The Peninsula Foundation

Author: Jayati Ghosh

  • India’s Self-Inflicted Economic Catastrophe

    India’s Self-Inflicted Economic Catastrophe

    Noted economist Jayati Ghosh reviews India’s economic recovery from the impact of the pandemic. She asserts that the major economic problems of unemployment, poverty, and inadequate healthcare are due to poor strategies and policies implemented by the government. In her analysis, COVID-19’s devastating impact on India has been compounded by the BJP government’s disastrous decision to impose nationwide lockdowns without providing any support to workers. Instead, the BJP used the pandemic to consolidate its power and suppress dissent. Even with existing socio-political constraints, she says India can do much better as there is scope for different economic strategies.

    This article was published earlier in Project Syndicate. The views expressed are the author’s own.

                                                                                                                                                                          -TPF Editorial Team

    Nearly 80% of the estimated 70 million people around the world who fell into extreme poverty at the onset of COVID-19 in 2020 were from India, a recent World Bank report has revealed. But even this shocking figure could be an underestimate, as the lack of official data makes it difficult to assess the pandemic’s human costs.

    What accounts for this alarming rise in Indian poverty? COVID-19 was undoubtedly India’s worst health calamity in at least a century. But the pandemic’s economic and social consequences go beyond the direct effects on health and mortality. As I argue in my recent book, The Making of a Catastrophe: The Disastrous Economic Fallout of the COVID-19 Pandemic in India, very significant policy failures – owing to government action and inaction – were responsible for widespread and significant damage to Indian livelihoods and for the country’s decline in terms of many basic indicators of economic well-being.

    But the devastating impact of the pandemic on India has been compounded by economic policies that reflected the country’s deeply-embedded inequalities.

    This judgment may seem excessively harsh. After all, India’s government did not cause the pandemic, and many other countries experienced economic setbacks after they failed to control the virus. But the devastating impact of the pandemic on India has been compounded by economic policies that reflected the country’s deeply-embedded inequalities.

    To be sure, the pandemic did not create India’s many economic vulnerabilities. But it did highlight India’s many societal fissures and fault lines. And while the country already suffered from glaring inequalities of income, wealth, and opportunities long before COVID-19, the government’s pandemic response has taken them to unimaginable extremes.

    Even as Indian workers faced poverty, hunger, and ever-greater material insecurity due to the pandemic, money and resources continued to flow from the poor and the middle class to the country’s largest corporations and wealthiest individuals. The intersecting inequalities of caste, gender, religion, and migration status have become increasingly marked and oppressive. The result has been a major setback to social and economic progress.

    At the beginning of the pandemic, the central government imposed a prolonged nationwide lockdown with little notice. It then adopted containment strategies that were clearly unsuited to the Indian context, with immediately devastating effects on employment and livelihoods.

    The grim state of affairs reflects the priorities of the ruling Bharatiya Janata Party (BJP) response. At the beginning of the pandemic, the central government imposed a prolonged nationwide lockdown with little notice. It then adopted containment strategies that were clearly unsuited to the Indian context, with immediately devastating effects on employment and livelihoods.

    Instead of using the breathing space provided by the lockdown to bolster local health systems, the central government left state authorities to manage as best they could with minimal and inadequate resources. And when the resulting economic disaster threatened to spiral out of control, the government eased restrictions to “unlock” the economy even as the number of cases mounted, thereby putting more people at risk.

    At a time when governments worldwide were significantly increasing public spending to fight the pandemic and mitigate its economic impact, the Indian government preferred to control expenditures (after adjusting for inflation) as its revenues declined.

    But at the heart of India’s self-inflicted economic catastrophe is the government’s decision to provide very little compensation or social protection, even as COVID-19 lockdowns deprived hundreds of millions of their livelihoods for several months. At a time when governments worldwide were significantly increasing public spending to fight the pandemic and mitigate its economic impact, the Indian government preferred to control expenditures (after adjusting for inflation) as its revenues declined.

    But in a country where median wages are too low to provide more than the most basic subsistence, losing even a week’s income could lead millions to the brink of starvation. Given that more than 90% of all workers in India are informal – without any legal or social protection – and that around half of those are self-employed, the effect was immediate and devastating.

    The government’s decision not to increase spending aggravated the shock of the lockdown, generating a humanitarian crisis that disproportionately affected women and marginalized groups, including millions of migrant workers who were forced to return home under harrowing conditions.

    But the effects of the official response to the pandemic are only one side of the story. COVID-19 safety measures have been a natural fit for the country’s still-pervasive caste system, which has long relied on forms of social distancing to enforce the socioeconomic order and protect those at the top. It also further entrenched India’s persistent patriarchy.

    Instead of taking appropriate countermeasures, like providing greater support to the population, the BJP used the pandemic to consolidate its power and suppress dissent. This, in turn, limited the central government’s ability to generate the widespread social consensus and public trust needed to contain the virus.

    Even within India’s deep-seated social and political constraints, there is scope for a different economic strategy that would enable a just, sustainable, and more equitable recovery.

    None of this was inevitable. Even within India’s deep-seated social and political constraints, there is scope for a different economic strategy that would enable a just, sustainable, and more equitable recovery. To ensure that most Indians, not just the stock market or large companies, benefit from growth, India’s voters must reject the BJP’s policies, which threaten to impoverish them further.

    Feature Image Credit: textilevaluechain.in

  • The Rich World’s Climate Hypocrisy

    The Rich World’s Climate Hypocrisy

    Many people around the world already consider the United Nations Climate Change Conference (COP26) in Glasgow a disappointment. That is a massive understatement. Global leaders – especially in the developed world – still fail to grasp the gravity of the climate challenge. Although they acknowledge its severity and urgency in their speeches, they mostly pursue short-term national interests and make conveniently distant “” emissions pledges without clear and immediate commitments to act.

    Many of the statements by developed-country leaders at the COP26 summit in Glasgow are at odds with their actual climate policies, and with what they say in other settings. Their short-sighted strategy ultimately benefits no one – including the powerful corporate interests whose immediate financial interests it serves

    For example, could the real US government please stand up and declare itself? In his recent address in Glasgow, President Joe Biden said that “as we see current volatility in energy prices, rather than cast it as a reason to back off our clean energy goals, we must view it as a call to action.” Indeed, “high energy prices only reinforce the urgent need to diversify sources, double down on clean energy deployment, and adapt promising new clean-energy technologies.”

    But just three days later, the Biden administration claimed that OPEC+ is endangering the global economic recovery by not increasing oil production. It even warned that the United States is prepared to use “all tools” necessary to reduce fuel prices.

    This is one of the most blatant recent examples of climate hypocrisy by a developed-country leader, but it is by no means the only one. And the duplicity extends to the proceedings at COP26 itself, where developing-country negotiators are apparently finding that advanced economies’ positions in closed-door meetings are quite different from their public stances.

    Rich countries, which are responsible for the dominant share of global carbon-dioxide emissions to date, are dithering on longstanding commitments to provide climate finance to developing countries. They are also resisting a proposed operational definition that would prevent them from fudging what counts as climate finance. And they are still treating adaptation to climate change as a separate stream and refusing to provide finance to avert, minimize, and address the loss and damage associated with climate change in the worst-affected countries.

    The declared COP26 promises also reveal the developed world’s double standards. A group of 20 countries, including the US, pledged to end public financing for “unabated” fossil-fuel projects, including those powered by coal, by the end of 2022. But the prohibition applies only to international projects, not domestic ones. Significantly, the US and several other signatories refused to join the 23 countries that separately committed to stop new coal-power projects within their borders and phase out existing coal infrastructure.

    But even if the pledges in Glasgow had been more solid, rich-country governments, in particular, face a major credibility problem. They have previously made too many empty climate promises, undermining the interests of developing countries that have contributed little to climate change. Advanced economies have made emissions-reduction commitments that they have not kept, and reneged on their assurances to developing countries regarding not only climate finance but also technology transfer.

    The climate finance commitment is now 12 years old. At COP15 in Copenhagen, advanced economies promised to provide $100 billion per year to the developing world, and the 2015 Paris climate agreement made it clear that all developing countries would be eligible for such financing. This amount is trivial relative to developing countries’ need, which is in the trillions of dollars, and also when compared to the vast sums that rich countries have spent on fiscal and monetary support for their economies during the COVID-19 pandemic.

    But the developed world has not fulfilled even this relatively modest pledge. In 2019, total climate finance channeled to developing countries was less than $80 billion; the average amount each year since 2013 was only $67 billion. And this figure massively overstated the actual flows from developed-country governments, because bilateral public climate finance (which should have been provided to the developing world under the Paris accord) averaged less than $27 billion per year. The remainder came from multilateral institutions – including development banks – and private finance, which rich-country governments sought to take credit for mobilizing. Compared to this paltry sum, global fossil-fuel subsidies amounted to an estimated $555 billion per year from 2017 to 2019.

    Likewise, the rich world’s promises of green technology transfer have become mere lip service. Developed-country governments allowed domestic companies to cling to intellectual-property rights that block the spread of critical knowledge for climate mitigation and adaptation. When countries like China and India have sought to encourage their own renewable-energy industries, the US, in particular, has filed complaints with the World Trade Organization.

    This short-sighted strategy ultimately benefits no one, including the firms whose immediate financial interests it serves, because it accelerates the planet’s destruction and the revenge of nature on what now appears to be terminally stupid humanity. The student and activist marches in Glasgow against this myopic approach are important but are nowhere near enough to force governments to change course.

    The problem is that powerful corporate interests are clearly intertwined with political leadership. People around the world, and especially in the Global North, must become much more vociferous in insisting on meaningful climate action and a real change in economic strategy that resonates beyond national borders. Only that can end the rich world’s green hypocrisy and save us all.

    This article was published earlier in project-syndicate.org