life in financial markets: massive hypocrisy when it comes to property rights

There is much hypocrisy among the educated affluent of India when it comes to the issue of property rights. When they talk of industrialisation and 'development' they are desperate to snatch away the property rights of individuals, families and tribes residing in the remote areas and villages of India so that their kind of 'development' happens. But if at all their own homes and offices were to be snatched away for the same purpose they will cry themselves hoarse about their property rights not being respected.

In my 14Oct09 blog post on the dangerous hypocrisies of capitalists I had written that:

"Development is just an excuse to grab land for companies who will then make electricity, goods etc which will be consumed in urban India and other countries. Such capitalists are an insult to true capitalism that says that governments should not interfere in the free play of property rights and competition in trade. Why then do companies worldwide manipulate governments to seek tax favours and other cruel interventions against poor people living in remote areas?
Why aren't the property rights of these poor & un-influential, whether individual or collective (of a community or a tribe) respected by industrialists, politicians and civil-service-bureaucrats? Their machinations and double-standards disgust me completely. As a journalist, I know, for a fact, that they also manipulate very senior editors in the media (print, TV and internet) to carry forward their ugly agenda. The affluent citizenry, in the meanwhile, continue to remain steeped in their excessive consumerism."

Currently, the government of India, that is supposed to be beholden to democracy, is using excessive, even brutal, force against the villagers and tribals of Orissa who are protesting against the illegal and forced acquisition of their land for steel company Posco.

Below is a copy of an email I received from an internet-based group called 'Orissa Concerns' (I am on its mailing list) that gives details of more violations going beyond land acquisition ones:

From: Anivar Aravind
Date: 15 May 2010 22:19
Subject: [OrissaConcerns] Police Open Fire for Illegal Mineral Robbers: The Real Story of the POSCO Project
To: connect , Invitesplus , common-concern

Police Open Fire for Illegal Mineral Robbers: The Real Story of the POSCO Project

From Forest Rights act

Today, Orissa police opened fire on peaceful protesters sitting on dharna for their lands and livelihoods. We join other democratic forces in condemning this atrocious brutality, in which at least 50 people have been injured, markets have been burned and many more are likely to be wounded or killed. We also wish to draw attention to the following facts:

This is not just a “dispute over land acquisition for development.” The POSCO project is illegal and will not bring any benefits for the local population or the country's economy. Rather, it is simply plunder of lives and resources:

• The POSCO project is illegal as it violates the Forest Rights Act of 2006. Under that law, no forest land can be given to anyone until 1) all the rights of the people in the area are recognised and 2) their consent is given to the project. This is the requirement of the law, acknowledged further by an Environment Ministry order of August 3, 2009. This has never been done in the area despite the people demanding it. The Central and State governments have no legal right to hand over this land to POSCO. In law, not just in public view, this is daylight robbery. Please see the attached timeline for more details.

• The project is nothing less than a robbery of the country's natural resources by a multinational. There is no conflict between people's rights and “development” here. Despite grand talk of 51,000 crores of foreign investment, what is not mentioned is that POSCO is getting a huge amount of:
  
  • land: 4,000 acres for the plant, 2,000 acres for a “township”, 25 acres in Bhubaneshwar for their office, plus an unknown amount in the mining and port areas;
  • water: an estimated 12,000 crore liters from the river Mahanadi, threatening the water supply of Bhubaneshwar and Cuttack;
  • iron ore: 600 million tonnes in the form of captive mines, and a further 400 million tonnes will be “allocated';
• in exchange for which it will:
  
  • pay essentially nothing for the water and the land;
  • pay a pittance as royalty, allowing it to make tens of thousands of crores in profits just by the difference between market prices and extraction costs (one 2005 estimate put the net profits at 96,000 crores from extraction alone);
  • practically no income and other direct taxes, as it is seeking SEZ status;
  • provide 13,000 jobs – by their own estimates, which in the case of all industrial projects have proven to be gross overestimates – while displacing around 40,000 people in the plant and port sites alone (not including the mines). More than 20,000 people will lose employment in the plant site alone.

In sum, no tax revenue, net loss of employment, no royalties, loss of 15% of India's proven ore reserves, environmental devastation and the forced displacement of 40,000 people. This is what our government considers “development.”

Today's police action shows better than any other that the government is neither concerned about law nor resources nor development – it is interested in daylight robbery. We stand by the POSCO Pratirodh Sangram Samiti, who are among the many unsung heroes of our country today, fighting not only for themselves and their homes but for the idea of true democracy in India.

Timeline of Events in POSCO Project Area Relating to Forest Rights

From Forest Rights Act

June 22, 2005: MoU signed between Orissa government and POSCO-India, subsidiary of the POSCO Corporation of South Korea. MoU pertains to an integrated iron ore mine – steel plant – private port project. Rs. 51,000 crore investment is spoken of. Critics point out that there are almost no linkages with local or national economy; operation consists of extracting iron ore while paying extremely low rates of royalty, processing into steel without paying full land, electricity, water or tax costs (due to SEZ status and use of State government's powers for all these resources), and exporting it.

MoU allocates an area of 4,004 acres for the steel plant in Jagatsinghpur District. Of this, 1,253 hectares (approximately 3,000 acres) are officially classified as forest land. However, this “forest land” is largely under cultivation by various betel vine, cashew nut and other cash crop cultivators as well as people engaged in aquaculture. Some of these people have lived in the area for over a century and most have been there for several decades. The land was classified as forest land as a result of an agitation in the 1950's demanding afforestation in the area. The main actual forests of the area are mangroves, which occupy only a small part of the “forest” land.

Due to absence of title, out of an estimated 4,000 families that will be physically displaced by the steel plant, only 270 odd are officially entitled to compensation.

August / September 2005: POSCO Pratirodh Sangram Samiti formed to oppose project. A people's blockade declared in three gram panchayat areas affected by plant. The blockade allows all persons entry and exit except government officials and POSCO employees. The Samiti calls for negotiations. No negotiations have been held till date.

December 18, 2006: Forest Rights Act passed by Parliament. Some sections that are relevant:

2(o) declares that all those living on forest land for at least three generations (75 years), as well as forest dwelling scheduled tribes, have rights under the Act

3(1)(a) recognises right to land under occupation and/or cultivation in forest areas

3(1)(c) recognises right to own, use, collect, dispose of minor forest produce

4(5) bars removal of any forest dweller without recognition of rights

5 empowers gram sabha to protect and manage forests as a statutory authority

November 29, 2007: Police and hired goondas attack PPSS dharna at one entry point with bombs – more than 50 people injured – dharna tent demolished. The protesters are driven back into one gram panchayat (Dhinkia). Police set up camps in the schools of the other two villages, deploy in heavy force.

January 1, 2008: Forest Rights Act notified into force.

August 8, 2008: Supreme Court upholds “in principle” clearance for use of forest land but directs Environment Ministry to proceed “in accordance with law.” No final clearance granted. The case is only between Orissa government, Central governent and POSCO; no opponents to the project are represented.

March 23, 2008: Gram sabha of Dhinkia passes resolution electing a Forest Rights Committee and starting process of inviting claims under the Forest Rights Act. Resolution also states the gram sabha's decision to protect the surrounding area from environmental destruction in exercise of its powers under section 5. Claism are filed, but Sub-Divisional Officer illegally refuses to accept them. The State government takes no steps to implement Act in the area. Claims are till this date with the gram sabha.

August 3, 2009: Following prolonged protest, Environment Ministry issues circular clearly stating that no application for “diversion” (i.e. clearance for non-forest use) can be made without inter alia certificates from gram sabhas of the affected area stating that:

1. The process of implementation of the Forest Rights Act is complete and all rights have been recognised
2. That they consent to the diversion after being informed of the nature and details of the project and rehabilitation project.

50% quorum is required. Without these requirements, the Ministry says, no final clearance can be granted.

December 29, 2009: In violation of its own circular and the Forest Rights Act, Ministry grants final clearance for diversion of forest land.

January 5, 2010: POSCO Pratirodh Sangram Samiti writes to Ministry against illegal action. CPI also raises issue, and various people's organisations protest.

January 8, 2010: Environment Ministry “clarifies” that clearance is subject to the August 3^rd, 2009 circular, including “informed consent of the tribal people” (emphasis added). There are no tribals in the area, but there are people eligible as other traditional forest dwellers, who are also protected to the same extent by the Forest Rights Act. Taking advantage of this obvious and illegal loophole, POSCO responds within a few days that there are no tribals in the area. Despite the “clarification”, illegal final clearance is not withdrawn and all government officials are treating it as final.

First week of February, 2010: In response to a request from the Collector for the opinion of the gram sabhas, all three in the steel plant area pass resolutions refusing consent for diversion of forest land and demanding recognitin of their rights and power to protect forests. As per law, the forest clearance is now clearly illegal and has to be withdrawn. Despite this, till date MoEF has done nothing and the clearance is standing.

February 2010: PPSS begins a three month dharna at main entry point at Balitutha.

May 11 2010: 25 platoons of police deploy in the area. Attack on protesters expected at any moment.

May 15 2010: Attack begins.  At least 50 people injured, market areas and protest camps burned, police attacking people.

life in financial markets: review of 'the dismal science' book

A couple of weeks back I reviewed, for the magazine I presently write for, a book on economics. I present it below. Economics is understood differently by different people. Economists, like every other professional in his or her respective field, try to lobby and influence governments, companies and finance professionals with their theories.

The ideal situation is one where such heavy lobbying, as economists and others do presently, fails and instead quiet and straight-forward research and theories are picked up directly by governments, companies and finance professionals. The latter should do their own hard work to surf the world of economists and their economic theories and pick the right ones for implementation in their policies and businesses.

Anyway, here is the review of that book:

Title: THE DISMAL SCIENCE - How Thinking Like An Economist Undermines Community

Author: Stephen Marglin

Publisher: Oxford University Press

First published in India 2009

ISBN-13: 978-0-19-806335

ISBN-10: 0-19-806335-0

Number of pages: 307

Price in India: Around Rs 800

Good criticism, poor alternatives

A critic from inside provides his expose to problems in economic theory and practice but only in order to bat, without success, for community-based thinking

Stephen Marglin, the author of this book, is a trained economist from a few decades back. Presently, he is a member of the Department of Economics at Harvard University. It has taken courage on the part of Marglin to defy conventional economics wisdom among his colleagues and students to write this book.

This is because his book 'Dismal Science' works on a comprehensive and intense critique of the mainstream consensus, among economists, that a system of unfettered markets is good for the people. This, Marglin does, in order to put forth his theory that community-based economics would serve humanity better.

His training as an economist gives Marglin some credibility when he elaborates on why he rejects many of foundational assumptions of economics calling them "cultural myths" as against what conventional economists would term as "universal truths".

One of them is the idea of individualism that, Marglin writes, is be understood as "a collection of autonomous individuals, that groups—with the exception of the nation—have no normative significance as groups, that all behavior, policy, and even ethical judgment should be reduced to their effects on individuals."

Marglin continues articulating, "A second founding myth is the modern ideology of knowledge, an ideology that privileges the algorithmic over the experiential, an ideology that elevates the knowledge that can be logically deduced from what are regarded as self-evident first principles over what is learned from intuition and authority, from touch and feel."

The third assumption, and myth, according to Marglin, is that "the nation... is the only legitimate social grouping," where "it is legitimate to ask whether the nation will be better off by free trade, but it is parochial to ask whether workers, old folks, or farmers will fare better or worse."

The fourth myth is of unlimited human wants that can never be fulfilled and so economics tries to allocate scarce resources towards it. Marglin states that the western economy allows free play to unlimited desires and allows "rivalry—keeping up with the Joneses and the like—to be expressed in the acquisition of display and wealth."

These four foundational assumptions of economics, and other theories associated with any of these, are very craftily argued against in 'The Dismal Science'. One thoroughly enjoys reading the well-articulated and sharp points and elaborations made by Marglin, particularly in the middle half of the book in chapters titled 'From Vice to Virtue in a Century', 'How Do We Know When We Do Not Know?', 'Taking Experience Seriously', 'Why is Enough Never Enough?' and 'The Economics of Tragic Choices'.

The book provides very well-presented thoughts of the author although at times the frequent references to people, events and places from the history of economics get boring and pointless. There have been other critiques of economic theory in the past but Marglin's book is nevertheless a fresh and interesting addition to the list of critiques.

Marglin, however, fails to give justice to the second part of the book title 'How Thinking Like An Economist Undermines Community'. Even though he has one full chapter on 'What is Community? And Is It Worth the Cost?' it does not present a convincing case as to why community-based economics is necessarily free of the myriad problems that bog down market-oriented economics.

It is, however, to Marglin's credit that he stays fair to the mainstream economists in the sense that when he is stating their positions on economic theories and free markets there is no distortion of any kind. This, then, gives him enough credibility to launch his criticisms.

The second big failing in the book is that Marglin could have hit harder on the problems with foundational assumptions of economics. He could have, if he had put in just a bit more effort, to expose, through real-life examples, of the continuous failure of the fulfilment of the assumptions of economics. The fact that, more often that not, cronyism, unfair tax favours and corruption of government, and not free and fair markets, is how capitalists operate is ignored by Marglin.

The fact that some markets work, and work wonderfully, is despite the capitalists' cronyism and partly because of human nature to adapt as best they can to circumstances forced upon by the policy-makers and industrialists who resort to conventional economics' flawed theories.

Are there alternatives to conventional economic wisdom then? Marglin thinks going back to communities would help. But, in my view, any system that is run by humans will not be free of the negatives of human nature such as manipulativeness, greed, deception and violent, or subtle, exploitation of other living beings and the ecology.

At any rate, 'Dismal Science' is a book worth reading, and I can safely recommend you to go buy a copy.