being.

The paramount step in ensuring that the rights of the consumers are protected is for the consumers to know what their rights are and how they can be enforced. In this regard, the dept. Of Education, Pennsylvania, U.S. had published a handbook titled ‘Consumer Education Organisation and Implementation’. In the context of the said Consumer Awareness, a very little literature is provided in India.[11] This difference is awareness is of prime importance in regards to improving the consumer culture in India.

Another aspect of difference between U.S. and India is the enforcement of the statutes regarding Consumer Protection. Where in the U.S. the Federal Trade Commission’s sub-unit, Bureau of Consumer Protection, is using latest technology to easily facilitate consumer protection India is still left behind in addressing the complaints. The West has developed a highly developed Artificial Intelligence systems like Robocalls and automated answering protocols that help the consumer file a complaint easily and effectively. This again ties back to the issue of the awareness of citizens about consumer rights.

Disposition of cases is another factor that plays an important role in consumer protection. Speedy disposal of cases is a must in cases of consumer protection so that the consumer doesn’t suffer. While in the United States a lot of stress is placed upon the speedy disposal of cases, in India unfortunately the process is delayed by numerous complexities such as lab tests, unavailability of dates, etc. While the specified period of disposal is three to five months in the statutes, the dates of two subsequent hearings is this much apart in India.

Consumer protection in US focuses on economics of information.  Under right information, competition would force sellers to produce high quality products which meet the safety standards in all the aspects. In India, because the right information about the safety standards is still vague and complex, most of the times there is a conflict between different laws.[12] An instance of dissemination of information is regarding an automobile’s mileage. The manufactures have to disclose the actual mileage that an automobile can give and not the mileage that the automobile would grant in the ideal condition.

Right to choice is another matter of concern for Indian consumer market. Right of choice means the availability of products at the competitive and fair price at all the places. The competitive culture of the west has developed over the centuries while in India it is still in its nascent stages. By 1969 comparative analysis of magazines had become the norm in the west. Consumer reports held a lot of stake in right to choice with led the way in the sales of magazines. In India this revolution is being brought by online platforms where the prices are constantly scrutinized and kept in check.

To maintain the pressure on the government it is important to have some consumer organisations. While there are more than 100000 registered consumer organisations in the US[13], there are about 8000 consumer organisations in India. This shows that India is far behind U.S. in terms of consumer redressal. Because of the gap between the consumer and the redressal system, most of the consumer protection doesn’t get filed. While the consumer organisations in US are making sure that all the aggrieved get justice, for the limited number of organisations in India it is difficult to get all the consumers under the spectrum of consumer protection.

Consumer forums have not been successful in tackling the increasing consumer disputes. More than 4.5 lakh cases are pending in courts that suggests the miserable condition of consumer redressal in India. To tackle this issue, the govt. have to take immediate steps such as keeping vigil on availability of judges, contribute to R&D so that lab tests doesn’t waste time of the courts, establishing more benches in each part of state throughout the country. There have been many landmark cases under the Consumer Protection Act some of which are:

  • Chief Administrator, H.U.D.A. & Anr. v. Shakuntla Devi : In this case the Supreme Court held that for entitlement to compensation it’s necessary to prove damage.
  • Charan Singh v. Healing Touch Hospital and Others: The supreme court held that damages depend on facts of each case. No rigid rule can be set for universal application.
  • Om Prakash v. Reliance General Insurance : The supreme court held that insurance company cannot reject liability on technical grounds.
  • Manjeet Singh v. National Insurance Company Ltd. & Anr.: It was held that insurance company is liable to accept liability for hijacked vehicle.
  • Shri Rajendra Agarwal v. Shoppers Stop Limited: The CCI held that individual consumer grievances cannot be treated as competition concern.
  • New India Assurance Co. Ltd. v. Hilli Multipurpose Cold Storage Pvt. Ltd.: It was held that the respondent party have to reply within 15 days.
  • Dr. M. Kochar vs Ispita Seal: NCDRC said that No cure is not medical negligence.
  • M/S Emaar MGF Land Limited & Anr. v. Aftab Singh: Supreme court held that arbitration clause does not restrict consumer from filing a complaint with consumer forum.
  • Karnataka Power Transmission Corporation v. Ashok Iron Works Private Limited: Supreme Court held that supply of electricity is not considered ‘sale’ under the Act.
  • State of U.P. and Ors. v. All U.P. Consumer Protection Bar Association: Supreme court directed all the states to draft rules and regulations for better implementation of the Consumer Protection Act.

Consumer Movements in different areas

Telecom

Usually, consumer protection in Telecom sector is imposed by licensing arrangements or telecom act. The main provisions of the act aim at improving choices for consumers, to reduce prices, achieve better quality and avoid exploitation. In JK Mittal v Union of India the Delhi high court held that the respondent is not a telegraph authority under the telegraph act, 1885. The Supreme Court had given a broad interpretation in which it said that the consumer protection act is in addition and not in derogation to any law for the time being in force. The high court of Delhi held the suit maintainable in consumer forums. Through this case it was established that the suits against private telecom companies are maintainable in consumer forums.[14]

Health Care

Health care is one of the most controversial sectors where consumer rights have to be protected. In the Consumer Protection Act, 2019 the government of India has removed the word ‘healthcare’ which was added in the draft bill. There was a huge consumer movement about the removal of word healthcare because medical negligence is an integral part of consumerism in India and by removing the word it was being interpreted that the liability of doctors is diminished, but as was expounded in the Indian Medical Association vs V.P. Shantha & Ors case, the word includes medical negligence in the new definition of services as well.[15]

Food Industry

Food industry is the 5th largest industry in India. The Food Safety and Standards Authority of India has started the Food Smart campaign to raise awareness among consumers about food safety. The landmark case of Nestle Noodles, Maggie, was a testament to right to knowledge and the right to healthy food. In the case it was reported that the noodles were not harmful to health and the lead content was well within limits.[16] This case serves as an instance where consumer movements are most effective and provide the society a perspective of the justice for consumers.

Conclusion

Through the course of this article we have seen how Consumer Movements have evolved from being just conceptualized to being institutionalized. Consumer Protection is a necessity in a consumer dominated country like India. Consumer Movements go a long way in tacking the problem of consumer protection. When the people of a country stand up against a lazy government only then can the voice of consumers be strengthened.

This article focused on the mechanism of consumer redressal in our country. Different agencies have different roles to play and the government has the duty to duly resolve all the disputes. Studying the consumer redressal mechanism in other countries we saw where we lag behind. Although our government has taken various measures to resolve Consumer Disputes, there is still a long way to go in case of consumer protection.

The role of NGOs in eradicating a social evil is of eminent importance and this is the case with consumer protection also. A lot of NGOs are striving towards providing justice to consumers. To make the work of NGOs more impactful the government has the duty to provide them with necessary funds to do so.

While the government is doing its bit, it is equally necessary for the consumers to be aware of their rights and act on them. The government can’t do anything if the consumers do not take active steps to control the problem of Consumer exploitation. Hence, it is the moral duty of both the government and the consumer to act towards Consumer Protection.


[1] National Consumer Disputes Redressal Commission, ‘History’ (NCDRC) <http://ncdrc.nic.in/history.html> accessed 29 November 2019.

[2] National Consumer Disputes Redressal Commission, ‘Details Under Right To Information Act-2005’ (NCDRC) <http://ncdrc.nic.in/rti.html> accessed 29 November 2019.

[3]CUTS International, ‘Report: State of Consumer Affairs India’(CUTS International, 2012) <http://lms.nls.ac.in/pluginfile.php/1146/mod_page/content/8/Report_State_of_the_Indian_Consumer-2012.pdf>accessed 28 November 2019.

[4]CUTS International, ‘Report: State of Consumer Affairs India’(CUTS International, 2012) <http://lms.nls.ac.in/pluginfile.php/1146/mod_page/content/8/Report_State_of_the_Indian_Consumer-2012.pdf>accessed 28 November 2019.

[5] CUTS International, ‘Report: State of Consumer Affairs India’(CUTS International, 2012) <http://lms.nls.ac.in/pluginfile.php/1146/mod_page/content/8/Report_State_of_the_Indian_Consumer-2012.pdf>accessed 28 November 2019.

[6]Apurva Singh,‘Prof. Ashok R Patil, Professor of Law, NLSIU nominated as a member of the Central Consumer Protection Council’ (SSC Online, 19 November 2018)

<https://www.scconline.com/blog/post/2018/11/19/prof-ashok-r-patil-professor-of-law-nlsiu-nominated-as-a-member-of-the-central-consumer-protection-council/>accessed 27 November 2019

[7]Government of India, ‘Jago Grahak Jago complains portal’

<http://www.jagograhakjago.com/register-complaint/>accessed 27 November 2019

[8]Government of India, ‘Consumer helpline’<https://consumerhelpline.gov.in/nch.php>accessed 29 November 2019

[9]CUTS International, ‘Report: State of Consumer Affairs India’(CUTS International, 2012) <http://lms.nls.ac.in/pluginfile.php/1146/mod_page/content/8/Report_State_of_the_Indian_Consumer-2012.pdf>accessed 28 November 2019.

[10]Government of India, ‘Consumer helpline’<https://consumerhelpline.gov.in/nch.php>accessed 29 November 2019

[11] Sanjay Kaptan, ‘Consumer Movement in India: Issues and Problems’ (Sarup & Sons, 1st edn, 2013) accessed 30 November 2019.

[12]Journal of Institutional and Theoretical Economics, ‘Regulation: Analysis and Experience in West Germany and the U.S.A.: A Symposium’ (October 1983), pp. 527-544 accessed 26 November 2019.

[13] Yakoob C., ‘A study on the impact of the consumer protection act 1986 on consumer movement, with special reference to northern districts of Kerala’ (Department of Commerce and Management Studies , University of Calicut, 1998) accessed 25 November 2019.

[14] Ashok R. Patil, ‘Consumer Protection Law’ (Annual Survey of Indian Law, The Indian Law Institute, 2016) pp. 319-346 accessed 24 November 2019.

[15]Dipak Dash, ‘Consumer bill draft removes healthcare from Services’ (Times of India, 2 June 2019) <https://timesofindia.indiatimes.com/india/consumer-bill-draft-removes-healthcare-from-services/articleshow/69935129.cms> accessed 29 November 2019.

[16] Samanwaya Rautray, ‘Maggi Controversy: SC revives govt’s case against Nestle India in NCDRC’ (Economic Times, 4 January 2019) <https://economictimes.indiatimes.com/industry/cons-products/food/supreme-court-revives-governments-case-in-ncdrc-against-nestle-india/articleshow/67363564.cms> accessed 24 November 2019.

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Taxing The Super-Rich To Help The Poor

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What was traditional became law in 1941 when Thanksgiving was designated as the fourth Thursday in November.  Large turkeys, plenty of trimmings and family gatherings became the norm. . . that is until this year of the self-isolated holiday.  Small turkeys disappeared fast leaving masses of 20 lb birds and presumably more leftovers and more waste.  Yes, w e belong to the lucky 13.5 percent in this world through an accident of birth.

Half of the world’s population lives on less than $5.50 per day.  Of these, three quarters of a billion are in extreme poverty, classified as less than $1.90 per day.  Covid 19 has swelled these numbers by 114 million and the situation is dire.  Worst affected by poverty are the day laborers i.e. informal workers without a regular job.  Moreover, the ILO (International Labor Organization) estimates 200 million job losses from Covid.  It also notes that the average income of informal workers in places like Ethiopia, Haiti, and Malawi has already fallen by 82 percent. 

The US is not immune.  Adjusting for purchasing power the US Census Bureau classifies 11.1 percent of the population as poor with Covid exacerbating the situation.  Forty seven million have to rely on food banks including 16 million children.  Hardly surprising then that the US has the highest child mortality rate among the 20 OECD countries (major economies) as reported by the U.S. Health Affairs journal.  And life expectancy has shrunk by three years, affirms the U.S. Census Bureau. 

Even in Europe with its social net and social conscience, Covid 19 is estimated to increase poverty by about half if the pandemic lasts until the summer of 2021.  Italy alone, forecasts Caritas Italiana, will have a million more children living in poverty. 

In April of this year UNCTAD (United Nations Conference on Trade and Development) warned that at least $2.5 billion was needed to lessen the impact of the impending crisis within the narrow purview of their remit. 

So where is the money to come from?  If taxing the rich is unlikely to pass in most legislatures for the most obvious of reasons — they paid for them to be there — how about taxing only the super-rich, the storied 1 percent?

The wealth of the billionaire class has surged.  While 45.5 million filed for unemployment in just three months, the U.S. added 29 more billionaires and the wealth of the billionaire class surged nearly 20 percent or $584 billion, from $2.948 to $3.531 trillion, during the same period.  Just the top five billionaires, namely, Jeff Bezos, Bill Gates, Mark Zuckerberg, Warren Buffet and Larry Ellison increased their wealth by a whopping $101.7 billion between March 18 and June 17 of this year.  Bezos and Zuckerberg alone made $76 billion or almost three-quarters.  To be fair one has to point out that the stock market took a sudden dip in March from which it recovered to new highs. 

It’s shocking that just 10 percent of their $584 billion gain would have bailed out their compatriots classified as poor over the same period.  Is it time for a tax on the super rich?  Warren Buffett has often said that he needs to be taxed more.  The fact is a small extra tax would not make an iota of difference in their lives but would help out millions of the poor and also the economy because the latter are much more likely than the rich to spend the money.  

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International Conflicts from the View of Trade Expectations Theory

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Does economic interdependence between great powers have a significant effect on the probability of war between them? This once seemingly impossible question has become extremely realistic and urgent in the current tide of anti-globalization.

In fact, it is not the first time that free trade has been terminated, as all the great powers in the Western world had abandoned the principle of free trade at one point, such as Germany in 1879, France and Britain in 1881, and the United States as early as the 1860s during the Civil War. Global trade frictions and conflicts have developed from competing for raw materials, energy, and investment to today’s competition for market space (see Chan Kung’s “Spatial Determinism” for details).

There are two views on the relationship between economic interdependence and war. Liberals assert that with commercial ties, trade and investment flows can raise the opportunity cost of going to war and thereby providing a large material incentive to avoid war. Realists claim that commercial ties make states vulnerable to cutoffs, which can devastate an economy that has reoriented itself to rely on critical markets and goods from abroad, and thereby prompt leaders to go to war.

American scholar Dale C. Copeland believes that an additional causal variable, i.e., a state’s expectations of the future trade and investment environment should be introduced to determine whether the liberal prediction or realist prediction would prevail. When a dependent state has positive expectations about this future environment, it is more likely to see all the benefits of continuing the current peace and all the costs of turning to war. Economic interdependence would then be a force for peace. Yet if a dependent state has negative expectations about the future economic environment, i.e., seeing itself being cut off from access to foreign trade and investment, or believing that other states will soon cut it off, then the realist logic will kick in. Such a state would tend to believe that without access to the vital raw materials, investments, and export markets needed for its economic health, its economy will start to fall relative to other less vulnerable actors. If this economic decline is anticipated to be severe, the leaders of the dependent state would then begin to view war as the rational option, the lesser of two evils. Such leaders would consider it is better to fight that being forced to submission.

This argument is similar to the “preventive wars” in the field of international political economy, and Dale C. Copeland calls it the “trade expectations theory”. Copeland believes that in the situation where there are different great powers, the combination of economic interdependence along with expectations of future trade and investment was a critical driving force shaping the probability of war and conflict between these powers.

Several historical examples from the twentieth century are clear prove of this. Japan’s attacks on Russia in 1904 and the United States in 1941 were intimately related to Japanese fears of future access to the raw materials and trade of the East Asian region. In the first case, Japan witnessed Russia’s steady penetration into economically valuable areas of Manchuria and the Korean Peninsula. After repeated and invariably unsuccessful efforts to convince Russia to pull back, Tokyo realized that only preventive war would mitigate Japan’s long-term economic and military concerns. The closed economic policies of the great powers after 1929 had a devastating impact on Japan’s economy and Japanese views of the future trade environment. Tokyo’s efforts to consolidate its own economic sphere in Manchuria and northern China, spurred by its decades-long worry about Russian growth in the Far East, led to conflicts with the Soviet and Nationalist Chinese governments. When the United States entered the fray after 1938 and began a series of damaging economic embargoes, Japanese expectations of future trade fell even further, prompting a desperate effort to acquire access to oil and raw materials in Southeast Asia. The ultimate result was the attack on Pearl Harbor in December 1941.

During the forty-five-year Cold War struggle after World War II, there was a low level of economic dependence between the United States and the Soviet Union, and the “trade expectations theory” seemed unable to explain the geopolitical rivalry between the two great powers. Obviously, economic relations between states do not explain all the problems of geopolitics, which involves a variety of other issues (e.g., ideological rivalry, mutual military threats, etc.). However, the impact of economic relations can be seen even during the Cold War. In the late 1950s, President Dwight Eisenhower’s unwillingness to relax stringent economic restrictions alienated Nikita Khrushchev and contributed to the extreme tensions of the 1960–1962 period. But in the early 1970s and again in the late 1980s, Washington was more willing to commit itself to higher future trade with the Soviets. This proved critical to achieving an initial détente period and then an end to the Cold War altogether.

In the current tide of anti-globalization, it seems that the phenomenon of “trade expectations theory” can also be seen. The Trump administration, following the principle of “America First”, believes that the major trading partners of the United States have taken advantage of the United States through trade, making the economic interests of the United States damaged, and China has caused the greatest economic damage to the United States. As a result, the United States has adopted a series of crackdowns and sanctions on its major trading partners, including China. The modern world is less prone to war between major powers, but instead manifests in more diverse non-war forms, i.e., trade sanctions, technological sanctions and blockades, financial sanctions, diplomatic recriminations, and geopolitical repression. In the view of researchers at ANBOUND, this overall deterioration in geopolitical relations, triggered by economic ties, is merely an alternative to the “trade-security” model of war. If the geopolitical friction intensifies further and the threshold of a certain aspect is breached, a war of some kind is not out of the question.

The view of defensive realism is that national leaders, aware that their actions can lead to a vicious cycle of hostility, are justified in maintaining their current reputation for neutrality, prudent territorial policies, constant trade with other countries, and a willingness to embrace common international rules in a relatively open attitude. This view helps to create a pattern in which great powers tend to coexist for a long time without serious conflict or war. However, if national leaders take the view of aggressive realism, that in a leaderless world, great powers must always worry about what other nations will do in the future, and prepare for the worst, then they must maximize their power. The likelihood of violent conflict or even war between the great powers would then increase.

How to avoid security conflicts between great powers over trade issues? Some scholars have argued that it depends on the rationality of the national decision-makers, as well as the objective judgment on the strength and determination of both sides in the conflict. Rational actors have an incentive to reach agreements that prevent war from inflicting damage on each other, so that the situation for war does not arise and thereby improving the circumstances of both sides. In the event that if an actor do not understand the true balance of power and the determination of the other side, or do not trust the other side to keep the promises made in the agreement, war may occur.

Final analysis conclusion:

After World War II, the world as a whole has been largely at peace for 75 years (meaning that there was no major war involving a large number of countries). The current tide of anti-globalization and increasing geopolitical frictions is shaping up to be the most far-reaching and influential period of global trade and geopolitical turmoil since the end of the Cold War. “Trade expectations theory” provides an explanation for the current global conflicts, as well as an idea for countries to make rational decisions and mitigate international conflicts.

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Economy

Democracy in decline and its fate after the crisis: Why will the big crisis kill liberalism with or without the demos

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Being praised as never before, democracy was in crisis. The reality of the economic problems of 2008-2020 led to a new critical moment. All this makes us think about the meaning of the word “democracy”, about the economic logic of history and much more.

Twilight of a new big crisis

The countries of the core of capitalism had to face a new big economic crisis in 2008. In semi-peripheral and peripheral countries, democracy was outwardly similar to the central, with the difference that it was much more formal, implicated in falsifications and did not exclude coups and turmoil, though formally they started as a struggle for fair elections. Neoliberalism in a broad sense had no alternative and could only be mitigated in some countries. Therefore, due to its strength and rootedness, the encounter with the crisis was delayed and turned out to be completely unpleasant. In 2020, this story has not yet been concluded.

Neoliberal doctrine and ideology brought market and commercial freedom to the forefront, while public interests were pushed to the background. Under the pressure of neoliberal reforms, the social structures supporting democracy, as known in the 20th century, weakened, mass participation in them declined. People resorted to private life and the elites boldly practiced manipulations. The protest became anti-globalist with faith in social networks and a growing mistrust of “rotten parties.” The criticism of neoliberalism and the democracy that it subordinated, namely liberal democracy by the “stars” of anti-globalism was spectacular. It was not effective, as its countercultural pathos did not prevent it from fitting into the mainstream.

Not everything looked unequivocally gloomy in the era preceding the 2008–2020 crisis. When Bill Clinton came to power in the United States and Tony Blair in the United Kingdom a considerable number of ordinary people felt a certain turn. In France, such a feeling was created later by the victory in the elections of socialists led by Francois Hollande. In Greece by the election of the party “Syriza” and Alexis Tsipras. In practice, the turn did not occur, everything turned into manipulative simulations, convenient for continuing the old course. They undermined faith in the seemingly existing democratic mechanisms. Might the opposition have found a solution to the neoliberal mainstream? Wasn’t there an alternative to the “outdated” base organisations of trade unions and parties, the idea of network organisation? In the 2000s it was widely cherished in Europe and America.

Alas, the networks did not become the basis for the revival of “genuine democracy,” and faith in them only helped conserve the opposition of neoliberalism. In these networks it rotted, telling itself from time to time not to follow the way of old parties, they were all evil, they killed the egalitarianism of a genuine popular movement and not to suggest designs instead of the people and for the people (all these congresses, committees and commissions) for in this way the true spirit of democracy will be completely ruined. As a result, the “genuine spirit” existed only in imagination.

When the time of social networks on the Internet came, it showed how much they enable the control over individuals and how little horizontal connections of individuals mean to them. With such networks it was easy to organize a wave of protests and after a change of power (a coup by order of the United States or the Eurocracy) to return the mass participants to their places.

Democracy in an era of crisis once more in crisis

In 2008, the time of sustainable financial globalisation ended and the great global economic crisis began. The waves of crisis came one after another until 2020. And then it finally became clear that the seeds of the anti-globalist alternative give rotten seedlings even in the United States: Bernie Sanders withdrew from the elections at the most dramatic moment for his people in the 21st century. Before that there was a series of unsuccessful attempts by society to influence the process in Europe. It turned out that he has no structures and understanding of the mechanics of their work and personal work in them, lacks solidarity and understanding of the situation. As a result, the liberal elite retained dominance over “democracy”.

But liberal political constructs have become an obstacle in the fight against the crisis. And if in Russia and China the shift from neoliberalism to a new practice neo-mercantilism started from above, without the help of republican mechanisms set in motion by the people (the starting point were the problems of economic development),  the situation was different in the West. The manipulative liberal democracy preserved the crisis, blocking attempts to change politics. Even Trump, with his conservative transformation plan, came up against the resistance of liberal forces from the Democratic Party and its adherents in the power system. He could not overcome the checks and balances.

An extensive programme about which my colleagues and I in the Department of Political Economy and the History of Economic Science of the Plekhanov Russian University of Economics spoke in the report “Donald Trump and the Economic Situation” back in 2016[1]. In another report, entitled “A Society Without Opposition,” prepared with my participation in the Institute of the New Society, many vices of the left were revealed that prevented them from acting as the main force of transformations[2]. One of the problems lies in the desire to apply ready-made schemes to new historical conditions and the belief that capitalism cannot have anything new in itself, nothing that would not have happened before.

“Revolution or reform?” and myths about the ways

The disappointment in democratic mechanisms brought the old question, which in 1918 was included by Rosa Luxemburg in the title of her pamphlet “Reform or Revolution”, back to life. Reforms over the past 40 years have been neoliberal, and therefore the word “reform” often evoces negative emotions in people. In Russia, it is difficult for many citizens to accept the fact that the socio-patriotic reforms that are taking place in the country are not liberal, they are not shattering, but strengthening society. Therefore, the question remains valid.

But this question is false. However, it seems logical to many, as since the 1980s it was suggested that there are two ways that contradict each other: a seemingly tough and a seemingly soft one (identical to liberal democracy). In another interpretation: a progressive and an opportunistic, destructive or reactionary. Neoliberal reforms inspired the latter understanding, as they were destructive and antisocial in nature everywhere. However, under the influence of the global crisis of 2008-2020 at its very end, that is presently, reforms of a different type are now becoming possible. They are associated with the need to overcome the protracted era of economic crisis and the resumption of a sustainable growth and development. Naturally, they should increase the stability of the states in which they are implemented and, as a result, make them stronger in international rivalry.

Reforms of a new type and dictated by the new era became possible. In Russia they have already begun and with them another social reality started to form. But what about cliches? And what about the vulgar, but in practice voluntaristic understanding of revolutions based on disappointment in liberal democracy?

In the book “Capitalism of crises and revolutions how formation epochs alternate, new long waves are born, restorations die and neomercantilism advances” I devoted many pages to the complexity of such a phenomenon as the great modernisation revolution, as well as the Great Russian revolution. Here there is a unity of both revolutionary, evolutionary and reformist stages (not methods!). Voluntarists of “revolution” will never understand nor accept this. For them, all sorts of reforms of Russian or other capitalism will be a deception of the masses, and their support will be a betrayal of the “cause of the liberation of the working people” or a reactionary measure. There is no dialectic in such a vision of history. That is why voluntarists, adherents of maximalist phrase, are not related to real social revolutions with their complex diverse consequences.

In the United States, Britain, Western Europe and Japan, the situation is special. There neoliberalism has gone far in influencing society. From manipulations with the help of liberal institutions, it proceeded to the destruction of the basic norms of morality and relations, not centuries-old, but largely cultivated in the 20th century. Nuclear family was attacked as “slavery of the patriarchy”, trade unions as fetters to the market, the right of the majority to laws in its interest as the anti-democratic egoism of white men, discriminating minorities. Minorities themselves were nurtured and helped to fragment a society in which, as the events of 2008–2020 showed, no forces were found to overturn neoliberalism from the bottom in a left, reformist or more radical way.

Without being defeated, neoliberalism will die from the fact that its time has passed. This is already evident in some parts of the world, but not obvious in others. However, the impossibility of overcoming the crisis on the basis of neoliberal policy is the absolute proof of this thesis. And then what about democracy?

Neo-mercantilism is approaching

Left-wing intellectuals love to write phrases like this one: the struggle for social and cultural reforms, for another world with opportunities for every person to creatively find themselves, to be free, to control power and not be afraid to be poor, will continue and lead the world to success. In parallel, they can criticize the national conservatism of the “right”, and talk about the benefits of diversity in society, without which there can be no democracy. But truth requires adding at this point the story of Socrates. Athenian democracy did not at all tolerate his liberties and forced him to drink poison. His disciple Plato was forced to behave more carefully with the people. In modern realities, we must be prepared for a democratism that is conservative in spirit.

Neoliberalism has created a moral opposition in society, the foundations of which are considered traditional. The liberal left is indignant about this unrighteous, in their opinion, way of denying globalisation and the ideas of “free trade” in all spheres of life. However, conservatism is very limited here. It is not very religious, since society in countries with developed markets is not very religious, and the protection of family values and the importance of marriage is more like the defense of the Soviet understanding of relationships and lifestyle; it should be borne in mind that the emancipation of the 20th century is irreversible, universally recognised and inseparable from society, and these are not “patriarchal mores,” but the product of modernisation. Though this modernisation took place not so long ago. Therefore, anti-neoliberal conservatism does not at all refer to old morals, and only because of the love of religious justification of its position can be called right. However, there is also a reference to the national values and interests of nations, opposing the interests of global financial structures. And here it is important to finally accept the fact: neoliberalism hit the organised working class, the old class and left structures (including their structure) so hard that it left only a limited number of means to eliminate itself. The dismantling of neoliberalism is not a socialist act, but a bourgeois measure ensuring the further development of society. Another thing is that in the process in some countries a revival of the social state is possible.

The era of globalisation has taught many people to view democracy as something universal. Neoliberalism has replaced the dictatorship of modernisation in the countries of the semi-periphery and periphery of world capitalism. There was not much personal freedom and public freedom in them. But with neoliberalism, the local elites were able to cover up their rule with the word “democracy”. The plans of the elite of the countries of the centre did not include the transformation of part of the countries of the production periphery into new centres of development of capitalism, as candidates to play part in the core of the global economy. It was not part of the plans of the old centres that the local top officials should search for support in the “lower strata”, largely due to the rejection of the neoliberal course and reliance on social and patriotic measures. And the bold and independent behaviour of the highest bureaucracy, grand bureaucracy, is absolutely perceived in Washington and Brussels as a riot.

But it is precisely this rebellion that sets the limit to neoliberalism politically. Leaning or trying to rely on the majority of the country’s population (especially in Russia), it is democratic in its own way, reflecting the demos’ requests for social policy, the revival of national pride and the growth of prosperity based on the patronage of the state to its market, production and its mass buyer. This turn from neoliberalism, however, is not a turn created from below, that is, formally democratic, organised not under the pressure of society, but by society itself. In this regard, it is necessary to acknowledge the failure of attempts to end neoliberalism from below in many countries. With a firm commitment of the “upper strata” to this policy, it is not eliminated from above either. Even the split of the upper strata in the United States with the advent of Trump to the White House did not lead to such a development of events, the processes were blocked. Therefore, neoliberalism has not yet completed its history, it simply has lost economic efficiency and cannot be the basis for the exit of certain countries from the era of the great crisis. But this is not its complete end.

Democratism instead of democracy?

Nevertheless, the end of neoliberalism is inevitable. In some cases it will come in the form of a conservative in shade, and a socio-patriotic in form turn. In another case, problems in the economy will bring about movements that can either be such as in countries claiming to be new centres (Eurasian countries), or society will be able to move from an unstable and weak in content movement like the French “yellow vests” to something stronger and more productive. Finally, there is a scenario where popular intervention in politics will be like an outbreak such as in Argentina in the early 2000s. But in this case, progressive shifts will be the fruit of a new grand bureaucracy, simply not neoliberal.

All these paths are not easy. Democracy in them will probably be expressed not in procedures, but in mass support for the new agenda. It is hardly to be expected that the “lower strata” will restore the forms of organisation and practice that were characteristic of the 1930-1970s. In this sense, the prospect of the triumph of “pure democracy” soon seems doubtful. Republican procedures and structures will live, as society is agitated everywhere. However, even overcoming neoliberalism from above to a greater extent than from below will become a common scenario for overcoming the era of the great crisis, it should be taken into account: economic growth and social development in general will work for future democracy.

Formal Republics, where development does not stop and degradation does not happen (which is possible for some countries) will become more social. Relying on social unity, on the construction of nations and their associations, for example, during the Eurasian integration process, administrations will awaken reformist activity in society. As a result, formal Republics will move towards real Republics, where people influence processes not only through expression of mood. This will be the beginning of a new revival of democracy.

Here it is necessary to summarise. It was said enough by virtue of what economic processes neoliberal democracy (the right format of ideas and practice) found itself in a crisis, and was unable to provide a mechanism for leading the countries of the old core of capitalism out of the crisis and ensuring a change of power in Russia, China and other Eurasian states, claiming to be new centres of capitalism. There, the neoliberal “democrats” at the top are increasingly oppressed by the neo-mercantile grand bureaucracy. It can restart the growth of economies and this growth will continue for about 25 years. The big crisis will end and a new upward wave of development will begin; only shortly will commercial crises interrupt it, none of which will be similar to the era of 2008–2020. The establishment of a non-mercantile economic reality in the world launches a mechanism for mastering the practices and ideas of democracy in the conditions of strong national states of Eurasia, solving the tasks of continental integration and rivalry with the old global leaders. How the process of democratisation or the revival of democracy will develop is not yet clear. But economic recovery will be a better environment for this process than the last big crisis.

On the whole, the history of democracy is not only incomplete, but by and large is just beginning. And if in most countries in the era of neoliberalism democracy was a pure imitation, in a different era everything will be different.

 From our partner International Affairs

[1] Report of the Department of Political Economy and the History of Economic Science of the Plekhanov Russian University of Economics “Donald Trump i ekonomisteskaya situatsiya: strategiya kandidatov v presidenty i Vroraya volna krizisa v SSHA”  // Institute for globalisation and social movements. – URL: http://igso.ru/trump_situation/ (publication date: 28.10.2016; reference date: 27.08.2018).

[2] Report of the Institute of the New Society “Society without Opposition: the crisis of the left in the era of neoliberalism and afterwards”// Institute of the New Society. – URL: http://neosoc.ru/%d0%be%d0%b1%d1%89%d0%b5%d1%81%d1%82%d0%b2%d0%be-%d0%b1%d0%b5%d0%b7-%d0%be%d0%bf%d0%bf%d0%be%d0%b7%d0%b8%d1%86%d0%b8%d0%b8/ (publication date: 28.10.2016; reference date: 27.05.2020).

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